Business Wire | Jan 28, 2021 07:05AM EST

Bridgewater Bancshares, Inc. Announces Fourth Quarter 2020 Financial Results

Jan. 28, 2021

ST. LOUIS PARK, Minn.--(BUSINESS WIRE)--Jan. 28, 2021--Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $5.0 million, or $0.17 per diluted common share, for the fourth quarter of 2020, compared to net income of $7.2 million, or $0.25 per diluted common share, for the third quarter of 2020, and net income of $8.6 million, or $0.29 per diluted common share, for the fourth quarter of 2019. The net income decline in the fourth quarter of 2020 was primarily attributable to FHLB prepayment fees of $5.6 million.

"2020 has been an unprecedented year on many levels but despite the challenges faced, the Company excelled through adversity. With the team's steadfast commitment, we grew BWB's client base, fast tracked technology initiatives, meaningfully lowered our cost of funds, and delivered double-digit growth. We are extremely proud of the team's unwavering dedication to serve our clients, our shareholders, and our communities in this volatile environment," commented Chairman, Chief Executive Officer, and President, Jerry Baack. "This quarter's results include a significant non-recurring charge of $5.6 million related to prepayment penalties on the early retirement of FHLB advances. Given the historically low interest rate environment and extraordinary deposit inflows during the year, the Company took the opportunity to remove inefficient, longer term FHLB advances from the balance sheet. While this non-recurring charge overshadows strong, near-term operating results, this strategic action better orients the balance sheet, improves the net interest margin outlook and future earnings power of the Company. As we look to 2021, we remain nimble and well positioned to perform in the current environment with strong core earnings, capital levels well in excess of regulatory thresholds, adequate loan loss reserves, and solid credit quality."

Fourth Quarter 2020 Financial Results



Diluted Nonperforming Adjusted

ROA PPNR ROA^ ROE earnings per assets to total efficiency ratio (1) share assets ^(1)

0.70% 2.30% 7.45% $ 0.17 0.03% 36.6%

* Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Linked-Quarter Highlights

* The fourth quarter results included $5.6 million of prepayment fees related to the early extinguishment of $69.0 million of FHLB term advances, which had a weighted average rate of 2.85%. * Net income for the fourth quarter of 2020 totaled $9.3 million, or $0.32 per diluted common share, when excluding the FHLB prepayment fees and tax-adjusting at an effective rate of 23.8%. * Annualized return on average assets (ROA) and annualized return on average common equity (ROE) for the fourth quarter of 2020 were 1.31% and 13.86%, respectively, when excluding the FHLB prepayment fees and tax-adjusting at an effective rate of 23.8%. * Annualized pre-provision net revenue return on average assets (PPNR ROA), a non-GAAP financial measure, was 2.30% for the fourth quarter of 2020, compared to 1.94% for the third quarter of 2020. * Net interest margin increased 33 basis points from 3.28% for the third quarter of 2020 to 3.61% for the fourth quarter of 2020, primarily due to the accelerated recognition of Paycheck Protection Program (PPP) loan fees and continued reduction in the cost of interest bearing liabilities. * Cost of interest bearing deposits declined 25 basis points to 0.96% in the fourth quarter of 2020, compared to 1.21% in the third quarter of 2020. * The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 36.6% for the fourth quarter of 2020, compared to 41.7% for the third quarter of 2020. * A loan loss provision of $3.9 million was recorded for the fourth quarter of 2020, primarily due to increased allocations for economic factors associated with the COVID-19 pandemic and strong organic loan growth. The allowance for loan losses to total loans was 1.50% at December 31, 2020, compared to 1.39% at September 30, 2020. The allowance for loan losses to total loans, excluding $138.5 million of PPP loans, was 1.59% at December 31, 2020, compared to 1.51% at September 30, 2020. * Loan modification balances as a percent of totals loans, excluding PPP loans, decreased from 9.2% at the end of the third quarter of 2020 to 3.0% at the end of the fourth quarter of 2020. * The Company repurchased 624,933 shares of common stock at a weighted average price of $11.18 for a total of $7.0 million during the fourth quarter of 2020.

Annual 2020 Highlights

* Diluted earnings per common share for the year ended December 31, 2020 were $0.93, compared to $1.05 for the year ended December 31, 2019. Diluted earnings per common share for the year ended December 31, 2020 were $1.12, when excluding the $7.0 million of FHLB prepayment fees and tax-adjusting at an effective tax rate of 23.8%. * Pre-provision net revenue, a non-GAAP financial measure, was $54.7 million for the year ended December 31, 2020, an increase of 25.1%, compared to $43.7 million for the year ended December 31, 2019. PPNR ROA, a non-GAAP financial measure, was 2.09% for the year ended December 31, 2020, compared to 2.07% for the year ended December 31, 2019. * The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 40.5% for the year ended December 31, 2020, compared to 43.3% for the year ended December 31, 2019. * Extinguished $94.0 million of FHLB term advances with a weighted average rate of 2.83%, incurring $7.0 million of prepayment fees. * Gross loans increased $414.4 million at December 31, 2020, or 21.7%, compared to December 31, 2019. Excluding $138.5 million of PPP loans, gross loans increased 14.4%, at December 31, 2020, compared to December 31, 2019. * Deposits increased $678.3 million at December 31, 2020, or 37.2%, compared to December 31, 2019. Excluding brokered deposits and remaining PPP loan funds, deposits increased 27.8% at December 31, 2020, compared to December 31, 2019. * Tangible book value per share, a non-GAAP financial measure, increased 11.8%, or $0.98, to $9.31 at December 31, 2020, compared to $8.33 at December 31, 2019. * Net loan charge-offs as a percentage of average loans were 0.02% for the year ended December 31, 2020, compared to 0.01% for the year ended December 31, 2019. * The ratio of nonperforming assets to total assets was 0.03% at December 31, 2020, compared to 0.02% at December 31, 2019.

Recent Developments

The outbreak of the novel coronavirus, or COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has continued to create uncertainty and extraordinary change for the Company, its clients, its communities and the country as a whole. In response to this pandemic, the Company rapidly deployed its business continuity plan and continues to take steps to protect the health and safety of its employees and clients. Given the fluidity of the situation, management cannot estimate the duration and full impact of the COVID-19 pandemic on the economy, financial markets and the Company's financial condition and results of operations.

The Company's primary banking market area is in the Minneapolis-St.Paul-Bloomington, MN-WI Metropolitan Statistical Area. In November 2020, Minnesota's Governor issued a number of new restrictions impacting business and gatherings due to a significant increase in positive COVID-19 cases within the state. The new restrictions closed gyms and entertainment spaces and limited restaurants to take-out operations only. In January 2021, the November restrictions were eased on restaurants, gyms and entertainment spaces to allow the businesses to operate with limited capacity. The Company's branch operations, including openings and any restrictions, continue to operate in compliance with fluid statewide mandates, maintaining the safety of employees and clients as the utmost priority, all the while attempting to ensure clients' diverse banking needs are met.

