Annual report
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Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2025. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-38412 BRIDGEWATER BANCSHARES, INC. (Exact name of registrant as specified in its charter) Minnesota 26-0113412(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 4450 Excelsior Boulevard, Suite 100St. Louis Park, Minnesota 55416(Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code (952) 893-6868 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Trading Symbol Name of each exchange on which registered: Common Stock, $0.01 Par Value BWB The Nasdaq Stock Market LLC Depositary Shares, each representing a1/100th interest in a share of 5.875% Non-Cumulative Perpetual Preferred Stock,Series A, par value $0.01 per share BWBBP The Nasdaq Stock Market LLC Securities registered under Section 12(g) of the Act:None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuantto Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reportingcompany, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and“emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectivenessof its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered publicaccounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrantincluded in this filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that require a recovery analysis of incentive-basedcompensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ The aggregate market value of the Common Stock held by non-affiliates of the Registrant on June 30, 2025, based on the closing price of$15.91 of such shares on that date, was $348,524,730. The number of shares of the Common Stock issued and outstanding as of February 9, 2026 was 27,824,165. DOCUMENTS INCORPORATED BY REFERENCEThe information required by Part III is incorporated by reference to portions of the definitive proxy statement to be filed within 120 days afterDecember 31, 2025, pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with the annual meeting of stockholdersto be held on April 28, 2026.
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Table of Contents 2 Table of Contents Page PART I Item 1. Business 4 Item 1A. Risk Factors 24 Item 1B. Unresolved Staff Comments 47 Item 1C. Cybersecurity 47 Item 2. Properties 48 Item 3. Legal Proceedings 48 Item 4. Mine Safety Disclosures 48 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 49 Item 6. [Reserved] 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 51 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 78 Item 8. Financial Statements and Supplementary Data 80 Reports of Independent Registered Public Accounting Firm (RSM US LLP, Auditor Firm ID: 49) 80 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 145 Item 9A. Controls and Procedures 145 Item 9B. Other Information 146 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 146 PART III Item 10. Directors, Executive Officers and Corporate Governance 146 Item 11. Executive Compensation 146 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 147 Item 13. Certain Relationships and Related Transactions, and Director Independence 147 Item 14. Principal Accountant Fees and Services 148 PART IV Item 15. Exhibits and Financial Statement Schedules 148 Item 16: Form 10-K Summary 152 Signatures 153
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Table of Contents 3 Forward-Looking Statements This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-lookingstatements include, without limitation, statements concerning plans, estimates, calculations, forecasts andprojections with respect to the anticipated future performance of the Company. These statements areoften, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”,“believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”,“annualized”, “target” and “outlook”, or the negative version of those words or other comparable words ofa future or forward-looking nature. Forward-looking statements are neither historical facts nor assurancesof future performance. Instead, they are based only on our current beliefs, expectations and assumptionsregarding our business, future plans and strategies, projections, anticipated events and trends, theeconomy and other future conditions. Because forward-looking statements relate to the future, they aresubject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and manyof which are outside of our control. Our actual results and financial condition may differ materially fromthose indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differmaterially from those indicated in the forward-looking statements include, among others, the following: ● interest rate risk, including the effects of changes in interest rates;● effects on the U.S. economy resulting from actions taken by the federal government, including thethreat or implementation of tariffs, immigration enforcement and changes in foreign policy;● fluctuations in the values of the securities held in our securities portfolio, including as the result ofchanges in interest rates;● business and economic conditions generally and in the financial services industry, nationally andwithin our market area, including the level and impact of inflation, and future monetary policies ofthe Federal Reserve and executive orders in response thereto, and possible recession;● credit risk and risks from concentrations (including by type of borrower, geographic area,collateral and industry) within the Company’s loan portfolio or large loans to certain borrowers(including CRE loans);● the overall health of the local and national real estate market; our ability to successfully managecredit risk;● our ability to maintain an adequate level of allowance for credit losses on loans;● new or revised accounting standards as may be adopted by state and federal regulatoryagencies, the Financial Accounting Standards Board, Securities and Exchange Commission orPublic Company Accounting Oversight Board;● the concentration of large deposits from certain clients, including those who have balances abovecurrent Federal Deposit Insurance Corporation insurance limits;● our ability to successfully manage liquidity risk, which may increase our dependence on non-corefunding sources such as brokered deposits, and negatively impact our cost of funds;● our ability to raise additional capital to implement our business plan;● our ability to implement our growth strategy and manage costs effectively;● the composition of our strategic leadership team and our ability to attract and retain keypersonnel;● talent and labor shortages and employee turnover;● the occurrence of fraudulent activity, breaches or failures of our or our third-party vendors’information security controls or cybersecurity-related incidents, including as a result ofsophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud;● interruptions involving our information technology and telecommunications systems or third-partyservicers;● competition in the financial services industry, including from nonbank competitors such as creditunions, “fintech” companies and digital asset service providers;● the effectiveness of our risk management framework;
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Table of Contents 4 ● rapid technological changes implemented by us and other parties in the financial servicesindustry, including third-party vendors, which may be more difficult to implement or moreexpensive than anticipated or which may have unforeseen consequences to us and ourcustomers, including the development and implementation of tools incorporating artificialintelligence;● the commencement, cost and outcome of litigation and other legal proceedings and regulatoryactions against us;● the impact of recent and future legislative and regulatory changes, domestic or foreign;● risks related to climate change and the negative impact it may have on our customers and theirbusinesses;● the imposition of tariffs or other governmental policies impacting the global supply chain and thevalue of products produced by our commercial borrowers;● severe weather, natural disasters, wide spread disease or pandemics, acts of war, militaryconflicts, or terrorism, changes in foreign relations, or other adverse external events, includingongoing conflicts in the Middle East, the Russian invasion of Ukraine and recent military activitiesin Venezuela and Mexico;● potential impairment to the goodwill the Company recorded in connection with acquisitions;● changes to U.S. or state tax laws, regulations and governmental policies concerning theCompany’s general business, including changes in interpretation or prioritization of such rulesand regulations;● the impact of bank failures or adverse developments at other banks and related negative publicityabout the banking industry in general on investor and depositor sentiment regarding the stabilityand liquidity of banks; and● any other risks described in the “Risk Factors” sections of reports filed by the Company with theSecurities and Exchange Commission. The foregoing factors should not be construed as exhaustive and should be read together withthe other cautionary statements included in this report. In addition, past results of operations are notnecessarily indicative of future results. Any forward-looking statement made by us in this report is basedonly on information currently available to us and speaks only as of the date on which it is made. TheCompany undertakes no obligation to publicly update any forward-looking statement, whether written ororal, that may be made from time to time, whether as a result of new information, future developments orotherwise. PART I ITEM 1. BUSINESS Company Overview and History Bridgewater Bancshares, Inc. (the “Company”) is a Minnesota corporation and financial holdingcompany with one wholly-owned subsidiary: Bridgewater Bank (the “Bank”). The Bank has two wholly-owned subsidiaries: BWB Holdings, LLC, which was formed for the purpose of holding repossessedproperty; and Bridgewater Investment Management, Inc., which was formed for the purposes of holdingcertain municipal securities and engaging in municipal lending activities. The Bank has nine full-serviceoffices located in Bloomington, Greenwood, Minneapolis (2), Minnetonka, Orono, Lake Elmo, St. LouisPark, and St. Paul, Minnesota. The Lake Elmo branch opened in February 2026. The Company is headquartered in St. Louis Park, Minnesota, a suburb located approximately 5miles southwest of downtown Minneapolis. The Company and Bank were established in 2005 as a denovo bank by a group of industry veterans and local business leaders dedicated to providing responsive support and simple solutions to businesses, entrepreneurs, and successful individuals. Since inception, the Company has grown significantly and profitably, with a focus on organicgrowth, driven primarily by commercial real estate (“CRE”) lending. Assets have grown at a compoundedannual growth rate of 28.6% since 2005, surpassing total asset milestones of $1.0 billion in 2016, $3.0billion in 2021, and $5.0 billion in 2024. While
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Table of Contents 5 this growth has primarily been organic, the Company has completed two bank acquisitions. Most recently,the Bank acquired First Minnetonka City Bank (“FMCB”) in December 2024, which added approximately$245.0 million of assets, $225.7 million of deposits, $117.1 million of loans and leases, and two branchlocations in Minnetonka, Minnesota. One of these branches was subsequently closed in December 2025given the close proximity of other Bridgewater Bank branches. The acquisition also added an investmentadvisory function that offers nondeposit investment products through a third party arrangement. As of December 31, 2025, total assets were $5.41 billion, total gross loans were $4.31 billion,total deposits were $4.32 billion, and total shareholders’ equity was $517.1 million. The principal sources of funds for loans and investments are transaction, savings, time, and brokered deposits, and short-term and long-term borrowings. The Company’s principal sources of income are interest and fees collected on loans, interest and dividends earned on investment securities and noninterest income, including service charges, letter of credit fees, and swap fees. The Company’s principal expenses are interest paid on deposit accounts and borrowings, employee compensation and other overhead expenses. The Company’s simple, highly efficient business model of providing responsive support and simple solutions to clients continues to be the underlying principle that drives the Company’s profitable growth. Market Area and Competition The Company operates in the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan StatisticalArea (“Twin Cities MSA”) which had total deposits of $232.6 billion as of June 30, 2025, and ranks as the15th largest MSA in the United States in total deposits, and the third largest MSA in the Midwest in totaldeposits, based on FDIC data. This area is commonly known as the “Twin Cities” after its two largestcities, Minneapolis, the city with the largest population in the state, and St. Paul, the state capital. The Twin Cities MSA is defined by attractive market demographics, including strong householdincomes, dense populations, a resilient employee base and the presence of a diverse group of large andsmall businesses. As of December 31, 2025, the Twin Cities ranked first in median household income inthe Midwest and seventh in the nation, when compared to the top 20 MSAs by population size in eacharea, based on data available on S&P Global Market Intelligence. According to the U.S. Bureau of LaborStatistics, the population in the Twin Cities MSA was approximately 3.7 million as of December 31, 2025,making it the third largest MSA in the Midwest and 16th largest MSA in the United States. The Twin CitiesMSA had an unemployment rate of 4.3%, which was lower than the national average of 4.4%, as ofDecember 31, 2025. These strong labor market fundamentals can be attributed to the significantpresence of national and international businesses across diverse industries operating within the TwinCities MSA. The Company operates in a competitive market area and competes with other, often much larger,retail and commercial banks and financial institutions. Two large, national banking chains, Wells Fargoand U.S. Bank, together controlled 58.96% of the deposit market share in the Twin Cities MSA as ofJune 30, 2025, based on FDIC data and as displayed in the table below. By comparison, the Companyhad a deposit market share of 1.84%, which ranked the Company ninth in the Twin Cities MSA overall andthird in the Twin Cities MSA among banks headquartered in Minnesota.
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Table of Contents 6 Total MarketState Branch Deposits ShareRank Institution Headquarters Count ($000) (%) 1 U.S. Bancorp MN 78 $ 95,865,087 41.21%2 Wells Fargo & Co CA 84 41,284,514 17.753 Ameriprise Financial, Inc. MN 2 22,499,683 9.674 Old National Bancorp IN 48 8,220,790 3.535 Huntington Bancshares Incorporated OH 58 6,526,628 2.816 Bank of America Corporation NC 22 5,189,645 2.237 Bank of Montreal N/A 26 4,830,532 2.08 8 State Bankshares, Inc. ND 7 4,443,923 1.919 Bridgewater Bancshares, Inc. MN 9 4,278,556 1.8410 Choice Financial Holdings, Inc. ND 4 3,035,777 1.31 Top 10 Institutions 338 $ 196,175,135 84.34% Total Bank Deposits 741 $ 232,599,766 The market has experienced disruption in recent years due to acquisitions of local institutions bylarger regional banks headquartered outside of the market, resulting in only three of the ten largest banksin Minnesota by deposit market share being headquartered in-state. The disruption has created significantopportunities for the Company to add both talent and clients. In addition, the Company has developed alocal banking advantage in the market by being the bank-of-choice for Twin Cities clients looking to banklocal. Products and Services The Company offers a full array of simple, quality loan and deposit products with a focus oncommercial clients. While the Company provides products and services that compete with those offeredby large national and regional competitors, the Company additionally offers responsive support andpersonalized solutions tailored for each client. The Company emphasizes client service and believes inproviding distinguishing levels of service through the experience of employees, the responsiveness andcertainty of the credit process and the efficiency with which business is conducted. The Company believesthat clients notice a difference in service compared to the much larger institutions in the market. TheCompany has built a strong referral network that continually provides opportunities for new clientrelationships. Lending. The Bank focuses primarily on commercial lending, consisting of loans secured by nonfarm, nonresidential properties, loans secured by multifamily residential properties, nonowner occupied single family residential properties, construction loans, land development loans and commercial and industrial loans. The Bank has a particular expertise in multifamily financing which has historically represented a large portion of the loan portfolio. This asset class has performed extremely well and has lower historical loss rates when compared to other loan types. The Company has also leveraged its expertise in the affordable housing space to expand its focus on supporting clients and communities across the Twin Cities and nationally. Commercial real estate loans (excluding multifamily and construction) consist of owner andnonowner occupied properties. This portfolio segment is well diversified with loans secured by industrialproperties, office buildings, retail strip centers, senior housing and hospitality properties and mixed-useproperties. In addition to loans secured by improved commercial real estate properties, the Bank engagesin construction lending, which includes single family residential construction loans, land development,finished lots and raw land loans, and commercial and multifamily construction.
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Table of Contents 7 The Bank focuses on lending to borrowers located or investing in the Twin Cities MSA across adiverse range of industries and property types, however, as a relationship lender, it will finance propertieslocated outside of Minnesota for its existing local clients. The Bank has been active in lending to affordable housing projects since 2008, but has increasedthe level of investment in recent years and expanded nationally. The Bank has leveraged its deepexpertise in the affordable housing space to support developers both in the Twin Cities and across thecountry. Affordable housing lending includes a high barrier to entry due to the complex nature of thetransactions, which positions the Bank well from a competitive standpoint. The Bank can also providefunding through multiple stages of the transaction. Historically, the Bank has generated robust and consistent growth due to its strengthening brandand service model, client and banker acquisitions resulting from M&A-related market disruption and theexpansion of talented lending and business service teams. The Bank’s pace of loan growth returned tomore normalized levels in 2025 due to the improved interest rate environment, increased loan demandand strong core deposit growth momentum. Deposits. The Bank has developed a suite of deposit products targeted at commercial clients, including a variety of remote deposit and cash management products, along with commercial transaction accounts. The Bank also offers consumers traditional retail deposit products through its branch network, along with online, mobile and direct banking channels. Many of the deposits do not require a branch visit, creating efficiencies across the Bank’s branch network. Deposits continue to be the primary funding source for the Bank’s lending activities, including bothcore and non-core deposits. The Bank generated strong core deposit growth throughout 2025. Due to thisstrong core deposit growth in 2025, the Bank was able to reduce its reliance on brokered deposits andwholesale funding sources. However, the Bank will continue to leverage these funding sources tosupplement core deposit growth as needed. Brokered deposits have remained a strategic component of the funding strategy and interest raterisk management. The Bank’s Asset Liability Management (“ALM”) Committee monitors the size of thisportfolio and ongoing opportunities. The Bank has developed relationships with certain individuals and businesses that have resultedin a concentration of large deposits from a small number of clients. As of December 31, 2025, the10 largest depositor relationships accounted for approximately 16.2% of total deposits. This highconcentration of deposits from this group of depositors, some of whom may have balances above currentFDIC insurance limits, presents a risk to liquidity if one or more of them decides to change its relationshipwith the Bank and to withdraw all or a significant portion of their accounts. Competitive Strengths As the Company seeks to continue to grow the business, management believes the followingstrengths provide a competitive advantage over other financial institutions operating in its market area: Commercial Banking Expertise. Management believes the Company has earned the reputation as one of the prominent commercial real estate lenders in the Twin Cities MSA due in large part to the strength of the banking team. The Company has an experienced, professional team of bankers, and believes the ability to drive quality commercial loan growth is a result of being able to provide each client with access to a knowledgeable, experienced, responsive and dedicated banker. Due to their market knowledge and understanding of clients’ businesses, the bankers are well positioned to provide timely and relevant feedback to clients. Management believes the responsive credit culture separates the Company from its competitors.
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Table of Contents 8 Multifamily Lending Expertise. The Company specializes in multifamily lending, which has historically represented a large portion of the total loan portfolio. The Company believes this lending niche lowers the risk profile of the overall loan portfolio due to its lower historical loss rates when compared to other loan types. In fact, the multifamily portfolio has experienced no net charge-offs over the past three years and only $62,000 of net charge-offs since inception. As a result of the Company’s segment expertise and strong portfolio performance, the Company has been comfortable continuing to grow the multifamily portfolio. In addition, the Company has also expanded its focus in affordable housing lending, the majority of which is in multifamily. Engaged and Experienced Board of Directors and Management Team. The Company’s board of directors consists of highly accomplished individuals with strong industry and business experience in the market area. The combined expertise of the board of directors and the significant banking experience of the strategic leadership team (“SLT”) help execute the Company’s growth strategy. The Company’s seven-person SLT has a strong balance of extensive banking experience, driveand talent. In 2025, the Company announced several leadership transitions through a thoughtfulsuccession strategy, including the retirement of Mary Jayne Crocker, Chief Strategy Officer, and JeffShellberg, former Chief Credit Officer and current Deputy Chief Credit Officer, both becoming effective in2026. Joining the SLT in 2025 were Katie Morrell, Chief Credit Officer, Jessica Stejskal, Chief ExperienceOfficer, and Laura Espeseth, Chief Administrative Officer. All three of these new SLT members have beenwith the Company for at least five years and bring a wealth of talent, judgement, and energy to theirenhanced leadership roles. In addition to the SLT, the Company has demonstrated an ability to grow through the recruitmentof high performing individuals. The Company seeks to hire people with significant in-market experiencewho fit the Company’s hard-working, entrepreneurial culture. Through targeted hiring and internaldevelopment efforts, the Company has established a deep bench of talent to continue to grow andmanage the business. This includes recent talent additions related to the ongoing M&A disruption in theTwin Cities which continues to provide opportunities to attract top talent in various areas across theorganization. The Company has structured its team to prepare for long-term growth and stability bycombining the experienced strategic leadership and commercial lending teams with its next generation ofleaders. Efficiency. The Company operates as a highly efficient organization based on a simple business model. By focusing on commercial real estate lending, employee overhead is low due to its bankers maintaining larger loan portfolio sizes compared to other types of commercial lending. In addition, the Company serves its clients through a strategically positioned “branch-light” model of just nine branches, as well as through online, mobile and direct banking channels, and is not dependent on a traditional branch network with a large number of locations. Hard-Working and Entrepreneurial Culture. The Company has developed a hard-working and entrepreneurial culture, which is a critical component for attracting and retaining experienced and talented bankers, as well as clients. The Company has established a set of core values, based on characteristics that describe and inspire the culture—Unconventional, Responsive, Dedicated, Growth and Accurate. To maintain the culture, all potential and current personnel evaluations include an assessment of these attributes. Clients notice the unconventional environment with dedicated employees who feel like they are part of building a high performing bank. Solid Asset Quality Metrics. A risk-management focused business model has contributed to solid asset quality during a period of strong loan growth and economic uncertainty. The Company diligently monitors and routinely stress tests the loan portfolio. The strong credit metrics are the result of measured risk selection, consistent underwriting standards, active credit oversight and experienced lending and credit teams. Proactive Enterprise Risk Management. The Company’s enterprise risk management practices provide an enhanced level of oversight allowing management to be proactive rather than reactive. The Company has been focused on scaling its enterprise risk management function to address emerging risks and support growth plans. The
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Table of Contents 9 management-level enterprise risk management committee, comprised of the strategic leadership team, the Chief Risk Officer and senior representatives from all departments, meets quarterly to identify, assess, measure, monitor, and manage the Company’s overall enterprise risk position and to discuss how the Company’s strategic initiatives may impact the Company’s risk profile. Enterprise risk management reports are provided to the board of directors on a quarterly basis. The Company also has a comprehensive Commercial Real Estate Portfolio Risk ManagementPolicy which implements formal processes and procedures designed to manage and mitigate risk withinthe commercial real estate portfolio. This policy addresses regulatory guidelines for institutions, such asthe Bank, that exhibit higher levels of commercial real estate concentrations. These processes andprocedures include board of directors and management oversight, commercial real estate exposure limits,portfolio monitoring tools, management information systems, market reports, underwriting standards, acredit risk review function and periodic stress testing to evaluate potential credit risk and the subsequentimpacts on capital and earnings. Strategies for Growth The Company has a track record of generating consistent, robust growth over the past 20 years.After moderating in 2023 and 2024 due to higher interest rates and the more challenging bankingenvironment, growth returned to more normalized levels in 2025 due to a more favorable interest rateenvironment and core deposit growth momentum. To generate continued growth, the Company intends tocontinue to execute the proven strategies that it has used in prior years to achieve strong performanceresults. These strategies include the following: Focus on Organic Growth. The Company intends to continue to grow its business organically in a focused and strategic manner by leveraging its competitive strengths, including commercial banking expertise, an experienced banking team, an efficient business model and strong branding, to capitalize on the opportunities in the Company’s market area. This includes the affordable housing strategy which has expanded to a national level. As a publicly traded but locally-headquartered bank, the Company can go beyond what small banks can provide by offering sophisticated products and services similar to those offered by the much larger, out-of-state banks, but in a manner that is tailored to the needs of local clients in a more efficient, responsive and flexible way. The Company plans to increase core deposits over time to support loan growth and build marketshare by expanding existing client relationships and by developing new deposit-focused clients. TheCompany plans to continue to expand its footprint through marketing and networking efforts focused ongenerating deposits. The increased focus on affordable housing has also generated strong core depositgrowth. On the lending side, the Company intends to rely on the expertise of the bankers, and believesthe Company is well-positioned to continue to organically grow commercial loans based on the favorablemarket demographics in the Twin Cities MSA. In addition, the Company expects to see additional growthopportunities as a result of market disruption related to local banks being acquired by out-of-stateacquirers. Leverage Entrepreneurial Culture and Talent. The Company has built a team of bankers that is hard-working, passionate and energized by the opportunities to continue to grow the Company’s business and develop its brand. With an experienced strategic leadership team and a strong layer of talented middle managers, the Company is well positioned for future growth. The Company recruits qualified personnel and develops talent internally and believes the culture, which empowers employees to be entrepreneurs for the business, will allow the Company to attract and develop the talent needed to drive growth. Ongoing M&A disruption in the Twin Cities has also provided additional opportunities to acquire top talent. Consider Additional Opportunistic Acquisitions. In addition to organic growth, the Company may consider acquisition opportunities that fit with the organization, similar to the acquisition of FMCB in December 2024. The Company will continue to evaluate acquisitions that would be complementary to its existing business and align with its strategic priorities. While pursuing potential acquisitions, the Company intends to be disciplined in its approach to
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Table of Contents 10 pricing, new business lines and new markets. In the future, the Company may evaluate and act upon acquisition opportunities that would produce attractive returns for shareholders. Management believes that there will be further bank consolidation in the Twin Cities MSA and in the surrounding markets and that the Company is well positioned to be a preferred partner for smaller institutions looking to exit through a sale to a strong buyer. Human Capital Resources The Company believes that its growth and success are dependent on its ability to attract,develop, and retain a high-performing and diverse team of people. The Company’s unconventionalcorporate culture is a key differentiator and meaningful driver in achieving this objective. As ofDecember 31, 2025, the Company had 322 full-time equivalent employees, most of which are full-timeemployees, an increase of 11% from December 31, 2024. None of the Company’s employees is a party toa collective bargaining agreement. The Company considers the relationship with its employees to be goodand has not experienced interruptions of operations due to labor disagreements. The Company believes embracing and understanding diversity, equity and inclusion has and willcontinue to make the Company stronger. In 2019, the Company established a Diversity, Equity andInclusion Committee that focuses on building an inclusive culture that encourages, supports andcelebrates the diversity of the Company’s employees and the communities in which it serves. TheCompany recognizes that different perspectives enhance its thinking and improve its employees’experience by bringing together unique backgrounds, beliefs, cultures, and experiences at the Company.As of December 31, 2025, women and people of color comprised 53% and 21% of the Company’s totalworkforce, respectively. Similarly, women and people of color made up 56% and 13% of manager roles,respectively. Employee retention helps the Company operate efficiently and carry out its mission of being thefinest entrepreneurial bank in the Twin Cities. The Company believes its commitment to its core values, aswell as prioritizing concern for its employees’ well-being, supporting its employees’ career goals andoffering competitive wages and benefits aid in the retention of its employees. The Company believes developing employees’ leadership skills is a critical factor for the long-term future success of the Company. In 2025, the Company continued to enhance its LeadershipDevelopment Program, delivering impactful content designed to support leaders in their growth anddevelopment. The program focuses on essential skills such as engaging in crucial conversations,empowering team members, and effectively navigating change. The Company also has a MentorshipProgram that gives employees the opportunity to open the door to professional advice and constructivecommunication from leaders at all levels within the organization. The program provides participants withways to build leadership skills, learn from others outside of their normal area of activity, and continue togrow both personally and professionally. The Company strives to give back to the communities in which it operates by encouragingemployees to be engaged in the communities where they live and work. To help remove roadblocks tovolunteering, the Company offers a program that provides employees paid time off to volunteer at non-profit organizations (up to 16 hours per year). The Company is proud to support many local communityorganizations through financial contributions and employee-driven volunteerism. The safety, health and wellness of employees is a top priority. The Company’s Health andWellness Committee is focused on promoting physical fitness, nutrition, and mental health across theorganization, with events including pickleball, a blood drive, a healthy cooking class, and annual stepchallenge. The Health and Wellness Committee also hosted a series of mental health-related events in2025. The Company has a hybrid working model with most team members having the flexibility to workremotely up to two days per week. The Company recognizes the importance of having this flexibility whilealso emphasizing the benefits of the in-person workplace culture that is unique to Bridgewater.
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Table of Contents 11 Environmental, Social and Governance (“ESG”) The Company is committed to establishing and maintaining impactful initiatives that support itscorporate responsibility as a growing, local bank in the Twin Cities, while regularly sharing progress withstakeholders. The Company has a management-level ESG Committee with the role of developing,implementing and growing a formal ESG program. Oversight of the Company’s ESG strategy is providedby the Nominating and ESG Committee of the board of directors. The Company’s ESG priorities are to: 1) Leverage its unconventional corporate culture to leave a positive, lasting impact on its teammembers, clients and communities; 2) Create a diverse, equitable and inclusive work environment and community; 3) Ensure strong corporate governance oversight including an effective risk managementframework to support a growing organization; and 4) Contribute to a healthier natural environment in the communities in which employees live andwork. The Company has an ESG webpage to share a summary of the actions being taken to supportthe ESG priorities. The webpage is updated periodically to highlight ongoing efforts to support ESG-related initiatives. For more information on the Company’s ESG commitment, please visit the Company’sESG webpage at https://www.bridgewaterbankmn.com/about-bridgewater/esg. Available Information The Company’s principal executive office is located at 4450 Excelsior Blvd., Suite 100, St. LouisPark, Minnesota, 55416, and the telephone number at that address is (952) 893-6868. The websiteaddress is investors.bridgewaterbankmn.com. The information contained on the website is not a part of,nor incorporated by reference into, this report. All filings made by the Company with the SEC may be copied or read at the SEC’s PublicReference Room at 100 F Street NE, Washington, D.C. 20549. Information on the operation of the PublicReference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains anInternet site that contains reports, proxy and information statements, and other information regardingissuers that file electronically with the SEC, as the Company does. The website is www.sec.gov. TheCompany provides access to its SEC filings through its Investor Relations website atinvestors.bridgewaterbankmn.com. After accessing the website, the filings are available free of chargeupon selecting “SEC Filings/Documents.” Reports available include the Company’s proxy statements,annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and allamendments to those reports as soon as reasonably practicable after the documents and reports areelectronically filed with or furnished to the SEC. SUPERVISION AND REGULATION General FDIC-insured banking institutions, their holding companies and their affiliates are extensivelyregulated under federal and state law. As a result, the Company’s growth and earnings performance maybe affected not only by management decisions and general economic conditions, but also by therequirements of federal and state statutes and by the regulations and policies of various bankingagencies, including the Company’s primary regulator, the Federal Reserve Board of Governors (the“Federal Reserve”) and the Bank’s primary federal regulator, the FDIC, and primary state regulator, theMinnesota Department of Commerce, Financial Institutions Division (the “MDOC”), and federal and stateconsumer financial protection agencies. Furthermore, taxation laws administered by the Internal RevenueService
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Table of Contents 12 (the “IRS”), and state taxing authorities, accounting rules developed by the FASB, securities lawsadministered by the SEC and state securities authorities and anti-money laundering and sanctions lawsenforced by the U.S. Department of the Treasury (the “Treasury”) have an impact on the Company’sbusiness. The effect of these statutes, regulations, regulatory policies and accounting rules are significantto the Company’s operations and results. Federal and state banking laws impose a comprehensive system of supervision, regulation andenforcement on the operations of FDIC-insured institutions, their holding companies and affiliates that isintended primarily for the protection of the FDIC-insured deposits and depositors of banks, rather thanshareholders. These laws, and the regulations of the banking agencies issued under them, affect, amongother things, the scope of the Company’s business, the kinds and amounts of investments that theCompany and the Bank may make, reserve requirements, required capital levels relative to assets, thenature and amount of collateral for loans, the establishment of branches, the ability of the Company andthe Bank to merge, consolidate and acquire, dealings with the Company’s and the Bank’s insiders andaffiliates and the Company’s payment of dividends. In response to the global financial crisis and particularly following the passage of the Dodd-FrankWall Street Reform and Consumer Protection Act (the “Dodd Frank Act”), the Company experiencedheightened regulatory requirements and scrutiny. Although the reforms primarily targeted large bankingorganizations and systemically important financial institutions, their influence filtered down in varyingdegrees to community banks over time and caused the Company’s compliance and risk managementprocesses, and the costs thereof, to increase. The Economic Growth, Regulatory Relief and ConsumerProtection Act of 2018 (the “Regulatory Relief Act”) eliminated questions about the applicability of certainDodd-Frank Act reforms to community banking organizations, including relieving the Company of anyrequirement to engage in mandatory stress tests, maintain a risk committee or comply with the VolckerRule’s complicated prohibitions on proprietary trading and ownership of private funds. Over the past year, the federal banking agencies have continued efforts to reduce regulatoryburden on banking organizations, including community banks, through various supervisory, regulatory andpolicy initiatives. These efforts have included the rescission or revision of certain rulemakings andproposals, initiatives to streamline examination and application processes and efforts to increasetransparency and consistency in supervisory expectations. Congress also has considered additionalmeasures aimed at easing specific compliance obligations for community banks, although no reformscomparable in scope to the Regulatory Relief Act have been enacted to date. These developments maybe favorable to the operations of the Company or the Bank; however, future changes in laws, regulationsor supervisory priorities, and their impacts on the Company’s or the Bank’s business, remain uncertain. The supervisory framework applicable to U.S. banking organizations subjects banks and bankholding companies to regular examination by their respective banking agencies. Examinations result inconfidential examination reports and supervisory ratings may impact an institution’s operations, capitallevels, growth and strategic initiatives. Examinations consider not only compliance with applicable lawsand regulations, but also capital levels, asset quality, management ability, earnings, liquidity and overallrisk profile, among other things. The banking agencies generally have broad discretion to imposerestrictions and limitations on the operations of a regulated entity where the agencies determine, amongother things, that such operations are unsafe or unsound, violate applicable law or are otherwiseinconsistent with laws and regulations. Changes in supervisory approach or emphasis may materiallyaffect the operations and financial results of the Company and the Bank, as well as the banking industryin general. In recent supervisory communications, rulemakings and policy statements, federal bankingagencies have indicated an increased focus on core, material financial risks (rather than risk managementprocesses), greater transparency in supervisory expectations and efforts to reduce examination burden,particularly for community banks. For example, the FDIC, the Bank’s primary federal regulator, hasproposed or implemented initiatives: (i) to clarify standards for unsafe or unsound practices; (ii) toenhance supervisory appeals processes; (iii) to streamline examination procedures; and (iv) to revisestandards governing the termination of enforcement actions. These initiatives may enable management tofocus more effectively on growth opportunities and the management of material financial risks.
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Table of Contents 13 The following is a summary of the material elements of the supervisory and regulatory frameworkapplicable to the Company and the Bank. It does not describe all of the statutes, regulations andregulatory policies that apply, nor does it restate all of the requirements of those that are described. Thedescriptions are qualified in their entirety by reference to the particular statutory and regulatory provision. The Role of Capital Regulatory capital represents the net assets of a banking organization available to absorb losses.Because of the risks attendant to their business, FDIC-insured institutions, such as banks, as well as theirholding companies (i.e., banking organizations), generally are required to hold more capital than otherbusinesses, which directly affects the Company’s earnings capabilities. Although capital has historicallybeen one of the key measures of the financial health of both bank holding companies and banks, its rolebecame fundamentally more important in the wake of the global financial crisis, as the banking agenciesrecognized that the amount and quality of capital held by banking organizations prior to that crisis wasinsufficient to absorb losses during periods of severe stress. Capital Levels. Banking organizations have been required to hold minimum levels of capitalbased on guidelines established by the federal banking agencies since 1983. The minimum capital levelsfor banking organizations have been expressed in terms of ratios of “capital” divided by “total assets.” Thecapital guidelines for U.S. banking organizations beginning in 1989 have been based upon internationalcapital accords (known as the “Basel” accords) adopted by the Basel Committee on Banking Supervision,a committee of central banks and bank supervisors that acts as the primary global standard-setter forprudential regulation, as interpreted and implemented by the U.S. federal banking agencies on aninteragency basis. These accords recognized that bank assets for the purpose of the capital ratiocalculations needed to be risk weighted (the theory being that riskier assets should require more capital)and that off-balance sheet exposures needed to be factored in the calculations. Following the globalfinancial crisis, the Group of Governors and Heads of Supervision, the oversight body of the BaselCommittee on Banking Supervision, announced an agreement on a strengthened set of capitalrequirements for banking organizations around the world, known as the Basel III accords, to addressdeficiencies recognized in connection with the global financial crisis. The Basel III Rule. The U.S. federal banking agencies adopted the U.S. Basel III regulatorycapital reforms, and, at the same time, effected changes required by the Dodd-Frank Act, in regulationsthat were effective in 2015 (with certain phase-ins) (the “Basel III Rule”). The Basel III Rule establishedcapital standards for banks and bank holding companies that are meaningfully more stringent than thoseestablished previously and are still in effect today. The Basel III Rule increased the required quantity and quality of capital and required a morecomplex, detailed and calibrated assessment of risk in the calculation of risk weightings for bank assets.The Basel III Rule is applicable to all banking organizations that are subject to minimum capitalrequirements, including national and state banks and savings and loan associations, as well as to mostbank and savings and loan holding companies. The Company and the Bank are each subject to the BaselIII Rule as described below. Not only did the Basel III Rule increase most of the required minimum capital ratios in effect priorto 2015, but, by requiring that capital instruments be of higher quality to absorb loss, it introduced theconcept of Common Equity Tier 1 Capital (“CET1”), which consists primarily of common stock, relatedsurplus (net of Treasury stock), retained earnings and CET1 minority interests, subject to certainregulatory adjustments and deductions. The Basel III Rule also changed the definition of regulatory capitalby establishing more stringent criteria for instruments to qualify as Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stock that meets certain requirements) and Tier 2 Capital (primarily othertypes of preferred stock and subordinated debt, subject to limitations). In addition, the Basel III Rulelimited the inclusion of minority interests, mortgage-servicing assets and deferred tax assets in regulatorycapital and required deductions from CET1 if such assets exceeded prescribed thresholds.
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Table of Contents 14 The Basel III Rule requires banking organizations to maintain minimum capital ratios to bedeemed “adequately capitalized” as follows: ● A ratio of CET1 equal to 4.5% of risk-weighted assets; ● A ratio of Tier 1 Capital equal to 6% of risk-weighted assets; ● A ratio of Total Capital (Tier 1 plus Tier 2 Capital) equal to 8% of risk-weighted assets; and ● A leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4%. In addition, banking organizations that want to make capital distributions (including dividends andstock repurchases) and pay discretionary bonuses to executive officers without restriction must maintain2.5% in the form of CET1 for a capital conservation buffer. The purpose of the conservation buffer is toensure that banking organizations maintain a cushion of capital that can be used to absorb losses duringperiods of financial and economic stress. Factoring in the capital conservation buffer increases theminimum ratios described above to 7% for CET1, 8.5% for Tier 1 Capital and 10.5% for Total Capital. Well Capitalized Requirements. The capital ratios described above representminimum standards for banking organizations to be considered “adequately capitalized.”Banking agencies uniformly encourage banks to maintain capital levels above these minimums and to be“well capitalized.” To that end, federal law and regulations provide various incentives for bankingorganizations to maintain regulatory capital at levels in excess of minimum regulatory requirements. Forexample, a well capitalized banking organization may: (i) qualify for exemptions from prior notice orapplication requirements otherwise applicable to certain activities; (ii) receive expedited processing ofother required notices or applications; and (iii) accept, roll-over or renew brokered deposits. In addition,the banking agencies may require higher capital levels where warranted by an organization’s specific riskprofile or operating circumstances. For example, the Federal Reserve’s capital guidelines contemplatethat additional capital may be required to take adequate account of, among other things, risks, such asinterest rate risk or risks associated with credit concentration, nontraditional activities or securities tradingactivities. Further, any banking organization experiencing or anticipating significant growth would beexpected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 Capital less allintangible assets), well above the minimum regulatory levels. Under the capital regulations of the Federal Reserve for the Company and the FDIC for the Bank,in order to be well capitalized, a banking organization must maintain: ● A CET1 ratio to risk-weighted assets of 6.5% or more; ● A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more; ● A ratio of Total Capital to total risk-weighted assets of 10% or more; and ● A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater. Under the Basel III Rule, a banking organization may be considered “well capitalized,” while notcomplying with the capital conservation buffer requirement described above. As of December 31, 2025: (i) the Bank was not subject to a directive from MDOC or FDIC toincrease its capital; and (ii) the Bank was well capitalized, as defined by FDIC regulations. As ofDecember 31, 2025, the Company had regulatory capital in excess of the Federal Reserve’s requirementsand met the Basel III Rule requirements to be well capitalized. As of December 31, 2025, the Companyand the Bank also were in compliance with the capital conservation buffer.
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Table of Contents 15 Basel III Endgame Proposal. Previously, federal banking agencies proposed a “Basel IIIEndgame Rule” to complete the implementation of certain aspects of the Basel III accords, including tothe risk weighting of assets; however, the proposal was not adopted, in part due to stakeholder concernsregarding potential economic impacts, data transparency and the alignment of certain provisions withstatutory tailoring requirements. Based on public statements from federal agency officials, it is anticipatedthat a revised proposal may be issued in the future. Any re-proposal of the Basel III Endgame Rule isexpected to primarily affect large, complex banking organizations. Prompt Corrective Action. The concept of a banking organization being “adequately capitalized”or “well capitalized,” as defined above, is part of a regulatory enforcement regime that provides the federalbanking agencies with broad power to take “prompt corrective action” to resolve the problems ofundercapitalized depository institutions based on the capital level of each particular institution. The extentof the banking agencies’ powers depends on whether the institution in question is “adequatelycapitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in eachcase as defined by regulation. Depending upon the capital category to which a banking organization isassigned, the banking agencies’ corrective powers include: (i) requiring the institution to submit a capitalrestoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring theinstitution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restrictingtransactions between the institution and its affiliates; (v) restricting the interest rate that the institution maypay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that seniorexecutive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits fromcorrespondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the paymentof principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution. Community Bank Capital Simplification. Community banking organizations have long raisedconcerns with federal banking agencies about the regulatory burden, complexity and costs associatedwith certain provisions of the Basel III Rule. In response, the U.S. Congress provided an “off-ramp” forinstitutions, like the Company, with total consolidated assets of less than $10 billion as part of theRegulatory Relief Act. Section 201 of the Regulatory Relief Act specifically instructed the federal bankingagencies to establish a single “Community Bank Leverage Ratio” (“CBLR”) of between 8 and 10%. Underthe final rule, a community banking organization is eligible to elect to comply with its capital requirementsunder the CBLR framework if it has: (i) less than $10 billion in total consolidated assets; (ii) limitedamounts of certain assets and off-balance sheet exposures; and (iii) a CBLR greater than 9%. In late2025, the federal banking agencies proposed changes to the CBLR framework intended to encouragebroader adoption, including reducing the required leverage ratio from 9.0% to 8.0%; however, theproposal has not yet been finalized. The Bank and the Company have not elected to use theCBLR framework at this time, but may make such an election at any time. Supervision and Regulation of the Company General. The Company, as the sole shareholder of the Bank, is a bank holding company that haselected financial holding company status. As a bank holding company, the Company is registered with,and is subject to regulation, supervision and enforcement by, the Federal Reserve under the BankHolding Company Act of 1956, as amended (the “BHCA”). The Company is legally obligated to act as asource of financial strength to the Bank and to commit resources to support the Bank in circumstanceswhere the Company might not otherwise do so. Under the BHCA, the Company is subject to periodicexamination by the Federal Reserve. The Company is required to file with the Federal Reserve periodicreports of the Company’s operations and such additional information regarding the Company and itssubsidiaries as the Federal Reserve may require. Acquisitions and Activities. The primary purpose of a bank holding company is to control andmanage banks. The BHCA generally requires the prior approval of the Federal Reserve for any mergerinvolving a bank holding company or any acquisition by a bank holding company of another bank or bankholding company. Pursuant to the BHCA and the Dodd-Frank Act, the Federal Reserve may permit a wellcapitalized and well managed bank holding company to acquire banks located in any U.S. state, subjectto federal deposit concentration limits, applicable
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Table of Contents 16 nondiscriminatory state deposit-cap laws, and state minimum-existence requirements for target banks(not exceeding five years). The BHCA generally prohibits the Company from acquiring direct or indirect ownership or controlof more than 5% of an outstanding class of the voting shares of any nonbanking entity, and from engagingin any business other than that of banking, managing and controlling banks or furnishing services tobanks and their subsidiaries. This general prohibition is subject to a number of exceptions. The principalexception allows bank holding companies to engage in, and to own shares of companies engaged in,certain businesses found by the Federal Reserve prior to November 11, 1999 to be “so closely related tobanking... as to be a proper incident thereto.” This authority permits the Company to engage in a varietyof banking-related businesses, including, among other things, the ownership and operation of a savingsassociation, or any entity engaged in consumer finance, equipment leasing, the operation of a computerservice bureau (including software development) and mortgage banking and brokerage services. TheBHCA does not place formal territorial restrictions on the domestic activities of nonbank subsidiaries ofbank holding companies. In addition to approval from the Federal Reserve that may be required in certaincircumstances, prior approval for the establishment or acquisitions of nonbank subsidiaries by a bankholding company may be required from other agencies, such as agencies that regulate such nonbankcompany. Financial Holding Company Election. Bank holding companies that meet certain BHCAeligibility requirements and elect to operate as financial holding companies may engage in, or own sharesin companies engaged in, a wider range of nonbanking activities, including securities and insuranceunderwriting and sales, merchant banking and any other activity that: (i) the Federal Reserve, inconsultation with the Secretary of the Treasury, determines by regulation or order is financial in nature orincidental to any such financial activity; or (ii) the Federal Reserve determines by order to becomplementary to any such financial activity, as long as the activity does not pose a substantial risk to thesafety or soundness of FDIC-insured institutions or the financial system generally. The Company has elected to operate as a financial holding company. In order to maintain itsstatus as a financial holding company, the Company and the Bank must be well capitalized and wellmanaged, and the Bank must have a least a satisfactory Community Reinvestment Act (“CRA”) rating. Ifthe Federal Reserve determines that a financial holding company or any bank subsidiary is not wellcapitalized or well managed, the Federal Reserve will provide a period of time in which to achievecompliance, but, during the period of noncompliance, the Federal Reserve may place any limitations onthe financial holding company that it deems appropriate. Furthermore, if the Federal Reserve determinesthat a financial holding company’s subsidiary bank has not received a satisfactory CRA rating, suchcompany would not be able to commence any new financial activities or acquire a company that engagesin such activities. Change in Control. Federal law prohibits any person or company from acquiring “control” of anFDIC-insured depository institution or its holding company without prior notice to the appropriate federalbanking agency. “Control” is conclusively determined to exist upon the acquisition of 25% or more of theoutstanding voting securities of a bank or bank holding company, but may be presumed to arise undercertain circumstances between 10% and 24.99% ownership. Capital Requirements. The Company is subject to the complex consolidated capitalrequirements of the Basel III Rule, see “–the Role of Capital” above. Dividend Payments. The Company’s ability to pay dividends to its shareholders may be affectedby both general corporate law considerations and policies and capital requirements of the FederalReserve applicable to bank holding companies. As a Minnesota corporation, the Company is subject tothe Minnesota Business Corporation Act, as amended, which prohibits the Company from paying adividend if, after giving effect to the dividend, the Company would not be able to pay its debts as the debtsbecome due in the ordinary course of business, or the Company’s total assets would be less than the sumof its total liabilities, plus the amount that would be needed, if the Company were to
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Table of Contents 17 be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution ofshareholders whose preferential rights are superior to those receiving the distribution. As a general matter, the Federal Reserve has indicated that the board of directors of abank holding company should eliminate, defer or significantly reduce dividends to shareholders if: (i) thecompany’s net income available to shareholders for the past four quarters, net of dividends previouslypaid during that period, is not sufficient to fully fund the dividends; (ii) the prospective rate of earningsretention is inconsistent with the company’s capital needs and overall current and prospective financialcondition; or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capitaladequacy ratios. The Federal Reserve also possesses enforcement powers over bank holding companiesand their nonbank subsidiaries to prevent or remedy actions that represent unsafe or unsound practicesor violations of applicable statutes and regulations. Among these powers is the ability to proscribe thepayment of dividends by banks and bank holding companies. Finally, the Basel III Rule imposesconsolidated capital requirements on banking organizations. As a result, banking organizations must holda capital conservation buffer of 2.5% of risk-weighted assets in CET1 above the minimum risk-basedcapital requirements to avoid regulatory limits on dividends and other capital distributions. See “–The Roleof Capital” above. Monetary Policy. The monetary policy of the Federal Reserve has a significant effect on theoperating results of bank holding companies and their subsidiaries. Among the tools available to theFederal Reserve to affect the money supply are open market transactions in U.S. government securitiesand changes in the discount rate on bank borrowings. These means are used in varying combinations toinfluence overall growth and distribution of bank loans, investments and deposits, and their use may affectinterest rates charged on loans or paid on deposits, which may impact the Company’s business andoperations. Federal Securities Regulation. The Company’s common stock is registered with the SEC underthe Securities Exchange Act of 1934, as amended (the “Exchange Act”). Consequently, the Company issubject to the information, proxy solicitation, insider trading and other restrictions and requirements of theSEC under the Exchange Act. Corporate Governance/Incentive Compensation. The Dodd-Frank Act addressed manyinvestor protection, corporate governance and executive compensation matters that will affect most U.S.publicly traded companies. It increased shareholder influence over boards of directors by requiringcompanies to give shareholders a nonbinding vote on executive compensation and so-called “goldenparachute” payments, and authorizing the SEC to promulgate rules that would allow shareholders tonominate and solicit voters for their own candidates using a company’s proxy materials. The Dodd-Frank Act also directed the Federal Reserve, together with the other federal bankingand financial services agencies, to promulgate rules prohibiting excessive incentive-based compensationpaid to executives of bank holding companies, regardless of whether such companies are publicly traded.Although several agencies have made repeated efforts to implement rules under this provision of theDodd-Frank Act—including a proposal issued most recently in May 2024, which was subsequentlywithdrawn—no final rule has been adopted at this time. Nevertheless, the federal banking agencies haveissued interagency guidance on sound incentive compensation practices for banking organizations,reflecting the agencies’ recognition that incentive compensation practices in the financial industry wereamong the factors contributing to the global financial crisis. The interagency guidance recognizes threecore principles for effective incentive compensation plans: (i) appropriately balancing risk and reward;(ii) compatibility with effective controls and risk management; and (iii) support by strong corporategovernance, including active and effective oversight by the organization’s board of directors. Althoughmuch of the guidance is directed at large banking organizations that are expected to maintain systematicand formalized policies and procedures, smaller banking organizations like us are expected to implementless extensive and less formalized systems pursuant to the guidance.
