●

Cost of deposits declined 47 basis points to 0.99% in the second quarter of 2020 compared to 1.46% in the second quarter of 2019.

●

Tangible book value per share, a non-GAAP financial measure, increased 13.1%, or $1.02, to $8.80 at June 30, 2020, compared to $7.78 at June 30, 2019.

●

Gross loans increased $408.9 million at June 30, 2020, or 22.9%, compared to June 30, 2019. Year-over-year loan growth was $228.6 million, excluding $180.2 million of PPP loans. Year-to-date annualized loan growth for 2020, excluding PPP loans, was 10.6% as of June 30, 2020.

●

Deposits increased $542.8 million at June 30, 2020, or 31.9%, compared to June 30, 2019. Year-over-year growth consisted of $316.7 million in organic deposits, excluding an estimated $60.0 million in growth attributable to remaining PPP loan funds. Year-to-date annualized organic deposit growth, excluding remaining PPP loan funds, for 2020 was 23.2% as of June 30, 2020.

●

The ratio of nonperforming assets to total assets was 0.02% at June 30, 2020, compared to 0.07% at June 30, 2019.

Recent Developments

The outbreak of the novel coronavirus, or COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has continued to create uncertainty and extraordinary change for the Company, its clients, its communities and the country as a whole. In response to this pandemic, the Company rapidly deployed its business continuity plan and continues to take steps to protect the health and safety of its employees and clients. Proactively, defensive strategies have been employed in all departments to ensure the Company is well positioned to battle the unforeseen implications of the COVID-19 pandemic. Given the fluidity of the situation, management cannot estimate the duration and full impact of the COVID-19 pandemic on the economy, financial markets and the Company’s financial condition and results of operations. At this point, management does not expect that the Company’s financial results in future quarters will track with the Company’s historical performance.

The Company’s primary banking market area is the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area. In Minnesota, the Governor issued an order on March 25, 2020 that, subject to limited exceptions, required individuals to stay at home and non-essential businesses to cease all activities, other than minimum basic operations. This order was lifted as of May 18, 2020 and the state entered a phased-in approach to reopening, where businesses must operate under certain restrictions based on the nature and industry of the business. As a result of the original order and restrictions, Minnesota has experienced a dramatic and sudden increase in unemployment levels, significant stress on personal and business income, and recessionary economic conditions. Recent increases in COVID-19 infections across the nation have created uncertainty surrounding the future recovery of many companies’ operations and the local economy. Fortunately, to date Minnesota has been less impacted by the virus than other states in terms of cases and deaths.

The Company’s operations are being conducted in material compliance with current federal, state and local government guidelines regarding social distancing, sanitation, and personal hygiene. Throughout the quarter, bank branches operated under modified hours and limited locations. In June, the Company started to expand hours and reopen branch locations providing clients with full-service options at all but the Company’s two downtown locations, where offices remain closed and traffic would be minimal. To ensure the safety of the Company’s staff and clients, masks are mandatory and proper social distancing protocols are enforced. Non-branch personnel continue to work remotely. A COVID-19 Preparedness Plan has been created outlining the protocols for employees as they return to the office which is currently scheduled for mid-August. Additional details about the Company’s COVID-19 pandemic assistance programs, including relevant disclosures and up-to-date information, are maintained at bwbmn.com.

During the second quarter, the Company participated in the SBA’s PPP which stemmed from the Coronavirus, Aid, Relief and Economic Security, or CARES, Act that was signed into law on March 27, 2020. The Company committed significant efforts related to PPP loan origination in the second quarter of 2020, and will shift such efforts to forgiveness processing in future quarters. The following table summarizes PPP loan originations by balance segment:


	As of and for the three months ended June 30, 2020
	Number		Principal		Net Origination		Net Origination
(dollars in thousands)	of Loans		Balance		Fees Generated		Fees Earned
Balance Segment
Less than $350		1,004	$	64,429	$	2,934	$	263
$350 to $2,000		107		80,618		2,388		231
Greater than $2,000		11		35,181		349		34
Totals		1,122	$	180,228	$	5,671	$	528

The Company has increased oversight and analysis of all credits, especially in vulnerable industries such as hospitality and restaurants, to proactively monitor evolving credit risk. With the change in economic conditions and the uncertain duration of the COVID-19 pandemic, the Company’s portfolio is expected to be negatively impacted and management expects delinquencies and charge-offs to rise in future

Page 2 of 16

periods. The Company will continue to monitor credits closely, while working with clients to provide relief when appropriate.

The Company has developed programs for clients who are experiencing business and personal disruptions due to the COVID-19 pandemic by providing loan payment deferrals and interest-only modifications. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic will not be considered troubled debt restructurings.

The following table presents a summary of closed loan modifications, by loan segment and modification type, as of June 30, 2020:


	Interest-Only			Payment Deferral			Total
	Amount		# of Loans	Amount		# of Loans	Amount		# of Loans
(dollars in thousands)
Commercial	$	17,615	36	$	13,355	14	$	30,970	50
Construction and Land Development		133	1		—	—		133	1
Real Estate Mortgage:
1 - 4 Family Mortgage		8,037	22		420	2		8,457	24
Multifamily		41,320	6		16,251	3		57,571	9
CRE Owner Occupied		7,397	14		1,502	3		8,899	17
CRE Nonowner Occupied		100,805	41		86,175	18		186,980	59
Consumer and Other		—	—		—	—		—	—
Totals	$	175,307	120	$	117,703	40	$	293,010	160

Modifications have been granted based on specific needs and circumstances affecting each borrower. Interest-only modifications have been primarily granted for a three to six month period, but range up to twelve months. Payment deferral modifications have been granted for a three to six month period. Management anticipates the loan modifications may continue throughout 2020.

