Business Wire | Jul 30, 2020 07:05AM EDT

Bridgewater Bancshares, Inc. Announces Second Quarter 2020 Earnings

Jul. 30, 2020

BLOOMINGTON, Minn.--(BUSINESS WIRE)--Jul. 30, 2020--Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $7.6 million for the second quarter of 2020, a 2.1% increase over net income of $7.4 million for the first quarter of 2020, and a 5.1% decrease over net income of $8.0 million for the second quarter of 2019. Net income per diluted common share for the second quarter of 2020 and 2019 was $0.26.

"I'm extremely proud of our team and their resiliency to navigate this challenging environment, in what has proved be a quarter of mixed emotions," commented Chairman, Chief Executive Officer, and President, Jerry Baack. "We believe our strong pre-provision earnings, driven by our top quartile efficiency, provide flexibility for us to continue weathering this pandemic. During the quarter, we enhanced our firm foundation by increasing our reserve build and successfully issuing $50 million of 5.25% Fixed-to-Floating Rate Subordinated Notes due June 2030 in a private placement. Our team has undergone massive efforts to remain connected with our clients, to understand the impacts to their operations, and we are actively working to support them during this unprecedented time. We worked tirelessly to help more than 1,100 clients, new and existing, obtain Paycheck Protection Program, or PPP, funds and have further supported borrowers through our loan modification programs. Although this teamwork inspired us this quarter, recent tragic events hit very close to home in our own Minneapolis community and bring to light the social injustices that exist. It is an important time for change and while there is much work to do, our team is committed to helping our communities emerge stronger and more united."

Second Quarter 2020 Financial Results

Diluted Nonperforming Adjusted Tangible commonROA ROE Earnings assets to efficiency equity per share total assets ratio ^(1) to tangible assets ^(1)

1.17% 11.98% $ 0.26 0.02% 40.4% 9.23%

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

Linked-Quarter Highlights

* Annualized pre-provision net revenue return on average assets, a non-GAAP financial measure, was 2.00% for the second quarter of 2020, compared to 2.11% for the first 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 40.4% for the second quarter of 2020, compared to 44.1% for the first quarter of 2020.

* Through the Company's participation in the Small Business Administration's (SBA) Paycheck Protection Program (PPP) over 1,100 loans were funded to both existing and new clients. As of June 30, 2020, principal balances originated during the quarter totaled $180.2 million and resulted in fees from the SBA, net of costs, of $5.7 million, $528,000 of which was recognized in the second quarter of 2020.

* Deposits increased $341.9 million to $2.24 billion at June 30, 2020, compared to March 31, 2020. The growth included $133.8 million in organic deposits, or 28.2% annualized, excluding an estimated $60.0 million in growth attributable to remaining PPP loan funds.

* Issued $50.0 million of 5.25% Fixed-to-Floating Rate Subordinated Notes due June 2030 in a private placement on June 19, 2020.

* Annualized net loan charge-offs (recoveries) as a percent of average loans were (0.01)% for the second quarter of 2020, compared to 0.01% for the first quarter of 2020.

* The ratio of nonperforming assets to total assets was 0.02% at June 30, 2020, compared to 0.03% at March 31, 2020.

* A loan loss provision of $3.0 million was recorded for the second quarter of 2020, primarily due to increased allocations for economic factors associated with the COVID-19 pandemic. The allowance for loan losses to total loans was 1.26% at June 30, 2020, compared to 1.23% at March 31, 2020. The allowance for loan losses to total loans, excluding $180.2 million of PPP loans, was 1.37% at June 30, 2020.

Year-Over-Year Highlights

* Diluted earnings per common share for the second quarter of 2020 were $0.26, compared to $0.26 for the second quarter of 2019.

* Cost of deposits declined 47 basis points to 0.99% in the second quarter of 2020 compared to 1.46% in the second quarter of 2019.

* Tangible book value per share, a non-GAAP financial measure, increased 13.1%, or $1.02, to $8.80 at June 30, 2020, compared to $7.78 at June 30, 2019.

* Gross loans increased $408.9 million at June 30, 2020, or 22.9%, compared to June 30, 2019. Year-over-year loan growth was $228.6 million, excluding $180.2 million of PPP loans. Year-to-date annualized loan growth for 2020, excluding PPP loans, was 10.6% as of June 30, 2020.

* Deposits increased $542.8 million at June 30, 2020, or 31.9%, compared to June 30, 2019. Year-over-year growth consisted of $316.7 million in organic deposits, excluding an estimated $60.0 million in growth attributable to remaining PPP loan funds. Year-to-date annualized organic deposit growth, excluding remaining PPP loan funds, for 2020 was 23.2% as of June 30, 2020.

* The ratio of nonperforming assets to total assets was 0.02% at June 30, 2020, compared to 0.07% at June 30, 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. Proactively, defensive strategies have been employed in all departments to ensure the Company is well positioned to battle the unforeseen implications of the COVID-19 pandemic. 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. At this point, management does not expect that the Company's financial results in future quarters will track with the Company's historical performance.

The Company's primary banking market area is the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area. In Minnesota, the Governor issued an order on March 25, 2020 that, subject to limited exceptions, required individuals to stay at home and non-essential businesses to cease all activities, other than minimum basic operations. This order was lifted as of May 18, 2020 and the state entered a phased-in approach to reopening, where businesses must operate under certain restrictions based on the nature and industry of the business. As a result of the original order and restrictions, Minnesota has experienced a dramatic and sudden increase in unemployment levels, significant stress on personal and business income, and recessionary economic conditions. Recent increases in COVID-19 infections across the nation have created uncertainty surrounding the future recovery of many companies' operations and the local economy. Fortunately, to date Minnesota has been less impacted by the virus than other states in terms of cases and deaths.

