AR 2018

Bridgewater bank year in review

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dear clients and shareholders,

It is a pleasure to provide the 2018 annual review for Bridgewater Bancshares, Inc. (Bridgewater Bank). We are pleased to share Bridgewater’s continued story of growth, profitability and efficiency. In 2018, we focused on building capital - an exciting journey during which we completed an initial public offering (IPO) of our stock, which is now listed on the Nasdaq with a ticker symbol of “BWB.” We have always been grateful for solid partnerships with clients, shareholders and vendors, and this year we have developed relationships with additional investors in connection with our IPO. This active network provides the foundation for our business to prosper. We look forward to building on the momentum that shareholders, team members and clients have helped create. Our financial results surpassed expectations and year-over-year results showed considerable growth. We posted financial returns in 2018 with higher earnings than any of the previous thirteen years. Our assets grew to $1.97 billion and our deposits and loans have grown at a pace that measures well into the double digits. We have seamlessly integrated the costs associated with being a publicly traded company and continue to operate as one of the most efficient banks in the country. In keeping with our original strategic plan, Bridgewater expanded its branch footprint in 2018 by entering into the downtown St. Paul market. With the addition of a new location in St. Paul, we now have seven locations to serve clients looking to establish a relationship with a locally-led bank that provides simple solutions backed by responsive support. Bridgewater operates in an attractive geographic market with a solid demographic profile - a healthy mix of both entrepreneurial and established companies, as well as a strong local economy. The appeal of this market has spurred significant M&A activity in recent years and several regional banks entered the market changing the banking landscape. As a result of this recent M&A activity, Bridgewater Bank has become one of the few banks with local leadership and now ranks as the 4th largest bank headquartered in Minnesota by asset size. Throughout 2018, we took advantage of this by adding experienced talent to our team. As M&A activity continues, we believe we are uniquely positioned to increase market share and capitalize on the opportunities resulting from this disruption. Since inception, Bridgewater has experienced tremendous success and we intend for this trend to continue. Recognized as the premier real estate lender in the Twin Cities, we plan to increase our market niche among seasoned real estate entrepreneurs and build out other products and services to meet the demands of our predominately commercial client base. We see opportunities in this market to expand our brand and investigate new avenues for both loan and deposit diversification. We remain committed to building shareholder value, and we intend to achieve this by delivering the same exceptional service without sacrificing earnings. As always, I remain appreciative of the efforts of the Bridgewater team: the staff, directors and shareholders. Together, we will continue to drive growth and maximize your share value. It is truly a pleasure to be building your Bank.

Contents letter from jerry baack Financial highlights

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4-5

Jerry Baack Chairman of the Board

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financial highlights

Total Assets

Pre-Tax Net Income

$200,000,000 $400,000,000 $600,000,000 $800,000,000 $1,000,000,000 $1,200,000,000 $1,400,000,000 $1,600,000,000 $1,800,000,000 $200,000,000 $400,000,000 $600,000,000 $800,000,000 $1,000,000,000 $1,200,000,000 $1,400,000,000 $1,600,000,000 $1,800,000,000 $500,000,000 $700,000,000 $900,000,000 $1,100,000,000 $1,300,000,000 $1,500,000,000 $1,700,000,000 $1,900,000,000 $2,100,000,000

$0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000

Total Assets

Pre-Tax Net Income

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

Total Loans

Total Loans originated ($ volume)

$200,000,000 $300,000,000 $400,000,000 $500,000,000 $600,000,000 $700,000,000 $800,000,000 $900,000,000 $1,000,000,000

Total Loans

Total Loans Originated ($ Volume)

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

Total deposits

Total classified assets

$16,000,000

$14,000,000

$12,000,000

$10,000,000

$8,000,000

$6,000,000

Total Deposits

$4,000,000

Total Classified Assets

$2,000,000

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

financial performance & growth Bridgewater achieved another year of strong financial performance while sustaining growth across all facets of the organization. For the year-ended December 31, 2018, Bridgewater earned a record pre-tax net income of $32.1 million, up 19% over 2017. Total consolidated assets reached $1.97 billion as of December 31, 2018, which was $357.1 million in growth over 2017’s year-end. This 22% growth in assets was driven by our largest earning asset, our loan portfolio, which reached $1.64 billion with $313.9 million in growth or 24% year-over-year. While real estate lending continues to be our niche and the primary source of loan growth in 2018, diversification within different types of real estate, as well as a broadening exposure in other asset classes such as commercial and industrial, was experienced.