The Company’s construction of a new corporate headquarters in St. Louis Park is nearing completion. Despite the challenges faced with the COVID-19 pandemic, the Company does not anticipate delays in the scheduled third quarter 2020 opening of the new building. Management expects that occupancy and equipment expense will rise in future periods related to the operations and depreciation of the new building.

Page 3 of 16

Key Financial Measures


	As of and for the Three Months Ended									As of and for the Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2020			2020			2019			2020			2019
Per Common Share Data
Basic Earnings Per Share	$	0.26		$	0.26		$	0.27		$	0.52		$	0.50
Diluted Earnings Per Share		0.26			0.25			0.26			0.51			0.49
Book Value Per Share		8.92			8.61			7.90			8.92			7.90
Tangible Book Value Per Share ⁽¹⁾		8.80			8.49			7.78			8.80			7.78
Basic Weighted Average Shares Outstanding		28,676,441			28,791,494			29,703,024			28,733,968			29,899,241
Diluted Weighted Average Shares Outstanding		29,165,157			29,502,245			30,312,039			29,350,426			30,510,180
Shares Outstanding at Period End		28,837,560			28,807,375			28,986,729			28,837,560			28,986,729

Selected Performance Ratios
Return on Average Assets (Annualized)		1.17	%		1.29	%		1.55	%		1.22	%		1.49	%
Pre-Provision Net Revenue Return on Average Assets (Annualized)⁽¹⁾		2.00			2.11			2.08			2.05			2.05
Return on Average Common Equity (Annualized)		11.98			11.94			13.88			11.96			13.25
Return on Average Tangible Common Equity (Annualized)⁽¹⁾		12.14			12.10			14.10			12.12			13.47
Yield on Interest Earning Assets		4.45			4.90			5.05			4.66			5.02
Yield on Total Loans, Gross		4.85			5.17			5.33			5.00			5.30
Cost of Interest Bearing Liabilities		1.58			1.84			2.07			1.70			2.07
Cost of Total Deposits		0.99			1.27			1.46			1.12			1.46
Net Interest Margin ⁽²⁾		3.38			3.59			3.60			3.48			3.57
Efficiency Ratio⁽¹⁾		48.6			44.4			50.1			46.5			47.20
Adjusted Efficiency Ratio ⁽¹⁾		40.4			44.1			42.7			42.2			42.9
Noninterest Expense to Average Assets (Annualized)		1.64			1.69			1.84			1.67			1.72
Adjusted Noninterest Expense to Average Assets (Annualized) ⁽¹⁾		1.37			1.68			1.57			1.51			1.56
Loan to Deposit Ratio		97.8			105.4			105.0
Core Deposits to Total Deposits		75.7			78.6			78.3
Tangible Common Equity to Tangible Assets ⁽¹⁾		9.23			10.13			10.64

Capital Ratios (Bank Only)⁽³⁾
Tier 1 Leverage Ratio		11.36	%		10.93	%		10.99	%
Tier 1 Risk-based Capital Ratio		12.96			11.53			11.73
Total Risk-based Capital Ratio		14.21			12.67			12.67

Capital Ratios (Consolidated)⁽³⁾
Tier 1 Leverage Ratio		9.94	%		10.51	%		10.75	%
Tier 1 Risk-based Capital Ratio		11.39			11.10			11.48
Total Risk-based Capital Ratio		15.99			13.38			13.70

(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 federal tax rate of 21%.

(3)	Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies.

Page 4 of 16

Selected Financial Data


	June 30,		March 31,		December 31,		September 30,		June 30,
(dollars in thousands)	2020		2020		2019		2019		2019
Selected Balance Sheet Data
Total Assets	$	2,754,463	$	2,418,730	$	2,268,830	$	2,232,339	$	2,123,631
Total Loans, Gross		2,193,778		2,002,817		1,912,038		1,846,218		1,784,903
Allowance for Loan Losses		27,633		24,585		22,526		22,124		21,362
Goodwill and Other Intangibles		3,391		3,439		3,487		3,535		3,582

Deposits		2,242,051		1,900,127		1,823,310		1,802,236		1,699,265
Tangible Common Equity⁽¹⁾		253,799		244,704		241,307		232,524		225,555
Total Shareholders' Equity		257,190		248,143		244,794		236,059		229,137
Average Total Assets - Quarter-to-Date		2,622,272		2,317,040		2,221,370		2,168,909		2,069,707
Average Common Equity - Quarter-to-Date		255,109		250,800		240,188		232,590		231,374

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


	For the Three Months Ended						For the Six Months Ended
	June 30,		March 31,		June 30,		June 30,		June 30,
(dollars in thousands)	2020		2020		2019		2020		2019
Selected Income Statement Data
Interest Income	$	28,166	$	27,468	$	25,520	$	55,634	$	49,787
Interest Expense		6,824		7,366		7,382		14,190		14,518
Net Interest Income		21,342		20,102		18,138		41,444		35,269
Provision for Loan Losses		3,000		2,100		600		5,100		1,200
Net Interest Income after Provision for Loan Losses		18,342		18,002		17,538		36,344		34,069
Noninterest Income		1,977		1,719		1,134		3,696		1,768
Noninterest Expense		10,711		9,746		9,474		20,457		17,359
Income Before Income Taxes		9,608		9,975		9,198		19,583		18,478
Provision for Income Taxes		2,010		2,532		1,189		4,542		3,451
Net Income	$	7,598	$	7,443	$	8,009	$	15,041	$	15,027

Income Statement

Net Interest Income

Net interest income was $21.3 million for the second quarter of 2020, an increase of $1.2 million, or 6.2%, from $20.1 million in the first quarter of 2020, and an increase of $3.2 million, or 17.7%, from $18.1 million in the second quarter of 2019. The linked-quarter increase in net interest income was primarily due to growth in average interest earning assets and lower rates paid on deposits, offset partially by lower rates on interest earning assets. The year-over-year increase in net interest income was largely attributed to growth in average interest earning assets, which increased by $521.7 million, or 25.5%, to $2.57 billion for the second quarter of 2020, from $2.05 billion for the second quarter of 2019. This increase in average interest earning assets was primarily due to continued organic growth in the loan portfolio and most recently, the funding of PPP loans.

Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2020 was 3.38%, a 21 basis point decrease from 3.59% in the first quarter of 2020, and a 22 basis point decrease from 3.60% in the second quarter of 2019. While the Company is encouraged by the continued reduction in the cost of interest bearing liabilities during the second quarter of 2020, the linked-quarter decrease in net interest margin was primarily attributed to a meaningful increase in on-balance sheet liquidity in conjunction with the historically low and flat yield curve weighing on subsequent earning asset yields. Furthermore, the Company’s participation in the PPP generated strong loan origination volume during the second quarter of 2020; however, the interest rate of 1.00% earned on these loans is significantly lower than the aggregate loan yield, thus impacting the net interest margin during the quarter. It is worth noting that the core net interest margin, excluding PPP loans and corresponding deposit balances, was 3.43% for the second quarter of 2020. The year-over-year decline in net interest margin largely followed the same themes as the quarter. Despite a significant reduction in interest bearing deposit costs over the year, the historically low interest rate environment coupled with a more liquid balance sheet mix pressured earning asset yields lower and ultimately compressed the net interest margin.

Interest income was $28.2 million for the second quarter of 2020, an increase of $698,000, or 2.5%, from $27.5 million in the first quarter of 2020, and an increase of $2.6 million, or 10.4%, from $25.5 million in the second quarter of 2019. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.45% in the second quarter of 2020, compared to 4.90% in the first quarter of 2020, and 5.05% in the second quarter of 2019. The linked-quarter decrease in the yield on interest earning assets was a function of the historically low yield

Page 5 of 16

curve combined with the Company’s deliberate shift to a more liquid balance sheet composition given the uncertain economic environment. The year-over-year decline in the yield on interest earning assets was primarily due to the falling interest rate environment.

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 5.01% in the second quarter of 2020, which is 16 basis points lower than 5.17% in the first quarter of 2020, and 32 basis points lower than 5.33% in the second quarter of 2019. While loan fees have maintained a stable contribution to aggregate loan yield, the historically low and flat 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
	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019
Interest	4.76	%	4.90	%	5.00	%	5.07	%	5.10	%
Fees	0.25		0.27		0.33		0.25		0.23
Yield on Loans	5.01	%	5.17	%	5.33	%	5.32	%	5.33	%

Interest expense was $6.8 million for the second quarter of 2020, a decrease of $542,000, or 7.4%, from $7.4 million in the first quarter of 2020, and a decrease of $558,000, or 7.6%, from $7.4 million in the second quarter of 2019. The cost of interest bearing liabilities declined 26 basis points on a linked-quarter basis from 1.84% in the first quarter of 2020 to 1.58% in the second quarter of 2020, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 49 basis points from 2.07% in the second quarter of 2019 to 1.58% in the second quarter of 2020. Given strong deposit growth and ample time deposit maturities over the next 12 months, the Company anticipates meaningful deposit repricing opportunities in future quarters. Furthermore, the Company will continue to evaluate strategies similar to the recent strategy that involved prepaying $25.0 million of long term FHLB advances with a blended 2.89% cost and supplementing with much lower cost core deposits.

A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019 is as follows:


	For the Three Months Ended
	June 30, 2020						March 31, 2020						June 30, 2019
	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	$	109,073	$	37	0.14	%	$	29,462	$	59	0.81	%	$	38,142	$	171	1.80	%
Investment Securities:
Taxable Investment Securities		203,559		1,304	2.58			188,186		1,387	2.96			140,890		1,058	3.01
Tax-Exempt Investment Securities⁽¹⁾		91,793		996	4.37			94,728		1,024	4.35			103,223		1,103	4.28
Total Investment Securities		295,352		2,300	3.13			282,914		2,411	3.43			244,113		2,161	3.55
Paycheck Protection Program Loans ⁽²⁾		139,235		873	2.52			—		—	—			—		—	—
Loans ⁽¹⁾⁽²⁾		2,013,163		25,070	5.01			1,954,959		25,150	5.17			1,755,686		23,321	5.33
Total Loans		2,152,398		25,943	4.85			1,954,959		25,150	5.17			1,755,686		23,321	5.33
Federal Home Loan Bank Stock		10,469		125	4.81			10,270		100	3.93			7,694		100	5.23
Total Interest Earning Assets		2,567,292		28,405	4.45	%		2,277,605		27,720	4.90	%		2,045,635		25,753	5.05	%
Noninterest Earning Assets		54,980						39,435						24,072
Total Assets	$	2,622,272					$	2,317,040					$	2,069,707
Interest Bearing Liabilities:
Deposits:
Interest Bearing Transaction Deposits		272,565		377	0.56	%		246,843		431	0.70	%		202,886		387	0.77	%
Savings and Money Market Deposits		521,313		1,327	1.02			533,578		1,905	1.44			431,716		1,938	1.80
Time Deposits		388,357		2,122	2.20			376,154		2,177	2.33			354,026		2,120	2.40
Brokered Deposits		319,711		1,344	1.69			218,289		1,211	2.23			266,804		1,575	2.37
Total Interest Bearing Deposits		1,501,946		5,170	1.38			1,374,864		5,724	1.67			1,255,432		6,020	1.92
Federal Funds Purchased		9		—	0.72			24,835		107	1.74			2,089		12	2.24
Notes Payable		12,000		111	3.72			12,505		115	3.70			14,000		130	3.72
FHLB Advances		193,819		1,064	2.21			172,379		1,027	2.40			131,385		827	2.52
Subordinated Debentures		31,228		479	6.17			24,744		393	6.39			24,673		393	6.39
Total Interest Bearing Liabilities		1,739,002		6,824	1.58	%		1,609,327		7,366	1.84	%		1,427,579		7,382	2.07	%
Noninterest Bearing Liabilities:
Noninterest Bearing Transaction Deposits		603,456						444,201						401,480
Other Noninterest Bearing Liabilities		24,705						12,712						9,274

