Business Wire | Oct 28, 2021 07:05AM EDT

Bridgewater Bancshares, Inc. Announces Record Third Quarter 2021 Net Income of $11.5 Million, $0.40 Diluted Earnings Per Common Share

Oct. 28, 2021

ST. LOUIS PARK, Minn.--(BUSINESS WIRE)--Oct. 28, 2021--Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $11.5 million for the third quarter of 2021, a 4.7% increase over net income of $11.0 million for the second quarter of 2021, and a 60.4% increase over net income of $7.2 million for the third quarter of 2020. Net income per diluted common share for the third quarter of 2021 was $0.40, a 4.8% increase compared to $0.38 per diluted common share for the second quarter of 2021, and a 60.8% increase, compared to $0.25 per diluted common share for the same period in 2020.

"Bridgewater's third consecutive quarter of record net income was highlighted by a continuation of our robust organic loan growth, as well as two capital raising transactions to support our ongoing growth plans," said Chairman, Chief Executive Officer, and President, Jerry Baack. "Driven by expanded lending teams, strong brand penetration and M&A-related market disruption, we are generating consistent loan growth by providing our clients with our signature high-touch and responsive level of service. As a result, we have been able to drive continued revenue growth and maintain an adjusted efficiency ratio in the low 40% range, even as we make incremental investments in the business to support our broader growth strategy. With superb asset quality trends and successful subordinated debt and preferred stock issuances during the third quarter, we are well positioned to continue our unique growth story and drive shareholder value going forward."

Third Quarter 2021 Financial Results



Diluted Nonperforming Adjusted

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

1.37 % 2.09 % 13.81 % $ 0.40 0.02 % 41.5 %

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

Third Quarter 2021 Highlights

* Diluted earnings per common share were $0.40 for the third quarter of 2021, compared to $0.38 per common share for the second quarter of 2021. Adjusted diluted earnings per common share, a non-GAAP financial measure, were $0.41 for the third quarter of 2021, excluding a $582,000 loss, or $0.01 per common share, on the extinguishment of subordinated debt from the partial early redemption of $11.3 million of subordinated debentures issued in July 2017.

* Annualized return on average assets (ROA) and annualized return on average shareholders' equity (ROE) for the third quarter of 2021 were 1.37% and 13.81%, compared to ROA and ROE of 1.43% and 15.40%, respectively, for the second quarter of 2021. Annualized return on average tangible common equity, a non-GAAP financial measure, was 15.47% for the third quarter of 2021, compared to 15.58% for the second quarter of 2021.

* Pre-provision net revenue (PPNR), a non-GAAP financial measure, was $17.5 million for the third quarter of 2021, an increase of 10.3%, compared to $15.9 million for the second quarter of 2021. PPNR ROA, a non-GAAP financial measure, was 2.09% for the third quarter of 2021, compared to 2.07% for the second quarter of 2021.

* Gross loans increased $117.8 million in the third quarter of 2021, or 18.0% annualized, compared to the second quarter of 2021. Gross loans, excluding Paycheck Protection Program (PPP) loans, increased $162.7 million in the third quarter of 2021, or 25.9% annualized, compared to the second quarter of 2021.

* Deposits increased $133.3 million in the third quarter of 2021, or 19.4% annualized, compared to the second quarter of 2021.

* Net interest margin (on a fully tax-equivalent basis) was 3.54% for the third quarter of 2021, compared to 3.52% in the second quarter of 2021.

* The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 41.5% for the third quarter of 2021, compared to 41.5% for the second quarter of 2021.

* A loan loss provision of $1.3 million was recorded in the third quarter of 2021 to support strong organic loan growth. The allowance for loan losses to total loans was 1.43% at September 30, 2021, compared to 1.45% at June 30, 2021. The allowance for loan losses to total loans, excluding PPP loans, was 1.46% at September 30, 2021, compared to 1.50% at June 30, 2021.

* Annualized net loan charge-offs (recoveries) as a percentage of average loans were 0.00% for the third quarter of 2021, compared to 0.00% for the second quarter of 2021.

* Tangible book value per share, a non-GAAP financial measure, increased 3.9%, or $0.40, to $10.62 at September 30, 2021, compared to $10.22 at June 30, 2021.

Key Financial Measures



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

September 30, June 30, September 30, September 30, September 30,

2021 2021 2020 2021 2020

Per Common Share Data

Basic Earnings $ 0.41 $ 0.39 $ 0.25 $ 1.18 $ 0.77 Per Share

DilutedEarnings Per 0.40 0.38 0.25 1.14 0.76 Share

AdjustedDiluted 0.41 0.38 0.25 1.16 0.80 Earnings Per Share^ (1)

Book Value Per 10.73 10.33 9.25 10.73 9.25 Share

Tangible BookValue Per 10.62 10.22 9.13 10.62 9.13 Share ^(1)

Basic WeightedAverage Shares 28,047,280 28,040,762 28,683,855 28,035,246 28,717,142 Outstanding

DilutedWeighted 29,110,547 29,128,181 29,174,601 29,077,850 29,300,763 Average Shares Outstanding

SharesOutstanding at 28,066,822 28,162,777 28,710,775 28,066,822 28,710,775 Period End



SelectedPerformance Ratios

Return onAverage Assets 1.37 % 1.43 % 1.05 % 1.42 % 1.16 %(Annualized)

Pre-ProvisionNet RevenueReturn on 2.09 2.07 1.94 2.10 2.01 Average Assets (Annualized) ^(1)

Return onAverageShareholders' 13.81 15.40 10.84 14.95 11.57 Equity(Annualized)

Return onAverageTangible 15.47 15.58 10.98 15.69 11.73 Common Equity (Annualized)^(1)

Yield onInterest 4.14 4.17 4.30 4.20 4.53 Earning Assets

Yield on Total 4.65 4.56 4.73 4.65 4.91 Loans, Gross

Cost ofInterest 0.88 0.96 1.50 0.95 1.63 Bearing Liabilities

Cost of Total 0.48 0.54 0.87 0.53 1.03 Deposits

Net Interest 3.54 3.52 3.28 3.55 3.41 Margin ^(2)

Core NetInterest 3.22 3.31 3.14 3.29 3.24 Margin ^(1)(2)

Efficiency 43.9 42.0 42.3 42.4 45.1 Ratio^ (1)

AdjustedEfficiency 41.5 41.5 41.7 41.3 42.0 Ratio ^(1)

NoninterestExpense to 1.58 1.50 1.42 1.53 1.58 Average Assets (Annualized)

AdjustedNoninterestExpense to 1.49 1.48 1.40 1.49 1.47 Average Assets (Annualized) ^(1)

Loan to 95.0 95.3 99.4 Deposit Ratio

Core Depositsto Total 83.3 81.2 77.1 Deposits ^(3)

TangibleCommon Equity 8.81 9.10 9.46 to Tangible Assets ^(1)



Capital Ratios(Bank Only) ^ (4)

Tier 1 10.96 % 10.57 % 11.24 % Leverage Ratio

Common EquityTier 1 11.88 11.24 12.60 Risk-based Capital Ratio

Tier 1Risk-based 11.88 11.24 12.60 Capital Ratio

TotalRisk-based 13.13 12.49 13.85 Capital Ratio



Capital Ratios(Consolidated) ^ (4)

Tier 1 10.70 % 9.08 % 9.83 % Leverage Ratio

Common EquityTier 1 9.47 9.67 11.03 Risk-based Capital Ratio

Tier 1Risk-based 11.65 9.67 11.03 Capital Ratio

TotalRisk-based 15.93 13.49 15.45 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) Core deposits are defined as total deposits less brokered deposits andcertificates of deposit greater than $250,000.