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Table of Contents 18 Supervision and Regulation of the Bank General. The Bank is a Minnesota-chartered, nonmember bank. The deposit accounts of theBank are insured by the FDIC’s Deposit Insurance Fund (“DIF”) to the maximum extent provided underfederal law and FDIC regulations, currently $250,000 per insured depositor, per ownership category.Ongoing policy discussions at the federal level have focused on potential changes to deposit insurancecoverage, including possible adjustments to coverage limits, although no changes have been enacted. As a Minnesota-chartered FDIC-insured bank, the Bank is subject to the examination,supervision, reporting and enforcement requirements of the MDOC, the chartering authority for Minnesotabanks, and the FDIC, designated by federal law as the primary federal regulator of insured state banksthat, like the Bank, are not members of the Federal Reserve System (i.e., nonmember banks). Deposit Insurance Assessments. As an FDIC-insured institution, the Bank is required to paydeposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessmentsystem whereby FDIC-insured institutions pay insurance premiums at rates based on their riskclassification. For institutions like the Bank that are not considered large and highly complex bankingorganizations, assessments are based on examination ratings and financial ratios. The total baseassessment rates, effective as of January 1, 2023, generally range from 2.5 basis points (for the lowestrisk institutions) to 32 basis points or beyond (for higher risk institutions). At least semi-annually, the FDIC updates its loss and income projections for the DIF and, ifneeded, increases or decreases the assessment rates, following notice and comment on proposedrulemaking. For this purpose, the reserve ratio is the DIF balance divided by estimated insured deposits.In response to the global financial crisis, the Dodd-Frank Act increased the minimum reserve ratio from1.15% to 1.35% of the estimated amount of total insured deposits. In its May 2025 report, the FDIC statedthat the reserve ratio likely will reach the statutory minimum by the September 30, 2028 deadline, and noadjustments to the base assessment rates are currently projected. In addition, because the cost of the failures of Silicon Valley Bank and Signature Bank to the DIFattributable to the systemic risk exception was approximately $16.7 billion, the FDIC adopted a specialassessment applicable to banking organizations with assets of $5 billion or more. The FDIC has beencollecting the special assessment over eight quarters, at a quarterly rate of 3.36 basis points for the initialseven quarters of the collection period (ending on December 30, 2025), and at a quarterly rate of 2.97basis points for the eighth and final collection period. The quarterly special assessment rate is applied tothe special assessment base equal to an FDIC-insured institution’s estimated uninsured deposits for theDecember 31, 2022 reporting period, adjusted to exclude the first $5 billion in estimated uninsureddeposits. Although the Company is technically subject to the special assessment as a bankingorganization with more than $5 billion of assets as of December 31, 2025, the Bank does not have to paythe special assessment because it had less than $5 billion in estimated uninsured deposits as ofDecember 31, 2022. Supervisory Assessments. All Minnesota-chartered banks are required to pay supervisoryassessments to the MDOC to fund the operations of that agency. The amount of the assessment iscalculated on the basis of the Bank’s total assets or business volume. During the year ended December31, 2025, the Bank paid supervisory assessments to the MDOC totaling approximately $163,100. Capital Requirements. Banks are generally required to maintain capital levels in excess of otherbusinesses. For a discussion of capital requirements, see “–The Role of Capital” above. Liquidity Requirements. Liquidity is a measure of the ability and ease with which bank assetsmay be converted to meet financial obligations such as deposits or other funding sources. Banks arerequired to implement liquidity risk management frameworks that ensure they maintain sufficient liquidity,including a cushion of unencumbered, high quality liquid assets, to withstand a range of stress events.The level and speed of deposit outflows contributing to the failures of Silicon Valley Bank, Signature Bankand First Republic Bank in 2023 was
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Table of Contents 19 unprecedented and contributed to acute liquidity and funding strain, underscoring the importance ofliquidity risk management and contingency funding planning by insured depository institutions like theBank, as highlighted in a 2023 addendum to existing interagency guidance on funding and liquidity riskmanagement. The primary role of liquidity risk management is to: (i) prospectively assess the need for funds tomeet financial obligations; and (ii) ensure the availability of cash or collateral to fulfill those needs at theappropriate time by coordinating the various sources of funds available to the institution under normal andstressed conditions. The Basel III Rule includes a liquidity framework that requires the largest insuredinstitutions to measure their liquidity against specific liquidity tests. One test, referred to as the LiquidityCoverage Ratio (“LCR”) is designed to ensure that the banking organization has an adequate stock ofunencumbered high quality liquid assets that can be converted easily and immediately in private marketsinto cash to meet liquidity needs for a 30-calendar day liquidity stress scenario. The other test, known asthe Net Stable Funding Ratio (“NSFR”) is designed to promote more medium- and long-term funding ofthe assets and activities of FDIC-insured institutions over a one-year horizon. These tests provide anincentive for banks and bank holding companies to increase their holdings in Treasury securities andother sovereign debt as a component of assets, increase the use of long-term debt as a funding sourceand rely on stable funding like core deposits (in lieu of brokered deposits). Although these tests do not apply to the Bank, the Company continues to review its liquidity riskmanagement policies in light of regulatory requirements and industry developments. Dividend Payments. The primary source of funds for the Company is dividends from the Bank.Under Minnesota law, the Bank cannot declare or pay a cash dividend or dividend in kind unless it willhave a surplus amounting to not less than 20% of its capital after payment of the dividend. Once thissurplus amount reaches 50% of the Bank’s capital, the Bank may pay dividends out of net profits if thedividends will not reduce the Bank’s capital, undivided profits and reserves below requirementsestablished by the MDOC. Further, the Bank may not declare or pay a dividend until cumulative dividendson preferred stock, if any, are paid in full. The payment of dividends by any FDIC-insured institution is affected by the requirement tomaintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and anFDIC-insured institution generally is prohibited from paying any dividends if, following payment thereof,the institution would be undercapitalized. As described above, the Bank exceeded its capital requirementsunder applicable guidelines as of December 31, 2025. Notwithstanding the availability of funds fordividends, however, the FDIC and the MDOC may prohibit the payment of dividends by the Bank if eitheragency determines that such payment would constitute an unsafe or unsound practice. In addition, underthe Basel III Rule, banking organizations that want to pay unrestricted dividends must maintain 2.5% inCET1 attributable to the capital conservation buffer. See “-The Role of Capital” above. State Bank Investments, Activities and Acquisitions. The Bank is permitted to makeinvestments and engage in activities directly or through subsidiaries as authorized under Minnesota law.However, under federal law and FDIC regulations, FDIC-insured state banks are prohibited, subject tocertain exceptions, from making or retaining equity investments that are not permissible for a nationalbank. Federal law and FDIC regulations also prohibit FDIC-insured state banks and their subsidiariesfrom engaging as principal in any activity that is not permitted for a national bank unless they meet, andcontinue to meet, minimum regulatory capital requirements and the FDIC determines that the activitywould not pose a significant risk to the DIF. These restrictions have not had, and are not currentlyexpected to have, a material impact on the operations of the Bank. The Bank may be required to obtain approval from the MDOC, the FDIC and other applicablebanking or financial services agencies before engaging in certain acquisitions or mergers underapplicable state and federal law. With respect to interstate merger and acquisitions, federal law permitsstate banks to merge with out-of-state banks subject to: (i) regulatory approval; (ii) federal and statedeposit concentration limits; and (iii) state law requirements that the merging bank has been in existencefor a minimum period of time (not to exceed five years), prior to the merger. In 2025, the federal bankingagencies, including the FDIC and the OCC, rescinded certain prior administrative
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Table of Contents 20 actions regarding the review and approval of mergers and acquisitions, with the intent of streamlining andexpediting the regulatory review of certain merger and acquisition applications. Branching Authority. Minnesota banks, such as the Bank, have the authority under Minnesotalaw to establish branches anywhere in the State of Minnesota, subject to receipt of all required regulatoryapprovals. The Dodd-Frank Act permits well capitalized and well managed banks to establish newinterstate branches or acquire individual branches of a bank in another state (rather than the acquisition ofan out-of-state bank in its entirety) without impediments. Affiliate and Insider Transactions. The Bank is subject to certain restrictions imposed by federallaw on “covered transactions” between the Bank and its “affiliates.” The Company is an affiliate of theBank for purposes of these restrictions. Covered transactions subject to these restrictions includeextensions of credit to the Company, investments in the stock or other securities of the Company and theacceptance of the stock or other securities of the Company as collateral for loans made by the Bank. TheDodd-Frank Act enhanced these requirements by expanding the definition of “covered transactions” andextending the period for which collateral requirements for such transactions must be maintained. Certain limitations and reporting requirements also apply to extensions of credit by the Bank to itsdirectors and officers, to directors and officers of the Company and its subsidiaries, to principalshareholders of the Company and to “related interests” of such directors, officers and principalshareholders under state and/or federal law. In addition, federal law and regulations may govern the termson which any person who is a director or officer of the Company or the Bank, or a principal shareholder ofthe Company, may obtain credit from banks with which the Bank maintains a correspondent relationship. Safety and Soundness Standards/Risk Management. FDIC-insured institutions are expectedto operate in a safe and sound manner. The federal banking agencies have adopted operational andmanagerial standards to promote the safety and soundness of such institutions that address internalcontrols, information systems, internal audit systems, loan documentation, credit underwriting, interestrate exposure, asset growth, compensation, fees and benefits, asset quality and earnings. These safety and soundness standards generally prescribe the goals to be achieved in eacharea, and each institution is responsible for establishing its own procedures to achieve those goals. If anFDIC-insured institution fails to operate in a safe and sound manner, its primary federal regulator mayrequire the submission of a plan to achieve and maintain compliance. Failure to submit an acceptablecompliance plan, or to implement a plan in any material respect may result in a formal agency orderdirecting the institution to cure the deficiency. Until such deficiency is resolved, the agency may restrictthe institution’s rate of growth, require additional capital, limit deposit rates or take other corrective actionas deemed appropriate. Operating in an unsafe or unsound manner also will constitute grounds for otherenforcement action by the federal banking agencies, including cease and desist orders and civil moneypenalty assessments. Federal banking agencies have emphasized the importance of sound risk managementprocesses and strong internal controls when evaluating the activities of FDIC-insured institutions that theysupervise. In 2025, however, the agencies signaled a shift toward focusing on the identification andmanagement of material financial risks, rather than primarily on adherence to prescriptive operational andrisk management processes. Although effective risk management, internal controls and board andmanagement oversight remain important, supervisory attention may increasingly center on whetherspecific practices pose material harm to the institution’s financial condition or create a risk of loss to theDIF. Despite this potential shift in focus, the agencies continue to evaluate a broad spectrum of risks—including credit, market, liquidity, operational and legal risks—emphasizing their potential impact on safetyand soundness. Notably, the federal banking agencies have indicated that they intend to removereputation risk from consideration, citing concerns about its use in restricting banking services to certainindustries or groups. The key risk themes identified for 2025 are discussed under the heading “RiskFactors” below.
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Table of Contents 21 The Bank is expected to have active board of directors and senior management oversight;adequate policies, procedures and limits; adequate risk measurement, monitoring and managementinformation systems; and comprehensive internal controls. The federal banking agencies also haveissued guidance on specific risk management topics, including third party relationships, in response to theproliferation of relationships between banking organizations and fintech companies (although theguidance applies more broadly). Privacy and Cybersecurity. The Bank is subject to numerous U.S. federal and state laws andregulations aimed at protecting the non-public, confidential information of its customers. These lawsrequire the Bank to periodically disclose its privacy policies and practices regarding the sharing ofinformation and permit consumers to opt out of the sharing of information with unaffiliated third parties.They also limit the Bank’s ability to share certain information with affiliates and nonaffiliates for marketingand/or non-marketing purposes, or to contact customers with marketing offers. In addition, as a part of itsoperational risk mitigation, the Bank is required to implement a comprehensive information securityprogram that includes administrative, technical and physical safeguards to ensure the security andconfidentiality of customer records and information and to require the same of its service providers. Thesesecurity and privacy policies and procedures are applied consistently across all business lines andgeographic locations. The Bank and the Company also are subject to federal and state laws and regulations requiringnotifications and disclosures regarding certain cybersecurity incidents. In addition, the Bank must considerand address cybersecurity considerations as part of its risk management processes, includingimplementing and maintaining appropriate safeguards, monitoring and testing systems and overseeingthe cybersecurity practices of its service providers. Regulatory guidance emphasizes that cybersecurityshould be integrated into overall enterprise risk management and business continuity planning. Federal Home Loan Bank System. The Bank is a member of the Federal Home Loan Bank ofDes Moines (“FHLB”), which serves as a central credit facility for its members. The FHLB is fundedprimarily from proceeds from the sale of obligations of the FHLB system. It makes loans to member banksin the form of FHLB advances. All advances from the FHLB are required to be fully collateralized asdetermined by the FHLB. Community Reinvestment Act Requirements. The CRA imposes on the Bank a continuing andaffirmative obligation, consistent with safe and sound operations, to help meet the credit needs of theentire community, including low- and moderate-income neighborhoods. The FDIC regularly assesses theBank’s record of meeting these credit needs of its communities through periodic CRA examinations. TheBank’s CRA ratings derived from these examinations can have significant impacts on the activities inwhich the Bank and the Company may engage. For example, a low CRA rating may impact the review ofapplications for acquisitions by the Bank or the Company’s financial holding company status. In October 2023, the federal banking agencies issued a final rule intended to strengthen andmodernize the CRA regulations (the “CRA Rule”). The CRA Rule was subsequently challenged in court,which prevented it from taking effect. In 2025, the federal banking agencies issued a proposed rule torescind the CRA Rule and reinstate the prior CRA regulatory framework adopted in 1995. Additionally, the FDIC has determined to lengthen the period between CRA examinations forcertain banks with less than $3 billion in assets; however, this change is not expected to impact the Bank,which has more than $3 billion in total assets. Anti-Money Laundering/Sanctions. The Bank Secrecy Act (“BSA”) is U.S. federal statutoryframework, as amended and supplemented by subsequent laws and implemented through regulations,which is designed to combat money laundering, the financing of terrorism and other illicit financial activity.The BSA and related anti-money laundering and countering the financing of terrorism (“AML/CFT”) lawsand regulations are intended to prevent terrorists and criminals from accessing the U.S. financial systemand have significant implications for FDIC-insured institutions and other businesses involved in thetransmission of funds. Together, this regulatory framework provides a
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Table of Contents 22 foundation to promote financial transparency and deter and detect those who seek to misuse the U.S.financial system to launder criminal proceeds, finance terrorist acts or facilitate other illicit conduct. The BSA and related regulations require financial institutions to establish and maintain policiesand procedures addressing: (i) customer identification and due diligence; (ii) the prevention and detectionof money laundering and terrorist financing; (iii) the identification and reporting of suspicious activities andcertain currency transactions; (iv) compliance with laws relating to currency crimes; and (v) cooperationwith law enforcement authorities. The Bank also must comply with stringent economic and trade sanctionsregimes administered and enforced by the Office of Foreign Assets Control. Although core AML/CFT statutory requirements and expectations remain unchanged, federalbanking agencies and the Financial Crimes Enforcement Network have recently pursued or consideredefforts to modernize and streamline BSA/AML compliance through a more risk-based approach, includingtargeted regulatory relief, revised examination expectations and efforts to reduce certain reporting andcompliance burden, particularly for lower-risk and community banking organizations. Concentrations in Commercial Real Estate. Concentration risk exists when FDIC-insuredinstitutions allocate a disproportionate amount of assets to any one industry or economic segment.Concentration in CRE lending is one area of regulatory focus, which has been subject to additionalscrutiny by federal banking agencies as well as the SEC (for publicly-traded banking organizations) inrecent years. The interagency Concentrations in Commercial Real Estate Lending, Sound RiskManagement Practices guidance (“CRE Guidance”) provides supervisory criteria, including the followingnumerical indicators, to assist bank examiners in identifying banks with potentially significant CRE loanconcentrations that may warrant greater supervisory scrutiny. These indicators include: (i) total CRE loansexceeding 300% of capital and increasing 50% or more in the preceding three years; or (ii) constructionand land development loans exceeding 100% of capital. The CRE Guidance does not establish a binding limits on CRE lending activities, but rather isintended to inform supervisory assessment of whether an institution’s risk profile, earnings capacity andcapital levels are commensurate with its CRE exposure. In recent years, the federal banking agencieshave issued statements to reinforce prudent risk-management practices related to CRE lending, inresponse to observed growth in CRE markets, increased competitive pressures, rising CREconcentrations and an easing of CRE underwriting standards. In other statements, the agencies havereminded FDIC-insured institutions to maintain underwriting discipline and to identify, measure, monitorand manage the risks arising from CRE lending, including by holding capital commensurate with thoserisks. As of December 31, 2025, the Bank’s total loans secured by multifamily and CRE nonowneroccupied properties plus total construction and land development loans represented more than 473.1% ofits total risk-based capital. Thus, the Bank is deemed to have a concentration in CRE lending. Accordingly,pursuant to the CRE Guidance, the Bank is required to have, and does have, heightened riskmanagement practices in place to account for the heightened degree of risk associated with CRE lending. Consumer Financial Services. The historical structure of federal consumer protection regulationapplicable to all providers of consumer financial products and services changed significantly on July 21,2011, when the CFPB commenced operations to supervise and enforce consumer protection laws. TheCFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to allproviders of consumer products and services, including the Bank, as well as the authority to prohibit“unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authorityover providers with more than $10 billion in assets. FDIC-insured institutions with $10 billion or less inassets, like the Bank, continue to be examined by their applicable primary federal banking regulators. In response to mortgage-related abuses that contributed to the global financial crisis, the Dodd-Frank Act and CFPB rulemaking significantly expanded underwriting, disclosure, and anti-predatorylending requirements for
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Table of Contents 23 residential mortgage loans, including by imposing ability-to-repay standards and establishing apresumption of compliance for certain “qualified mortgages.” The CFPB has continued to refine theserequirements through additional rulemaking addressing qualified mortgages and ability-to-repaystandards. Over the last several years, the CFPB has taken an aggressive approach to the regulation (andsupervision, where applicable) of providers of consumer financial products and services. More recently,changes in leadership and policy direction have led to: (i) shifts in regulatory priorities, including therescission or reconsideration of certain CFPB guidance and rules; (ii) a reduction in CFPB enforcementactivity; and (iii) constraints on the CFPB’s budget and resources, although the CFPB continues to retainbroad statutory authority to administer, supervise and enforce federal consumer financial protection laws.In addition, state banking and other financial services regulatory agencies retain authority to administerand enforce state consumer financial protection laws and could increase supervisory or enforcementactivity in response to changes in federal regulatory priorities. The CFPB’s rules have not had a significant impact on the Bank’s operations, except for highercompliance costs. The Bank also must comply with certain state consumer protection laws andrequirements in the states in which it operates.
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Table of Contents 24 ITEM 1A. RISK FACTORS Investing in the Company’s common stock involves various risks, many of which are specific tothe Company’s business. Before making an investment decision, you should carefully read and considerthe risk factors described below as well as the other information included in this report and otherdocuments we file with the SEC. The discussion below addresses the material risks and uncertainties, ofwhich the Company is currently aware, that could have a material adverse effect on the Company’sbusiness, results of operations, financial condition, and growth prospects. Other risks that the Companydoes not know about now, or that the Company does not currently believe are significant, could negativelyimpact the Company’s business or the trading price of the Company’s securities. Summary This is a summary of some of the material risks and uncertainties that management believesaffects the Company. The list is not exhaustive, but provides a high-level summary of some of the materialrisks that are further described in this Item 1A. We encourage you to read Item 1A in its entirety. Credit Risks ● credit risk and risks from concentrations (by type of borrower, geographic area, collateral andindustry) within the Company’s loan portfolio or large loans to certain borrowers (includingCRE loans); ● the overall health of the local and national real estate market; ● business and economic conditions generally and in the financial services industry, nationallyand within our market area, including the level and impact of interest rates on inflation andpossible recession; ● the ability to successfully manage credit risk; and ● the ability to maintain an adequate level of allowance for credit losses on loans and leases. Liquidity and Funding Risks ● the ability to successfully manage liquidity risk, which may increase the dependence on non-core funding sources such as brokered deposits, and negatively impact our cost of funds; ● the concentration of large deposits from certain clients, including those who have balancesabove current FDIC insurance limits; and ● the ability to raise additional capital to implement our business plan. Operational, Strategic and Reputational Risks ● the ability to implement our growth strategy and manage costs effectively; ● the composition of the Company’s strategic leadership team and the ability to attract andretain key personnel; ● talent and labor shortages and employee turnover; ● the occurrence of fraudulent activity, breaches or failures of our or our third party vendors’information security controls or cybersecurity-related incidents, including as a result ofsophisticated attacks using artificial intelligence and similar tools or as a result of insiderfraud; ● interruptions involving our information technology and telecommunications systems or thirdparty servicers; ● competition in the financial services industry, including from nonbank competitors such ascredit unions, fintech companies and digital asset service providers; and
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Table of Contents 25 ● severe weather, natural disasters, widespread disease or pandemics, acts of war or terrorism orother adverse external events, including ongoing conflicts in the Middle East, the Russianinvasion of Ukraine, and recent military actions in Venezuela and Mexico. Legal, Accounting and Compliance Risks ● the effectiveness of the Company’s risk management fra mework; ● the imposition of tariffs or other governmental policies impacting the value of productsproduced by our commercial borrowers; ● potential impairment to the goodwill the Company recorded in connection with acquisitions; ● the commencement and outcome of litigation and other legal proceedings and regulatoryactions against us; ● the impact of recent and future legislative and regulatory changes, including in response toprior bank failures; ● changes to U.S. or state tax laws, regulations and governmental policies concerning theCompany’s general business; and ● risks related to climate change and the negative impact it may have on our customers andtheir businesses. Market and Interest Rate Risks ● interest rate risk, including the effects of changes in interest rates; and ● fluctuations in the values of the securities held in our securities portfolio or the values ofderivative instruments held in our derivatives portfolio, including as the result of changes ininterest rates. Credit Risks Our loan portfolio has a concentration of commercial real estate loans, which involve risksspecific to real estate values and the health and market dynamics of the real estate marketgenerally. As of December 31, 2025, we had $3.01 billion of commercial real estate loans, consisting of$1.17 billion of loans secured by nonowner occupied nonfarm nonresidential properties, $1.59 billion ofloans secured by multifamily residential properties, $45.2 million of 1-4 family construction loans and$216.2 million of construction and land development loans. Additionally, we had $227.1 million in loanswhose purpose was to finance commercial real estate projects, but were secured by other types ofcollateral. Commercial real estate secured loans represented 69.9% of our total gross loan portfolio and473.1% of the Bank’s total risk-based capital at December 31, 2025. Accordingly, pursuant to guidanceissued by the federal bank regulatory agencies, we are required to have heightened risk managementpractices in place to account for the heightened degree of risk associated with commercial real estatelending and may be required to maintain capital in excess of regulatory minimums. The market value ofreal estate securing our commercial real estate loans can fluctuate in a short period of time as a result ofinterest rates and market conditions. Adverse developments affecting real estate values in our marketarea could increase the credit risk associated with our loan portfolio. Additionally, the repayment ofcommercial real estate loans generally is dependent, in large part, on sufficient income from theproperties securing the loans to cover operating expenses and debt service. Economic events, includingchanges in interest rates, decreases in office occupancy due to the shift to remote work environments anddevelopments in artificial intelligence, or governmental regulations outside of the control of the borroweror lender could negatively impact the future cash flow and market values of the affected properties. If theloans that are collateralized by real estate become troubled during a time when market conditions aredeclining or have declined, then we may not be able to realize the full value of the collateral that weanticipated at the time of originating the
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Table of Contents 26 loan, which could force us to take charge-offs or require us to increase our provision for credit losses,which could have a material adverse effect on our business, financial condition, results of operations andgrowth prospects. Because a significant portion of our loan portfolio is comprised of real estate loans, negativechanges in the economy affecting real estate values and liquidity, as well as environmentalfactors, could impair the value of collateral securing our real estate loans and result in loan andother losses. At December 31, 2025, approximately 85.8% of our total gross loan portfolio was comprised ofloans with real estate as a primary component of collateral. As a result, adverse developments affectingreal estate values in our market area could increase the credit risk associated with our real estate loanportfolio. The market value of real estate can fluctuate significantly in a short period of time as a result ofinterest rates and market conditions in the area in which the real estate is located. Adverse changesaffecting real estate values, such as shifts in market demand for office space, and the liquidity of realestate in one or more of our markets could increase the credit risk associated with our loan portfolio,significantly impair the value of property pledged as collateral on loans and affect our ability to sell thecollateral upon foreclosure without a loss or additional losses, which could adversely affect ourprofitability. Such declines and losses would have a material adverse effect on our business, financialcondition, results of operations and growth prospects. A decline in the business and economic conditions in our market could have a material adverseeffect on our business, financial condition, results of operations and growth prospects. Unlike larger banks that are more geographically diversified, we conduct our operations primarilyin the Twin Cities MSA. Because of the geographic concentration of our operations in the Twin CitiesMSA, if the local economy weakens, our growth and profitability could be constrained. Weak economicconditions are characterized by, among other indicators, deflation, elevated levels of unemployment,fluctuations in debt and equity capital markets, and lower home sales and commercial activity. Adversebusiness conditions arising from state or local regulations such as rent control, housing policies, ortaxation, could also lead to a weaker local economy. These factors could negatively affect the volume ofloan originations, increase the level of nonperforming assets, increase the rate of foreclosures and reducethe value of the properties securing our loans. Any regional or local economic downturn in the Twin CitiesMSA, could negatively impact our operations and profitability. Because our business is moregeographically concentrated than that of certain competitors, these conditions may affect us moresignificantly and adversely. Our business depends on our ability to manage credit risk. As a bank, our business requires us to manage credit risk; however, default risk may arise fromevents or circumstances that are difficult to detect, such as fraud, or difficult to predict, such ascatastrophic events affecting certain industries. As a lender, we are exposed to the risk that our borrowerswill be unable to repay their loans according to their terms, and that the collateral securing repayment oftheir loans, if any, may not be sufficient to ensure repayment. In addition, there are risks inherent inmaking any loan, including risks with respect to the period of time over which the loan may be repaid,proper loan underwriting, changes in economic and industry conditions and inherent in dealing withindividual borrowers, including the risk that a borrower may not provide information to us about itsbusiness in a timely manner, or may present inaccurate or incomplete information to us, as well as risksrelating to the value of collateral. To manage our credit risk, we must, among other actions, maintaindisciplined and prudent underwriting standards and ensure that our bankers follow those standards. Theweakening of these standards for any reason, such as an attempt to attract higher yielding loans, a lack ofdiscipline or diligence by our employees in underwriting and monitoring loans or our inability to adequatelyadapt policies and procedures to changes in economic or any other conditions affecting borrowers andthe quality of our loan portfolio, may result in loan defaults, foreclosures and charge-offs and maynecessitate that we significantly increase our allowance for credit losses, each of which could adverselyaffect our net income. As a result, our inability to successfully manage credit risk could have a materialadverse effect on our business, financial condition, results of operations and growth prospects.
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Table of Contents 27 Our allowance for credit losses may prove to be insufficient to absorb potential credit losses inour loan portfolio. We establish and maintain our allowance for credit losses at a level that management considersadequate to absorb expected credit losses based on an analysis of our loan portfolio and current marketenvironment. The allowance for credit losses represents our estimate of expected credit losses in theportfolio at each balance sheet date and is based upon relevant information available to us at such time.The allowance contains provisions for expected credit losses that have been identified relating to specificborrowing relationships, as well as expected credit losses inherent in the loan portfolio that are notspecifically identified. Additions to the allowance for credit losses, which are charged to earnings throughthe provision for (or recovery of) credit loss expense, are determined based on a variety of factors,including an analysis of the loan portfolio, historical loss experience, a reasonable and supportableforecast and an evaluation of current economic conditions. The actual amount of credit losses is affectedby, among other things, changes in economic, operating and other conditions within our market, whichmay be beyond our control, and such losses may exceed current estimates. As of December 31, 2025, our allowance for credit losses as a percentage of total gross loanswas 1.31% and as a percentage of total nonperforming loans was 256.16%. Although managementbelieves that the allowance for credit losses was adequate on such date to absorb expected losses onexisting loans that may become uncollectible, losses in excess of the existing allowance will reduce ournet income and could have a material adverse effect on our business, financial condition, results ofoperations and growth prospects. We may also be required to take additional provisions for credit lossesin the future to further supplement the allowance for credit losses, either due to management’sassessment that the allowance is inadequate or as required by our banking regulators. Our bankingregulators periodically review our allowance for credit losses and the value attributed to loan segmentsand may require us to adjust our determination of the value for these items. These adjustments may havea material adverse effect on our business, financial condition, results of operations and growth prospects. Elevated levels of inflation could adversely impact our clients’ businesses, adversely impactingour business, financial condition, results of operations and growth prospects. The United States has experienced elevated levels of inflation in recent years, with the consumerprice index increasing approximately 2.7% as of the end of 2025, before seasonal adjustment. Elevatedinflation can have complex and potentially adverse effects on our clients’ business, financial condition,results of operations, and growth prospects. Prolonged inflationary pressures may also contribute toincreased volatility and uncertainty in the broader business environment, which could negatively impactloan demand and impair our clients’ ability to repay indebtedness. In addition, governmental responses to inflationary conditions, such as restrictive monetary orfiscal policies, the imposition or potential imposition of price controls, or uncertainty related to changes inkey government personnel affecting monetary policy, could further adversely affect our clients’ businessesand, in turn, our own financial performance. Our high concentration of large loans to certain borrowers may increase our credit risk. Our growth over the last several years has been partially attributable to our ability to cultivaterelationships with certain individuals and businesses that have resulted in a concentration of large loansto a small number of borrowers. As of December 31, 2025, our 10 largest borrowing relationshipsaccounted for approximately 15.3% of our total gross loan portfolio. Along with other risks inherent inthese loans, such as the deterioration of the underlying businesses or property securing these loans, thishigh concentration of borrowers presents a risk to our lending operations. If any one of these borrowersbecomes unable to repay its loan obligations as a result of business, economic or market conditions, orpersonal circumstances, such as divorce or death, our nonaccruing loans and our provision for creditlosses could increase significantly, which could have a material adverse effect on our business, financialcondition, results of operations and growth prospects.
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Table of Contents 28 Affordable housing loans involve unique risks that could adversely affect our business In recent years, our portfolio of affordable housing loans has grown rapidly in response tointentional growth initiatives and increasing demand for affordable housing. These transactions arecomplex in nature, often involve financing across the United States outside our Twin Cities MSA, and areinherently reliant on government programs. Unlike traditional real estate lending, these projects are notalways secured by real property, which increases risk because funds are advanced against the security ofprojects whose value is uncertain prior to completion. In declining real estate markets, construction costsmay exceed realizable values. Due to new client relationships, reliance on governmental regulations and programs, pace ofgrowth and lack of seasoning of the portfolio, and uncertainties in estimating construction costs, it can bedifficult to accurately assess the total funds required or the loan-to-value ratio for such loans. Repaymentof affordable housing loans frequently depends on the successful completion and performance of theunderlying project, including the borrower’s ability to sell or lease the property, rather than solely on theborrower’s or guarantor’s financial capacity. If our appraisal of a completed project is overstated, or ifmarket values, occupancy levels, or rental rates decline, the collateral securing the loan may beinsufficient and we may incur losses adversely affecting our profitability. Nonperforming assets take significant time and resources to resolve and adversely affect our netinterest income. Our nonperforming assets adversely affect our net interest income in various ways. We do notrecord interest income on nonaccrual loans or foreclosed assets, thereby adversely affecting our netincome and returns on assets and equity. When we take collateral in foreclosure and similar proceedings,we are required to mark the collateral to its then-fair market value, which may result in a loss. Thesenonperforming loans and foreclosed assets also increase our risk profile and the level of capital ourregulators believe is appropriate for us to maintain in light of such risks. The resolution of nonperformingassets requires significant time commitments from management, which increases our loan administrationcosts and adversely affects our efficiency ratio (a non-Generally Accepted Accounting Principles (“GAAP”)financial measure) and can be detrimental to the performance of their other responsibilities, and may alsoinvolve additional financial resources. If we experience increases in nonperforming loans andnonperforming assets, our net interest income may be negatively impacted and our loan administrationcosts could increase, each of which could have a material adverse effect on our business, financialcondition, results of operations and growth prospects. Liquidity and Funding Risks Liquidity risks could affect our operations and jeopardize our business, financial condition,results of operations and growth prospects. Liquidity is essential to our business. Liquidity risk is the risk that we will be unable to meet ourobligations as they come due because of an inability to liquidate assets or obtain adequate funding, or thepotential that we cannot easily unwind or offset specific exposures without significantly adjusting marketprices because of inadequate market depth or market disruptions. An inability to raise funds throughdeposits, borrowings, the sale of loans or investment securities and from other sources could have asubstantial negative effect on our liquidity. Our most important source of funds consists of our clientdeposits, which can decrease for a variety of reasons, including when clients perceive alternativeinvestments, such as bonds, treasuries or stocks, as providing a better risk/return tradeoff. If clients movemoney out of bank deposits and into other investments, we could lose a relatively low cost source offunds, which would require us to seek other funding alternatives, including increasing our dependence onwholesale funding sources, in order to continue to grow, thereby potentially increasing our funding costsand reducing our net interest income and net income. Additionally, uninsured deposits have historically been viewed by the FDIC as less stable thaninsured deposits. According to statements made by the FDIC staff and the leadership of the federalbanking agencies, clients with larger uninsured deposit account balances often are small- to mid-sizedbusinesses that rely upon deposit funds
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Table of Contents 29 for payment of operational expenses and, as a result, are more likely to closely monitor the financialcondition and performance of their depository institutions. As a result, in the event of financial distress,uninsured depositors historically have been more likely to withdraw their deposits. If a significant portionof our deposits were to be withdrawn within a short period of time such that additional sources of fundingwould be required to meet withdrawal demands, the Company may be unable to obtain funding atfavorable terms, which may have an adverse effect on our net interest margin. Additionally, we access collateralized public funds, which are bank deposits of state and localmunicipalities. These deposits are required to be secured by certain investment grade securities or othersources permitted by law to ensure repayment. If we are unable to pledge sufficient qualifying collateral tosecure public funding, we may lose access to this source of liquidity that we have historically utilized. Inaddition, the availability of and fluctuations in these funds depends on the individual municipality’s fiscalpolicies and cash flow needs. Other primary sources of funds consist of cash from operations, investment security maturitiesand sales and proceeds from the issuance and sale of our equity and debt securities to investors.Additional liquidity is provided by brokered deposits and the ability to borrow from the Federal Reserveand the FHLB. We may also borrow from third party lenders from time to time. Our access to fundingsources in amounts adequate to finance or capitalize our activities or on terms that are acceptable to uscould be impaired by factors that affect us directly or the financial services industry or economy ingeneral, such as disruptions in the financial markets or negative views and expectations about theprospects for the financial services industry. Economic conditions and a loss of confidence in financialinstitutions may increase our cost of funding and limit access to certain customary sources of capital,including inter-bank borrowings, repurchase agreements and borrowings from the discount window of theFederal Reserve. Any decline in available funding could adversely impact our ability to continue to implement ourstrategic plan, including originating loans and investing in securities, or to fulfill obligations such as payingour expenses, repaying our borrowings or meeting deposit withdrawal demands, any of which could havea material adverse effect on our business, financial condition, results of operations and growth prospects. We depend on non-core funding sources, which causes our cost of funds to be higher whencompared to other financial institutions. We use certain non-core, wholesale funding sources, including brokered deposits, federal fundspurchased, and FHLB advances. As of December 31, 2025, we had approximately $810.5 million ofbrokered deposits, which represented approximately 18.8% of our total deposits and $399.5 million ofFHLB advances. Unlike traditional deposits from our local clients, there is potential that wholesaledeposits will not remain with us after maturity. Although we are increasing our efforts to reduce ourreliance on non-core funding sources, we may not be able to maintain our market share of core depositfunding in our highly competitive market area. Local deposits, such as retail certificates of deposit, aremore difficult to replace than brokered deposits due to the smaller depositor base. If we are unable tomaintain core deposit funding in our market area, we may be forced to increase the amounts of wholesalefunding sources. The cost of these funds can be volatile and may exceed the cost of core deposits in ourmarket area, which could have a material adverse effect on our net interest income. In addition, ourmaximum borrowing capacity from the FHLB is based on the amount of mortgage and commercial loanswe can pledge. As of December 31, 2025, our advances from the FHLB were collateralized by$1.62 billion of real estate and commercial loans. We are also eligible to borrow from the Federal Reservediscount window with borrowing availability of approximately $1.03 billion as of December 31, 2025,consisting of $254.3 million of securities and $963.5 million of loans pledged as collateral. If we areunable to pledge sufficient collateral to secure funding from the FHLB or FRB, we may lose access to thissource of liquidity that we have historically relied upon. If we are unable to access any of these types offunding sources or if our costs related to them increases, our liquidity and ability to support demand forloans could be materially adversely affected.
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Table of Contents 30 Our high concentration of large depositors may increase our liquidity risk, and the loss of anylarge depositor may negatively impact our net interest margin. We have developed relationships with certain individuals and businesses that have resulted in aconcentration of large deposits from a small number of clients. As of December 31, 2025, our 10 largestdepositor relationships accounted for approximately 16.2% of our total deposits. This high concentrationof depositors presents a risk to our liquidity if one or more of them decides to change its relationship withus and to withdraw all or a significant portion of their deposits, for example as a result of deposits abovethe FDIC insurance limit. If such an event occurs, we may need to seek out alternative sources of fundingthat may not be on the same terms as the deposits being replaced, which could negatively impact our netinterest margin if the alternative source of funding is at a higher rate and have a material adverse effecton our business, financial condition, results of operations and growth prospects. We may need to raise additional capital in the future, and if we fail to maintain sufficient capital,whether due to losses, an inability to raise additional capital or otherwise, our business, as well asour ability to maintain regulatory compliance, would be adversely affected. We face significant capital and other regulatory requirements as a financial institution. We mayneed to raise additional capital in the future to provide us with sufficient capital resources and liquidity tomeet our commitments and business needs, which could include the possibility of financing acquisitions.In addition, the Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meetcertain regulatory capital requirements and maintain sufficient liquidity. Importantly, regulatory capitalrequirements could increase from current levels, which could require us to raise additional capital orcontract our operations. Our ability to raise additional capital depends on conditions in the capital markets,economic conditions and a number of other factors, including investor perceptions regarding the bankingindustry, market conditions and governmental activities, and our financial condition and performance. Inparticular, if we need to raise additional capital in the current interest rate environment, we believe thepricing and other terms investors may require in such an offering may not be attractive to us. Accordingly,we cannot assure that we will be able to raise additional capital if needed or on terms acceptable to us. Ifwe fail to maintain capital to meet regulatory requirements, or are unable to raise capital to meet ourbusiness needs, our business, financial condition, results of operations and growth prospects would bematerially and adversely affected. We may be adversely affected by changes in the actual or perceived soundness or condition ofother financial institutions. Financial services institutions that deal with each other are interconnected as a result of trading,investment, liquidity management, clearing, counterparty and other relationships, as well as reputationalconnections. Concerns about, or a default by, one institution could lead to significant liquidity problemsand losses or defaults by other institutions, as the commercial and financial soundness of many financialinstitutions is closely related as a result of these credit, trading, clearing and other relationships. Even theperceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidityproblems and losses or defaults by various institutions. This systemic risk may adversely affect financialintermediaries with which we interact on a daily basis or key funding providers such as the FHLB, whichcould have a material adverse effect on our access to liquidity. In addition, our credit risk may increasewhen the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recoverthe full amount of the loan or derivative exposure due to us. Any such losses could have a materialadverse effect on our business, financial condition, results of operations and growth prospects. Additionally, negative news about us or the banking industry in general could negatively impactmarket and/or client perceptions of our company, which could lead to a loss of depositor confidence andan increase in deposit withdrawals, particularly among those with uninsured deposits. Furthermore, as weand other regional banking organizations experienced in 2023, the failure of other financial institutionsmay cause deposit outflows as clients spread deposits among several different banks so as to maximizetheir amount of FDIC insurance, move deposits to banks deemed “too big to fail” or remove deposits fromthe banking system entirely. As of December 31, 2025,
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Table of Contents 31 approximately 30% of our deposits were uninsured and we rely on these deposits for liquidity. A failure tomaintain adequate liquidity could have a material adverse effect on our business, financial condition andresults of operations. Operational, Strategic and Reputational Risks We may not be able to implement our growth strategy or manage costs effectively, resulting inlower earnings or profitability. Our strategy focuses on organic growth, supplemented by opportunistic acquisitions, but we maynot be able to continue to grow and increase our earnings in the future. Our growth requires that weincrease our loans and deposits while managing risks by following prudent loan underwriting standardswithout increasing interest rate risk or compressing our net interest margin, hiring and retaining qualifiedemployees and successfully implementing strategic projects and initiatives. Even if we are able toincrease our interest income, our earnings may nonetheless be reduced by increased expenses, such asadditional employee compensation or other general and administrative expenses and increased interestexpense on any liabilities incurred or deposits solicited to fund increases in assets. Additionally, if our competitors extend credit on terms we find to pose excessive risks, or atinterest rates which we believe do not warrant the credit exposure, we may not be able to maintain ourlending volume and could experience deteriorating financial performance. Our inability to manage ourgrowth successfully could have a material adverse effect on our business, financial condition, results ofoperations and growth prospects. We are highly dependent on our strategic leadership team, and the loss of any of our seniorexecutive officers or other key employees, or our inability to attract and retain qualified personnel,could harm our ability to implement our strategic plan and impair our relationships with clients. Our success is dependent, to a large degree, upon the continued service and skills of ourstrategic leadership team. Our business and growth strategies are built primarily upon our ability to retainemployees with experience and business relationships within our market area. The loss of any of themembers of our strategic leadership team or any of our other key personnel could have an adverseimpact on our business and growth because of their skills, years of industry experience, knowledge of ourmarket area, the difficulty of finding qualified replacement personnel and any difficulties associated withtransitioning of responsibilities to any new members of the strategic leadership team. As such, we need tocontinue to attract and retain key personnel and to recruit qualified individuals who fit our culture tosucceed existing key personnel to ensure the continued growth and successful operation of our business.Leadership changes may occur from time to time, and we cannot predict whether significant retirementsor resignations will occur or whether we will be able to recruit additional qualified personnel. Compliance with labor and employment laws, including the Family and Medical Leave Act, couldincrease our costs and negatively affect operations. We are subject to numerous federal, state, and local labor and employment laws, including theFamily and Medical Leave Act (“FMLA”) and similar state statutes that provide eligible employees withjob-protected leave for specified family and medical reasons. Compliance with these requirements can becomplex and may increase our administrative and personnel costs, particularly as regulations evolve or asstates adopt more expansive leave laws. Extended employee absences under the FMLA or comparable state laws can place strain onstaffing in key operational areas such as retail banking, loan servicing, and compliance functions. Tomaintain service levels, we may incur additional expenses for overtime, temporary staffing, or training. Inaddition, any failure to comply with FMLA requirements or to appropriately administer leave policies couldresult in employee claims, legal proceedings, penalties, or reputational harm.
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Table of Contents 32 As we continue to operate in a competitive labor market, our ability to effectively manageemployee leave while maintaining adequate staffing levels is important to sustaining operationalperformance, employee morale, and customer service standards. Adverse outcomes in any of theseareas could have a material impact on our results of operations or financial condition. The occurrence of fraudulent activity, breaches or failures of our information security controls orcybersecurity-related incidents could have a material adverse effect on our business, financialcondition, results of operations and growth prospects. As a bank, we are susceptible to fraudulent activity, information security breaches andcybersecurity-related incidents that may be committed against us, third parties and their subservicers, orour clients, which may result in financial losses or increased costs to us, our third party partners or ourclients, disclosure or misuse of our information or our client information, misappropriation of assets,privacy breaches against our clients, litigation or damage to our reputation. Such fraudulent activity maytake many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering andother dishonest acts. Information security breaches and cybersecurity-related incidents may includefraudulent or unauthorized access to systems used by us or our clients, denial or degradation of serviceattacks and malware, ransomware, or other cyber-attacks. In recent periods, there continues to be a rise in electronic fraudulent activity, security breachesand cyber-attacks within the financial services industry, especially in the commercial banking sector dueto cyber criminals targeting commercial bank accounts and as a result of increasingly sophisticatedmethods of conducting cyber attacks, including those employing artificial intelligence or resulting frominsider fraud. Moreover, several large corporations, including financial institutions, third party partnersspecializing in providing services to financial institutions, and retail companies, have suffered major databreaches, in some cases exposing not only confidential and proprietary corporate information, but alsosensitive financial and other personal information of their customers and employees and subjecting themto potential fraudulent activity. Some of our clients may have been affected by these breaches, whichcould increase their risks of identity theft and other fraudulent activity that could involve their accountswith us. Information pertaining to us and our clients is maintained, and transactions are executed, onnetworks and systems maintained by us and certain third party partners, such as our online banking,mobile banking or accounting systems. The secure maintenance and transmission of confidentialinformation, as well as execution of transactions over these systems, are essential to protect us and ourclients against fraud and security breaches and to maintain the confidence of our clients. Breaches ofinformation security also may occur through intentional or unintentional acts by those having access toour systems or the confidential information of our clients, including employees. In addition, increases incriminal activity levels and sophistication, advances in computer capabilities, new discoveries,vulnerabilities in third party technologies (including browsers and operating systems) or otherdevelopments could result in a compromise or breach of the technology, processes and controls that weuse to prevent fraudulent transactions and to protect data about us, our clients and underlyingtransactions, as well as the technology used by our clients to access our systems. Our third partypartners’ inability to anticipate, or failure to adequately mitigate, breaches of security could result in anumber of negative events, including losses to us or our clients, loss of business or clients, damage to ourreputation, the incurrence of additional expenses, disruption to our business, additional regulatory scrutinyor penalties or our exposure to civil litigation and possible financial liability, any of which could have amaterial adverse effect on our business, financial condition, results of operations and growth prospects. Issues with the use of artificial intelligence in our marketplace may result in reputational harm orliability, or could otherwise adversely affect our business. Artificial intelligence, including generative artificial intelligence, is or may be enabled by orintegrated into our products or those developed by our third party partners. As with many developingtechnologies, artificial intelligence presents risks and challenges that could affect its further development,adoption, and use, and therefore our business. Artificial intelligence algorithms may be flawed, forexample datasets may contain biased information or otherwise be
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Table of Contents 33 insufficient, and inappropriate or controversial data practices could impair the acceptance of artificialintelligence solutions and result in burdensome new regulations. If the analyses that productsincorporating artificial intelligence assist in producing for us or our third party partners are deficient, biasedor inaccurate, we could be subject to competitive harm, potential legal liability and brand or reputationalharm. The use of artificial intelligence may also present ethical issues. If we or our third party partnersoffer artificial intelligence enabled products that are controversial because of their purported or real impacton human rights, privacy, or other issues, we may experience competitive harm, potential legal liabilityand brand or reputational harm. In addition, we expect that governments will continue to assess andimplement new laws and regulations concerning the use of artificial intelligence, which may affect orimpair the usability or efficiency of our products and services and those developed by our third partypartners. We depend on critical systems of third parties, and any systems failures, interruptions or databreaches involving these systems could adversely affect our operations and financial condition. We outsource to third parties many of our major systems, such as data processing and mobileand online banking, and are highly dependent on the successful and uninterrupted functioning of ourinformation technology and telecommunications systems, third party servicers, accounting systems,mobile and online banking platforms and financial intermediaries. The failure of these systems, or thetermination of a third party software license or service agreement on which any of these systems isbased, could interrupt our operations. Because our information technology and telecommunicationssystems interface with and depend on third party systems, we could experience service denials if demandfor such services exceeds capacity or such third party systems fail or experience interruptions. A systemfailure or service denial could result in a deterioration of our ability to process loans or gather deposits andprovide customer service, compromise our ability to operate effectively, result in potential noncompliancewith applicable laws or regulations, damage our reputation, result in a loss of customer business orsubject us to additional regulatory scrutiny and possible financial liability, any of which could have amaterial adverse effect on business, financial condition, results of operations and growth prospects. Inaddition, failures of third parties to comply with applicable laws and regulations, or fraud or misconduct onthe part of employees of any of these third parties, could disrupt our operations or adversely affect ourreputation. It may be difficult for us to replace some of our third party vendors, particularly vendors providingour core banking and information services, in a timely manner if they are unwilling or unable to provide uswith these services in the future for any reason and even if we are able to replace them, it may be athigher cost or result in the loss of clients. Any such events could have a material adverse effect on ourbusiness, financial condition, results of operations and growth prospects. Our operations rely heavily on the secure processing, storage and transmission of informationand the monitoring of a large number of transactions on a minute-by-minute basis, and even a shortinterruption in service could have significant consequences. We also interact with and rely on retailers, forwhom we process transactions, as well as financial counterparties and regulators. Each of these thirdparties may be targets of the same types of fraudulent activity, computer break-ins and othercybersecurity breaches described above, including those employing artificial intelligence, and thecybersecurity measures that they maintain to mitigate the risk of such activity may be different than ourown and may be inadequate. As a result of financial entities and technology systems becoming more interdependent andcomplex, a cyber incident, information breach or loss, or technology failure that compromises the systemsor data of one or more financial entities could have a material impact on counterparties or other marketparticipants, including ourselves. As a result of the foregoing, our ability to conduct business may beadversely affected by any significant disruptions to us or to third parties with whom we interact.
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Table of Contents 34 Our use of third party vendors and our other ongoing third party business relationships is subjectto increasing regulatory requirements and attention. Our use of third party vendors for certain information systems is subject to increasinglydemanding regulatory requirements and attention by our federal bank regulators. Regulations require usto enhance our due diligence, ongoing monitoring and control over our third party vendors and otherongoing third party business relationships. In certain cases, we may be required to renegotiate ouragreements with these vendors to meet these enhanced requirements, which could increase our costs.We expect that our regulators will hold us responsible for deficiencies in our oversight and control of ourthird party relationships and in the performance of the parties with which we have these relationships. Asa result, if our regulators conclude that we have not exercised adequate oversight and control over ourthird party vendors or other ongoing third party business relationships or that such third parties have notperformed appropriately, we could be subject to enforcement actions, including civil money penalties orother administrative or judicial penalties or fines, as well as requirements for customer remediation, any ofwhich could have a material adverse effect on our business, financial condition, results of operations andgrowth prospects. We have a continuing need for technological change, and we may not have the resources toeffectively implement new technology or we may experience operational challenges whenimplementing new technology. The financial services industry is undergoing rapid technological changes with frequentintroductions of new technology-driven products and services. In addition to better serving clients, theeffective use of technology increases efficiency and enables financial institutions to reduce costs. Ourfuture success will depend in part upon our ability and the ability of our third party partners to address theneeds of our clients by using technology to provide products and services that will satisfy client demandsfor convenience as well as to create additional efficiencies in our operations as we continue to grow. Thewidespread adoption of new technologies, including mobile banking services, artificial intelligence,cryptocurrencies and payment systems, could require us in the future to make substantial expenditures tomodify or adapt our existing products and services as we grow and develop new products to satisfy ourcustomers' expectations, remain competitive and comply with regulatory guidance. We may experienceoperational challenges as we implement these new technology enhancements, which could result in usnot fully realizing the anticipated benefits from such new technology or require us to incur significant coststo remedy any such challenges in a timely manner. Many of our larger competitors have substantially greater resources to invest in technologicalimprovements. As a result, they may be able to offer additional or superior products to those that we willbe able to offer, which would put us at a competitive disadvantage. Accordingly, a risk exists that we willnot be able to effectively implement new technology-driven products and services or be successful inmarketing such products and services to our clients.In addition, the implementation of technological changes and upgrades to maintain currentsystems and integrate new ones may also cause service interruptions, transaction processing errors andsystem conversion delays and may cause us to fail to comply with applicable laws. We expect that newtechnologies and business processes applicable to the banking industry will continue to emerge, andthese new technologies and business processes may be better than those we currently use. Because thepace of technological change is high and our industry is intensely competitive, we may not be able tosustain our investment in new technology as critical systems and applications become obsolete or asbetter ones become available. A failure to successfully keep pace with technological change affecting thefinancial services industry and failure to avoid interruptions, errors and delays could have a materialadverse effect on our business, reputation, financial condition, results of operations and growth prospects. We depend on the accuracy and completeness of information about clients and counterparties. In deciding whether to extend credit or enter into other transactions, and in evaluating andmonitoring our loan and deposit portfolios on an ongoing basis, we may rely on information furnished byor on behalf of clients and counterparties, including financial statements, credit reports and other financialinformation. We may also rely on representations of those clients or counterparties or of other thirdparties, such as independent auditors, as to the accuracy and completeness of that information. Relianceon inaccurate, incomplete, fraudulent or misleading financial
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Table of Contents 35 statements, credit reports or other financial or business information, or the failure to receive suchinformation on a timely basis, could result in loan or leases losses, reputational damage or other effectsthat could have a material adverse effect on our business, financial condition, results of operations andgrowth prospects. If we pursue strategic acquisitions, it may expose us to financial, execution and operational risks. We plan to grow our business organically but remain open to considering potential bank or otheracquisition opportunities that fit within our overall strategy and that we believe make financial andstrategic sense, such as the acquisition of FMCB in late 2024. In the event that we pursue additionalstrategic acquisitions, we may have difficulty completing them and may not realize the anticipated benefitsof any transaction we complete. For example, we may not be successful in realizing anticipated costsavings or in preventing disruptions in service to existing client relationships of the acquired institution.Our potential acquisition activities could require us to deploy a substantial amount of cash, other liquidassets or incur additional debt. In addition, if goodwill recorded in connection with future acquisitions weredetermined to be impaired, then we would be required to recognize a charge against our earnings, whichcould materially and adversely affect our results of operations during the period in which the impairmentwas recognized. In addition to the foregoing, we may face additional risks in acquisitions to the extent we acquirenew lines of business or new products, or enter new geographic areas, in which we have little or nocurrent experience, especially if we lose key employees of the acquired operations. We may not besuccessful in overcoming these risks or any other problems encountered in connection with acquisitions.Our inability to overcome risks associated with acquisitions could have a material adverse effect on ourbusiness, financial condition, results of operations and growth prospects. New lines of business, products, product enhancements or services may subject us to additionalrisks. From time to time, we may implement new lines of business or offer new products and productenhancements as well as new services within our existing lines of business. There are substantial risksand uncertainties associated with these efforts, particularly in instances in which the markets are not fullydeveloped. In implementing, developing or marketing new lines of business, products, productenhancements or services, we may invest significant time and resources, although we may not assign theappropriate level of resources or expertise necessary to make these new lines of business, products,product enhancements or services successful or to realize their expected benefits. Further, initialtimetables for the introduction and development of new lines of business, products, productenhancements or services may not be achieved, and price and profitability targets may not prove feasible.External factors, such as compliance with regulations, competitive alternatives and shifting marketpreferences, may also affect the ultimate implementation of a new line of business or offerings of newproducts, product enhancements or services. Furthermore, any new line of business, product, productenhancement or service or system conversion could have a significant impact on the effectiveness of oursystem of internal controls. Failure to successfully manage these risks in the development andimplementation of new lines of business or offerings of new products, product enhancements or servicescould have a material adverse effect on our business, financial condition, results of operations, growthprospects and reputation. We operate in a highly competitive and changing industry and market area and compete with bothbanks and non-banks. We operate in the highly competitive financial services industry and face significant competitionfor clients from financial institutions located both within and beyond our market area. We compete withnational commercial banks, regional banks, private banks, savings banks, credit unions, non-bankfinancial services companies, fintech companies, digital asset providers, and other financial institutionsoperating within or near the areas we serve, many of whom target the same clients we do in the TwinCities MSA. As client preferences and expectations continue to evolve, technology has lowered barriers toentry and made it possible for banks to expand their geographic reach by providing services over theinternet and for non-banks to offer products and services traditionally provided by banks, such as
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Table of Contents 36 automatic transfer and automatic payment systems. The banking industry is experiencing rapid changesin technology, and, as a result, our future success will depend in part on our ability to address our clients’needs by using technology. Client loyalty can be influenced by a competitor’s new products, especiallyofferings that could provide cost savings or a higher return to the client. Increased lending activity ofcompeting banks has also led to increased competitive pressures on loan rates and terms for high-qualitycredits. We may not be able to compete successfully with other financial institutions in our markets,particularly with larger financial institutions that have significantly greater resources than us, and we mayhave to pay higher interest rates to attract deposits, accept lower yields to attract loans and pay higherwages for new employees, resulting in lower net interest margins and reduced profitability. Many of ournon-bank competitors are not subject to the same extensive regulations that govern our activities and mayhave greater flexibility in competing for business. The financial services industry could become even morecompetitive as a result of legislative, regulatory and technological changes and continued consolidation.In addition, some of our current commercial banking clients may seek alternative banking sources as theydevelop needs for credit larger than we may be able to accommodate or more expansive product mixesoffered by larger institutions. While we do not offer products relating to digital assets, including cryptocurrencies, stablecoinsand other similar assets, there has been a significant increase in digital asset adoption within the UnitedStates and globally over the past several years. In 2025, President Trump signed the GENIUS Act intolaw. This act creates a Federal regulatory system for stablecoins, requiring, among other things, a 100%reserve backing with liquid assets, public disclosure of the compositions of the reserves, and alignmentwith State and Federal stablecoin networks. Certain characteristics of digital asset transactions, such asthe speed with which such transactions can be conducted, the ability to transact without the involvementof regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and theanonymous nature of the transactions, are appealing to certain consumers notwithstanding the variousrisks posed by such transactions. Accordingly, digital asset service providers—many of which, at presentare not subject to the same degree of scrutiny and oversight as banking organizations and other financialinstitutions—are becoming active competitors to more traditional financial institutions. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of client deposits and the related income generated from deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition and results of operations. Potential partnerships with digital asset companies, moreover, could also entail significant investment.