Page 6 of 16

Total Noninterest Bearing Liabilities		628,161						456,913						410,754
Shareholders' Equity		255,109						250,800						231,374
Total Liabilities and Shareholders' Equity	$	2,622,272					$	2,317,040					$	2,069,707
Net Interest Income / Interest Rate Spread				21,581	2.87	%				20,354	3.06	%				18,371	2.98	%
Net Interest Margin ⁽³⁾					3.38	%					3.59	%					3.60	%
Taxable Equivalent Adjustment:
Tax-Exempt Investment Securities				(239)						(252)						(233)
Net Interest Income			$	21,342					$	20,102					$	18,138

(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.

Provision for Loan Losses

The provision for loan losses was $3.0 million for the second quarter of 2020, an increase of $900,000 from $2.1 million for the first quarter of 2020, and an increase of $2.4 million from $600,000 for the second quarter of 2019. The allowance for loan losses to total loans was 1.26% at June 30, 2020, compared to 1.23% at March 31, 2020, and 1.20% at June 30, 2019. The allowance for loan losses to total loans, excluding $180.2 million of PPP loans, was 1.37% at June 30, 2020. The reserve build in the second quarter of 2020 was attributable to changes in economic conditions and evolving risks identified in certain commercial sectors driven by the impact of the COVID-19 pandemic.

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						Six Months Ended
	June 30,		March 31.		June 30,		June 30,		June 30,
(dollars in thousands)	2020		2020		2019		2020		2019
Balance at Beginning of Period	$	24,585	$	22,526	$	20,607	$	22,526	$	20,031
Provision for Loan Losses		3,000		2,100		600		5,100		1,200
Charge-offs		(1)		(47)		(3)		(48)		(39)
Recoveries		49		6		158		55		170
Balance at End of Period	$	27,633	$	24,585	$	21,362	$	27,633	$	21,362

Noninterest Income

Noninterest income was $2.0 million for the second quarter of 2020, an increase of $258,000 from $1.7 million for the first quarter of 2020, and an increase of $843,000 from $1.1 million for the second quarter of 2019. The linked-quarter increase was primarily due to increased gains on sales of securities, offset partially by decreased customer service and swap fees. Customer service fees have declined due to lower account activity and ongoing fee waivers as a result of the COVID-19 pandemic. The year-over-year increase was primarily due to increased gains on sales of securities and letter of credit fees.

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


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,		June 30,
(dollars in thousands)	2020		2020		2019		2020		2019
Noninterest Income:
Customer Service Fees	$	135	$	240	$	189	$	375	$	380
Net Gain on Sales of Securities		1,361		3		463		1,364		458
Letter of Credit Fees		265		274		213		539		459
Debit Card Interchange Fees		99		92		109		191		197
Swap Fees		—		907		—		907		—
Other Income		117		203		160		320		274
Totals	$	1,977	$	1,719	$	1,134	$	3,696	$	1,768

Page 7 of 16

Noninterest Expense

Noninterest expense was $10.7 million for the second quarter of 2020, an increase of $965,000 from $9.7 million for the first quarter of 2020, and an increase of $1.2 million from $9.5 million for the second quarter of 2019. The linked-quarter increase was primarily due to $1.4 million of FHLB advance prepayment fees incurred for the extinguishment of $25.0 million of fixed rate advances and higher amortization of tax credit investments. The increase was partially offset by general decreases in other operating expenses due to the COVID-19 pandemic, mainly marketing and advertising. The decrease in salaries expense was attributable to a $316,000 deferral of salary costs associated with the origination of PPP loans; these costs are netted against fees and amortized as a yield adjustment over the life of the loan. The year-over-year increase was attributed to increased salaries and employee benefits and FHLB advance prepayment fees, offset partially by decreased marketing and advertising and amortization of tax credit investments.

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


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,		June 30,
(dollars in thousands)	2020		2020		2019		2020		2019
Noninterest Expense:
Salaries and Employee Benefits	$	6,348	$	6,454	$	5,124	$	12,802	$	9,926
Occupancy and Equipment		672		713		785		1,385		1,441
FDIC Insurance Assessment		168		190		285		358		570
Data Processing		238		229		151		467		304
Professional and Consulting Fees		423		485		451		908		839
Information Technology and Telecommunications		326		266		208		592		444
Marketing and Advertising		85		466		404		551		869
Intangible Asset Amortization		47		48		47		95		95
Amortization of Tax Credit Investments		362		85		1,390		447		1,567
FHLB Advance Prepayment Fees		1,430		—		—		1,430		—
Other Expense		612		810		629		1,422		1,304
Totals	$	10,711	$	9,746	$	9,474	$	20,457	$	17,359

The Company had 173 full-time equivalent employees at June 30, 2020, compared to 170 employees at March 31, 2020, and 150 employees at June 30, 2019. Despite the uncertainty surrounding the COVID-19 pandemic, the Company continues to attract in-market lenders and deposit gatherers from previous M&A disruption.