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

Selected Financial Data



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

(dollars in 2021 2021 2021 2020 2020thousands)

SelectedBalance Sheet Data

Total Assets $ 3,389,125 $ 3,162,612 $ 3,072,359 $ 2,927,345 $ 2,774,564

Total Loans, 2,712,012 2,594,186 2,426,123 2,326,428 2,259,228Gross

Allowance for 38,901 37,591 35,987 34,841 31,381Loan Losses

Goodwill andOther 3,153 3,200 3,248 3,296 3,344Intangibles



Deposits 2,854,157 2,720,906 2,638,654 2,501,636 2,273,044

Tangible Common 298,135 287,630 275,923 262,109 262,088Equity^ (1)

TotalShareholders' 367,803 290,830 279,171 265,405 265,432Equity

Average TotalAssets - 3,332,301 3,076,712 2,940,262 2,816,032 2,711,755Quarter-to-Date

AverageShareholders' 330,604 286,311 272,729 265,716 263,195Equity -Quarter-to-Date

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

For the Three Months Ended For the Nine Months Ended

September June 30, September September September 30, 30, 30, 30,

(dollars in 2021 2021 2020 2021 2020thousands)

Selected Income Statement Data

Interest Income $ 33,517 $ 31,147 $ 28,493 $ 95,104 $ 84,127

Interest Expense 4,844 4,859 6,814 14,748 21,004

Net Interest Income 28,673 26,288 21,679 80,356 63,123

Provision for Loan 1,300 1,600 3,750 4,000 8,850Losses

Net Interest Incomeafter Provision for 27,373 24,688 17,929 76,356 54,273Loan Losses

Noninterest Income 1,410 1,603 1,157 4,021 4,853

Noninterest Expense 13,236 11,477 9,672 35,636 30,129

Income Before Income 15,547 14,814 9,414 44,741 28,997Taxes

Provision for Income 4,038 3,821 2,240 11,568 6,782Taxes

Net Income $ 11,509 $ 10,993 $ 7,174 $ 33,173 $ 22,215

Income Statement

Net Interest Income

Net interest income was $28.7 million for the third quarter of 2021, an increase of $2.4 million, or 9.1%, from $26.3 million in the second quarter of 2021, and an increase of $7.0 million, or 32.3%, from $21.7 million in the third quarter of 2020. The linked-quarter and year-over-year increases in net interest income were primarily due to robust 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 $3.23 billion for the third quarter of 2021, an increase of $214.9 million, or 7.1%, from $3.02 billion for the second quarter of 2021, and an increase of $578.4 million, or 21.8%, from $2.66 billion for the third quarter of 2020. The linked-quarter increase in average interest earning assets was primarily due to increased cash balances and continued strong organic growth in the loan portfolio, offset partially by the payoff of PPP loans. The year-over-year increase in average interest earning assets was primarily due to increased cash balances, continued purchases of investment securities, and strong organic growth in the loan portfolio, offset partially by the payoff of PPP loans.

Net interest margin (on a fully tax-equivalent basis) for the third quarter of 2021 was 3.54%, a 2 basis point increase from 3.52% in the second quarter of 2021, and a 26 basis point increase from 3.28% in the third quarter of 2020. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and PPP balances, interest, and fees, for the third quarter of 2021 was 3.22%, a 9 basis point decline from 3.31% in the second quarter of 2021, and an 8 basis point increase from 3.14% in the third quarter of 2020. Even though the capital raises during the quarter increased capital levels to support future growth, it is worth noting the net proceeds in the near-term compounded excess liquidity and negatively affected the net interest margin by 6 basis points.

While the origination volume of PPP loans earning 1.00% has negatively impacted net interest margin, the recognition of fees associated with the originations has benefited net interest margin for each of the past four quarters. The SBA has been forgiving PPP loans, which has accelerated the recognition of PPP fees starting in the fourth quarter of 2020 and continuing into the third quarter of 2021. The Company recognized $1.6 million of PPP origination fees during the third quarter of 2021, compared to $1.4 million during the second quarter of 2021. The elevated fee recognition is illustrated in the 9.15% PPP loan yield for the third quarter of 2021, compared to 4.75% for the second quarter of 2021.

The following table summarizes PPP loan originations and net origination fees as of September 30, 2021:





Originated Outstanding Program Lifetime

Number Principal Number Principal Net Net Origination Origination

(dollars of of Feesin Loans Balance Loans Balance Generated Fees Earnedthousands)

Round One 1,200 $ 181,600 72 $ 6,715 $ 5,706 $ 5,624PPP Loans

Round Two 651 78,386 301 47,475 3,544 1,769PPP Loans

Totals 1,851 $ 259,986 373 $ 54,190 $ 9,250 $ 7,393

Interest income was $33.5 million for the third quarter of 2021, an increase of $2.4 million, or 7.6%, from $31.1 million in the second quarter of 2021, and an increase of $5.0 million, or 17.6%, from $28.5 million in the third quarter of 2020. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.14% in the third quarter of 2021, compared to 4.17% in the second quarter of 2021, and 4.30% in the third quarter of 2020. The linked-quarter decrease in the yield on interest earning assets was primarily due to excess cash balances and the historically low interest rate environment resulting in a lower core loan yield, offset partially by $1.6 million of PPP loan origination fees. The year-over-year decline in the yield on interest earning assets was primarily due to excess cash balances and the historically low interest rate environment resulting in lower loan and security yields.

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 4.51% in the third quarter of 2021, which was 3 basis points lower than 4.54% in the second quarter of 2021, and 42 basis points lower than 4.93% in the third quarter of 2020. While loan fees have maintained a relatively 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

September June March December September 30, 2021 30, 31, 2021 31, 2020 30, 2020 2021

Interest 4.28 % 4.37 % 4.50 % 4.59 % 4.69 %

Fees 0.23 0.17 0.22 0.28 0.24

Yield on Loans, 4.51 % 4.54 % 4.72 % 4.87 % 4.93 %Excluding PPP Loans

Interest expense was $4.8 million for the third quarter of 2021, a decrease of $15,000, or 0.3%, from $4.9 million in the second quarter of 2021, and a decrease of $2.0 million, or 28.9%, from $6.8 million in the third quarter of 2020. The cost of interest bearing liabilities declined 8 basis points on a linked-quarter basis from 0.96% in the second quarter of 2021 to 0.88% in the third quarter of 2021, primarily due to lower rates paid on deposits, offset partially by additional subordinated debentures. On a year-over-year basis, the cost of interest bearing liabilities decreased 62 basis points from 1.50% in the third quarter of 2020 to 0.88% in the third quarter of 2021, primarily due to lower rates paid on deposits, the payoff of the Company's notes payable, and the early extinguishment of $94.0 million of longer term FHLB advances, offset partially by strong growth of interest bearing deposits and additional subordinated debentures.