The Company's operations are being conducted in material compliance with current federal, state and local government guidelines regarding social distancing, sanitation, and personal hygiene. Throughout the quarter, bank branches operated under modified hours and limited locations. In June, the Company started to expand hours and reopen branch locations providing clients with full-service options at all but the Company's two downtown locations, where offices remain closed and traffic would be minimal. To ensure the safety of the Company's staff and clients, masks are mandatory and proper social distancing protocols are enforced. Non-branch personnel continue to work remotely. A COVID-19 Preparedness Plan has been created outlining the protocols for employees as they return to the office which is currently scheduled for mid-August. Additional details about the Company's COVID-19 pandemic assistance programs, including relevant disclosures and up-to-date information, are maintained at bwbmn.com.

During the second quarter, the Company participated in the SBA's PPP which stemmed from the Coronavirus, Aid, Relief and Economic Security, or CARES, Act that was signed into law on March 27, 2020. The Company committed significant efforts related to PPP loan origination in the second quarter of 2020, and will shift such efforts to forgiveness processing in future quarters. The following table summarizes PPP loan originations by balance segment:

As of and for the three months ended June 30, 2020

Number Principal Net Net Origination Origination

(dollars in thousands) of Loans Balance Fees Generated Fees Earned

Balance Segment

Less than $350 1,004 $ 64,429 $ 2,934 $ 263

$350 to $2,000 107 80,618 2,388 231

Greater than $2,000 11 35,181 349 34

Totals 1,122 $ 180,228 $ 5,671 $ 528

The Company has increased oversight and analysis of all credits, 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 expects delinquencies and charge-offs to rise in future periods. The Company will continue to monitor credits closely, while working 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 and interest-only 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.

The following table presents a summary of closed loan modifications, by loan segment and modification type, as of June 30, 2020:

Interest-Only Payment Deferral Total

Amount # of Amount # of Amount # of Loans Loans Loans

(dollars in thousands)

Commercial $ 17,615 36 $ 13,355 14 $ 30,970 50

Construction and 133 1 - - 133 1Land Development

Real Estate Mortgage:

1 - 4 Family 8,037 22 420 2 8,457 24Mortgage

Multifamily 41,320 6 16,251 3 57,571 9

CRE Owner Occupied 7,397 14 1,502 3 8,899 17

CRE Nonowner 100,805 41 86,175 18 186,980 59Occupied

Consumer and Other - - - - - -

Totals $ 175,307 120 $ 117,703 40 $ 293,010 160

Modifications have been granted based on specific needs and circumstances affecting each borrower. Interest-only modifications have been primarily granted for a three to six month period, but range up to twelve months. Payment deferral modifications have been granted for a three to six month period. Management anticipates the loan modifications may continue throughout 2020.

The Company's construction of a new corporate headquarters in St. Louis Park is nearing completion. Despite the challenges faced with the COVID-19 pandemic, the Company does not anticipate delays in the scheduled third quarter 2020 opening of the new building. Management expects that occupancy and equipment expense will rise in future periods related to the operations and depreciation of the new building.

Key Financial Measures

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

June 30, March 31, June 30, June 30, June 30,

2020 2020 2019 2020 2019

Per Common Share Data

Basic Earnings $ 0.26 $ 0.26 $ 0.27 $ 0.52 $ 0.50 Per Share

DilutedEarnings Per 0.26 0.25 0.26 0.51 0.49 Share

Book Value Per 8.92 8.61 7.90 8.92 7.90 Share

Tangible BookValue Per 8.80 8.49 7.78 8.80 7.78 Share ^(1)

Basic WeightedAverage Shares 28,676,441 28,791,494 29,703,024 28,733,968 29,899,241 Outstanding

DilutedWeighted 29,165,157 29,502,245 30,312,039 29,350,426 30,510,180 Average SharesOutstanding

SharesOutstanding at 28,837,560 28,807,375 28,986,729 28,837,560 28,986,729 Period End



SelectedPerformance Ratios

Return onAverage Assets 1.17 % 1.29 % 1.55 % 1.22 % 1.49 %(Annualized)

Pre-ProvisionNet RevenueReturn on 2.00 2.11 2.08 2.05 2.05 Average Assets(Annualized)^(1)

Return onAverage Common 11.98 11.94 13.88 11.96 13.25 Equity(Annualized)

Return onAverageTangible 12.14 12.10 14.10 12.12 13.47 Common Equity(Annualized)^(1)

Yield onInterest 4.45 4.90 5.05 4.66 5.02 Earning Assets

Yield on Total 4.85 5.17 5.33 5.00 5.30 Loans, Gross

Cost ofInterest 1.58 1.84 2.07 1.70 2.07 BearingLiabilities

Cost of Total 0.99 1.27 1.46 1.12 1.46 Deposits

Net Interest 3.38 3.59 3.60 3.48 3.57 Margin ^(2)

Efficiency 48.6 44.4 50.1 46.5 47.20 Ratio^ (1)

AdjustedEfficiency 40.4 44.1 42.7 42.2 42.9 Ratio ^(1)

NoninterestExpense to 1.64 1.69 1.84 1.67 1.72 Average Assets(Annualized)

AdjustedNoninterestExpense to 1.37 1.68 1.57 1.51 1.56 Average Assets(Annualized) ^(1)

Loan to 97.8 105.4 105.0 Deposit Ratio

Core Depositsto Total 75.7 78.6 78.3 Deposits

TangibleCommon Equity 9.23 10.13 10.64 to TangibleAssets ^(1)



Capital Ratios(Bank Only)^ (3)

Tier 1 11.36 % 10.93 % 10.99 % Leverage Ratio

Tier 1Risk-based 12.96 11.53 11.73 Capital Ratio

TotalRisk-based 14.21 12.67 12.67 Capital Ratio



Capital Ratios(Consolidated) ^ (3)

Tier 1 9.94 % 10.51 % 10.75 % Leverage Ratio

Tier 1Risk-based 11.39 11.10 11.48 Capital Ratio

TotalRisk-based 15.99 13.38 13.70 Capital Ratio

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

(2) Amounts calculated on a tax-equivalent basis using the statutory federaltax rate of 21%.