While the Company has always prided itself on a “branch-light” footprint, the efficiencies of this model garnered throughout the pandemic, and going forward, have positioned the Company well to continue making investments in technology as the industry adapts to evolving client behavior. The efficiency ratio, a non-GAAP financial measure, was 48.6% for the second quarter of 2020, compared to 44.4% for the first quarter of 2020, and 50.1% for the second quarter of 2019. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 40.4% for the second quarter of 2020, 44.1% for the first quarter of 2020 and 42.7% for the second quarter of 2019.

Income Taxes

The effective combined federal and state income tax rate for the second quarter of 2020 was 20.9%, a decrease from 25.4% for the first quarter of 2020 and an increase from 12.9% for the second quarter of 2019. The change in effective combined rate compared to both periods was due to changes in tax credits being recognized.

Balance Sheet

Total assets at June 30, 2020 were $2.75 billion, a 13.9% increase from $2.42 billion at March 31, 2020, and a 29.7% increase from $2.12 billion at June 30, 2019. The increase in total assets was primarily due to organic loan growth and PPP loan growth.

Total gross loans at June 30, 2020 were $2.19 billion, an increase of $191.0 million, or 9.5%, over total gross loans of $2.00 billion at March 31, 2020, and an increase of $408.9 million, or 22.9%, over total gross loans of $1.78 billion at June 30, 2019. Loan growth in the second quarter of 2020 was primarily attributable to the Company’s participation in the PPP. Year-to-date annualized loan growth, excluding $180.2 million of PPP loans, was 10.6% as of June 30, 2020.

Page 8 of 16

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


	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019
(dollars in thousands)
Commercial and Industrial	$	302,536	$	299,425	$	276,035	$	291,723	$	287,804
Paycheck Protection Program		180,228		—		—		—		—
Construction and Land Development		191,768		183,350		196,776		216,054		195,568
Real Estate Mortgage:
1 - 4 Family Mortgage		289,456		272,590		260,611		254,782		247,029
Multifamily		522,491		536,380		515,014		456,257		437,198
CRE Owner Occupied		73,539		75,207		66,584		71,209		68,681
CRE Nonowner Occupied		627,651		631,541		592,545		551,992		544,579
Total Real Estate Mortgage Loans		1,513,137		1,515,718		1,434,754		1,334,240		1,297,487
Consumer and Other		6,109		4,324		4,473		4,201		4,044
Total Loans, Gross		2,193,778		2,002,817		1,912,038		1,846,218		1,784,903
Allowance for Loan Losses		(27,633)		(24,585)		(22,526)		(22,124)		(21,362)
Net Deferred Loan Fees		(10,287)		(5,336)		(5,512)		(5,788)		(5,157)
Total Loans, Net	$	2,155,858	$	1,972,896	$	1,884,000	$	1,818,306	$	1,758,384

Total deposits at June 30, 2020 were $2.24 billion, an increase of $341.9 million, or 18.0%, over total deposits of $1.90 billion at March 31, 2020, and an increase of $542.8 million, or 31.9%, over total deposits of $1.70 billion at June 30, 2019. Deposit growth in the second quarter of 2020 was primarily due to strong growth in noninterest bearing transaction deposits and a $148.1 million increase in brokered deposits. The growth in noninterest bearing transaction deposits was primarily attributable to general increases in existing client accounts, as personal and business depositors elected to conserve cash liquidity amidst the ongoing COVID-19 pandemic. The Company estimates approximately $60.0 million of the noninterest bearing transaction deposit growth was due to remaining PPP loan funds. Management believes noninterest bearing transactions deposits could experience fluctuations in future periods. Brokered deposits increased as a result of a change in mix of wholesale funding sources due to favorable funding costs offered compared to other wholesale funding alternatives and to expand on-balance sheet liquidity in this uncertain environment. Furthermore, the brokered deposit market provides flexibility in structure, optionality and efficiency not afforded in traditional, retail deposit channels.

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


	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019
(dollars in thousands)
Noninterest Bearing Transaction Deposits	$	648,869	$	476,217	$	447,509	$	478,493	$	409,198
Interest Bearing Transaction Deposits		285,386		255,483		264,627		243,889		231,318
Savings and Money Market Deposits		516,543		514,113		516,785		470,518		456,447
Time Deposits		382,187		393,340		360,027		363,308		359,338
Brokered Deposits		409,066		260,974		234,362		246,028		242,964
Total Deposits	$	2,242,051	$	1,900,127	$	1,823,310	$	1,802,236	$	1,699,265

Total shareholders’ equity at June 30, 2020 was $257.2 million, an increase of $9.0 million, or 3.6%, over total shareholders’ equity of $248.1 million at March 31, 2020, and an increase of $28.1 million, or 12.2%, over total shareholders’ equity of $229.1 million at June 30, 2019. The linked-quarter increase was due to net income retained and an increase in unrealized gains in the securities portfolio. The year-over-year increase was due to net income retained, partially offset by stock repurchases made in the first quarter of 2020 under the Company’s stock repurchase program.

The Company did not repurchase any shares of its common stock during the second quarter of 2020. The Company remains committed to maintaining strong capital levels and will consider the current economic environment and the uncertainty of the long-term impact of the COVID-19 pandemic when evaluating its future utilization of the stock repurchase program. Management currently does not expect to begin repurchasing shares again until the impacts of the COVID-19 pandemic have subsided.

While pre-provision earnings remain strong and capital ratios are well in excess of regulatory minimums, the Company further bolstered capital levels by issuing $50.0 million of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 during the second quarter of 2020. These notes are callable starting in 2025 and qualify for tier 2 capital treatment at the holding company level. The Company injected $25.0 million of capital into the Bank in connection with the subordinated note issuance, which qualifies for tier 1 capital treatment at the bank level.