Bridgewater continues to experience a reduction in the level of non-performing assets, indicating strong credit quality in the loan portfolio. At December 31, 2018, total non-performing assets represented 0.03% of total assets. On the liability side of the balance sheet, deposits were $1.56 billion, increasing $221.6 million or 17% as of December 31, 2018 compared to December 31, 2017. The strong growth is a testament to our strategic branch network and responsive support.

With such earnings momentum and solid capital levels, we are well positioned to continue strong growth and earnings in 2019.

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client profiles

earnings up 59%

“ Whether it’s simplifying management accounts, investing in long term reserves or providing construction financing for new developments, Bridgewater consistently provides creative and beneficial financial services. “

duffy development Established in 1986, Duffy Development Company is a developer and long-term holder of commercial and multifamily residential properties operating in the three-state region of Minnesota, Wisconsin and Iowa. Founded by President John Duffy, the locally-owned and operated team at Duffy Development is known for their ability to identify a community’s needs and work with neighborhoods and local representatives to fill a void. Their mission, to create and maintain quality rental communities for local municipal pride and solid corporate investment has earned them the reputation as a leader in affordable housing throughout the Upper Midwest.

Contents duffy development

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energy management collaborative

fulton beer

manning transfer

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minny & paul

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core value recipients

12-13

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Client profiles

asset growth 22%

fulton beer

“ Bridgewater Bank is nimble, responsive and understands our

“ Fulton has found the ideal banking partner in Bridgewater Bank. Everyone we work with is prompt and helpful. They not only understand the challenges of a small business, they put together solutions to address them. “

changing needs, making them a great fit for our high growth company. They are truly a valued partner to EMC, which is refreshing and sets them apart.

“

energy management collaborative Energy Management Collaborative (EMC) provides leading-edge LED lighting, controls and IoT conversion systems and service solutions to a broad range of multinational retail, commercial, industrial and specialized customers. Using its prioritization tool, a proprietary consultative application, EMC simplifies the process of prioritizing energy efficient lighting projects for hundreds of client locations. In 2018, energy savings from these projects surpassed five billion kilowatt hours (kWh) of energy savings for their clients, the equivalent of reducing gasoline consumption by 418.7 million gallons. EMC’s headquarters, an energy efficient 42,000 square-foot facility located in Plymouth, Minnesota, is designed with the same best-in-class approach used with customers. Visiting clients can see how daylight harvesting, scheduling, personal control and HVAC can be integrated to create a variety of attractive environments.

Fulton Beer was founded by four homebrewers in a Southwest Minneapolis garage in 2009 with the mantra “Ordinary Guys Brewing Extraordinary Beer.” Since then, Fulton has become one of the fastest-growing breweries in the Midwest. In 2012, Fulton opened its first taproom in Minneapolis, which offers an ever- changing tap selection as well as house-brewed non-alcoholic soda. Fulton commissioned its second brewery in 2014, a 51,000 square-foot facility in Northeast Minneapolis. Fulton is best known for Sweet Child of Vine, a balanced and approachable India Pale Ale, and Lonely Blonde, an easy-drinking Blonde Ale. These, along with Fulton’s seasonal and limited release beers, are currently available on draft, in bottles and in cans throughout the Upper Midwest and beyond.

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Client profiles

loan growth 24%

MINNY & Paul

“ The service we receive from Bridgewater allows us to build a relationship based on mutual success. We know we can trust and rely on them to give us the support we need to drive our business forward. “

We switched all of our banking needs to Bridgewater very early on in the business and never looked back. They make our growth possible and are with us each step of the way. “

Manning transfer “

“

Manning Transfer is an interstate contract carrier based out of Minneapolis. What began in 1970 as a single- truck operation, has grown into a 100+ truck fleet providing specialized van services throughout 48 states. While the company has grown and changed tremendously over the past 48 years, the heart of Manning has always stayed true. They have built an industry-wide reputation for strong values, exceptional service and for being a place for staff and drivers to call Manning a home-away-from-home. As a family-owned business in its second generation, Manning is also committed to supporting their industry and community through various volunteer service commitments, donation drives and financial contributions.