The Company participated in the Small Business Administration's (SBA) PPP, which stemmed from the Coronavirus Aid, Relief and Economic Security, or CARES, Act that was signed into law on March 27, 2020. As of December 31, 2020, PPP principal loan balances totaled $138.5 million, compared to $181.6 million at September 30, 2020. Beginning in October 2020, the SBA began forgiving PPP loans. During the fourth quarter of 2020, the Company recognized $1.7 million in PPP deferred origination fees, including approximately $1.1 million from the forgiveness of $43.1 million of loans.

The SBA reopened the PPP loan program as authorized by the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, which was signed into law on December 27, 2020 (Economic Aid Act). The Company intends to participate in originating additional PPP loans under the Economic Aid Act through the new application deadline of March 31, 2021. As of January 25, 2021, the Company has submitted 203 loans totaling $29.8 million to the SBA under the reopened program.

The Company continues to monitor the loan portfolio and work with clients to provide relief when appropriate. The Company has developed programs for clients who are experiencing business and personal disruptions due to the COVID-19 pandemic by providing loan payment deferrals, interest-only, and extended amortization modifications. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic will not be considered troubled debt restructurings. New modification activity was limited in the fourth quarter of 2020. The Company had 26 modified loans totaling $66.6 million outstanding as of December 31, 2020, representing 3.0% of the total loan portfolio, excluding PPP loans.

The following table presents a rollforward of loan modification activity, by modification type, from September 30, 2020 to December 31, 2020:



(dollars in Interest-Only Payment Extended Totalthousands) Deferral Amortization

Principal Balance - $ 160,885 $ 30,496 $ - $ 191,381 September 30, 2020

Modification (112,150 ) (30,496 ) - (142,646 )Expired

MultipleModifications 21,362 597 4,834 26,793 Granted

New Modifications 1,545 16 - 1,561

Net Principal (10,537 ) - - (10,537 )Advances (Payments)

Principal Balance - $ 61,105 $ 613 $ 4,834 $ 66,552 December 31, 2020

The following table presents a summary of active loan modifications, by loan segment and modification type, at December 31, 2020:



Interest-Only Payment Extended Total Deferral Amortization

(dollars in Amount # of Amount # of Amount # of Amount # ofthousands) Loans Loans Loans Loans

Commercial $ 5,212 9 $ - - $ 4,834 1 $ 10,046 10

Real Estate Mortgage:

1 - 4Family 48 1 - - - - 48 1Mortgage

Multifamily 23,636 1 - - - - 23,636 1

CRE Owner - - 613 3 - - 613 3Occupied

CRENonowner 32,209 11 - - - - 32,209 11Occupied

Totals $ 61,105 22 $ 613 3 $ 4,834 1 $ 66,552 26

Modifications have been granted on a case-by-case basis based on the specific needs and circumstances affecting each borrower. Interest-only modifications have been primarily granted for three to six-month periods, but range up to twelve months. Payment deferral modifications have been granted for three to six-month periods.

Key FinancialMeasures



As of and for the Three Months Ended As of and for the Year Ended

December 31, September 30, December 31, December 31, December 31,

2020 2020 2019 2020 2019

Per Common Share Data

Basic Earnings $ 0.18 $ 0.25 $ 0.30 $ 0.95 $ 1.07 Per Share

DilutedEarnings Per 0.17 0.25 0.29 0.93 1.05 Share

Book Value Per 9.43 9.25 8.45 Share

Tangible BookValue Per 9.31 9.13 8.33 Share ^(1)

Basic WeightedAverage Shares 28,179,768 28,683,855 28,833,576 28,582,064 29,358,644 Outstanding

DilutedWeighted 28,823,384 29,174,601 29,561,103 29,170,220 29,996,776 Average Shares Outstanding

SharesOutstanding at 28,143,493 28,710,775 28,973,572 Period End



SelectedPerformance Ratios

Return onAverage Assets 0.70 % 1.05 % 1.53 % 1.04 % 1.49 %(Annualized)

Pre-ProvisionNet RevenueReturn on 2.30 1.94 2.09 2.09 2.07 Average Assets (Annualized) ^(1)

Return onAverage Common 7.45 10.84 14.16 10.51 13.50 Equity (Annualized)

Return onAverageTangible 7.55 10.98 14.37 10.65 13.72 Common Equity (Annualized)^(1)

Yield onInterest 4.46 4.30 5.01 4.51 5.01 Earning Assets

Yield on Total 4.89 4.73 5.33 4.90 5.31 Loans, Gross

Cost ofInterest 1.24 1.50 1.96 1.53 2.03 Bearing Liabilities

Cost of Total 0.69 0.87 1.34 0.93 1.42 Deposits

Net Interest 3.61 3.28 3.65 3.46 3.59 Margin ^(2)

Efficiency 59.0 42.3 49.6 49.0 47.4 Ratio^ (1)

AdjustedEfficiency 36.6 41.7 44.3 40.5 43.3 Ratio ^(1)

NoninterestExpense to 2.16 1.42 1.87 1.73 1.75 Average Assets (Annualized)

AdjustedNoninterestExpense to 1.34 1.40 1.67 1.44 1.59 Average Assets (Annualized) ^(1)

Loan to 93.0 99.4 104.9 Deposit Ratio

Core Depositsto Total 78.1 77.1 80.7 Deposits

TangibleCommon Equity 8.96 9.46 10.65 to Tangible Assets ^(1)



Capital Ratios(Bank Only) ^ (3)

Tier 1 10.89 % 11.24 % 11.01 % Leverage Ratio

Tier 1Risk-based 12.12 12.60 11.72 Capital Ratio

TotalRisk-based 13.37 13.85 12.16 Capital Ratio



Capital Ratios(Consolidated) ^ (3)

Tier 1 9.28 % 9.83 % 10.69 % Leverage Ratio

Tier 1Risk-based 10.35 11.03 11.39 Capital Ratio

TotalRisk-based 14.58 15.45 12.98 Capital Ratio

* Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. * Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%. * Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies.SelectedFinancial Data



December September June 30, March 31, December 31, 30, 31,

(dollars in 2020 2020 2020 2020 2019thousands)

SelectedBalance Sheet Data

Total Assets $ 2,927,345 $ 2,774,564 $ 2,754,463 $ 2,418,730 $ 2,268,830

Total Loans, 2,326,428 2,259,228 2,193,778 2,002,817 1,912,038Gross

Allowance for 34,841 31,381 27,633 24,585 22,526Loan Losses

Goodwill andOther 3,296 3,344 3,391 3,439 3,487Intangibles



Deposits 2,501,636 2,273,044 2,242,051 1,900,127 1,823,310

Tangible Common 262,109 262,088 253,799 244,704 241,307Equity^ (1)

TotalShareholders' 265,405 265,432 257,190 248,143 244,794Equity

Average TotalAssets - 2,816,032 2,711,755 2,622,272 2,317,040 2,221,370Quarter-to-Date

Average CommonEquity - 265,716 263,195 255,109 250,800 240,188Quarter-to-Date

* Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details.