Tangible book value per share, a non-GAAP financial measure, was $8.80 as of June 30, 2020, an increase of 3.6% from $8.49 as of March 31, 2020, and an increase of 13.1% from $7.78 as of June 30, 2019.

Page 9 of 16

Asset Quality

The Company has not seen direct impacts of the COVID-19 pandemic to the Company’s asset quality metrics; however, management believes that the economic uncertainty that exists may begin to negatively impact the portfolio in future quarters. Annualized net charge-offs (recoveries) as a percent of average loans for the second quarter of 2020 were (0.01)%, compared to 0.01% for the first quarter of 2020, and (0.04)% for the second quarter of 2019. At June 30, 2020, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $602,000, or 0.02% of total assets, as compared to $606,000, or 0.03% of total assets at March 31, 2020, and $1.6 million, or 0.07% of total assets at June 30, 2019.

The Company is closely analyzing all segments within the loan portfolio in response to the COVID-19 pandemic. Loans that have potential weaknesses that warrant a watchlist risk rating remained stable. At June 30, 2020, watchlist loans were $45.7 million, compared to $45.8 million at March 31, 2020. As the COVID-19 pandemic continues to evolve, the length and extent of the economic contraction may dictate further watchlist or adverse classifications in the loan portfolio.

The following table presents a summary of asset quality measurements at the dates indicated:


	As of and for the Three Months Ended
	June 30,			March 31			December 31,			September 30,			June 30,
(dollars in thousands)	2020			2020			2019			2019			2019
Selected Asset Quality Data
Loans 30-89 Days Past Due	$	153		$	21		$	403		$	—		$	470
Loans 30-89 Days Past Due to Total Loans		0.01	%		0.00	%		0.02	%		0.00	%		0.03	%
Nonperforming Loans	$	602		$	606		$	461		$	828		$	555
Nonperforming Loans to Total Loans		0.03	%		0.03	%		0.02	%		0.04	%		0.03	%
Foreclosed Assets	$	—		$	—		$	—		$	—		$	1,033
Nonaccrual Loans to Total Loans		0.03	%		0.03	%		0.02	%		0.04	%		0.03	%
Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans		0.03			0.03			0.02			0.04			0.03
Nonperforming Assets ⁽¹⁾	$	602		$	606		$	461		$	828		$	1,588
Nonperforming Assets to Total Assets ⁽¹⁾		0.02	%		0.03	%		0.02	%		0.04	%		0.07	%
Allowance for Loan Losses to Total Loans		1.26			1.23			1.18			1.20			1.20
Allowance for Loan Losses to Total Loans, Excluding PPP Loans		1.37			N/A			N/A			N/A			N/A
Allowance for Loans Losses to Nonperforming Loans		4,590.20			4,056.93			4,886.33			2,671.98			3,849.01
Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans		(0.01)			0.01			0.04			0.03			(0.04)

(1)

Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due plus foreclosed assets.

About the Company

Bridgewater Bancshares, Inc. is a financial holding company headquartered in Bloomington, Minnesota. The Company has two wholly owned subsidiaries, Bridgewater Bank, a Minnesota-chartered commercial bank founded in November 2005, and Bridgewater Risk Management, Inc., a captive insurance company founded in December 2016. Bridgewater Bank has two wholly owned subsidiaries, Bridgewater Investment Management, Inc. and BWB Holdings, LLC. Bridgewater Bank currently operates through 7 branches in Bloomington, Greenwood, Minneapolis (2), St. Louis Park, Orono, and St. Paul, all located within the Minneapolis-St. Paul-Bloomington metropolitan statistical area.

Investor Relations Contact:

Jerry Baack

Chief Executive Officer

investorrelations@bwbmn.com

952-893-6866

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

Page 10 of 16

Bridgewater Bancshares, Inc. and Subsidiaries
Consolidated Balance Sheets

(dollars in thousands, except share data)


	June 30,		December 31,		June 30,
	2020		2019		2019
	(Unaudited)				(Unaudited)
ASSETS
Cash and Cash Equivalents	$	178,428	$	31,935	$	66,389
Bank-Owned Certificates of Deposit		2,895		2,654		2,699
Securities Available for Sale, at Fair Value		326,295		289,877		241,925
Loans, Net of Allowance for Loan Losses of $27,633 at June 30, 2020 (unaudited), $22,526 at December 31, 2019 and $21,362 at June 30, 2019 (unaudited)		2,155,858		1,884,000		1,758,384
Federal Home Loan Bank (FHLB) Stock, at Cost		8,617		7,824		8,064
Premises and Equipment, Net		43,062		27,628		18,623
Foreclosed Assets		—		—		1,033
Accrued Interest		8,267		6,775		7,583
Goodwill		2,626		2,626		2,626
Other Intangible Assets, Net		765		861		956
Other Assets		27,650		14,650		15,349
Total Assets	$	2,754,463	$	2,268,830	$	2,123,631

LIABILITIES AND EQUITY
LIABILITIES
Deposits:
Noninterest Bearing	$	648,869	$	447,509	$	409,198
Interest Bearing		1,593,182		1,375,801		1,290,067
Total Deposits		2,242,051		1,823,310		1,699,265
Notes Payable		12,000		13,000		14,000
FHLB Advances		147,500		136,500		142,500
Subordinated Debentures, Net of Issuance Costs		73,658		24,733		24,681
Accrued Interest Payable		1,953		1,982		2,109
Other Liabilities		20,111		24,511		11,939
Total Liabilities		2,497,273		2,024,036		1,894,494