Minny & Paul is a Minneapolis-based studio that curates gift sets featuring the best of local Minnesota makers. Their mission is to make the gifting process thoughtful, easy, charming and with a true taste of home. The company was founded in 2016 by Minnesota native, Laura Roos. Inspired to bring high quality, small-batch products together and make them more easily accessible, Laura developed the idea of Minny & Paul gifts. Over the last two years, Minny & Paul has grown its team, online shop, sourcing and production capabilities, and custom clientele. The fastest growing part of their business is in the corporate and custom gifting space, serving local and national clients alike including CBRE, Squarespace, RBC Wealth Management, the Minnesota Vikings and more. They help companies big and small deliver unique and memorable gifts to the people that help their business thrive.

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Core Values

Unconventional. our clients notice a difference. responsive. Under promise, over deliver. dedicated. Don’t Stop until you get it done. growth. if you aren’t moving forward, where are you going? accurate. it’s more than j st an expectation.

Elizabeth Fechter

Marketing Specialist | Team Member Since 2016 Bringing a brand to life is no simple task for any marketer, but with an eye for creativity and a can-do attitude, Elizabeth makes it look effortless. From designing the Bank’s annual report to developing unique advertisements and brochures, Elizabeth’s strategic thinking and creative abilities always convey what makes Bridgewater unconventional. In a predominately left-brained industry, Elizabeth’s right side stands out with the power to speak to our brand. deb beise Vice President Branch Operations | Team Member Since 2017 With branches spanning the Twin Cities, keeping each location operationally sound requires swift action. That’s where Deb comes in. Quickly responding to assorted daily requests, while ensuring each office is equipped with people and resources, is Deb’s forte. She realizes her internal team needs timely answers to serve our external patrons. As the Bank’s security officer, Deb has the key for each of our physical offices – and fortunately for Bridgewater, she also knows the key to keep us moving forward. marti stone Vice President Loan Administration | Team Member Since 2017 Running a marathon isn’t an easy feat, but for someone who has an attitude of dedication, anything is possible. Marti brings this spirited persistence to her position at the Bank, too. In her short tenure at Bridgewater, she has built a team of loan administration professionals whose priority is serving our clients. Whether it be leading this talented team – or running the Twin Cities Marathon – Marti puts one foot in front of the other to advance herself and others. KAtie klug Vice President Business Services | Team Member Since 2018 It’s rumored that Katie closes 100% of new business opportunities that come her way. How does she do it? Katie genuinely wants to help clients succeed. With a relationship- focused approach to banking, she makes growing our client base look as simple as the solutions we offer. The Bridgewater team agrees – Katie is a reliable partner with an impressive track record. By providing the personal, efficient support the Bank is known for, Katie only raises the bar.

sam palmisano Senior Financial Analyst | Team Member Since 2015

Known as an analytical whiz, Sam uses his talents to provide rich insights and reports for a variety of audiences. This work requires much input, and his output is always error-free. Whether creating detailed graphs in Excel or analyzing deposit growth data, Sam uses his eagle eyes to ensure accuracy leads the way in his work. Sam may have a knack for numbers, but he understands the formula for success is more than a math equation.

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products & services

Deposits Up 17%

• Competitive Checking & Savings Account • Certificates of Deposit • Digital Wallet • Foreign Currency Exchange • Online & Mobile Banking Client services

• ICS & CDARS • Remote Deposit

• Online Bill Pay • Wire Services • Notary Services • IRA Savings & Certificates of Deposit

Personal banking BridgewaterBank’sdedicatedDepositServicesTeamprovidespersonalized, professional and responsive service. Our full suite of deposit products is specially designed to meet the unique needs of our entrepreneurial clients. By dealing directly with our Account Executives, clients avoid automated phone systems and long teller lines. We pride ourselves on delivering an unconventional customer experience by providing responsive support and simple solutions, and our clients notice the difference.