(3) Preliminary data. Current period subject to change prior to filings withapplicable regulatory agencies.

Selected Financial Data

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

(dollars in 2020 2020 2019 2019 2019thousands)

SelectedBalance Sheet Data

Total Assets $ 2,754,463 $ 2,418,730 $ 2,268,830 $ 2,232,339 $ 2,123,631

Total Loans, 2,193,778 2,002,817 1,912,038 1,846,218 1,784,903Gross

Allowance for 27,633 24,585 22,526 22,124 21,362Loan Losses

Goodwill andOther 3,391 3,439 3,487 3,535 3,582Intangibles



Deposits 2,242,051 1,900,127 1,823,310 1,802,236 1,699,265

Tangible Common 253,799 244,704 241,307 232,524 225,555Equity^ (1)

TotalShareholders' 257,190 248,143 244,794 236,059 229,137Equity

Average TotalAssets - 2,622,272 2,317,040 2,221,370 2,168,909 2,069,707Quarter-to-Date

Average CommonEquity - 255,109 250,800 240,188 232,590 231,374Quarter-to-Date

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



For the Three Months Ended For the Six Months Ended

June 30, March June 30, June 30, June 30, 31,

(dollars in thousands) 2020 2020 2019 2020 2019

Selected Income Statement Data

Interest Income $ 28,166 $ 27,468 $ 25,520 $ 55,634 $ 49,787

Interest Expense 6,824 7,366 7,382 14,190 14,518

Net Interest Income 21,342 20,102 18,138 41,444 35,269

Provision for Loan 3,000 2,100 600 5,100 1,200Losses

Net Interest Incomeafter Provision for Loan 18,342 18,002 17,538 36,344 34,069Losses

Noninterest Income 1,977 1,719 1,134 3,696 1,768

Noninterest Expense 10,711 9,746 9,474 20,457 17,359

Income Before Income 9,608 9,975 9,198 19,583 18,478Taxes

Provision for Income 2,010 2,532 1,189 4,542 3,451Taxes

Net Income $ 7,598 $ 7,443 $ 8,009 $ 15,041 $ 15,027

Income Statement

Net Interest Income

Net interest income was $21.3 million for the second quarter of 2020, an increase of $1.2 million, or 6.2%, from $20.1 million in the first quarter of 2020, and an increase of $3.2 million, or 17.7%, from $18.1 million in the second quarter of 2019. The linked-quarter increase in net interest income was primarily due to growth in average interest earning assets and lower rates paid on deposits, offset partially by lower rates on interest earning assets. The year-over-year increase in net interest income was largely attributed to growth in average interest earning assets, which increased by $521.7 million, or 25.5%, to $2.57 billion for the second quarter of 2020, from $2.05 billion for the second quarter of 2019. This increase in average interest earning assets was primarily due to continued organic growth in the loan portfolio and most recently, the funding of PPP loans.

Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2020 was 3.38%, a 21 basis point decrease from 3.59% in the first quarter of 2020, and a 22 basis point decrease from 3.60% in the second quarter of 2019. While the Company is encouraged by the continued reduction in the cost of interest bearing liabilities during the second quarter of 2020, the linked-quarter decrease in net interest margin was primarily attributed to a meaningful increase in on-balance sheet liquidity in conjunction with the historically low and flat yield curve weighing on subsequent earning asset yields. Furthermore, the Company's participation in the PPP generated strong loan origination volume during the second quarter of 2020; however, the interest rate of 1.00% earned on these loans is significantly lower than the aggregate loan yield, thus impacting the net interest margin during the quarter. It is worth noting that the core net interest margin, excluding PPP loans and corresponding deposit balances, was 3.43% for the second quarter of 2020. The year-over-year decline in net interest margin largely followed the same themes as the quarter. 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.

Interest income was $28.2 million for the second quarter of 2020, an increase of $698,000, or 2.5%, from $27.5 million in the first quarter of 2020, and an increase of $2.6 million, or 10.4%, from $25.5 million in the second quarter of 2019. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.45% in the second quarter of 2020, compared to 4.90% in the first quarter of 2020, and 5.05% in the second quarter of 2019. The linked-quarter decrease in the yield on interest earning assets was a function of the historically low yield curve combined with the Company's deliberate shift to a more liquid balance sheet composition given the uncertain economic environment. The year-over-year decline in the yield on interest earning assets was primarily due to the falling interest rate environment.

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 5.01% in the second quarter of 2020, which is 16 basis points lower than 5.17% in the first quarter of 2020, and 32 basis points lower than 5.33% in the second quarter of 2019. While loan fees have maintained a stable contribution to aggregate loan yield, the historically low and flat 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

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

Interest 4.76 % 4.90 % 5.00 % 5.07 % 5.10 %

Fees 0.25 0.27 0.33 0.25 0.23

Yield on 5.01 % 5.17 % 5.33 % 5.32 % 5.33 %Loans

Interest expense was $6.8 million for the second quarter of 2020, a decrease of $542,000, or 7.4%, from $7.4 million in the first quarter of 2020, and a decrease of $558,000, or 7.6%, from $7.4 million in the second quarter of 2019. The cost of interest bearing liabilities declined 26 basis points on a linked-quarter basis from 1.84% in the first quarter of 2020 to 1.58% in the second quarter of 2020, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 49 basis points from 2.07% in the second quarter of 2019 to 1.58% in the second quarter of 2020. Given strong deposit growth and ample time deposit maturities over the next 12 months, the Company anticipates meaningful deposit repricing opportunities in future quarters. Furthermore, the Company will continue to evaluate strategies similar to the recent strategy that involved prepaying $25.0 million of long term FHLB advances with a blended 2.89% cost and supplementing with much lower cost core deposits.