SHAREHOLDERS' EQUITY
Preferred Stock- $0.01 par value
Authorized 10,000,000; None Issued and Outstanding at June 30, 2020 (unaudited), December 31, 2019 and June 30, 2019 (unaudited)		—		—		—
Common Stock- $0.01 par value
Common Stock - Authorized 75,000,000; Issued and Outstanding 28,837,560 at June 30, 2020 (unaudited), 28,973,572 at December 31, 2019 and 28,986,729 at June 30, 2019 (unaudited)		288		290		290
Additional Paid-In Capital		110,906		112,093		113,838
Retained Earnings		142,678		127,637		111,261
Accumulated Other Comprehensive Income		3,318		4,774		3,748
Total Shareholders' Equity		257,190		244,794		229,137
Total Liabilities and Equity	$	2,754,463	$	2,268,830	$	2,123,631

Page 12 of 16

Bridgewater Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income

(dollars in thousands, except per share data)


	Three Months Ended						Six Months Ended
	June 30,		March 31		June 30,		June 30,		June 30,
	2020		2020		2019		2020		2019
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
INTEREST INCOME
Loans, Including Fees	$	25,913	$	25,113	$	23,321	$	51,026	$	45,500
Investment Securities		2,091		2,196		1,928		4,287		3,829
Other		162		159		271		321		458
Total Interest Income		28,166		27,468		25,520		55,634		49,787

INTEREST EXPENSE
Deposits		5,170		5,724		6,020		10,894		11,723
Notes Payable		111		115		130		226		251
FHLB Advances		1,064		1,027		827		2,091		1,602
Subordinated Debentures		479		393		393		872		770
Federal Funds Purchased		—		107		12		107		172
Total Interest Expense		6,824		7,366		7,382		14,190		14,518

NET INTEREST INCOME		21,342		20,102		18,138		41,444		35,269
Provision for Loan Losses		3,000		2,100		600		5,100		1,200

NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		18,342		18,002		17,538		36,344		34,069

NONINTEREST INCOME
Customer Service Fees		135		240		189		375		380
Net Gain on Sales of Available for Sale Securities		1,361		3		463		1,364		458
Other Income		481		1,476		482		1,957		930
Total Noninterest Income		1,977		1,719		1,134		3,696		1,768

NONINTEREST EXPENSE
Salaries and Employee Benefits		6,348		6,454		5,124		12,802		9,926
Occupancy and Equipment		672		713		785		1,385		1,441
Other Expense		3,691		2,579		3,565		6,270		5,992
Total Noninterest Expense		10,711		9,746		9,474		20,457		17,359

INCOME BEFORE INCOME TAXES		9,608		9,975		9,198		19,583		18,478
Provision for Income Taxes		2,010		2,532		1,189		4,542		3,451
NET INCOME	$	7,598	$	7,443	$	8,009	$	15,041	$	15,027

EARNINGS PER SHARE
Basic	$	0.26	$	0.26	$	0.27	$	0.52	$	0.50
Diluted		0.26		0.25		0.26		0.51		0.49
Dividends Paid Per Share		—		—		—		—		—

Page 13 of 16

Non-GAAP Financial Measures

(dollars in thousands) (unaudited)


	For the Three Months Ended									For the Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2020			2020			2019			2020			2019

Efficiency Ratio
Noninterest Expense	$	10,711		$	9,746		$	9,474		$	20,457		$	17,359
Less: Amortization of Intangible Assets		(47)			(48)			(47)			(95)			(95)
Adjusted Noninterest Expense	$	10,664		$	9,698		$	9,427		$	20,362		$	17,264
Net Interest Income		21,342			20,102			18,138			41,444			35,269
Noninterest Income		1,977			1,719			1,134			3,696			1,768
Less: Gain on Sales of Securities		(1,361)			(3)			(463)			(1,364)			(458)
Adjusted Operating Revenue	$	21,958		$	21,818		$	18,809		$	43,776		$	36,579
Efficiency Ratio		48.6	%		44.4	%		50.1	%		46.5	%		47.2	%

Adjusted Efficiency Ratio
Noninterest Expense	$	10,711		$	9,746		$	9,474		$	20,457		$	17,359
Less: Amortization of Tax Credit Investments		(362)			(85)			(1,390)			(447)			(1,567)
Less: FHLB Advance Prepayment Fees		(1,430)			—			—			(1,430)			—
Less: Amortization of Intangible Assets		(47)			(48)			(47)			(95)			(95)
Adjusted Noninterest Expense	$	8,872		$	9,613		$	8,037		$	18,485		$	15,697
Net Interest Income		21,342			20,102			18,138			41,444			35,269
Noninterest Income		1,977			1,719			1,134			3,696			1,768
Less: Gain on Sales of Securities		(1,361)			(3)			(463)			(1,364)			(458)
Adjusted Operating Revenue	$	21,958		$	21,818		$	18,809		$	43,776		$	36,579
Adjusted Efficiency Ratio		40.4	%		44.1	%		42.7	%		42.2	%		42.9	%


	For the Three Months Ended									For the Six Months Ended
	June 30,			March 31			June 30,			June 30,			June 30,
	2020			2020			2019			2020			2019
Pre-Provision Net Revenue
Noninterest Income	$	1,977		$	1,719		$	1,134		$	3,696		$	1,768
Less: Gain on sales of Securities		(1,361)			(3)			(463)			(1,364)			(458)
Total Operating Noninterest Income		616			1,716			671			2,332			1,310
Plus: Net Interest income		21,342			20,102			18,138			41,444			35,269
Net Operating Revenue	$	21,958		$	21,818		$	18,809		$	43,776		$	36,579

Noninterest Expense	$	10,711		$	9,746		$	9,474		$	20,457		$	17,359
Less: Amortization of Tax Credit Investments		(362)			(85)			(1,390)			(447)			(1,567)
Less: FHLB Advance Prepayment Fees		(1,430)			—			—			(1,430)			—
Total Operating Noninterest Expense	$	8,919		$	9,661		$	8,084		$	18,580		$	15,792

