Bridgewater Bank Annual Report

Bridgewater Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (dollars in thousands, except share data)

The following table presents the components of the net deferred tax asset included in other assets, as of December, 31, 2018 and 2017:

2018

2017

Start-up Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,757 4,743 Unrealized (Gain) Loss on Securities Available for Sale . . . . . . . . . . . . 491 (335) Unrealized Gain on Cash Flow Hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . (74) (72) Foreclosed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13 Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (496) (329) Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 495 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 199 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,842 $ 4,720 15 $ 33 (249)

Note 15: Tax Credit Investments The Company invests in qualified affordable housing projects and federal historic projects for the purpose of community reinvestment and obtaining tax credits. The Company’s tax credit investments are limited to existing lending relationships with well-known developers and projects within the Company’s market area. The following table summarizes the Company’s investments in qualified affordable housing projects and other tax credit investments at December 31, 2018 and 2017:

December 31, 2018

December 31, 2017

Unfunded Commitment

Unfunded Commitment (1) Investment

Investment

Accounting Method

Investment

— $

— $

—

Low Income Housing Tax Credit (LIHTC) . . . Proportional Amortization $ 2,436 $

Federal Historic Tax Credit (FHTC) . . . . . . . . Equity Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,814

3,226

508

1,706 1,706

$ 4,250 $

3,226 $ 508 $

(1) All commitments are expected to be paid by the Company by December 31, 2019.

The following table summarizes the amortization expense and tax benefit recognized for the Company’s qualified affordable housing projects and other tax credit investments during 2018 and 2017. There were was no tax credit benefits recognized in 2016.

Amortization Expense (1)

Tax Benefit

Recognized (2)

Year Ended December 31, 2018 LIHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ FHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Year Ended December 31, 2017 LIHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ FHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

310 $

(346) (3,782) (4,128)

3,293

3,603 $

— $

—

1,916

(2,225) (2,225)

1,916 $

(1) The amortization expense for the LIHTC investments are included in income tax expense. The amortization for the FHTC tax credits are included in noninterest expense. (2) All of the tax benefits recognized are included in income tax expense. The tax benefit recognized for the FHTC investments primarily reflects the tax credits generated from the investments, and excludes the net tax expense/benefit of the investments’ income/loss.

106