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Table of Contents 37 Severe weather, natural disasters, widespread disease or pandemics, acts of war or terrorism orother adverse external events could significantly impact our business. Severe weather, natural disasters, effects of climate change, widespread disease or pandemics,acts of war or terrorism, or other adverse external events could have a significant impact on our ability toconduct business. In addition, such events could affect the stability of our deposit base, impair the abilityof borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significantproperty damage, result in loss of revenue or cause us to incur additional expenses. The occurrence ofany of these events in the future could have a material adverse effect on our business, financial condition,results of operations and growth prospects. Legal, Accounting and Compliance Risks We are subject to commercial real estate lending guidance issued by the federal bankingregulators that impacts our operations and capital requirements. The federal banking regulators have issued guidance regarding concentrations in commercial realestate lending directed at institutions that have particularly high concentrations of commercial real estateloans within their lending portfolios. This guidance suggests that institutions whose commercial real estateloans exceed certain percentages of capital should implement heightened risk management practicesappropriate to their concentration risk and may be required to maintain higher capital ratios thaninstitutions with lower concentrations in commercial real estate lending. As of December 31, 2025, ourcommercial real estate secured loans represented 473.1% of the Bank’s total risk-based capital. As aresult, we are deemed to have a concentration in commercial real estate lending under applicableregulatory guidelines. Accordingly, pursuant to guidance issued by the federal bank regulatory agencies,we are required to have heightened risk management practices in place to account for the heighteneddegree of risk associated with commercial real estate lending and may be required to maintain capital inexcess of regulatory minimums. We cannot guarantee that the risk management practices we haveimplemented will be effective to prevent losses relating to our commercial real estate portfolio. In addition,increased capital requirements could limit our ability to leverage our capital, which could have a materialadverse effect on our business, financial condition, results of operations and growth prospects. Our risk management framework and programs may not be effective in mitigating risks or lossesto us. Our risk management framework is comprised of various processes, systems and strategies, andis designed to manage the types of risk to which we are subject, including, among others, strategic,operational, reputational, credit, capital, market, liquidity, interest rate and compliance risk. Our riskmanagement framework also includes financial or other modeling methodologies that involvemanagement assumptions and judgment. Our risk management framework may not be effective under allcircumstances and it may not adequately mitigate any risk or loss to us. If our framework is not effective,we could suffer unexpected losses and our business, financial condition, results of operations and growthprospects could be materially and adversely affected. We may also be subject to potentially adverseregulatory consequences, which may adversely affect our reputation. Our accounting estimates, risk management processes and controls rely on analytical andforecasting techniques and models and assumptions, which may not accurately predict futureevents. Our accounting policies and methods are fundamental to the manner in which we record andreport our financial condition and results of operations. Our management must exercise judgment inselecting and applying many of these accounting policies and methods so they comply with GAAP andreflect management’s judgment of the most appropriate manner to report our financial condition andresults of operations. In some cases, management must select the accounting policy or method to applyfrom two or more alternatives, any of which may be reasonable under the circumstances, yet which mayresult in our reporting materially different results than would have been reported under a differentalternative.
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Table of Contents 38 Certain accounting policies are critical to presenting our financial condition and results ofoperations. They require management to make difficult, subjective or complex judgments about mattersthat are uncertain. Materially different amounts could be reported under different conditions or usingdifferent assumptions or estimates. These critical accounting policies include policies related to theallowance for credit losses. See “Note 1 – Description of the Business and Summary of SignificantAccounting Policies” of the Company’s Consolidated Financial Statements included as part of this AnnualReport on Form 10-K for further information. Because of the uncertainty of estimates involved in thesematters, we may be required to significantly increase the allowance for credit losses or sustain creditlosses that are significantly higher than the reserve provided. This could have a material adverse effect onour business, financial condition, results of operations and growth prospects. Our risk management processes, internal controls, disclosure controls and corporate governancepolicies and procedures are based in part on certain assumptions and can provide only reasonable (notabsolute) assurances that the objectives of the system are met. Any failure or circumvention of ourcontrols, processes and procedures or failure to comply with regulations related to controls, processesand procedures could necessitate changes in those controls, processes and procedures, which mayincrease our compliance costs, divert management attention from our business or subject us to regulatoryactions and increased regulatory scrutiny. Any of these could have a material adverse effect on ourbusiness, financial condition, results of operations and growth prospects. Changes in accounting policies or standards could materially impact our financial statements. From time to time, the FASB, PCAOB, or the SEC, may change the financial accounting andreporting standards that govern the preparation of our financial statements. Such changes may result inus being subject to new or changing accounting and reporting standards. In addition, the bodies thatinterpret the accounting standards (such as banking regulators or outside auditors) may change theirinterpretations or positions on how these standards should be applied. In addition, trends in financial andbusiness reporting, including ESG related disclosures, could require us to incur additional reportingexpense. These changes may be beyond our control, can be hard to predict and can materially impacthow we record and report our financial condition and results of operations. In some cases, we could berequired to apply a new or revised standard retroactively, or apply an existing standard differently, in eachcase resulting in our needing to revise or restate prior period financial statements. The obligations associated with being a public company require significant resources andmanagement attention, which may divert time and attention from our business operations. As a public company, we are required to file periodic reports containing our consolidated financialstatements with the SEC within a specified time following the completion of quarterly and annual periods.As a public company, we also incur significant legal, accounting, insurance, and other expenses.Compliance with these reporting requirements and other rules and regulations, including periodicrevisions to and additional rules and regulations, of the SEC could increase our legal and financialcompliance costs and make some activities more time consuming and costly, which could negativelyaffect our efficiency ratio (a non-GAAP financial measure). Furthermore, the need to establish andmaintain the corporate infrastructure demanded of a public company may divert management’s attentionfrom implementing our strategic plan, which could prevent us from successfully implementing our growthinitiatives and improving our business, financial condition and results of operations. Litigation and regulatory actions, including possible enforcement actions, could subject us tosignificant fines, penalties, judgments or other requirements resulting in increased expenses orrestrictions on our business activities. Our business is subject to increased litigation and regulatory risks as a result of a number offactors, including the highly regulated nature of the financial services industry. In the normal course ofbusiness, from time to time, we have in the past and may in the future be named as a defendant invarious legal actions, including arbitrations, class actions and other litigation, arising in connection withour current or prior business activities. Legal actions could include claims for substantial compensatory orpunitive damages or claims for indeterminate amounts of damages. We
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Table of Contents 39 may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigationsand proceedings (both formal and informal) by governmental agencies regarding our current or priorbusiness activities. Any such legal or regulatory actions may subject us to substantial compensatory orpunitive damages, significant fines, penalties, obligations to change our business practices or otherrequirements resulting in increased expenses, diminished income and damage to our reputation. Ourinvolvement in any such matters, whether tangential or otherwise and even if the matters are ultimatelydetermined in our favor, could also cause significant harm to our reputation and divert managementattention from the operation of our business. Further, any settlement, consent order or adverse judgmentin connection with any formal or informal proceeding or investigation by government agencies may resultin litigation, investigations or proceedings as other litigants and government agencies begin independentreviews of the same activities. As a result, the outcome of legal and regulatory actions could have amaterial adverse effect on our business, reputation, financial condition, results of operations and growthprospects. We are subject to extensive regulation, and the regulatory framework that applies to us, togetherwith any future legislative or regulatory changes, may significantly affect our operations. The banking industry is extensively regulated and supervised under both federal and state lawsand regulations that are intended primarily for the protection of depositors, clients, federal depositinsurance funds and the banking system as a whole, not for the protection of our business or ourshareholders. The Company is subject to regulation and supervision by the Federal Reserve, and theBank is subject to regulation and supervision by the FDIC and the MDOC. The laws and regulationsapplicable to us govern a variety of matters, including permissible types, amounts and terms of loans andinvestments we may make, the maximum interest rate that may be charged, the amount of reserves wemust hold against deposits we take, the types of deposits we may accept, maintenance of adequatecapital and liquidity, changes in the control of us and our bank, restrictions on dividends andestablishment of new offices. We must obtain approval from our regulators before engaging in certainactivities, and there is the risk that such approvals may not be obtained, either in a timely manner or at all.Our regulators also have the ability to compel us to take certain actions, or restrict us from taking certainactions entirely, such as actions that our regulators deem to constitute an unsafe or unsound bankingpractice. Our failure to comply with any applicable laws or regulations, or regulatory policies andinterpretations of such laws and regulations, could result in sanctions by regulatory agencies, civil moneypenalties or damage to our reputation, all of which could have a material adverse effect on our business,financial condition, results of operations and growth prospects. Any future changes in federal and state laws and regulations, as well as the interpretation andimplementation of such laws and regulations, could affect us in substantial and unpredictable ways,including those listed above or other ways that could have a material adverse effect on our business,financial condition, results of operations and growth prospects. In addition, political developments,including changes in laws and regulations, as well as changes in staffing at the regulatory agencies, adduncertainty to the implementation, scope and timing of regulatory reforms. Changes in tax laws and regulations, or changes in the interpretation of existing tax laws andregulations, may have a material adverse effect on our business, financial condition, results ofoperations and growth prospects. We operate in an environment that imposes income taxes on our operations at both the federaland state levels to varying degrees. We engage in certain strategies to minimize the impact of thesetaxes. Consequently, any change in tax laws or regulations, or new interpretation of an existing law orregulation, could significantly alter the effectiveness of these strategies. The net deferred tax asset reported on our balance sheet generally represents the tax benefit offuture deductions from taxable income for items that have already been recognized for financial reportingpurposes. The bulk of the deferred tax asset consists of deferred loan loss deductions. The net deferredtax asset is measured by applying currently-enacted income tax rates to the accounting period duringwhich the tax benefit is expected to be realized. As of December 31, 2025, our net deferred tax asset was$18.3 million.
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Table of Contents 40 Bridgewater Investment Management, Inc., a Minnesota corporation and a subsidiary of the Bank,holds certain municipal securities and engages in municipal lending activities. Based on current taxregulations and guidance, we believe that municipal securities and loans held by a non-bank subsidiary ofa financial institution are eligible to receive favorable federal income tax treatment. There is a risk that theIRS may investigate these types of arrangements and issue new guidance eliminating the tax benefit tosuch a structure. We are subject to more stringent capital requirements. Banking institutions are required to hold more capital as a percentage of assets than mostindustries. In the wake of the global financial crisis, our capital requirements increased, both in theamount of capital we must hold and in the quality of the capital to absorb losses. Holding high amounts ofcapital compresses our earnings and constrains growth. In addition, the failure to meet applicableregulatory capital requirements could result in one or more of our regulators placing limitations orconditions on our activities, including our growth initiatives, or restricting the commencement of newactivities, and could affect client and investor confidence, our cost of funds and FDIC insurance costs andour ability to make acquisitions and ultimately result in a material adverse effect on our business, financialcondition, results of operations and growth prospects. Federal and state regulators periodically examine our business, and we may be required toremediate adverse examination findings. The Federal Reserve, the FDIC and the MDOC periodically examine us, including our operationsand our compliance with laws and regulations. If, as a result of an examination, a banking agency were todetermine that our financial condition, capital resources, asset quality, earnings prospects, management,liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violationof any law or regulation, they may take a number of different remedial actions as they deem appropriate.These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action tocorrect any conditions resulting from any violation or practice, to issue an administrative order that can bejudicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil moneypenalties, to fine or remove officers and directors and, if it is concluded that such conditions cannot becorrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and placeus into receivership or conservatorship. Any regulatory action against us could have a material adverseeffect on our business, financial condition, results of operations and growth prospects. We are subject to numerous laws designed to protect consumers, including the CommunityReinvestment Act and fair lending laws, and failure to comply with these laws could lead to a widevariety of sanctions. The CRA requires the Bank, consistent with safe and sound operations, to ascertain and meet thecredit needs of its entire community, including low and moderate income areas. Our failure to comply withthe CRA could, among other things, result in the denial or delay of certain corporate applications filed byus, including applications for branch openings or relocations and applications to acquire, merge orconsolidate with another banking institution or holding company. In addition, the CRA, the Equal CreditOpportunity Act, the Fair Housing Act and other fair lending laws and regulations prohibit discriminatorylending practices by financial institutions. The U.S. Department of Justice, bank regulatory agencies andother federal agencies are responsible for enforcing these laws and regulations. A challenge to aninstitution’s compliance with fair lending laws and regulations could result in a wide variety of sanctions,including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitionsactivity, restrictions on expansion and restrictions on entering new business lines. Private parties may alsochallenge an institution’s performance under fair lending laws in private class action litigation. Suchactions could have a material adverse effect on our business, financial condition, results of operations andgrowth prospects.
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Table of Contents 41 Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes andregulations could result in fines or sanctions against us. The Bank Secrecy Act and other laws and regulations require financial institutions, among otherduties, to institute and maintain an effective anti-money laundering program and to file reports such assuspicious activity reports and currency transaction reports. We are required to comply with these andother anti-money laundering requirements. The bank regulatory agencies and Financial CrimesEnforcement Network are authorized to impose significant civil money penalties for violations of thoserequirements and have recently engaged in coordinated enforcement efforts against banks and otherfinancial services providers with the U.S. Department of Justice, Drug Enforcement Administration andIRS. We are also subject to increased scrutiny of compliance with the rules enforced by the OFAC. If ourpolicies, procedures and systems are deemed deficient, we would be subject to liability, including finesand regulatory actions, which may include restrictions on our ability to pay dividends and the necessity toobtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisitionplans. Failure to maintain and implement adequate programs to combat money laundering and terroristfinancing could also have serious reputational consequences for us. Any of these results could have amaterial adverse effect on our business, financial condition, results of operations and growth prospects. Regulations relating to privacy, information security and data protection could increase our costs,affect or limit how we collect and use personal information and adversely affect our businessopportunities. We are subject to various privacy, information security and data protection laws, includingrequirements concerning security breach notification, and we could be negatively affected by these laws.For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things(i) imposes certain limitations on our ability to share nonpublic personal information about our clients withnonaffiliated third parties, (ii) requires that we provide certain disclosures to clients about our informationcollection, sharing and security practices and afford clients the right to “opt out” of any information sharingby us with nonaffiliated third parties (with certain exceptions) and (iii) requires that we develop, implementand maintain a written comprehensive information security program containing appropriate safeguardsbased on our size and complexity, the nature and scope of our activities and the sensitivity of clientinformation we process, as well as plans for responding to data security breaches. Various state andfederal banking regulators and states have also enacted data security breach notification requirementswith varying levels of individual, consumer, regulatory or law enforcement notification in certaincircumstances in the event of a security breach. Moreover, legislators and regulators in the United Statesare increasingly adopting or revising privacy, information security and data protection laws, including withrespect to the use of artificial intelligence by financial institutions and their service providers, thatpotentially could have a significant impact on our current and planned privacy, data protection andinformation security-related practices, our collection, use, sharing, retention and safeguarding ofconsumer or employee information and some of our current or planned business activities. This could alsoincrease our costs of compliance and business operations and could reduce income from certainbusiness initiatives. This includes increased privacy-related enforcement activity at the federal level, bythe Federal Trade Commission and the CFPB, as well as at the state level, such as with regard to mobileapplications. Compliance with current or future privacy, data protection and information security laws (includingthose regarding security breach notification) affecting client or employee data to which we are subjectcould result in higher compliance and technology costs and could restrict our ability to provide certainproducts and services, which could have a material adverse effect on our business, financial condition,results of operations and growth prospects. Our failure to comply with privacy, data protection andinformation security laws could result in potentially significant regulatory or governmental investigations oractions, litigation, fines, sanctions and damage to our reputation, which could have a material adverseeffect on our business, financial condition, results of operations and growth prospects.
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Table of Contents 42 The Federal Reserve may require us to commit capital resources to support the Bank. As a matter of policy, the Federal Reserve expects a bank holding company to act as a source offinancial and managerial strength to a subsidiary bank and to commit resources to support suchsubsidiary bank. The Dodd-Frank Act codified the Federal Reserve’s policy on serving as a source offinancial strength. Under the “source of strength” doctrine, the Federal Reserve may require a bankholding company to make capital injections into a troubled subsidiary bank and may charge the bankholding company with engaging in unsafe and unsound practices for failure to commit resources to asubsidiary bank. A capital injection may be required at times when the holding company may not have theresources to provide it and therefore may be required to borrow the funds or raise capital. Any loans by aholding company to its subsidiary bank are subordinate in right of payment to deposits and to certainother indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, thebankruptcy trustee will assume any commitment by the holding company to a federal bank regulatoryagency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims basedon any such commitment will be entitled to a priority of payment over the claims of the institution’s generalunsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be doneby the Company to make a required capital injection becomes more difficult and expensive and couldhave a material adverse effect on our business, financial condition, results of operations and growthprospects. The financial reporting resources we have put in place may not be sufficient to ensure theaccuracy of the additional information we are required to disclose as a publicly listed company. As a result of being a publicly listed company, we are subject to the heightened financial reportingstandards under GAAP and SEC rules, including more extensive levels of disclosure. Complying withthese standards required enhancements to the design and operation of our internal control over financialreporting as well as additional financial reporting and accounting staff with appropriate training andexperience in GAAP and SEC rules and regulations. If we are unable to meet the demands that are placed upon us as a public company, including therequirements of Sarbanes-Oxley, we may be unable to report our financial results accurately, or reportthem within the timeframes required by law or stock exchange regulations. Failure to comply withSarbanes-Oxley, when and as applicable, could also potentially subject us to sanctions or investigationsby the SEC or other regulatory authorities. If material weaknesses or other deficiencies occur, our abilityto report our financial results accurately and timely could be impaired, which could result in late filings ofour annual and quarterly reports under the Exchange Act, restatements of our consolidated financialstatements, a decline in our stock price, suspension or delisting of our common stock from the NasdaqStock Market, and could have a material adverse effect on our business, financial condition, results ofoperations and growth prospects. Even if we are able to report our financial statements accurately and ina timely manner, any failure in our efforts to implement the improvements or disclosure of materialweaknesses in our future filings with the SEC could cause our reputation to be harmed and our stockprice to decline significantly. Market and Interest Rate Risks Our business is subject to interest rate risk, and fluctuations in interest rates may adversely affectour earnings. Fluctuations in interest rates may negatively affect our business and may weaken demand forsome of our products. Our earnings and cash flows are largely dependent on our net interest income,which is the difference between the interest income that we earn on interest earning assets, such as loansand investment securities, and the interest expense that we pay on interest bearing liabilities, such asdeposits and borrowings. Additionally, changes in interest rates also affect our ability to fund ouroperations with client deposits and the fair value of securities in our investment portfolio and derivativesportfolio. Therefore, any change in general market interest rates, including changes in federal fiscal andmonetary policies, can have a significant effect on our net interest income and results of operations.
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Table of Contents 43 Our interest earning assets and interest bearing liabilities may react in different degrees tochanges in market interest rates. Interest rates on some types of assets and liabilities may fluctuate priorto changes in broader market interest rates, while rates on other types of assets and liabilities may lagbehind. The result of these changes to rates may cause differing spreads on interest earning assets andinterest bearing liabilities. We cannot control or accurately predict changes in market rates of interest. It is currently expected that during 2026, the Federal Open Market Committee of the FederalReserve (“FOMC”) may execute additional interest rate cuts in an effort to move closer to its view ofneutral levels of its benchmark rate. However, this outlook remains uncertain, as policy views within theFOMC continue to vary and future actions will depend on prevailing economic conditions and expectedpersonnel changes to the composition of the committee. In the fourth quarter of 2025, the FOMCdecreased the target range for the federal funds rate to a range of 3.50% to 3.75%, following a series ofsignificant increases beginning in 2022. Levels of inflation or weakness in the jobs market will ultimatelyimpact the path of the federal funds rate. Although the FOMC may decide to further decrease the targetedfederal funds rate, overall interest rates may behave differently, which may impact the national economy.In addition, our net interest income could be affected if the rates we pay on deposits and borrowingsremain elevated. Elevated interest rates also may reduce the demand for loans and the value of fixed-rateinvestment securities. These effects from interest rate changes or from other sustained economic stressor a recession, among other matters, could have a material adverse effect on our business, financialcondition, liquidity, results of operations, and growth prospects. We seek to mitigate our interest rate risk by entering into interest rate swaps and other interestrate derivative contracts from time to time with counterparties. Our hedging strategies rely on assumptionsand projections regarding interest rates, asset levels, and general market factors and subject us tocounterparty risk. There is no assurance that our interest rate mitigation strategies will be successful, andif our assumptions and projections prove to be incorrect or our hedging strategies do not adequatelymitigate the impact of changes in interest rates, we may incur losses that could adversely affect ourearnings. As of December 31, 2025, we had $923.1 million of noninterest bearing deposit accounts and$3.40 billion of interest bearing deposit accounts. We do not know what future market rates will be, andbased on recent guidance from the Federal Reserve, we currently expect some level of continuedmoderation in the federal funds rate in 2026. If we need to offer higher interest rates on these accounts tomaintain current clients or attract new clients, our interest expense will increase, perhaps materially.Furthermore, if we fail to offer interest in a sufficient amount to keep these demand deposits, our coredeposits may be reduced, which would require us to obtain funding in other ways or risk slowing ourfuture asset growth. We could recognize losses on securities held in our securities portfolio, particularly if interestrates increase or economic and market conditions deteriorate. As of December 31, 2025, the fair value of our securities portfolio was approximately$776.4 million, or 14.4% of our total assets. Factors beyond our control can significantly influence the fairvalue of securities in our portfolio and can cause potential adverse changes to the fair value of thesesecurities. For example, fixed-rate securities acquired by us are generally subject to decreases in marketvalue when interest rates rise. Additional factors include, but are not limited to, the intent to sell thesecurity, rating agency downgrades of the securities or our own analysis of the value of a security,defaults by the issuer or individual mortgagors with respect to the underlying securities and instability inthe credit markets. Any of the foregoing factors could cause impairment in future periods and result inrealized losses. Because of changing economic and market conditions affecting interest rates, thefinancial condition of issuers of the securities and the performance of the underlying collateral, we mayrecognize realized or unrealized losses in future periods, which could have a material adverse effect onour business, financial condition, results of operations and growth prospects.
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Table of Contents 44 All of our investment securities classified as available-for-sale have fixed interest rates. As is thecase with many financial institutions, our emphasis on increasing the development of core non-maturitydeposits has resulted in our interest-bearing liabilities having a shorter duration than our interest-earningassets. This imbalance can create significant earnings volatility because interest rates change over time.As interest rates have declined from elevated levels toward more neutral conditions in recent years, ourcost of funds has also decreased, resulting in improved alignment with the yields on a significant portionof our interest-earning assets. In addition, the market value of our fixed-rate assets, for example, ourinvestment securities, has improved since 2024 when the FOMC began decreasing interest rates. Theeffects of these rate decreases has not been fully realized but we are beginning to see improvements inour investment securities portfolio. In line with the foregoing, we have experienced and may continue toexperience a lower level of the cost of interest-bearing liabilities, primarily due to lower rates we pay onsome of our deposit products. At December 31, 2025, we had $7.3 million of unrealized losses, net of tax, in our securitiesportfolio. If we are forced to liquidate any of those investments prior to maturity, including because of alack of liquidity, we would recognize as a charge to earnings the losses attributable to those securities. Monetary policies of the Federal Reserve could adversely affect our financial condition and resultsof operations. In the current environment, economic and business conditions are significantly affected by U.S.monetary policy, particularly the actions of the Federal Reserve in its effort to fight elevated levels ofinflation. The Federal Reserve is mandated to pursue the goals of maximum employment and pricestability, and throughout 2022 and 2023 made a series of significant increases to the target Federal Fundsrate as part of an effort to combat elevated levels of inflation affecting the U.S. economy. Following aperiod of no action on interest rates, the FOMC began easing monetary policy by cutting the federal fundsrate in September of 2024 and continued to cut rates through the end of 2025. Monetary policy in recentyears has resulted in a significant structural change in prevailing interest rates and, while this has had anegative effect during years of higher interest rates, we are beginning to see improvements in our netinterest income and the value of our available for sale investment securities portfolio, which had $7.3million in unrealized losses, net of tax, as of December 31, 2025. The $20.5 million improvement inmarket value from December 31, 2024 has positively affected our tangible book value. A neutral level ofinterest rates can also more positively affect our clients’ businesses and financial condition, and the valueof collateral securing loans in our portfolio. Given the complex factors affecting the strength of the U.S. economy, including uncertaintiesregarding the persistence of inflation, geopolitical developments such as international conflicts and tariffs,changing labor market conditions as well as fiscal policy and the Trump Administration priorities, there is ameaningful risk that the Federal Reserve and other central banks may keep interest rates at or near theircurrent neutral levels, thereby limiting economic growth and potentially causing an economic recession orother political instability. As noted above, this could decrease loan demand, harm the credit characteristicsof our existing loan portfolio and decrease the value of collateral securing loans in the portfolio. Our stock is relatively thinly traded. Although our common stock is traded on the Nasdaq Stock Market, the average daily tradingvolume of our common stock is relatively low compared to many public companies. The desired marketcharacteristics of depth, liquidity, and orderliness require the substantial presence of willing buyers andsellers in the marketplace at any given time. In our case, this presence depends on the individualdecisions of a relatively small number of investors and general economic and market conditions overwhich we have no control. Due to the relatively low trading volume of our common stock, significant salesof our common stock, or the expectation of these sales, could cause the stock price to fall more thanwould be justified by the inherent worth of the Company. Conversely, attempts to purchase a significantamount of our stock could cause the market price to rise above the reasonable inherent worth of theCompany.
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Table of Contents 45 The price of our common stock could be volatile and other factors could cause our stock price todecline. Stock price volatility may make it more difficult for you to resell your common stock when youwant and at prices you find attractive. The market price of our common stock may be volatile and could besubject to wide fluctuations in price in response to various factors, some of which are beyond our control.These factors include, among other things: ● actual or anticipated variations in our quarterly results of operations; ● recommendations or research reports about us or the financial services industry in generalpublished by securities analysts; ● the failure of securities analysts to cover, or continue to cover us; ● operating and stock price performance of other companies in the industry or that investors oranalysts deem comparable to us; ● news reports relating to trends, concerns and other issues in the financial services industry; ● perceptions in the marketplace regarding us, our competitors or other financial institutions; ● future sales of our common stock; ● departure of members of our strategic leadership team or other key personnel; ● new technology used, or services offered, by competitors; ● significant acquisitions or business combinations, strategic partnerships, joint ventures orcapital commitments by or involving us or our competitors; ● changes or proposed changes in laws or regulations, or differing interpretations of existinglaws and regulations, affecting our business, or enforcement of these laws and regulations; ● litigation and governmental investigations; ● the imposition of tariffs or other governmental policies impacting the value of productsproduced by our commercial borrowers; and ● geopolitical conditions such as acts or threats of terrorism or military conflicts. In addition, if the market for stocks in our industry, or the stock market in general, experiences aloss of investor confidence, the trading price of our common stock could decline for reasons unrelated toour business, financial condition, results of operations or growth prospects. If any of the foregoing occurs,it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could becostly to defend and a distraction to management. An investment in our common stock is not an insured deposit. An investment in our common stock is not a bank deposit and, therefore, is not insured againstloss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment inour common stock is inherently risky for the reasons described in this report, and is subject to the samemarket forces that affect the price of common stock in any company. As a result, if you acquire ourcommon stock, you could lose some or all of your investment. We do not intend to pay cash dividends on our common stock in the foreseeable future.Consequently, the ability of shareholders to achieve a return on their investment will depend onappreciation in the price of our common stock. Holders of our common stock are entitled to receive only such dividends as our board of directorsmay declare out of funds legally available for such payments. We expect that we will retain all earnings, ifany, for operating capital, and we do not expect our board of directors to declare any dividends on ourcommon stock in the foreseeable future.
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Table of Contents 46 Even if we have earnings in an amount sufficient to pay cash dividends, our board of directors may decideto retain earnings for the purpose of funding growth. We cannot assure you that cash dividends on ourcommon stock will ever be paid. You should not purchase shares of common stock offered hereby if youneed or desire dividend income from this investment. In addition, we are a financial holding company, and our ability to declare and pay dividends isdependent on certain federal regulatory considerations, including the guidelines of the Federal Reserveregarding capital adequacy and dividends, as outlined in more detail in the “SUPERVISION ANDREGULATION–Supervision and Regulation of the Company–Dividend Payments” above. It is the policy ofthe Federal Reserve that bank and financial holding companies should generally pay dividends on capitalstock only out of earnings, and only if prospective earnings retention is consistent with the organization’sexpected future needs, asset quality and financial condition. Further, if we are unable to satisfy the capital requirements applicable to us for any reason, wemay not be able to make, or may have to reduce or eliminate, the payment of dividends on our commonstock in the event we decide to declare dividends. Any change in the level of our dividends or thesuspension of the payment thereof could have a material adverse effect on the market price of ourcommon stock. Future issuances of common stock could result in dilution, which could cause our common stockprice to decline. We are generally not restricted from issuing additional shares of our common stock, up to the75,000,000 shares of common stock authorized in our third amended and restated articles ofincorporation, which could be increased by a vote of the holders of a majority of our shares of commonstock. We may issue additional shares of our common stock in the future pursuant to current or futureequity compensation plans, upon conversions of preferred stock or debt, or in connection with futureacquisitions or financings. If we choose to raise capital by issuing and selling shares of our common stockfor any reason, the issuance would have a dilutive effect on the holders of our common stock and couldhave a material negative effect on the market price of our common stock. The holders of our debt obligations and preferred stock will have priority over our common stockwith respect to payment in the event of liquidation, dissolution or winding up and with respect tothe payment of interest and dividends. In any liquidation, dissolution or winding up of the Company, our common stock would rank belowall claims of debt holders against us and claims of all of our outstanding shares of preferred stock. As ofDecember 31, 2025, we had $110.0 million of subordinated debentures outstanding and $69.0 million ofpreferred stock outstanding. As a result, holders of our common stock will not be entitled to receive anypayment or other distribution of assets upon the liquidation, dissolution or winding up of the Company untilafter all of our obligations to our debt holders have been satisfied and holders of senior equity securities,including the preferred shares, have received any payment or distribution due to them. We cannot guarantee that our stock repurchase program will be fully implemented or that it willenhance long-term shareholder value. On August 17, 2022, the Company’s board of directors approved a stock repurchase program (the“2022 Stock Repurchase Program”) which authorizes the Company to repurchase up to $25.0 million ofits common stock, subject to certain limitations and conditions. On July 22, 2025, the Company’s board ofdirectors extended the expiration date of the 2022 Stock Repurchase Program from August 20, 2025 toAugust 26, 2026. The 2022 Stock Repurchase Program does not obligate the Company to repurchaseany shares of its common stock, and other than repurchases that have been completed to date, there isno assurance that the Company will do so. Under the 2022 Stock Repurchase Program, the Companymay repurchase shares of common stock from time to time in open market or privately negotiatedtransactions. The extent to which the Company repurchases its shares, and the timing of suchrepurchases, will depend upon a variety of factors, including general market and economic conditions,regulatory requirements,
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Table of Contents 47 availability of funds, and other relevant considerations, as determined by the Company. The Companymay, in its discretion, begin, suspend or terminate repurchases at any time prior to the Program’sexpiration, without any prior notice. Even if fully implemented, we cannot guarantee that the program willenhance long-term shareholder value. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 1C. CYBERSECURITY Cybersecurity risk management is an important and continuously evolving focus for the Company.Resources are devoted to protecting and enhancing the security of computer systems, software,networks, storage devices, and other technology assets. The Company’s security efforts are designedand tested to protect against, among other things, cybersecurity attacks by unauthorized partiesattempting to obtain access to confidential information, destroy data, disrupt, or degrade service,sabotage systems or cause other damage. The Company has implemented precautionary measures andcontrols reasonably designed to address this increased risk, such as enhanced threat monitoring. TheCompany continues to make investments and partner with qualified third parties to enhance its cyberdefense capabilities to monitor the evolving spectrum of cybersecurity risks in the operating environment,enhance defenses and improve resiliency against cybersecurity threats. The Company activelyparticipates in discussions and simulations of cybersecurity risks and has engaged in efforts to educate allemployees on the topic of cybersecurity risks. The Company acknowledges that third parties and clients may also be sources of cybersecurityrisk for the Company. As a result, the Company engages in regular and ongoing reviews and discussionswith vendors and clients regarding cybersecurity risks and opportunities to improve the Company’scybersecurity posture. The Company maintains a vendor risk management program to identify and helpmanage any third party cybersecurity risks. Additionally, the Company maintains an Information Security Program designed to prevent,detect, and respond to cyberattacks, and maintains a cybersecurity incident response plan designed toenable the Company to respond to cybersecurity incidents, coordinate such responses with lawenforcement and other government agencies, and notify clients and customers, as applicable. TheCompany’s risk and technology teams, led by the Company’s Chief Risk Officer (“CRO”) and ChiefTechnology Officer (“CTO”), respectively, are responsible for leading the incident response team,identifying technology and cybersecurity risks, utilizing management’s expertise in assessing themateriality of cybersecurity events, and are responsible for the controls to manage threats. TheCompany’s risk team in conjunction with the broader incident response team conduct periodic tabletopexercises and business continuity simulations to train and align on best practices and assessment ofpotential cyber events. Management utilizes the incident response plan and incident response team toassesses materiality of any cyber event through a qualitative and quantitative assessment. Theinformation security program and overall cybersecurity risk management processes are aligned andintegrated into the Company’s overall risk profile and appetite through the Company’s Enterprise RiskManagement Committee. The Company’s governance structure is designed to identify, escalate, and mitigate informationsecurity risks. Management utilizes its Enterprise Risk Management Committee and IT SteeringCommittee, comprised of senior leaders including the Company’s CRO, CTO, President, Chief FinancialOfficer, and other leaders with cybersecurity expertise, to disseminate information and monitor informationsecurity efforts throughout the Company. Each committee’s charter, in addition to the Information SecurityPolicy, establishes roles and responsibilities related the Company’s cybersecurity governance andprogram. The risk team provides oversight of the Company’s activities designed to identify, assess,measure, and mitigate cybersecurity risk. The Company’s Information Security Program includes trainingthat reinforces the Company's Information Security Program policies, standards, and practices, as well asthe expectation employees comply with these policies. The technology team engages employees throughtraining on how to identify potential cybersecurity risks and protect the Company’s resources andinformation. This training is
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Table of Contents 48 mandatory for all employees, and is supplemented by various testing initiatives, including socialengineering testing. Finally, the Company provides specialized security training for certain employee rolessuch as system administrators and all information security training is monitored and reported on by therisk team as well as the Company’s learning and development function. The Company’s management team is responsible for the day-to-day management ofcybersecurity risks faced by the Company. In addition, our board of directors, as a whole and through itsAudit Committee, is responsible for the oversight of cybersecurity risks. In that role, the board of directorsand Audit Committee are responsible for ensuring that the risk management processes designed andimplemented by management are adequate and functioning as designed. To carry out those duties, theboard of directors and Audit Committee receive periodic updates on the Company’s Information SecurityProgram, cybersecurity policies and practices, ongoing efforts to improve security, as well as theCompany’s efforts to prevent, detect, mitigate, and remediate significant cybersecurity incidents. Risks from cybersecurity threats, including any previous cybersecurity events, did not materiallyaffect the Company or its business strategy, results of operations or financial condition during the periodcovered by the report. Notwithstanding the comprehensive approach that the Company takes to addresscybersecurity risk, the Company may not be successful in preventing or mitigating a future cybersecurityincident that could have a material adverse effect on the Company or its business strategy, results ofoperation or financial condition. ITEM 2. PROPERTIES Our corporate headquarters is located at 4450 Excelsior Boulevard, Suite 100, St. Louis Park,Minnesota 55416. Including our corporate headquarters, we operate nine full-service branch officeslocated in the Twin Cities MSA. We currently own five of our branch offices located in Lake Elmo,Minneapolis (Hennepin Avenue), Minnetonka, Orono, and St. Louis Park, and lease the remaining fourlocations. Additional information regarding our locations is set forth below: Address Owned/Leased Headquarters and St. Louis Park Branch: 4450 Excelsior Boulevard, Suite 100, St. Louis Park, Minnesota 55416 OwnedOther Branch Locations: 21500 Highway 7, Greenwood, Minnesota 55331 Leased 60 South Sixth Street, Suite 285, Minneapolis, Minnesota 55402 Leased 2445 Shadywood Road, Orono, Minnesota 55331 Owned 3100 Hennepin Avenue, Minneapolis, Minnesota 55408 (1) Owned 370 Wabasha Street N., St. Paul, Minnesota 55102 Leased 7831 East Bush Lake Road, Suite 300, Bloomington, Minnesota 55439 Leased 14550 Excelsior Boulevard., Minnetonka, Minnesota 55345 Owned 11999 Upper 40th Street N., Lake Elmo, Minnesota 55042 (2) Owned (1) Does not include the leased drive-up property located adjacent to the branch.(2) Branch was under construction as of December 31, 2025. Construction was completed and branch was opened in February2026. ITEM 3. LEGAL PROCEEDINGS Neither the Company nor any of its subsidiaries is a party, and no property of these entities issubject, to any material pending legal proceedings, other than ordinary routine litigation incidental to theBank’s business. The Company does not know of any proceeding contemplated by a governmentalauthority against the Company or any of its subsidiaries. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.
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Table of Contents 49 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERSAND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on the Nasdaq Stock Market (“Nasdaq”) under the symbol “BWB.” Ourdepository shares, each representing a 1/100th ownership interest in a share of our 5.875% Non-Cumulative Perpetual Preferred Stock, Series A, $0.01 par value per share (“Series A Preferred Stock”),trade on Nasdaq under the symbol “BWBBP”. Holders of Record As of February 19, 2026, the Company had 45 holders of record of the Company’s common stockand an estimated 10,459 additional beneficial holders of the Company’s common stock whose stock washeld in street name by brokerages or fiduciaries. Issuer Purchases of Equity Securities The following table presents stock purchases made during the fourth quarter of 2025: Period Total Number ofSharesPurchased (1) AveragePrice PaidPer Share Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor Programs (2) MaximumApproximate DollarValue of Shares thatMay Yet BePurchased Under thePlans or Programs October 1 - 31, 2025 — $ — — $ 13,089,198November 1 - 30, 2025 — — — 13,098,198December 1 - 31, 2025 32,702 17.89 — 13,098,198 Total 32,702 $ 17.89 — $ 13,098,198 (1) The total number of shares repurchased during the periods indicated includes shares withheld for income tax purposes inconnection with vesting of restricted stock and stock options. The shares were purchased or otherwise valued at the closingprice of the Company’s common stock on the date of withholding. (2) On August 17, 2022, the Company’s board of directors approved the 2022 Stock Repurchase Program which authorizes the Company to repurchase up to $25.0 million of its common stock, subject to certain limitations and conditions. On July 22, 2025, the Company’s board of directors extended the expiration date of the 2022 Stock Repurchase Program from August 20, 2025 to August 26, 2026. The 2022 Stock Repurchase Program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will do so.
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Table of Contents 50 Performance Graph The following graph compares the percentage change in the cumulative shareholder return of theCompany’s common stock between December 31, 2020 and December 31, 2025, with the cumulativereturn of the Nasdaq Composite Index and the total return of the Nasdaq Bank Index. This comparisonassumes $100.00 was invested on December 31, 2020 and assumes the reinvestment of all cashdividends, if any, prior to any tax effect and retention of all stock dividends. There is no assurance that theCompany's common stock performance will continue in the future with the same or similar results asshown in the graph. Dividend Policy The Company has not historically declared or paid dividends on its common stock and does notintend to declare or pay dividends on its common stock in the foreseeable future. Instead, the Companyanticipates that future earnings will be retained to support its operations and to finance the growth anddevelopment of its business. Any future determination relating to the Company’s common stock dividendpolicy will be made by the board of directors and will depend on a number of factors, including historic andprojected financial condition, liquidity and results of operations, capital levels and needs, taxconsiderations, any acquisitions or potential acquisitions that may be pursued, statutory and regulatoryprohibitions and other limitations, the terms of any credit agreements or other borrowing
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Table of Contents 51 arrangements that restrict the ability to pay cash dividends, general economic conditions and other factorsdeemed relevant by the board of directors. The Company is not obligated to pay dividends on its commonstock and is subject to restrictions on paying dividends on its common stock. Although the Company intends to pay dividends on the Series A Preferred Stock, dividends on the Series A Preferred Stock are not cumulative or mandatory. If the board of directors does not declare a dividend on the Series A Preferred Stock or if the board of directors authorizes and declares less than a full dividend in respect of any dividend period, the holders of the Series A Preferred Stock will have no right to receive any dividend or a full dividend and the Company will have no obligation to pay a dividend or to pay full dividends for that dividend period at any time, whether or not dividends on the Series A Preferred Stock or common stock are declared for any future dividend period. Dividend Restrictions As a Minnesota corporation, the Company is subject to certain restrictions on dividends under theMinnesota Business Corporation Act, as amended. Generally, a Minnesota corporation is prohibited frompaying a dividend if, after giving effect to the dividend the corporation would not be able to pay its debtsas the debts become due in the usual course of business, or the corporation's total assets would be lessthan the sum of its total liabilities, plus the amount that would be needed, if the corporation were to bedissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholderswhose preferential rights are superior to those receiving the distribution. In addition, the Company is subject to certain restrictions on the payment of cash dividends as aresult of banking laws, regulations and policies. See “Supervision and Regulation—Supervision andRegulation of the Company—Dividend Payments.” Because the Company is a financial holding companyand does not engage directly in business activities of a material nature, the ability to pay dividends toshareholders depends, in large part, upon receipt of dividends from the Bank, which is also subject tonumerous limitations on the payment of dividends under federal and state banking laws, regulations andpolicies. See “Supervision and Regulation—Supervision and Regulation of the Bank—DividendPayments.” Under the terms of a loan agreement with a third party correspondent lender which the Companyentered into in March of 2021 and amended in each of July 2021, September 2022 and September 2024,the Company cannot declare or pay any cash dividend or make any other distribution in respect to capitalstock, except in accordance with past practices and dividends paid on its preferred stock and so long asno default has occurred and is continuing. In addition, under the terms of the subordinated notes issued inJuly of 2021 and June 2025 and the related subordinated note purchase agreements, the Company is notpermitted to declare or pay any dividends on capital stock if an event of default occurs under the terms ofthe subordinated notes, excluding any dividends or distributions in shares of, or options, warrants or rightsto subscribe for or purchase shares of, any class of our common stock and any declaration of a non-cashdividend in connection with the implementation of a shareholders' rights plan. ITEM 6. [RESERVED] ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following discussion and analysis of the Company’s results of operations and financialcondition should be read in conjunction with the Company’s consolidated financial statements and relatednotes included elsewhere in this report. In addition to historical information, this discussion and analysiscontains forward-looking statements that involve risks, uncertainties and assumptions. Certain risks,uncertainties and other factors, including but not limited to those set forth under “Forward-LookingStatements,” “Risk Factors” and elsewhere in this report, may cause actual results to differ materially fromthose projected in the forward-looking statements. The Company assumes no obligation to update any ofthese forward-looking statements. Readers of the Company’s Annual Report on Form 10-K should
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Table of Contents 52 consider these risks and uncertainties in evaluating forward-looking statements and should not placeundue reliance on forward-looking statements. The following consolidated selected financial data is derived from the Company’s auditedconsolidated financial statements as of and for the three years ended December 31, 2025. Thisinformation should be read in connection with our audited consolidated financial statements and relatednotes appearing elsewhere in this report. As of and for the year ended December 31, (dollars in thousands, except per share data) 2025 2024 2023 Income Statement Net Interest Income $ 132,438 $ 102,193 $ 105,174 Provision for (Recovery of) Credit Losses 6,050 3,525 (175) Noninterest Income 10,915 7,368 6,493 Noninterest Expense 77,271 63,300 59,320 Net Income 46,088 32,825 39,960 Net Income Available to Common Shareholders 42,034 28,771 35,906 Per Common Share Data Basic Earnings Per Share $ 1.53 $ 1.05 $ 1.29 Diluted Earnings Per Share 1.49 1.03 1.27 Adjusted Diluted Earnings Per Share (1) 1.52 1.04 1.25 Book Value Per Share 16.23 14.21 12.94 Tangible Book Value Per Share (1) 15.55 13.49 12.84 Basic Weighted Average Shares Outstanding 27,544,024 27,479,764 27,857,420 Diluted Weighted Average Shares Outstanding 28,169,857 27,943,342 28,315,587 Shares Outstanding at Period End 27,759,970 27,552,449 27,748,965 Selected Performance Ratios Return on Average Assets (ROA) 0.87% 0.70% 0.89% Pre-Provision Net Revenue Return on Average Assets (PPNR ROA) (1) 1.24 0.98 1.15 Return on Average Shareholders' Equity (ROE) 9.53 7.45 9.73 Return on Average Tangible Common Equity (1) 10.56 7.75 10.53 Net Interest Margin (2) 2.63 2.26 2.42 Core Net Interest Margin (1)(2) 2.50 2.19 2.34 Yield on Interest Earning Assets 5.55 5.40 5.08 Yield on Total Loans, Gross 5.73 5.50 5.21 Cost of Interest Bearing Liabilities 3.81 4.14 3.61 Cost of Total Deposits 3.12 3.44 2.73 Cost of Funds 3.17 3.44 2.92 Efficiency Ratio (1) 53.5 57.9 53.0 Noninterest Expense to Average Assets 1.47 1.35 1.32 Adjusted Financial Ratios (1) Adjusted Return on Average Assets 0.89% 0.71% 0.88% Adjusted Pre-Provision Net Revenue Return on Average Assets 1.27 0.99 1.15 Adjusted Return on Average Shareholders' Equity 9.69 7.50 9.59 Adjusted Return on Average Tangible Common Equity 10.77 7.82 10.36 Adjusted Efficiency Ratio 52.2 57.3 53.4 Adjusted Noninterest Expense to Average Assets 1.43 1.34 1.32 Balance Sheet Total Assets $ 5,407,002$ 5,066,242$ 4,611,990 Total Loans, Gross 4,309,517 3,868,514 3,724,282 Deposits 4,320,369 4,086,767 3,709,948 Total Shareholders' Equity 517,095 457,935 425,515 Average Shareholders' Equity to Average Assets 9.18% 9.41% 9.14% Loan to Deposit Ratio 99.7 94.7 100.4 Core Deposits to Total Deposits (4) 77.6 76.0 68.7 Uninsured Deposits to Total Deposits 29.8 27.7 24.3
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Table of Contents 53 As of and for the year ended December 31, (dollars in thousands, except per share data) 2025 2024 2023 Capital Ratios (Consolidated) Tier 1 Leverage Ratio 9.20% 9.44% 9.57% Common Equity Tier 1 Risk-based Capital Ratio 9.17 9.08 9.16 Tier 1 Risk-based Capital Ratio 10.57 10.64 10.79 Total Risk-based Capital Ratio 14.12 13.76 13.97 Tangible Common Equity to Tangible Assets (1) 8.01 7.36 7.73 Growth Ratios Percentage Change in Total Assets 6.7% 9.8% 6.1% Percentage Change in Total Loans, Gross 11.4 3.9 4.3 Percentage Change in Total Deposits 5.7 10.2 8.6 Percentage Change in Shareholders' Equity 12.9 7.6 8.0 Percentage Change in Net Income 40.4 (17.9) (25.2) Percentage Change in Diluted Earnings Per Share 44.9 (18.8) (26.3) Percentage Change in Tangible Book Value Per Share (1) 15.3 5.1 9.8 Selected Asset Quality Data Loans 30-89 Days Past Due $ 968 $ 1,291 $ 15,110 Loans 30-89 Days Past Due to Total Loans 0.02% 0.03% 0.41% Nonperforming Loans $ 22,034 $ 301 $ 919 Nonperforming Loans to Total Loans 0.51% 0.01% 0.02% Nonaccrual Loans to Total Loans 0.51 0.01 0.02 Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.51 0.01 0.02 Foreclosed Assets $ — $ — $ — Nonperforming Assets (3) 22,034 301 919 Nonperforming Assets to Total Assets (3) 0.41% 0.01% 0.02% Allowance for Credit Losses on Loans and Leases to Total Loans 1.31 1.35 1.36 Allowance for Credit Losses on Loans and Leases to Nonaccrual Loans 256.16 17,367.77 5,494.45 Net Loan Charge-Offs to Average Loans 0.04 0.03 0.01 (1) Represents a non-GAAP financial measure. See “GAAP Reconciliation and Management Explanation of Non-GAAP FinancialMeasures” for further details.(2) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%.(3) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due plus foreclosed assets.(4) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. Overview The Company is a financial holding company headquartered in St. Louis Park, Minnesota. Theprincipal sources of funds for loans and investments are transaction, savings, time, and other deposits,and short-term and long-term borrowings. The Company’s principal sources of income are interest andfees collected on loans, interest and dividends earned on investment securities and service charges. TheCompany’s principal expenses are interest paid on deposit accounts and borrowings, employeecompensation and other overhead expenses. The Company’s simple, efficient business model ofproviding responsive support and simple solutions to clients continues to be the underlying principle thatdrives the Company’s profitable growth. Recent Developments On June 24, 2025, the Company entered into a Subordinated Note Purchase Agreement withcertain institutional accredited investors and qualified institutional buyers pursuant to which the Companysold and issued $80.0 million in aggregate principal amount of its 7.625% Fixed-to-Floating RateSubordinated Notes due 2035 (the “Notes”). The Notes were issued by the Company to such purchasersat a price equal to 100% of their face amount. The Company used the net proceeds it received from thesale of the Notes to redeem $50 million of outstanding 5.25% Fixed-to-Floating Rate Subordinated Notesdue 2030 and for general corporate purposes.
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Table of Contents 54 On July 4, 2025, the U.S. government enacted tax legislation commonly referred to as the OneBig Beautiful Bill Act. The Company evaluated the impact of the legislation in accordance with ASC 740and determined that it did not have a material effect on the Company’s consolidated financial statementsfor the year ended December 31, 2025. On December 29, 2025, the Company closed its Country Village branch location, given the closeproximity to its other branch locations. In February 2026, the Company opened a new branch location in Lake Elmo, Minnesota toexpand the Company’s presence in the eastern side of the Twin Cities market. Critical Accounting Policies and Estimates The consolidated financial statements of the Company are prepared based on the application ofcertain accounting policies, the most significant of which are described in “Note 1 – Description of theBusiness and Summary of Significant Accounting Policies” of the notes to the consolidated financialstatements included as a part of this report. Certain policies require numerous estimates and strategic oreconomic assumptions that may prove inaccurate or subject to variation and may significantly affect thereported results and financial position for the current period or in future periods. The use of estimates,assumptions, and judgments are necessary when financial assets and liabilities are required to berecorded or adjusted to reflect fair value. Assets carried at fair value inherently result in more financialstatement volatility. Fair values and information used to record valuation adjustments for certain assetsand liabilities are based on either quoted market prices or are provided by other independent third partysources, when available. When such information is not available, management estimates valuationadjustments. Changes in underlying factors, assumptions or estimates in any of these areas could have amaterial impact on the future financial condition and results of operations. Management has discussedeach critical accounting policy and the methodology for the identification and determination of criticalaccounting policies with the Company’s Audit Committee. The following is a discussion of the critical accounting policies and significant estimates thatrequire the Company to make complex and subjective judgments. Allowance for Credit Losses In accordance with ASC 326, Financial Instruments - Credit Losses, the allowance for creditlosses on loans and leases is a valuation account that is deducted from the amortized cost basis of loansand leases to present the net amount expected to be collected on the loans and leases. Loans and leasesare charged against the allowance for credit losses on loans and leases when management determinesall or a portion of the loan or lease balance is uncollectible. Subsequent recoveries, if any, are credited tothe allowance. The allowance is increased (decreased) by provisions (or recovery of) and reported in theincome statement as a component of provisions for credit loss. The allowance for credit losses on off-balance sheet credit exposures is a liability account representing expected credit losses over thecontractual period for which the Company is exposed to credit risk resulting from an off-balance sheetexposure. The amount of each allowance account represents management's best estimate of currentexpected credit losses on such financial instruments using relevant available information, from internaland external sources, relating to past events, current conditions and reasonable and supportableforecasts. The allowance for credit losses on loans and leases is measured on a collective basis forportfolios of loans when similar risk characteristics exist. Loans that do not share risk characteristics areevaluated for expected credit losses on an individual basis and excluded from the collective evaluation.For determining the appropriate allowance for credit losses on a collective basis, the loan portfolio issegmented into pools based upon similar risk characteristics and a lifetime loss-rate model is utilized.Management qualitatively adjusts model results for reasonable and supportable forecasts and risk factorsthat are not considered within the modeling processes but are relevant in assessing the expected creditlosses within the loan segment. These qualitative factor adjustments may increase or decreasemanagement's estimate of expected credit losses by a calculated percentage or amount based upon theestimated level of risk. Due to the subjective nature of
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Table of Contents 55 these estimates the various components of the calculation require significant management judgment andcertain assumptions are highly subjective. Results of Operations Net Income Net income was $46.1 million for the year ended December 31, 2025, compared to net income of$32.8 million for the year ended December 31, 2024. Earnings per diluted common share for the yearended December 31, 2025 were $1.49, compared to $1.03 per diluted common share for the year endedDecember 31, 2024. Adjusted net income (a non-GAAP financial measure) was $46.9 million for the yearended December 31, 2025, compared to $33.1 million for the year ended December 31, 2024. Adjustedearnings per diluted common share (a non-GAAP financial measure) were $1.52 for the year endedDecember 31, 2025, compared to $1.04 for the year ended December 31, 2024. Net Interest Income The Company’s primary source of revenue is net interest income, which is impacted by the levelof interest earning assets and related funding sources, as well as changes in interest rates. The differencebetween the average yield on earning assets and the average rate paid for interest bearing liabilities is thenet interest spread. Noninterest bearing sources of funds, such as demand deposits and shareholders’equity, also support earning assets. The impact of the noninterest bearing sources of funds is captured inthe net interest margin, which is calculated as net interest income divided by average earning assets.Both the net interest margin and net interest spread are presented on a tax-equivalent basis, whichmeans that tax-free interest income has been adjusted to pretax-equivalent income, assuming a 21%federal tax rate. Management’s ability to respond to changes in interest rates by using effective asset-liability management techniques is critical to managing the net interest margin and the Company’s primarysource of earnings.