For the Three Months Ended For the Year Ended

December September December December December 31, 30, 31, 31, 31,

(dollars in 2020 2020 2019 2020 2019thousands)

Selected Income Statement Data

Interest Income $ 30,699 $ 28,493 $ 27,419 $ 114,826 $ 103,778

Interest Expense 5,858 6,814 7,491 26,862 29,646

Net Interest Income 24,841 21,679 19,928 87,964 74,132

Provision for Loan 3,900 3,750 600 12,750 2,700Losses

Net Interest Incomeafter Provision for 20,941 17,929 19,328 75,214 71,432Loan Losses

Noninterest Income 986 1,157 1,112 5,839 3,826

Noninterest Expense 15,258 9,672 10,489 45,387 36,932

Income Before Income 6,669 9,414 9,951 35,666 38,326Taxes

Provision for Income 1,690 2,240 1,380 8,472 6,923Taxes

Net Income $ 4,979 $ 7,174 $ 8,571 $ 27,194 $ 31,403

Income Statement

Net Interest Income

Net interest income was $24.8 million for the fourth quarter of 2020, an increase of $3.2 million, or 14.6%, from $21.7 million in the third quarter of 2020, and an increase of $4.9 million, or 24.7%, from $19.9 million in the fourth quarter of 2019. The linked-quarter and year-over-year increases in net interest income were primarily due to growth in average interest earning assets, lower rates paid on deposits, and the recognition of PPP loan origination fees, offset partially by declining yields on loans. Average interest earning assets were $2.76 billion for the fourth quarter of 2020, an increase of $103.7 million, or 3.9%, from $2.66 billion for the third quarter of 2020, and an increase of $570.5 million, or 26.1%, from $2.19 billion for the fourth quarter of 2019. This increase in average interest earning assets during both periods was primarily due to continued organic growth in the loan portfolio, as well as the funding of PPP loans.

Net interest margin (on a fully tax-equivalent basis) for the fourth quarter of 2020 was 3.61%, a 33 basis point increase from 3.28% in the third quarter of 2020, and a 4 basis point decrease from 3.65% in the fourth quarter of 2019.

While the origination volume of PPP loans earning 1.00% negatively impacted net interest margin, the recognition of fees associated with the originations benefited net interest margin in the fourth quarter. The SBA began forgiving PPP loans in October of 2020, which accelerated the recognition of PPP fees in the fourth quarter of 2020. The Company recognized $1.7 million of PPP origination fees during the fourth quarter of 2020, compared to $716,000 during the third quarter of 2020. The elevated fee recognition is illustrated in the 5.05% PPP loan yield for the fourth quarter of 2020 compared to 2.57% for the third quarter of 2020. Even with headwinds surrounding earning asset yields, the Company was encouraged by another quarter of meaningful deposit repricing that ultimately translated to net interest margin expansion. The cost of total deposits declined 18 basis points to 0.69% in the fourth quarter of 2020, compared to 0.87% in the third quarter of 2020.

Given the volatility of 2020 and competing dynamics on both sides of the balance sheet, the Company was pleased to report only a 4 basis point decline in the net interest margin on a year-over-year basis. Despite a significant reduction in interest bearing deposit costs over the year, the historically low interest rate environment coupled with a more liquid balance sheet mix pressured earning asset yields lower and ultimately compressed the net interest margin. Furthermore, the Company's subordinated debenture issuance and the PPP loan origination volumes, both occurring during the second quarter of 2020, had a negative impact on the net interest margin during the year.

Interest income was $30.7 million for the fourth quarter of 2020, an increase of $2.2 million, or 7.7%, from $28.5 million in the third quarter of 2020, and an increase of $3.3 million, or 12.0%, from $27.4 million in the fourth quarter of 2019. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.46% in the fourth quarter of 2020, compared to 4.30% in the third quarter of 2020, and 5.01% in the fourth quarter of 2019. The linked-quarter increase in the yield on interest earning assets was due primarily to the recognition of $1.7 million of PPP loan origination fees, offset partially by lower market rates resulting in lower loan and security yields. The year-over-year decrease in the yield on interest earning assets was primarily due to the falling interest rate environment resulting in lower loan and security yields, the impact of PPP loans originated at a meaningfully lower rate than the aggregate loan portfolio yield, and an increase in cash balances due to extraordinary deposit inflows.

Loan interest income and loan fees remain the primary contributing factors to the changes in yield on interest earning assets. The aggregate loan yield, excluding PPP loans, decreased to 4.87% in the fourth quarter of 2020, which was 6 basis points lower than 4.93% in the third quarter of 2020, and 46 basis points lower than 5.33% in the fourth quarter of 2019. While loan fees have maintained a stable contribution to the aggregate loan yield, the historically low yield curve has resulted in a declining core yield on loans in comparison to both prior periods.

A summary of interest and fees recognized on loans, excluding PPP loans, for the periods indicated is as follows:



Three Months Ended

December September June March December 31, 2020 30, 2020 30, 31, 31, 2019 2020 2020

Interest 4.59 % 4.69 % 4.76 % 4.90 % 5.00 %

Fees 0.28 0.24 0.25 0.27 0.33

Yield on Loans,Excluding PPP 4.87 % 4.93 % 5.01 % 5.17 % 5.33 %Loans

Interest expense was $5.9 million for the fourth quarter of 2020, a decrease of $956,000, or 14.0%, from $6.8 million in the third quarter of 2020, and a decrease of $1.6 million, or 21.8%, from $7.5 million in the fourth quarter of 2019. The cost of interest bearing liabilities declined 26 basis points on a linked-quarter basis from 1.50% in the third quarter of 2020 to 1.24% in the fourth quarter of 2020, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 72 basis points from 1.96% in the fourth quarter of 2019 to 1.24% in the fourth quarter of 2020 primarily due to lower rates paid on deposits, offset partially by strong growth of interest bearing deposits and additional subordinated debentures.

Interest expense on deposits was $4.1 million for the fourth quarter of 2020, a decrease of $761,000, or 15.7%, from $4.8 million in the third quarter of 2020, and a decrease of $2.0 million, or 32.7%, from $6.1 million in the fourth quarter of 2019. The cost of total deposits declined 18 basis points on a linked-quarter basis from 0.87% in the third quarter of 2020, and declined 65 basis points on a year-over-year basis from 1.34% in the fourth quarter of 2019, to 0.69% in the fourth quarter of 2020, primarily due to deposit rate cuts consistent with a lower rate environment and the repricing of time deposits.

Given strong deposit growth and ample time deposit maturities over the next 12 months, the Company anticipates continued deposit repricing opportunities in the future. Moreover, the significant FHLB de-leveraging strategy executed in the fourth quarter of 2020 will begin to manifest lower interest bearing liability costs in subsequent quarters.