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

For the Three Months Ended

June 30, 2020 March 31, 2020 June 30, 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 Investments $ 109,073 $ 37 0.14 % $ 29,462 $ 59 0.81 % $ 38,142 $ 171 1.80 %

Investment Securities:

Taxable Investment 203,559 1,304 2.58 188,186 1,387 2.96 140,890 1,058 3.01 Securities

Tax-Exempt Investment 91,793 996 4.37 94,728 1,024 4.35 103,223 1,103 4.28 Securities^ (1)

Total Investment 295,352 2,300 3.13 282,914 2,411 3.43 244,113 2,161 3.55 Securities

Paycheck Protection 139,235 873 2.52 - - - - - - Program Loans ^(2)

Loans ^(1)(2) 2,013,163 25,070 5.01 1,954,959 25,150 5.17 1,755,686 23,321 5.33

Total Loans 2,152,398 25,943 4.85 1,954,959 25,150 5.17 1,755,686 23,321 5.33

Federal Home Loan Bank 10,469 125 4.81 10,270 100 3.93 7,694 100 5.23 Stock

Total Interest Earning 2,567,292 28,405 4.45 % 2,277,605 27,720 4.90 % 2,045,635 25,753 5.05 %Assets

Noninterest Earning 54,980 39,435 24,072 Assets

Total Assets $ 2,622,272 $ 2,317,040 $ 2,069,707

Interest Bearing Liabilities:

Deposits:

Interest Bearing 272,565 377 0.56 % 246,843 431 0.70 % 202,886 387 0.77 %Transaction Deposits

Savings and Money Market 521,313 1,327 1.02 533,578 1,905 1.44 431,716 1,938 1.80 Deposits

Time Deposits 388,357 2,122 2.20 376,154 2,177 2.33 354,026 2,120 2.40

Brokered Deposits 319,711 1,344 1.69 218,289 1,211 2.23 266,804 1,575 2.37

Total Interest Bearing 1,501,946 5,170 1.38 1,374,864 5,724 1.67 1,255,432 6,020 1.92 Deposits

Federal Funds Purchased 9 - 0.72 24,835 107 1.74 2,089 12 2.24

Notes Payable 12,000 111 3.72 12,505 115 3.70 14,000 130 3.72

FHLB Advances 193,819 1,064 2.21 172,379 1,027 2.40 131,385 827 2.52

Subordinated Debentures 31,228 479 6.17 24,744 393 6.39 24,673 393 6.39

Total Interest Bearing 1,739,002 6,824 1.58 % 1,609,327 7,366 1.84 % 1,427,579 7,382 2.07 %Liabilities

Noninterest Bearing Liabilities:

Noninterest Bearing 603,456 444,201 401,480 Transaction Deposits

Other Noninterest Bearing 24,705 12,712 9,274 Liabilities

Total Noninterest Bearing 628,161 456,913 410,754 Liabilities

Shareholders' Equity 255,109 250,800 231,374

Total Liabilities and $ 2,622,272 $ 2,317,040 $ 2,069,707 Shareholders' Equity

Net Interest Income / 21,581 2.87 % 20,354 3.06 % 18,371 2.98 %Interest Rate Spread

Net Interest Margin ^(3) 3.38 % 3.59 % 3.60 %

Taxable Equivalent Adjustment:

Tax-Exempt Investment (239 ) (252 ) (233 ) Securities

Net Interest Income $ 21,342 $ 20,102 $ 18,138



Interest income and average rates for tax-exempt investment securities and(1) loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%.

(2) 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(3) 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 $3.0 million for the second quarter of 2020, an increase of $900,000 from $2.1 million for the first quarter of 2020, and an increase of $2.4 million from $600,000 for the second quarter of 2019. The allowance for loan losses to total loans was 1.26% at June 30, 2020, compared to 1.23% at March 31, 2020, and 1.20% at June 30, 2019. The allowance for loan losses to total loans, excluding $180.2 million of PPP loans, was 1.37% at June 30, 2020. The reserve build in the second quarter of 2020 was attributable to changes in economic conditions and evolving risks identified in certain commercial sectors driven by the impact 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 Six Months Ended

June 30, March 31. June 30, June 30, June 30,

(dollars in 2020 2020 2019 2020 2019thousands)

Balance atBeginning of $ 24,585 $ 22,526 $ 20,607 $ 22,526 $ 20,031 Period

Provision for 3,000 2,100 600 5,100 1,200 Loan Losses

Charge-offs (1 ) (47 ) (3 ) (48 ) (39 )

Recoveries 49 6 158 55 170

Balance at End $ 27,633 $ 24,585 $ 21,362 $ 27,633 $ 21,362 of Period

Noninterest Income

Noninterest income was $2.0 million for the second quarter of 2020, an increase of $258,000 from $1.7 million for the first quarter of 2020, and an increase of $843,000 from $1.1 million for the second quarter of 2019. The linked-quarter increase was primarily due to increased gains on sales of securities, offset partially by decreased customer service and swap fees. Customer service fees have declined due to lower account activity and ongoing fee waivers as a result of the COVID-19 pandemic. The year-over-year increase was primarily due to increased gains on sales of securities and letter of credit fees.

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



Three Months Ended Six Months Ended

June March June June June 30, 31, 30, 30, 30,

(dollars in thousands) 2020 2020 2019 2020 2019

Noninterest Income:

Customer Service Fees $ 135 $ 240 $ 189 $ 375 $ 380

Net Gain on Sales of 1,361 3 463 1,364 458Securities

Letter of Credit Fees 265 274 213 539 459

Debit Card Interchange Fees 99 92 109 191 197

Swap Fees - 907 - 907 -

Other Income 117 203 160 320 274

Totals $ 1,977 $ 1,719 $ 1,134 $ 3,696 $ 1,768

Noninterest Expense

Noninterest expense was $10.7 million for the second quarter of 2020, an increase of $965,000 from $9.7 million for the first quarter of 2020, and an increase of $1.2 million from $9.5 million for the second quarter of 2019. The linked-quarter increase was primarily due to $1.4 million of FHLB advance prepayment fees incurred for the extinguishment of $25.0 million of fixed rate advances and higher amortization of tax credit investments. The increase was partially offset by general decreases in other operating expenses due to the COVID-19 pandemic, mainly marketing and advertising. The decrease in salaries expense was attributable to a $316,000 deferral of salary costs associated with the origination of PPP loans; these costs are netted against fees and amortized as a yield adjustment over the life of the loan. The year-over-year increase was attributed to increased salaries and employee benefits and FHLB advance prepayment fees, offset partially by decreased marketing and advertising and amortization of tax credit investments.