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Table of Contents 56 Average Balances and Yields The following table presents, for the years ended December 31, 2025, 2024 and 2023, theaverage balances of each principal category of assets, liabilities and shareholders’ equity, and an analysisof net interest income. The average balances are principally daily averages and, for loans, include bothperforming and nonperforming balances. Interest income on loans includes the effects of net deferredloan origination fees and costs accounted for as yield adjustments. This table is presented on a tax-equivalent basis, if applicable. December 31, 2025 December 31, 2024 December 31, 2023 Average Interest Yield/ Average Interest Yield/ Average Interest Yield/ (dollars in thousands) Balance & Fees Rate Balance & Fees Rate Balance & Fees Rate Interest Earning Assets:Cash Investments $ 203,433 $ 8,118 3.99% $ 124,205 $ 5,690 4.58% $ 77,759 $ 3,170 4.08% Investment Securities:Taxable Investment Securities 726,164 35,365 4.87 668,012 32,681 4.89 577,102 25,199 4.37Tax-Exempt Investment Securities (1) 74,649 4,207 5.64 30,864 1,577 5.11 29,004 1,325 4.57 Total Investment Securities 800,813 39,572 4.94 698,876 34,258 4.90 606,106 26,524 4.38 Loans (1)(2) 4,088,601 234,164 5.73 3,738,260 205,646 5.50 3,699,252 192,679 5.21Federal Home Loan Bank Stock 21,296 1,852 8.70 18,256 1,550 8.49 21,249 1,538 7.24 Total Interest Earning Assets 5,114,143 283,706 5.55% 4,579,597 247,144 5.40% 4,404,366 223,911 5.08% Noninterest Earning Assets 154,410 103,547 86,438 Total Assets $ 5,268,553 $ 4,683,144 $ 4,490,804 Interest Bearing Liabilities:Deposits:Interest Bearing Transaction Deposits $ 852,426 $ 31,907 3.74% $ 776,768 $ 34,294 4.41% $ 650,028 $ 23,379 3.60% Savings and Money Market Deposits 1,401,187 50,689 3.62 956,300 39,297 4.11 922,799 30,639 3.32Time Deposits 334,003 13,562 4.06 342,582 14,585 4.26 263,161 7,064 2.68Brokered Deposits 825,114 35,260 4.27 963,676 40,629 4.22 909,662 34,963 3.84 Total Interest Bearing Deposits 3,412,730 131,418 3.85 3,039,326 128,805 4.24 2,745,650 96,045 3.50Federal Funds Purchased 466 21 4.53 21,493 1,201 5.59 169,645 8,521 5.02Notes Payable 8,250 624 7.57 13,750 1,162 8.45 13,750 1,143 8.31FHLB Advances 403,411 11,465 2.84 320,497 8,554 2.67 238,000 7,489 3.15Subordinated Debentures 95,334 5,882 6.17 79,473 3,983 5.01 79,090 3,983 5.04 Total Interest Bearing Liabilities 3,920,191 149,410 3.81% 3,474,539 143,705 4.14% 3,246,135 117,181 3.61% Noninterest Bearing Liabilities:Noninterest Bearing TransactionDeposits 799,099 705,247 768,428Other Noninterest Bearing Liabilities 65,435 62,595 65,763Total Noninterest BearingLiabilities 864,534 767,842 834,191 Shareholders' Equity 483,828 440,763 410,478 Total Liabilities and Shareholders'Equity $ 5,268,553 $ 4,683,144 $ 4,490,804 Net Interest Income / Interest RateSpread 134,296 1.74% 103,439 1.26% 106,730 1.47% Net Interest Margin (3) 2.63% 2.26% 2.42% Taxable Equivalent Adjustment:Tax-Exempt Investment Securitiesand Loans (1,858) (1,246) (1,556) Net Interest Income $ 132,438 $ 102,193 $ 105,174 (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis,assuming a federal income tax rate of 21%.(2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net ofdeferred loan costs.(3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference betweeninterest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interestearning assets for the period. Interest Rates and Operating Interest Differential Increases and decreases in interest income and interest expense result from changes in averagebalances (volume) of interest earning assets and interest bearing liabilities, as well as changes in averageinterest rates. The following table presents the effect that these factors had on the interest earned oninterest earning assets and the interest incurred on interest bearing liabilities. The effect of changes involume is determined by multiplying the change in volume by the previous period’s average rate. Similarly,the effect of rate changes is calculated by multiplying the change in average rate by the previous period’svolume. The changes not attributable specifically to either volume or rate have been allocated to thechanges due to volume. The following table presents the changes in
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Table of Contents 57 the volume and rate of interest bearing assets and liabilities for the year ended December 31, 2025,compared to the year ended December 31, 2024, and for the year ended December 31, 2024, comparedto the year ended December 31, 2023: Year Ended December 31, 2025 Year Ended December 31, 2024Compared with Compared withYear Ended December 31, 2024 Year Ended December 31, 2023 Change Due To: Interest Change Due To: Interest (dollars in thousands) Volume Rate Variance Volume Rate Variance Interest Earning Assets:Cash Investments $ 3,161 $ (733) $ 2,428 $ 2,128 $ 392 $ 2,520Investment Securities:Taxable Investment Securities 2,832 (148) 2,684 4,448 3,034 7,482Tax-Exempt Investment Securities 2,468 162 2,630 94 158 252 Total Securities 5,300 14 5,314 4,542 3,192 7,734 Loans 20,081 8,437 28,518 2,162 10,805 12,967Federal Home Loan Bank Stock 264 38 302 (254) 266 12 Total Interest Earning Assets $ 28,806 $ 7,756 $ 36,562 $ 8,578 $ 14,655 $ 23,233 Interest Bearing Liabilities: Interest Bearing Transaction Deposits $ 2,832 $ (5,219) $ (2,387) $ 5,595 $ 5,320 $ 10,915 Savings and Money Market Deposits 16,095 (4,703) 11,392 1,376 7,282 8,658Time Deposits (349) (674) (1,023) 3,381 4,140 7,521 Brokered Deposits (5,921) 552 (5,369) 2,277 3,389 5,666 Total Interest Bearing Deposits 12,657 (10,044) 2,613 12,629 20,131 32,760 Federal Funds Purchased (952) (228) (1,180) (8,278) 958 (7,320)Notes Payable (414) (124) (538) — 19 19 FHLB Advances 2,356 555 2,911 2,202 (1,137) 1,065Subordinated Debentures 978 921 1,899 19 (19) — Total Interest Bearing Liabilities 14,625 (8,920) 5,705 6,572 19,952 26,524 Net Interest Income $ 14,181 $ 16,676 $ 30,857 $ 2,006 $ (5,297) $ (3,291) Interest Income, Interest Expense, and Net Interest Margin Net interest income was $132.4 million for the year ended December 31, 2025, an increase of$30.2 million compared to $102.2 million for the year ended December 31, 2024. The increase in netinterest income was primarily due to higher cash and securities balances, growth and higher yields in theloan portfolio, lower rates paid on deposits, and purchase accounting accretion, offset partially by growthin deposit balances. Net interest margin (on a fully tax-equivalent basis) for the year ended December 31, 2025 was2.63%, a 37 basis point increase from 2.26% for the year ended December 31, 2024. Core net interestmargin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loanfees and purchase accounting accretion attributable to the acquisition of FMCB, for the year endedDecember 31, 2025 was 2.50%, a 31 basis point increase from 2.19% for the year endedDecember 31, 2024. The increase in the margin was primarily due to growth in the loan and securitiesportfolios at higher yields and purchase accounting accretion, offset partially by higher balances and ratespaid on FHLB advances, as well as the refinancing of subordinated debt at the end of the second quarterof 2025. Average interest earning assets were $5.11 billion for the year ended December 31, 2025, anincrease of $534.5 million, or 11.7%, compared to $4.58 billion for the year ended December 31, 2024.The increase in average interest earning assets was primarily due to growth in the loan and securitiesportfolios and an increase in cash balances. Average interest bearing liabilities were $3.92 billion for theyear ended December 31, 2025, an increase of $445.7 million, or 12.8%, compared to $3.47 billion for theyear ended December 31, 2024. The increase in average
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Table of Contents 58 interest bearing liabilities was primarily due to increases in savings and money market deposits, FHLBadvances, and interest bearing transaction deposits, offset partially by a decrease in brokered deposits. Average interest earning assets produced a tax-equivalent yield of 5.55% for the year endedDecember 31, 2025, compared to 5.40% for the year ended December 31, 2024. The cost of interestbearing liabilities was 3.81% for the year ended December 31, 2025, compared to 4.14% for the yearended December 31, 2024. Interest Income. Total interest income on a tax-equivalent basis was $283.7 million for the yearended December 31, 2025, compared to $247.1 million for the year ended December 31, 2024. The$36.6 million, or 14.8%, increase in total interest income on a tax-equivalent basis was primarily due togrowth and higher yields in the loan and securities portfolios. Interest income on cash investments was $8.1 million for the year ended December 31, 2025,compared to $5.7 million for the year ended December 31, 2024. The $2.4 million increase in total interestincome on cash investments was primarily due to higher balances during the year, offset partially by adecrease in rates. Interest income on the investment securities portfolio, on a fully-tax equivalent basis,was $39.6 million for the year ended December 31, 2025, compared to $34.3 million for the year endedDecember 31, 2024. The $5.3 million increase in total interest income on the investment securitiesportfolio was primarily due to a $101.9 million, or 14.6%, increase in average balances between the twoperiods. Interest income on loans, on a fully-tax equivalent basis, for the year ended December 31, 2025was $234.2 million, compared to $205.6 million for the year ended December 31, 2024. The $28.5 million,or 13.9%, increase was primarily due to loan growth and the repricing of the loan portfolio in the higherinterest rate environment. The aggregate loan yield, on a fully-tax equivalent basis, increased to 5.73% for the year endedDecember 31, 2025, which was a 23 basis point increase from 5.50% for the year endedDecember 31, 2024. Core loan yield, a non-GAAP financial measure, continued to rise as new loansoriginated at higher yields and the existing fixed rate portfolio repriced in the higher rate environment. The following table presents a summary of interest, fees, and accretion on loans for the periodsindicated: For the year ended December 31, 2025 2024 2023 Interest 5.59% 5.42% 5.11% Fees 0.10 0.08 0.10 Accretion 0.04 — — Yield on Loans 5.73% 5.50% 5.21% Interest Expense. Interest expense on interest bearing liabilities was $149.4 million for the yearended December 31, 2025, compared to $143.7 million for the year ended December 31, 2024. The $5.7million, or 4.0%, increase was primarily due to growth of the deposit portfolio. Interest expense on deposits was $131.4 million for the year ended December 31, 2025,compared to $128.8 million for the year ended December 31, 2024. The $2.6 million, or 2.0%, increase ininterest expense on deposits was primarily due to growth of the deposit portfolio, offset partially by lowerrates paid on deposits. The cost of total deposits was 3.12% for the year ended December 31, 2025, a 32basis point decrease, compared to 3.44% for the year ended December 31, 2024. The decrease wasprimarily due to lower rates paid on deposits following the interest rate cuts in 2024 and 2025 anddecreases in brokered deposit balances.
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Table of Contents 59 Interest expense on borrowings was $18.0 million for the year ended December 31, 2025,compared to $14.9 million for the year ended December 31, 2024. The $3.1 million, or 20.8%, increasewas primarily due to an increased utilization of FHLB advances and higher balance and rate ofsubordinated debentures due to the subordinated debt refinance in the second quarter of 2025. Provision for Credit Losses The provision for credit losses on loans and leases was $5.7 million for the year endedDecember 31, 2025, compared to $2.9 million for the year ended December 31, 2024. The increase in theprovision for credit losses on loans and leases was primarily attributable to growth in the loan portfolio andan increase in historical loss rates. The allowance for credit losses on loans and leases to total loans was1.31% at December 31, 2025, compared to 1.35% at December 31, 2024. The following table presents a summary of the activity in the allowance for credit losses on loansand leases for the years ended December 31, 2025, 2024, and 2023: Year Ended December 31, (dollars in thousands) 2025 2024 2023 Balance at Beginning of Period $ 52,277 $ 50,494 $ 47,996Impact of Adopting CECL — — 650Day 1 PCD Allowance — 114 —Provision for Credit Losses (1) 5,650 2,900 2,050Charge-offs (1,553) (1,266) (224) Recoveries 69 35 22 Balance at End of Period $ 56,443 $ 52,277 $ 50,494 (1) Includes an initial provision for credit losses for non-PCD loans acquired in the FMCB transaction of $950,000 for the yearended December 31, 2024. The provision for credit losses for off-balance sheet credit exposures was $400,000 for the yearended December 31, 2025, compared to $625,000 for the year ended December 31, 2024. The provisionfor the year ended December 31, 2025 was due to an increase in the volume of newly originated loanswith unfunded commitments. The allowance for credit losses on off-balance sheet credit exposures was$4.0 million as of December 31, 2025, compared to $3.6 million as of December 31, 2024. The following table presents a summary of the activity in the provision for credit losses for theyears ended December 31, 2025, 2024, and 2023: Year Ended December 31, (dollars in thousands) 2025 2024 2023 Provision for Credit Losses on Loans and Leases $ 5,650 $ 2,900 $ 2,050Provision for (Recovery of) Credit Losses for Off-Balance SheetCredit Exposures 400 625 (2,225) Provision for (Recovery of) Credit Losses $ 6,050 $ 3,525 $ (175)
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Table of Contents 60 Noninterest Income Noninterest income was $10.9 million for the year ended December 31, 2025, an increase of $3.5million, or 48.1%, compared to $7.4 million for the year ended December 31, 2024. The increase wasprimarily due to higher swap fees, investment advisory fees, and customer service fees. The following table presents the major components of noninterest income for the periodsindicated: Year Ended Year EndedDecember 31, Increase/ December 31, Increase/ (dollars in thousands) 2025 2024 (Decrease) 2024 2023 (Decrease) Noninterest Income: Customer Service Fees $ 2,013 $ 1,475 $ 538 $ 1,475 $ 1,455 $ 20Net Gain (Loss) on Sales of Securities 614 385 229 385 (33) 418Net Gain on Sales of Foreclosed Assets — 62 (62) 62 — 62 Letter of Credit Fees 1,829 1,976 (147) 1,976 1,746 230Debit Card Interchange Fees 640 593 47 593 595 (2)Swap Fees 1,631 547 1,084 547 — 547 Bank-Owned Life Insurance 1,661 1,327 334 1,327 992 335Investment Advisory Fees 973 — 973 — — —FHLB Prepayment Income 301 — 301 — 792 (792) Other Income 1,253 1,003 250 1,003 946 57 Totals $ 10,915 $ 7,368 $ 3,547 $ 7,368 $ 6,493 $ 875 Noninterest Expense Noninterest expense totaled $77.3 million for the year ended December 31, 2025, a $14.0 million,or 22.1%, increase compared to $63.3 million for the year ended December 31, 2024. The increase wasprimarily attributable to increases in salaries and employee benefits, professional and consulting fees,data processing, marketing and advertising, intangible asset amortization, operating costs related to theFMCB acquisition, and merger-related expenses. Merger-related expenses totaled $2.0 million for theyear ended December 31, 2025, compared to $712,000 for the year ended December 31, 2024. The Company had 322 full-time equivalent employees at December 31, 2025, compared to 290employees at December 31, 2024. The increase during the year was largely driven by the hiring of keytalent in roles across the organization. Efficiency Ratio. The efficiency ratio, a non-GAAP financial measure, reports total noninterest expense, less amortization of intangible assets, as a percentage of net interest income plus total noninterest income less gains (losses) on sales of securities. Management believes this non-GAAP financial measure provides a meaningful comparison of operational performance and facilitates investors’ assessments of business performance and trends in comparison to peers in the banking industry. The efficiency ratio was 53.5% for the year ended December 31, 2025, compared to 57.9% forthe year ended December 31, 2024. The Company’s efficiency ratio has remained consistently below theindustry median due in part to its “branch-light” model.
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Table of Contents 61 The following table presents the major components of noninterest expense for the periods indicated: Year Ended Year EndedDecember 31, Increase/ December 31, Increase/ (dollars in thousands) 2025 2024 (Decrease) 2024 2023 (Decrease) Noninterest Expense: Salaries and Employee Benefits $ 47,397 $ 39,564 $ 7,833 $ 39,564 $ 36,538 $ 3,026Occupancy and Equipment 4,945 4,399 546 4,399 4,447 (48)FDIC Insurance Assessment 2,745 2,959 (214) 2,959 3,690 (731)Data Processing 2,519 1,697 822 1,697 1,574 123Professional and Consulting Fees 4,769 3,879 890 3,879 3,081 798Derivative Collateral Fees 1,369 1,821 (452) 1,821 1,900 (79)Information Technology and Telecommunications 3,891 3,325 566 3,325 2,889 436Marketing and Advertising 2,138 1,485 653 1,485 1,129 356Intangible Asset Amortization 921 78 843 78 100 (22)Other Expense 6,577 4,093 2,484 4,093 3,972 121 Totals $ 77,271 $ 63,300 $ 13,971 $ 63,300 $ 59,320 $ 3,980 Income Tax Expense The provision for income taxes includes both federal and state taxes. Fluctuations in effective taxrates reflect the differences in the inclusion or deductibility of certain income and expenses for income taxpurposes and the recognition of tax credits. The Company’s future effective income tax rate will fluctuatebased on the mix of taxable and tax-free investments and loans, the recognition and availability of taxcredit investments, and overall taxable income. Income tax expense was $13.9 million for the year ended December 31, 2025, compared to $9.9million for the year ended December 31, 2024. The effective combined federal and state income tax ratefor both the years ended December 31, 2025 and December 31, 2024 was 23.2%. Comparison of Results of Operations for the Years Ended December 31, 2024 and 2023 For a discussion of the Company’s results of operations for 2024 compared to 2023, see “Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in theCompany’s 2024 Annual Report on Form 10-K, filed with the SEC on March 6, 2025. Financial Condition Overview Total assets at December 31, 2025 were $5.41 billion, an increase of $340.8 million, or 6.7%,compared to $5.07 billion at December 31, 2024. The increase in total assets was primarily due to organicloan growth, offset partially by a decrease in cash and cash equivalents. Total gross loans atDecember 31, 2025 were $4.31 billion, an increase of $441.0 million, or 11.4%, compared to $3.87 billionat December 31, 2024. Investment Securities Portfolio The investment securities portfolio is used to make various term investments and is intended toprovide the Company with adequate liquidity, a source of stable income, and at times, serve as collateralfor certain types of deposits or borrowings. Investment balances in the investment securities portfolio aresubject to change over time
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Table of Contents 62 based on funding needs and interest rate risk management objectives. The liquidity levels take intoaccount anticipated future cash flows and are maintained at levels management believes are appropriateto ensure future flexibility in meeting anticipated funding needs. All investment securities are held asavailable for sale. Securities available for sale were $776.4 million at December 31, 2025, an increase of$8.2 million, or 1.1%, compared to $768.2 million at December 31, 2024. The following table presents the amortized cost and fair value of securities available for sale, bytype, at December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Amortized Fair Amortized Fair(dollars in thousands) Cost Value Percent Cost Value Percent U.S. Treasury Securities $ 155,863 $ 146,206 18.8%$ 179,835 $ 167,748 21.8%U.S Government Agency Securities 8,664 8,707 1.1 22,053 22,082 2.9Mortgage-Backed Securities Issued or Guaranteed by U.S. Agencies(MBS): Residential Pass-Through: Guaranteed by GNMA 44,133 44,124 5.7 7,726 7,021 0.8Issued by FNMA and FHLMC 21,166 19,326 2.5 60,532 57,354 7.5Other Residential Mortgage-Backed Securities 73,596 67,322 8.7 71,301 61,969 8.1Commercial Mortgage-Backed Securities 6,226 6,034 0.8 11,084 10,583 1.4 All Other Commercial MBS 107,170 108,866 14.0 109,190 107,963 14.1 Total MBS 252,291 245,672 31.7 259,833 244,890 31.9 Municipal Securities 242,995 239,168 30.8 139,891 122,265 15.9 Corporate Securities 93,080 92,407 11.9 139,161 134,186 17.5Asset-Backed Securities 44,298 44,281 5.7 76,891 77,076 10.0 Total $ 797,191 $ 776,441 100.0%$ 817,664 $ 768,247 100.0% Loan Portfolio The Company focuses on lending to borrowers located or investing in the Twin Cities MSA acrossa diverse range of industries and property types. The Company lends primarily to commercial clients,consisting of loans secured by nonfarm, nonresidential properties, multifamily residential properties, land,and non-real estate business assets. Responsive service, local decision making, and an efficientturnaround time from application to closing have been significant factors in growing the loan portfolio. The Company manages concentrations of credit exposure through a risk management programwhich implements formalized processes and procedures specifically for managing and mitigating riskwithin the loan portfolio. The processes and procedures include board of directors and managementoversight, commercial real estate exposure limits, portfolio monitoring tools, management informationsystems, market reports, underwriting standards, internal and external loan review, and stress testing. Total gross loans were $4.31 billion at December 31, 2025, an increase of $441.0 million, or11.4%, compared to $3.87 billion at December 31, 2024. The multifamily, construction and landdevelopment, and commercial real estate (“CRE”) nonowner occupied categories contributed mostsignificantly to the $441.0 million of loan growth. As of December 31, 2025, multifamily loans increased$161.7 million, or 11.3%, construction and land development loans increased $118.9 million, or 122.3%,and CRE nonowner occupied loans increased $82.0 million, or 7.6%, when compared toDecember 31, 2024. The Bank’s pace of loan growth returned to more normalized levels in 2025 compared to the last few years. The Company’s loan growth was driven by the strong brand of the Bank in the Twin Cities market and the MSA-related market disruption resulting in client and banker acquisition opportunities, as well as favorable market conditions.
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Table of Contents 63 The following table presents the dollar amount and percentage composition of the loan portfolioby category, at the dates indicated: December 31, 2025 December 31, 2024 (dollars in thousands) Amount Percent Amount Percent Commercial $ 547,245 12.7% $ 497,662 12.9% Leases 43,407 1.0 44,291 1.1Construction and Land Development 216,163 5.0 97,255 2.51-4 Family Construction 45,152 1.1 41,961 1.1Real Estate Mortgage:1-4 Family Mortgage 496,142 11.5 474,383 12.3Multifamily 1,587,338 36.8 1,425,610 36.9CRE Owner Occupied 189,754 4.4 191,248 4.9 CRE Nonowner Occupied 1,165,104 27.0 1,083,108 28.0 Total Real Estate Mortgage Loans 3,438,338 79.7 3,174,349 82.1 Consumer and Other 19,212 0.5 12,996 0.3 Total Loans, Gross 4,309,517 100.0% 3,868,514 100.0% Allowance for Credit Losses (56,443) (52,277) Net Deferred Loan Fees (8,966) (6,801) Total Loans, Net $ 4,244,108 $ 3,809,436 The Company primarily focuses on real estate mortgage lending, which constituted 79.7% of theportfolio as of December 31, 2025. The composition of the portfolio has remained relatively consistentwith prior periods and the Company does not expect any significant changes in the foreseeable future inthe composition of the loan portfolio or in the emphasis on real estate lending. As of December 31, 2025, investor CRE loans totaled $3.01 billion, consisting of $1.59 billion ofloans secured by multifamily residential properties, $1.17 billion of loans secured by CRE nonowneroccupied, $216.2 million of construction and land development loans, and $45.2 million of 1-4 familyconstruction loans. Investor CRE loans represented 69.9% of the total gross loan portfolio and 473.1% ofthe Bank’s total risk-based capital at December 31, 2025, compared to 68.4% and 462.0%, respectively,at December 31, 2024. As of December 31, 2025, over 75% of the Bank’s real estate loan balances were secured byproperties located in the Twin Cities MSA. The following table provides a breakdown of CRE nonowner occupied loans by collateral types asof December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Percent of Percent of Percent of Percent of CRE Nonowner Total Loan CRE Nonowner Total Loan (dollars in thousands) Balance Occupied Portfolio Portfolio Balance Occupied Portfolio Portfolio Collateral Type:Industrial $ 320,107 27.5% 7.4%$ 285,594 26.4% 7.4%Office 212,926 18.3 4.9 191,638 17.7 5.0 Retail 202,904 17.4 4.7 172,530 15.9 4.5Nursing/Assisted Living 119,738 10.3 2.8 111,705 10.3 2.9Mini Storage Facility 109,324 9.4 2.5 110,486 10.2 2.9Medical Office 65,527 5.6 1.5 108,452 10.0 2.8Other 134,578 11.5 3.2 102,703 9.5 2.5 Total CRE Nonowner Occupied $ 1,165,104 100.0% 27.0%$ 1,083,108 100.0% 28.0%
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Table of Contents 64 The following tables present time to contractual maturity and sensitivity to interest rate changesfor the loan portfolio at December 31, 2025 and 2024: As of December 31, 2025 Due in One Year More Than One More Than Five After(dollars in thousands) or Less Year to Five Years Years to Fifteen Years Fifteen Years Commercial $ 231,121 $ 237,328 $ 75,966 $ 2,830Leases 4,514 38,351 542 —Construction and Land Development 123,801 82,397 9,965 —1-4 Family Construction 37,784 7,171 197 —Real Estate Mortgage: 1-4 Family Mortgage 105,250 308,347 59,085 23,460Multifamily 202,007 891,088 408,779 85,464CRE Owner Occupied 13,483 123,336 50,239 2,696CRE Nonowner Occupied 274,244 693,610 196,828 422 Total Real Estate Mortgage Loans 594,984 2,016,381 714,931 112,042Consumer and Other 9,594 9,149 156 313 Total Loans, Gross $ 1,001,798 $ 2,390,777 $ 801,757 $ 115,185 Interest Rate Sensitivity: Fixed Interest Rates $ 636,867 $ 1,772,310 $ 389,099 $ 23,773Floating or Adjustable Rates 364,931 618,467 412,658 91,412 Total Loans, Gross $ 1,001,798 $ 2,390,777 $ 801,757 $ 115,185 As of December 31, 2024 Due in One Year More Than One More Than Five After(dollars in thousands) or Less Year to Five Years Years to Fifteen Years Fifteen Years Commercial $ 170,588 $ 248,695 $ 75,467 $ 2,912Leases 4,998 38,641 652 —Construction and Land Development 53,373 42,002 1,880 —1-4 Family Construction 38,996 2,764 201 —Real Estate Mortgage: 1-4 Family Mortgage 74,914 297,516 76,647 25,306Multifamily 206,913 637,012 513,194 68,491CRE Owner Occupied 4,704 112,223 69,742 4,579 CRE Nonowner Occupied 264,947 602,380 214,971 810 Total Real Estate Mortgage Loans 551,478 1,649,131 874,554 99,186 Consumer and Other 8,813 3,776 174 233 Total Loans, Gross $ 828,246 $ 1,985,009 $ 952,928 $ 102,331 Interest Rate Sensitivity: Fixed Interest Rates $ 580,854 $ 1,622,161 $ 475,264 $ 32,271 Floating or Adjustable Rates 247,392 362,848 477,664 70,060 Total Loans, Gross $ 828,246 $ 1,985,009 $ 952,928 $ 102,331 Asset Quality The Company emphasizes credit quality in the originating and monitoring of the loan portfolio,and success in underwriting is measured by the levels of classified and nonperforming assets and netcharge-offs. Federal regulations and internal policies require the use of an asset classification system asa means of managing and reporting problem and potential problem assets. The Company hasincorporated an internal asset classification system, substantially consistent with federal bankingregulations, as a part of the credit monitoring system. Federal banking regulations set forth a classificationscheme for problem and potential problem assets as “special mention,” “substandard,” “doubtful” or “loss”assets. An asset identified as “special mention” is not adversely classified but has potential weaknessesthat deserve management’s close attention. If left uncorrected, these potential weaknesses may result inthe deterioration of the payment prospects of the asset. An asset is considered “substandard” if it isinadequately protected by the current net worth and paying capacity of the obligor or of the collateralpledged, if any. A financial institution with assets classified as “special mention” is not expected to sustainlosses of principal or interest from these assets and should not classify assets under this category formore than a year. “Substandard” assets include those characterized by the “distinct possibility” that thefinancial institution will sustain “some loss” if the deficiencies are not corrected.
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Table of Contents 65 Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” withthe added characteristic that the weaknesses present make “collection or liquidation in full,” on the basisof currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classifiedas “loss” are those considered “uncollectible” and of such little value that their continuance as assetswithout the establishment of a specific loss reserve is not warranted. Assets which do not currentlyexpose the insured institution to sufficient risk to warrant classification in one of the aforementionedcategories but possess weaknesses are required to be designated “watch.” The following table presents information on loan classifications at December 31, 2025. TheCompany had no assets classified as doubtful or loss at December 31, 2025. Risk Category (dollars in thousands) Watch/Special Mention Substandard Total Commercial $ 1,983 $ 10,454 $ 12,437Leases — — —Construction and Land Development — 34 341-4 Family Construction — — —Real Estate Mortgage: 1-4 Family Mortgage — 1,000 1,000Multifamily 33,929 23,776 57,705CRE Owner Occupied 11,778 1,711 13,489CRE Nonowner Occupied 133 15,981 16,114 Total Real Estate Mortgage Loans 45,840 42,468 88,308Consumer and Other — — — Totals $ 47,823 $ 52,956 $ 100,779 Loans that have potential weaknesses that warranted a watch or special mention rating atDecember 31, 2025 totaled $47.8 million, compared to $46.6 million at December 31, 2024. Loans thatwarranted a substandard risk rating at December 31, 2025 totaled $53.0 million, compared to $21.8million at December 31, 2024. Management continues to actively work with these borrowers and closelymonitor substandard credits. Nonperforming Assets Nonperforming loans include loans accounted for on a nonaccrual basis and loans 90 days pastdue and still accruing. Nonperforming assets consist of nonperforming loans plus foreclosed assets (i.e.,real or personal property acquired through foreclosure). Nonaccrual loans totaled $22.0 million atDecember 31, 2025, compared to $301,000 at December 31, 2024. There were no loans 90 days pastdue and still accruing as of December 31, 2025 and 2024. There were also no foreclosed assets as ofDecember 31, 2025 and 2024.
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Table of Contents 66 The following table presents a summary of nonperforming assets, by category, at the datesindicated: December 31, (dollars in thousands) 2025 2024 Total Nonaccrual Loans $ 22,034 $ 301 Total Nonperforming Loans $ 22,034 $ 301 Total Nonperforming Assets (1) $ 22,034 $ 301 Total Nonperforming Assets and Modified Accruing Loans $ 22,034 $ 301 Nonaccrual Loans to Total Loans 0.51% 0.01% Nonperforming Loans to Total Loans 0.51 0.01Nonperforming Assets to Total Loans Plus Foreclosed Assets (1) 0.51 0.01 (1) Nonperforming assets are defined as nonaccrual loans and loans greater than 90 days past due still accruing plus foreclosedassets. There were no loans greater than 90 days past due still accruing for any period shown. The balance of nonperforming assets can fluctuate due to changes in economic conditions. TheCompany has established a policy to discontinue accruing interest on a loan (that is, place the loan onnonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unlessthe loan is considered to be well-collateralized and is actively in the process of collection. In addition, aloan will be placed on nonaccrual status before it becomes 90 days delinquent unless managementbelieves that the collection of interest is expected. Interest previously accrued but uncollected on suchloans is reversed and charged against current income when the receivable is determined to beuncollectible. If management believes that a loan will not be collected in full, an increase to the allowancefor credit losses on loans and leases is recorded to reflect management’s estimate of any potentialexposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.There are no loans, outside of those included in the tables above, that cause management to haveserious doubts as to the ability of borrowers to comply with present repayment terms. Gross income thatwould have been recorded on nonaccrual loans during the years ended December 31, 2025 and 2024was approximately $556,000 and $163,000, respectively. Allowance for Credit Losses The allowance for credit losses on loans and leases is a reserve established through charges toearnings in the form of a provision for credit losses. The Company maintains an allowance for creditlosses at a level management considers adequate to provide for expected lifetime losses in the portfolio.Although management strives to maintain an allowance it deems adequate, future economic changes,deterioration of borrowers’ creditworthiness, and the impact of examinations by regulatory agencies,among other factors, all could cause changes to the allowance for credit losses on loans and leases. At December 31, 2025, the allowance for credit losses on loans and leases was $56.4 million,an increase of $4.2 million from $52.3 million at December 31, 2024. Net charge-offs totaled $1.5million for the year ended December 31, 2025 and $1.2 million for the year ended December 31, 2024.The allowance for credit losses on loans and leases as a percentage of total loans was 1.31% atDecember 31, 2025, compared to 1.35% at December 31, 2024.
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Table of Contents 67 The following table presents a summary of net charge-offs for the periods indicated: As of and for the year ended December 31, (dollars in thousands) 2025 2024 Net Charge-offs (Recoveries)Commercial $ 1,501 $ (22)Leases 14 11Real Estate Mortgage: 1-4 Family Mortgage (12) (3)CRE Nonowner Occupied (44) 1,236 Total Real Estate Mortgage Loans (56) 1,233Consumer and Other 25 9 Total Net Charge-offs $ 1,484 $ 1,231 Net Charge-offs (Recoveries) to Average Loans Commercial 0.29% 0.00%Leases 0.03 0.48Real Estate Mortgage: 1-4 Family Mortgage 0.00 0.00CRE Nonowner Occupied 0.00 0.12 Total Real Estate Mortgage Loans 0.00 0.04Consumer and Other 0.15 (0.04) Total Net Charge-offs to Average Loans 0.04% 0.03% Gross Loans, End of Period $ 4,309,517 $ 3,868,514Average Loans 4,088,601 3,738,260Allowance for Credit Losses to Total Gross Loans 1.31% 1.35% The following table presents a summary of the allocation of the allowance for credit losses onloans and leases by loan portfolio segment as of the periods indicated: December 31, December 31, 2025 2024 (dollars in thousands) Amount Percent Amount Percent Commercial $ 5,982 10.6% $ 5,630 10.8% Leases 352 0.6 368 0.7Construction and Land Development 1,687 3.0 866 1.71-4 Family Construction 316 0.6 331 0.6Real Estate Mortgage: 1-4 Family Mortgage 2,475 4.4 2,795 5.3Multifamily 23,775 42.1 23,120 44.2CRE Owner Occupied 1,080 1.9 1,290 2.5 CRE Nonowner Occupied 20,595 36.5 17,735 33.9 Total Real Estate Mortgage Loans 47,925 84.9 44,940 85.9 Consumer and Other 181 0.3 142 0.3 Total Allowance for Credit Losses $ 56,443 100.0% $ 52,277 100.0% Goodwill and Other Intangible Assets Goodwill was $12.0 million at both December 31, 2025 and 2024. Goodwill is not amortized but issubject to, at a minimum, an annual test for impairment. Other intangible assets consist of core depositrelationships and favorable lease term intangibles. Total other intangible assets at December 31, 2025and 2024 were $6.9 million and $7.9 million, respectively. Other intangible assets are amortized over theirestimated useful life.
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Table of Contents 68 Deposits The principal sources of funds for the Company are deposits, consisting of demand deposits,money market accounts, savings accounts, and certificates of deposit. The following table presents thedollar and percentage composition of the deposit portfolio, by category, at the dates indicated: December 31, 2025 December 31, 2024 (dollars in thousands) Amount Percent Amount Percent Noninterest Bearing Transaction Deposits $ 923,070 21.4% $ 800,763 19.6% Interest Bearing Transaction Deposits 893,740 20.7 862,242 21.1Savings and Money Market Deposits 1,380,922 31.9 1,259,503 30.8Time Deposits 312,154 7.2 338,506 8.3Brokered Deposits 810,483 18.8 825,753 20.2 Total Deposits $ 4,320,369 100.0% $ 4,086,767 100.0% Total deposits at December 31, 2025 were $4.32 billion, an increase of $233.6 million, or 5.7%,compared to total deposits of $4.09 billion at December 31, 2024. Core deposits, defined as total depositsexcluding brokered deposits and time deposits greater than $250,000, were $3.35 billion atDecember 31, 2025, an increase of $244.6 million, or 7.9%, compared to $3.11 billion atDecember 31, 2024. Growth in deposits was primarily due to an increase in noninterest bearing transaction deposits and savings and money market accounts, offset partially by a decrease in time deposits and brokered deposits. The Company relies on increasing the deposit base to fund loans and other asset growth. TheCompany is in a highly competitive market and competes for local deposits by offering attractive productswith competitive rates. The Company expects to have a higher average cost of funds for local depositscompared to competitor banks due to the lack of an extensive branch network. The Company’s strategy isto offset the higher cost of funding with a lower level of operating expense. When appropriate, theCompany utilizes alternative funding sources such as brokered deposits. The brokered deposit marketprovides flexibility in structure, optionality and efficiency not afforded in traditional retail deposit channels.At December 31, 2025, total brokered deposits were $810.5 million, a decrease of $15.3 million, or 1.8%,compared to total brokered deposits of $825.8 million at December 31, 2024. Brokered deposits continueto be used as a supplemental funding source, as needed, to support loan portfolio growth. The following table presents the average balance and average rate paid on each of the followingdeposit categories for the years ended December 31, 2025, 2024, and 2023: As of and for the As of and for the As of and for theYear Ended Year Ended Year EndedDecember 31, 2025 December 31, 2024 December 31, 2023 Average Average Average Average Average Average(dollars in thousands) Balance Rate Balance Rate Balance Rate Noninterest Bearing Transaction Deposits $ 799,099 —% $ 705,247 —% $ 768,428 —%Interest Bearing Transaction Deposits 852,426 3.74 776,768 4.41 650,028 3.60 Savings and Money Market Deposits 1,401,187 3.62 956,300 4.11 922,799 3.32Time Deposits < $250,000 172,758 3.78 178,541 3.78 179,242 2.33Time Deposits > $250,000 161,245 4.34 164,041 4.78 83,919 3.45Brokered Deposits 825,114 4.27 963,676 4.22 909,662 3.84 Total Deposits $ 4,211,829 3.12% $ 3,744,573 3.44% $ 3,514,078 2.73%
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Table of Contents 69 The following table presents time deposits, including brokered time deposits, that are in excess ofthe FDIC insurance limit, currently $250,000, by time remaining until maturity: December 31, (dollars in thousands) 2025 Three Months or Less $ 106,553Over Three Months through Six Months 18,210 Over Six Months through 12 Months 25,903Over 12 Months 8,007 Totals $ 158,673 The Company’s total uninsured deposits, which are the amounts of deposit accounts that exceedthe FDIC insurance limit, currently $250,000, were approximately $1.29 billion, or 30% of total deposits, atDecember 31, 2025 and $1.14 billion, or 28% of total deposits, at December 31, 2024. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes. Borrowed Funds Federal Funds Purchased In addition to deposits, the Company utilizes overnight borrowings to meet the daily liquidityneeds as a supplemental funding source for loan growth. The Company had no outstanding federal fundspurchased as of each of December 31, 2025 and 2024. Other Borrowings At December 31, 2025, the Company had outstanding FHLB advances of $399.5 million,compared to $359.5 million at December 31, 2024. The Company’s borrowing capacity at the FHLB isdetermined based on collateral pledged, generally consisting of loans. The Company had additionalborrowing capacity under this credit facility of $611.3 million and $483.2 million at December 31, 2025 and2024, respectively. The Company has an outstanding Loan and Security Agreement and revolving note with a thirdparty correspondent lender, which is secured by 100% of the issued and outstanding stock of the Bank.The maximum principal amount of the Company’s revolving line of credit is $40.0 million, and the facilitymatures on September 1, 2026. As of December 31, 2025, the Company had no outstanding balancesunder the revolving line of credit, compared to $13.8 million as of December 31, 2024. The Company hadtwo outstanding letters of credit totaling $6.4 million under this facility as of December 31, 2025 and 2024,which reduce the availability under the facility by the amounts of the letters of credit so long as theyremain outstanding. Additionally, the Company has borrowing capacity from other sources. As of December 31, 2025,the Bank was eligible to use the Federal Reserve discount window for borrowings. Based on assetspledged as collateral as of the applicable date, the Bank’s borrowing availability was approximately$1.03 billion and $925.8 million at December 31, 2025 and 2024, respectively. As of December 31, 2025and 2024, the Company had no outstanding advances from the discount window. Subordinated Debentures As of December 31, 2025 and 2024, the Company had subordinated debentures, net of issuancecosts of $108.7 million and $79.7 million, respectively.
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Table of Contents 70 For additional information, see “Note 13 – Subordinated Debentures” of the Company’sConsolidated Financial Statements included as part of this report. Contractual Obligations The following table presents supplemental information regarding total contractual obligations atDecember 31, 2025: Within One to Three to After(dollars in thousands) One Year Three Years Five Years Five Years Total Deposits Without a Stated Maturity $ 3,343,186 $ — $ — $ — $ 3,343,186Time Deposits 630,296 142,312 204,575 — 977,183FHLB Advances 319,500 57,500 22,500 — 399,500Subordinated Debentures — — — 110,000 110,000Commitment to Fund Tax Credit Investments 11,380 — — — 11,380 Operating Lease Obligations 543 733 237 — 1,513 Totals $ 4,304,905 $ 200,545 $ 227,312 $ 110,000 $ 4,842,762 Operating lease obligations are in place for facilities and land on which banking branches arelocated. See “Note 9 – Leases” of the Company’s Consolidated Financial Statements included as part ofthis report for additional information. The Company believes that it will be able to meet all contractual obligations as they come duethrough the maintenance of adequate cash levels. The Company expects to maintain adequate cashlevels through earnings, loan and securities repayments and maturity activity and continued depositgathering activities. As described above, the Company has in place various borrowing mechanisms forboth short-term and long-term liquidity needs. Capital Total shareholders’ equity at December 31, 2025 was $517.1 million, an increase of $59.2 million,or 12.9%, compared to shareholders’ equity of $457.9 million at December 31, 2024. The increase wasprimarily due to net income retained and a decrease in unrealized losses in the securities portfolio, offsetpartially by a decrease in unrealized gains in the derivatives portfolio, preferred stock dividends, and stockrepurchases. Tangible book value per share, a non-GAAP financial measure, was $15.55 as ofDecember 31, 2025, an increase of 15.3% from $13.49 as of December 31, 2024. Tangible commonequity as a percentage of tangible assets, a non-GAAP financial measure, was 8.01% atDecember 31, 2025, compared to 7.36% at December 31, 2024. Stock Repurchase Program. During the year ended December 31, 2025, the Companyrepurchased 167,709 shares of its common stock, representing 0.6% of the Company’s outstandingshares. Shares were repurchased during this period at a weighted average price of $13.07 for a total of$2.2 million. All shares repurchased under the stock repurchase program were converted to authorizedbut unissued shares. The Company remains committed to maintaining strong capital levels whileenhancing shareholder value, use of its stock repurchase program is based on various factors includingvaluation, capital levels and other uses of capital. As of December 31, 2025, the remaining amount thatcould be used to repurchase shares under the stock repurchase program was $13.1 million. Regulatory Capital. The Company and the Bank are subject to various regulatory capitalrequirements administered by federal banking regulators. Failure to meet minimum capital requirementscan initiate certain mandatory and possibly additional discretionary actions by federal banking regulatorsthat, if undertaken, could have a direct material effect on the Company’s and Bank’s business. Management believes the Company and the Bank met all capital adequacy requirements to whichthey were subject as of December 31, 2025. The regulatory capital ratios for the Company and the Bankto meet the minimum
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Table of Contents capital adequacy standards and for the Bank to be considered well capitalized under the promptcorrective action framework are set forth in the following tables. The Company’s and the Bank’s actualcapital amounts and ratios are as of the dates indicated. Minimum Required For Capital Adequacy To be Well CapitalizedFor Capital Adequacy Purposes Plus Capital Under Prompt CorrectiveActual Purposes Conservation Buffer Action Regulations (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio December 31, 2025 Company (Consolidated): Total Risk-based Capital$ 667,814 14.12% $ 378,356 8.00% $ 496,593 10.50% N/A N/A Tier 1 Risk-based Capital 500,002 10.57 283,767 6.00 402,004 8.50 N/A N/A Common Equity Tier 1 Capital 433,488 9.17 212,825 4.50 331,062 7.00 N/A N/A Tier 1 Leverage Ratio 500,002 9.20 217,505 4.00 217,505 4.00 N/A N/A Bank: Total Risk-based Capital$ 636,973 13.49% $ 377,687 8.00% $ 495,715 10.50% $ 472,109 10.00% Tier 1 Risk-based Capital 577,942 12.24 283,266 6.00 401,293 8.50 377,687 8.00 Common Equity Tier 1 Capital 577,942 12.24 212,449 4.50 330,477 7.00 306,871 6.50 Tier 1 Leverage Ratio 577,942 10.65 217,116 4.00 217,116 4.00 271,395 5.00 Minimum Required For Capital Adequacy To be Well CapitalizedFor Capital Adequacy Purposes Plus Capital Under Prompt CorrectiveActual Purposes Conservation Buffer Action Regulations (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio December 31, 2024 Company (Consolidated): Total Risk-based Capital$ 585,966 13.76% $ 340,581 8.00% $ 447,013 10.50% N/A N/A Tier 1 Risk-based Capital 453,049 10.64 255,436 6.00 361,867 8.50 N/A N/A Common Equity Tier 1 Capital 386,535 9.08 191,577 4.50 298,008 7.00 N/A N/A Tier 1 Leverage Ratio 453,049 9.44 191,878 4.00 191,878 4.00 N/A N/A Bank: Total Risk-based Capital$ 573,158 13.49% $ 340,003 8.00% $ 446,254 10.50% $ 425,004 10.00% Tier 1 Risk-based Capital 520,000 12.24 255,002 6.00 361,253 8.50 340,003 8.00 Common Equity Tier 1 Capital 520,000 12.24 191,252 4.50 297,503 7.00 276,253 6.50 Tier 1 Leverage Ratio 520,000 10.86 191,593 4.00 191,593 4.00 239,491 5.00 The Company and the Bank are subject to stringent regulatory capital requirements and relatedDodd-Frank Wall Street Reform and Consumer Protection Act regulations. The rules require a capitalconservation buffer of 2.5% that was added to the minimum requirements for capital adequacy purposes.A banking organization with a conservation buffer of less than the required amount is subject to limitationson capital distributions, including dividend payments, stock repurchases and certain discretionary bonuspayments to executive officers. At December 31, 2025, the ratios for the Company and the Bank weresufficient to meet the conservation buffer. Off-Balance Sheet Arrangements In the normal course of business, the Company enters into various transactions to meet thefinancing needs of clients, which, in accordance with GAAP, are not included in the consolidated balancesheets. These transactions include commitments to extend credit, standby letters of credit, andcommercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate riskin excess of the amounts recognized in the consolidated balance sheets. Most of these commitmentsmature within two years and the standby letters of credit are expected to expire without being drawn upon.All off-balance sheet commitments are included in the determination of the amount of risk-based capitalthat the Company and the Bank are required to hold. The Company’s exposure to credit loss in the event of non-performance by the other party to thefinancial instrument for commitments to extend credit, standby letters of credit, and commercial letters ofcredit is represented
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Table of Contents 72 by the contractual or notional amount of those instruments. The Company decreases its exposure tolosses under these commitments by subjecting them to credit approval and monitoring procedures. TheCompany assesses the credit risk associated with certain commitments to extend credit and establishes aliability for expected credit losses. The following table presents credit arrangements and financial instruments whose contractamounts represent credit risk as of December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Fixed Variable Fixed Variable(dollars in thousands) Unfunded Commitments Under Lines of Credit $ 245,571 $ 551,272 $ 174,273 $ 504,791Letters of Credit 13,074 111,763 9,012 115,385Totals $ 258,645 $ 663,035 $ 183,285 $ 620,176 Commitments to extend credit beyond current funding are agreements to lend to a customer aslong as there is no violation of any condition established in the contract. Such commitments generallyhave fixed expiration dates or other termination clauses and may require payment of a fee. Since many ofthe commitments may expire without being drawn upon, the total commitment amounts do not necessarilyrepresent future cash requirements. The Company evaluates each customer’s creditworthiness on acase-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, isbased on management’s credit evaluation. Collateral held varies but may include accounts receivable,inventory, property, plant and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by us to guarantee the performanceof a customer to a third party. Those guarantees are primarily issued to support public and privateborrowing arrangements, including commercial paper, bond financing, and similar transactions.Commercial letters of credit are issued specifically to facilitate trade or commerce and are paid directlywhen the underlying transaction is consummated. The credit risk involved in issuing letters of credit isessentially the same as that involved in extending loan facilities to customers. The Company had outstanding letters of credit with the FHLB in the amount of $109.0 million and$103.2 million at December 31, 2025 and 2024, respectively, on behalf of customers and to secure publicdeposits. Liquidity Liquidity is the Company’s capacity to meet cash and collateral obligations at a reasonable cost.Maintaining an adequate level of liquidity depends on the Company’s ability to efficiently meet bothexpected and unexpected cash flows and collateral needs without adversely affecting either dailyoperations or financial condition. The Bank’s Asset Liability Management (“ALM”) Committee, isresponsible for managing commitments to meet the needs of customers while achieving the Company’sfinancial objectives. The ALM Committee meets regularly to review balance sheet composition, fundingcapacities, and current and forecasted loan demand. The Company manages liquidity by maintaining adequate levels of cash and other assets fromon- and off-balance sheet arrangements. Specifically, on-balance sheet liquidity consists of cash and duefrom banks and unpledged investment securities available for sale, which are referred to as primaryliquidity. In regards to off-balance sheet capacity, the Company maintains available borrowing capacityunder secured borrowing lines with the FHLB, the Federal Reserve Bank of Minneapolis, and acorrespondent lender, as well as unsecured lines of credit for the purpose of overnight funds with variouscorrespondent banks, which the Company refers to as secondary liquidity. Total on- and off-balance sheet liquidity was $2.51 billion as of December 31, 2025, compared to$2.30 billion at December 31, 2024.
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Table of Contents 73 The following tables present a summary of primary and secondary liquidity levels as of the datesindicated: Primary Liquidity—On-Balance Sheet December 31, 2025 December 31, 2024 (dollars in thousands) Cash and Cash Equivalents $ 96,997 $ 188,884Securities Available for Sale 776,441 768,247Less: Pledged Securities (254,334) (289,903)Total Primary Liquidity $ 619,104 $ 667,228Ratio of Primary Liquidity to Total Deposits 14.3% 16.3% Secondary Liquidity—Off-Balance Sheet Borrowing Capacity Net Secured Borrowing Capacity with the FHLB $ 611,349 $ 483,245Net Secured Borrowing Capacity with the Federal Reserve Bank 1,026,415 925,798Unsecured Borrowing Capacity with Correspondent Lenders 220,000 200,000Secured Borrowing Capacity with Correspondent Lender 33,605 19,855 Total Secondary Liquidity $ 1,891,369 $ 1,628,898 Total Primary and Secondary Liquidity $ 2,510,473 $ 2,296,126 Ratio of Primary and Secondary Liquidity to Total Deposits 58.1% 56.2% During the year ended December 31, 2025, primary liquidity decreased $48.1 million due to adecrease in cash and cash equivalents of $91.9 million, offset partially by a $35.6 million decrease inpledged securities and an increase in securities available for sale of $8.2 million. Secondary liquidityincreased $262.5 million as of December 31, 2025 due to a $128.1 million increase in the borrowingcapacity with the FHLB, a $100.6 million increase in the borrowing capacity with the Federal ReserveBank, a $20.0 million increase in the unsecured borrowing capacity with various correspondent lenders,and a $13.8 million increase in the secured borrowing capacity with a correspondent lender. In addition to primary liquidity, the Company generates liquidity from cash flows from the loan andsecurities portfolios and from the large base of core customer deposits, defined as noninterest bearingtransaction, interest bearing transaction, savings, non-brokered money market accounts and non-brokered time deposits less than $250,000. At December 31, 2025, core deposits totaled approximately$3.35 billion and represented 77.6% of total deposits. These core deposits are normally less volatile, oftenwith customer relationships tied to other products offered by the Company, which promote long-standingrelationships and stable funding sources. The Company uses brokered deposits, the availability of which is uncertain and subject tocompetitive market forces and regulation, for liquidity and interest rate risk management purposes. AtDecember 31, 2025, brokered deposits totaled $810.5 million, consisting of $665.0 million of brokeredtime deposits and $145.5 million of non-maturity brokered money market and transaction accounts. AtDecember 31, 2024, brokered deposits totaled $825.8 million, consisting of $698.3 million of brokeredtime deposits and $127.4 million of non-maturity brokered money market and transaction accounts. The Company’s liquidity policy includes guidelines for On-Balance Sheet Liquidity (ameasurement of primary liquidity to total deposits plus borrowings), Total On-Balance Sheet Liquidity withBorrowing Capacity (a measurement of primary and secondary liquidity to total deposits plus borrowings),Wholesale Funding Ratio (a measurement of total wholesale funding to total deposits plus borrowings),and other guidelines developed for measuring and maintaining liquidity. As of December 31, 2025, theCompany was in compliance with all established liquidity guidelines in the policy.