Pre-Provision Net Revenue	$	13,039		$	12,157		$	10,725		$	25,196		$	20,787

Plus:
Non-Operating Revenue Adjustments		1,361			3			463			1,364			458
Less:
Provision for Loan Losses		3,000			2,100			600			5,100			1,200
Non-Operating Expense Adjustments		1,792			85			1,390			1,877			1,567
Provision for Income Taxes		2,010			2,532			1,189			4,542			3,451
Net Income	$	7,598		$	7,443		$	8,009		$	15,041		$	15,027

Average Assets	$	2,622,272		$	2,317,040		$	2,069,707		$	2,469,656		$	2,040,602
Pre-Provision Net Revenue Return on Average Assets		2.00	%		2.11	%		2.08	%		2.05	%		2.05	%

Page 14 of 16


	As of and for the Three Months Ended									As of and for the Six Months Ended
	June 30,			March 31,			June 30,			June 30,		June 30,
	2020			2020			2019			2020		2019

Tangible Common Equity and Tangible Common Equity/Tangible Assets
Common Equity	$	257,190		$	248,143		$	229,137
Less: Intangible Assets		(3,391)			(3,439)			(3,582)
Tangible Common Equity		253,799			244,704			225,555
Total Assets		2,754,463			2,418,730			2,123,631
Less: Intangible Assets		(3,391)			(3,439)			(3,582)
Tangible Assets	$	2,751,072		$	2,415,291		$	2,120,049
Tangible Common Equity/Tangible Assets		9.23	%		10.13	%		10.64	%

Tangible Book Value Per Share
Book Value Per Common Share	$	8.92		$	8.61		$	7.90
Less: Effects of Intangible Assets		(0.12)			(0.12)			(0.12)
Tangible Book Value Per Common Share	$	8.80		$	8.49		$	7.78

Average Tangible Common Equity
Average Common Equity	$	255,109		$	250,800		$	231,374		$	252,955	$	228,625
Less: Effects of Average Intangible Assets		(3,419)			(3,466)			(3,605)			(3,442)		(3,630)
Average Tangible Common Equity	$	251,690		$	247,334		$	227,769		$	249,513	$	224,995

Page 15 of 16

Bridgewater Bancshares, Inc. and Subsidiaries

Analysis of Average Balances, Yields and Rates (year-to-date)

(dollars in thousands, except per share data) (Unaudited)


	For the Six Months Ended
	June 30, 2020						June 30, 2019
	Average		Interest		Yield/		Average		Interest		Yield/
	Balance		& Fees		Rate		Balance		& Fees		Rate
(dollars in thousands)
Interest Earning Assets:
Cash Investments	$	69,267	$	96	0.28	%	$	33,071	$	258	1.57	%
Investment Securities:
Taxable Investment Securities		195,873		2,691	2.76			139,651		2,031	2.93
Tax-Exempt Investment Securities⁽¹⁾		93,260		2,020	4.36			106,823		2,276	4.30
Total Investment Securities		289,133		4,711	3.28			246,474		4,307	3.52
Paycheck Protection Program Loans ⁽²⁾		70,037		873	2.51			—		—	—
Loans ⁽¹⁾⁽²⁾		1,983,641		50,220	5.09			1,731,928		45,500	5.30
Total Loans		2,053,678		51,093	5.00			1,731,928		45,500	5.30
Federal Home Loan Bank Stock		10,370		225	4.37			7,802		200	5.17
Total Interest Earning Assets		2,422,448		56,125	4.66	%		2,019,275		50,265	5.02	%
Noninterest Earning Assets		47,208						21,327
Total Assets	$	2,469,656					$	2,040,602
Interest Bearing Liabilities:
Deposits:
Interest Bearing Transaction Deposits		259,704		808	0.63	%		192,020		619	0.65	%
Savings and Money Market Deposits		527,445		3,232	1.23			423,310		3,704	1.76
Time Deposits		382,256		4,299	2.26			341,836		4,001	2.36
Brokered Deposits		269,000		2,555	1.91			279,366		3,399	2.45
Total Interest Bearing Deposits		1,438,405		10,894	1.52			1,236,532		11,723	1.91
Federal Funds Purchased		12,422		107	1.74			13,459		172	2.58
Notes Payable		12,253		226	3.71			14,250		251	3.55
FHLB Advances		183,099		2,091	2.30			127,713		1,602	2.53
Subordinated Debentures		27,986		872	6.27			24,660		770	6.30
Total Interest Bearing Liabilities		1,674,165		14,190	1.70	%		1,416,614		14,518	2.07	%
Noninterest Bearing Liabilities:
Noninterest Bearing Transaction Deposits		523,828						385,758
Other Noninterest Bearing Liabilities		18,708						9,605
Total Noninterest Bearing Liabilities		542,536						395,363
Shareholders' Equity		252,955						228,625
Total Liabilities and Shareholders' Equity	$	2,469,656					$	2,040,602
Net Interest Income / Interest Rate Spread				41,935	2.96	%				35,747	2.95	%
Net Interest Margin ⁽³⁾					3.48	%					3.57	%
Taxable Equivalent Adjustment:
Tax-Exempt Investment Securities				(491)						(478)
Net Interest Income			$	41,444					$	35,269

(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.

Page 16 of 16


		Diluted		Nonperforming	Adjusted	Tangible common equity
ROA	ROE	Earnings per share		assets to total assets	efficiency ratio ⁽¹⁾	to tangible assets ⁽¹⁾
1.17%	11.98%	$	0.26	0.02%	40.4%	9.23%