Interest expense on deposits was $3.4 million for the third quarter of 2021, a decrease of $96,000, or 2.7%, from $3.5 million in the second quarter of 2021, and a decrease of $1.4 million, or 29.4%, from $4.8 million in the third quarter of 2020. The cost of total deposits declined 6 basis points on a linked-quarter basis from 0.54% in the second quarter of 2021, and declined 39 basis points on a year-over-year basis from 0.87% in the third quarter of 2020, to 0.48% in the third quarter of 2021, primarily due to deposit rate cuts consistent with a lower rate environment and the continued downward repricing of time deposits.

A summary of the Company's average balances, interest yields and rates, and net interest margin for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020 is as follows:



For the Three Months Ended

September 30, 2021 June 30, 2021 September 30, 2020

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 $ 187,405 $ 67 0.14 % $ 88,067 $ 33 0.15 % $ 101,787 $ 42 0.16 %

Investment Securities:

TaxableInvestment 314,367 1,751 2.21 314,049 1,647 2.10 256,808 1,389 2.15 Securities

Tax-ExemptInvestment 71,801 737 4.07 77,029 842 4.38 82,579 900 4.33 Securities^ (1)

Total Investment 386,168 2,488 2.56 391,078 2,489 2.55 339,387 2,289 2.68 Securities

PaycheckProtection 76,006 1,753 9.15 149,312 1,767 4.75 181,397 1,173 2.57 Program Loans ^ (2)

Loans ^(1)(2) 2,579,021 29,348 4.51 2,384,759 27,011 4.54 2,025,410 25,081 4.93

Total Loans 2,655,027 31,101 4.65 2,534,071 28,778 4.56 2,206,807 26,254 4.73

Federal Home Loan 5,701 68 4.65 6,221 54 3.51 7,901 127 6.38 Bank Stock

Total Interest 3,234,301 33,724 4.14 % 3,019,437 31,354 4.17 % 2,655,882 28,712 4.30 %Earning Assets

Noninterest 98,000 57,275 55,873 Earning Assets

Total Assets $ 3,332,301 $ 3,076,712 $ 2,711,755

Interest Bearing Liabilities:

Deposits:

Interest BearingTransaction $ 479,580 $ 562 0.47 % $ 421,132 $ 520 0.50 % $ 306,162 $ 400 0.52 %Deposits

Savings and Money 801,354 904 0.45 764,632 940 0.49 501,246 1,106 0.88 Market Deposits

Time Deposits 318,222 928 1.16 332,346 1,075 1.30 369,975 1,899 2.04

Brokered Deposits 440,167 1,023 0.92 379,768 978 1.03 419,744 1,435 1.36

Total Interest 2,039,323 3,417 0.66 1,897,878 3,513 0.74 1,597,127 4,840 1.21 Bearing Deposits

Federal Funds - - - 9,932 6 0.24 152 - 0.33 Purchased

Notes Payable - - - - - - 11,500 108 3.74

FHLB Advances 54,130 213 1.56 57,500 228 1.59 129,457 748 2.30

Subordinated 91,337 1,214 5.27 73,862 1,112 6.04 73,649 1,118 6.04 Debentures

Total InterestBearing 2,184,790 4,844 0.88 % 2,039,172 4,859 0.96 % 1,811,885 6,814 1.50 %Liabilities

NoninterestBearing Liabilities:

NoninterestBearing 784,148 732,299 615,214 Transaction Deposits

Other NoninterestBearing 32,759 18,930 21,461 Liabilities

Total NoninterestBearing 816,907 751,229 636,675 Liabilities

Shareholders' 330,604 286,311 263,195 Equity

Total Liabilitiesand Shareholders' $ 3,332,301 $ 3,076,712 $ 2,711,755 Equity

Net InterestIncome / Interest 28,880 3.26 % 26,495 3.21 % 21,898 2.80 %Rate Spread

Net Interest 3.54 % 3.52 % 3.28 %Margin ^(3)

TaxableEquivalent Adjustment:

Tax-ExemptInvestment (207 ) (207 ) (219 ) Securities and Loans

Net Interest $ 28,673 $ 26,288 $ 21,679 Income

(1) Interest income and average rates for tax-exempt investment securities andloans are presented on a tax-equivalent basis, assuming a statutory federalincome tax rate of 21%.(2) Average loan balances include nonaccrual loans. Interest income on loansincludes amortization of deferred loan fees, net of deferred loan costs.(3) Net interest margin includes the tax equivalent adjustment and representsthe annualized results of: (i) the difference between interest income oninterest earning assets and the interest expense on interest bearingliabilities, divided by (ii) average interest earning assets for the period. Provision for Loan Losses

The provision for loan losses was $1.3 million for the third quarter of 2021, a decrease of $300,000 from $1.6 million for the second quarter of 2021, and a decrease of $2.5 million from $3.8 million for the third quarter of 2020. The provision recorded in the third quarter of 2021 was attributable to growth of the loan portfolio. The allowance for loan losses to total loans was 1.43% at September 30, 2021, compared to 1.45% at June 30, 2021, and 1.39% at September 30, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.46% at September 30, 2021, compared to 1.50% at June 30, 2021, and 1.51% at September 30, 2020.

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 Nine Months Ended

September June 30, September September September 30, 30, 30, 30,

(dollars in 2021 2021 2020 2021 2020thousands)

Balance at $ 37,591 $ 35,987 $ 27,633 $ 34,841 $ 22,526 Beginning of Period

Provision for Loan 1,300 1,600 3,750 4,000 8,850 Losses

Charge-offs (20 ) (3 ) (6 ) (37 ) (54 )

Recoveries 30 7 4 97 59

Balance at End of $ 38,901 $ 37,591 $ 31,381 $ 38,901 $ 31,381 Period

Noninterest Income

Noninterest income was $1.4 million for the third quarter of 2021, a decrease of $193,000 from $1.6 million for the second quarter of 2021, and an increase of $253,000 from $1.2 million for the third quarter of 2020. The linked-quarter decrease was primarily due to decreased gains on sales of securities, offset partially by an increase in letter of credit fees. The year-over-year increase was primarily due to increased letter of credit fees and bank-owned life insurance income.