Business Services • Online Banking • Mobile Banking • Remote Deposit • ACH Origination • Online Wire Transfer (Domestic & International)

• Positive Pay • ACH Blocking

• Debit & Credit Card • Merchant Card • Checking & Savings Accounts

• Lockbox • Sweeps • Bill Pay

commercial banking Bridgewater Bank’s dedicated relationship team offers responsive support and simple solutions for many business clients that call Bridgewater Bank home. Our experienced team enjoys developing relationships and supporting many of the enhanced products that businesses need to operate efficiently in today’s marketplace. Simply put, our goal is to simplify banking, allowing our clients to focus on their business.

contents Personal banking & commercial banking 15 Deposit portfolio & loan portfolio 16 lending 17

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products & services

total equity capital up 61%

• Property Rehabilitation • New Construction • Lot Financing • Land Development Construction & Developmemt commercial loans

deposit portfolio Personal Savings Personal Checking Business Savings Business Checking Certificates of Deposit

• Mini-Permanent Loans • Revolving Lines of Credit • Affordable Housing Financing • Tax Credit Bridge Loans MultiFamily Lending

• Owner Occupied Homes • Vacation Homes • Residential Rental Homes • Home Equity Lines of Credit • Construction/Bridge Loans Residential Real Estate • Office Buildings • Retail Strip Centers • Industrial Properties • Mixed-Use Buildings Commercial Real Estate

commercial & industrial

• Receivables & Inventory Financing • Equipment Acquisition

• Lease Financing • SBA Financing

• Executive Lines of Credit • Stock/Bond Secured Loans • Auto Financing • Recreational Vehicles • Overdraft Lines of Credit personal loans

Loan portfolio Owner Occupied Commercial Real Estate Nonowner Occupied Commercial Real Estate Construction & Development Commercial & Industrial

Lending As the premier real estate lender in the Twin Cities, Bridgewater Bank’s loan products are assembled tomeet the distinctive needs of real estate and small business entrepreneurs. Our lenders are experts in the markets we serve. Together, we realize that flexibility and quick responses are integral to ensuring our clients’ success.

Multifamily 1-4 Family

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financial summary

consolidated statements of income (unaudited)

INTEREST INCOME

$60,024 12/31/17

$78,033 12/31/18

Loans, Including Fees Investment Securities Other

6,694

5,981

499

341

Total Interest Income

85,226

66,346

Interest expense Deposits Notes Payable Federal Home Loan Bank Advances

15,972

9,719

594 1,718 1,568

656 880 749 169

Subordinated Debentures Federal Funds Purchased Total Interest Expense NET INTEREST INCOME provision for loan losses net interest income after provision for loan losses noninterest income Customer Services Fees

636

20,488 64,738

12,173

54,173

3,575

4,175

61,163

49,998

745

660

Net Loss on Sales of Available for Sale Securities Net Gain (Loss) on Sales of Foreclosed Assets Other Income Total Noninterest Income Noninterest expense Salaries and Employee Benefits Occupancy Other

(125) (225) 2,148 2,543

(250)

356

1,770

2,536

18,620

14,051 2,192 9,253

2,351

10,591

Total NonInterest Expense income before income taxes provision for income taxes

31,562 32,144

25,496 27,038

5,224

10,149

net income

$

$

26,920

16,889

contents Consolidated Statements of income Consolidated balance sheets Consolidated Shareholders’ equity

*Dollars in thousands

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21

Directors

22-23 24-25

Strategic leadership team

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Financial summary

consolidated Balance SheetS (unaudited) Assets Cash and Cash Equivalents Bank-Owned Certificates of Deposits

consolidated shareholders’ equity (unaudited)

$23,725 12/31/17

$28,444 12/31/18

3,305

3,072

Securities Available for Sale, at Fair Value Loans, Net of Allowance for Loan Losses of $20,031 at December 31, 2018 and $16,502 at December 31, 2017 Federal Home Loan Bank Stock, at Cost Premises and Equipment, Net Foreclosed Assets Accrued Interest Goodwill