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Table of Contents 74 GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures Some of the financial data included in this report are not measures of financial performancerecognized by GAAP. In management’s judgment, the adjustments made to operating revenue allowinvestors and analysts to better assess our operating expenses in relation to our core operating revenueby removing the volatility that is associated with certain one-time items and other discrete items that areunrelated to the Company’s core business. Management uses these non-GAAP financial measures in theanalysis of performance: ● “Pre-Provision Net Revenue” is defined as net interest income plus total noninterest income(excluding all gains and losses on sales of assets or extinguishments or prepayments ofliabilities) minus total noninterest expense. ● “Adjusted Pre-Provision Net Revenue” is defined as net interest income plus total noninterestincome (excluding all gains and losses on sales of assets or extinguishments or prepaymentsof liabilities) minus total noninterest expense, excluding merger-related expenses. ● “Core Net Interest Margin” is defined as the ratio of net interest income (on a fully tax-equivalent basis), reduced by loan fees and purchase accounting accretion, divided byinterest earning assets. ● “Core Loan Yield” is defined as loan interest income (on fully tax-equivalent basis), reducedby loan fees and loan accretion, divided by average loans. ● “Efficiency Ratio” is defined as noninterest expense less the amortization of intangiblesdivided by our operating revenue, which is equal to net interest income plus noninterestincome excluding gains and losses on sales of assets. ● “Adjusted Efficiency Ratio” is defined as the efficiency ratio adjusted to exclude merger-related expenses from noninterest expense and exclude FHLB prepayment income fromoperating revenue. ● “Adjusted Noninterest Expense to Average Assets” is defined as the ratio of noninterestexpense adjusted to exclude merger-related expenses divided by average assets. ● “Tangible Common Equity” is defined as shareholders’ equity reduced by preferred stock,goodwill and other intangible assets. The Company believes that this measure is important tomany investors in the marketplace who are interested in changes from period to period incommon shareholders’ equity exclusive of changes in intangible assets. Goodwill and otherintangibles that were recorded in a purchase business combination have the effect ofincreasing both equity and assets while not increasing tangible equity or tangible assets. ● “Tangible Common Equity to Tangible Assets” is defined as the ratio of tangible commonequity, as defined above, divided by total assets reduced by goodwill and other intangibleassets. The Company believes that this measure is important to many investors in themarketplace who are interested in relative changes from period to period in commonshareholders’ equity to total assets, each exclusive of changes in intangible assets. Goodwilland other intangibles that were recorded in a purchase business combination have the effectof increasing both equity and assets while not increasing our tangible equity or tangibleassets. ● “Tangible Book Value per Share” is defined as tangible common shareholders’ equity dividedby total common voting shares outstanding. The Company believes that this measure isimportant to many investors in the marketplace who are interested in changes from period toperiod in book value per share exclusive of changes in intangible assets. Goodwill and otherintangibles that were recorded in a purchase business combination have the effect ofincreasing book value while not increasing tangible book value. ● “Return on Average Tangible Common Equity” is defined as the ratio of net income availableto common shareholders, divided by average tangible common equity. Management believesthat this measure is important to many investors in the marketplace because it measures thereturn on common equity, exclusive of the effects of preferred stock and intangible assets onearnings and capital.
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Table of Contents 75 ● “Adjusted Diluted Earnings per Common Share,” “Adjusted Return on Average Assets,”“Adjusted Return on Average Shareholders’ Equity,” and “Adjusted Return on TangibleCommon Equity” are defined as ratios adjusted to exclude the impact of merger-relatedexpenses, FHLB prepayment income, and all gains or losses on sales of securities. Inmanagement’s judgement, the adjustments to earnings remove the volatility that isassociated with certain one-time items unrelated to the Company’s core business. The Company believes these non-GAAP financial measures provide useful information tomanagement and investors that is supplementary to the financial condition, results of operations and cashflows computed in accordance with GAAP; however, the Company acknowledges that these non-GAAPfinancial measures have a number of limitations. As such, you should not view these disclosures as asubstitute for results determined in accordance with GAAP, and they are not necessarily comparable tonon-GAAP financial measures that other companies use. Financial measures computed in accordancewith GAAP can be found within the consolidated selected financial data appearing at the beginning ofmanagement’s discussion and analysis of financial condition and results of operations within this report.The following reconciliation table provides a more detailed analysis of these non-GAAP financialmeasures: As of and for the year ended December 31, (dollars in thousands) 2025 2024 2023 Pre-Provision Net RevenueNoninterest Income $ 10,915 $ 7,368 $ 6,493Less: (Gain) Loss on Sales of Securities (614) (385) 33Less: FHLB Advance Prepayment Income (301) — (792) Total Operating Noninterest Income 10,000 6,983 5,734Plus: Net Interest Income 132,438 102,193 105,174 Net Operating Revenue $ 142,438 $ 109,176 $ 110,908 Noninterest Expense $ 77,271 $ 63,300 $ 59,320 Total Operating Noninterest Expense $ 77,271 $ 63,300 $ 59,320 Pre-Provision Net Revenue $ 65,167 $ 45,876 $ 51,588 Plus: Non-Operating Revenue Adjustments 915 385 759Less: Provision (Recovery of) for Credit Losses 6,050 3,525 (175) Provision for Income Taxes 13,944 9,911 12,562 Net Income $ 46,088 $ 32,825 $ 39,960 Average Assets $ 5,268,553 $ 4,683,144 $ 4,490,804 Pre-Provision Net Revenue Return on Average Assets 1.24% 0.98% 1.15% Adjusted Pre-Provision Net Revenue Net Operating Revenue $ 142,438 $ 109,176 $ 110,908 Noninterest Expense $ 77,271 $ 63,300 $ 59,320Less: Merger-related Expenses (1,981) (712) — Adjusted Total Operating Noninterest Expense $ 75,290 $ 62,588 $ 59,320 Adjusted Pre-Provision Net Revenue $ 67,148 $ 46,588 $ 51,588 Adjusted Pre-Provision Net Revenue Return on Average Assets 1.27% 0.99% 1.15%
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Table of Contents 76 As of and for the year ended December 31, (dollars in thousands) 2025 2024 2023 Core Net Interest MarginNet Interest Income (Tax-Equivalent Basis) $ 134,296 $ 103,440 $ 106,730Less:Loan Fees (3,745) (3,090) (3,604)Purchase Accounting Accretion:Loan Accretion (1,693) — —Bond Accretion (852) (91) —Bank-Owned Certificates of Deposit Accretion (33) — —Deposit Certificates of Deposit Accretion (88) — — Total Purchase Accounting Accretion (2,666) (91) — Core Net Interest Income (Tax-Equivalent Basis) $ 127,885 $ 100,259 $ 103,126 Average Interest Earning Assets $ 5,114,143 $ 4,579,597$ 4,404,366 Core Net Interest Margin 2.50% 2.19% 2.34% Core Loan YieldLoan Interest Income (Tax-equivalent Basis) $ 234,164 $ 205,646 $ 192,679Less:Loan Fees (3,745) (3,090) (3,604)Loan Accretion (1,693) — — Core Loan Interest Income $ 228,726 $ 202,556 $ 189,075 Average Loans $ 4,088,601$ 3,738,260$ 3,699,252 Core Loan Yield 5.59% 5.42% 5.11% Efficiency RatioNoninterest Expense $ 77,271 $ 63,300 $ 59,320Less: Amortization of Intangible Assets (921) (78) (100) Adjusted Noninterest Expense $ 76,350 $ 63,222 $ 59,220 Net Interest Income $ 132,438 $ 102,193 $ 105,174Noninterest Income 10,915 7,368 6,493Less: (Gain) Loss on Sales of Securities (614) (385) 33 Adjusted Operating Revenue $ 142,739 $ 109,176 $ 111,700 Efficiency Ratio 53.5% 57.9% 53.0% Adjusted Efficiency RatioNoninterest Expense $ 77,271 $ 63,300 $ 59,320Less: Amortization of Intangible Assets (921) (78) (100)Less: Merger-related Expenses (1,981) (712) — Adjusted Noninterest Expense $ 74,369 $ 62,510 $ 59,220 Net Interest Income $ 132,438 $ 102,193 $ 105,174Noninterest Income 10,915 7,368 6,493Less: (Gain) Loss on Sales of Securities (614) (385) 33Less: FHLB Advance Prepayment Income (301) — (792) Adjusted Operating Revenue $ 142,438 $ 109,176 $ 110,908 Adjusted Efficiency Ratio 52.2% 57.3% 53.4% Adjusted Noninterest Expense to Average AssetsNoninterest Expense $ 77,271 $ 63,300 $ 59,320Less: Merger-related Expenses (1,981) (712) — Adjusted Noninterest Expense $ 75,290 $ 62,588 $ 59,320 Average Assets $ 5,268,553$ 4,683,144$ 4,490,804 Adjusted Noninterest Expense to Average Assets 1.43% 1.34% 1.32%
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Table of Contents 77 As of and for the year ended December 31, (dollars in thousands) 2025 2024 2023 Tangible Common Equity and Tangible Common Equity/Tangible AssetsTotal Shareholders' Equity $ 517,095 $ 457,935 $ 425,515Less: Preferred Stock (66,514) (66,514) (66,514) Total Common Shareholders' Equity 450,581 391,421 359,001Less: Intangible Assets (18,912) (19,832) (2,814) Tangible Common Equity $ 431,669 $ 371,589 $ 356,187 Total Assets $ 5,407,002$ 5,066,242$ 4,611,990Less: Intangible Assets (18,912) (19,832) (2,814) Tangible Assets $ 5,388,090$ 5,046,410$ 4,609,176 Tangible Common Equity/Tangible Assets 8.01% 7.36% 7.73% Tangible Book Value Per ShareBook Value Per Common Share $ 16.23 $ 14.21 $ 12.94Less: Effects of Intangible Assets (0.68) (0.72) (0.10) Tangible Book Value Per Common Share $ 15.55 $ 13.49 $ 12.84 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 42,034 $ 28,771 $ 35,906 Average Shareholders' Equity $ 483,828 $ 440,763 $ 410,478Less: Average Preferred Stock (66,514) (66,514) (66,514) Average Common Equity 417,314 374,249 343,964Less: Effects of Average Intangible Assets (19,387) (3,207) (2,847) Average Tangible Common Equity $ 397,927 $ 371,042 $ 341,117 Return on Average Tangible Common Equity 10.56% 7.75% 10.53% Adjusted Diluted Earnings Per Common ShareNet Income Available to Common Shareholders $ 42,034 $ 28,771 $ 35,906 Add: Merger-related Expenses 1,981 712 —Less: FHLB Advance Prepayment Income (301) — (792)Less: (Gain) Loss on Sales of Securities (614) (385) 33 Total Adjustments 1,066 327 (759)Less: Tax Impact of Adjustments (247) (76) 181 Adjusted Net Income Available to Common Shareholders $ 42,853 $ 29,022 $ 35,328 Diluted Weighted Average Shares Outstanding 28,169,857 27,943,342 28,315,587 Adjusted Diluted Earnings Per Common Share $ 1.52 $ 1.04 $ 1.25 Adjusted Return on Average AssetsNet Income $ 46,088 $ 32,825 $ 39,960Add: Total Adjustments 1,066 327 (759)Less: Tax Impact of Adjustments (247) (76) 181 Adjusted Net Income $ 46,907 $ 33,076 $ 39,382 Average Assets $ 5,268,553$ 4,683,144$ 4,490,804 Adjusted Return on Average Assets 0.89% 0.71% 0.88% Adjusted Return on Average Shareholders' Equity Adjusted Net Income $ 46,907 $ 33,076 $ 39,382 Average Shareholders' Equity $ 483,828 $ 440,763 $ 410,478 Adjusted Return on Average Shareholders' Equity 9.69% 7.50% 9.59% Adjusted Return on Average Tangible Common Equity Adjusted Net Income Available to Common Shareholders $ 42,853 $ 29,022 $ 35,328 Average Tangible Common Equity $ 397,927 $ 371,042 $ 341,117 Adjusted Return on Average Tangible Common Equity 10.77% 7.82% 10.36%
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Table of Contents 78 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk As a financial institution, the Company’s primary market risk is interest rate risk, which is definedas the risk of loss of net interest income or net interest margin because of changes in interest rates. TheCompany continually seeks to measure and manage the potential impact of interest rate risk. Interest raterisk occurs when interest earning assets and interest bearing liabilities mature or re-price at differenttimes, on a different basis or in unequal amounts. Interest rate risk also arises when assets and liabilitieseach respond differently to changes in interest rates. The Company’s management of interest rate risk is overseen by its ALM Committee, based on arisk management infrastructure approved by the board of directors that outlines reporting andmeasurement requirements. In particular, this infrastructure sets limits and management targets forvarious metrics, including net interest income simulation involving parallel shifts in interest rate curves,steepening and flattening yield curves, and various prepayment and deposit duration assumptions. TheCompany’s risk management infrastructure also requires a periodic review of all key assumptions used,such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historicalanalysis and noninterest bearing and interest bearing transaction deposit durations based on historicalanalysis. The Company does not engage in speculative trading activities relating to interest rates, foreignexchange rates, commodity prices, equities or credit. The Company manages the interest rate risk associated with interest earning assets by managingthe interest rates and terms associated with the investment securities portfolio by purchasing and sellinginvestment securities from time to time. The Company manages the interest rate risk associated withinterest bearing liabilities by managing the interest rates and terms associated with wholesale borrowingsand deposits from customers which the Company relies on for funding. For example, the Companyoccasionally uses special offers on deposits to alter the interest rates and terms associated with interestbearing liabilities. The Company has entered into certain hedging transactions including fair value swaps andinterest rate swaps and caps, which are designed to lessen elements of the Company’s interest rateexposure. Fair value swaps are used to mitigate the effect of changing interest rates on the fair values offixed rate available for sale securities. At December 31, 2025 and 2024, these fair value hedges had atotal notional amount of $242.3 million and $145.9 million, respectively. Cash flow hedge relationshipsmitigate exposure to the variability of future cash flows or other forecasted transactions. The Companyutilizes cash flow hedges to manage interest rate exposure for the brokered deposit and wholesaleborrowing portfolios. At December 31, 2025 and 2024, these cash flow hedges had a total notionalamount of $388.0 million and $303.0 million, respectively. In the event that interest rates do not change inthe manner anticipated, such transactions may adversely affect the Company’s results of operations. Net Interest Income Simulation The Company uses a net interest income simulation model to measure and evaluate potentialchanges in net interest income that would result over the next 12 months from immediate and sustainedchanges in interest rates as of the measurement date. This model has inherent limitations and the resultsare based on a given set of rate changes and assumptions as of a certain point in time. For purposes ofthe simulation, the Company assumes no growth in either interest-sensitive assets or liabilities over thenext 12 months; therefore, the model’s results reflect an interest rate shock to a static balance sheet. Thesimulation model also can incorporate various other assumptions, which the Company believes arereasonable but which may have a significant impact on results, such as: (1) the timing of changes ininterest rates, (2) shifts or rotations in the yield curve, (3) re-pricing characteristics for market-rate-sensitive instruments, (4) differing sensitivities of financial instruments due to differing underlying rateindices, (5) varying loan prepayment speeds for different interest rate scenarios, (6) the effect of interestrate limitations in assets, such as floors and caps, and (7) overall growth and repayment rates andproduct mix of assets and liabilities. Because of the limitations inherent in any approach used to measureinterest rate risk, simulation results are not intended as a
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Table of Contents 79 forecast of the actual effect of a change in market interest rates on the results, but rather as a means tobetter plan and execute appropriate asset-liability management strategies and to manage interest raterisk. Potential changes to the Company’s net interest income in hypothetical rising and declining ratescenarios calculated as of December 31, 2025 and 2024, are presented in the table below. Theprojections assume an immediate, parallel shift downward of the yield curve of 100, 200, 300, and 400basis points and immediate, parallel shifts upward of the yield curve of 100, 200, 300 and 400 basispoints. (dollars in thousands) December 31, 2025 December 31, 2024 Change (basis points) Forecasted Percentage Forecasted Percentagein Interest Rates Net Interest Change Net Interest Change(12-Month Projection) Income from Base Income from Base +400 $ 156,625 (6.09)% $ 130,390 (6.00)%+300 159,606 (4.30) 132,605 (4.40)+200 162,132 (2.79) 134,355 (3.14)+100 164,454 (1.40) 136,411 (1.66)0 166,785 — 138,708 —−100 173,029 3.74 143,038 3.12−200 182,394 9.36 147,997 6.70−300 193,779 16.18 153,515 10.67−400 199,357 19.53 158,778 14.47 The table above indicates that as of December 31, 2025, in the event of an immediate andsustained 400 basis point increase in interest rates, the Company would experience a 6.09% decrease innet interest income. In the event of an immediate 400 basis point decrease in interest rates, the Companywould experience a 19.53% increase in net interest income. The results of this simulation analysis are hypothetical, and a variety of factors might cause actualresults to differ substantially from what is depicted. For example, if the timing and magnitude of interestrate changes differ from those projected, net interest income might vary significantly. Non-parallel yieldcurve shifts such as a flattening or steepening of the yield curve or changes in interest rate spreads wouldalso cause net interest income to be different from that depicted. An increasing interest rate environmentcould reduce projected net interest income if deposits and other short-term liabilities re-price faster thanexpected or re-price faster than the Company’s assets. Actual results could differ from those projected ifthe Company grows assets and liabilities faster or slower than estimated, if the Company experienced anet outflow of deposit liabilities, or if the mix of assets and liabilities otherwise changes. Actual resultscould also differ from those projected if the Company experienced substantially different prepaymentspeeds in the loan portfolio than those assumed in the simulation model. Finally, these simulation resultsdo not contemplate all the actions that the Company may undertake in response to potential or actualchanges in interest rates, such as changes to the Company’s loan, investment, deposit, or fundingstrategies.
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Table of Contents 80 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Bridgewater Bancshares, Inc. Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Bridgewater Bancshares, Inc. and itssubsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income,comprehensive income, shareholders’ equity and cash flows for each of the three years in the period endedDecember 31, 2025, and the related notes to the consolidated financial statements (collectively, the financialstatements). In our opinion, the financial statements present fairly, in all material respects, the financial positionof the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows foreach of the three years in the period ended December 31, 2025, in conformity with accounting principlesgenerally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025,based on criteria established in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission in 2013, and our report dated February 25, 2026expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on the Company’s financial statements based on our audits. We are a public accountingfirm registered with the PCAOB and are required to be independent with respect to the Company in accordancewith U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement, whether due to error or fraud. Our audits included performing procedures to assess therisks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the financialstatements that was communicated or required to be communicated to the audit committee and that: (1) relatesto accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective or complex judgments. The communication of the critical audit matter does not alter inany way our opinion on the financial statements, taken as a whole, and we are not, by communicating thecritical audit matter below, providing a separate opinion on the critical audit matter or on the accounts ordisclosures to which it relates. Allowance for credit losses on loansAs described in Notes 1 and Note 6 to the consolidated financial statements, the allowance for credit losses onloans (allowance) totaled $56.4 million at December 31, 2025. The allowance is a valuation account that isdeducted from the Company’s amortized cost basis of loans to present the net amount of loans for investmentexpected to be collected over their contractual life. The allowance is measured on a collective or pooled basiswhen similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on anindividual basis at the balance sheet date. At December 31, 2025 the general reserve on loans collectivelyevaluated for impairment totaled $52.6 million and there was $3.8 million on loans individually evaluated. The measurement of the allowance is based on relevant available information from internal and externalsources, related to past events, current conditions and reasonable and supportable forecasts. The Companyuses the weighted-average
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Table of Contents 81 remaining maturity (WARM) method as a basis for estimated expected credit loss. The WARM method uses ahistorical average annual charge off rate. This average annual charge off rate contains loss content over ahistorical lookback period and is used as a foundation for estimating the allowance for the remainingoutstanding balances of loans by segment at the balance sheet date. The average annual charge off rate isapplied to the contractual term to determine the unadjusted historical charge off rate. The calculation of theunadjusted historical charge off rate is then adjusted for current conditions and for reasonable and supportableforecast periods through qualitative factors prior to being applied to the current balance of the loan segments. Forecast adjustments to the historical loss rate are based on a forecast of the U.S. national unemployment rate,a forecast of the difference between the 10-year and 3-month treasury rates, and the most recent availableBBB rated corporate bond spreads to U.S. Treasury securities, or BBB Spread. The forecast overlayadjustment for the reasonable and supportable forecast assumes an immediate reversion after a one-yearforecast period to historical loss rates for the remaining life of the respective loan segment. Qualitative factorsare used to cover losses that are expected but, in the Company’s assessment, may not be adequatelyrepresented in the quantitative (historical loss factors) analysis or the forecasts described above. Thesequalitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are notreflected in the historic loss factors. Each qualitative loss factor, for each loan segment within the portfolio,incorporates consideration for a minimal to maximum range for loss factors. These qualitative factoradjustments may increase or decrease the Company’s estimate of expected credit losses and are applied toeach loan segment. The qualitative factors applied to each loan segment include changes in lending policiesand procedures, general economic and business conditions, the nature, volume and terms of the loans, theexperience, depth and ability of lending staff, quality of the loan review function, the value of underlyingcollateral, competition, legal and regulatory factors, the volume and severity of watchlist and past due loans andthe level of concentrations. We identified the qualitative factors and forecasted adjustments applied to the allowance as a critical auditmatter as auditing management’s determination of the qualitative factors required significant auditor judgementas the estimate is highly sensitive to changes in significant assumptions. Our audit procedures related to the Company’s qualitative factors and forecasted adjustments applied to theallowance included the following, among others: ● We obtained an understanding of the relevant controls related to the qualitative factors and forecastedadjustments applied to the allowance and tested such controls for design and operating effectiveness,including controls relating to management’s review and approval of the qualitative factors, forecastedadjustments and the underlying data used in determining those factors. ● We tested management’s process and evaluated the reasonableness of their judgments andassumptions to develop the qualitative factors and forecasted adjustments, which included: o Testing the accuracy and relevancy of the data inputs used by management as a basis for theadjustments for qualitative factors and forecasted adjustments by comparing to internal andexternal source data. o Evaluating the reasonableness of the magnitude and directional consistency of theadjustments for such. o Evaluating whether management’s conclusions were consistent with Company providedinternal data and external, independently sourced data and agreeing the impact to theallowance calculation /s/ RSM US LLP We have served as the Company’s auditor since 2022. Des Moines, IowaFebruary 25, 2026
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Table of Contents 82 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Bridgewater Bancshares, Inc. Opinion on the Internal Control Over Financial ReportingWe have audited Bridgewater Bancshares, Inc.’s (the Company) internal control over financial reporting as ofDecember 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Companymaintained, in all material respects, effective internal control over financial reporting as of December 31, 2025,based on criteria established in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission in 2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2025 and 2024, the consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes to the consolidated financial statements of the Company and our report dated February 25, 2026 expressed an unqualified opinion. Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financial reporting in the accompanyingManagement’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinionon the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance withU.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we planand perform the audit to obtain reasonable assurance about whether effective internal control over financialreporting was maintained in all material respects. Our audit included obtaining an understanding of internalcontrol over financial reporting, assessing the risk that a material weakness exists, and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Our audit also includedperforming such other procedures as we considered necessary in the circumstances. We believe that our auditprovides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reportingincludes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statementsin accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company;and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, useor disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate. /s/ RSM US LLPDes Moines, IowaFebruary 25, 2026
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Table of Contents 83 Bridgewater Bancshares, Inc. and SubsidiariesConsolidated Balance Sheets(dollars in thousands, except share data) December 31, December 31, 2025 2024 ASSETS Cash and Cash Equivalents $ 123,511 $ 229,760 Bank-Owned Certificates of Deposit — 4,377 Securities Available for Sale, at Fair Value 776,441 768,247 Loans, Net of Allowance for Credit Losses of $56,443 at December 31, 2025, and $52,277 at December 31, 2024 4,244,108 3,809,436 Federal Home Loan Bank (FHLB) Stock, at Cost 21,122 19,297 Premises and Equipment, Net 51,576 49,533 Accrued Interest 18,929 17,711 Goodwill 11,982 11,982 Other Intangible Assets, Net 6,930 7,850 Bank-Owned Life Insurance 46,576 44,646 Other Assets 105,827 103,403 Total Assets $ 5,407,002$ 5,066,242 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 923,070$ 800,763 Interest Bearing 3,397,299 3,286,004 Total Deposits 4,320,369 4,086,767 Notes Payable — 13,750 FHLB Advances 399,500 359,500 Subordinated Debentures, Net of Issuance Costs 108,677 79,670 Accrued Interest Payable 3,227 4,008 Other Liabilities 58,134 64,612 Total Liabilities 4,889,907 4,608,307 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value; Authorized 10,000,000 Preferred Stock - Issued and Outstanding 27,600 Series A shares ($2,500 liquidation preference) at December 31, 2025 and 2024 66,514 66,514 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,759,970 at December 31, 2025 and 27,552,449 at December 31, 2024 278 276 Additional Paid-In Capital 98,287 95,088 Retained Earnings 351,455 309,421 Accumulated Other Comprehensive Income Gain (Loss) 561 (13,364) Total Shareholders' Equity 517,095 457,935 Total Liabilities and Equity $ 5,407,002$ 5,066,242 See accompanying notes to consolidated financial statements.
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Table of Contents 84 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) Year Ended December 31, December 31, December 31, 2025 2024 2023INTEREST INCOME Loans, Including Fees $ 233,190$ 204,731$ 191,402Investment Securities 38,688 33,927 26,245Other 9,970 7,240 4,708Total Interest Income 281,848 245,898 222,355 INTEREST EXPENSE Deposits 131,418 128,805 96,045Federal Funds Purchased 21 1,201 8,521Notes Payable 624 1,162 1,143FHLB Advances 11,465 8,554 7,489Subordinated Debentures 5,882 3,983 3,983Total Interest Expense 149,410 143,705 117,181 NET INTEREST INCOME 132,438 102,193 105,174Provision for (Recovery of) Credit Losses 6,050 3,525 (175) NET INTEREST INCOME AFTER PROVISION FOR (RECOVERY OF) CREDIT LOSSES 126,388 98,668 105,349 NONINTEREST INCOME Customer Service Fees 2,013 1,475 1,455Net Gain (Loss) on Sales of Available for Sale Securities 614 385 (33)Net Gain on Sales of Foreclosed Assets — 62 —Letters of Credit Fees 1,829 1,976 1,746Debit Card Interchange Fees 640 593 595Swap Fees 1,631 547 —Bank-Owned Life Insurance 1,661 1,327 992Investment Advisory Fees 973 — —FHLB Prepayment Income 301 — 792Other Income 1,253 1,003 946Total Noninterest Income 10,915 7,368 6,493 NONINTEREST EXPENSE Salaries and Employee Benefits 47,397 39,564 36,538Occupancy and Equipment 4,945 4,399 4,447FDIC Insurance Assessment 2,745 2,959 3,690Data Processing 2,519 1,697 1,574Professional and Consulting Fees 4,769 3,879 3,081Derivative Collateral Fees 1,369 1,821 1,900Information Technology and Telecommunications 3,891 3,325 2,889Marketing and Advertising 2,138 1,485 1,129Intangible Asset Amortization 921 78 100Other Expense 6,577 4,093 3,972Total Noninterest Expense 77,271 63,300 59,320 INCOME BEFORE INCOME TAXES 60,032 42,736 52,522Provision for Income Taxes 13,944 9,911 12,562NET INCOME 46,088 32,825 39,960Preferred Stock Dividends (4,054) (4,054) (4,054)NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 42,034 $ 28,771 $ 35,906 EARNINGS PER SHARE Basic $ 1.53 $ 1.05 $ 1.29Diluted 1.49 1.03 1.27Dividends Paid Per Common Share — — — See accompanying notes to consolidated financial statements.
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Table of Contents 85 Bridgewater Bancshares, Inc. and SubsidiariesConsolidated Statements of Comprehensive Income(dollars in thousands) Year Ended December 31, December 31, December 31, 2025 2024 2023 Net Income $ 46,088 $ 32,825 $ 39,960Other Comprehensive Income (Loss): Unrealized Gains on Available for Sale Securities 29,313 5,967 3,339Unrealized Gains (Losses) on Cash Flow Hedges (2,673) 10,515 2,299Reclassification Adjustment for Gains Realized inIncome (7,098) (9,630) (6,069)Income Tax Impact (5,617) (1,970) 127Total Other Comprehensive Income (Loss), Net of Tax 13,925 4,882 (304)Comprehensive Income $ 60,013 $ 37,707 $ 39,656 See accompanying notes to consolidated financial statements.
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Table of Contents 86 Bridgewater Bancshares, Inc. and SubsidiariesConsolidated Statements of Shareholders’ Equity(amounts in thousands, except share data) AccumulatedAdditional OtherPreferred Common StockPaid-In RetainedComprehensiveYear Ended Stock Shares Amount Capital Earnings Income (Loss) Total BALANCE December 31, 2022 $ 66,51427,751,950$ 278 $ 96,529$248,685$ (17,942) $394,064Cumulative Effect of the Adoption of ASU 2016-13 — — — — (3,920) — (3,920)Cumulative Effect of the Adoption of ASU 2023-02 — — — — (21) — (21)Balance as of January 1, 2023, as Adjusted forChange in Accounting Principles 66,51427,751,950 278 96,529 244,744 (17,942) 390,123Stock-based Compensation — 44,753 — 3,954 — — 3,954Comprehensive Income (Loss) — — — — 39,960 (304) 39,656Stock Options Exercised — 305,950 3 960 — — 963Stock Repurchases — (423,749) (4) (4,537) — — (4,541)Forfeiture of Restricted Stock Awards — (250) — — — — —Vested Restricted Stock Units — 121,603 1 (1) — — —Restricted Shares Withheld for Taxes — (51,292) (1) (585) — — (586) Preferred Stock Dividend — — — — (4,054) — (4,054) BALANCE December 31, 2023 66,51427,748,965 277 96,320 280,650 (18,246) 425,515Stock-based Compensation — 38,724 — 3,905 — — 3,905Comprehensive Income — — — — 32,825 4,882 37,707Stock Options Exercised — 99,385 1 762 — — 763Stock Repurchases — (446,509) (4) (5,190) — — (5,194)Vested Restricted Stock Units — 160,630 2 (2) — — —Restricted Shares Withheld for Taxes — (48,746) — (707) — — (707) Preferred Stock Dividend — — — — (4,054) — (4,054) BALANCE December 31, 2024 66,51427,552,449 276 95,088 309,421 (13,364) 457,935Stock-based Compensation — 30,728 — 4,199 — — 4,199Comprehensive Income — — — — 46,088 13,925 60,013Stock Options Exercised — 233,934 2 1,937 — — 1,939Stock Repurchases — (167,709) (1) (2,190) — — (2,191)Vested Restricted Stock Units — 154,473 2 (2) — — —Restricted Shares Withheld for Taxes — (43,905) (1) (745) — — (746) Preferred Stock Dividend — — — — (4,054) — (4,054) BALANCE December 31, 2025 $ 66,51427,759,970$ 278 $ 98,287$351,455$ 561 $517,095 See accompanying notes to consolidated financial statements.
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Table of Contents 87 Bridgewater Bancshares, Inc. and SubsidiariesConsolidated Statements of Cash Flows(dollars in thousands) December 31, 2025December 31, 2024December 31, 2023CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 46,088$ 32,825$ 39,960Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net Amortization on Securities Available for Sale (3,639) (1,358) 10Net (Gain) Loss on Sales of Securities Available for Sale (614) (385) 33Provision for Credit Losses on Loans and Leases 5,650 2,900 2,050Provision (Credit) for Off-Balance Sheet Exposures 400 625 (2,225)Loan Discount Accretion (1,693) — —Depreciation of Premises and Equipment 2,468 2,368 2,509Loss on Disposal of Premises and Equipment 6 — 20Amortization of Other Intangible Assets 921 78 100Amortization of Right-of use Asset 558 559 534Cash Surrender Value of Bank-Owned Life Insurance (1,661) (1,326) (992)Amortization of Subordinated Debt Issuance Costs 402 382 383Net Gain on Sales of Foreclosed Assets — (62) —Stock-based Compensation 4,199 3,905 3,954Deferred Income Taxes (2,004) 24 676Remeasurement of Interest Rate Swap (30) — —Changes in Operating Assets and Liabilities: Accrued Interest Receivable and Other Assets (13,947) 2,364 (20,902)Accrued Interest Payable and Other Liabilities (9,292) 3,477 3,905Net Cash Provided by Operating Activities 27,812 46,376 30,015 CASH FLOWS FROM INVESTING ACTIVITIES Decrease in Bank-Owned Certificates of Deposit 4,377 — 1,181Proceeds from Sales of Securities Available for Sale 76,953 101,612 28,756Proceeds from Maturities, Paydowns, Payups and Calls of Securities Available for Sale 153,875 65,600 32,747Purchases of Securities Available for Sale (206,101) (245,175) (113,648)Net Increase in Loans (438,814) (26,247) (157,874)Purchase of FHLB Stock (59,690) (88,772) (87,091)Redemption of FHLB Stock 57,865 86,824 89,600Purchases of Premises and Equipment (5,847) (4,080) (2,970)Proceeds from Sales of Foreclosed Assets 185 496 116Cash Received, Net of Cash Paid for Acquisition — 17,284 —Purchase of Bank-Owned Life Insurance (4,630) (2,778) —Redemption of Bank-owned Life Insurance 4,361 — —Net Cash Used in Investing Activities (417,466) (95,236) (209,183) CASH FLOWS FROM FINANCING ACTIVITIES Net Increase in Deposits 233,602 119,250 293,405Net Decrease in Federal Funds Purchased — — (287,000)Principal Payment on Notes Payable (13,750) — —Proceeds from FHLB Advances 1,234,500 997,000 679,500Principal Payments on FHLB Advances (1,194,500) (957,000) (457,000)Issuance of Subordinated Debt, net of Issuance Costs 78,605 — —Redemption of Subordinated Debt (50,000) — —Preferred Stock Dividends Paid (4,054) (4,054) (4,054)Stock Options Exercised 1,939 763 963Stock Repurchases (2,191) (5,194) (4,541)Shares Repurchased for Tax Withholdings Upon Vesting of Restricted Stock-Based Awards (713) (634) (457)Shares Repurchased for Tax Withholdings Upon Exercise of Stock Options (33) (73) (129)Net Cash Provided by Financing Activities 283,405 150,058 220,687 NET CHANGE IN CASH AND CASH EQUIVALENTS (106,249) 101,198 41,519Cash and Cash Equivalents Beginning 229,760 128,562 87,043Cash and Cash Equivalents Ending $ 123,511$ 229,760$ 128,562 See accompanying notes to consolidated financial statements.
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Table of Contents 88 Bridgewater Bancshares, Inc. and SubsidiariesConsolidated Statements of Cash Flows(dollars in thousands) December 31, 2025December 31, 2024December 31, 2023SUPPLEMENTAL CASH FLOW DISCLOSURE Cash Paid for Interest $ 149,789$ 144,596$ 114,347Cash Paid for Income Taxes Federal $ 8,300$ 2,850$ 5,650Minnesota 5,748 2,766 4,639Other States (1) 235 137 99Total Cash Paid for Income Taxes $ 14,283$ 5,753$ 10,388 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIESLoans Transferred to Foreclosed Assets $ 185$ 434$ 116Premises and Equipment Transferred to Other Assets 1,330 — —Acquisition:Fair Value of Assets Acquired $ —$ 282,229$ —Fair Value of Liabilities Assumed — 258,489 —Net Assets Acquired $ —$ 23,740$ — (1) Jurisdiction below the 5 percent of total income taxes paid (net of refunds) threshold for the periods presented. See accompanying notes to consolidated financial statements.
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Table of Contents 89 Bridgewater Bancshares, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 1: Description of the Business and Summary of Significant Accounting Policies Organization Bridgewater Bancshares, Inc. (the “Company”) is a financial holding company headquartered inSt. Louis Park, Minnesota, whose operations consist of the ownership of its wholly-owned bankingsubsidiary: Bridgewater Bank (the “Bank”). The Bank commenced operations in 2005 and provides retailand commercial loan and deposit services, principally to customers within the Twin Cities MSA. In 2008,the Bank formed BWB Holdings, LLC, a wholly owned subsidiary of the Bank, for the purpose of holdingrepossessed property. In 2018, the Bank formed Bridgewater Investment Management, Inc., a whollyowned subsidiary of the Bank, for the purpose of holding certain municipal securities and to engage inmunicipal lending activities. Recent Developments On June 24, 2025, the Company entered into a Subordinated Note Purchase Agreement withcertain institutional accredited investors and qualified institutional buyers pursuant to which the Companysold and issued $80.0 million in aggregate principal amount of its 7.625% Fixed-to-Floating RateSubordinated Notes due 2035 (the “Notes”). The Notes were issued by the Company to such purchasersat a price equal to 100% of their face amount. The Company used the net proceeds it received from thesale of the Notes to redeem $50 million of outstanding 5.25% Fixed-to-Floating Rate Subordinated Notesdue 2030 and for general corporate purposes. On July 4, 2025, the U.S. government enacted tax legislation commonly referred to as the OneBig Beautiful Bill Act. The Company evaluated the impact of the legislation in accordance with ASC 740and determined that it did not have a material effect on the Company’s consolidated financial statementsfor the year ended December 31, 2025. On September 30, 2025, the Company announced its plan to close its Country Village branchlocation, effective December 29, 2025, given the close proximity to its other locations. In February 2026, the Company opened a new branch location in Lake Elmo, Minnesota toexpand the Company’s presence in the eastern side of the Twin Cities market. Principles of Consolidation The consolidated financial statements include the amounts of the Company, the Bank, withlocations in Bloomington, Greenwood, Minneapolis (2), Minnetonka, Orono, St. Louis Park, and St. Paul,Minnesota, BWB Holdings, LLC, and Bridgewater Investment Management, Inc. All significantintercompany balances and transactions have been eliminated in consolidation. Use of Estimates in Preparation of Financial Statements The preparation of consolidated financial statements in conformity with GAAP requiresmanagement to make estimates and assumptions that affect the reported amounts of assets andliabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financialstatements, and the reported amounts of revenue and expenses during the reporting period. Actualresults could differ from those estimates. Information available which could affect judgments includes, butis not limited to, changes in interest rates, changes in the performance of the economy, including elevatedlevels of inflation and possible recession, and changes in the financial condition of borrowers.
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Table of Contents 90 Material estimates that are particularly susceptible to significant change in the near term includethe determination of the allowance for credit losses (“ACL”). Business Combinations Business combinations are accounted for under the acquisition method of accounting inaccordance with ASC 805, Business Combinations. Under the acquisition method, the acquiring entity in abusiness combination recognizes all of the acquired assets and assumed liabilities at their estimated fairvalues as of the date of acquisition. Any excess of the purchase price over the fair value of net assets andother identifiable intangible assets acquired is recorded as goodwill. To the extent the fair value of netassets acquired, including identified intangible assets, exceeds the purchase price, a bargain purchasegain is recognized. Assets acquired and liabilities assumed from contingencies are also recognized at fairvalue if the fair value can be determined during the measurement period. Results of operations of anacquired business are included in the Consolidated Statements of Income from the date of acquisition.Acquisition-related costs, including conversion and restructuring charges, are expensed as incurred. Cash and Cash Equivalents For purpose of the consolidated statements of cash flows, cash and cash equivalents includecash, both interest bearing and noninterest bearing balances due from banks and federal funds sold, all ofwhich mature within 90 days. Cash flows from loans, deposits, federal funds purchased and notespayable are reported net. Bank-Owned Certificates of Deposit Bank-owned certificates of deposit mature within five years and are carried at cost. Securities Available for Sale Debt securities are classified as available for sale and are carried at fair value with unrealizedgains and losses reported in other comprehensive income (loss). Realized gains and losses on securitiesavailable for sale are included in noninterest income and, when applicable, are reported as areclassification adjustment, net of tax, in other comprehensive income (loss). Gains and losses on salesof securities are determined using the specific identification method on the trade date. The amortization ofpremiums and accretion of discounts are recognized in interest income over the estimated life (earliestcall date, maturity, or estimated life) using a prospective method that approximates level yield. Loans Loans that management has the intent and ability to hold for the foreseeable future or untilmaturity or pay-off generally are reported at their outstanding unpaid balances adjusted for charge-offs,the allowance for credit losses, any deferred fees or costs on originated loans, and premiums or discountson purchased loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certaindirect origination costs, as well as premiums and discounts, are deferred and recognized as anadjustment of the related loan yield using the interest method. Amortization of deferred loan fees isdiscontinued when a loan is placed on nonaccrual status. The accrual of interest on all loans is discontinued if the loan is 90 days past due unless the creditis well-secured and in process of collection. Past due status is based on contractual terms of the loan. Inall cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal orinterest is considered doubtful.
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Table of Contents 91 All interest accrued, but not collected for loans that are placed on nonaccrual or charged-off isreversed against interest income and amortization of related deferred loan fees or costs is suspended.The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifyingfor return to accrual. The cash-basis is used when a determination has been made that the principal andinterest of the loan is collectible. If collectability of the principal and interest is in doubt, payments areapplied to loan principal. The determination of ultimate collectability is supported by a current, welldocumented credit evaluation of the borrower’s financial condition and prospects for repayment, includingconsideration of the borrower’s sustained historical repayment performance and other relevant factors.Loans are returned to accrual status when all the principal and interest amounts contractually due arebrought current, the borrower has demonstrated a period of sustained performance, and future paymentsare reasonably assured. A sustained period of repayment performance generally would be a minimum ofsix months. Loans – Acquired Loans purchased in acquisition transactions are acquired loans, and are recorded at theirestimated fair value on the acquisition date. Acquired loans that have evidence of more-than-insignificantdeterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans.At acquisition, an estimate of expected credit losses is made for PCD loans. This initial allowance forcredit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fairvalue to establish the initial amortized cost basis of the PCD loans. Any difference between the unpaidprincipal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors,resulting in a discount or premium that is amortized to interest income. For acquired loans not deemedPCD loans at acquisition, the difference between the initial fair value mark and the unpaid principalbalance are recognized in interest income over the estimated life of the loans. In addition, an initialallowance for expected credit losses is estimated and recorded as provision expense at the acquisitiondate. The subsequent measurement of expected credit losses for all acquired loans is the same as thesubsequent measurement of expected credit losses for originated loans. Allowance for Credit Losses Securities Available for Sale For any securities classified as available for sale that are in an unrealized loss position at thebalance sheet date, the Company assesses whether or not it intends to sell the security, or if it is morelikely than not it will be required to sell the security, before recovery of its amortized cost basis. If eithercriteria is met, the security's amortized cost basis is written down to fair value through income with theestablishment of an allowance. For securities that do not meet the aforementioned criteria, the Companyevaluates whether any portion of the decline in fair value is the result of credit deterioration. In making thisassessment, management considers the extent to which the amortized cost of the security exceeds its fairvalue, changes in credit ratings and any other known adverse conditions related to the specific security,among other factors. If the assessment indicates that a credit loss exists, an allowance for credit losses isrecorded for the amount by which the amortized cost basis of the security exceeds the present value ofcash flows expected to be collected, limited by the amount by which the amortized cost exceeds fairvalue. Any credit loss not recognized in the allowance for credit losses is recognized in othercomprehensive income. Changes in the ACL on securities are recorded as a provision for (or recovery of) credit lossexpense. Losses are charged against the allowance when management believes the uncollectibility of asecurity is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accruedinterest receivable on securities available for sale is excluded from the estimate of credit losses. Loans The ACL on loans is a valuation account that is deducted from the amortized cost basis of loansto present the net amount expected to be collected on loans over their contractual life. The contractualterm does not consider
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Table of Contents 92 extensions, renewals or modifications. Loans are charged off against the ACL on loans whenmanagement believes the uncollectibility of a loan balance has been confirmed. Recoveries do notexceed the aggregate of amounts previously charged off or expected to be charged off. Subsequentrecoveries, if any, are credited to the ACL on loans. The ACL on loans is measured on a collective or pooled basis when similar risk characteristicsexist. The Company’s pooling method is primarily based on loan purpose and collateral type and generallyfollows the Company’s loan segmentation for regulatory reporting. The Company has identified thefollowing pools of loans with similar risk characteristics for measuring the ACL on loans: Commercial: Commercial loans generally are loans to sole proprietorships, partnerships,corporations, and other business enterprises to finance working capital, capital investment, or for otherbusiness related purposes. Collateral generally consists of pledges of business assets or interests,including but not limited to accounts receivable, inventory, plant and equipment, and real estate interests,if applicable. The primary repayment sources for commercial loans are the cash flow of the operatingbusinesses which can be adversely affected by company, industry and economic business cycles.Commercial loans may be secured or unsecured. Leases: The lease portfolio consists primarily of business purpose auto loans, managed througha select number of third parties. Leases are generally secured by an assignment of the lease. Repaymentof leases is highly reliant on employment income. The primary risk characteristics associated with leasestypically include major changes to the borrower’s financial or personal circumstances, includingunemployment or other loss of income, significant unexpected expenses, such as major medicalexpenses, catastrophic events, divorce or death. Construction and Land Development: Construction and land development loans are generallyloans to finance land development or the construction of industrial, commercial, or multifamily buildings.Construction loans can include construction of new structures, additions or alterations to existingstructures, or the demolition of existing structures to make way for new structures. Construction loans aregenerally secured by real estate. The primary risk characteristics are specific to the uncertainty onwhether the construction will be completed according to the specifications and schedules and the relianceon the sale of the completed project as the primary repayment source for the loan. Factors that mayinfluence the completion of construction may be customer specific, such as the quality and depth ofproperty management, or related to changes in general economic conditions. Trends in the commercialand residential construction industries can significantly impact the credit quality of these loans due tosupply and demand imbalances. In addition, fluctuations in real estate values can significantly impact thecredit quality of these loans, as property values may determine the economic viability of constructionprojects and adversely impact the value of the collateral securing the loan. 1-4 Family Construction: 1-4 family construction loans are generally loans to finance theconstruction of new structures, additions or alterations to existing structures, or the demolition of existingstructures to make way for new structures. 1-4 family construction loans are generally secured by realestate. The primary risk characteristics are specific to the uncertainty on whether the construction will becompleted according to the specifications and schedules. Factors that may influence the completion of 1-4 family construction may be customer specific or related to changes in general economic conditions. 1-4 Family Mortgage: 1-4 family mortgage loans are generally loans to finance loans on owneroccupied and nonowner occupied properties. 1-4 family mortgage loans are secured by first or secondliens on the property. The degree of risk in residential mortgage lending involving owner occupiedproperties depends primarily on the borrower’s ability to repay and the loan amount in relation to collateralvalue. Economic trends determined by unemployment rates and other key economic indicators are closelycorrelated to the credit quality of these loans. Weak economic trends indicate that the borrower’s capacityto repay their obligations may be deteriorating. 1-4 family mortgage loans include credits to financenonowner occupied properties used as rentals. These loans can involve additional risks as the borrower’sability to repay is based on the net operating income from the property which can be
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Table of Contents 93 impacted by occupancy levels, rental rates, and operating expenses. Declines in net operating incomecan negatively impact the value of the property which increases the credit risk in the event of default. Multifamily: Multifamily loans are loans to finance multifamily properties. The primary source ofrepayment for multifamily loans is the cash flows of the underlying property. The primary riskcharacteristics include increases in vacancy rates, overbuilt supply, interest rates or changes in generaleconomic conditions. Economic factors such as unemployment, wage growth and home affordability canimpact vacancy rates and property cash flow. Commercial Real Estate (CRE) Owner Occupied: Owner occupied commercial real estate loansare properties that are owned and operated by the borrower and the primary source for repayment is thecash flow from the ongoing operations and activities conducted by the borrower’s business. The primaryrisk characteristics are specific to the underlying business and its ability to generate sustainableprofitability and positive cash flow. Also, certain types of businesses also may require specialized facilitiesthat can increase costs and may not be economically feasible to an alternative user, which couldadversely impact the market value of the collateral. Factors that may influence a borrower's ability torepay their loan include demand for the business’ products or services, the quality and depth ofmanagement, the degree of competition, regulatory changes, and general economic conditions. Commercial Real Estate (CRE) Nonowner Occupied: Nonowner occupied commercial real estateloans are investment properties and the primary source for repayment of the loan is derived from rentalincome associated with the property or proceeds of the sale of the property. Nonowner occupiedcommercial real estate loans consist of mortgage loans to finance investments in real property that mayinclude, but are not limited to, commercial/retail office space, industrial/warehouse space, hotels, assistedliving facilities and other specific use properties. The primary risk characteristics include impacts of overallleasing rates, absorption timelines, levels of vacancy rates and operating expenses, and generaleconomic conditions. Banks that are concentrated in commercial real estate lending are subject toadditional regulatory scrutiny and must employ enhanced risk management practices. Consumer and Other: Consumer and other loans generally include personal lines of credit andamortizing loans made to qualified individuals for various purposes such as auto loans, debt consolidationloans, personal expense loans or overdraft protection. The primary risk characteristics associated withconsumer and other loans typically include major changes to the borrower’s financial or personalcircumstances, including unemployment or other loss of income, significant unexpected expenses, suchas major medical expenses, catastrophic events, divorce or death. Management assesses the adequacy of the ACL on loans on a quarterly basis. Managementestimates the ACL on loans using relevant available information, from internal and external sources,relating to past events, current conditions, and reasonable and supportable forecasts. The Company usesthe weighted-average remaining maturity, or WARM, method as the basis for estimating expected creditlosses. The WARM method uses a historical average annual charge-off rate. This average annual charge-off rate contains loss content over a historical lookback period and is used as a foundation for estimatingthe ACL on loans for the remaining outstanding balances of loans by segment at the balance sheet date.The average annual charge-off rate is applied to the contractual term to determine the unadjustedhistorical charge-off rate. The calculation of the unadjusted historical charge-off rate is then adjusted forcurrent conditions and for reasonable and supportable forecast periods through qualitative factors prior tobeing applied to the current balance of the loan segments. Accrued interest receivable on loans availablefor sale is excluded from the estimate of credit losses. Forecast adjustments to the historical loss rate are based on a forecast of the U.S. nationalunemployment rate, a forecast of the difference between the 10-year and 3-month treasury rates, and themost recent available BBB rated corporate bond spreads to U.S. Treasury securities, or BBB Spread. Theforecast overlay adjustment for the reasonable and supportable forecast assumes an immediate reversionafter a one-year forecast period to historical loss rates for the remaining life of the respective loansegment.
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Table of Contents 94 Qualitative factors are used to cover losses that are expected but, in the Company’s assessment,may not be adequately represented in the quantitative analysis or the forecasts described above. Thesequalitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that arenot reflected in the historic loss factors. Each qualitative loss factor, for each loan segment within theportfolio, incorporates consideration for a minimum to maximum range for loss factors. These qualitativefactor adjustments may increase or decrease the Company’s estimate of expected credit losses and areapplied to each loan segment. The qualitative factors applied to each loan segment include changes inlending policies and procedures, general economic and business conditions, the nature, volume andterms of loans, the experience, depth and ability of lending staff, the quality of the loan review function,the value of underlying collateral, competition, legal and regulatory factors, the volume and severity ofwatchlist and past due loans, and the level of concentrations. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluatedindividually are not included in the pooled evaluations and typically represent collateral dependent loansbut may also include other nonperforming loans or modifications. The Company has elected to use thepractical expedient to measure individually evaluated loans as collateral dependent when repayment isexpected to be provided substantially through the operation or sale of the collateral. The credit loss ismeasured as the difference between the amortized cost basis of the loan and the fair value of theunderlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repaymentor satisfaction of a loan is dependent on the sale of the collateral. Management may also adjust its assumptions to account for differences between expected andactual losses from period to period. The variability of management’s assumptions could alter the ACL onloans materially and impact future results of operations and financial condition. The loss estimationmodels and methods used to determine the allowance for credit losses are continually refined andenhanced. Off-Balance Sheet Credit Exposures The Company maintains a separate ACL on off-balance sheet credit exposures, includingunfunded loan commitments, financial guarantees, and letters of credit, which is included in otherliabilities on the consolidated balance sheet, unless the obligation is unconditionally cancellable. The ACLon off-balance sheet credit exposures is adjusted as a provision for (or recovery of) credit loss expense.The estimate includes consideration of the likelihood that funding will occur and an estimate of expectedcredit losses on commitments expected to be funded over the estimated life of such commitments. Theallowance is calculated using the same aggregate reserve rates calculated for the funded portion of theloan segment and applied to the amount of commitments expected to fund. Federal Home Loan Bank Stock The Bank is a member of FHLB Des Moines. Members are required to own a certain amount ofstock based on the level of borrowings and other factors, and may invest in additional amounts. Restrictedstock is carried at cost and periodically evaluated for impairment. Because this stock is viewed as a long-term investment, impairment is based on ultimate recovery at par value. Both cash and stock dividendsare reported as income. Premises and Equipment Land is stated at cost. Premises and equipment are stated at cost less accumulated depreciationon the straight-line method over the estimated useful lives of the assets. Leasehold improvements aredepreciated over the shorter of the estimated useful life or lease term for leasehold improvements.Premises and equipment are evaluated for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. Maintenance and repairs areexpensed as incurred while major additions and improvements are capitalized. Gains and losses ondispositions are included in current operations.