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

Three Months Ended Six Months Ended

June 30, March June June 30, June 30, 31, 30,

(dollars in thousands) 2020 2020 2019 2020 2019

Noninterest Expense:

Salaries and Employee $ 6,348 $ 6,454 $ 5,124 $ 12,802 $ 9,926Benefits

Occupancy and Equipment 672 713 785 1,385 1,441

FDIC Insurance Assessment 168 190 285 358 570

Data Processing 238 229 151 467 304

Professional and 423 485 451 908 839Consulting Fees

Information Technology and 326 266 208 592 444Telecommunications

Marketing and Advertising 85 466 404 551 869

Intangible Asset 47 48 47 95 95Amortization

Amortization of Tax Credit 362 85 1,390 447 1,567Investments

FHLB Advance Prepayment 1,430 - - 1,430 -Fees

Other Expense 612 810 629 1,422 1,304

Totals $ 10,711 $ 9,746 $ 9,474 $ 20,457 $ 17,359

The Company had 173 full-time equivalent employees at June 30, 2020, compared to 170 employees at March 31, 2020, and 150 employees at June 30, 2019. Despite the uncertainty surrounding the COVID-19 pandemic, the Company continues to attract in-market lenders and deposit gatherers from previous M&A disruption.

While the Company has always prided itself on a "branch-light" footprint, the efficiencies of this model garnered 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. The efficiency ratio, a non-GAAP financial measure, was 48.6% for the second quarter of 2020, compared to 44.4% for the first quarter of 2020, and 50.1% for the second quarter of 2019. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 40.4% for the second quarter of 2020, 44.1% for the first quarter of 2020 and 42.7% for the second quarter of 2019.

Income Taxes

The effective combined federal and state income tax rate for the second quarter of 2020 was 20.9%, a decrease from 25.4% for the first quarter of 2020 and an increase from 12.9% for the second quarter of 2019. The change in effective combined rate compared to both periods was due to changes in tax credits being recognized.

Balance Sheet

Total assets at June 30, 2020 were $2.75 billion, a 13.9% increase from $2.42 billion at March 31, 2020, and a 29.7% increase from $2.12 billion at June 30, 2019. The increase in total assets was primarily due to organic loan growth and PPP loan growth.

Total gross loans at June 30, 2020 were $2.19 billion, an increase of $191.0 million, or 9.5%, over total gross loans of $2.00 billion at March 31, 2020, and an increase of $408.9 million, or 22.9%, over total gross loans of $1.78 billion at June 30, 2019. Loan growth in the second quarter of 2020 was primarily attributable to the Company's participation in the PPP. Year-to-date annualized loan growth, excluding $180.2 million of PPP loans, was 10.6% as of June 30, 2020.

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

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

(dollars in thousands)

Commercialand $ 302,536 $ 299,425 $ 276,035 $ 291,723 $ 287,804 Industrial

PaycheckProtection 180,228 - - - - Program

Constructionand Land 191,768 183,350 196,776 216,054 195,568 Development

Real Estate Mortgage:

1 - 4 Family 289,456 272,590 260,611 254,782 247,029 Mortgage

Multifamily 522,491 536,380 515,014 456,257 437,198

CRE Owner 73,539 75,207 66,584 71,209 68,681 Occupied

CRE Nonowner 627,651 631,541 592,545 551,992 544,579 Occupied

Total RealEstate 1,513,137 1,515,718 1,434,754 1,334,240 1,297,487 MortgageLoans

Consumer and 6,109 4,324 4,473 4,201 4,044 Other

Total Loans, 2,193,778 2,002,817 1,912,038 1,846,218 1,784,903 Gross

Allowancefor Loan (27,633 ) (24,585 ) (22,526 ) (22,124 ) (21,362 )Losses

Net Deferred (10,287 ) (5,336 ) (5,512 ) (5,788 ) (5,157 )Loan Fees

Total Loans, $ 2,155,858 $ 1,972,896 $ 1,884,000 $ 1,818,306 $ 1,758,384 Net

Total deposits at June 30, 2020 were $2.24 billion, an increase of $341.9 million, or 18.0%, over total deposits of $1.90 billion at March 31, 2020, and an increase of $542.8 million, or 31.9%, over total deposits of $1.70 billion at June 30, 2019. Deposit growth in the second quarter of 2020 was primarily due to strong growth in noninterest bearing transaction deposits and a $148.1 million increase in brokered deposits. The growth in noninterest bearing transaction deposits was primarily attributable to general increases in existing client accounts, as personal and business depositors elected to conserve cash liquidity amidst the ongoing COVID-19 pandemic. The Company estimates approximately $60.0 million of the noninterest bearing transaction deposit growth was due to remaining PPP loan funds. Management believes noninterest bearing transactions deposits could experience fluctuations in future periods. Brokered deposits increased as a result of a change in mix of wholesale funding sources due to favorable funding costs offered compared to other wholesale funding alternatives and to expand on-balance sheet liquidity in this uncertain environment. Furthermore, the brokered deposit market provides flexibility in structure, optionality and efficiency not afforded in traditional, retail deposit channels.