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



Three Months Ended Nine Months Ended

September June September September September 30, 30, 30, 30, 30,

(dollars in 2021 2021 2020 2021 2020thousands)

Noninterest Income:

Customer Service Fees $ 268 $ 231 $ 200 $ 733 $ 575

Net Gain on Sales of 48 702 109 750 1,473Securities

Letter of Credit Fees 577 231 487 1,135 1,026

Debit Card 143 141 119 414 310Interchange Fees

Swap Fees - - - - 907

Other Income 374 298 242 989 562

Totals $ 1,410 $ 1,603 $ 1,157 $ 4,021 $ 4,853

Noninterest Expense

Noninterest expense was $13.2 million for the third quarter of 2021, an increase of $1.8 million from $11.5 million for the second quarter of 2021, and an increase of $3.6 million from $9.7 million for the third quarter of 2020. The increase in both periods was primarily due to increases in salaries and employee benefits, professional and consulting fees, marketing and advertising, and $582,000 of prepayment fees associated with a partial early redemption of $11.3 million of subordinated debentures issued in July 2017. The linked-quarter increase in salaries and employee benefits reflects both annual merit increases and a full quarter of salaries expense related to the significant net FTE growth experienced during the second quarter of 2021.

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



Three Months Ended Nine Months Ended

September June 30, September September September 30, 30, 30, 30,

(dollars in 2021 2021 2020 2021 2020thousands)

Noninterest Expense:

Salaries and $ 8,309 $ 7,512 $ 6,550 $ 22,923 $ 19,352Employee Benefits

Occupancy and 942 980 894 2,977 2,279Equipment

FDIC Insurance 355 290 160 960 518Assessment

Data Processing 325 300 267 916 734

Professional and 708 552 492 1,804 1,400Consulting Fees

InformationTechnology and 598 549 385 1,609 977Telecommunications

Marketing and 418 314 94 1,018 645Advertising

Intangible Asset 48 47 48 143 143Amortization

Amortization of Tax 152 140 145 410 592Credit Investments

Debt Prepayment Fees 582 - - 582 1,430

Other Expense 799 793 637 2,294 2,059

Totals $ 13,236 $ 11,477 $ 9,672 $ 35,636 $ 30,129

The Company continues to make hires, reaching 219 full-time equivalent employees at September 30, 2021, compared to 214 employees at June 30, 2021, and 180 employees at September 30, 2020.

The efficiency ratio, a non-GAAP financial measure, was 43.9% for the third quarter of 2021, compared to 42.0% for the second quarter of 2021, and 42.3% for the third quarter of 2020. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 41.5% for the third quarter of 2021, 41.5% for the second quarter of 2021 and 41.7% for the third quarter of 2020. The efficiencies of the Company's "branch-light" model have positioned the Company well, and going forward, provide more flexibility for the Company to make significant investments in technology as the industry adapts to evolving client behavior.

Income Taxes

The effective combined federal and state income tax rate for the third quarter of 2021 was 26.0%, an increase from 25.8% for the second quarter of 2021 and an increase from 23.8% for the third quarter of 2020. The effective combined federal and state income tax rate for the nine months ended September 30, 2021 was 25.9%, compared to 23.4% for the nine months ended September 30, 2020.

Balance Sheet

Total assets at September 30, 2021 were $3.39 billion, a 7.2% increase from $3.16 billion at June 30, 2021, and a 22.1% increase from $2.77 billion at September 30, 2020. The linked-quarter increase in total assets was primarily due to strong organic loan growth and increased on-balance sheet liquidity. The year-over-year increase in total assets was primarily due to increased cash balances, robust organic loan growth, as well as continued purchases of investment securities.

Total gross loans at September 30, 2021 were $2.71 billion, an increase of $117.8 million, or 4.5%, over total gross loans of $2.59 billion at June 30, 2021, and an increase of $452.8 million, or 20.0%, over total gross loans of $2.26 billion at September 30, 2020. The increase in the loan portfolio during the third quarter of 2021 was primarily due to growth in the commercial, multifamily and CRE nonowner occupied segments, offset partially by the payoff of PPP loans. When excluding the PPP loans altogether, gross loans grew $162.7 million during the third quarter of 2021, or 25.9% on an annualized basis. The Company's continued strong loan growth has been driven by the expansion of the talented lending teams, PPP-related client acquisition opportunities, the strong and growing brand of the Bank in the Twin Cities market and the M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities.

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



September 30, June 30, 2021 March 31, December 31, September 30, 2021 2021 2020 2020

(dollars in thousands)

Commercial $ 350,081 $ 321,474 $ 301,023 $ 304,220 $ 287,254

PaycheckProtection 54,190 99,072 163,258 138,454 181,596 Program

Constructionand Land 257,167 251,573 193,372 170,217 175,882 Development

Real Estate Mortgage:

1 - 4 Family 290,535 277,943 294,964 294,479 286,089 Mortgage

Multifamily 865,172 790,275 665,415 626,465 585,814

CRE Owner 101,834 87,507 79,665 75,604 75,963 Occupied

CRE Nonowner 786,271 758,101 720,396 709,300 660,058 Occupied

Total RealEstate 2,043,812 1,913,826 1,760,440 1,705,848 1,607,924 MortgageLoans

Consumer and 6,762 8,241 8,030 7,689 6,572 Other

Total Loans, 2,712,012 2,594,186 2,426,123 2,326,428 2,259,228 Gross

Allowancefor Loan (38,901 ) (37,591 ) (35,987 ) (34,841 ) (31,381 )Losses

Net Deferred (10,199 ) (11,450 ) (11,273 ) (9,151 ) (10,367 )Loan Fees

Total Loans, $ 2,662,912 $ 2,545,145 $ 2,378,863 $ 2,282,436 $ 2,217,480 Net

Total deposits at September 30, 2021 were $2.85 billion, an increase of $133.3 million, or 4.9%, over total deposits of $2.72 billion at June 30, 2021, and an increase of $581.1 million, or 25.6%, over total deposits of $2.27 billion at September 30, 2020. Deposit growth in the third quarter of 2021 was primarily due to an increase in noninterest bearing and interest bearing transaction deposits and savings and money market deposits, offset partially by a decline in time deposits and brokered deposits. Similar to the loan portfolio, the growth in core deposits has been a result of successful new client and banker acquisition initiatives and the strong, growing brand of the Bank in the Twin Cities market.

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



September June 30, March 31, December September 30, 2021 2021 2021 31, 2020 30, 2020

(dollars in thousands)

NoninterestBearing $ 846,490 $ 758,023 $ 712,999 $ 671,903 $ 685,773TransactionDeposits

InterestBearing 488,785 432,123 433,344 366,290 322,253TransactionDeposits

Savings andMoney 791,861 761,485 791,583 657,617 498,397MarketDeposits

Time 309,824 321,857 344,581 353,543 363,897Deposits

Brokered 417,197 447,418 356,147 452,283 402,724Deposits

Total $ 2,854,157 $ 2,720,906 $ 2,638,654 $ 2,501,636 $ 2,273,044Deposits

Capital

On July 8, 2021, the Company announced the completion of a private placement of $30.0 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated debentures due 2031. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of outstanding indebtedness.

In July of 2021, the Company redeemed $11.3 million of the $25.0 million outstanding of its fixed-to-floating rate subordinated debentures due in 2027. The early redemption of the subordinated debentures was recorded as a loss on the extinguishment of subordinated debt, included in noninterest expense, in the amount of $582,000, consisting of $532,000 in prepayment penalties and $50,000 in unamortized issuance costs.