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Table of Contents 95 Construction in Process The Company capitalizes costs associated with assets under construction. Construction inprogress (“CIP”) represents expenditures for projects that are not yet ready for their intended use as ofthe balance sheet date. CIP is recorded at cost and is not depreciated until the related asset is placed intoservice. Upon completion, accumulated CIP balances are transferred to the appropriate premises andequipment category and depreciated over the asset’s estimated useful life. Foreclosed Assets Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recordedat fair value less estimated selling cost at the date of foreclosure, establishing a new cost basis. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance. Subsequentto foreclosure, valuations are periodically performed by management and the assets held for sale arecarried at the lower of the new cost basis or fair value less cost to sell. This evaluation is inherentlysubjective and requires estimates that are susceptible to significant revisions as more informationbecomes available. Impairment losses on assets to be held and used are measured at the amount by which thecarrying amount of a property exceeds its fair value. Costs relating to holding and improving assets areexpensed. Revenues and expenses from operations are included in other noninterest income andexpense on the income statement. Goodwill and Intangible Assets Intangible assets attributed to the value of core deposits and favorable lease terms are stated atcost less accumulated amortization and reported in other intangible assets in the consolidated balancesheets. Intangible assets are amortized on a straight-line basis over the estimated lives of the assets. The excess of purchase price over fair value of net assets acquired is recorded as goodwill and isnot amortized. The Company conducts an annual impairment test of goodwill in the third quarter of each year, ormore frequently if events or changes in circumstances indicate that is is more likely than not that the fairvalue of a reporting unit or asset is below its carrying amount. The Company evaluates goodwill forimpairment using a method that incorporates a qualitative assessment and, when necessary, aquantitative fair value analysis. There have been no indications or triggering events during the year endedDecember 31, 2025, for which management believes is more likely than not that goodwill is impaired. Leases Leases are classified as operating or finance leases at the lease commencement date. Leaseexpense for operating leases and short-term leases is recognized on a straight-line basis over the leaseteam. The Company includes lease extension and termination options in the lease term if, afterconsidering relevant economic factors, it is reasonably certain the Company will exercise the extension ortermination option. Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the leaseterm and lease liabilities represent the Company’s obligation to make lease payments arising from thelease. ROU assets and lease liabilities are recognized at the lease commencement date based on theestimated present value of the lease payments over the lease term. The Company's ROU asset isincluded in other assets and its lease liability is included in other liabilities in the accompanyingconsolidated balance sheets. The Company uses its incremental borrowing rate at lease commencementto calculate the present value of lease payments when the rate implicit in a lease is not known. TheCompany's incremental borrowing rate is based on the FHLB amortizing advance rate, adjusted for thelease term
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Table of Contents 96 and other factors. The Company has elected not to recognize leases with original terms of 12 months orless on the consolidated balance sheet. Bank-Owned Life Insurance The Company has purchased life insurance policies on certain key executives. Bank owned lifeinsurance is recorded at the amount that can be realized under the insurance contract at the balancesheet date, which is the cash surrender value adjusted for other charges or other amounts due that areprobable at settlement. Transfers of Financial Assets and Participating Interests Transfers of an entire financial asset or a participating interest in an entire financial asset areaccounted for as sales when control over the assets has been surrendered. Control over transferredassets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) thetransferee obtains the right (free of conditions that constrain it from taking advantage of that right) topledge or exchange the transferred assets, and (3) the Company does not maintain effective control overthe transferred assets through an agreement to repurchase them before maturity. The transfer of a participating interest in an entire financial asset must also meet the definition ofa participating interest. A participating interest in a financial asset has all of the following characteristics:(1) from the date of transfer, it must represent a proportionate (pro rata) ownership interest in the financialasset, (2) from the date of transfer, all cash flows received, except any cash flows allocated as anycompensation for servicing or other services performed, must be divided proportionately amongparticipating interest holders in the amount equal to their share ownership, (3) the rights of eachparticipating interest holder must have the same priority, and (4) no party has the right to pledge orexchange the entire financial asset unless all participating interest holders agree to do so. Advertising Advertising costs are expensed as incurred. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable totemporary differences between the financial statement carrying amounts of existing assets and liabilitiesand their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply to taxable income in the years in which those temporary differences are expected to berecovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognizedin income in the period that includes the enactment date. These calculations are based on many factors including estimates of the timing of reversals oftemporary differences, the interpretation of federal and state income tax laws, and a determination of thedifferences between the tax and the financial reporting basis of assets and liabilities. Actual results coulddiffer significantly from the estimates and interpretations used in determining the current and deferredincome tax liabilities. Under GAAP, a valuation allowance is required to be recognized if it is “more likely than not” thatthe deferred tax asset will not be realized. The determination of the realizability of the deferred tax assetsis highly subjective and dependent upon judgment concerning management’s evaluation of both positiveand negative evidence, the forecasts of future income, applicable tax planning strategies, andassessments of the current and future economic and business conditions. In preparation of the income tax returns, tax positions are taken based on interpretation of federaland state income tax laws. Management periodically reviews and evaluates the status of uncertain taxpositions and makes
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Table of Contents 97 estimates of amounts ultimately due or owed. The Company can recognize in financial statements theimpact of a tax position taken, or expected to be taken, if it is more likely than not that the position will besustained on audit based on the technical merit of the position. The Company recognizes both interestand penalties as a component of other noninterest expense. The amount of the uncertain tax positions was not deemed to be material. It is not expected thatthe unrecognized tax benefit will be material within the next 12 months. The Company did not recognizeany interest or penalties for the years ended December 31, 2025, 2024 and 2023. Tax Credit Investments The Company invests in qualified affordable housing projects and federal historic projects for thepurpose of community reinvestment and obtaining tax credits. These investments are included in otherassets on the balance sheet, with any unfunded commitments included within other liabilities. Thequalified affordable housing projects and federal historic projects are accounted for under the proportionalamortization method. Under the proportional amortization method, the initial cost of the investment isrecognized over the period that the Company expects to receive the tax credits, with the expenseincluded within income tax expense on the consolidated statements of income. Management analyzesthese investments for potential impairment when events or changes in circumstances indicate that it ismore likely than not that the carrying amount of the investment will not be realized. An impairment loss ismeasured as the amount by which the carrying amount of an investment exceeds its fair value. The Company is not required to consolidate variable interest entities in which it has concluded itdoes not have a controlling financial interest and is not the primary beneficiary. The Company's maximumexposure to loss related to its investments in these unconsolidated variable interest entities is limited tothe carrying amount of the investment, net of any unfunded capital commitments and previously recordedtax credits which remain subject to recapture by taxing authorities based on compliance features requiredto be met at the project level. Comprehensive Income Recognized revenue, expenses, gains, and losses are included in net income. Certain changes inassets and liabilities, such as unrealized gains and losses on securities available for sale and changes inthe fair value of derivative instruments designated as a cash flow hedge, are reported as a separatecomponent of the equity section of the consolidated balance sheets, such items, along with net income,are components of comprehensive income. Derivative Financial Instruments The Company uses derivative financial instruments, which consist of interest rate swaps, interestrate caps and fair value swaps, to assist in its interest rate risk management. All derivatives are measuredand reported at fair value on the Company’s consolidated balance sheet as other assets or otherliabilities. The accounting for changes in fair value (i.e., gains or losses) of a derivative instrumentdepends on whether it has been designated and qualifies as part of a hedging relationship. If thederivative instrument is not designated as a hedge, changes in the fair value of the derivative instrumentare recognized in earnings, specifically in noninterest income. The Company does not use derivativeinstruments for trading or speculative purposes. The Company enters into interest rate swaps to facilitate client transactions and meet theirfinancing needs. Upon entering into these instruments to meet client needs, the Company enters intooffsetting positions with large U.S. and international financial institutions in order to minimize the risk tothe Company. These swaps are derivatives, but are not designated as hedging instruments. Cash flow hedges represent a hedge of a forecasted transaction or the variability of cash flows tobe received or paid related to a recognized asset or liability. The Company prepares written hedgedocumentation for all
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Table of Contents 98 derivatives which are designed as hedges. The written hedge documentation includes identification of,among other items, the risk management objective, hedging instrument, hedged item and methodologiesfor assessing and measuring hedge effectiveness and ineffectiveness, along with support formanagement's assertion that the hedge will be highly effective. Assessments of hedge effectiveness andmeasurements of hedge ineffectiveness are performed at least quarterly. For a cash flow hedge that iseffective, the gain or loss on the derivative is reported as a component in other comprehensive income(loss) and is reclassified into earnings in the same periods during which the hedged transaction affectsearnings. The changes in the fair value of derivatives that are not highly effective in hedging the changesin expected cash flows of the hedged item are recognized immediately in current earnings. To determinefair value, the Company uses third party pricing models that incorporate assumptions about marketconditions and risks that are current at the reporting date. The Company enters into fair value hedges to mitigate the effect of changing interest rates on thefair value of fixed rate available for sale securities. The gain or loss on a given derivative instrument, aswell as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk, arerecognized in current earnings. The gain or loss on the derivative instrument is presented on the sameincome statement line item as the earnings effect of the corresponding hedged item. The Companyprepares written hedge documentation for all derivatives which are designed as hedges. The writtenhedge documentation includes identification of, among other items, the risk management objective,hedging instrument, hedged item and methodologies for assessing and measuring hedge effectivenessand ineffectiveness, along with support for management's assertion that the hedge will be highly effective. Net cash settlements on derivatives that qualify for hedge accounting are recorded in interestincome or interest expense, based on the item being hedged. Net cash settlements on derivatives that donot qualify for hedge accounting are reported in noninterest income. Hedge accounting is discontinued prospectively when a derivative no longer qualifies for hedgeaccounting, including when the hedging relationship is determined to be ineffective, the derivativeinstrument is terminated, or the Company removes the hedge designation. Upon discontinuance of a fairvalue hedge, the derivative instrument continues to be recognized at fair value in the consolidatedbalance sheets, with subsequent changes in fair value recognized in earnings. The cumulative basisadjustment to the carrying amount of the hedged item resulting from the hedge relationship is amortizedto earnings over the remaining life of the hedged item, as applicable. If the hedged item is sold orotherwise derecognized, any remaining unamortized basis adjustment is recognized in earnings as part ofthe gain or loss on sale. Upon discontinuance of a cash flow hedge, amounts previously recorded in accumulated othercomprehensive income remain in accumulated other comprehensive income and are reclassified intoearnings in the same periods during which the hedged forecasted transactions affect earnings. If thehedged forecasted transaction is no longer probable of occurring, the related amounts in accumulatedother comprehensive income are immediately reclassified into earnings. Stock-based Compensation The Company’s stock-based compensation plans provide for awards of stock options, restrictedstock units, and other stock awards to the Company’s directors, officers, and employees. The cost ofservices received in exchange for awards of equity instruments is based on the grant-date fair value ofthose awards. Compensation cost is recognized over the requisite service period as a component ofcompensation expense. Compensation cost is recognized on a straight-line basis over the requisiteservice period for the entire award. Forfeitures are recognized as they occur. The Company uses theBlack-Scholes model to estimate the fair value of stock options, while the market
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Table of Contents 99 price of the Company’s common stock at the date of grant is used for restricted stock awards andrestricted stock units. Earnings per Share Basic earnings per common share are computed by dividing net income available to commonshareholders by the weighted average number of common shares outstanding for the period. Dilutedearnings common per share are calculated by dividing net income by the weighted average number ofshares adjusted for the dilutive effect of stock compensation using the treasury stock method. Segment Reporting An operating segment is generally defined as a component of a business for which discretefinancial information is available and whose operating results are regularly reviewed by the chief operatingdecision maker (“CODM’). Substantially all of the Company’s operations involve the delivery of loan anddeposit products to clients. The Company’s CODM makes operating decisions and assesses performancebased on an ongoing review of the banking activities, which constitute the Company’s only operatingsegment for financial reporting purposes. The Company’s single segment is managed on a consolidatedbasis by the CODM who is the Chief Executive Officer. The accounting policies of this segment are the same as those described throughout thesesignificant accounting policies. The CODM assesses performance of the segment and determines theallocation of resources based on consolidated net income, which is reported in the ConsolidatedStatements of Income. Consolidated net income is used in deciding where to deploy capital and tomonitor budget vs. actual results. It is also used in benchmarking performance measures to Companypeers for compensation related analysis. The measure of segment assets is reported on the ConsolidatedBalance Sheets as total consolidated assets. Reclassifications Certain reclassifications have been made to the 2024 consolidated financial statements toconform to the 2025 classifications. Impact of Recently Adopted Accounting Guidance On January 1, 2025, the Company adopted Accounting Standards Update (“ASU”) 2023-09,Income Taxes(Topic ASC 740) Income Taxes. The ASU improves the transparency of income tax disclosures byrequiring (1)consistent categories and greater disaggregation of information in rate reconciliation and (2)disaggregation of incometaxes paid by jurisdiction. It also includes certain other amendments to improve the effectiveness ofincome taxdisclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15,2024. TheCompany adopted this standard on a prospective basis and did not have a material impact on theCompany’s consolidated financial statements. Impact of Recently Issued Accounting Standards The following ASUs have been issued by FASB and may impact the Company’s consolidatedfinancial statements in future reporting periods. On November 4 2024, the FASB issued ASU 2024-03, Income Statement–ReportingComprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation ofIncome Statement Expenses. The ASU requires disclosure, in the notes of the financial statements, ofspecific information about costs and expenses. The amendments require an entity to: (1) disclose theamounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible assetamortization, and (e) depreciation, depletion, and amortization (“DD&A”)
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Table of Contents 100 recognized as part of oil-and gas-producing activities included in each relevant expense caption; (2)include certain amounts already required to be disclosed by GAAP in the same disclosure as the otherdisaggregated requirements; (3) disclose a qualitative description of the amounts remaining in relevantexpense captions that are not separately disaggregated quantitatively; and (4) disclose the total amountof selling expenses and an entity's definition of selling expenses. ASU 2024-03 is effective for annualreporting periods beginning after December 15, 2026, and interim periods within annual reporting periodsbeginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating theprovisions of the amendments and the impact on its future consolidated statements. On September 18, 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-UseSoftware. The ASU removes all references to a prescriptive and sequential software development method(referred to as “project stages”) throughout Subtopic 350-40. The amendments require an entity to startcapitalizing software costs when management has authorized and committed to funding the softwareproject and it is probable that the project will be completed and the software will be used to perform thefunction intended. The amendments are effective for annual reporting periods beginning after December15, 2027 and for interim reporting within those annual reporting periods. Early adoption is permitted as ofthe beginning of an annual reporting period. The Company is currently evaluating the impact of ASU2025-06. On November 25, 2025 the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815):Hedge Accounting Improvements. The ASU clarifies certain aspects of hedge accounting guidance andaddresses incremental hedge accounting issues arising from the global reference rate reform initiative.The ASU addresses five key issues and aims to align hedge accounting more closely with the economicsof an entity’s risk management activities, enabling entities to achieve and maintain hedge accounting forhighly effective economic hedges of forecasted transactions. The amendments are effective for annualreporting periods beginning after December 15, 2026, and for interim periods within those annualreporting periods. Entities should apply the amendments on a prospective basis. Early adoption ispermitted for both interim and annual reporting periods. The Company is currently evaluating the impactof ASU 2025-09. On December 8, 2025 the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU aims to enhance the clarity and navigability of guidance in Topic 270,Interim Reporting, and specifies the disclosures required during interim reporting periods. The amendments clarify that Topic 270 applies to all entities that provide interim financial statements and notes in accordance with GAAP. The ASU provides a comprehensive list of interim disclosures required by GAAP, which is intended to improve efficiency in using the Codification. The list clarifies existing requirements and does not aim to expand or reduce current interim disclosure obligations. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. Early adoption is permitted and can be applied prospectively or retrospectively. Company is currently evaluating the impact of ASU 2025-11. On December 17, 2025 the FASB issued ASU 2025-12, Codification Improvements. The ASUaddresses various technical corrections, clarifications, and minor improvements to the FASB AccountingStandards Codification. The amendments are varied in nature and may impact the application of guidancein areas where the original guidance was unclear. The amendments are effective for annual reportingperiods beginning after December 15, 2026, and for interim periods within those annual reporting periods.Early adoption is permitted for both interim and annual reporting periods. Entities may elect to early adoptthe amendments on a issue-by-issue basis. The Company is currently evaluating the impact of ASU 2025-12.
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Table of Contents 101 Note 2: Business Combination On December 13, 2024, the Bank completed its acquisition of FMCB in an all-cash transactionwith total consideration of $33.1 million. The primary reasons for the acquisition were for continued growthand to increase the Company's presence in the Twin Cities market. Immediately following the completionof the acquisition, FMCB was merged with and into the Bank, with the Bank as the surviving entity. Netinterest income and net income for FMCB were $408,000 and $373,000, respectively, since the date ofacquisition through December 31, 2024 and were included in the Company's Consolidated Statements ofIncome. Merger-related expenses of $712,000 and $2.0 million are reflected in noninterest expense onthe Consolidated Statements of Income for the year ended December 31, 2024, and December 31, 2025,respectively. The pro forma information has not been included as it is impracticable due to the lack ofavailable historical U.S. GAAP financial data and the proximity between closing on the transaction to theend of the year. Goodwill of $9.4 million was recorded in connection with the acquisition, which reflects expectedsynergies from combining the operations of the companies and is fully deductible for tax purposes overfifteen years. The following table presents a summary of the fair values of assets acquired and liabilitiesassumed as of the acquisition date: (dollars in thousands) December 31, 2024 AssetsCash and Cash Equivalents $ 50,380Bank-Owned Certificates of Deposits 4,375Securities Available for Sale 89,345Loans, Net of PCD Allowance 119,308FHLB Stock 252Premises and Equipment 3,674Accrued Interest 847Core Deposit Intangible 7,740Bank-Owned Life Insurance 6,065Other Assets 243 Total Assets Acquired $ 282,229 LiabilitiesDeposits $ 257,569Accrued Interest Payable 865Other Liabilities 55 Total Liabilities Assumed 258,489 Net Assets Acquired $ 23,740 Consideration Paid Cash Paid 33,096 Total Consideration Paid 33,096 Goodwill $ 9,356 The Company acquired loans both with and without evidence of credit quality deterioration sinceorigination. Acquired loans are recorded at their fair value at the time of acquisition with no carryover fromthe acquired institution’s previously recorded allowance for loan and lease losses. Acquired loans areaccounted for under ASC 326 - Measurement of Credit Losses on Financial Instruments. The fair value of acquired loans recorded at the time of acquisition is based upon several factors,including the timing and payment of expected cash flows, as adjusted for estimated credit losses andprepayments, and then discounting these cash flows using comparable market rates. The resulting fairvalue adjustment is recorded in the form of a premium or discount to the unpaid principal balance of therespective loans. As it relates to PCD loans, the net premium or net discount is adjusted to reflect theCompany’s allowance for credit losses recorded for PCD loans at the time of acquisition, and theremaining fair value adjustment is accreted or amortized into interest income over the
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Table of Contents 102 remaining life of the respective loans. As it relates to non-PCD loans, the credit loss and yield componentsof their fair value adjustment are aggregated, and the resulting net premium or net discount is accreted oramortized into interest income over the remaining life of the respective loans. The following table presents a summary of PCD loans at acquisition: (dollars in thousands) December 31, 2024 Purchase Price of PCD Loans at Acquisition $ 2,987Allowance for Credit Losses on PCD Loans at Acquisition 114Non-credit Discount at Acquisition 75 Par Value of PCD Loans at Acquisition $ 3,176 Note 3: Earnings Per Share Basic earnings per common share are computed by dividing net income available to commonshareholders by the weighted average number of common shares outstanding for the period. Dilutedearnings per common share are calculated by dividing net income available to common shareholders bythe weighted average number of common shares adjusted for the dilutive effect of stock compensation.For the years ended December 31, 2025, 2024 and 2023, 557,832, 786,830 and 1,096,472, respectively,of stock options and restricted stock units were excluded from the calculation because they were deemedto be antidilutive. The following table presents the numerators and denominators for basic and diluted earnings pershare computations for the years ended December 31, 2025, 2024 and 2023: Year Ended December 31, (dollars in thousands, except per share data) 2025 2024 2023 Net Income Available to Common Shareholders $ 42,034$ 28,771$ 35,906 Weighted Average Common Stock Outstanding: Weighted Average Common Stock Outstanding (Basic)27,544,02427,479,76427,857,420 Dilutive Effect of Stock Compensation 625,833 463,578 458,167 Weighted Average Common Stock Outstanding (Dilutive)28,169,85727,943,34228,315,587 Basic Earnings per Common Share $ 1.53 $ 1.05 $ 1.29 Diluted Earnings per Common Share 1.49 1.03 1.27 Note 4: Bank-Owned Certificates of Deposit Certificates of deposit in other financial institutions by maturity are as follows: December 31, December 31, (dollars in thousands) 2025 2024 Certificates of Deposit at Cost Maturing in:One Year or Less $ — $ 1,225After One Year Through Five Years — 3,152 $ — $ 4,377
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Table of Contents 103 Note 5: Securities The following tables present the amortized cost and estimated fair value of securities with grossunrealized gains and losses at December 31, 2025 and 2024: December 31, 2025 Gross GrossAmortized Unrealized Unrealized(dollars in thousands) Cost Gains Losses Fair Value Securities Available for Sale:U.S. Treasury Securities $155,863 $ — $ (9,657) $146,206Municipal Bonds 242,995 8,686 (12,513) 239,168Mortgage-Backed Securities 252,291 3,442 (10,061) 245,672Corporate Securities 93,080 1,958 (2,631) 92,407U.S Government Agency Securities 8,664 73 (30) 8,707Asset-Backed Securities 44,298 20 (37) 44,281Total Securities Available for Sale $797,191 $14,179 $(34,929) $776,441 December 31, 2024 Gross GrossAmortized Unrealized Unrealized(dollars in thousands) Cost Gains Losses Fair Value Securities Available for Sale:U.S. Treasury Securities $179,835 $ 3 $(12,090) $167,748Municipal Bonds 139,891 23 (17,649) 122,265Mortgage-Backed Securities 259,833 882 (15,825) 244,890Corporate Securities 139,161 1,041 (6,016) 134,186U.S Government Agency Securities 22,053 85 (56) 22,082Asset-Backed Securities 76,891 211 (26) 77,076 Total Securities Available for Sale $817,664 $ 2,245 $(51,662) $768,247 Securities with a carrying value of $254.3 million and $289.9 million were pledged to securepublic fund deposits and borrowing capacity at the Federal Reserve Discount Window as of December 31,2025 and 2024, respectively. The following tables present the fair value and gross unrealized losses of securities withunrealized losses, aggregated by investment category and length of time that individual securities havebeen in a continuous unrealized loss position at December 31, 2025 and 2024: Less Than 12 Months12 Months or Greater Total Number of Unrealized Unrealized Unrealized(dollars in thousands, except number ofholdings) Holdings Fair Value Losses Fair Value Losses Fair Value Losses December 31, 2025 U.S. Treasury Securities 2 $ — $ — $146,206$ (9,657) $146,206$ (9,657) Municipal Bonds 185 22,430 (354) 94,839 (12,159) 117,269 (12,513) Mortgage-Backed Securities108 4,701 (14) 110,265 (10,047) 114,966 (10,061) Corporate Securities 45 10,341 (68) 39,318 (2,563) 49,659 (2,631) U.S Government Agency Securities 25 800 (3) 1,884 (27) 2,684 (30) Asset-Backed Securities 7 13,024 (31) 6,150 (6) 19,174 (37) Total Securities Available for Sale 372 $51,296$ (470) $398,662$(34,459) $449,958$(34,929)
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Table of Contents 104 Less Than 12 Months12 Months or Greater Total Number of Unrealized Unrealized Unrealized(dollars in thousands, except numberof holdings) Holdings Fair Value Losses Fair Value Losses Fair Value Losses December 31, 2024 U.S. Treasury Securities 14 $157,091$(12,090) $ — $ — $157,091$(12,090) Municipal Bonds 236 21,329 (120) 95,774 (17,529) 117,103 (17,649) Mortgage-Backed Securities168 47,636 (391) 118,824 (15,434) 166,460 (15,825) Corporate Securities 93 6,860 (75) 91,666 (5,941) 98,526 (6,016) U.S Government Agency Securities 38 5,878 (5) 4,071 (51) 9,949 (56) Asset-Backed Securities 7 5,735 (5) 10,161 (21) 15,896 (26) Total Securities Available for Sale 556 $244,529$(12,686) $320,496$(38,976) $565,025$(51,662) At December 31, 2025 and 2024, 372 and 556 debt securities had unrealized losses withaggregate depreciation of approximately 7.2% and 8.4%, respectively, from the Company’s amortizedcost basis. These unrealized losses have not been recognized into income because management doesnot intend to sell these securities, and it is not more likely than not it will be required to sell the securitiesbefore recovery of its amortized cost basis. Furthermore, the unrealized losses are due to changes ininterest rates and other market conditions and were not reflective of credit events. To make thisdetermination, consideration is given to such factors as the credit rating of the issuer, level of creditenhancement, changes in credit ratings, market conditions such as current interest rates, any adverseconditions specific to the security, and delinquency status on contractual payments. As of December 31,2025 and 2024, there was no allowance for credit losses carried on the Company’s securities portfolio. Accrued interest receivable on securities, which is recorded within accrued interest on thebalance sheet, totaled $6.2 million at both December 31, 2025 and 2024, and was excluded from theestimate of credit losses. The Company has entered into fair value hedging transactions to mitigate the impact of changinginterest rates on the fair value of securities within the portfolio. See Note 11 – Derivative Instruments andHedging Activities for additional information. The following table presents a summary of amortized cost and estimated fair value of debtsecurities by the lesser of expected call date or contractual maturity as of December 31, 2025. Call date isused when a call of the debt security is expected, determined by the Company when the security has amarket value above its amortized cost. Contractual maturities will differ from expected maturities formortgage-backed, U.S. government agency securities and asset-backed securities because borrowersmay have the right to call or prepay obligations without penalties. (dollars in thousands) Amortized Cost Fair Value December 31, 2025 Due in One Year or Less $ 26,639 $ 27,543Due After One Year Through Five Years 120,988 125,871Due After Five Years Through 10 Years 160,258 152,042Due After 10 Years 184,053 172,325 Subtotal 491,938 477,781Mortgage-Backed Securities 252,291 245,672U.S Government Agency Securities 8,664 8,707Asset-Backed Securities 44,298 44,281 Totals $ 797,191 $776,441
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Table of Contents 105 The following table presents a summary of the proceeds from sales of securities available forsale, as well as gross gains and losses, for the years ended December 31, 2025, 2024, and 2023: Year Ended December 31, (dollars in thousands) 2025 2024 2023 Proceeds From Sales of Securities $76,953 $101,612 $28,756Gross Gains on Sales 632 1,594 247Gross Losses on Sales (18) (1,209) (280) Note 6: Loans and Leases The following table presents the components of the loan portfolio at December 31, 2025 and2024: December 31, December 31, (dollars in thousands) 2025 2024 Commercial $ 547,245 $ 497,662Leases 43,407 44,291Construction and Land Development 216,163 97,2551-4 Family Construction 45,152 41,961Real Estate Mortgage: 1-4 Family Mortgage 496,142 474,383Multifamily 1,587,338 1,425,610CRE Owner Occupied 189,754 191,248CRE Nonowner Occupied 1,165,104 1,083,108 Total Real Estate Mortgage Loans 3,438,338 3,174,349Consumer and Other 19,212 12,996 Total Loans, Gross 4,309,517 3,868,514Allowance for Credit Losses (56,443) (52,277)Net Deferred Loan Fees (8,966) (6,801) Total Loans, Net $4,244,108 $3,809,436
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Table of Contents 106 The following tables present the aging in past due loans and nonaccrual status, with and withoutan ACL, by loan segment as of December 31, 2025 and 2024: Accruing Interest 30-89 Days 90 Days or Nonaccrual Nonaccrual(dollars in thousands) Current Past Due More Past Due with ACL without ACL Total December 31, 2025 Commercial $ 546,499 $ 746 $ — $ — $ — $ 547,245Leases 43,407 — — — — 43,407Construction and LandDevelopment 216,129 — — — 34 216,1631-4 Family Construction 45,152 — — — — 45,152Real Estate Mortgage: 1-4 Family Mortgage 495,922 164 — — 56 496,142Multifamily 1,574,043 — — 13,295 — 1,587,338CRE Owner Occupied 189,754 — — — — 189,754 CRE Nonowner Occupied 1,156,397 58 — 8,649 — 1,165,104Consumer and Other 19,212 — — — — 19,212 Totals $4,286,515 $ 968 $ — $ 21,944 $ 90 $4,309,517 Accruing Interest 30-89 Days 90 Days or Nonaccrual Nonaccrual(dollars in thousands) Current Past Due More Past Due with ACL without ACL Total December 31, 2024 Commercial $ 497,432 $ 59 $ — $ 171 $ — $ 497,662Leases 44,257 — — 34 — 44,291Construction and LandDevelopment 97,197 — — — 58 97,2551-4 Family Construction 41,961 — — — — 41,961Real Estate Mortgage: 1-4 Family Mortgage 474,185 178 — — 20 474,383Multifamily 1,425,610 — — — — 1,425,610CRE Owner Occupied 190,197 1,051 — — — 191,248CRE Nonowner Occupied 1,083,108 — — — — 1,083,108 Consumer and Other 12,975 3 — 18 — 12,996 Totals $3,866,922 $ 1,291 $ — $ 223 $ 78 $3,868,514 The Company aggregates loans into credit quality indicators based on relevant information aboutthe ability of borrowers to service their debt by using internal reviews in which management monitors andanalyzes the financial condition of borrowers and guarantors, trends in the industries in which theborrowers operate, and the fair values of collateral securing the loans. The Company analyzes all loansindividually to assign a risk rating, grouped into six major categories defined as follows: Pass: A pass loan is a credit with no known or existing potential weaknesses deserving ofmanagement’s close attention. Watch: Loans classified as watch have a credit where the borrower’s financial strength andperformance has been declining and may pose an elevated level of risk. Watch loans have been identifiedas having minor deterioration in loan quality or other credit weaknesses/circumstances meriting closerattention of management. Watch loans are not adversely classified and do not expose the Company tosufficient risk to warrant adverse classification. Special Mention: Loans classified as special mention have a potential weakness that deservemanagement’s close attention. If left uncorrected, these potential weaknesses may result in deteriorationof the repayment prospects
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Table of Contents 107 for the loan of the Company’s credit position at some future date. Special mention loans are not adverselyclassified and do not expose the Company to sufficient risk to warrant adverse classification. This is atransitional rating and loans should not be classified special mention for more than one year. Substandard: Loans classified as substandard are not adequately protected by the current networth and paying capacity of the borrower or of the collateral pledged, if any. Loans classified assubstandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt.Well defined weaknesses include a borrower’s lack of marketability, inadequate cash flow or collateralsupport, failure to complete construction on time, or the failure to fulfill economic expectations. They arecharacterized by the distinct possibility that the Company will sustain loss if the deficiencies are notcorrected. Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified assubstandard, with the added characteristic that the weaknesses make collection or repayment in full, onthe basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss: Loans classified as loss are considered uncollectible and charged-off immediately.
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Table of Contents 108 The following tables present loan balances classified by credit quality indicators by year oforigination as of December 31, 2025 and 2024: December 31, 2025 (dollars in thousands) 2025 2024 2023 2022 2021 Prior Revolving Total CommercialPass $ 163,333 $ 83,059 $ 17,582 $ 28,653 $ 14,774 $ 25,668 $ 201,739 $ 534,808Watch/Special Mention — — 584 165 — — 1,234 1,983 Substandard — 135 — 10,313 6 — — 10,454 Total Commercial 163,333 83,194 18,166 39,131 14,780 25,668 202,973 547,245Current Period Gross Write-offs 21 — 1,239 58 186 — — 1,504 Leases Pass 15,721 11,057 8,412 5,390 1,749 1,078 — 43,407 Total Leases 15,721 11,057 8,412 5,390 1,749 1,078 — 43,407 Current Period Gross Write-offs — — — 15 — — — 15 Construction and Land DevelopmentPass 158,592 42,019 1,598 222 412 — 13,286 216,129Substandard — 34 — — — — — 34 Total Construction and Land Development 158,592 42,053 1,598 222 412 — 13,286 216,163Current Period Gross Write-offs — — — — — — — — 1-4 Family Construction Pass 29,621 2,910 — 196 186 — 12,239 45,152 Total 1-4 Family Construction 29,621 2,910 — 196 186 — 12,239 45,152Current Period Gross Write-offs — — — — — — — — Real Estate Mortgage:1-4 Family MortgagePass 98,718 68,467 43,294 85,577 66,080 47,581 85,425 495,142 Substandard 944 — — 56 — — — 1,000 Total 1-4 Family Mortgage 99,662 68,467 43,294 85,633 66,080 47,581 85,425 496,142Current Period Gross Write-offs — — — — — — — — MultifamilyPass 440,012 166,790 77,979 405,405 304,191 124,609 10,647 1,529,633Watch/Special Mention 31,728 — 2,201 — — — — 33,929Substandard 13,296 — — 10,480 — — — 23,776 Total Multifamily 485,036 166,790 80,180 415,885 304,191 124,609 10,647 1,587,338Current Period Gross Write-offs — — — — — — — — CRE Owner OccupiedPass 22,102 20,740 23,532 52,754 28,295 26,910 1,932 176,265Watch/Special Mention — — 1,510 5,823 432 2,171 1,842 11,778 Substandard — — — — 1,711 — — 1,711 Total CRE Owner Occupied 22,102 20,740 25,042 58,577 30,438 29,081 3,774 189,754 Current Period Gross Write-offs — — — — — — — — CRE Nonowner OccupiedPass 367,117 252,912 70,464 216,814 123,618 113,955 4,110 1,148,990Watch/Special Mention — — — — — 133 — 133Substandard 15,080 901 — — — — — 15,981 Total CRE Nonowner Occupied 382,197 253,813 70,464 216,814 123,618 114,088 4,110 1,165,104Current Period Gross Write-offs — — — — — — — — Total Real Estate Mortgage Loans 988,997 509,810 218,980 776,909 524,327 315,359 103,956 3,438,338 Consumer and OtherPass 3,046 198 306 269 44 1,074 14,275 19,212 Substandard — — — — — — — — Total Consumer and Other 3,046 198 306 269 44 1,074 14,275 19,212Current Period Gross Write-offs — — 4 — — — 30 34 Total Period Gross Write-offs 21 — 1,243 73 186 — 30 1,553 Total Loans $1,359,310 $649,222 $247,462 $822,117 $541,498 $343,179 $ 346,729 $4,309,517
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Table of Contents 109 December 31, 2024 (dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Total CommercialPass $135,665 $ 45,089 $ 67,579 $ 23,353 $ 13,349 $ 19,794 $ 178,293 $ 483,122 Watch/Special Mention — — 76 96 29 — 1,716 1,917Substandard 110 44 10,491 — 65 — 1,913 12,623 Total Commercial 135,775 45,133 78,146 23,449 13,443 19,794 181,922 497,662Current Period Gross Write-offs — — — — — — — — LeasesPass 15,128 12,684 9,736 4,057 1,504 1,148 — 44,257Substandard — — 34 — — — — 34 Total Leases 15,128 12,684 9,770 4,057 1,504 1,148 — 44,291Current Period Gross Write-offs — — — — 11 — — 11 Construction and Land DevelopmentPass 74,967 6,027 6,791 585 — — 8,827 97,197 Substandard 58 — — — — — — 58 Total Construction and Land Development 75,025 6,027 6,791 585 — — 8,827 97,255Current Period Gross Write-offs — — — — — — — — 1-4 Family ConstructionPass 29,378 488 1,164 363 — — 10,568 41,961 Total 1-4 Family Construction 29,378 488 1,164 363 — — 10,568 41,961Current Period Gross Write-offs — — — — — — — — Real Estate Mortgage:1-4 Family MortgagePass 89,561 58,054 102,627 77,293 55,936 18,289 71,097 472,857Watch/Special Mention 298 196 — — 324 — — 818 Substandard 20 45 — — — 643 — 708 Total 1-4 Family Mortgage 89,879 58,295 102,627 77,293 56,260 18,932 71,097 474,383Current Period Gross Write-offs — — — — — — — — MultifamilyPass 219,162 133,916 486,854 336,859 161,626 57,679 6,624 1,402,720 Watch/Special Mention 9,953 2,245 10,692 — — — — 22,890 Total Multifamily 229,115 136,161 497,546 336,859 161,626 57,679 6,624 1,425,610Current Period Gross Write-offs — — — — — — — — CRE Owner OccupiedPass 22,761 31,402 62,522 34,228 17,801 15,355 2,121 186,190Watch/Special Mention — — — 1,759 1,739 — 593 4,091Substandard — 967 — — — — — 967 Total CRE Owner Occupied 22,761 32,369 62,522 35,987 19,540 15,355 2,714 191,248Current Period Gross Write-offs — — — — — — — — CRE Nonowner OccupiedPass 356,582 113,973 261,827 148,866 73,300 97,350 6,962 1,058,860Watch/Special Mention 9,622 3,659 — 2,690 — 894 — 16,865 Substandard 7,261 122 — — — — — 7,383 Total CRE Nonowner Occupied 373,465 117,754 261,827 151,556 73,300 98,244 6,962 1,083,108 Current Period Gross Write-offs 1,236 — — — — — — 1,236 Total Real Estate Mortgage Loans 715,220 344,579 924,522 601,695 310,726 190,210 87,397 3,174,349 Consumer and OtherPass 921 3,061 498 157 1,301 5 7,035 12,978Substandard — 18 — — — — — 18 Total Consumer and Other 921 3,079 498 157 1,301 5 7,035 12,996Current Period Gross Write-offs 17 — — — — — 2 19 Total Period Gross Write-offs 1,253 — — — 11 — 2 1,266 Total Loans $971,447 $411,990 $1,020,891 $630,306 $326,974 $211,157 $ 295,749 $3,868,514
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Table of Contents 110 The Company recorded a $5.7 million, $2.9 million, and $2.1 million provision for credit losses onloans and leases for the years ended December 31, 2025, 2024, and 2023, respectively. The followingtable presents the activity in the allowance for credit losses, by segment, for the year endedDecember 31, 2025, 2024, and 2023: Provision for(Recoveryof)CreditLosses Loans and Recoveries Total EndingBeginning for Loans Leases of Loans Allowance(dollars in thousands) Balance and Leases Charged-off and Leases Balance For the year ended December 31, 2025 Commercial $ 5,630 $ 1,853 $ (1,504) $ 3 $ 5,982Leases 368 (2) (15) 1 352Construction and Land Development 866 821 — — 1,6871-4 Family Construction 331 (15) — — 316Real Estate Mortgage: 1-4 Family Mortgage 2,795 (332) — 12 2,475Multifamily 23,120 655 — — 23,775CRE Owner Occupied 1,290 (210) — — 1,080CRE Nonowner Occupied 17,735 2,816 — 44 20,595 Total Real Estate Mortgage Loans 44,940 2,929 — 56 47,925Consumer and Other 142 64 (34) 9 181 Total $ 52,277 $ 5,650 $ (1,553) $ 69 $ 56,443 Provisionfor(Recoveryof)CreditLosses Loans and Recoveries TotalEndingBeginning Day 1 PCD for Loans Leases of Loans Allowance (dollars in thousands) Balance Allowance and Leases(1) Charged-off and Leases Balance For the year ended December 31,2024Commercial $ 5,398 $ 90 $ 120 $ — $ 22 $ 5,630Leases — 20 359 (11) — 368Construction and LandDevelopment 2,156 — (1,290) — — 8661-4 Family Construction 558 — (227) — — 331Real Estate Mortgage: 1-4 Family Mortgage 2,651 — 141 — 3 2,795Multifamily 22,217 — 903 — — 23,120 CRE Owner Occupied 1,184 — 106 — — 1,290CRE Nonowner Occupied 16,225 — 2,746 (1,236) — 17,735Total Real Estate Mortgage Loans 42,277 — 3,896 (1,236) 3 44,940Consumer and Other 105 4 42 (19) 10 142Total $ 50,494 $ 114 $ 2,900 $ (1,266) $ 35 $ 52,277 (1) Includes an initial provision for credit losses for non-PCD loans acquired in the FMCB transaction of $950,000 for the yearended December 31, 2024.
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Table of Contents 111 Provisionfor(Recoveryof) Impact of CreditLosses Loans and Recoveries TotalEndingBeginning Adopting for Loans Leases of Loans Allowance (dollars in thousands) Balance CECL and Leases Charged-off and Leases Balance For the year ended December 31,2023Commercial $ 6,501 $ (1,158) $ 225 $ (180) $ 10 $ 5,398Leases — — — — — —Construction and LandDevelopment 3,911 (1,070) (685) — — 2,1561-4 Family Construction 845 (235) (52) — — 558Real Estate Mortgage: 1-4 Family Mortgage 4,325 (1,778) 99 — 5 2,651 Multifamily 17,459 3,318 1,440 — — 22,217CRE Owner Occupied 1,965 (943) 162 — — 1,184CRE Nonowner Occupied 12,576 2,869 780 — — 16,225Total Real Estate Mortgage Loans 36,325 3,466 2,481 — 5 42,277Consumer and Other 151 (90) 81 (44) 7 105Unallocated 263 (263) — — — —Total $ 47,996 $ 650 $ 2,050 $ (224) $ 22 $ 50,494 The following tables present the balance in the allowance for credit losses and the recordedinvestment in loans, by segment as of December 31, 2025 and 2024: Individually CollectivelyEvaluated for Evaluated for(dollars in thousands) Credit Loss Credit Loss Total ACL at December 31, 2025 Commercial $ 134 $ 5,848 $ 5,982Leases — 352 352Construction and Land Development — 1,687 1,6871-4 Family Construction — 316 316Real Estate Mortgage: 1-4 Family Mortgage — 2,475 2,475Multifamily 789 22,986 23,775CRE Owner Occupied — 1,080 1,080 CRE Nonowner Occupied 2,889 17,706 20,595Total Real Estate Mortgage Loans 3,678 44,247 47,925Consumer and Other — 181 181Total $ 3,812 $ 52,631 $ 56,443
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Table of Contents 112 Individually CollectivelyEvaluated for Evaluated for(dollars in thousands) Credit Loss Credit Loss Total ACL at December 31, 2024 Commercial $ 133 $ 5,497 $ 5,630Leases 6 362 368Construction and Land Development — 866 8661-4 Family Construction — 331 331Real Estate Mortgage: 1-4 Family Mortgage — 2,795 2,795Multifamily — 23,120 23,120CRE Owner Occupied — 1,290 1,290CRE Nonowner Occupied — 17,735 17,735 Total Real Estate Mortgage Loans — 44,940 44,940Consumer and Other 5 137 142 Total $ 144 $ 52,133 $ 52,277 Individually CollectivelyEvaluated for Evaluated for(dollars in thousands) Credit Loss Credit Loss Total Loans at December 31, 2025 Commercial $ 10,527 $ 536,718 $ 547,245Leases — 43,407 43,407Construction and Land Development 34 216,129 216,1631-4 Family Construction — 45,152 45,152Real Estate Mortgage: 1-4 Family Mortgage 1,000 495,142 496,142Multifamily 23,776 1,563,562 1,587,338CRE Owner Occupied 3,553 186,201 189,754CRE Nonowner Occupied 16,867 1,148,237 1,165,104 Total Real Estate Mortgage Loans 45,196 3,393,142 3,438,338Consumer and Other — 19,212 19,212 Total $ 55,757 $ 4,253,760 $ 4,309,517
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Table of Contents 113 Individually CollectivelyEvaluated for Evaluated for(dollars in thousands) Credit Loss Credit Loss Total Loans at December 31, 2024 Commercial $ 14,045 $ 483,617 $ 497,662Leases 34 44,257 44,291Construction and Land Development 58 97,197 97,2551-4 Family Construction — 41,961 41,961Real Estate Mortgage: 1-4 Family Mortgage 708 473,675 474,383Multifamily — 1,425,610 1,425,610CRE Owner Occupied 1,558 189,690 191,248 CRE Nonowner Occupied 8,278 1,074,830 1,083,108Total Real Estate Mortgage Loans 10,544 3,163,805 3,174,349Consumer and Other 18 12,978 12,996Total $ 24,699 $ 3,843,815 $ 3,868,514 The following tables present the amortized cost basis of collateral dependent loans by the primarycollateral type, which are individually evaluated to determine expected credit losses, and the related ACLallocated to these loans as of December 31, 2025 and 2024: Primary Type of Collateral Business ACL(dollars in thousands) Real Estate Assets Other Total Allocation December 31, 2025 Commercial $ 72 $ 159 $10,296 $10,527 $ 134Construction and Land Development 34 — — 34 —Real Estate Mortgage: 1-4 Family Mortgage 1,000 — — 1,000 —Multifamily 23,776 — 23,776 789CRE Owner Occupied 3,553 — — 3,553 — CRE Nonowner Occupied 16,867 — — 16,867 2,889 Total Real Estate Mortgage Loans 45,196 — — 45,196 3,678 Totals $45,302 $ 159 $10,296 $55,757 $ 3,812
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Table of Contents 114 Primary Type of Collateral Business ACL(dollars in thousands) Real Estate Assets Other Total Allocation December 31, 2024 Commercial $ — $3,688 $10,357 $14,045 $ 133Leases — — 34 34 6Construction and Land Development 58 — — 58 —Real Estate Mortgage: 1-4 Family Mortgage 708 — — 708 —CRE Owner Occupied 1,558 — — 1,558 —CRE Nonowner Occupied 8,278 — — 8,278 —Total Real Estate Mortgage Loans 10,544 — — 10,544 —Consumer and Other — — 18 18 5 Totals $10,602 $3,688 $10,409 $24,699 $ 144 Accrued interest receivable on loans, which is recorded within accrued interest on the balancesheet, totaled $12.7 million and $11.4 million at December 31, 2025 and 2024, respectively, and wasexcluded from the estimate of credit losses. For the twelve months ended December 31, 2025, theCompany modified one CRE nonowner occupied loan, with an outstanding balance of $8.6 million, for aborrower experiencing financial difficulty by granting a 3-year extension of the loan at a below market rate.There were no instances of subsequent default on the loan modified during the period. For the twelvemonths ended December 31, 2024, there were no loans modified to borrowers experiencing financialdifficulty. Note 7: Premises and Equipment Premises and equipment are summarized as follows for the years ended December 31, 2025 and2024: Range of December 31, December 31, (dollars in thousands) Useful Lives 2025 2024 Land N/A $ 7,848 $ 8,145Building 15 - 39 Years 43,333 43,580 Leasehold Improvements 3 ‑ 15 Years 2,022 2,022 Furniture and Equipment 2 ‑ 5 Years 7,419 6,411Construction in Progress N/A 4,210 357 Subtotal 64,832 60,515Accumulated Depreciation (13,256) (10,982) Totals $ 51,576 $ 49,533 Depreciation and amortization expense charged to noninterest expense for the years endedDecember 31, 2025, 2024 and 2023, totaled $2.5 million, $2.4 million and $2.5 million, respectively.Construction in progress represents amounts paid for the construction of the Bank’s new branch buildingin Lake Elmo, Minnesota. Construction was completed in February 2026. Note 8: Goodwill and Other Intangible Assets Goodwill was $12.0 million at both December 31, 2025 and 2024. Goodwill is not amortized but issubject to, at a minimum, an annual test for impairment. Other intangible assets consist of core depositrelationships and favorable lease terms.
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Table of Contents 115 The following table presents a summary of other intangible assets at December 31, 2025 and2024: December 31, (dollars in thousands) 2025 2024 Core Deposit Intangible $ 7,740 $ 7,740 Favorable Lease 445 445 Subtotal 8,185 8,185 Accumulated Amortization (1,255) (335) Totals $ 6,930 $ 7,850 Amortization expense of other intangible assets for the years ended December 31, 2025, 2024and 2023 was $921,000, $78,000 and $100,000, respectively. The core deposit intangible asset isamortized over its estimated useful life of ten years. The following table presents the estimated future amortization of the core deposit intangible andfavorable lease asset for the next five years and thereafter. The projections of amortization expense arebased on existing asset balances as of December 31, 2025. Core Deposit Favorable (dollars in thousands) Intangible Lease 2026 $ 871 342027 852 342028 830 342029 803 182030 773 — Thereafter 2,681 — Totals $ 6,810 $ 120 Note 9: Leases The Company’s operating leases are real estate leases which are comprised of bank branchesand office space with terms extending through 2030. Operating lease agreements are required to berecognized on the consolidated balance sheets as an ROU asset and a corresponding lease liability. TheCompany’s lease agreements often include one or more options to renew at the Company’s discretion. Ifat lease inception, the Company considers the exercising of a renewal option to be reasonably certain,the Company will include the extended term in the calculation of the ROU asset and lease liability. Operating lease ROU assets represent the Company’s right to use the underlying asset duringthe lease term and operating lease liabilities represent the Company’s obligation to make lease paymentsarising from the lease. ROU assets and operating lease liabilities are recognized at lease commencementbased on the present value of the remaining lease payments using the rate implicit in the lease. As therate implicit in the lease is rarely determinable, the Company uses its incremental borrowing rate at leasecommencement to calculate the present value of lease payments. The Company's incremental borrowingrate is based on the FHLB amortizing advance rate, adjusted for the lease term and other factors. As the Company elected not to separate lease and non-lease components and instead to accountfor them as a single lease component, the variable lease cost primarily represents variable paymentssuch as common area maintenance, property taxes and other costs associated with the lease. Thesevariable payments are not included in the lease liability and are expensed as incurred.
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Table of Contents 116 The following table presents the components of lease expense and cash flow information relatedto operating leases as of the periods indicated: December 31, (dollars in thousands) 2025 2024 2023 Operating Lease Cost $ 595 $ 593 $ 557 Variable Lease Cost 269 265 262 Total Lease Cost $ 864 $ 858 $ 819 The following table presents other information on the Company’s operating leases for the yearsended December 31, 2025 and 2024: December 31, (dollars in thousands) 2025 2024 Operating Lease Right-of-Use Assets $ 1,374 $ 1,540Operating Lease Liabilities 1,446 1,580Weighted Average Remaining Lease Term (in Years) 3.41 3.34Weighted Average Discount Rate 2.55% 1.91% Other InformationCash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases $ 599 $ 587 The following table presents the future expected operating lease payments under the Company'soperating lease agreements as of December 31, 2025: December 31, (dollars in thousands) 2025 2026 $ 5432027 3802028 3532029 1482030 89 Thereafter — Total Undiscounted Lease Payments 1,513 Discount for Present Value of Expected Cash Flows (67) Total Lease Liability $ 1,446 The Greenwood location is leased pursuant to the terms of a non‑cancelable lease agreement with Bridgewater Properties Greenwood, LLC, a related party through common ownership, in effect atDecember 31, 2025. The lease contains one remaining option to extend the lease for a period of fiveyears. Future minimum rent commitments under the operating lease are listed below at December 31,2025. (dollars in thousands) 2025 2026 $ 108 Total $ 108
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Table of Contents 117 The Company receives rents from the lease of office and retail space in its corporateheadquarters building and its two office buildings in Minnetonka. Rental income is included in noninterestexpense as an offset to rental expense. Future minimum rental income under these leases are listedbelow at December 31, 2025. (dollars in thousands) 2025 2026 $ 7352027 7272028 6502029 5252030 433 Thereafter 124 Total $3,194 Rental income, which is included in occupancy and equipment expense, including common areamaintenance pertaining to banking premises for the years ended December 31, 2025, 2024 and 2023,totaled $1.2 million, $919,000 and $894,000, respectively. Note 10: Deposits The following table presents the composition of deposits at December 31, 2025 and 2024: December 31, (dollars in thousands) 2025 2024 Transaction Deposits $1,816,810 $1,663,005Savings and Money Market Deposits 1,380,922 1,259,503Time Deposits 312,154 338,506Brokered Deposits 810,483 825,753 Totals $4,320,369 $4,086,767 Brokered deposits contained brokered transaction and money market accounts of $145.5 millionand $127.4 million as of December 31, 2025 and 2024, respectively. The following table presents the scheduled maturities of brokered and customer time deposits atDecember 31, 2025: December 31, (dollars in thousands) 2025 Less than 1 Year $ 630,2961 to 2 Years 64,4272 to 3 Years 77,8853 to 4 Years 65,1044 to 5 Years 139,471 Greater than 5 Years — Totals $ 977,183 The aggregate amount of time deposits greater than $250,000 was $158.7 million and $155.0million at December 31, 2025 and 2024, respectively.
