Bridgewater Bank Annual Report

The following table presents a summary of the allocation of the allowance for loan losses by loan portfolio segment for the periods indicated:

December 31,

December 31,

December 31,

December 31,

December 31,

2018

2017

2016

2015

2014

(dollars in thousands)

Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Commercial . . . . . . . . . . . . . $ 2,898 Construction and Land Development . . . . . . . . . . 2,451 Real Estate Mortgage: 1 - 4 Family Mortgage . . . . 2,597 Multifamily . . . . . . . . . . . . 4,644 CRE Nonowner Occupied . 5,872 Total Real Estate Mortgage Loans . . . . . . . . . . . . . . . . 13,921 CRE Owner Occupied . . . . 808

14.5 % $ 2,435

14.7 % $ 1,315

10.7 % $ 1,349

13.4 % $ 1,093

11.5 %

12.2 1,892

11.5 1,379

11.2 1,708

17.0 1,841

19.4

13.0 2,317 23.2 3,170

14.0 2,410 19.2 1,568 5.8 1,160 30.8 3,323

19.5 1,765

17.6 2,168 8.7 910 10.1 717 24.4 1,628

22.8

12.7

871

9.6 7.6

4.0

956

9.4 1,019 27.0 2,452

29.3 5,087

17.2

69.5 11,530

69.8 8,461

68.6 6,107

60.8 5,423

57.1

Consumer and Other. . . . . . . Unallocated . . . . . . . . . . . . .

65

0.3 3.5

60

0.4

78

0.6 8.9

36

0.3

64

0.7

696

585

3.6 1,100

852

8.5 1,068

11.2

Total Allowance for Loan Losses . . . . . . . . . . . . . . . . . $ 20,031 100.0 % $ 16,502 100.0 % $ 12,333 100.0 % $ 10,052 100.0 % $ 9,489 100.0 %

Goodwill and Other Intangible Assets Goodwill was $2.6 million at December 31, 2018 and December 31, 2017. Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired, which originated from the acquisition of First National Bank of the Lakes in May of 2016. Goodwill is not amortized but is subject to, at a minimum, an annual test for impairment. Other intangible assets consist of core deposit relationships and favorable lease term intangibles. Total other intangible assets at December 31, 2018 and December 31, 2017 were $1.0 million and $1.2 million, respectively. Other intangible assets are amortized over their estimated useful life. Deposits The principal sources of funds for the Company are core deposits, consisting of demand deposits, money market accounts, savings accounts, and certificates of deposit. The following table details the dollar and percentage composition of the deposit portfolio, by category, at the dates indicated: 2014 (dollars in thousands) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Noninterest Bearing Transaction Deposits . $ 369,203 23.6 % $ 292,539 21.9 % $ 238,062 23.3 % $ 169,403 22.2 % $ 109,491 18.2 % Interest Bearing Transaction Deposits . 179,567 11.5 177,292 13.2 132,800 13.0 130,496 17.1 119,083 19.8 Savings and Money Market Deposits . . . . 402,639 25.8 369,942 27.6 239,084 23.4 152,848 20.1 106,779 17.8 Time Deposits. . . . . . . . 318,356 20.4 292,096 21.8 273,229 26.6 192,620 25.3 182,504 30.3 Brokered Deposits. . . . . 291,169 18.7 207,481 15.5 140,333 13.7 116,515 15.3 83,515 13.9 Total Deposits . . . . . $ 1,560,934 100.0 % $ 1,339,350 100.0 % $ 1,023,508 100.0 % $ 761,882 100.0 % $ 601,372 100.0 % Total deposits at December 31, 2018 were $1.56 billion, an increase of $221.6 million, or 16.5%, compared to total deposits of $1.34 billion at December 31, 2017. Noninterest bearing deposits were $369.2 million at December 31, 2018, compared to $292.5 million at December 31, 2017. Noninterest bearing deposits comprised 23.6% of total deposits at December 31, 2018, compared to 21.9% at December 31, 2017. The Company relies on increasing the deposit base to fund loan and other asset growth. The Company is in a highly competitive market and competes for local deposits by offering attractive products with competitive rates. The Company expects to have a higher average cost of funds for local deposits compared to competitor banks due to the lack December 31, December 31, December 31, December 31, December 31, 2018 2017 2016 2015

64