On August 17, 2021, the Company announced the closing of its underwritten public offering of 2,400,000 depositary shares, each representing a 1/100th interest in a share of the Company's 5.875% Non-Cumulative Perpetual Preferred Stock, Series A ("Series A Preferred Stock"). On August 20, 2021, the underwriters of the offering exercised in full their option to purchase 360,000 additional depositary shares to cover over-allotments. As a result, the gross proceeds from the offering totaled $69.0 million. The Company intends to use the net proceeds from the offering for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of outstanding indebtedness. On October 26, 2021, the Company's Board of Directors declared a quarterly cash dividend on the Series A Preferred Stock, payable on December 1, 2021 to shareholders of record on the Series A Preferred Stock at the close of business on November 15, 2021.

Total shareholders' equity at September 30, 2021 was $367.8 million, an increase of $77.0 million, or 26.5%, over total shareholders' equity of $290.8 million at June 30, 2021, and an increase of $102.4 million, or 38.6%, over total shareholders' equity of $265.4 million at September 30, 2020. The linked-quarter increase was due to net income retained and the issuance of preferred stock, offset partially by stock repurchases made under the Company's stock repurchase program. The year-over-year increase was due to net income retained, the issuance of preferred stock and an increase in unrealized gains in the securities and derivatives portfolios, offset partially by stock repurchases made under the Company's stock repurchase program. The consolidated tier 1 leverage ratio increased to 10.70% at September 30, 2021, compared to 9.08% at June 30, 2021, primarily due to the preferred stock issuance.

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. 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 third quarter of 2021, the Company repurchased 126,507 shares of its common stock. Shares were repurchased at a weighted average price of $16.11 for a total of $2.0 million.

Tangible book value per share, a non-GAAP financial measure, was $10.62 as of September 30, 2021, an increase of 3.9% from $10.22 as of June 30, 2021, and an increase of 16.4% from $9.13 as of September 30, 2020. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 8.81% at September 30, 2021, compared to 9.10% at June 30, 2021.

Asset Quality

Annualized net charge-offs as a percent of average loans for the third quarter of 2021 were 0.00%, consistent with 0.00% for the second quarter of 2021 and the third quarter of 2020. At September 30, 2021, the Company's nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $734,000, or 0.02% of total assets, as compared to $761,000, or 0.02% of total assets at June 30, 2021, and $433,000 or 0.02% of total assets at September 30, 2020.

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. Loans that have potential weaknesses that warrant a watchlist risk rating at September 30, 2021 totaled $67.4 million, compared to $56.7 million at June 30, 2021, and $50.9 million at September 30, 2020. As the COVID-19 pandemic continues to evolve, the length and extent of the economic uncertainty may result in further watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at September 30, 2021 totaled $7.7 million, compared to $7.2 million at June 30, 2021, and $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

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

(dollars in 2021 2021 2021 2020 2020thousands)

SelectedAsset Quality Data

Loans 30-89 $ 18 $ - $ - $ 13 $ 458 Days Past Due

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

Nonperforming $ 734 $ 761 $ 770 $ 775 $ 433 Loans

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

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

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

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

Nonperforming $ 734 $ 761 $ 770 $ 775 $ 433 Assets ^(1)

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

Allowance forLoan Losses 1.43 1.45 1.48 1.50 1.39 to Total Loans

Allowance forLoan Lossesto Total 1.46 1.50 1.59 1.59 1.51 Loans, Excluding PPPLoans

Allowance forLoans Lossesto 5,299.86 4,939.68 4,673.64 4,495.61 7,247.34 NonperformingLoans

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

(1) Nonperforming assets are defined as nonaccrual loans plus loans 90 dayspast due plus foreclosed assets. The Company developed programs for clients who experienced business and personal disruptions due to the COVID-19 pandemic by providing interest-only modifications, loan payment deferrals, and extended amortization modifications. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic are not considered troubled debt restructurings. The Company had 13 modified loans totaling $35.4 million outstanding as of September 30, 2021, representing 1.3% of the total loan portfolio, excluding PPP loans, which is down slightly from 1.4% at June 30, 2021.

The following table presents a rollforward of loan modification activity, by modification type, from June 30, 2021 to September 30, 2021:



(dollars in thousands) Interest-Only Extended Total Amortization

Principal Balance - June 30, $ 29,159 $ 4,778 $ 33,937 2021

Modification Expired (27,521 ) (4,764 ) (32,285 )

Additional Modification 18,313 4,764 23,077 Granted

New Modifications 10,623 - 10,623

Net Principal Advances 23 (14 ) 9 (Payments)

Principal Balance - September $ 30,597 $ 4,764 $ 35,361 30, 2021

About the Company

Bridgewater Bancshares, Inc. (Nasdaq: BWB) is a St. Louis Park, Minnesota-based financial holding company. Bridgewater's banking subsidiary, Bridgewater Bank, is a premier, full-service Twin Cities bank dedicated to serving the diverse needs of commercial real estate investors, entrepreneurs, business clients and high-net-worth individuals. By pairing a range of deposit, lending and business services solutions with a responsive service model, Bridgewater has seen continuous growth and profitability. With total assets of $3.4 billion and seven branches as of September 30, 2021, Bridgewater is considered one of the largest locally led banks in the State of Minnesota, and has received numerous awards for its growth, banking services and esteemed corporate culture.

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, including due to supply chain disruptions, 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, including changes to federal and state corporate tax rates; 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; changes to U.S. or state tax laws, regulations and guidance, including recent proposals to increase the federal corporate tax rate; 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)



September December September 30, 31, 30,

2021 2020 2020

(Unaudited) (Unaudited)

ASSETS

Cash and Cash Equivalents $ 189,502 $ 160,675 $ 91,510

Bank-Owned Certificates of Deposit 1,877 2,860 2,862

Securities Available for Sale, at 413,149 390,629 373,955Fair Value

Loans, Net of Allowance for LoanLosses of $38,901 at September 30,2021 (unaudited), $34,841 at December 2,662,912 2,282,436 2,217,48031, 2020 and $31,381 at September 30,2020 (unaudited)

Federal Home Loan Bank (FHLB) Stock, 5,442 5,027 7,817at Cost

Premises and Equipment, Net 49,803 50,987 48,885

Accrued Interest 8,550 9,172 9,647

Goodwill 2,626 2,626 2,626

Other Intangible Assets, Net 527 670 718

Other Assets 54,737 22,263 19,064

Total Assets $ 3,389,125 $ 2,927,345 $ 2,774,564



LIABILITIES AND EQUITY

LIABILITIES

Deposits:

Noninterest Bearing $ 846,490 $ 671,903 $ 685,773

Interest Bearing 2,007,667 1,829,733 1,587,271

Total Deposits 2,854,157 2,501,636 2,273,044

Notes Payable - 11,000 11,500

FHLB Advances 47,500 57,500 127,500

Subordinated Debentures, Net of 92,153 73,739 73,665Issuance Costs

Accrued Interest Payable 1,656 1,615 2,082

Other Liabilities 25,856 16,450 21,341

Total Liabilities 3,021,322 2,661,940 2,509,132



SHAREHOLDERS' EQUITY

Preferred Stock- $0.01 par value; Authorized 10,000,000

Preferred Stock - Issued andOutstanding 2,760,000 Series A shares($25 liquidation preference) at 66,515 - -September 30, 2021 (unaudited), -0-at December 31, 2020 and -0- atSeptember 30, 2020 (unaudited)