A summary of the Company's average balances, interest yields and rates, and net interest margin for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019 is as follows:



For the Three Months Ended

December 31, 2020 September 30, 2020 December 31, 2019

Average Interest Yield Average Interest Yield Average Interest Yield / / /

Balance & Fees Rate Balance & Fees Rate Balance & Fees Rate

(dollars in thousands)

Interest Earning Assets:

Cash $ 79,896 $ 32 0.16 % $ 101,787 $ 42 0.16 % $ 45,818 $ 150 1.30 %Investments

Investment Securities:

TaxableInvestment 290,093 1,632 2.24 256,808 1,389 2.15 168,911 1,228 2.88 Securities

Tax-ExemptInvestment 81,370 888 4.34 82,579 900 4.33 95,015 1,019 4.26 Securities^ (1)

TotalInvestment 371,463 2,520 2.70 339,387 2,289 2.68 263,926 2,247 3.38 Securities

PaycheckProtection 165,099 2,097 5.05 181,397 1,173 2.57 - - - Program Loans ^(2)

Loans ^(1)(2) 2,136,229 26,168 4.87 2,025,410 25,081 4.93 1,872,234 25,132 5.33

Total Loans 2,301,328 28,265 4.89 2,206,807 26,254 4.73 1,872,234 25,132 5.33

Federal Home 6,856 92 5.35 7,901 127 6.38 7,947 103 5.13 Loan Bank Stock

Total Interest 2,759,543 30,909 4.46 % 2,655,882 28,712 4.30 % 2,189,925 27,632 5.01 %Earning Assets

Noninterest 56,489 55,873 31,445 Earning Assets

Total Assets $ 2,816,032 $ 2,711,755 $ 2,221,370

InterestBearing Liabilities:

Deposits:

InterestBearing 353,806 420 0.47 % 306,162 400 0.52 % 257,777 503 0.77 %TransactionDeposits

Savings andMoney Market 538,030 1,003 0.74 501,246 1,106 0.88 487,424 1,963 1.60 Deposits

Time Deposits 362,469 1,607 1.76 369,975 1,899 2.04 353,351 2,151 2.41

Brokered 433,037 1,049 0.96 419,744 1,435 1.36 243,358 1,447 2.36 Deposits

Total InterestBearing 1,687,342 4,079 0.96 1,597,127 4,840 1.21 1,341,910 6,064 1.79 Deposits

Federal Funds 4,072 4 0.33 152 - 0.33 3,011 14 1.82 Purchased

Notes Payable 11,000 105 3.77 11,500 108 3.74 13,000 123 3.75

FHLB Advances 99,196 551 2.21 129,457 748 2.30 136,554 897 2.61

Subordinated 73,696 1,119 6.04 73,649 1,118 6.04 24,725 393 6.31 Debentures

Total InterestBearing 1,875,306 5,858 1.24 % 1,811,885 6,814 1.50 % 1,519,200 7,491 1.96 %Liabilities

NoninterestBearing Liabilities:

NoninterestBearing 654,299 615,214 451,265 TransactionDeposits

OtherNoninterest 20,711 21,461 10,717 BearingLiabilities

TotalNoninterest 675,010 636,675 461,982 BearingLiabilities

Shareholders' 265,716 263,195 240,188 Equity

TotalLiabilities and $ 2,816,032 $ 2,711,755 $ 2,221,370 Shareholders'Equity

Net InterestIncome / 25,051 3.22 % 21,898 2.80 % 20,141 3.05 %Interest RateSpread

Net Interest 3.61 % 3.28 % 3.65 %Margin ^(3)

TaxableEquivalent Adjustment:

Tax-ExemptInvestment (210) (219) (213) Securities

Net Interest $ 24,841 $ 21,679 $ 19,928 Income

* Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. * Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. * Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Provision for Loan Losses

The provision for loan losses was $3.9 million for the fourth quarter of 2020, an increase of $150,000 from $3.8 million for the third quarter of 2020, and an increase of $3.3 million from $600,000 for the fourth quarter of 2019. The allowance for loan losses to total loans was 1.50% at December 31, 2020, compared to 1.39% at September 30, 2020, and 1.18% at December 31, 2019. The allowance for loan losses to total loans, excluding $138.5 million of PPP loans, was 1.59% at December 31, 2020. The continued reserve build in the fourth quarter of 2020 was primarily attributable to growth of the loan portfolio, economic uncertainties, and evolving risks driven by the impacts of the COVID-19 pandemic.

As an emerging growth company, the Company is not subject to Accounting Standards Update No. 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments," or CECL, until January 1, 2023.

The following table presents the activity in the Company's allowance for loan losses for the periods indicated:



Three Months Ended Year Ended

December September December December December 31, 30, 31, 31, 31,

(dollars in 2020 2020 2019 2020 2019thousands)

Balance atBeginning of $ 31,381 $ 27,633 $ 22,124 $ 22,526 $ 20,031 Period

Provision for 3,900 3,750 600 12,750 2,700 Loan Losses

Charge-offs (463 ) (6 ) (205 ) (517 ) (388 )

Recoveries 23 4 7 82 183

Balance at End $ 34,841 $ 31,381 $ 22,526 $ 34,841 $ 22,526 of Period

Noninterest Income

Noninterest income was $986,000 for the fourth quarter of 2020, a decrease of $171,000 from $1.2 million for the third quarter of 2020, and a decrease of $126,000 from $1.1 million for the fourth quarter of 2019. The linked-quarter decrease was primarily due to decreased gains on sales of securities, offset partially by increased customer service fees. The year-over-year decrease was primarily due to decreased swap fees, partially offset by increased letter of credit fees and customer service fees.

The following table presents the major components of noninterest income for the periods indicated:



Three Months Ended Year Ended

December September December December December 31, 30, 31, 31, 31,

(dollars in thousands) 2020 2020 2019 2020 2019

Noninterest Income:

Customer Service Fees $ 251 $ 200 $ 196 $ 826 $ 760

Net Gain on Sales of 30 109 - 1,503 516 Securities

Net Gain on Sales of - - - - 69 Foreclosed Assets

Letter of Credit Fees 477 487 394 1,503 1,184

Debit Card Interchange 118 119 105 428 418 Fees

Swap Fees - - 255 907 255

Other Income 110 242 162 672 624

Totals $ 986 $ 1,157 $ 1,112 $ 5,839 $ 3,826

Noninterest Expense

Noninterest expense was $15.3 million for the fourth quarter of 2020, an increase of $5.6 million from $9.7 million for the third quarter of 2020, and an increase of $4.8 million from $10.5 million for the fourth quarter of 2019. The linked-quarter increase was primarily due to $5.6 million of prepayment fees associated with the extinguishment of $69.0 million of FHLB term advances, as well as increases in FDIC insurance assessment and occupancy and equipment expenses, partially offset by a decrease in salaries and employee benefits. The year-over-year increase was primarily attributable to increased data processing, professional and consulting fees and FHLB advance prepayment fees, offset partially by decreased marketing and advertising expenses and lower amortization of tax credit investments.

The following table presents the major components of noninterest expense for the periods indicated:



Three Months Ended Year Ended

December September December December December 31, 30, 31, 31, 31,

(dollars in thousands) 2020 2020 2019 2020 2019

Noninterest Expense:

Salaries and Employee $ 6,216 $ 6,550 $ 6,235 $ 25,568 $ 22,076Benefits

Occupancy and Equipment 979 894 883 3,258 3,085

FDIC Insurance Assessment 270 160 165 788 735

Data Processing 293 267 161 1,027 647

Professional and 566 492 437 1,966 1,690Consulting Fees

Information Technology 397 385 319 1,374 996and Telecommunications

Marketing and Advertising 143 94 299 788 1,507

Intangible Asset 48 48 48 191 191Amortization

Amortization of Tax 146 145 1,128 738 3,225Credit Investments

FHLB Advance Prepayment 5,613 - - 7,043 -Fees

Other Expense 587 637 814 2,646 2,780

Totals $ 15,258 $ 9,672 $ 10,489 $ 45,387 $ 36,932

The Company had 183 full-time equivalent employees at December 31, 2020, compared to 180 employees at September 30, 2020, and 160 employees at December 31, 2019. Despite the uncertainty surrounding the COVID-19 pandemic, the Company continues to attract strategic hires in lending, deposit gathering, technology and risk management roles. The efficiency ratio, a non-GAAP financial measure, was 59.0% for the fourth quarter of 2020, compared to 42.3% for the third quarter of 2020, and 49.6% for the fourth quarter of 2019. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 36.6% for the fourth quarter of 2020, 41.7% for the third quarter of 2020 and 44.3% for the fourth quarter of 2019. The efficiencies of the Company's "branch-light" model have been evident throughout the pandemic, and going forward, have positioned the Company well to continue making investments in technology as the industry adapts to evolving client behavior.