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

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

(dollars in thousands)

NoninterestBearing $ 648,869 $ 476,217 $ 447,509 $ 478,493 $ 409,198 TransactionDeposits

InterestBearing 285,386 255,483 264,627 243,889 231,318 TransactionDeposits

Savings andMoney 516,543 514,113 516,785 470,518 456,447 MarketDeposits

Time 382,187 393,340 360,027 363,308 359,338 Deposits

Brokered 409,066 260,974 234,362 246,028 242,964 Deposits

Total $ 2,242,051 $ 1,900,127 $ 1,823,310 $ 1,802,236 $ 1,699,265 Deposits

Total shareholders' equity at June 30, 2020 was $257.2 million, an increase of $9.0 million, or 3.6%, over total shareholders' equity of $248.1 million at March 31, 2020, and an increase of $28.1 million, or 12.2%, over total shareholders' equity of $229.1 million at June 30, 2019. The linked-quarter increase was due to 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 in the first quarter of 2020 under the Company's stock repurchase program.

The Company did not repurchase any shares of its common stock during the second quarter of 2020. The Company remains committed to maintaining strong capital levels and will consider the current economic environment and the uncertainty of the long-term impact of the COVID-19 pandemic when evaluating its future utilization of the stock repurchase program. Management currently does not expect to begin repurchasing shares again until the impacts of the COVID-19 pandemic have subsided.

While pre-provision earnings remain strong and capital ratios are well in excess of regulatory minimums, the Company further bolstered capital levels by issuing $50.0 million of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 during the second quarter of 2020. These notes are callable starting in 2025 and qualify for tier 2 capital treatment at the holding company level. The Company injected $25.0 million of capital into the Bank in connection with the subordinated note issuance, which qualifies for tier 1 capital treatment at the bank level.

Tangible book value per share, a non-GAAP financial measure, was $8.80 as of June 30, 2020, an increase of 3.6% from $8.49 as of March 31, 2020, and an increase of 13.1% from $7.78 as of June 30, 2019.

Asset Quality

The Company has not seen direct impacts of the COVID-19 pandemic to the Company's asset quality metrics; however, management believes that the economic uncertainty that exists may begin to negatively impact the portfolio in future quarters. Annualized net charge-offs (recoveries) as a percent of average loans for the second quarter of 2020 were (0.01)%, compared to 0.01% for the first quarter of 2020, and (0.04)% for the second quarter of 2019. At June 30, 2020, the Company's nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $602,000, or 0.02% of total assets, as compared to $606,000, or 0.03% of total assets at March 31, 2020, and $1.6 million, or 0.07% of total assets at June 30, 2019.

The Company is closely analyzing all segments within the loan portfolio in response to the COVID-19 pandemic. Loans that have potential weaknesses that warrant a watchlist risk rating remained stable. At June 30, 2020, watchlist loans were $45.7 million, compared to $45.8 million at March 31, 2020. As the COVID-19 pandemic continues to evolve, the length and extent of the economic contraction may dictate further watchlist or adverse classifications in the loan portfolio.

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

As of and for the Three Months Ended

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

(dollars in 2020 2020 2019 2019 2019thousands)

SelectedAsset Quality Data

Loans 30-89 $ 153 $ 21 $ 403 $ - $ 470 Days Past Due

Loans 30-89Days Past Due 0.01 % 0.00 % 0.02 % 0.00 % 0.03 %to TotalLoans

Nonperforming $ 602 $ 606 $ 461 $ 828 $ 555 Loans

NonperformingLoans to 0.03 % 0.03 % 0.02 % 0.04 % 0.03 %Total Loans

Foreclosed $ - $ - $ - $ - $ 1,033 Assets

NonaccrualLoans to 0.03 % 0.03 % 0.02 % 0.04 % 0.03 %Total Loans

NonaccrualLoans andLoans PastDue 90 Days 0.03 0.03 0.02 0.04 0.03 and StillAccruing toTotal Loans

Nonperforming $ 602 $ 606 $ 461 $ 828 $ 1,588 Assets ^(1)

NonperformingAssets to 0.02 % 0.03 % 0.02 % 0.04 % 0.07 %Total Assets^(1)

Allowance forLoan Losses 1.26 1.23 1.18 1.20 1.20 to TotalLoans

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

Allowance forLoans Lossesto 4,590.20 4,056.93 4,886.33 2,671.98 3,849.01 NonperformingLoans

Net LoanCharge-Offs(Recoveries) (0.01 ) 0.01 0.04 0.03 (0.04 )(Annualized)to AverageLoans

(1) Nonperforming assets are defined as nonaccrual loans plus loans 90 dayspast due plus foreclosed assets.

About the Company

Bridgewater Bancshares, Inc. is a financial holding company headquartered in Bloomington, 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. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except share data)



June 30, December June 30, 31,

2020 2019 2019

(Unaudited) (Unaudited)

ASSETS

Cash and Cash Equivalents $ 178,428 $ 31,935 $ 66,389

Bank-Owned Certificates of Deposit 2,895 2,654 2,699

Securities Available for Sale, at 326,295 289,877 241,925Fair Value

Loans, Net of Allowance for LoanLosses of $27,633 at June 30, 2020(unaudited), $22,526 at December 31, 2,155,858 1,884,000 1,758,3842019 and $21,362 at June 30, 2019(unaudited)

Federal Home Loan Bank (FHLB) Stock, 8,617 7,824 8,064at Cost

Premises and Equipment, Net 43,062 27,628 18,623

Foreclosed Assets - - 1,033

Accrued Interest 8,267 6,775 7,583

Goodwill 2,626 2,626 2,626

Other Intangible Assets, Net 765 861 956

Other Assets 27,650 14,650 15,349

Total Assets $ 2,754,463 $ 2,268,830 $ 2,123,631



LIABILITIES AND EQUITY

LIABILITIES

Deposits:

Noninterest Bearing $ 648,869 $ 447,509 $ 409,198

Interest Bearing 1,593,182 1,375,801 1,290,067

Total Deposits 2,242,051 1,823,310 1,699,265

Notes Payable 12,000 13,000 14,000

FHLB Advances 147,500 136,500 142,500

Subordinated Debentures, Net of 73,658 24,733 24,681Issuance Costs

Accrued Interest Payable 1,953 1,982 2,109

Other Liabilities 20,111 24,511 11,939

Total Liabilities 2,497,273 2,024,036 1,894,494



SHAREHOLDERS' EQUITY

Preferred Stock- $0.01 par value

Authorized 10,000,000; None Issuedand Outstanding at June 30, 2020 - - -(unaudited), December 31, 2019 andJune 30, 2019 (unaudited)

Common Stock- $0.01 par value

Common Stock - Authorized 75,000,000;Issued and Outstanding 28,837,560 atJune 30, 2020 (unaudited), 28,973,572 288 290 290at December 31, 2019 and 28,986,729at June 30, 2019 (unaudited)

Additional Paid-In Capital 110,906 112,093 113,838

Retained Earnings 142,678 127,637 111,261

Accumulated Other Comprehensive 3,318 4,774 3,748Income

Total Shareholders' Equity 257,190 244,794 229,137

Total Liabilities and Equity $ 2,754,463 $ 2,268,830 $ 2,123,631

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in thousands, except per share data)



Three Months Ended Six Months Ended

June 30, March 31 June 30, June 30, June 30,

2020 2020 2019 2020 2019

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

INTEREST INCOME

Loans,Including $ 25,913 $ 25,113 $ 23,321 $ 51,026 $ 45,500Fees

Investment 2,091 2,196 1,928 4,287 3,829Securities

Other 162 159 271 321 458

TotalInterest 28,166 27,468 25,520 55,634 49,787Income



INTEREST EXPENSE

Deposits 5,170 5,724 6,020 10,894 11,723

Notes 111 115 130 226 251Payable

FHLB 1,064 1,027 827 2,091 1,602Advances

Subordinated 479 393 393 872 770Debentures

FederalFunds - 107 12 107 172Purchased

TotalInterest 6,824 7,366 7,382 14,190 14,518Expense



NET INTEREST 21,342 20,102 18,138 41,444 35,269INCOME

Provisionfor Loan 3,000 2,100 600 5,100 1,200Losses



NET INTEREST INCOME AFTER

PROVISIONFOR LOAN 18,342 18,002 17,538 36,344 34,069LOSSES



NONINTEREST INCOME

Customer 135 240 189 375 380Service Fees

Net Gain onSales ofAvailable 1,361 3 463 1,364 458for SaleSecurities

Other Income 481 1,476 482 1,957 930

TotalNoninterest 1,977 1,719 1,134 3,696 1,768Income



NONINTEREST EXPENSE

Salaries andEmployee 6,348 6,454 5,124 12,802 9,926Benefits

Occupancyand 672 713 785 1,385 1,441Equipment

Other 3,691 2,579 3,565 6,270 5,992Expense

TotalNoninterest 10,711 9,746 9,474 20,457 17,359Expense



INCOMEBEFORE 9,608 9,975 9,198 19,583 18,478INCOME TAXES

Provisionfor Income 2,010 2,532 1,189 4,542 3,451Taxes

NET INCOME $ 7,598 $ 7,443 $ 8,009 $ 15,041 $ 15,027



EARNINGS PER SHARE

Basic $ 0.26 $ 0.26 $ 0.27 $ 0.52 $ 0.50

Diluted 0.26 0.25 0.26 0.51 0.49

DividendsPaid Per - - - - -Share

Non-GAAP Financial Measures

(dollars in thousands) (unaudited)



For the Three Months Ended For the Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2020 2020 2019 2020 2019



Efficiency Ratio

Noninterest $ 10,711 $ 9,746 $ 9,474 $ 20,457 $ 17,359 Expense

Less:Amortization (47 ) (48 ) (47 ) (95 ) (95 )of IntangibleAssets

AdjustedNoninterest $ 10,664 $ 9,698 $ 9,427 $ 20,362 $ 17,264 Expense

Net Interest 21,342 20,102 18,138 41,444 35,269 Income

Noninterest 1,977 1,719 1,134 3,696 1,768 Income

Less: Gain onSales of (1,361 ) (3 ) (463 ) (1,364 ) (458 )Securities

AdjustedOperating $ 21,958 $ 21,818 $ 18,809 $ 43,776 $ 36,579 Revenue

Efficiency 48.6 % 44.4 % 50.1 % 46.5 % 47.2 %Ratio



AdjustedEfficiency Ratio

Noninterest $ 10,711 $ 9,746 $ 9,474 $ 20,457 $ 17,359 Expense

Less:Amortization (362 ) (85 ) (1,390 ) (447 ) (1,567 )of Tax CreditInvestments

Less: FHLBAdvance (1,430 ) - - (1,430 ) - PrepaymentFees

Less:Amortization (47 ) (48 ) (47 ) (95 ) (95 )of IntangibleAssets

AdjustedNoninterest $ 8,872 $ 9,613 $ 8,037 $ 18,485 $ 15,697 Expense

Net Interest 21,342 20,102 18,138 41,444 35,269 Income

Noninterest 1,977 1,719 1,134 3,696 1,768 Income

Less: Gain onSales of (1,361 ) (3 ) (463 ) (1,364 ) (458 )Securities

AdjustedOperating $ 21,958 $ 21,818 $ 18,809 $ 43,776 $ 36,579 Revenue

AdjustedEfficiency 40.4 % 44.1 % 42.7 % 42.2 % 42.9 %Ratio



For the Three Months Ended For the Six Months Ended

June 30, March 31 June 30, June 30, June 30,

2020 2020 2019 2020 2019

Pre-Provision Net Revenue

Noninterest $ 1,977 $ 1,719 $ 1,134 $ 3,696 $ 1,768 Income

Less: Gain onsales of (1,361 ) (3 ) (463 ) (1,364 ) (458 )Securities

TotalOperating 616 1,716 671 2,332 1,310 NoninterestIncome

Plus: NetInterest 21,342 20,102 18,138 41,444 35,269 income

Net Operating $ 21,958 $ 21,818 $ 18,809 $ 43,776 $ 36,579 Revenue



Noninterest $ 10,711 $ 9,746 $ 9,474 $ 20,457 $ 17,359 Expense

Less:Amortization (362 ) (85 ) (1,390 ) (447 ) (1,567 )of Tax CreditInvestments

Less: FHLBAdvance (1,430 ) - - (1,430 ) - PrepaymentFees

TotalOperating $ 8,919 $ 9,661 $ 8,084 $ 18,580 $ 15,792 NoninterestExpense



Pre-Provision $ 13,039 $ 12,157 $ 10,725 $ 25,196 $ 20,787 Net Revenue



Plus:

