2020 Annual Report

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

The following table presents a summary of the Company’s investments in qualified affordable housing projects and other tax credit investments at December 31, 2020 and 2019:

December 31, 2020

December 31, 2019

Unfunded Commitment (1) Investment

Unfunded Commitment

Investment

Accounting Method

Investment

— $ 2,148 $

—

Low Income Housing Tax Credit (LIHTC) . . . Proportional Amortization $ 1,867 $

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

2,198

1,858 2,262

3,395 3,395

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,065 $

1,858 $ 4,410 $

(1) All commitments are expected to be paid by the Company by December 31, 2021.

The following table presents a summary of the amortization expense and tax benefit recognized for the Company’s qualified affordable housing projects and other tax credit investments during 2020, 2019 and 2018.

Amortization Expense (1)

Tax Benefit Recognized (2)

Year Ended December 31, 2020 LIHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ FHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Year Ended December 31, 2019 LIHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ FHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Year Ended December 31, 2018 LIHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ FHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

281 738

$

(330)

(1,056) (1,386)

1,019

$

289

$

(330)

3,225 3,514

(3,687) (4,017)

$

310

$

(346)

3,293 3,603

(3,782) (4,128)

$

(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.

Note 16: Commitments, Contingencies and Credit Risk Financial Instruments with Off-Balance Sheet Credit Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Company’s exposure to credit loss is represented by the contractual, or notional, amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. Since some of the commitments are expected to expire without being drawn upon and some of the commitments may not be drawn upon to the total extent of the commitment, the notional amount of these commitments does not necessarily represent future cash requirements.

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