Income Taxes

The effective combined federal and state income tax rate for the fourth quarter of 2020 was 25.3%, an increase from 23.8% for the third quarter of 2020, and an increase from 13.9% for the fourth quarter of 2019. The higher effective combined rate in the fourth quarter of 2020 compared to the fourth quarter of 2019 was primarily due to fewer tax credits being recognized. The effective combined federal and state income tax rate was 23.8% for the year ended December 31, 2020, compared to 18.1% for the year ended December 31, 2019.

Balance Sheet

Total assets at December 31, 2020 were $2.93 billion, a 5.5% increase from $2.77 billion at September 30, 2020, and a 29.0% increase from $2.27 billion at December 31, 2019. The linked-quarter increase in total assets was primarily due to organic loan growth, purchases of investment securities, and excess cash balances linked to extraordinary deposit growth at year-end. The year-over-year increase in total assets was primarily due to organic loan growth, PPP loan growth, purchases of investment securities, and excess cash balances.

Total gross loans at December 31, 2020 were $2.33 billion, an increase of $67.2 million, or 3.0%, over total gross loans of $2.26 billion at September 30, 2020, and an increase of $414.4 million, or 21.7%, over total gross loans of $1.91 billion at December 31, 2019. The linked-quarter increase of $67.2 million was net of $43.1 million in PPP forgiven loans during the quarter. When excluding the PPP loans altogether, gross loans grew $110.3 million, or 21.2% on an annualized basis.

The following table presents the dollar composition of the Company's loan portfolio, by category, at the dates indicated:



December 31, September 30, June 30, 2020 March 31, December 31, 2020 2020 2020 2019

(dollars in thousands)

Commercial $ 304,220 $ 287,254 $ 302,536 $ 299,425 $ 276,035

PaycheckProtection 138,454 181,596 180,228 - - Program

Constructionand Land 170,217 175,882 191,768 183,350 196,776 Development

Real Estate Mortgage:

1 - 4 Family 294,479 286,089 289,456 272,590 260,611 Mortgage

Multifamily 626,465 585,814 522,491 536,380 515,014

CRE Owner 75,604 75,963 73,539 75,207 66,584 Occupied

CRE Nonowner 709,300 660,058 627,651 631,541 592,545 Occupied

Total RealEstate 1,705,848 1,607,924 1,513,137 1,515,718 1,434,754 MortgageLoans

Consumer and 7,689 6,572 6,109 4,324 4,473 Other

Total Loans, 2,326,428 2,259,228 2,193,778 2,002,817 1,912,038 Gross

Allowancefor Loan (34,841 ) (31,381 ) (27,633 ) (24,585 ) (22,526 )Losses

Net Deferred (9,151 ) (10,367 ) (10,287 ) (5,336 ) (5,512 )Loan Fees

Total Loans, $ 2,282,436 $ 2,217,480 $ 2,155,858 $ 1,972,896 $ 1,884,000 Net

Total deposits at December 31, 2020 were $2.50 billion, an increase of $228.6 million, or 10.1%, over total deposits of $2.27 billion at September 30, 2020, and an increase of $678.3 million, or 37.2%, over total deposits of $1.82 billion at December 31, 2019. Deposit growth in the fourth quarter of 2020 was primarily due to an increase in savings and money market deposits, offset partially by a decline in noninterest bearing and time deposits. The growth in savings and money market deposits is a result of both successful new client acquisition initiatives and pandemic-related accumulation of liquidity by existing clients. Given the fluid environment, management believes deposits could experience fluctuations in future periods.

The following table presents the dollar composition of the Company's deposit portfolio, by category, at the dates indicated:



December September June 30, March 31, December 31, 2020 30, 2020 2020 2020 31, 2019

(dollars in thousands)

NoninterestBearing $ 671,903 $ 685,773 $ 648,869 $ 476,217 $ 447,509 TransactionDeposits

InterestBearing 366,290 322,253 285,386 255,483 264,627 TransactionDeposits

Savings andMoney 657,617 498,397 516,543 514,113 516,785 MarketDeposits

Time 353,543 363,897 382,187 393,340 360,027 Deposits

Brokered 452,283 402,724 409,066 260,974 234,362 Deposits

Total $ 2,501,636 $ 2,273,044 $ 2,242,051 $ 1,900,127 $ 1,823,310 Deposits

Total shareholders' equity at December 31, 2020 and September 30, 2020 was $265.4 million, an increase of $20.6 million, or 8.4%, over total shareholders' equity of $244.8 million at December 31, 2019. The linked-quarter balances remained the same due to stock repurchases made under the Company's stock repurchase program offset by net income retained and an increase in unrealized gains in the securities portfolio. The year-over-year increase was due to net income retained, partially offset by stock repurchases made throughout 2020 under the Company's stock repurchase program.

Strong earnings and capital growth coupled with better asset quality visibility as loan modifications expired, supported management's decision to resume repurchases under the Company's stock repurchase program late in the third quarter of 2020. On October 27, 2020, the Company's Board of Directors approved a $15.0 million increase to the Company's previously announced stock repurchase program, increasing the amount of common stock that may be repurchased from $25.0 million to up to $40.0 million for the duration of the program, which is approved to run through October 27, 2022. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program in this fluid economic environment. During the fourth quarter of 2020, the Company repurchased 624,933 shares of its common stock, or approximately 2% of the basic weighted average shares outstanding during the quarter. Shares were repurchased at a weighted average price of $11.18 for a total of $7.0 million. At December 31, 2020, the remaining amount that could be used to repurchase shares under the stock repurchase program was $14.7 million.

Tangible book value per share, a non-GAAP financial measure, was $9.31 as of December 31, 2020, an increase of 2.0% from $9.13 as of September 30, 2020, and an increase of 11.8% from $8.33 as of December 31, 2019.

Asset Quality

Annualized net charge-offs as a percent of average loans for the fourth quarter of 2020 were 0.08%, compared to 0.00% for the third quarter of 2020, and 0.04% for the fourth quarter of 2019. At December 31, 2020, the Company's nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $775,000, or 0.03% of total assets, as compared to $433,000, or 0.02% of total assets at September 30, 2020, and $461,000 or 0.02% of total assets at December 31, 2019.