253,378

229,491

Voting

Nonvoting

Voting

Nonvoting

Shares

Common Stock

1,640,385

1,326,507

Additional Paid-In Capital

Accumulated Other

Comprehensive Income (Loss) Total

Retained

Earnings

Balance, December 31, 2016

7,614

5,147 10,115 581 5,342 2,626 1,243

115,366

20,744,001

3,845,860

207

38

65,777

52,619 (3,275)

13,074

Comprehensive Income Stock-Based Compensation Stock Options Exercised Balance, December 31, 2017 Comprehensive Income (Loss) Stock-Based Compensation Stock Options Exercised Issuance of Common Stock, Net of Issuance of Costs Conversion of Non-voting Stock to Voting Stock Reclassification of the Income Tax Effects of the Tax Cuts and Job Acts to Retained Earnings Balance, December 31, 2018

368 21,248 180

368

6,589 2,626 1,052

16,889

4,359

90,000

1

179

Other Assets Other Intangible Assets, Net Total Assets

$17,274

$8,763

137,162 799 24,074 106

20,834,001

38

3,845,860

208

69,508

66,324 799

1,084

1,973,741

1,616,612

$

$

Liabilities Deposits:

26,920

(2,846)

37,900

1

105

Noninterest Bearing Interest Bearing

$

369,203 1,191,731

292,539 1,046,811 1,339,350

$

58,857

5,379,513

54

58,803

Total Deposits

1,560,934

3,845,860

(3,845,860)

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(38)

Notes Payable Federal Funds Purchased Federal Home Loan Bank Advances Subordinated Debentures, Net of Issuance Costs Accrued Interest Payable Other Liabilities

18,000 15,000 124,000 24,630

23,000 17,000 68,000 24,527

(194)

194

1,806 8,373

1,408 6,165

30,097,274

301

126,031

96,234

(1,568)

220,998

Total Liabilities

1,752,743

1,479,450

shareholders’ equity

Preferred Stock, $0.01 Par Value Authorized 10,000,000; Issued and Outstanding at December 31, 2018 and December 31, 2017

Common Stock, $0.01 Par Value Voting Common Stock - Authorized 75,000,000; Issued and Outstanding 30,097,274 at December 31, 2018 and 20,834,001 at December 31, 2017 Non-voting Common Stock - Authorized 10,000,000; Issued and Outstanding -0- at December 31, 2018 and 3,845,860 at December 31, 2017 Retained Earnings Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss)

301

208

38

126,031 96,234 (1,568)

66,324 69,508

*Dollars in thousands, except share amounts

After tax return on equity - 13.87% Earnings Per share - $0.93 diluted earnings per share - $0.91 tangible book value per share - $7.22

1,084

Total Shareholders’ Equity Total liabilities and equity

220,998 1,973,741

137,162

1,616,612

$

$

*Dollars in thousands, except share amounts

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Directors

Jerry baack President & chief executive officer, Chairman of the board

jeffrey shellberg executive vice president & chief credit officer, director

As the principal founder of the Company and the Bank, Mr. Baack was responsible for all aspects of the Bank’s formation; including the initial capital raise, business plan, board and management team structure and recruitment, charter and regulatory approval. He currently serves as Chairman of the Board, Chief Executive Officer and President of the Company, positions he has held since the Bank was founded in 2005.

Mr. Shellberg is a founder of the Company and founding director of the board. He has worked in the regulatory and commercial banking industry for over 30 years. As Executive Vice President and Chief Credit Officer, Mr. Shellberg is responsible for all aspects of the Bank’s credit policies and risk management systems. He currently chairs the loan and appraisal committees and plays an integral role in credit actions on the Bank’s largest lending relationships.

james johnson director

thomas trutna director

Mr. Johnson is a founding director of the board. He is a franchise owner of Flagship Marketing, Inc., a privately-held company that operates as Express Employment Professionals (Express) and Specialized Recruiting Group (SRG), which both deliver staffing support and human resource services through a network of franchise office owners. In addition, Mr. Johnson currently serves as Regional Franchise Developer for Express Services, Inc.