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Table of Contents 118 Note 11: Derivative Instruments and Hedging Activities The Company uses derivative financial instruments, which consist of interest rate swaps andinterest rate caps, to assist in its interest rate risk management. The notional amount does not representamounts exchanged by the parties. The amount exchanged is determined by reference to the notionalamount and the other terms of the individual agreements. Derivative financial instruments are reported atfair value in other assets or other liabilities. The accounting for changes in the fair value of a derivativedepends on whether it has been designated and qualifies as part of a hedging relationship andclassification as either a cash flow hedge or fair value hedge for those derivatives which are designatedas part of a hedging relationship. For derivatives not designated as hedges, the gain or loss is recognizedin current earnings. Derivatives Designated as Hedging Instruments The Company uses derivative instruments to hedge its exposure to economic risks, includinginterest rate, liquidity and credit risk. Certain hedging relationships are formally designated and qualify forhedge accounting under GAAP. On the date the Company enters into a derivative contract designated asa hedging instrument, the derivative is designated as either a fair value hedge, cash flow hedge, or a netinvestment hedge. When a derivative is designated as a fair value, cash flow, or net investment hedge,the Company performs an assessment, at inception, and at a minimum, quarterly thereafter, to determinethe effectiveness of the derivative in offsetting changes in the value or cash flows of the hedged item(s).As of December 31, 2025 and 2024, the Company only used fair value and cash flow hedges. Fair value hedges: For derivative instruments that are designated and qualify as a fair valuehedge, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedgedasset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on thederivative instrument is presented on the same income statement line item as the earnings effect of thehedged item. The Company utilizes fair value hedges to mitigate the effect of changing interest rates onthe fair values of fixed rate available for sale securities. The hedging strategy converts the fixed interestrates to variable interest rates based on Secured Overnight Financing Rate (“SOFR”). The following table presents a summary of the Company’s interest rate swaps designated as fairvalue hedges as of December 31, 2025 and 2024: (dollars in thousands) December 31, 2025 December 31, 2024 Notional Amount $ 242,314 $ 145,850Weighted Average Pay Rate 3.55% 3.52% Weighted Average Receive Rate 4.20 4.82Weighted Average Maturity (Years) 14.54 19.47 Cash flow hedges: For derivative instruments that are designated and qualify as a cash flowhedge, the aggregate fair value of the derivative instrument is recorded in other assets or other liabilitieswith any gain or loss related to changes in fair value recorded in accumulated other comprehensiveincome, net of tax. The gain or loss is reclassified into earnings in the same period during which thehedged asset or liability affects earnings and is presented in the same income statement line item as theearnings effect of the hedged asset or liability. The Company utilizes cash flow hedges to manage interestrate exposure for the brokered deposit and wholesale borrowing portfolios. During the next 12 months, theCompany estimates that $3.3 million will be reclassified to interest expense, as a reduction of theexpense.
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Table of Contents 119 The following table presents a summary of the Company’s interest rate swaps designated as cashflow hedges as of December 31, 2025 and 2024: (dollars in thousands) December 31, 2025 December 31, 2024 Notional Amount $ 263,000 $ 178,000Weighted Average Pay Rate 2.96% 2.20% Weighted Average Receive Rate 3.94% 4.80% Weighted Average Maturity (Years) 3.90 4.02Net Unrealized Gain $ 1,286 $ 5,139 The Company purchases interest rate caps, designated as cash flow hedges, of certain fundingliabilities. The interest rate caps require receipt of variable amounts from the counterparties when interestrates rise above the strike price in the contracts. For the years ended December 31, 2025, 2024, and2023, the Company recognized amortization expense on the interest rate caps of $793,000, $800,000,and $791,000, respectively, which was recorded as a component of interest expense on brokereddeposits and FHLB advances. The following table presents a summary of the Company’s interest rate caps designated as cashflow hedges as of December 31, 2025 and 2024: (dollars in thousands) December 31, 2025 December 31, 2024 Notional Amount $ 125,000 $ 125,000Unamortized Premium Paid 3,488 4,281Weighted Average Strike Rate 0.96% 0.96% Weighted Average Maturity (Years) 4.34 5.34 Derivatives Not Designated as Hedging Instruments Interest rate swaps: The Company enters into interest rate swaps to facilitate client transactionsand meet their financing needs. Upon entering into these instruments to meet client needs, the Companyenters into offsetting positions with large U.S. financial institutions in order to minimize the risk to theCompany. These swaps are derivatives, but are not designated as hedging instruments. Interest rateswap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms.When the fair value of a derivative instrument contract is positive, this generally indicates that thecounterparty or client owes the Company, and results in credit risk to the Company. When the fair value ofa derivative instrument contract is negative, the Company owes the client or counterparty and therefore,the Company has no credit risk. Risk participation agreements (“RPA”): The Company has entered into RPAs to share creditexposure with a counterparty in connection with an interest rate swap associated with a loan participation.Under an RPA, the Company either assumes or sells a portion of the underlying credit exposure and, inexchange, pays or receives an upfront fee. When the Company assumes credit exposure, it is entitled toreceive payment from the counterparty in the event of a borrower default. Conversely, when the Companysells credit exposure, it is obligated to make a payment to the counterparty if the underlying borrowerdefaults on its obligations. The notional amount of the RPA reflects the Company’s pro-rata share of thederivative instrument consistent with its share of the related participated loan.
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Table of Contents 120 The following table presents the total notional amounts and gross fair values of the Company’sderivatives as of December 31, 2025 and 2024: Derivative Assets Derivative Liabilities Notional Estimated Notional Estimated(dollars in thousands) Amount Fair Value Amount Fair Value December 31, 2025Designated as hedging instruments:Fair Value hedges:Interest rate swaps $ 145,850 $ 10,968 $ 96,464 $ 419Cash flow hedges:Interest rate swaps 185,500 2,012 77,500 725Interest rate caps 125,000 13,221 — — Total derivatives designated as hedging instruments $ 456,350 $ 26,201 $ 173,964 $ 1,144 Not designated as hedging instruments:Interest rate swaps $ 267,831 $ 8,699 $ 267,831 $ 8,699Risk Participation Agreements 12,851 1 9,902 13 Total derivatives not designated as hedging instruments $ 280,682 $ 8,700 $ 277,733 $ 8,712 December 31, 2024Designated as hedging instruments:Fair Value hedges:Interest rate swaps $ 145,850 $ 10,487 $ — $ —Cash flow hedges:Interest rate swaps 178,000 5,139 — —Interest rate caps 125,000 19,319 — — Total derivatives designated as hedging instruments $ 448,850 $ 34,945 $ — $ — Not designated as hedging instruments:Interest rate swaps $ 115,577 $ 8,210 $ 115,577 $ 8,210 Total derivatives not designated as hedging instruments $ 115,577 $ 8,210 $ 115,577 $ 8,210 The Company is party to collateral support agreements with certain derivative counterparties.These agreements require that the Company maintain collateral based on the fair values of derivativetransactions. In the event of default by the Company, the counterparty would be entitled to the collateral.As of both December 31, 2025 and 2024, the Company pledged no cash collateral for the Company’sderivative contracts. As of December 31, 2025 and 2024, the Company’s derivative counterpartiespledged cash collateral to the Company of $26.2 million and $44.2 million, respectively.
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Table of Contents 121 The following table presents the effect of derivative instruments in cash flow hedging relationshipson the consolidated statements of income for the years ended December 31, 2025, 2024 and 2023: Gains (Losses) Gains (Losses)Recognized in Reclassified from(dollars in thousands) OCI OCI into Earnings December 31, 2025Cash flow hedges:Interest rate swaps $ 3,852 $ 2,955Interest rate caps 5,305 3,529December 31, 2024Cash flow hedges:Interest rate swaps $ 132 $ 5,721Interest rate caps (1,402) 3,524December 31, 2023Cash flow hedges:Interest rate swaps $ 3,904 $ 5,783Interest rate caps (101) 319 No amounts were reclassified from accumulated other comprehensive income into net incomerelated to hedge ineffectiveness for these derivatives during the years ended December 31, 2025, 2024and 2023, and no amounts are expected to be reclassified from accumulated other comprehensiveincome into net income related to hedge ineffectiveness over the next twelve months. The effects of the Company’s hedging relationships on the income statement during the yearending December 31, 2025 and 2024 were as follows: Location and Amount of Gains (Losses) Recognized in Income Interest Income Interest Expense Investmentsecurities -(dollars in thousands) taxable Deposits FHLB Advances December 31, 2025Total amounts in the Consolidated Statements of Income $ 38,688 $ 131,418 $ 11,465Fair value hedges:Interest rate swaps 31 — —Cash flow hedges:Interest rate swaps — 234 2,721Interest rate caps — 192 3,337December 31, 2024Total amounts in the Consolidated Statements of Income $ 33,927 $ 128,805 $ 8,554Fair value hedges:Interest rate swaps 10,487 — —Cash flow hedges:Interest rate swaps — 1,482 4,239Interest rate caps — 382 3,142December 31, 2023Total amounts in the Consolidated Statements of Income $ 26,245 $ 96,045 $ 7,489Fair value hedges:Interest rate swaps — — —Cash flow hedges:Interest rate swaps — 2,611 3,172Interest rate caps — (260) 579
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Table of Contents 122 The following table presents amounts that were recorded on the balance sheet related tocumulative basis adjustments for fair value hedges at December 31, 2025 and 2024: Cumulative FairValue HedgingAdjustment in theCarrying Amount Carrying Amount ofNotional of Hedged Assets/ Hedged Assets/(dollars in thousands) Amount Liabilities Liabilities December 31, 2025Available for sale securities $ 242,314 $ 252,863 $ 10,549 December 31, 2024Available for sale securities $ 145,850 $ 156,337 $ 10,487 The gain recognized on derivatives not designated as hedging relationships for the yearsended December 31, 2025, 2024, and 2023 was as follows: (dollars in thousands) Derivatives not designated Consolidated Statements Year Ended December 31, as hedging Instruments of Income Location 2025 2024 2023 Risk participation agreementsOther Income $ 11 $ — $ — The following table summarizes gross and net information about derivative instruments that areeligible for offset on the balance sheet at December 31, 2025 and 2024: Net Amounts ofGrossAmounts GrossAmounts Assets(Liabilities)Gross Amounts Not Offset in the Balance Sheet of RecognizedOffset in thePresented in the Financial Cash CollateralNet Assets(dollars inthousands) Assets(Liabilities) BalanceSheet Balance Sheet Instruments Received (Paid)(Liabilities) December 31, 2025 Assets $ 34,900$ —$ 34,900$ — $ 26,183$ 8,717 Liabilities (9,844) — (9,844) — — (9,844) December 31, 2024 Assets $ 43,155$ —$ 43,155$ — $ 44,233$ (1,078) Liabilities (8,210) — (8,210) — — (8,210) Note 12: Federal Home Loan Bank Advances and Other Borrowings Federal Home Loan Bank Advances. The Company has entered into an Advances, Pledge, and Security Agreement with the FHLB whereby specific mortgage loans of the Bank’s with principal balances of $1.62 billion and $1.54 billion at December 31, 2025 and 2024, respectively, were pledged to the FHLBas collateral. FHLB advances are also secured with FHLB stock owned by the Company. Total remainingavailable capacity under the agreement was $611.3 million and $483.2 million at December 31, 2025 and2024, respectively.
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Table of Contents 123 The following table presents FHLB advances, by maturity, at December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Weighted Weighted Average Total Average Total (dollars in thousands) Rate Outstanding Rate Outstanding Less than 1 Year 4.04% $319,500 4.62% $288,0001 to 2 Years 4.13 27,500 3.45 21,5002 to 3 Years 4.02 30,000 4.13 27,5003 to 4 Years 4.10 15,000 4.01 22,500 4 to 5 Years 4.09 7,500 — — Totals $399,500 $359,500 Federal Reserve Discount Window. At December 31, 2025 and 2024, the Company had the ability to draw additional borrowings of $1.03 billion and $925.8 million, respectively, from the FederalReserve Bank of Minneapolis. The ability to draw borrowings was based on loan collateral pledged withprincipal balances of $963.5 million and investment securities collateral pledged with fair value of $254.3million as of December 31, 2025, subject to the approval from the Board of Governors of the FederalReserve System. As of December 31, 2024, the ability to draw borrowings was based on loan collateralpledged with principal balances of $815.5 million and investment securities pledged with fair value of$289.9 million. There were no Federal Reserve borrowings outstanding as of either December 31, 2025or 2024. Federal Funds Purchased. Federal funds purchased mature one business day from thetransaction date. There were $-0- federal funds purchased outstanding as of each of December 31, 2025and 2024. Line of Credit. The Company has an outstanding Loan and Security Agreement and relatedrevolving note with an unaffiliated financial institution that is secured by 100% of the issued andoutstanding stock of the Bank. The maximum principal amount of the Company’s revolving line of credit is$40.0 million. As of both December 31, 2025 and 2024, the Company had two outstanding letters of credittotaling $6.4 million under this facility. The note contains customary representations, warranties, andcovenants, including certain financial covenants and capital ratio requirements. As of December 31, 2025,the Company believes it was in compliance with all such covenants and capital ratio requirements. The following table presents the revolving line of credit at December 31, 2025 and 2024: Total Debt Total DebtOutstanding Outstanding InterestName Maturity Date December 31, 2025 December 31, 2024 Rate Coupon Structure Revolving Credit Facility September 1, 2026 $ — $ 13,750 6.75% Variable with Floor (1) (1) The variable interest rate is equal to the greater of the Wall Street Journal Prime Rate in effect or a floor rate of 4.50%.
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Table of Contents 124 Note 13: Subordinated Debentures The following presents a summary of the Company’s subordinated debentures as of December31, 2025 and 2024: Total Debt Total DebtDate First Maturity Outstanding Outstanding InterestName EstablishedRedemption Date Date December 31, 2025 December 31, 2024 Rate Coupon Structure (dollars in thousands)2030 Notes June 19, 2020 July 1, 2025 July 1, 2030 $ —$ 50,000 5.25%Fixed-to-Floating (1) 2031 Notes July 8, 2021 July 15, 2026 July 15, 2031 30,000 30,000 3.25%Fixed-to-Floating (2) 2035 Notes June 24, 2025 June 30, 2030 June 30, 2035 80,000 — 7.625%Fixed-to-Floating (3) Subordinated Debentures 110,000 80,000Debt Issuance Costs (1,323) (330)SubordinatedDebentures, Net ofIssuance Costs $ 108,677$ 79,670 (1) Notes fully redeemed as of June 30, 2025.(2) Migrates to three month term SOFR + 2.52% beginning July 15, 2026 until either the maturity date or earlier redemption date.(3) Migrates to three month term SOFR + 3.88% beginning June 30, 2030 until either the maturity date or earlier redemption date. Note 14: Related-Party Transactions In the ordinary course of business, the Company has granted loans to executive officers,directors, principal shareholders, and their affiliates (together, “related parties”). The following tablepresents the activity associated with loans made between related parties for the years ended December31, 2025 and 2024: (dollars in thousands) 2025 2024 Beginning Balance $ 9,319 $31,840New Loans and Advances 11,289 6,598 Repayments (10,244) (29,119) Totals $10,364 $ 9,319 Deposits from related parties held by the Company at December 31, 2025 and 2024 were $16.6million and $18.4 million, respectively. The Company has a lease agreement with a related party which is disclosed in “Note 9 –Leases”.
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Table of Contents 125 Note 15: Income Taxes The following table presents the allocation of federal and state income taxes between current anddeferred portions as of December 31, 2025: (dollars in thousands) 2025 Current Tax ProvisionFederal $ 10,321 State 5,627 Total Current Tax Provision $ 15,948 Deferred Tax BenefitFederal $ (1,500) State (504) Total Deferred Tax Benefit $ (2,004) Total Income Tax ProvisionFederal $ 8,821 State 5,123 Total Income Tax Provision $ 13,944 The Company does not have pretax income from continuing foreign operations or foreign taxexpense. The following table presents the allocation of federal and state income taxes between current anddeferred portions as of December 31, 2024 and 2023 before the adoption of ASU 2023-09: (dollars in thousands) 2024 2023 Current Tax Provision $ 9,887 $ 11,886 Deferred Tax Expense 24 676 Total Income Tax Provision $ 9,911 $ 12,562 The reasons for the differences between the statutory federal income tax rate and the effectivetax rates are summarized as follows as of December 31, 2025: 2025 (dollars in thousands) Amount Percent Amount of Statutory Rate $ 12,607 21.0%State Income Taxes (Net of Federal Income Tax Benefit) (1) 4,047 6.7Tax CreditsLow Income Housing (2,347) (3.9)Rehabilitation (815) (1.4)Nontaxable or Nondeductible ItemsInterest on Investment Securities and Loans Exempt from Federal IncomeTax (1,468) (2.4)Other (183) (0.3)Other AdjustmentsProportional Amortization 2,451 4.1Other (348) (0.6) Totals $ 13,944 23.2% (1) State taxes in Minnesota made up the majority (greater than 50 percent) of the tax effect in this category.
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Table of Contents 126 The reasons for the differences between the statutory federal income tax rate and the effectivetax rates are summarized as follows as of December 31, 2024 and 2023 before the adoption of ASU2023-09: 2024 2023 (dollars in thousands) Amount Percent Amount Percent Amount of Statutory Rate $ 8,974 21.0%$11,030 21.0% State Income Taxes (Net of Federal Income Tax Benefit) (1) 2,920 6.8 3,511 6.6Interest on Investment Securities and Loans Exempt FromFederal Income Tax (984) (2.3) (1,175) (2.3) Tax Credits (360) (0.8) (91) 0.0 Other Differences (639) (1.5) (713) (1.4) Totals $ 9,911 23.2% 12,562 23.9% (1) State taxes in Minnesota made up the majority (greater than 50 percent) of the tax effect in this category. The Company’s effective tax rate may fluctuate as it is impacted by the level and timing of theCompany’s utilization of historic tax credits, low-income housing tax credits, the level of tax-exemptinvestments and loans, and the overall level of pre-tax income. The following table presents the components of the net deferred tax asset included in otherassets, as of December 31, 2025 and 2024: (dollars in thousands) 2025 2024 Depreciation $ (832) $ (834)Allowance for Credit Losses 15,764 14,559Unrealized Loss on Securities Available for Sale 2,940 11,189Unrealized Gain on Cash Flow Hedges (3,167) (5,799)Intangibles (443) (315)Deferred Loan Fees 2,503 1,912Reserve for Off-Balance Sheet Credit Exposures 1,120 1,015Other 436 207 Totals $18,321 $21,934 Note 16: Tax Credit Investments The Company invests in qualified affordable housing projects and federal historic projects for thepurpose of community reinvestment and obtaining tax credits. The Company’s tax credit investments arelimited to existing lending relationships with well-known developers and projects within the Company’smarket area.
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Table of Contents 127 The following table presents a summary of the Company’s investments in qualified affordablehousing projects and other tax credit investments at December 31, 2025 and 2024: (dollars in thousands) December 31, 2025December 31, 2024 Investment Accounting MethodInvestment Unfunded Commitment(1) Investment Unfunded Commitment Low Income Housing Tax Credit (LIHTC)Proportional Amortization$ 24,767$ 10,887$ 14,922$ 340Federal Historic Tax Credit (FHTC) Proportional Amortization 2,005 493 2,872 2,541 Total $ 26,772$ 11,380$ 17,794$ 2,881 (1) All commitments are expected to be paid by the Company by December 31, 2026. The following table presents a summary of the amortization expense and tax benefit recognizedfor the Company’s qualified affordable housing projects and other tax credit investments during 2025,2024 and 2023: Year Ended December 31, (dollars in thousands) 2025 2024 2023 Amortization Expense (1) LIHTC $ 1,875 $ 1,991 $ 1,810 FHTC 576 719 668 Total $ 2,451 $ 2,710 $ 2,478 Tax Benefit Recognized (2) LIHTC $ (2,347) $ (2,347) $ (1,693) FHTC (829) (885) (912) Total $ (3,176) $ (3,232) $ (2,605) (1) The amortization expense for the LIHTC investments are included in income tax expense.(2) All of the tax benefits recognized are included in income tax expense. Note 17: 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 courseof 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 ofthese commitments. The Company follows the same credit policies in making commitments as it does foron-balance sheet instruments. Since some of the commitments are expected to expire without beingdrawn 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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Table of Contents 128 The following commitments were outstanding at December 31, 2025 and 2024: December 31, December 31, (dollars in thousands) 2025 2024 Unfunded Commitments Under Lines of Credit $ 796,843 $ 679,064Letters of Credit 124,837 124,397 Totals $ 921,680 $ 803,461 Commitments to extend credit are agreements to lend to a customer at fixed or variable rates aslong as there is no violation of any condition established in the contract. Commitments generally havefixed expiration dates or other termination clauses and may require payment of a fee. The amount ofcollateral obtained upon extension of credit is based on management’s credit evaluation of the customer.Collateral held varies but may include accounts receivable; inventory; property, plant, and equipment; realestate; and stocks and bonds. Unfunded commitments under commercial lines of credit, home equity linesof credit, and overdraft protection agreements are commitments for possible future extensions of credit toexisting customers. These lines of credit may or may not require collateral and may or may not contain aspecific maturity date. Standby letters of credit are conditional lending commitments issued by the Company toguarantee the performance of a customer to a third party. Generally, all standby letters of credit issuedhave expiration dates within two years. The credit risk involved in issuing standby letters of credit isessentially the same as that involved in extending loan facilities to customers. The Company generallyholds collateral supporting these commitments. The Company had outstanding letters of credit with the FHLB in total amounts of $109.0 millionand $103.2 million at December 31, 2025 and 2024, respectively, on behalf of customers and to securepublic deposits. The ACL for off-balance sheet credit exposures was $4.0 million and $3.6 million at December 31,2025 and 2024, respectively, and is separately classified on the balance sheet within other liabilities. The following table presents the balance and activity in the ACL for off-balance sheet creditexposures for the year ended December 31, 2025 and 2024: (dollars in thousands) December 31, 2025 December 31, 2024 Allowance for Credit Losses: Beginning Balance $ 3,610 $ 2,985 Provision for Off-Balance Sheet Credit Exposures 400 625 Total Ending Balance $ 4,010 $ 3,610 Legal Contingencies Various legal claims arise from time to time in the normal course of business. In the opinion ofmanagement, any liability resulting from such proceedings would not have a material impact on theconsolidated financial statements. Note 18: Stock Options and Restricted Stock In 2012, the Company adopted the Bridgewater Bancshares, Inc. 2012 Combined Incentive andNon-Statutory Stock Option Plan (the “2012 Plan”) under which the Company was able to grant options toits directors, officers, and employees for up to 750,000 shares of common stock. Both incentive stockoptions and nonqualified stock options were granted under the 2012 Plan. The exercise price of eachoption equals the fair market value of the Company’s stock on the date of grant, and the maximum term ofeach outstanding option is ten years. All outstanding options
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Table of Contents 129 have been granted with vesting periods of four or five years. The 2012 Plan expired in March 2022, andawards are no longer able to be granted under the 2012 Plan. In 2017, the Company adopted the Bridgewater Bancshares, Inc. 2017 Combined Incentive andNon-Statutory Stock Option Plan (the “2017 Plan”). Under the 2017 Plan, the Company may grant optionsto its directors, officers, employees and consultants for up to 1,500,000 shares of common stock. Bothincentive stock options and nonqualified stock options may be granted under the 2017 Plan. The exerciseprice of each option equals the fair market value of the Company’s stock on the date of grant and themaximum term of each outstanding option is ten years. All outstanding options have been granted withvesting periods of four or five years. As of December 31, 2025 and 2024, there were 10,000 and 30,000shares, respectively, of the Company’s common stock reserved for future option grants under the 2017Plan. In 2019, the Company adopted the Bridgewater Bancshares, Inc. 2019 Equity Incentive Plan (the“2019 EIP”). The types of awards which may be granted under the 2019 EIP include incentive andnonqualified stock options, stock appreciation rights, stock awards, restricted stock units, restricted stockand cash incentive awards. The Company may grant these awards to its directors, officers, employeesand certain other service providers for up to 1,000,000 shares of common stock. The exercise price ofeach option equals the fair market value of the Company’s stock on the date of grant and the maximumterm of each award is ten years. All outstanding awards have been granted with vesting periods of fouryears. As of December 31, 2025, and 2024, there were 2,192 and 87 shares, respectively, of theCompany’s common stock reserved for future grants under the 2019 EIP. In 2023, the Company adopted the Bridgewater Bancshares, Inc. 2023 Equity Incentive Plan (the“2023 EIP”). Under the 2023 EIP, the Company may grant incentive and nonqualified stock options, stockappreciation rights, stock awards, restricted stock units, restricted stock and cash incentive awards. TheCompany may grant these awards to its directors, officers, employees and certain other service providersfor up to 1,500,000 shares of common stock. The exercise price of each option equals the fair marketvalue of the Company’s stock on the date of grant and the maximum term of each award is ten years. Alloutstanding awards have been granted with a vesting period of four years. As of December 31, 2025, and2024, there were 464,751 and 972,460 shares, respectively, of the Company’s common stock reservedfor future grants under the 2023 EIP. Stock Options The fair value of each option award is estimated on the date of grant using a closed form optionvaluation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilitiesare based on an industry index as described below. The expected term of options granted is based onhistorical data and represents the period of time that options granted are expected to be outstanding,which takes into account that the options are not transferable. The risk-free interest rate for the expectedterm of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. Historically,the Company has not paid a dividend on its common stock and does not expect to do so in the nearfuture.
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Table of Contents 130 The Company used the S&P 600 CM Bank Index as its historical volatility index. The S&P 600CM Bank Index is an index of publicly traded small capitalization, regional, commercial banks locatedthroughout the United States. There were 56 banks in the index ranging in market capitalization from$600.0 million up to $5.0 billion. The weighted average assumptions used in the model for valuing stock option grants in 2025 isas follows: December 31, 2025 Dividend Yield —% Expected Life 7YearsExpected Volatility 30.86% Risk-Free Interest Rate 4.33% The following table presents a summary of the status of the Company’s outstanding stock optionsfor the years ended December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Weighted WeightedAverage AverageShares Exercise Price Shares Exercise Price Outstanding at Beginning ofYear 1,860,609 $ 10.69 2,014,994 $ 10.57Granted 325,000 14.43 10,000 13.17Exercised (233,934) 8.29 (99,385) 7.68 Forfeitures (16,500) 12.94 (65,000) 11.81 Outstanding at Period End 1,935,175 $ 11.59 1,860,609 $ 10.69 Options Exercisable at PeriodEnd 1,350,924 $ 10.69 1,423,108 $ 9.95 For the years ended December 31, 2025, 2024 and 2023, the Company recognizedcompensation expense for stock options of $1.2 million, $917,000 and $851,000, respectively. The following table presents information pertaining to options outstanding at December 31, 2025: Options Outstanding Options Exercisable Weighted AverageNumber of Weighted AverageRemaining Contractual Number of Weighted AverageRange of Exercise Prices Options Exercise Price Life in Years Options Exercise Price $ 7.00 - 7.99 642,792 $ 7.47 1.8 642,792 $ 7.478.00 - 8.99 2,961 8.76 4.3 2,961 8.7610.00 - 10.99 202,500 10.62 7.4 94,749 10.5911.00 - 11.99 221,125 11.16 6.2 148,375 11.2012.00 - 12.99 245,297 12.91 3.6 245,297 12.9113.00 - 13.99 285,000 13.75 9.1 2,500 13.1717.00 - 17.99 285,500 17.50 6.1 214,250 17.5018.00 - 18.99 50,000 18.03 9.9 — — Totals 1,935,175 $ 11.59 5.0 1,350,924 $ 10.69 As of December 31, 2025, there was $2.5 million of total unrecognized compensation cost relatedto nonvested stock options that is expected to be recognized over a weighted-average period of2.3 years.
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Table of Contents 131 The following table presents an analysis of nonvested options to purchase shares of theCompany’s stock issued and outstanding for the year ended December 31, 2025: WeightedNumber of Average GrantShares Date Fair Value Nonvested Options at December 31, 2024 437,501 $ 5.18Granted 325,000 6.08Vested (168,375) 5.15 Forfeited (9,875) 4.85 Nonvested Options at December 31, 2025 584,251 $ 5.69 Restricted Stock Awards There was no restricted stock award granting activity for the year ended December 31, 2025.Compensation expense associated with the restricted stock awards is recognized on a straight-line basisover the period that the restrictions associated with the awards lapse based on the total cost of the awardat the grant date. For the years ended December 31, 2025, 2024 and 2023, the Company recognizedcompensation expense for restricted stock awards of $-0-, $13,000 and $417,000, respectively. In addition, during the year ended December 31, 2025, the Company issued 30,728 shares ofcommon stock to directors as a part of their compensation for their annual services on the Company’sboard of directors. The aggregate value of the shares issued to directors of $496,000 was included instock-based compensation expense in the accompanying consolidated statements of shareholders’equity. Restricted Stock Units The Company has granted restricted stock units out of the 2019 EIP and 2023 EIP. Restrictedstock units represent the right to receive one share of Company stock upon vesting and vest in equalannual installments on the first four anniversaries of the date of the grant. Nonvested restricted stock unitshave no voting or dividend rights and are not considered outstanding until vested and settled. The following table presents an analysis of nonvested restricted stock units outstanding for theyears ended December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Weighted WeightedNumber of Average Grant Number of Average GrantShares Date Fair Value Shares Date Fair Value Nonvested at Beginning of Year 415,758 $ 14.46 441,015 $ 14.71Granted 194,774 16.82 178,010 14.06Vested (154,473) 15.18 (160,630) 14.67 Forfeited (8,398) 14.39 (42,637) 14.59 Nonvested at Year End 447,661 $ 15.24 415,758 $ 14.46 Compensation expense associated with the restricted stock units is recognized on a straight-linebasis over the period that the restrictions associated with the units lapse based on the total cost of the unitat the grant date. For the years ended December 31, 2025, 2024 and 2023, the Company recognizedcompensation expense for restricted stock units of $2.5 million, $2.5 million and $2.2 million, respectively.
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Table of Contents 132 As of December 31, 2025, there was $6.1 million of total unrecognized compensation cost relatedto nonvested restricted stock units granted under the 2019 EIP or 2023 EIP that is expected to berecognized over a weighted-average period of 2.8 years. Note 19: Profit Sharing Plan The Company has a combined profit sharing 401(k) plan which provides that an annualcontribution up to 100% of each participating employee’s total pay, may be contributed to the plan.Employees are eligible to participate after meeting certain eligibility requirements as defined in the planand are allowed to make pre-tax contributions up to the maximum amount allowed by the InternalRevenue Service. The terms of the 401(k) plan require employer match contributions equal to 100% ofthe employee contributions up to 4% of pay. In addition, the terms of the plan allow for discretionary profitsharing contributions as determined by the Company and approved by the board of directors. The employer match contributions for the 401(k) plan were $1.2 million, $1.1 million, and $1.0million for the years ended December 31, 2025, 2024 and 2023, respectively. The total employerdiscretionary profit sharing contributions to the plan were $1.0 million, $840,000, and $824,000 for theyears ended December 31, 2025, 2024 and 2023, respectively. Note 20: Deferred Compensation Plan In 2013, the Company implemented a deferred compensation plan for certain employees whichallows the Company to make a discretionary contribution to the account of any employee designated as aparticipant in the plan based upon the participant’s performance for the calendar year. Companycontributions to the plan vest on the fourth anniversary of the last day of the calendar year for which thecontribution was made to the plan and accrue interest at a rate equal to the Bank’s return on averageequity for the immediately preceding calendar year, or an alternative rate set by the Company’s board ofdirectors. Distribution of amounts contributed under the plan, including accrued interest, is made in a lumpsum cash payment within 75 days following the date such amounts become vested. As of each ofDecember 31, 2025 and 2024, the Company had a liability of $-0- recorded on the consolidated balancesheets. There were no new contributions made to the plan during the years ended December 31, 2025and 2024. Note 21: Preferred Stock In 2021, the Company announced the closing of its underwritten public offering of 2,400,000depositary shares, each representing a 1/100th interest in a share of the Company’s 5.875% Non-Cumulative Perpetual Preferred Stock, Series A, $0.01 par value per share (“Series A Preferred Stock”).The underwriters of the offering exercised in full their option to purchase 360,000 additional depositaryshares to cover over-allotments. As a result, the gross proceeds from the offering totaled $69.0 million.Dividends on the Series A Preferred Stock will be non-cumulative and, if declared, accrue and are payablequarterly, in arrears, at a rate of 5.875% per annum. The Series A Preferred Stock qualifies as additionalTier 1 capital for the purposes of the regulatory capital calculations. The net proceeds from the issuanceand sale of the depositary shares, each representing a 1/100th ownership interest in the Series APreferred Stock, after deducting $2.5 million of issuance costs, including the underwriting discount andprofessional service fees, were $66.5 million.
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Table of Contents Note 22: Regulatory Capital The Company and the Bank are subject to various regulatory requirements administered byfederal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatoryand possibly additional discretionary actions by regulators that, if undertaken, could have a direct materialeffect on the Company’s financial statements. Under capital adequacy guidelines, the Company and theBank must meet specific capital guidelines that involve quantitative measures of their assets, liabilitiesand certain off-balance sheet items as calculated under regulatory accounting practices. The Bank mustalso meet certain specific capital guidelines under the regulatory framework for prompt corrective action.The capital amounts and classifications are also subject to qualitative judgments by the regulators aboutcomponents, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Companyand Bank to maintain minimum amounts and ratios of common equity Tier 1 capital, Tier 1 capital andtotal capital to risk-weighted assets and of Tier 1 capital to average consolidated assets (referred to as the“leverage ratio”), as defined under the applicable regulatory capital rules. The following tables present the capital amounts and ratios for the Company, on a consolidatedbasis, and the Bank as of December 31, 2025 and 2024: Minimum Required For Capital Adequacy To be Well CapitalizedFor Capital Adequacy Purposes Plus Capital Under Prompt CorrectiveActual Purposes Conservation Buffer Action Regulations (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio December 31, 2025 Company (Consolidated): Total Risk-based Capital $667,81414.12% $ 378,356 8.00% $ 496,593 10.50% N/A N/A Tier 1 Risk-based Capital 500,00210.57 283,767 6.00 402,004 8.50 N/A N/A Common Equity Tier 1 Capital 433,488 9.17 212,825 4.50 331,062 7.00 N/A N/A Tier 1 Leverage Ratio 500,002 9.20 217,505 4.00 217,505 4.00 N/A N/A Bank: Total Risk-based Capital $636,97313.49% $ 377,687 8.00% $ 495,715 10.50% $ 472,109 10.00% Tier 1 Risk-based Capital 577,94212.24 283,266 6.00 401,293 8.50 377,687 8.00 Common Equity Tier 1 Capital 577,94212.24 212,449 4.50 330,477 7.00 306,871 6.50 Tier 1 Leverage Ratio 577,94210.65 217,116 4.00 217,116 4.00 271,395 5.00 Minimum Required For Capital Adequacy To be Well CapitalizedFor Capital Adequacy Purposes Plus Capital Under Prompt CorrectiveActual Purposes Conservation Buffer Action Regulations (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio December 31, 2024 Company (Consolidated): Total Risk-based Capital $585,96613.76% $ 340,581 8.00% $ 447,013 10.50% N/A N/A Tier 1 Risk-based Capital 453,04910.64 255,436 6.00 361,867 8.50 N/A N/A Common Equity Tier 1 Capital 386,535 9.08 191,577 4.50 298,008 7.00 N/A N/A Tier 1 Leverage Ratio 453,049 9.44 191,878 4.00 191,878 4.00 N/A N/A Bank: Total Risk-based Capital $573,15813.49% $ 340,003 8.00% $ 446,254 10.50% $ 425,004 10.00% Tier 1 Risk-based Capital 520,00012.24 255,002 6.00 361,253 8.50 340,003 8.00 Common Equity Tier 1 Capital 520,00012.24 191,252 4.50 297,503 7.00 276,253 6.50 Tier 1 Leverage Ratio 520,00010.86 191,593 4.00 191,593 4.00 239,491 5.00 The Company and the Bank must maintain a capital conservation buffer as defined by regulatoryguidelines, in order to avoid limitations on capital distributions, including dividend payments, stockrepurchases and certain discretionary bonus payments to executive officers.
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Table of Contents 134 As of December 31, 2025 and 2024, the capital ratios of the Company and the Bank were inexcess of the quantitative capital ratio standards applicable on those dates. Note 23: Fair Value Measurement The Company categorizes its assets and liabilities measured at fair value into a three-levelhierarchy based on the priority of the inputs to the valuation technique used to determine fair value. Thefair value hierarchy gives the highest priority to quoted prices in active markets for identical assets orliabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used in thedetermination of the fair value measurement fall within different levels of the hierarchy, the categorizationis based on the lowest level input that is significant to the fair value measurement. Assets and liabilitiesvalued at fair value are categorized based on the inputs to the valuation techniques as follows: Level 1 – Inputs that utilized quoted prices (unadjusted) in active markets for identical assets orliabilities that the Company has the ability to access. Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets andinputs that are observable for the asset or liability, either directly or indirectly, for substantially the full termof the financial instruments. Fair values for these instruments are estimated using pricing models, quotedprices of securities with similar characteristics, or discounted cash flows. Level 3 – Inputs that are unobservable for the asset or liability, which are typically based on anentity’s own assumptions, as there is little, if any, related market activity. Subsequent to initial recognition, the Company may re-measure the carrying value of assets andliabilities measured on a nonrecurring basis to fair value. Adjustments to fair value usually result whencertain assets are impaired. Such assets are written down from their carrying amounts to their fair value. Professional standards allow entities the irrevocable option to elect to measure certain financialinstruments and other items at fair value for the initial and subsequent measurement on an instrument-by-instrument basis. The Company adopted the policy to value certain financial instruments at fair value. TheCompany has not elected to measure any existing financial instruments at fair value; however, it mayelect to measure newly acquired financial instruments at fair value in the future. Recurring Basis The Company uses fair value measurements to record fair value adjustments to certain assetsand liabilities and to determine fair value disclosures. There have been no changes in the methodologiesused at December 31,
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Table of Contents 135 2025. The following table presents the balances of the assets and liabilities measured at fair value on arecurring basis as of December 31, 2025 and 2024: December 31, 2025 (dollars in thousands) Level 1 Level 2 Level 3 Total Fair Value of Financial Assets:Securities Available for Sale:U.S. Treasury Securities $146,206 $ — $ — $146,206Municipal Bonds — 239,168 — 239,168Mortgage-Backed Securities — 245,672 — 245,672Corporate Securities — 92,407 — 92,407U.S. Government Agency Securities — 8,707 — 8,707Asset-Backed Securities — 44,281 — 44,281Fair Value Swaps — 10,968 — 10,968Interest Rate Caps — 13,221 — 13,221Interest Rate Swaps — 10,711 — 10,711Risk Participation Agreements — — 1 1Total Fair Value of Financial Assets $146,206 $665,135 $ 1 $811,342 Fair Value of Financial Liabilities:Fair Value Swaps $ — $ 419 $ — $ 419Interest Rate Swaps — 9,424 — 9,424Risk Participation Agreements — — 13 13Total Fair Value of Financial Liabilities $ — $ 9,843 $ 13 $ 9,856 December 31, 2024 (dollars in thousands) Level 1 Level 2 Level 3 Total Fair Value of Financial Assets:Securities Available for Sale:U.S. Treasury Securities $167,748 $ — $ — $167,748Municipal Bonds — 122,265 — 122,265Mortgage-Backed Securities — 244,890 — 244,890Corporate Securities — 134,186 — 134,186U.S. Government Agency Securities — 22,082 — 22,082Asset-Backed Securities — 77,076 — 77,076Fair Value Swaps — 10,487 — 10,487Interest Rate Caps — 19,319 — 19,319 Interest Rate Swaps — 13,349 — 13,349 Total Fair Value of Financial Assets $167,748 $643,654 $ — $811,402 Fair Value of Financial Liabilities: Interest Rate Swaps $ — $ 8,210 $ — $ 8,210 Total Fair Value of Financial Liabilities $ — $ 8,210 $ — $ 8,210 Investment Securities When available, the Company uses quoted market prices to determine the fair value ofinvestment securities; such items are classified in Level 1 of the fair value hierarchy. For the Company’s investments, when quoted prices are not available for identical securities in anactive market, the Company determines fair value utilizing vendors who apply matrix pricing for similarbonds where no price is observable or may compile prices from various sources. These models areprimarily industry-standard models that consider various assumptions, including time value, yield curve,volatility factors, prepayment speeds, default rates,
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Table of Contents 136 loss severity, current market, and contractual prices for the underlying financial instruments, as well asother relevant economic measures. Substantially, all of these assumptions are observable in themarketplace and can be derived from observable data or are supported by observable levels at whichtransactions are executed in the marketplace. Fair values from these models are verified, where possible,against quoted market prices for recent trading activity of assets with similar characteristics to the securitybeing valued. Such methods are generally classified as Level 2. However, when prices from independentsources vary, or cannot be obtained or corroborated, a security is generally classified as Level 3. Fair Value Swaps Fair value swaps are traded in over-the-counter markets where quoted market prices are notreadily available. For those fair value swaps, fair value is determined using internally developed models ofa third party that uses primarily market observable inputs, such as yield curves and option volatilities, andaccordingly are valued using Level 2 inputs. Interest Rate Caps The fair value of the caps are calculated by determining the total expected asset or liabilityexposure of the derivatives. Total expected exposure incorporates both the current and potential futureexposure of the derivative, derived from using observable inputs, such as yield curves and volatilities, andaccordingly are valued using Level 2 inputs. Interest Rate Swaps Interest rate swaps are traded in over-the-counter markets where quoted market prices are notreadily available. For those interest rate swaps, fair value is determined using internally developed modelsof a third party that uses primarily market observable inputs, such as yield curves and option volatilities,and accordingly are valued using Level 2 inputs. Risk Participation Agreements The fair value of RPAs is calculated by determining the total expected asset or liability exposureusing observable inputs, such as yield curves and volatilities, of the derivative to the borrower andapplying an unobservable credit default probability to that exposure, and accordingly are valued usinglevel 3 inputs. Nonrecurring Basis Certain assets are measured at fair value on a nonrecurring basis. These assets are notmeasured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certaincircumstances, such as when there is evidence of impairment or a change in the amount of previouslyrecognized impairment.
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Table of Contents 137 The following tables present nonrecurring fair value measurements of certain assets forthe periods ended December 31, 2025, 2024 and 2023: December 31, 2025 (dollars in thousands) Level 1 Level 2 Level 3 Loss Individually Evaluated Loans $ — $ — $39,043 $3,812 Totals $ — $ — $39,043 $3,812 December 31, 2024 (dollars in thousands) Level 1 Level 2 Level 3 Loss Individually Evaluated Loans $ — $ — $ 91 $ 44 Totals $ — $ — $ 91 $ 44 December 31, 2023 (dollars in thousands) Level 1 Level 2 Level 3 Loss Individually Evaluated Loans $ — $ — $9,602 $199 Totals $ — $ — $9,602 $199 Individually Evaluated Loans The Company records certain loans at fair value on a non-recurring basis. Individually evaluatedloans for which an allowance is established, or a write-down has occurred during the period, based on thefair value of collateral require classification in the fair value hierarchy. The fair value of the loan’s collateralis determined by appraisals, independent valuation and other techniques. When the fair value of theloan’s collateral is based on an observable market price the Company classifies the fair value of theindividually evaluated loans within Level 2 of the valuation hierarchy. For loans in which the valuation hasunobservable inputs, the Company classifies these within the Level 3 of the valuation hierarchy. As ofDecember 31, 2025, collateral values were estimated using a combination of observable inputs, includingrecent appraisals, and unobservable inputs, including internally determined values based on cost adjustedfor depreciation and customized discounting criteria on appraisals which ranged from 4-25%. Due to thesignificance of unobservable inputs, fair values of individually evaluated loans have been classified asLevel 3. Fair Value Disclosure of fair value information about financial instruments, for which it is practicable toestimate that value, is required whether or not recognized in the consolidated balance sheets. In caseswhere quoted market prices are not available, fair values are based on estimates using present value ofcash flow or other valuation techniques. Those techniques are significantly affected by the assumptionsused, including the discount rate and estimate of future cash flows. In that regard, the derived fair valueestimates cannot be substantiated by comparison to independent markets and, in many cases could notbe realized in immediate settlement of the instruments. Certain financial instruments with a fair value thatis not practicable to estimate and all non-financial instruments are excluded from the disclosurerequirements. Accordingly, the aggregate fair value amounts presented do not necessarily represent theunderlying value of the Company. Fair value estimates are made at a specific point in time based on relevant market informationand information about the financial instrument. These estimates do not reflect any premium or discountthat could result from offering for sale at one time the Company’s entire holdings of a particularinstrument. Because no market exists for a significant portion of the Company’s financial instruments, fairvalue estimates are based on judgments regarding future expected loss experience, current economicconditions, risk characteristics of various financial instruments, and other factors. These estimates aresubjective in nature and involve uncertainties and matters that could affect the estimates. Fair valueestimates are based on existing on and off-balance sheet financial instruments without attempting toestimate the value of anticipated future business. Deposits with no stated maturities are defined as
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Table of Contents 138 having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair valuederived from retaining those deposits for an expected future period of time. This component, commonlyreferred to as a deposit base intangible, is neither considered in the below amounts nor is it recorded asan intangible asset on the balance sheet. In addition, the tax ramifications related to the realization of theunrealized gains and losses can have a significant effect on fair value estimates and have not beenconsidered in the estimates. The following tables present the carrying amounts and estimated fair values of financialinstruments at December 31, 2025 and 2024: December 31, 2025 Fair Value Hierarchy Carrying Estimated(dollars in thousands) Amount Level 1 Level 2 Level 3 Fair Value Financial Assets:Cash and Due From Banks $ 123,511 $123,511 $ — $ — $ 123,511Securities Available for Sale 776,441 146,206 630,235 — 776,441FHLB Stock, at Cost 21,122 — 21,122 — 21,122Loans, Net 4,244,108 — 4,142,794 39,043 4,181,837Accrued Interest Receivable 18,929 — 18,929 — 18,929Fair Value Swaps 10,968 — 10,968 — 10,968Interest Rate Caps 13,221 — 13,221 — 13,221Interest Rate Swaps 10,711 — 10,711 — 10,711Risk Participation Agreements 1 — — 1 1 Financial Liabilities:Deposits $4,320,369 $ — $4,324,551 $ — $4,324,551FHLB Advances 399,500 — 399,760 — 399,760Subordinated Debentures 108,677 — 102,579 — 102,579Accrued Interest Payable 3,227 — 3,227 — 3,227Fair Value Swaps 419 — 419 — 419Interest Rate Swaps 9,424 — 9,424 — 9,424Risk Participation Agreements 13 — — 13 13
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Table of Contents 139 December 31, 2024 Fair Value Hierarchy Carrying Estimated(dollars in thousands) Amount Level 1 Level 2 Level 3 Fair Value Financial Assets:Cash and Due From Banks $ 229,760 $229,760 $ — $ — $ 229,760Bank-Owned Certificates of Deposit 4,377 — 4,370 — 4,370Securities Available for Sale 768,247 167,748 600,499 — 768,247FHLB Stock, at Cost 19,297 — 19,297 — 19,297Loans, Net 3,809,436 — 3,709,775 91 3,709,866Accrued Interest Receivable 17,711 — 17,711 — 17,711Fair Value Swaps 10,487 — 10,487 — 10,487Interest Rate Caps 19,319 — 19,319 — 19,319Interest Rate Swaps 13,349 — 13,349 — 13,349 Financial Liabilities:Deposits $4,086,767 $ — $4,131,298 $ — $4,131,298Notes Payable 13,750 — 13,775 — 13,775FHLB Advances 359,500 — 358,759 — 358,759Subordinated Debentures 79,670 — 76,056 — 76,056Accrued Interest Payable 4,008 — 4,008 — 4,008Interest Rate Swaps 8,210 — 8,210 — 8,210 The following methods and assumptions were used by the Company to estimate fair value ofconsolidated financial statements not previously discussed: Cash and due from banks – The carrying amount of cash and cash equivalents approximatestheir fair value. Bank-owned certificates of deposit – Fair values of bank-owned certificates of deposit areestimated using the discounted cash flow analysis based on current rates for similar types of deposits. FHLB stock – The carrying amount of FHLB stock approximates its fair value. Loans, net – Fair values for loans are estimated based on discounted cash flows, using interestrates currently being offered for loans with similar terms to borrowers with similar credit quality. Accrued interest receivable – The carrying amount of accrued interest receivable approximates itsfair value since it is short term in nature and does not present anticipated credit concerns. Deposits – The fair values disclosed for demand deposits without stated maturities (interest andnoninterest transaction, savings, and money market accounts) are equal to the amount payable ondemand at the reporting date (their carrying amounts). Fair values for the fixed-rate certificates of depositare estimated using a discounted cash flow calculation that applies interest rates currently being offeredon certificates to a schedule of aggregated expected monthly maturities on time deposits. Federal Funds purchased – The carrying amount of federal funds purchased approximates thefair value. Notes payable and subordinated debentures – The fair values of the Company’s notes payableand subordinated debentures are estimated using a discounted cash flow analysis, based on theCompany’s current incremental borrowing rate for similar types of borrowing arrangements.
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Table of Contents 140 FHLB advances – The fair values of the Company’s FHLB advances are estimated usingdiscounted cash flow analysis based on the Company’s current incremental borrowing rates for similartypes of borrowing agreements. Accrued interest payable – The carrying amount of accrued interest payable approximates its fairvalue since it is short term in nature. Off-balance sheet instruments – Fair values of the Company’s off-balance sheet instruments(lending commitments and unused lines of credit) are based on fees currently charged to enter into similaragreements, taking into account the remaining terms of the agreements, the counterparties’ creditstanding and discounted cash flow analysis. The fair value of these off-balance sheet items approximatesthe recorded amounts of the related fees and was not material at December 31, 2025 and 2024. Limitations – The fair value of a financial instrument is the current amount that would beexchanged between market participants, other than in a forced liquidation. Fair value is best determinedbased upon quoted market prices. However, in many instances, there are no quoted market prices for theCompany’s various financial instruments. In cases where quoted market prices are not available, fairvalues are based on estimates using present value or other valuation techniques. Those techniques aresignificantly affected by the assumptions used, including the discount rate and estimates of future cashflows. Accordingly, the fair value estimates may not be realized in an immediate settlement of theinstrument. Consequently, the aggregate fair value amounts presented may not necessarily represent theunderlying fair value of the Company. Note 24: Revenue Recognition The Company recognizes revenue from contracts with customers in accordance with ASC Topic606, Revenue from Contracts with Customers. The core principle requires an entity to recognize revenueto depict the transfer of goods or services to customers in an amount that reflects the consideration itexpects to be entitled to receive in exchange for those goods or services recognized as performanceobligations are satisfied. Substantially all of the Company’s revenue is generated from financial instruments, includinginterest income related to loans and investment securities, letters of credit, and derivatives, which are notwithin the scope of Topic 606 as these activities are subject to other GAAP discussed elsewhere withinthe Company’s disclosures. The following is a summary of revenue-generating activities that are withinthe scope of Topic 606, which are presented in the Company’s income statements as components ofnoninterest income: Service charges on deposit accounts. These represent general service fees for monthly accountmaintenance and activity and transaction-based fees such as wire transfer fees, check cashing fees,check printing fees, stop payment fees and ATM and card replacement fees. Revenue is recognized whenthe Company’s performance obligation is completed, which is generally monthly for account maintenanceservices or when a transaction has been completed. Payments for these performance obligations aregenerally received at the time the performance obligations are satisfied. The adoption of Topic 606 had noimpact on the Company’s revenue recognition practice for these services. Debit card interchange fees. When a debit card issued by the Company is used to purchasegoods or services from a merchant, the Company earns an interchange fee. The performance obligationis completed and the fees are recognized as the service is provided (i.e., when the customer uses thedebit card). The adoption of Topic 606 had no impact on the Company’s revenue recognition related todebit card interchange fees. Gain on sales of other real estate. ASU 2014-09 also created Topic 610-20, under which a gainon sale should be recognized when a contract for sale exists and control of the asset has beentransferred to the buyer. Topic 606 list several criteria which must exist to conclude that a contract for saleexists, including a determination that the institution will collect substantially all of the consideration towhich it is entitled.