Common Stock- $0.01 par value; Authorized 75,000,000

Common Stock - Issued and Outstanding28,066,822 at September 30, 2021(unaudited), 28,143,493 at December 281 281 28731, 2020 and 28,710,775 at September30, 2020 (unaudited)

Additional Paid-In Capital 103,471 103,714 110,010

Retained Earnings 188,004 154,831 149,852

Accumulated Other Comprehensive 9,532 6,579 5,283Income

Total Shareholders' Equity 367,803 265,405 265,432

Total Liabilities and Equity $ 3,389,125 $ 2,927,345 $ 2,774,564

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in thousands, except per share data)



Three Months Ended Nine Months Ended

September June 30, September September September 30, 30, 30, 30,

2021 2021 2020 2021 2020

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

INTEREST INCOME

Loans,Including $ 31,049 $ 28,748 $ 26,224 $ 87,705 $ 77,250Fees

Investment 2,333 2,312 2,100 7,065 6,387Securities

Other 135 87 169 334 490

TotalInterest 33,517 31,147 28,493 95,104 84,127Income



INTEREST EXPENSE

Deposits 3,417 3,513 4,840 10,601 15,734

Notes - - 108 61 334Payable

FHLB 213 228 748 669 2,839Advances

Subordinated 1,214 1,112 1,118 3,411 1,990Debentures

FederalFunds - 6 - 6 107Purchased

TotalInterest 4,844 4,859 6,814 14,748 21,004Expense



NET INTEREST 28,673 26,288 21,679 80,356 63,123INCOME

Provisionfor Loan 1,300 1,600 3,750 4,000 8,850Losses



NET INTEREST INCOME AFTER

PROVISIONFOR LOAN 27,373 24,688 17,929 76,356 54,273LOSSES



NONINTEREST INCOME

Customer 268 231 200 733 575Service Fees

Net Gain onSales ofAvailable 48 702 109 750 1,473for SaleSecurities

Other Income 1,094 670 848 2,538 2,805

TotalNoninterest 1,410 1,603 1,157 4,021 4,853Income



NONINTEREST EXPENSE

Salaries andEmployee 8,309 7,512 6,550 22,923 19,352Benefits

Occupancyand 942 980 894 2,977 2,279Equipment

Other 3,985 2,985 2,228 9,736 8,498Expense

TotalNoninterest 13,236 11,477 9,672 35,636 30,129Expense



INCOMEBEFORE 15,547 14,814 9,414 44,741 28,997INCOME TAXES

Provisionfor Income 4,038 3,821 2,240 11,568 6,782Taxes

NET INCOME $ 11,509 $ 10,993 $ 7,174 $ 33,173 $ 22,215



EARNINGS PER SHARE

Basic $ 0.41 $ 0.39 $ 0.25 $ 1.18 $ 0.77

Diluted 0.40 0.38 0.25 1.14 0.76

For the Nine Months Ended

September 30, 2021

September 30, 2020

Average

Interest

Yield/

Average

Interest

Yield/

Balance

& Fees

Rate

Balance

& Fees

Rate

(dollars in thousands)

Interest Earning Assets:

Cash Investments

$

127,283

$

134

0.14

%

$

80,186

$

138

0.23

%

Investment Securities:

Taxable Investment Securities

310,078

5,122

2.21

216,332

4,080

2.52

Tax-Exempt Investment Securities (1)

76,564

2,460

4.30

89,674

2,920

4.35

Total Investment Securities

386,642

7,582

2.62

306,006

7,000

3.06

Paycheck Protection Program Loans (2)

124,466

5,384

5.78

107,541

2,046

2.54

Loans (1)(2)

2,402,844

82,433

4.59

1,997,553

75,301

5.04

Total Loans

2,527,310

87,817

4.65

2,105,094

77,347

4.91

Federal Home Loan Bank Stock

5,658

200

4.71

9,541

352

4.93

Total Interest Earning Assets

3,046,893

95,733

4.20

%

2,500,827

84,837

4.53

%

Noninterest Earning Assets

70,968

50,118

Total Assets

$

3,117,861

$

2,550,945

Interest Bearing Liabilities:

Deposits:

Interest Bearing Transaction Deposits

$

422,000

$

1,504

0.48

%

$

275,303

$

1,207

0.58

%

Savings and Money Market Deposits

763,646

2,853

0.50

518,648

4,338

1.12

Time Deposits

331,664

3,269

1.32

378,133

6,199

2.19

Brokered Deposits

407,680

2,975

0.98

319,615

3,990

1.67

Total Interest Bearing Deposits

1,924,990

10,601

0.74

1,491,699

15,734

1.41

Federal Funds Purchased

3,311

6

0.24

8,302

107

1.73

Notes Payable

2,216

61

3.66

12,000

334

3.72

FHLB Advances

56,364

669

1.59

165,088

2,839

2.30

Subordinated Debentures

79,723

3,411

5.72

43,318

1,990

6.14

Total Interest Bearing Liabilities

2,066,604

14,748

0.95

%

1,720,407

21,004

1.63

%

Noninterest Bearing Liabilities:

Noninterest Bearing Transaction Deposits

731,269

554,513

Other Noninterest Bearing Liabilities

23,228

19,632

Total Noninterest Bearing Liabilities

754,497

574,145

Shareholders' Equity

296,760

256,393

Total Liabilities and Shareholders' Equity

$

3,117,861

$

2,550,945

Net Interest Income / Interest Rate Spread

80,985

3.25

%

63,833

2.90

%

Net Interest Margin (3)

3.55

%

3.41

%

Taxable Equivalent Adjustment:

Tax-Exempt Investment Securities and Loans

(629

)

(710

)

Net Interest Income

$

80,356

$

63,123

(1) 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%(2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.(3) 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.

For the Nine Months Ended

September 30, 2021 September 30, 2020

Average Interest Yield/ Average Interest Yield/

Balance & Fees Rate Balance & Fees Rate

(dollars in thousands)

InterestEarning Assets:

Cash $ 127,283 $ 134 0.14 % $ 80,186 $ 138 0.23 %Investments

Investment Securities:

TaxableInvestment 310,078 5,122 2.21 216,332 4,080 2.52 Securities

Tax-ExemptInvestment 76,564 2,460 4.30 89,674 2,920 4.35 Securities^ (1)

TotalInvestment 386,642 7,582 2.62 306,006 7,000 3.06 Securities

PaycheckProtection 124,466 5,384 5.78 107,541 2,046 2.54 Program Loans ^(2)

Loans ^(1)(2) 2,402,844 82,433 4.59 1,997,553 75,301 5.04

Total Loans 2,527,310 87,817 4.65 2,105,094 77,347 4.91

Federal HomeLoan Bank 5,658 200 4.71 9,541 352 4.93 Stock

TotalInterest 3,046,893 95,733 4.20 % 2,500,827 84,837 4.53 %Earning Assets

NoninterestEarning 70,968 50,118 Assets

Total Assets $ 3,117,861 $ 2,550,945

InterestBearing Liabilities:

Deposits:

InterestBearing $ 422,000 $ 1,504 0.48 % $ 275,303 $ 1,207 0.58 %Transaction Deposits

Savings andMoney Market 763,646 2,853 0.50 518,648 4,338 1.12 Deposits

Time Deposits 331,664 3,269 1.32 378,133 6,199 2.19

Brokered 407,680 2,975 0.98 319,615 3,990 1.67 Deposits

TotalInterest 1,924,990 10,601 0.74 1,491,699 15,734 1.41 Bearing Deposits

Federal Funds 3,311 6 0.24 8,302 107 1.73 Purchased

Notes Payable 2,216 61 3.66 12,000 334 3.72

FHLB Advances 56,364 669 1.59 165,088 2,839 2.30

Subordinated 79,723 3,411 5.72 43,318 1,990 6.14 Debentures

TotalInterest 2,066,604 14,748 0.95 % 1,720,407 21,004 1.63 %Bearing Liabilities

NoninterestBearing Liabilities:

NoninterestBearing 731,269 554,513 Transaction Deposits

OtherNoninterest 23,228 19,632 Bearing Liabilities

TotalNoninterest 754,497 574,145 Bearing Liabilities

Shareholders' 296,760 256,393 Equity

TotalLiabilitiesand $ 3,117,861 $ 2,550,945 Shareholders'Equity

Net InterestIncome / 80,985 3.25 % 63,833 2.90 %Interest Rate Spread

Net Interest 3.55 % 3.41 %Margin ^(3)

TaxableEquivalent Adjustment:

Tax-ExemptInvestment (629 ) (710 ) Securities and Loans

Net Interest $ 80,356 $ 63,123 Income

(1) Interest income and average rates for tax-exempt investment securities andloans are presented on a tax-equivalent basis, assuming a statutory federalincome tax rate of 21%(2) Average loan balances include nonaccrual loans. Interest income on loansincludes amortization of deferred loan fees, net of deferred loan costs.(3) Net interest margin includes the tax equivalent adjustment and representsthe annualized results of: (i) the difference between interest income oninterest earning assets and the interest expense on interest bearingliabilities, divided by (ii) average interest earning assets for the period.Non-GAAPFinancial Measures

(dollars inthousands)(unaudited)



For the Three Months Ended For the Nine Months Ended

September 30, June 30, September 30, September 30, September 30,

2021 2021 2020 2021 2020

Pre-Provision Net Revenue

Noninterest $ 1,410 $ 1,603 $ 1,157 $ 4,021 $ 4,853 Income

Less: Gain onsales of (48 ) (702 ) (109 ) (750 ) (1,473 )Securities

TotalOperating 1,362 901 1,048 3,271 3,380 Noninterest Income

Plus: NetInterest 28,673 26,288 21,679 80,356 63,123 Income

Net Operating $ 30,035 $ 27,189 $ 22,727 $ 83,627 $ 66,503 Revenue



Noninterest $ 13,236 $ 11,477 $ 9,672 $ 35,636 $ 30,129 Expense

Less:Amortization (152 ) (140 ) (145 ) (410 ) (592 )of Tax Credit Investments

Less: DebtPrepayment (582 ) - - (582 ) (1,430 )Fees

TotalOperating $ 12,502 $ 11,337 $ 9,527 $ 34,644 $ 28,107 Noninterest Expense



Pre-Provision $ 17,533 $ 15,852 $ 13,200 $ 48,983 $ 38,396 Net Revenue



Plus:

Non-OperatingRevenue 48 702 109 750 1,473 Adjustments

Less:

Provision for 1,300 1,600 3,750 4,000 8,850 Loan Losses

Non-OperatingExpense 734 140 145 992 2,022 Adjustments

Provision for 4,038 3,821 2,240 11,568 6,782 Income Taxes

Net Income $ 11,509 $ 10,993 $ 7,174 $ 33,173 $ 22,215



Average $ 3,332,301 $ 3,076,712 $ 2,711,755 $ 3,117,861 $ 2,550,945 Assets

Pre-ProvisionNet RevenueReturn on 2.09 % 2.07 % 1.94 % 2.10 % 2.01 %AverageAssets

As of and for the Three Months Ended

As of and for the Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2021

2021

2020

2021

2020

Core Net Interest Margin

Net Interest Income (Tax-Equivalent Basis)

$

28,880

$

26,495

$

21,898

$

80,985

$

63,833

Less: Loan Fees

(1,487

)

(1,023

)

(1,198

)

(3,712

)

(3,769

)

Less: PPP Interest and Fees

(1,753

)

(1,767

)

(1,173

)

(5,384

)

(2,046

)

Core Net Interest Income

$

25,640

$

23,705

$

19,527

$

71,889

$

58,018

Average Interest Earning Assets

3,234,301

3,019,437

2,655,882

3,046,893

2,500,827

Less: Average PPP Loans

(76,006

)

(149,312

)

(181,397

)

(124,466

)

(107,541

)

Core Average Interest Earning Assets

$

3,158,295

$

2,870,125

$

2,474,485

$

2,922,427

$

2,393,286

Core Net Interest Margin

3.22

%

3.31

%

3.14

%

3.29

%

3.24

%



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

September 30, June 30, September 30, September 30, September 30,

2021 2021 2020 2021 2020

Core Net Interest Margin

Net InterestIncome $ 28,880 $ 26,495 $ 21,898 $ 80,985 $ 63,833 (Tax-Equivalent Basis)

Less: Loan Fees (1,487 ) (1,023 ) (1,198 ) (3,712 ) (3,769 )

Less: PPPInterest and (1,753 ) (1,767 ) (1,173 ) (5,384 ) (2,046 )Fees

Core Net $ 25,640 $ 23,705 $ 19,527 $ 71,889 $ 58,018 Interest Income



AverageInterest 3,234,301 3,019,437 2,655,882 3,046,893 2,500,827 Earning Assets

Less: Average (76,006 ) (149,312 ) (181,397 ) (124,466 ) (107,541 )PPP Loans

Core AverageInterest $ 3,158,295 $ 2,870,125 $ 2,474,485 $ 2,922,427 $ 2,393,286 Earning Assets

Core Net 3.22 % 3.31 % 3.14 % 3.29 % 3.24 %Interest Margin

Non-GAAPFinancial Measures

(dollars inthousands) (unaudited)