Mr. Trutna is a founding director of the board. He is the President and Founder of BIG INK, a visual communications company that creates branded solutions for Fortune 1000 companies, an organization he has run since 1999. Prior to founding BIG INK, Mr. Trutna held a marketing and business management positions at General Mills and Periscope, a Twin Cities advertising firm.

david juran director

todd urness director

Mr. Juran, a member of the board since 2010, is the Executive Vice President of Dougherty & Company LLC, a full-service investment bank and brokerage firm founded in 1997. He has been with the company since 2002 and is also a member of the Board of Directors of Dougherty Financial Group LLC, President of Dougherty LLC, President of Dougherty Equipment Finance LLC, Chief Executive Officer of Dougherty Real Estate Advisors LLC and President and Chief Operating Officer of Dougherty Mortgage LLC.

Mr. Urness is a founding director of the board. He is a shareholder at the law firm of Winthrop & Weinstine, P.A., a 130 lawyer general practice firm located in Minneapolis, Minnesota. Mr. Urness has practiced with Winthrop & Weinstine since 1985 and has been a shareholder with the firm since 1988. He has served on the Board of Directors of Winthrop & Weinstine as well as its senior management and compensation committees since 1993.

doug parish director

david volk director

Mr. Parish, a member of the board since 2018, is the former Senior Vice President and Chief Compliance Officer for Ameriprise Financial, Inc., a Fortune 250 diversified financial services company. As both a Certified Public Accountant and a Certified Internal Auditor, Doug is a financial expert with 30 years of diverse experience across a number of disciplines, including accounting, finance, audit, risk management, regulatory compliance and corporate governance.

Mr. Volk, a member of the board since 2017, is a principal at Castle Creek Capital, an alternative asset management firm focused on the community banking industry located in Rancho Santa Fe, California. He has been with Castle Creek Capital since 2005 and has led or supported investments in numerous recapitalization, distressed and growth solutions.

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Strategic leadership team

jerry baack President & chief executive officer, chairman of the board

nick place chief lending officer

As Chief Lending Officer, Mr. Place oversees a talented team of lenders as well as an active portfolio of loans. In addition to his managerial responsibilities, Mr. Place actively engages in loan origination, primarily focusing on real estate lending in the Minneapolis/St. Paul metro area. He has been instrumental in strategically developing specialty loan products in response to market demands.

As the principal founder of the Company and the Bank, Mr. Baack was responsible for all aspects of the Bank’s formation; including the initial capital raise, business plan, board and management team structure and recruitment, charter and regulatory approval. He currently serves as Chairman of the Board, Chief Executive Officer and President of the Company, positions he has held since the Bank was founded in 2005.

Joe chybowski chief financial officer

lisa salazar senior vice president deposit Services and emerging products

Mr. Chybowski serves as Chief Financial Officer and has been with Bridgewater Bank since 2013. Mr. Chybowski directs and manages all financial-related activities for the Bank, including but not limited to accounting, regulatory reporting, liquidity management, investment strategies, insurance and capital development. Additionally, he chairs the Bank’s Asset Liability Management Committee as well as the Investment Committee.

As Senior Vice President Deposit Services and Emerging Products, Ms. Salazar is responsible for driving accountablity and results through initiatives that deliver revenue growth, market share, new business opportunities and market penetration. In addition to leading a talented team of deposit services professionals, she is responsible for driving the strategic direction of the Bank’s product offering by maintaining awareness of industry trends.

mary jayne crocker Executive vice president & chief operating officer Ms. Crocker has been with the Bank since its origin and has served as Executive Vice President and Chief Operating Officer since January 2014. Prior to her role as COO, Ms. Crocker was the Bank’s Senior Vice President of Communications, where she was instrumental in building awareness of the Bridgewater Bank brand, maintaining and communicating simple deposit solutions and creating positive shareholder relationships. In her current role, she is responsible for directing the implementation of all strategic initiatives and overseeing marketing, daily operations, technology and human resources.

jeffrey shellberg Executive vice president & Chief credit officer, director

Mr. Shellberg is a founder of the Company and founding director of the board. He has worked in the regulatory and commercial banking industry for over 30 years. As Executive Vice President and Chief Credit Officer, Mr. Shellberg is responsible for all aspects of the Bank’s credit policies and risk management systems. He currently chairs the loan and appraisal committees and plays an integral role in credit actions on the Bank’s largest lending relationships.

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BWBMn.com | 952.893.6868 member fdic

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