The Company has increased oversight and analysis of all segments of the loan portfolio in response to the COVID-19 pandemic, especially in vulnerable industries such as hospitality and restaurants, to proactively monitor evolving credit risk. With the change in economic conditions and the uncertain duration of the COVID-19 pandemic, the Company's portfolio is expected to be negatively impacted and management anticipates that delinquencies and charge-offs could rise in future periods. Loans that have potential weaknesses that warrant a watchlist risk rating at December 31, 2020, were $44.8 million, compared to $50.9 million at September 30, 2020. As the COVID-19 pandemic continues to evolve, the length and extent of the economic contraction may result in further watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at December 31, 2020 were $15.2 million, compared to $16.1 million at September 30, 2020.

The following table presents a summary of asset quality measurements at the dates indicated:



As of and for the Three Months Ended

December 31, September June 30, March 31, December 31, 30,

(dollars in 2020 2020 2020 2020 2019thousands)

SelectedAsset Quality Data

Loans 30-89 $ 13 $ 458 $ 153 $ 21 $ 403 Days Past Due

Loans 30-89Days Past Due 0.00 % 0.02 % 0.01 % 0.00 % 0.02 %to Total Loans

Nonperforming $ 775 $ 433 $ 602 $ 606 $ 461 Loans

NonperformingLoans to 0.03 % 0.02 % 0.03 % 0.03 % 0.02 %Total Loans

Foreclosed $ - $ - $ - $ - $ - Assets

NonaccrualLoans to 0.03 % 0.02 % 0.03 % 0.03 % 0.02 %Total Loans

NonaccrualLoans andLoans PastDue 90 Days 0.03 0.02 0.03 0.03 0.02 and StillAccruing toTotal Loans

Nonperforming $ 775 $ 433 $ 602 $ 606 $ 461 Assets ^(1)

NonperformingAssets to 0.03 % 0.02 % 0.02 % 0.03 % 0.02 %Total Assets ^(1)

Allowance forLoan Losses 1.50 1.39 1.26 1.23 1.18 to Total Loans

Allowance forLoan Lossesto Total 1.59 1.51 1.37 N/A N/A Loans, Excluding PPPLoans

Allowance forLoans Lossesto 4,495.61 7,247.34 4,590.20 4,056.93 4,886.33 NonperformingLoans

Net LoanCharge-Offs(Recoveries) 0.08 0.00 (0.01 ) 0.01 0.04 (Annualized) to AverageLoans

* Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due plus foreclosed assets. About the Company

Bridgewater Bancshares, Inc. is a financial holding company headquartered in St. Louis Park, Minnesota. The Company has two wholly owned subsidiaries, Bridgewater Bank, a Minnesota-chartered commercial bank founded in November 2005, and Bridgewater Risk Management, Inc., a captive insurance company founded in December 2016. Bridgewater Bank has two wholly owned subsidiaries, Bridgewater Investment Management, Inc. and BWB Holdings, LLC. Bridgewater Bank currently operates through 7 branches in Bloomington, Greenwood, Minneapolis (2), St. Louis Park, Orono, and St. Paul, all located within the Minneapolis-St. Paul-Bloomington metropolitan statistical area.

Use of Non-GAAP financial measures

In addition to the results presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), the Company routinely supplements its evaluation with an analysis of certain non-GAAP financial measures. The Company believes these non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors to help them understand the Company's operating performance and trends, and to facilitate comparisons with the performance of peers. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of non-GAAP disclosures used in this earnings release to the comparable GAAP measures are provided in the accompanying tables.

Forward-Looking Statements

This earnings release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, identified by words such as "may", "might", "should", "could", "predict", "potential", "believe", "expect", "continue", "will", "anticipate", "seek", "estimate", "intend", "plan", "projection", "would", "annualized", "target" and "outlook", or the negative version of those words or other comparable words of a future or forward-looking nature.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the negative effects of the COVID-19 pandemic, including its effects on the economic environment, our clients and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; loan concentrations in our portfolio; the overall health of the local and national real estate market; our ability to successfully manage credit risk; business and economic conditions generally and in the financial services industry, nationally and within our market area; our ability to maintain an adequate level of allowance for loan losses; new or revised accounting standards, including as a result of the future implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients; our ability to successfully manage liquidity risk; our dependence on non-core funding sources and our cost of funds; our ability to raise additional capital to implement our business plan; our ability to implement our growth strategy and manage costs effectively; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; the composition of our senior leadership team and our ability to attract and retain key personnel; the occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents; interruptions involving our information technology and telecommunications systems or third-party servicers; competition in the financial services industry; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us; the impact of recent and future legislative and regulatory changes; interest rate risk; fluctuations in the values of the securities held in our securities portfolio; the imposition of tariffs or other governmental policies impacting the value of products produced by our commercial borrowers; severe weather, natural disasters, wide spread disease or pandemics (including the COVID-19 pandemic), acts of war or terrorism or other adverse external events; potential impairment to the goodwill we recorded in connection with our past acquisition; and any other risks described in the "Risk Factors" sections of reports filed by the Company with the Securities and Exchange Commission.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Bridgewater Bancshares, Inc. andSubsidiaries

Consolidated Balance Sheets

(dollars in thousands, except sharedata)



December September December 31, 30, 31,

2020 2020 2019

(Unaudited) (Unaudited)

ASSETS

Cash and Cash Equivalents $ 160,675 $ 91,510 $ 31,935

Bank-Owned Certificates of Deposit 2,860 2,862 2,654

Securities Available for Sale, at 390,629 373,955 289,877Fair Value

Loans, Net of Allowance for LoanLosses of $34,841 at December 31,2020 (unaudited), $31,381 at 2,282,436 2,217,480 1,884,000September 30, 2020 (unaudited) and$22,526 at December 31, 2019

Federal Home Loan Bank (FHLB) Stock, 5,027 7,817 7,824at Cost

Premises and Equipment, Net 50,987 48,885 27,628

Accrued Interest 9,172 9,647 6,775

Goodwill 2,626 2,626 2,626

Other Intangible Assets, Net 670 718 861

Other Assets 22,263 19,064 14,650

Total Assets $ 2,927,345 $ 2,774,564 $ 2,268,830



LIABILITIES AND EQUITY

LIABILITIES

Deposits:

Noninterest Bearing $ 671,903 $ 685,773 $ 447,509

Interest Bearing 1,829,733 1,587,271 1,375,801

Total Deposits 2,501,636 2,273,044 1,823,310

Notes Payable 11,000 11,500 13,000

FHLB Advances 57,500 127,500 136,500

Subordinated Debentures, Net of 73,739 73,665 24,733Issuance Costs

Accrued Interest Payable 1,615 2,082 1,982

Other Liabilities 16,450 21,341 24,511

Total Liabilities 2,661,940 2,509,132 2,024,036



SHAREHOLDERS' EQUITY

Preferred Stock- $0.01 par value

Authorized 10,000,000; None Issuedand Outstanding at December 31, 2020 - - -and December 31, 2019

Common Stock- $0.01 par value

Common Stock - Authorized 75,000,000;Issued and Outstanding 28,143,493 atDecember 31, 2020 (unaudited), 281 287 29028,710,775 at September 30, 2020(unaudited) and 28,973,572 atDecember 31, 2019