For the Three Months Ended For the Nine Months Ended

September June 30, September September September 30, 30, 30, 30,

2021 2021 2020 2021 2020

Efficiency Ratio

Noninterest $ 13,236 $ 11,477 $ 9,672 $ 35,636 $ 30,129 Expense

Less:Amortization (48 ) (47 ) (48 ) (143 ) (143 )of Intangible Assets

AdjustedNoninterest $ 13,188 $ 11,430 $ 9,624 $ 35,493 $ 29,986 Expense

Net Interest 28,673 26,288 21,679 80,356 63,123 Income

Noninterest 1,410 1,603 1,157 4,021 4,853 Income

Less: Gain onSales of (48 ) (702 ) (109 ) (750 ) (1,473 )Securities

AdjustedOperating $ 30,035 $ 27,189 $ 22,727 $ 83,627 $ 66,503 Revenue

Efficiency 43.9 % 42.0 % 42.3 % 42.4 % 45.1 %Ratio



AdjustedEfficiency Ratio

Noninterest $ 13,236 $ 11,477 $ 9,672 $ 35,636 $ 30,129 Expense

Less:Amortization (152 ) (140 ) (145 ) (410 ) (592 )of Tax Credit Investments

Less: DebtPrepayment (582 ) - - (582 ) (1,430 )Fees

Less:Amortization (48 ) (47 ) (48 ) (143 ) (143 )of Intangible Assets

AdjustedNoninterest $ 12,454 $ 11,290 $ 9,479 $ 34,501 $ 27,964 Expense

Net Interest 28,673 26,288 21,679 80,356 63,123 Income

Noninterest 1,410 1,603 1,157 4,021 4,853 Income

Less: Gain onSales of (48 ) (702 ) (109 ) (750 ) (1,473 )Securities

AdjustedOperating $ 30,035 $ 27,189 $ 22,727 $ 83,627 $ 66,503 Revenue

AdjustedEfficiency 41.5 % 41.5 % 41.7 % 41.3 % 42.0 %Ratio

For the Three Months Ended

For the Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2021

2021

2020

2021

2020

Adjusted Noninterest Expense to Average Assets (Annualized)

Noninterest Expense

$

13,236

$

11,477

$

9,672

$

35,636

$

30,129

Less: Amortization of Tax Credit Investments

(152

)

(140

)

(145

)

(410

)

(592

)

Less: Debt Prepayment Fees

(582

)

-

-

(582

)

(1,430

)

Adjusted Noninterest Expense

$

12,502

$

11,337

$

9,527

$

34,644

$

28,107

Average Assets

$

3,332,301

$

3,076,712

$

2,711,755

$

3,117,861

$

2,550,945

Adjusted Noninterest Expense to Average Assets (Annualized)

1.49

%

1.48

%

1.40

%

1.49

%

1.47

%



For the Three Months Ended For the Nine Months Ended

September 30, June 30, September 30, September 30, September 30,

2021 2021 2020 2021 2020

AdjustedNoninterestExpense to Average Assets(Annualized)

Noninterest $ 13,236 $ 11,477 $ 9,672 $ 35,636 $ 30,129 Expense

Less:Amortizationof Tax (152 ) (140 ) (145 ) (410 ) (592 )CreditInvestments

Less: DebtPrepayment (582 ) - - (582 ) (1,430 )Fees

AdjustedNoninterest $ 12,502 $ 11,337 $ 9,527 $ 34,644 $ 28,107 Expense



Average $ 3,332,301 $ 3,076,712 $ 2,711,755 $ 3,117,861 $ 2,550,945 Assets

AdjustedNoninterestExpense to 1.49 % 1.48 % 1.40 % 1.49 % 1.47 %Average Assets(Annualized)

Non-GAAPFinancial Measures

(dollars inthousands)(unaudited)



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

September 30, June 30, September 30, September September 30, 30,

2021 2021 2020 2021 2020

TangibleCommon Equityand Tangible Common Equity /TangibleAssets

TotalShareholders' $ 367,803 $ 290,830 $ 265,432 Equity

Less:Preferred (66,515 ) - - Stock

Total CommonShareholders' 301,288 290,830 265,432 Equity

Less:Intangible (3,153 ) (3,200 ) (3,344 ) Assets

Tangible $ 298,135 $ 287,630 $ 262,088 Common Equity



Total Assets $ 3,389,125 $ 3,162,612 $ 2,774,564

Less:Intangible (3,153 ) (3,200 ) (3,344 ) Assets

Tangible $ 3,385,972 $ 3,159,412 $ 2,771,220 Assets

TangibleCommon Equity 8.81 % 9.10 % 9.46 % /Tangible Assets



Tangible BookValue Per Share

Book ValuePer Common $ 10.73 $ 10.33 $ 9.25 Share

Less: Effectsof Intangible (0.11 ) (0.11 ) (0.12 ) Assets

Tangible BookValue Per $ 10.62 $ 10.22 $ 9.13 Common Share



Return onAverage Tangible Common Equity

Net Income $ 11,509 $ 10,993 $ 7,174 $ 33,173 $ 22,215



AverageShareholders' $ 330,604 $ 286,311 $ 263,195 $ 296,760 $ 256,393 Equity

Less: AveragePreferred (32,332 ) - - (10,896 ) - Stock

Average 298,272 286,311 263,195 285,864 256,393 Common Equity

Less: Effectsof Average (3,180 ) (3,228 ) (3,371 ) (3,227 ) (3,418 )Intangible Assets

AverageTangible $ 295,092 $ 283,083 $ 259,824 $ 282,637 $ 252,975 Common Equity

Return onAverage 15.47 % 15.58 % 10.98 % 15.69 % 11.73 %Tangible Common Equity

Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2021

2021

2021

2020

2020

Tangible Common Equity

Total Shareholders' Equity

$

367,803

$

290,830

$

279,171

$

265,405

$

265,432

Less: Preferred Stock

(66,515

)

-

-

-

-

Common Shareholders' Equity

301,288

290,830

279,171

265,405

265,432

Less: Intangible Assets

(3,153

)

(3,200

)

(3,248

)

(3,296

)

(3,344

)

Tangible Common Equity

$

298,135

$

287,630

$

275,923

$

262,109

$

262,088



Three Months Ended

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

2021 2021 2021 2020 2020

Tangible Common Equity

TotalShareholders' $ 367,803 $ 290,830 $ 279,171 $ 265,405 $ 265,432 Equity

Less:Preferred (66,515 ) - - - - Stock

CommonShareholders' 301,288 290,830 279,171 265,405 265,432 Equity

Less:Intangible (3,153 ) (3,200 ) (3,248 ) (3,296 ) (3,344 )Assets

Tangible $ 298,135 $ 287,630 $ 275,923 $ 262,109 $ 262,088 Common Equity

As of and for the Three Months Ended

As of and for the Nine Months Ended

September 30, 2021

June 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Adjusted Diluted Earnings Per Common Share

Net Income

$

11,509

$

10,993

$

7,174

$

33,173

$

22,215

Add: Debt Prepayment Fees

582

-

-

582

1,430

Less: Tax Impact

(151

)

-

-

(151

)

(335

)

Net Income, Excluding Impact of Debt Prepayment Fees

$

11,940

$

10,993

$

7,174

$

33,604

$

23,310

Diluted Weighted Average Shares Outstanding

29,110,547

29,128,181

29,174,601

29,077,850

29,300,763

Adjusted Diluted Earnings Per Common Share

$

0.41

$

0.38

$

0.25

$

1.16

$

0.80

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028005538/en/

CONTACT: Investor Relations Contact: Justin Horstman Director of Investor Relations investorrelations@bwbmn.com 952-542-5169