Non-OperatingRevenue 1,361 3 463 1,364 458 Adjustments

Less:

Provision for 3,000 2,100 600 5,100 1,200 Loan Losses

Non-OperatingExpense 1,792 85 1,390 1,877 1,567 Adjustments

Provision for 2,010 2,532 1,189 4,542 3,451 Income Taxes

Net Income $ 7,598 $ 7,443 $ 8,009 $ 15,041 $ 15,027



Average $ 2,622,272 $ 2,317,040 $ 2,069,707 $ 2,469,656 $ 2,040,602 Assets

Pre-ProvisionNet RevenueReturn on 2.00 % 2.11 % 2.08 % 2.05 % 2.05 %AverageAssets



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

June 30, March 31, June 30, June 30, June 30,

2020 2020 2019 2020 2019



TangibleCommonEquity andTangible CommonEquity/TangibleAssets

Common $ 257,190 $ 248,143 $ 229,137 Equity

Less:Intangible (3,391 ) (3,439 ) (3,582 ) Assets

TangibleCommon 253,799 244,704 225,555 Equity

Total 2,754,463 2,418,730 2,123,631 Assets

Less:Intangible (3,391 ) (3,439 ) (3,582 ) Assets

Tangible $ 2,751,072 $ 2,415,291 $ 2,120,049 Assets

TangibleCommonEquity/ 9.23 % 10.13 % 10.64 % TangibleAssets



TangibleBook Value Per Share

Book ValuePer Common $ 8.92 $ 8.61 $ 7.90 Share

Less:Effects of (0.12 ) (0.12 ) (0.12 ) IntangibleAssets

TangibleBook Value $ 8.80 $ 8.49 $ 7.78 Per CommonShare



AverageTangible CommonEquity

AverageCommon $ 255,109 $ 250,800 $ 231,374 $ 252,955 $ 228,625 Equity

Less:Effects ofAverage (3,419 ) (3,466 ) (3,605 ) (3,442 ) (3,630 )IntangibleAssets

AverageTangible $ 251,690 $ 247,334 $ 227,769 $ 249,513 $ 224,995 CommonEquity

Bridgewater Bancshares, Inc. and Subsidiaries

Analysis of Average Balances, Yields and Rates (year-to-date)

(dollars in thousands, except per share data) (Unaudited)



For the Six Months Ended

June 30, 2020 June 30, 2019

Average Interest Yield/ Average Interest Yield/

Balance & Fees Rate Balance & Fees Rate

(dollars in thousands)

Interest Earning Assets:

Cash Investments $ 69,267 $ 96 0.28 % $ 33,071 $ 258 1.57 %

Investment Securities:

Taxable Investment 195,873 2,691 2.76 139,651 2,031 2.93 Securities

Tax-Exempt Investment 93,260 2,020 4.36 106,823 2,276 4.30 Securities^ (1)

Total Investment 289,133 4,711 3.28 246,474 4,307 3.52 Securities

Paycheck Protection 70,037 873 2.51 - - - Program Loans ^(2)

Loans ^(1)(2) 1,983,641 50,220 5.09 1,731,928 45,500 5.30

Total Loans 2,053,678 51,093 5.00 1,731,928 45,500 5.30

Federal Home Loan Bank 10,370 225 4.37 7,802 200 5.17 Stock

Total Interest Earning 2,422,448 56,125 4.66 % 2,019,275 50,265 5.02 %Assets

Noninterest Earning 47,208 21,327 Assets

Total Assets $ 2,469,656 $ 2,040,602

Interest Bearing Liabilities:

Deposits:

Interest Bearing 259,704 808 0.63 % 192,020 619 0.65 %Transaction Deposits

Savings and Money 527,445 3,232 1.23 423,310 3,704 1.76 Market Deposits

Time Deposits 382,256 4,299 2.26 341,836 4,001 2.36

Brokered Deposits 269,000 2,555 1.91 279,366 3,399 2.45

Total Interest Bearing 1,438,405 10,894 1.52 1,236,532 11,723 1.91 Deposits

Federal Funds 12,422 107 1.74 13,459 172 2.58 Purchased

Notes Payable 12,253 226 3.71 14,250 251 3.55

FHLB Advances 183,099 2,091 2.30 127,713 1,602 2.53

Subordinated 27,986 872 6.27 24,660 770 6.30 Debentures

Total Interest Bearing 1,674,165 14,190 1.70 % 1,416,614 14,518 2.07 %Liabilities

Noninterest Bearing Liabilities:

Noninterest Bearing 523,828 385,758 Transaction Deposits

Other Noninterest 18,708 9,605 Bearing Liabilities

Total Noninterest 542,536 395,363 Bearing Liabilities

Shareholders' Equity 252,955 228,625

Total Liabilities and $ 2,469,656 $ 2,040,602 Shareholders' Equity

Net Interest Income / 41,935 2.96 % 35,747 2.95 %Interest Rate Spread

Net Interest Margin ^ 3.48 % 3.57 %(3)

Taxable Equivalent Adjustment:

Tax-Exempt Investment (491 ) (478 ) Securities

Net Interest Income $ 41,444 $ 35,269



Interest income and average rates for tax-exempt investment securities and(1) loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%.

(2) 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(3) 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/20200730005140/en/

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