Additional Paid-In Capital 103,714 110,010 112,093

Retained Earnings 154,831 149,852 127,637

Accumulated Other Comprehensive 6,579 5,283 4,774Income

Total Shareholders' Equity 265,405 265,432 244,794

Total Liabilities and Shareholders' $ 2,927,345 $ 2,774,564 $ 2,268,830Equity

BridgewaterBancshares,Inc. and Subsidiaries

ConsolidatedStatementsof Income

(dollars inthousands,except pershare data)



Three Months Ended Year Ended

December September December December December 31, 30, 31, 31, 31,

2020 2020 2019 2020 2019

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

INTEREST INCOME

Loans,Including $ 28,242 $ 26,224 $ 25,132 $ 105,492 $ 94,852Fees

Investment 2,333 2,100 2,034 8,720 7,773Securities

Other 124 169 253 614 1,153

TotalInterest 30,699 28,493 27,419 114,826 103,778Income



INTEREST EXPENSE

Deposits 4,079 4,840 6,064 19,813 23,996

Notes 105 108 123 439 501Payable

FHLB 551 748 897 3,390 3,407Advances

Subordinated 1,119 1,118 393 3,109 1,556Debentures

FederalFunds 4 - 14 111 186Purchased

TotalInterest 5,858 6,814 7,491 26,862 29,646Expense



NET INTEREST 24,841 21,679 19,928 87,964 74,132INCOME

Provisionfor Loan 3,900 3,750 600 12,750 2,700Losses



NET INTEREST INCOME AFTER

PROVISIONFOR LOAN 20,941 17,929 19,328 75,214 71,432LOSSES



NONINTEREST INCOME

Customer 251 200 196 826 760Service Fees

Net Gain onSales ofAvailable 30 109 - 1,503 516for SaleSecurities

Net Gain onSales of - - - - 69ForeclosedAssets

Other Income 705 848 916 3,510 2,481

TotalNoninterest 986 1,157 1,112 5,839 3,826Income



NONINTEREST EXPENSE

Salaries andEmployee 6,216 6,550 6,235 25,568 22,076Benefits

Occupancyand 979 894 883 3,258 3,085Equipment

Other 8,063 2,228 3,371 16,561 11,771Expense

TotalNoninterest 15,258 9,672 10,489 45,387 36,932Expense



INCOMEBEFORE 6,669 9,414 9,951 35,666 38,326INCOME TAXES

Provisionfor Income 1,690 2,240 1,380 8,472 6,923Taxes

NET INCOME $ 4,979 $ 7,174 $ 8,571 $ 27,194 $ 31,403



EARNINGS PER SHARE

Basic $ 0.18 $ 0.25 $ 0.30 $ 0.95 $ 1.07

Diluted 0.17 0.25 0.29 0.93 1.05

DividendsPaid Per - - - - -Share

Non-GAAPFinancial Measures

(dollars inthousands) (unaudited)



For the Three Months Ended For the Year Ended

December September December December December 31, 30, 31, 31, 31,

2020 2020 2019 2020 2019



Efficiency Ratio

Noninterest $ 15,258 $ 9,672 $ 10,489 $ 45,387 $ 36,932 Expense

Less:Amortization (48 ) (48 ) (48 ) (191 ) (191 )of Intangible Assets

AdjustedNoninterest $ 15,210 $ 9,624 $ 10,441 $ 45,196 $ 36,741 Expense

Net Interest $ 24,841 $ 21,679 $ 19,928 $ 87,964 $ 74,132 Income

Noninterest 986 1,157 1,112 5,839 3,826 Income

Less: Gain onSales of (30 ) (109 ) - (1,503 ) (516 )Securities

AdjustedOperating $ 25,797 $ 22,727 $ 21,040 $ 92,300 $ 77,442 Revenue

Efficiency 59.0 % 42.3 % 49.6 % 49.0 % 47.4 %Ratio



AdjustedEfficiency Ratio

Noninterest $ 15,258 $ 9,672 $ 10,489 $ 45,387 $ 36,932 Expense

Less:Amortization (146 ) (145 ) (1,128 ) (738 ) (3,225 )of Tax Credit Investments

Less: FHLBAdvance (5,613 ) - - (7,043 ) - Prepayment Fees

Less:Amortization (48 ) (48 ) (48 ) (191 ) (191 )of Intangible Assets

AdjustedNoninterest $ 9,451 $ 9,479 $ 9,313 $ 37,415 $ 33,516 Expense

Net Interest $ 24,841 $ 21,679 $ 19,928 $ 87,964 $ 74,132 Income

Noninterest 986 1,157 1,112 5,839 3,826 Income

Less: Gain onSales of (30 ) (109 ) - (1,503 ) (516 )Securities

AdjustedOperating $ 25,797 $ 22,727 $ 21,040 $ 92,300 $ 77,442 Revenue

AdjustedEfficiency 36.6 % 41.7 % 44.3 % 40.5 % 43.3 %Ratio

For the Three Months Ended

For the Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2020

2020

2019

2020

2019

Pre-Provision Net Revenue

Noninterest Income

$

986

$

1,157

$

1,112

$

5,839

$

3,826

Less: Gain on sales of Securities

(30

)

(109

)

-

(1,503

)

(516

)

Total Operating Noninterest Income

956

1,048

1,112

4,336

3,310

Plus: Net Interest income

24,841

21,679

19,928

87,964

74,132

Net Operating Revenue

$

25,797

$

22,727

$

21,040

$

92,300

$

77,442

Noninterest Expense

$

15,258

$

9,672

$

10,489

$

45,387

$

36,932

Less: Amortization of Tax Credit Investments

(146

)

(145

)

(1,128

)

(738

)

(3,225

)

Less: FHLB Advance Prepayment Fees

(5,613

)

-

-

(7,043

)

-

Total Operating Noninterest Expense

$

9,499

$

9,527

$

9,361

$

37,606

$

33,707

Pre-Provision Net Revenue

$

16,298

$

13,200

$

11,679

$

54,694

$

43,735

Plus:

Non-Operating Revenue Adjustments

30

109

-

1,503

516

Less:

Provision for Loan Losses

3,900

3,750

600

12,750

2,700

Non-Operating Expense Adjustments

5,759

145

1,128

7,781

3,225

Provision for Income Taxes

1,690

2,240

1,380

8,472

6,923

Net Income

$

4,979

$

7,174

$

8,571

$

27,194

$

31,403

Average Assets

$

2,816,032

$

2,711,755

$

2,221,370

$

2,617,579

$

2,114,211

Pre-Provision Net Revenue Return on Average Assets

2.30

%

1.94

%

2.09

%

2.09

%

2.07

%



For the Three Months Ended For the Year Ended

December 31, September 30, December 31, December 31, December 31,

2020 2020 2019 2020 2019

Pre-Provision Net Revenue

Noninterest $ 986 $ 1,157 $ 1,112 $ 5,839 $ 3,826 Income

Less: Gain onsales of (30 ) (109 ) - (1,503 ) (516 )Securities

TotalOperating 956 1,048 1,112 4,336 3,310 NoninterestIncome

Plus: NetInterest 24,841 21,679 19,928 87,964 74,132 income

Net Operating $ 25,797 $ 22,727 $ 21,040 $ 92,300 $ 77,442 Revenue



Noninterest $ 15,258 $ 9,672 $ 10,489 $ 45,387 $ 36,932 Expense

Less:Amortization (146 ) (145 ) (1,128 ) (738 ) (3,225 )of Tax CreditInvestments

Less: FHLBAdvance (5,613 ) - - (7,043 ) - PrepaymentFees

TotalOperating $ 9,499 $ 9,527 $ 9,361 $ 37,606 $ 33,707 NoninterestExpense



Pre-Provision $ 16,298 $ 13,200 $ 11,679 $ 54,694 $ 43,735 Net Revenue



Plus:

Non-OperatingRevenue 30 109 - 1,503 516 Adjustments

Less:

Provision for 3,900 3,750 600 12,750 2,700 Loan Losses

Non-OperatingExpense 5,759 145 1,128 7,781 3,225 Adjustments

Provision for 1,690 2,240 1,380 8,472 6,923 Income Taxes

Net Income $ 4,979 $ 7,174 $ 8,571 $ 27,194 $ 31,403



Average $ 2,816,032 $ 2,711,755 $ 2,221,370 $ 2,617,579 $ 2,114,211 Assets

Pre-ProvisionNet RevenueReturn on 2.30 % 1.94 % 2.09 % 2.09 % 2.07 %AverageAssets

As of and for the Three Months Ended

As of and for the Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2020

2020

2019

2020

2019

Tangible Common Equity and Tangible Common Equity/Tangible Assets

Common Equity

$

265,405

$

265,432

$

244,794

Less: Intangible Assets

(3,296

)

(3,344

)

(3,487

)

Tangible Common Equity

262,109

262,088

241,307

Total Assets

2,927,345

2,774,564

2,268,830

Less: Intangible Assets

(3,296

)

(3,344

)

(3,487

)

Tangible Assets

$

2,924,049

$

2,771,220

$

2,265,343

Tangible Common Equity/Tangible Assets

8.96

%

9.46

%

10.65

%

Tangible Book Value Per Share

Book Value Per Common Share

$

9.43

$

9.25

$

8.45

Less: Effects of Intangible Assets

(0.12

)

(0.12

)

(0.12

)

Tangible Book Value Per Common Share

$

9.31

$

9.13

$

8.33

Average Tangible Common Equity

Average Common Equity

$

265,716

$

263,195

$

240,188

$

258,736

$

232,539

Less: Effects of Average Intangible Assets

(3,323

)

(3,371

)

(3,510

)

(3,395

)

(3,582

)

Average Tangible Common Equity

$

262,393

$

259,824

$

236,678

$

255,341

$

228,957



As of and for the Three Months Ended As of and for the Year Ended

December 31, September 30, December 31, December December 31, 31,

2020 2020 2019 2020 2019



TangibleCommonEquity andTangible Common Equity/TangibleAssets

Common $ 265,405 $ 265,432 $ 244,794 Equity

Less:Intangible (3,296 ) (3,344 ) (3,487 ) Assets

TangibleCommon 262,109 262,088 241,307 Equity



Total 2,927,345 2,774,564 2,268,830 Assets

Less:Intangible (3,296 ) (3,344 ) (3,487 ) Assets

Tangible $ 2,924,049 $ 2,771,220 $ 2,265,343 Assets

TangibleCommonEquity/ 8.96 % 9.46 % 10.65 % TangibleAssets



TangibleBook Value Per Share

Book ValuePer Common $ 9.43 $ 9.25 $ 8.45 Share

Less:Effects of (0.12 ) (0.12 ) (0.12 ) Intangible Assets

TangibleBook Value $ 9.31 $ 9.13 $ 8.33 Per Common Share



AverageTangible Common Equity

AverageCommon $ 265,716 $ 263,195 $ 240,188 $ 258,736 $ 232,539 Equity

Less:Effects ofAverage (3,323 ) (3,371 ) (3,510 ) (3,395 ) (3,582 )IntangibleAssets

AverageTangible $ 262,393 $ 259,824 $ 236,678 $ 255,341 $ 228,957 Common Equity

BridgewaterBancshares,Inc. and Subsidiaries

Analysis ofAverageBalances,Yields and Rates(year-to-date)

(dollars inthousands,except per share data)(Unaudited)



December 31, 2020 December 31, 2019

Average Interest Yield/ Average Interest Yield/

Balance & Fees Rate Balance & Fees Rate

(dollars in thousands)

InterestEarning Assets:

Cash $ 80,113 $ 170 0.21 % $ 46,366 $ 755 1.63 %Investments

Investment Securities:

TaxableInvestment 234,873 5,712 2.43 149,967 4,354 2.90 Securities

Tax-ExemptInvestment 87,587 3,807 4.35 101,012 4,327 4.28 Securities^ (1)

TotalInvestment 322,460 9,519 2.95 250,979 8,681 3.46 Securities

PaycheckProtection 122,240 4,143 3.39 - - - Program Loans ^(2)

Loans ^(1)(2) 2,032,180 101,469 4.99 1,785,937 94,852 5.31

Total Loans 2,154,420 105,612 4.90 1,785,937 94,852

Federal HomeLoan Bank 8,866 444 5.01 7,916 398 5.03 Stock

TotalInterest 2,565,859 115,745 4.51 % 2,091,198 104,686 5.01 %Earning Assets

NoninterestEarning 51,720 23,013 Assets

Total Assets $ 2,617,579 $ 2,114,211

InterestBearing Liabilities:

Deposits:

InterestBearing 295,036 1,626 0.55 % 223,376 1,634 0.73 %Transaction Deposits

Savings andMoney Market 523,520 5,341 1.02 447,040 7,747 1.73 Deposits

Time Deposits 374,195 7,806 2.09 349,148 8,379 2.40

Brokered 348,126 5,040 1.45 261,023 6,236 2.39 Deposits

TotalInterest 1,540,877 19,813 1.29 1,280,587 23,996 1.87 Bearing Deposits

Federal Funds 7,239 111 1.53 7,433 186 2.50 Purchased

Notes Payable 11,749 439 3.73 13,750 501 3.64

FHLB Advances 148,524 3,390 2.28 133,968 3,407 2.54

Subordinated 50,954 3,109 6.10 24,686 1,556 6.30 Debentures

TotalInterest 1,759,343 26,862 1.53 % 1,460,424 29,646 2.03 %Bearing Liabilities

NoninterestBearing Liabilities:

NoninterestBearing 579,595 414,377 Transaction Deposits

OtherNoninterest 19,905 6,871 Bearing Liabilities

TotalNoninterest 599,500 421,248 Bearing Liabilities

Shareholders' 258,736 232,539 Equity

TotalLiabilitiesand $ 2,617,579 $ 2,114,211 Shareholders'Equity

Net InterestIncome / 88,883 2.98 % 75,040 2.98 %Interest Rate Spread

Net Interest 3.46 % 3.59 %Margin ^(3)

TaxableEquivalent Adjustment:

Tax-ExemptInvestment (919 ) (908 ) Securities

Net Interest $ 87,964 $ 74,132 Income

* Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. * Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. * Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. View source version on businesswire.com: https://www.businesswire.com/news/home/20210128005324/en/

CONTACT: Investor Relations Contact: Jerry Baack Chief Executive Officer investorrelations@bwbmn.com 952-893-6866