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Table of Contents 141 Note 25: Accumulated Other Comprehensive Income (Loss) The following table presents the components of other comprehensive income (loss) for the yearsended December 31, 2025, 2024 and 2023: (dollars in thousands) Before Tax Tax EffectNet of Tax Year Ended December 31, 2025 Net Unrealized Gain on Available for Sale Securities $ 29,313$ (8,425) $ 20,888 Less: Reclassification Adjustment for Net Gains Included in Net Income(614) 176 (438) Total Unrealized Gain 28,699 (8,249) 20,450 Net Unrealized Loss on Cash Flow Hedge (2,673) 768 (1,905) Less: Reclassification Adjustment for Gains Included in Net Income(6,484) 1,864 (4,620) Total Unrealized Loss (9,157) 2,632 (6,525) Other Comprehensive Gain $ 19,542$ (5,617) $ 13,925 Year Ended December 31, 2024 Net Unrealized Gain on Available for Sale Securities $ 5,967$ (1,716) $ 4,251 Less: Reclassification Adjustment for Net Gains Included in Net Income(385) 111 (274) Total Unrealized Gain 5,582 (1,605) 3,977 Net Unrealized Gain on Cash Flow Hedge 10,515 (3,022) 7,493 Less: Reclassification Adjustment for Gains Included in Net Income(9,245) 2,657 (6,588) Total Unrealized Gain 1,270 (365) 905 Other Comprehensive Gain $ 6,852$ (1,970) $ 4,882 Year Ended December 31, 2023 Net Unrealized Gain on Available for Sale Securities $ 3,339$ (959) $ 2,380 Less: Reclassification Adjustment for Net Losses Included in Net Income33 (9) 24 Total Unrealized Gain 3,372 (968) 2,404 Net Unrealized Gain on Cash Flow Hedge 2,299 (660) 1,639 Less: Reclassification Adjustment for Gains Included in Net Income(6,102) 1,755 (4,347) Total Unrealized Loss (3,803) 1,095 (2,708) Other Comprehensive Loss $ (431) $ 127 $ (304)
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Table of Contents 142 The following table presents the changes in each component of accumulated othercomprehensive income (loss), net of tax, for the years ended December 31, 2025, 2024 and 2023: Accumulated Available For Other Comprehensive (dollars in thousands) Sale SecuritiesCash Flow HedgeIncome (Loss) Year Ended December 31, 2025 Balance at Beginning of Year $ (27,743) $ 14,379$ (13,364) Other Comprehensive Income Before Reclassifications 20,888 (1,905) 18,983 Amounts Reclassified from Accumulated Other Comprehensive Income (438) (4,620) (5,058) Net Other Comprehensive Income During Period20,450 (6,525) 13,925 Balance at End of Year $ (7,293) $ 7,854$ 561 Year Ended December 31, 2024 Balance at Beginning of Year $ (31,720) $ 13,474$ (18,246) Other Comprehensive Income Before Reclassifications 4,251 7,493 11,744 Amounts Reclassified from Accumulated Other Comprehensive Income (274) (6,588) (6,862) Net Other Comprehensive Income During Period3,977 905 4,882 Balance at End of Year $ (27,743) $ 14,379$ (13,364) Year Ended December 31, 2023 Balance at Beginning of Year $ (34,124) $ 16,182$ (17,942) Other Comprehensive Income Before Reclassifications 2,380 1,639 4,019 Amounts Reclassified from Accumulated Other Comprehensive Income 24 (4,347) (4,323) Net Other Comprehensive Income (Loss) During Period2,404 (2,708) (304) Balance at End of Year $ (31,720) $ 13,474$ (18,246)
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Table of Contents 143 Note 26: Parent Company Financial Information The following information presents the condensed balance sheets of the Company as ofDecember 31, 2025 and 2024, and the condensed statements of income and cash flows of the Companyfor the years ended December 31, 2025, 2024 and 2023: Condensed Balance Sheets December 31, December 31, (dollars in thousands) 2025 2024 ASSETSCash and Cash Equivalents $ 23,039 $ 20,008Investment in Subsidiaries 595,035 524,886Premises and Equipment, Net 755 785 Other Assets 11,412 8,882 Total Assets $ 630,241 $ 554,561 LIABILITIES AND EQUITYLIABILITIESNotes Payable $ — $ 13,750Subordinated Debentures, Net of Issuance Costs 108,677 79,670Accrued Interest Payable 493 452 Other Liabilities 3,976 2,754 Total Liabilities 113,146 96,626SHAREHOLDERS’ EQUITYPreferred Stock—$0.01 par valuePreferred Stock—Authorized 10,000,000 66,514 66,514Common Stock—$0.01 par valueVoting Common Stock—Authorized 75,000,000 278 276Additional Paid‑In Capital 98,287 95,088Retained Earnings 351,455 309,421 Accumulated Other Comprehensive Income (Loss) 561 (13,364) Total Shareholders’ Equity 517,095 457,935 Total Liabilities and Shareholders' Equity $ 630,241 $ 554,561
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Table of Contents 144 Condensed Statements of Income December 31, December 31, December 31, (dollars in thousands) 2025 2024 2023 INCOMEDividend Income $ — $ 10,000 $ — Interest Income 2 13 3 Other Income 118 115 118 Total Income 120 10,128 121EXPENSEInterest Expense 6,507 5,144 5,126 Other Expenses 1,819 1,805 1,757 Total Interest Expense 8,326 6,949 6,883 INCOME (LOSS) BEFORE INCOME TAX BENEFIT ANDEQUITY IN UNDISTRIBUTED EARNINGS (8,206) 3,179 (6,762)Income Tax Benefit 2,269 1,902 1,894INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTEDEARNINGS (5,937) 5,081 (4,868) Equity in Undistributed Earnings 52,025 27,744 44,828 NET INCOME $ 46,088 $ 32,825 $ 39,960 Condensed Statements of Cash Flows December 31, December 31, December 31, (dollars in thousands) 2025 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIESNet Income $ 46,088 $ 32,825 $ 39,960Adjustments to Reconcile Net Income to Net CashProvided (Used) by Operating Activities:Equity in Undistributed Earnings of Subsidiaries (52,025) (27,744) (44,828)Changes in Other Assets and Liabilities (835) (3,614) (738) Net Cash Provided (Used) by Operating Activities (6,772) 1,467 (5,606) CASH FLOWS FROM INVESTING ACTIVITIESInvestment in Subsidiaries — — —Proceeds from Bridgewater Risk Management, Inc.Liquidation — — 4,143 Net Cash Provided (Used) by Investing Activities — — 4,143 CASH FLOWS FROM FINANCING ACTIVITIESPrincipal Payments on Notes Payable (13,750) — —Proceeds from Notes Payable — — —Proceeds from Issuance of Subordinated Debt 78,605 — —Redemption of Subordinated Debt (50,000) — —Stock Options Exercised 1,939 763 963Stock Repurchases and Repurchases for TaxWithholding on Equity Awards (2,937) (5,901) (5,127) Preferred Stock Dividends Paid (4,054) (4,054) (4,054) Net Cash Provided (Used) by Financing Activities 9,803 (9,192) (8,218) NET CHANGE IN CASH AND CASH EQUIVALENTS 3,031 (7,725) (9,681) Cash and Cash Equivalents Beginning 20,008 27,733 37,414 Cash and Cash Equivalents Ending $ 23,039 $ 20,008 $ 27,733
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Table of Contents 145 Note 27: Subsequent Events On January 27, 2026, the Company’s board of directors declared a quarterly cash dividend of$36.72 per share ($0.3672 per depositary share) on the Series A Preferred Stock, payable on March 2,2026, to shareholders of record on the Series A Preferred Stock at the close of business on February 13,2026. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company’s Chief Executive Officer and President and Chief Financial Officer have evaluatedthe effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (asthat term is defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2025, the end of thefiscal year covered by this Annual Report on Form 10-K. Based on that evaluation, the Chief ExecutiveOfficer and the President and Chief Financial Officer have concluded that, as of December 31, 2025, theCompany’s disclosure controls and procedures were effective to ensure that the information required tobe disclosed by the Company in the reports it files or submits under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in the SEC’s rules and forms andis accumulated and communicated to the Company’s management, including the Chief Executive Officerand the President and Chief Financial Officer, as appropriate, to allow timely decisions regarding requireddisclosure. Management’s Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internalcontrol over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). TheCompany’s internal control system is a process designed to provide reasonable assurance to theCompany’s management and board of directors regarding the preparation and fair presentation ofpublished financial statements. Internal control over financial reporting of the Company includes those policies and proceduresthat pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions of the Company; provide reasonable assurance that transactions are recorded as necessaryto permit preparation of financial statements in accordance with generally accepted accounting principles,and that receipts and expenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’sassets that could have a material effect on the Company’s consolidated financial statements. Because of inherent limitations in any system of internal control, no matter how well designed,misstatements due to error or fraud may occur and not be detected, including the possibility of thecircumvention or overriding of controls. Accordingly, even effective internal control over financial reportingcan provide only reasonable assurance with respect to financial statement preparation. Further, becauseof changes in conditions, internal control effectiveness may vary over time. Management assessed the Company’s internal control over financial reporting as ofDecember 31, 2025. This assessment was based on criteria for effective internal control over financialreporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission in InternalControl-Integrated Framework in 2013. Based on
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Table of Contents 146 this assessment, the Chief Executive Officer and Chief Financial Officer assert that the Companymaintained effective internal control over financial reporting as of December 31, 2025 based on thespecified criteria. The effectiveness of the Company’s internal control over financial reporting as of December 31,2025, has been audited by RSM US LLP, the independent registered public accounting firm who also hasaudited the Company’s consolidated financial statements included in this Annual Report on Form 10-K.RSM US LLP’s report on the Company’s internal control over financial reporting appears in Item 8 of thisForm-10K and is incorporated into this item by reference. Changes in Internal Control Over Financial Reporting There has been no change in the Company’s internal control over financial reporting that occurredduring the period covered by this Annual Report on Form 10-K that has materially affected, or isreasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B. OTHER INFORMATION Rule 10b5-1 Trading Plans During the fiscal quarter ended December 31, 2025, none of the Company’s directors orexecutive officers adopted or terminated any contract, instruction or written plan for the purchase or saleof Company securities that was intended to satisfy the affirmative defense conditions of Rule10b5-1(c) orany non-Rule 10b5-1 trading arrangement. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information called for by this item, including information relating to compliance with Section16(a) of the Exchange Act, is set forth under the headings “Proposal 1 – Election of Directors,” “CorporateGovernance and the Board of Directors,” “Security Ownership of Certain Beneficial Owners,” “DelinquentSection 16(a) Reports” and in the Company’s definitive Proxy Statement for our Annual Meeting ofShareholders to be held on April 28, 2026, which will be filed with the SEC pursuant to Regulation 14Aunder the Exchange Act within 120 days of the Company’s fiscal year end, which is incorporated hereinby reference. ITEM 11. EXECUTIVE COMPENSATION. The information called for by this item is set forth under the headings “Compensation Discussionand Analysis,” “Executive Compensation,” “Corporate Governance and the Board of Directors – DirectorCompensation,” and “Corporate Governance and the Board of Directors – Compensation CommitteeInterlocks and Insider Participation,” “CEO Pay Ratio,” “Pay Versus Performance,” “CompensationCommittee Report” appearing in the Company's definitive Proxy Statement for our Annual Meeting ofShareholders to be held on April 28, 2026, which will be filed with the SEC pursuant to Regulation 14Aunder the Exchange Act within 120 days of the Company’s fiscal year end, which is incorporated hereinby reference.
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Table of Contents 147 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS. Equity Compensation Plans The following table presents the number of outstanding options, warrants and rights granted toparticipants by the Company under its equity compensation plans, as well as the number of securitiesremaining available for future issuance under these plans as of December 31, 2025. The table providesthis information separately for equity compensation plans that have and have not been approved bysecurity holders. Additional information regarding stock incentive plans is presented in “Note 18 – StockOptions, Restricted Stock and Restricted Stock Units” to the Consolidated Financial Statements for theyear ending December 31, 2025. (c)Number of(a) securitiesNumber of (b) available forsecurities to be Weighted- future issuanceissued upon average under equityexercise of exercise price compensationoutstanding of outstanding plans (excludingoptions, options, securitieswarrants and warrants and reflected inPlan Category rights rights column (a)) Equity compensation plans approved by shareholders (1) 2,382,836 $ 11.59 476,943 Equity compensation plans not approved by shareholders — — — Total 2,382,836 $ 11.59 476,943 (1) Column (a) includes outstanding stock options granted under the Bridgewater Bancshares, Inc. 2023 Equity Incentive Plan, theBridgewater Bancshares, Inc. 2019 Equity Incentive Plan, the Bridgewater Bancshares, Inc. 2017 Combined Incentive andNon-Statutory Stock Option Plan and the Bridgewater Bancshares, Inc. 2012 Combined Incentive and Non-Statutory StockOption Plan. This column also includes unvested restricted stock units granted under the Bridgewater Bancshares, Inc. 2023Equity Incentive Plan and the Bridgewater Bancshares, Inc. 2019 Equity Incentive Plan. Column (b) does not reflect restricted stock units as they do not include an exercise price. Column (c) includes 10,000, 2,192, and 464,751 shares remaining available for future issuance under the BridgewaterBancshares, Inc. 2017 Combined Incentive and Non-Statutory Stock Option Plan, Bridgewater Bancshares, Inc. 2019 EquityIncentive Plan and the Bridgewater Bancshares, Inc. 2023 Equity Incentive Plan, respectively, as of December 31, 2025. The information required pursuant to Item 403 of Regulation S-K can be found under the caption“Security Ownership of Certain Beneficial Owners” in the Company’s definitive Proxy Statement on FormDEF 14A for our Annual Meeting of Shareholders to be held on April 28, 2026, which will be filed with theSEC within 120 days of the Company’s fiscal year end, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE. The information called for by this item is set forth under the headings “Certain Relationships andRelated Party Transactions” and “Corporate Governance and the Board of Directors” appearing in theCompany’s definitive Proxy Statement for our Annual Meeting of Shareholders to be held on April 28,2026, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act within 120days of the Company’s fiscal year end, which is incorporated herein by reference.
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Table of Contents 148 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The information called for by this item is set forth under the heading “Proposal 3 – Ratification ofthe Appointment of RSM US LLP as our Independent Registered Public Accounting Firm” appearing in theCompany’s definitive Proxy Statement for our Annual Meeting of Shareholders to be held on April 28,2026, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act within 120days of the Company’s fiscal year end, which is incorporated herein by reference. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 1. Financial Statements: The consolidated financial statements that appear in Item 8 of this Form 10-Kare incorporated herein by reference. 2. Financial Statement Schedules: All schedules are omitted because they are not applicable, notrequired, or because the required information is included in the consolidated financial statements ornotes thereto. 3. Exhibits. ExhibitNumber Description 3.1 Third Amended and Restated Articles of Incorporation of Bridgewater Bancshares, Inc.(incorporated herein by reference to Exhibit 3.1 on Form 8-K filed on April 27, 2023) 3.2 Second Amended and Restated Bylaws of Bridgewater Bancshares, Inc. (incorporated hereinby reference to Exhibit 3.2 on Form 8-K filed on April 27, 2023) 3.3 Statement of Designation of 5.875% Non-Cumulative Perpetual Preferred Stock, Series A(incorporated herein by reference to Exhibit 3.1 on Form 8-K filed on August 17, 2021) 4.1 Description of the Company’s Securities Registered Pursuant to Section 12 of the SecuritiesExchange Act of 1934 (incorporated herein by reference to Exhibit 4.1 on Form 10-K filed onMarch 7, 2023) 4.2 Indenture, dated June 24, 2025, by and between Bridgewater Bancshares, Inc. and U.S.Bank Trust Company, National Association, as trustee (incorporated herein by reference toExhibit 4.1 on Form 8-K filed on June 24, 2025) 4.3 Forms of 7.625% Fixed-to-Floating Rate Subordinated Note due July 1, 2035 (included asExhibit A-1 and Exhibit A-2 to the Indenture filed as Exhibit 4.3 hereto and incorporated byreference herein to Exhibit 4.1 on Form 8-K filed on June 24, 2025) 4.4 Indenture, dated July 8, 2021, by and between Bridgewater Bancshares, Inc. and U.S. BankNational Association, as trustee (incorporated herein by reference to Exhibit 4.1 on Form 8-Kfiled on July 8, 2021) 4.5 Forms of 3.25% Fixed-to-Floating Rate Subordinated Note due July 15, 2031 (included asExhibit A-1 and Exhibit A-2 to the Indenture filed as Exhibit 4.5 hereto and incorporated hereinby reference to Exhibit 4.1 on Form 8-K filed on July 8, 2021)
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Table of Contents 149 4.6 Deposit Agreement, dated as of August 17, 2021, among Bridgewater Bancshares, Inc.,Computershare Inc. and Computershare Trust Company, N.A., jointly as depositary, and theholders from time to time of the depositary receipts issued thereunder (incorporated herein byreference to Exhibit 4.1 on Form 8-K filed on August 17, 2021) 4.7 Form of depositary receipt representing the Depositary Shares (included as Exhibit A to Exhibit4.7 hereto) 10.1 Bridgewater Bank Deferred Cash Incentive Plan effective December 31, 2013 (incorporatedherein by reference to Exhibit 10.4 filed on Form S-1 on February 16, 2018)† 10.2 Bridgewater Bancshares, Inc. 2017 Combined Incentive and Non-Statutory Stock Option Plan(incorporated herein by reference to Exhibit 10.5 on Form S-1 filed on February 16, 2018)† 10.3 Form of Stock Option Agreement under the Bridgewater Bancshares, Inc. 2017 CombinedIncentive and Non-Statutory Stock Option Plan (incorporated herein by reference to Exhibit10.6 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2019)† 10.4 Bridgewater Bancshares, Inc. 2012 Combined Incentive and Non-Statutory Stock Option Plan(incorporated herein by reference to Exhibit 10.7 on Form S-1 filed on February 16, 2018)† 10.5 Form of Stock Option Agreement under the Bridgewater Bancshares, Inc. 2012 CombinedIncentive and Non-Statutory Stock Option Plan (incorporated herein by reference to Exhibit10.8 on Form S-1 filed on February 16, 2018)† 10.6 Construction Contract, dated as of August 27, 2018, by and between Bridgewater Bank andReuter Walton Commercial, LLC (incorporated herein by reference to Exhibit 10.1 filed with theForm 8-K on August 30, 2018) 10.7 Exchange Agreement, dated as of October 25, 2018 by and between Bridgewater Bancshares,Inc. and Castle Creek Capital Partners V, LP (incorporated herein by reference to Exhibit 10.1filed with the Form 8-K on October 26, 2018) 10.8 Exchange Agreement, dated as of October 25, 2018 by and between Bridgewater Bancshares,Inc. and EJF Sidecar Fund, Series LLC – Series E (incorporated herein by reference to Exhibit10.2 filed with the Form 8-K on October 26, 2018) 10.9 Exchange Agreement, dated as of October 25, 2018 by and between Bridgewater Bancshares,Inc. and Endeavour Regional Bank Opportunities Fund II LP (incorporated herein by referenceto Exhibit 10.3 filed with the Form 8-K on October 26, 2018) 10.10 Bridgewater Bancshares, Inc. 2019 Equity Incentive Plan (incorporated herein by reference toExhibit 4.3 to the Company’s Registration Statement on Form S-8 filed on April 26, 2019)† 10.11 Form of Restricted Stock Award Agreement under the Bridgewater Bancshares, Inc. 2019Equity Incentive Plan (incorporated herein by reference to Exhibit 4.4 to the Company’sRegistration Statement on Form S-8 filed on April 26, 2019)† 10.12 Form of Restricted Stock Unit Award Agreement under the Bridgewater Bancshares, Inc. 2019Equity Incentive Plan (incorporated herein by reference to Exhibit 10.17 on Form 10-K filed onMarch 7, 2024)†
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Table of Contents 150 10.13 Form of Nonqualified Stock Option Award Agreement under the Bridgewater Bancshares, Inc.2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.6 to the Company’sRegistration Statement on Form S-8 filed on April 26, 2019)† 10.14 Form of Incentive Stock Option Award Agreement under the Bridgewater Bancshares, Inc.2019 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.7 to the Company’sRegistration Statement on Form S-8 filed on April 26, 2019)† 10.15 Form of Subordinated Note Purchase Agreement, dated June 24, 2025, by and amongBridgewater Bancshares, Inc. and the Purchasers (incorporated herein by reference to Exhibit10.1 on Form 8-K filed on June 24, 2025) 10.16 Form of Registration Rights Agreement, dated June 24, 2025, by and among BridgewaterBancshares, Inc. and the Purchasers (incorporated herein by reference to Exhibit 10.2 onForm 8-K filed on June 24, 2025) 10.17 Loan and Security Agreement, dated as of March 1, 2021, by and between BridgewaterBancshares, Inc., as Borrower, and ServisFirst Bank, as Lender (incorporated herein byreference to Exhibit 10.1 on Form 8-K filed on March 5, 2021) 10.18 Revolving Note, dated as of March 1, 2021, made by Bridgewater Bancshares, Inc., asBorrower, to and in favor of ServisFirst Bank, as Lender (incorporated herein by reference toExhibit 10.2 on Form 8-K filed on March 5, 2021) 10.19 Pledge Agreement, dated as of March 1, 2021, by and between Bridgewater Bancshares, Inc.,as Borrower, and ServisFirst Bank, as Lender (incorporated herein by reference to Exhibit 10.3on Form 8-K filed on March 5, 2021) 10.20 Form of Subordinated Note Purchase Agreement, dated July 8, 2021, by and amongBridgewater Bancshares, Inc. and the Purchasers (incorporated herein by reference to Exhibit10.1 on Form 8-K filed on July 8, 2021) 10.21 Form of Registration Rights Agreement, dated July 8, 2021, by and among BridgewaterBancshares, Inc. and the Purchasers (incorporated herein by reference to Exhibit 10.2 onForm 8-K filed on July 8, 2021) 10.22 Executive Employment Agreement, dated January 1, 2022 between Bridgewater Bancshares,Inc. and Jerry Baack (incorporated herein by reference to Exhibit 10.27 on Form 10-K filed onMarch 7, 2023)† 10.23 Executive Employment Agreement, dated January 1, 2022 between Bridgewater Bancshares,Inc. and Mary Jayne Crocker (incorporated herein by reference to Exhibit 10.28 on Form 10-Kfiled on March 7, 2023)† 10.24 First Amendment to Employment Agreement among Bridgewater Bancshares, Inc.,Bridgewater Bank, and Mary Jane Crocker, dated August 18, 2025. (incorporated herein byreference to Exhibit 10.1 on Form 8-K filed on August 19, 2025)† 10.25 Executive Employment Agreement, dated January 1, 2022 between Bridgewater Bancshares,Inc. and Joseph Chybowski (incorporated herein by reference to Exhibit 10.29 on Form 10-Kfiled on March 7, 2023)† 10.26 Executive Employment Agreement, dated January 1, 2022 between Bridgewater Bancshares,Inc. and Nicholas Place (incorporated herein by reference to Exhibit 10.31 on Form 10-K filedon March 7, 2023)†
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Table of Contents 151 10.27 Executive Employment Agreement, dated January 1, 2022 between Bridgewater Bancshares,Inc. and Lisa Salazar† 10.28 First Amendment to Employment Agreement among Bridgewater Bancshares, Inc.,Bridgewater Bank, and Lisa Salazar, dated January 31, 2025† 10.29 Second Amendment to Loan and Security Agreement, dated September 1, 2022, by andbetween Bridgewater Bancshares, Inc. and ServisFirst Bank (incorporated herein by referenceto Exhibit 10.1 on Form 8-K filed on September 1, 2022) 10.30 Amended and Restated Revolving Note, dated September 1, 2022, made by BridgewaterBancshares, Inc. to and in favor of ServisFirst Bank (incorporated herein by reference toExhibit 10.2 on Form 8-K filed on September 1, 2022) 10.31 Bridgewater Bancshares, Inc. 2023 Equity Incentive Plan (incorporated herein by reference toAppendix C on Schedule 14A filed on March 13, 2023)† 10.32 Form of Restricted Stock Award Agreement under the Bridgewater Bancshares, Inc. 2023Equity Incentive Plan (incorporated herein by reference to Exhibit 4.4 on Form S-8 filed onApril 28, 2023)† 10.33 Form of Restricted Stock Unit Award Agreement under the Bridgewater Bancshares, Inc. 2023Equity Incentive Plan (incorporated herein by reference to Exhibit 10.36 on Form 10-K filed onMarch 7, 2024)† 10.34 Form of Nonqualified Stock Option Award Agreement under the Bridgewater Bancshares, Inc.2023 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.6 on Form S-8 filedon April 28, 2023)† 10.35 Form of Incentive Stock Option Award Agreement under the Bridgewater Bancshares, Inc.2023 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.7 on Form S-8 filedon April 28, 2023)† 10.36 Third Amendment to Loan and Security Agreement, dated September 1, 2024, by and betweenBridgewater Bancshares, Inc. and ServisFirst Bank (incorporated herein by reference toExhibit 10.1 to form 8-K filed on September 6, 2024) 10.37 Amended and Restated Revolving Note, dated September 1, 2024, made by BridgewaterBancshares, Inc. to and in favor of ServisFirst Bank (incorporated herein by reference toExhibit 10.2 to form 8-K filed on September 6, 2024) 10.38 Short Term Incentive Plan (incorporated herein by reference to Exhibit 10.36 on Form 10-Kfiled on March 6, 2025)† 10.39 BOLI Supplementary Life Insurance Benefit (incorporated herein by reference to Exhibit 10.37on Form 10-K filed on March 6, 2025)† 19.1 Insider Trading Policy (incorporated herein by reference to Exhibit 19.1 on Form 10-K filed onMarch 7, 2024) 21.1 Subsidiaries of Bridgewater Bancshares, Inc. (incorporated herein by reference to Exhibit 21.1on Form 10-K filed on March 7, 2024) 23.1 Consent of RSM US LLP
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Table of Contents 152 31.1 Certification of the Chief Executive Officer required by Rule 13a-14(a) of the SecuritiesExchange Act of 1934, and Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer required by Rule 13a-14(a) of the SecuritiesExchange Act of 1934, and Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97.1 Bridgewater Bancshares, Inc. Clawback Policy (Incorporated herin by reference to Exhibit 97.1on Form 10-K filed on March 7, 2024) 101.1 Financial information from the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2025, formatted in inline XBRL interactive data files pursuant to Rule 405 ofRegulation S-T: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii)Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements ofShareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes toConsolidated Financial Statements 104 Cover Page Interactive Data File (formatted as inline XBRL, with applicable taxonomyextension information contained in Exhibit 101)________________† Indicates a management contract or compensatory plan. ITEM 16. FORM 10-K SUMMARY None.
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Table of Contents 153 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Bridgewater Bancshares, Inc. Date: February 26, 2026 By: /s/ Jerry J. Baack Name:Jerry J. Baack Title: Chairman and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jerry J. Baack Chairman and Chief ExecutiveFebruary 26, 2026 Jerry J. Baack Officer (Principal Executive Officer) /s/ Joe M. Chybowski President and Chief Financial February 26, 2026 Joe M. Chybowski Officer (Principal Financial Officer) /s/ Laura B. Espeseth Chief Administrative Officer February 26, 2026 Laura B. Espeseth (Principal Accounting Officer) /s/ Lisa M. Brezonik Director February 26, 2026 Lisa M. Brezonik /s/ Mary Jayne Crocker Director February 26, 2026 Mary Jayne Crocker /s/ James S. Johnson Director February 26, 2026 James S. Johnson /s/ David B. Juran Director February 26, 2026 David B. Juran /s/ Mohammed Lawal Director February 26, 2026 Mohammed Lawal /s/ Douglas J. Parish Director February 26, 2026 Douglas J. Parish /s/ Jeffrey D. Shellberg Director, Secretary and February 26, 2026 Jeffrey D. Shellberg Deputy Chief Credit Officer /s/ Thomas P. Trutna Director February 26, 2026 Thomas P. Trutna /s/ Todd B. Urness Director February 26, 2026 Todd B. Urness
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Table of Contents 154 /s/ David J. Volk Director February 26, 2026 David J. Volk
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B RIDGEWATER B ANCSHARES , I NC . E MPLOYMENT A GREEMENT This Employment Agreement (“Agreement”) is made and entered into as of January 1, 2022 (the “Effective Date”), by and among Bridgewater Bancshares, Inc. (the “Company”), Bridgewater Bank (the “Bank” and together with the Company, the “Employer”) and Lisa Salazar (“Executive,” and together with the Company, the “Parties”). R ECITALS A. The Bank is a wholly-owned subsidiary of the Company. B. Executive is currently employed by Employer pursuant to that certain employment agreement by and between Executive and Employer dated September 1, 2019 (the “Prior Employment Agreement”). C. The Employer desires to employ Executive as the Employer’s Chief Deposit Officer pursuant to the terms of this Agreement. D. Executive desires to be employed by the Employer as the Employer’s Chief Deposit Officer pursuant to the terms of this Agreement. E. The Parties have made commitments to each other on a variety of important issues concerning Executive’s employment, including the performance that will be expected of Executive, the compensation Executive will be paid, how long and under what circumstances Executive will remain employed and the financial details relating to any decision that either the Employer or Executive may make to terminate this Agreement. A GREEMENTS In consideration of the foregoing and the mutual promises and covenants of the Parties set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby expressly covenant and agree as follows: 1. Employment Period. The Employer shall employ Executive, and Executive shall be so employed, during the Employment Period in accordance with the terms of this Agreement. The “Employment Period” shall be the period beginning on the Effective Date and ending on December 31, 2024, unless sooner terminated as provided herein. The Employment Period shall automatically be extended for one (1) additional year beginning on January 1, 2025 and on each January 1 thereafter unless either Party notifies the other Party, by written notice delivered no later than ninety (90) days prior to such January 1, that the Employment Period shall not be extended for an additional year. Notwithstanding any provision of this Agreement to the contrary, if a Change in Control occurs during the Employment Period, this Agreement shall remain in effect for the one (1)-year period following the Change in Control and shall then terminate. 2. Duties. During the Employment Period, Executive shall devote Executive’s full business time, energies and talents to serving as the Employer’s Chief Deposit Officer, at the direction of the Company’s President and Chief Executive Officer (the “CEO”). Executive shall have such duties and Exhibit 10.27
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-2- responsibilities as may be assigned to Executive from time to time by the CEO, which duties and responsibilities shall be commensurate with Executive’s position, shall perform all duties assigned to Executive faithfully and efficiently, subject to the direction of the CEO and shall have such authorities and powers as are inherent to the undertakings applicable to Executive’s position and necessary to carry out the responsibilities and duties required of Executive hereunder. Executive shall perform the duties required by this Agreement at the Bank’s headquarters (as determined by the Bank) unless the nature of such duties requires otherwise. Notwithstanding the foregoing provisions of this Section 2, during the Employment Period, Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the CEO, inhibit, prohibit, interfere with or conflict with Executive’s duties under this Agreement or conflict in any material way with the business of the Company or an Affiliate; provided, however, that Executive shall not serve on the board of directors of any business (other than the Company, the Bank or any Affiliate of either) or hold any other position with any business without receiving the prior written consent of the CEO. 3. Compensation and Benefits. Subject to the terms of this Agreement, during the Employment Period, while Executive is employed by the Employer, the Employer shall compensate Executive for Executive’s services as follows: (a) Executive shall be compensated at an annual rate of Three Hundred Thousand Dollars ($300,000) (the “Annual Base Salary”), which shall be payable in accordance with the normal payroll practices of the Employer then in effect. Beginning on January 1, 2023 and on each anniversary of such date, Executive’s Annual Base Salary shall be reviewed, and may be adjusted, by the CEO. (b) During the Employment Period, the Employer shall pay an automobile allowance to Executive not to exceed Eight Hundred Fifty Dollars ($850) per month. The automobile allowance shall be reviewed from time to time by the CEO and may be increased subject to the sole discretion of the CEO. At any time after the date of this Agreement, the CEO may, in its sole discretion, eliminate Executive’s monthly automobile allowance and instead provide Executive with an Employer-owned automobile for Executive’s use. (c) Once every year during the Employment Period, Executive shall be entitled to receive, at Executive’s option and at the Company’s expense, an executive physical exam at the Mayo clinic in Rochester, Minnesota. (d) During the Employment Period, Executive and Executive’s dependents, as the case may be, shall be eligible to participate, subject to the terms thereof, in all pension and similar benefit plans (including qualified, non-qualified and supplemental plans) and all medical, dental, vision, disability, group and executive life, accidental death and travel accident insurance and other similar welfare benefit plans and programs of the Employer, as may be in effect from time to time, on as favorable a basis as other similarly situated senior executives. (e) Executive shall receive paid time off in accordance with the Employer's policies for executive officers as such policies may exist from time to time. 4. Rights upon Termination. Executive’s right to benefits, if any, for periods after the Termination Date shall be determined in accordance with this Section 4: (a) Minimum Benefits. If the Termination Date occurs during the Employment Period for any reason, Executive shall be entitled to the following benefits (“Minimum Benefits”) in
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-3- addition to any other benefits to which Executive may be entitled under the following provisions of this Section 4 or the express terms of any employee benefit plan or as required by law: (i) Executive’s earned but unpaid Annual Base Salary for the period ending on the Termination Date; (ii) Executive’s earned but unpaid incentive bonus, if any, for any completed fiscal year preceding the Termination Date; and Any benefits to be provided to Executive pursuant to this Section 4(a) shall be provided within thirty (30) days after the Termination Date. (b) Termination for Cause, Death, Disability or Voluntary Resignation. If the Termination Date occurs following the Effective Date and prior to the end of the Employment Period and is a result of a Termination for Cause, Executive’s death or Disability, or termination by Executive other than for Good Reason, then, other than the Minimum Benefits, Executive shall have no right to benefits under this Agreement (and the Employer shall have no obligation to provide any such benefits) for periods after the Termination Date. (c) Termination other than for Cause or Termination for Good Reason. If Executive’s employment with the Employer is subject to a Termination other than during a Covered Period, then, in addition to the Minimum Benefits, the Employer shall provide Executive the following benefits: (i) Commencing on the first Employer payroll date that occurs on or following the sixtieth (60th) day following the Termination Date, Executive shall receive the Severance Amount described in Section 4(c)(ii) (less any amount described in Section 4(c)(iii)), with such amount to be paid in twelve (12) substantially equal monthly installments (subject to the remaining provisions of this paragraph), with each successive payment being due on the next monthly payroll date following the first installment, provided that any such monthly installments that would have been paid in the sixty (60)-day period following the Termination Date but for the Release requirement in Section 5 shall be paid on the first Employer payroll date that occurs on or following the sixtieth (60th) day following the Termination Date, and the number of remaining substantially equal monthly installments to be made shall be reduced from twelve (12) by any such “catch-up” payments that are made. (ii) For purposes of this Agreement, “Severance Amount” means (A) for any Termination other than during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s then-current Annual Base Salary as of the respective Termination; or (B) for a Termination during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s Base Compensation as of the respective Termination. (iii) To the extent any portion of the Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation §1.409A-1(b)(9)(iii)(A), Executive shall receive such portion of the Severance Amount that exceeds the “safe harbor” amount in a single lump sum payment payable on the first Employer payroll date that occurs on or following the sixtieth (60th) day following the Termination Date. (iv) Executive (and Executive’s dependents, as may be applicable) shall be entitled to the benefits described in Section 4(e).
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-4- (d) Termination upon a Change in Control. If Executive’s employment with the Employer is subject to a Termination within a Covered Period, then, in addition to Minimum Benefits, the Employer shall provide Executive the following benefits: (i) On the sixtieth (60th) day following the Termination Date, the Employer shall pay Executive a lump sum payment in an amount equal to the Severance Amount. (ii) Executive (and Executive’s dependents, as may be applicable) shall be entitled to the benefits provided in Section 4(e). (e) Medical, Dental and Vision Benefits. If Executive’s employment with the Bank is subject to a Termination, then, to the extent that Executive or any of Executive’s dependents may be covered under the terms of any medical, dental or vision plans maintained for active employees of the Bank or any Affiliate, the Bank shall provide Executive and those dependents with coverage equivalent to the coverage received while Executive was employed with the Bank for as long as Executive is eligible for and elects coverage under the health care continuation rules of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Executive will be required to pay the same amount as Executive would pay if Executive continued in active employment with the Bank during such period. Such coverage shall be provided only to the extent that it does not result in any additional tax or other penalty being imposed on the Bank or any Affiliate. The coverage under this Section 4(e) may be procured directly by the Bank (or any Affiliate, if appropriate) apart from and outside of the terms of the respective plans, provided that Executive and Executive’s dependents comply with all of the terms of the substitute medical, dental or vision plans, and provided, further, that the cost to the Bank shall not exceed the cost for continued COBRA coverage. In the event Executive or any of Executive’s dependents is or becomes eligible for coverage under the terms of any other medical, dental or vision plan of a subsequent employer with plan benefits that are comparable to Bank (or any Affiliate) plan benefits, the Bank’s obligations under this Section 4(e) shall cease with respect to the eligible Executive and dependents. Executive and Executive’s dependents must notify the Bank (or any Affiliate) of any subsequent employment and eligibility for such comparable coverage. (f) Other Benefits. Executive’s rights following a termination of employment with the Employer and its Affiliates for any reason with respect to any benefits, incentives or awards provided to Executive pursuant to the terms of any plan, program or arrangement sponsored or maintained by the Employer or an Affiliate, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms of such plan, program or arrangement, and this Agreement shall have no effect upon such terms except as specifically provided herein. (g) Removal from any Boards and Positions. Upon Executive’s termination of employment for any reason under this Agreement, Executive shall be deemed to resign (i) if a member, from the Board and board of directors of any Affiliate and any other board to which Executive has been appointed or nominated by or on behalf of the Employer, (ii) from each position with the Company or any Affiliate, including as an officer of the Company, the Bank, or any of their respective Affiliates and (iii) as a fiduciary of any employee benefit plan of the Employer. 5. Release. Notwithstanding any provision of this Agreement to the contrary, no payments or benefits shall be owed to Executive under Section 4(c), 4(d) or 4(e), unless Executive executes and delivers to the Company a Release within forty-five (45) days following the Termination Date, and any applicable revocation period has expired prior to the sixtieth (60th) day following the Termination Date. 6. [Reserved]
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-5- 7. Restrictive Covenants. (a) Confidential Information. (i) Executive acknowledges that, during the course of Executive’s employment with the Employer, Executive may produce and have access to confidential and/or proprietary, non-public information concerning the Company or its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”). Executive shall not directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Company, either during or after Executive’s employment with the Company, except to the extent such disclosure is authorized in writing by the Company, required by law or any competent administrative agency or judicial authority, or otherwise as reasonably necessary or appropriate in connection with the performance by Executive of Executive’s duties hereunder. If Executive receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Company or any of its Affiliates, or Executive’s activities in connection with the business of the Company or any of its Affiliates, Executive shall immediately notify the Company of such subpoena, court order or other requirement and deliver forthwith to the Company a copy thereof and any attachments and non-privileged correspondence related thereto. Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information. Executive shall abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Company and its Affiliates. (ii) Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Accordingly, Executive has the right to disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. Executive also has the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b). Nothing in this Agreement shall be construed to authorize, or limit liability for, an act that is otherwise prohibited by law, such as the unlawful access of material by unauthorized means. (iii) Nothing contained in this Section 7(a) shall limit Executive’s ability to file a charge or complaint with any governmental, administrative or judicial agency (each, an “Agency”) pursuant to any applicable whistleblower statute or program (each, a “Whistleblower Program”). Executive acknowledges that this Section 7(a) does not limit (i) his ability to communicate, in connection with a charge or complaint pursuant to any Whistleblower Program with any Agency or otherwise participate in any investigation or proceeding that may be conducted by such Agency, including providing documents or other information, without notice to the Company, or (ii) his right to receive an award for information provided to such Agency pursuant to any Whistleblower Program. (b) Documents and Property. (i) All records, files, documents and other materials or copies thereof relating to the business of the Company or its Affiliates that Executive prepares, receives or uses shall be and remain
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-6- the sole property of the Company and, other than in connection with the performance by Executive of Executive’s duties hereunder, shall not be removed from the premises of the Company or any of its Affiliates without the Company’s prior written connect, and shall be promptly returned to the Company upon Executive’s termination of employment for any reason, together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials. (ii) Executive acknowledges that Executive’s access to and permission to use the Company’s and any Affiliate’s computer systems, networks and equipment, and all Company and Affiliate information contained therein, is restricted to legitimate business purposes on behalf of the Company. Any other access to or use of such systems, network, equipment and information is without authorization and is prohibited except that Executive may use an Employer-provided computer for reasonable personal use in accordance with the Company’s Acceptable Use and Responsibility Policy as in effect from time to time. The restrictions contained in this Section 7(b) extend to any personal computers or other electronic devices of Executive that are used for business purposes relating to the Company or any Affiliate. Executive shall not transfer any Company or Affiliate information to any personal computer or other electronic device that is not otherwise used for any business purpose relating to the Company. Upon the termination of Executive’s employment with the Employer for any reason, Executive’s authorization to access and permission to use the Company’s and any Affiliate’s computer systems, networks and equipment, and any Company and Affiliate information contained therein, shall cease. (c) Non-Competition and Non-Solicitation. The Parties have jointly reviewed the operations of the Company and the Bank and have agreed that the primary service area of the Company’s operations and the Bank’s lending and deposit taking functions in which Executive will actively participate extends to an area that encompasses a twenty-five (25)-mile radius from each banking or other office location of the Company, the Bank and any Affiliates (the “Restrictive Area”). Therefore, as an essential ingredient of and in consideration of this Agreement and Executive’s employment with the Employer, Executive, during Executive’s employment with the Employer and for a period of twelve (12) months immediately following the termination of Executive’s employment for any reason (the “Restrictive Period”), whether such termination occurs during the Employment Period or thereafter, shall not directly or indirectly do any of the following (all of which are collectively referred to in this Agreement as the “Restrictive Covenant”): (i) Engage or invest in, own, manage, operate, finance, control, participate in the ownership, management, operation or control of, be employed by, associated with or in any manner connected with, serve as a director, officer or consultant to, lend Executive’s name or any similar name to, lend Executive’s credit to or render services or advice to, in each case in the capacity that Executive provided services to the Company or any Affiliate, any person, firm, partnership, corporation or trust that owns, operates or is in the process of forming a bank, savings bank, savings and loan association, credit union or similar financial institution (each, a “Financial Institution”) with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restrictive Area; provided, however, that the ownership by Executive of shares of the capital stock of any Financial Institution, which shares are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System and which do not represent more than five (5) percent (5%) of the institution’s outstanding capital stock, shall not violate any terms of this Agreement; (ii) Either for Executive or any Financial Institution: (A) induce or attempt to induce any employee of the Company or any of its Affiliates with whom Executive had significant contact to leave the employ of the Company or any of its Affiliates; (B) in any way interfere with the relationship between the Company or any of its Affiliates and any employee of the Company or any of its Affiliates with whom Executive had significant contact; or (C) induce or attempt to induce any customer, supplier, licensee
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-7- or business relation of the Company or any of its Affiliates with whom Executive had significant contact to cease doing business with the Company or any of its Affiliates or in any way interfere with the relationship between the Company or any of its Affiliates and their respective customers, suppliers, licensees or business relations with whom Executive had significant contact; (iii) Either for Executive or any Financial Institution, solicit the business of any person or entity known to Executive to be a customer of the Company or any of its Affiliates, where Executive had significant contact with such person or entity, with respect to products, activities or services that compete in whole or in part with the products, activities or services of the Company or any of its Affiliates; or (iv) Serve as the agent, broker or representative of, or otherwise assist, any person or entity in obtaining services or products from any Financial Institution within the Restrictive Area, with respect to products, activities or services that Executive devoted time to on behalf of the Company or any of its Affiliates and that compete in whole or in part with the products, activities or services of the Company or any of its Affiliates. (d) Works Made for Hire Provisions. The Parties acknowledge that all work performed by Executive for the Company or any of its Affiliates shall be deemed a “work made for hire.” The Company shall at all times own and have exclusive right, title and interest in and to all Confidential Information and Inventions, and the Company shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same. Any and all enhancements of the technology of the Company or any of its Affiliates that are developed by Executive shall be the exclusive property of the Company. Executive hereby assigns to the Company any right, title and interest in and to all Inventions that Executive may have, by law or equity, without additional consideration of any kind whatsoever from the Company or any of its Affiliates. Executive shall execute and deliver any instruments or documents and do all other things (including the giving of testimony) requested by the Company (both during and after the termination of Executive’s employment with the Employer) in order to vest more fully in the Company or any of its Affiliates all ownership rights in the Inventions (including obtaining patent, copyright or trademark protection therefor in the United States and/or foreign countries). For purposes of this Section 7(d), “Inventions” shall mean all systems, procedures, techniques, manuals, databases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by Executive in the course of Executive’s employment with the Bank or any of its Affiliates and/or comprised, in whole or part, of Confidential Information. Notwithstanding the foregoing sentence, Inventions shall not include: (i) any inventions independently developed by Executive and not derived, in whole or part, from any Confidential Information or (ii) any invention made by Executive prior to Executive’s exposure to any Confidential Information. (e) Remedies for Breach of Restrictive Covenant. Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and Executive acknowledges that the covenants contained in this Section 7 are reasonable with respect to their duration, geographical area and scope. Executive further acknowledges that the restrictions contained in this Section 7 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement. In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by Executive and any and all persons directly or indirectly acting for or with Executive, as the case may be. If Executive violates the Restrictive Covenant and the Employer brings legal action for injunctive or other
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-8- relief, the Employer shall not, as a result of the time involved in obtaining such relief, be deprived of the benefit of the full period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall be deemed to have the duration specified herein computed from the date the relief is granted but reduced by the time between the period when the Restrictive Period began to run and the date of the first violation of the Restrictive Covenant by Executive. (f) Other Agreements. In the event of the existence of another agreement between the Parties that (a) is in effect during the Restrictive Period, and (b) contains restrictive covenants that conflict with any of the provisions of this Section 7, then the more restrictive of such provisions from the two (2) agreements shall control for the period during which both agreements would otherwise be in effect. 8. Indemnification. (a) To the maximum extent permitted by law, the Employer shall indemnify and hold Executive harmless (including advances of attorneys’ fees and other litigation expenses) for losses or damages incurred by Executive as a result of all causes of action arising from Executive’s performance of duties for the benefit of the Employer, whether or not the claim is asserted during the Employment Period. Executive shall be covered under any directors’ and officers’ insurance that Employer maintains for its directors and other officers in the same manner and on the same basis as Employer’s directors and officers. (b) In the event Executive becomes a party, or is threatened to be made a party, to any action, suit, or proceeding for which the Employer has agreed to provide insurance coverage or indemnification under this Section 8, the Employer shall, to the full extent permitted by law, advance all expenses (including reasonable attorneys’ fees), judgments, fines, and amounts paid in settlement (“Expenses”) incurred by Executive in connection with the investigation, defense, settlement, or appeal of any threatened, pending, or completed action, suit, or proceeding; provided, however, that Executive must provide the Employer with a written undertaking from Executive (i) to reimburse the Employer for all Expenses actually paid by the Employer to or on behalf of Executive in the event it be determined that Executive is not entitled to indemnification by the Employer for such Expenses, and (ii) to assign the Employer all rights of Executive to indemnification, under any policy of directors’ and officers’ liability insurance or otherwise, to the extent of the amount of Expenses actually paid by the Employer to or on behalf of Executive. 9. Notices. Notices and all other communications under this Agreement shall be in writing and shall be deemed given when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Employer: Bridgewater Bancshares, Inc. Attention: General Counsel 4450 Excelsior Blvd, Suite 100 St. Louis Park, MN 55416 If to Executive: Executive’s address on file with the Employer or to such other address as either Party may furnish to the other in writing, except that notices of changes of address shall be effective only upon receipt. 10. Applicable Law. All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by
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-9- the internal laws of the State of Minnesota applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Hennepin, Minnesota. 11. Entire Agreement. This Agreement constitutes the entire agreement between the Parties concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral, specifically including the Prior Employment Agreement. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect. The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations. Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and such scope may be judicially modified accordingly. 12. Withholding of Taxes. The Employer may withhold from any benefits payable under this Agreement all federal, state, city and other taxes as may be required pursuant to any law, governmental regulation or ruling. 13. No Assignment. Executive’s rights to receive benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution. In the event of any attempted assignment or transfer contrary to this Section 13, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 14. Successors. This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns. 15. Amendment. This Agreement may not be amended or modified except by written agreement signed by the Parties. 16. Code Section 409A. (a) This Agreement may be amended to the extent necessary (including retroactively) by the Bank to avoid the application of taxes or interest under Code Section 409A, while maintaining to the maximum extent practicable the original intent of this Agreement. If it is determined that any payments or benefits due hereunder upon Executive’s termination of employment are subject to Code Section 409A, no such payments or benefits shall be payable unless such termination constitutes a “separation from service” within the meaning of Code Section 409A. To the extent any reimbursements or in-kind benefit payments under this Agreement are subject to Code Section 409A, such reimbursements and in-kind benefit payments shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv). This Section 16 shall not be construed as a guarantee of any particular tax effect for Executive’s benefits under this Agreement and the Bank does not guarantee that any such benefits will satisfy the provisions of Code Section 409A or any other provision of the Code. (b) Notwithstanding any provision of this Agreement to the contrary, if Executive is determined to be a “specified employee” (as defined in Code Section 409A) as of the Termination Date, then the six (6)-month payment delay rule under Code Section 409A shall apply as set forth therein. All
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-10- delayed payments shall be accumulated and paid in a lump-sum payment as of the first day of the seventh month following the Termination Date (or, if earlier, as of Executive’s death). Any portion of the benefits hereunder that were not otherwise due to be paid during the six (6)-month period following the Termination Date shall be paid to Executive in accordance with the payment schedule established herein. 17. Definitions. As used in this Agreement, the terms defined in this Section 17 have the meanings set forth below. (a) “Affiliate” means each company, corporation, partnership, Financial Institution or other entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Company, where “control” means (i) the ownership of fifty-one percent (51%) or more of the Voting Securities or other voting or equity interests of any corporation, partnership, joint venture or other business entity or (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity. (b) “Base Compensation” means the amount equal to the sum of (i) the greater of Executive’s then-current Annual Base Salary or Executive’s Annual Base Salary as of the date one (1) day prior to the Change in Control, and (ii) the amount of any cash incentive bonus paid (or payable) for the most recently completed fiscal year of the Employer. (c) “Board” means the board of directors of the Company. (d) “Change in Control” means: (i) the consummation of the acquisition by any “person” (as such term is defined in Section 13(d) or 14(d) of the 1934 Act) of “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (the “1934 Act”)) of fifty percent (50%) or more of the combined voting power of the then outstanding Voting Securities of the Company; or (ii) the individuals who, as of the Effective Date, are members of the Board cease for any reason to constitute a majority of the Board, unless the election, or nomination for election by the shareholders, of any new director was approved by a vote of a majority of the Board, and such new director shall, for purposes of this Agreement, be considered as a member of the Board; or (iii) the consummation by the Company of: (A) a merger or consolidation if the shareholders immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding Voting Securities of the entity resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the Voting Securities of the Company outstanding immediately before such merger or consolidation; or (B) a complete liquidation or dissolution or an agreement for the sale or other disposition of all or substantially all of the assets of the Company. Notwithstanding any provision in this definition to the contrary, a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the then outstanding securities of the Company are acquired by (A) a trustee or other fiduciary holding securities under one (1) or more employee benefit plans maintained for employees of the Company or an Affiliate or (B) any corporation that, immediately prior to such acquisition, is owned directly or indirectly by the shareholders in the same proportion as their ownership of stock immediately prior to such acquisition.
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-11- Further notwithstanding any provision in this definition to the contrary, in the event that any amount or benefit under this Agreement constitutes deferred compensation and the settlement of or distribution of such amount or benefit is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in control event” under Code Section 409A. (e) “Covered Period” means the period beginning six (6) months prior to a Change in Control and ending twenty-four (24) months after the Change in Control. (f) “Disability” means that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident or health plan covering employees of the Employer. (g) “Good Reason” means the occurrence of any one (1) of the following events, unless Executive agrees in writing that such event shall not constitute Good Reason: (i) an adverse change in the nature, scope or status of Executive’s position, authorities or duties from those in effect in accordance with Section 2 immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period; (ii) a reduction of ten percent (10%) or more in Executive’s Annual Base Salary or annual cash incentive bonus opportunity (each as measured as of the Effective Date), or a material reduction in Executive’s aggregate benefits or other compensation plans as in effect immediately following the Effective Date, or if applicable and greater, immediately prior to the Covered Period; (iii) relocation of Executive’s primary place of employment by more than twenty-five (25) miles from Executive’s primary place of employment immediately following the Effective Date or a requirement that Executive engage in travel that is materially greater than immediately following the Effective Date; (iv) failure by an acquirer to assume this Agreement at the time of a Change in Control; or (v) a material breach by the Employer of this Agreement. Notwithstanding any provision in this definition to the contrary, prior to Executive’s Termination for Good Reason, Executive must give the Company written notice of the existence of any condition set forth in clause (i) – (v) immediately above within ninety (90) days of its initial existence and the Company shall have thirty (30) days from the date of such notice in which to cure the condition giving rise to Good Reason, if curable. If, during such thirty (30)-day period, the Company cures the condition giving rise to Good Reason, the condition shall not constitute Good Reason. Further notwithstanding any provision in this definition to the contrary, in order to constitute a Termination for Good Reason, such Termination must occur within twenty-four (24) months of the initial existence of the applicable condition. (h) “Release” means a general release and waiver substantially in the form attached hereto as Exhibit A.
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-12- (i) “Termination” means termination of Executive’s employment with the Employer following the Effective Date and prior to the end of the Employment Period either: (i) by the Employer, other than a Termination for Cause or a termination as a result of Executive’s death or Disability; or (ii) by Executive for Good Reason. (j) “Termination Date” means the date of termination of Executive’s employment with the Employer. (k) “Termination for Cause” means only a termination of Executive’s employment with the Employer as a result of: (i) Executive’s willful continuing failure, that is not remedied within twenty (20) days after receipt of written notice of such failure from the Employer, to perform Executive’s obligations hereunder; (ii) Executive’s conviction of, or the pleading of nolo contendere to, a crime of embezzlement or fraud or a felony under the laws of the United States or any state thereof; (iii) Executive’s breach of fiduciary responsibility; or (iv) an act of dishonesty by Executive that is materially injurious to the Employer. Any determination of a Termination for Cause under this Agreement shall be made by resolution adopted by at least a two-thirds (2/3) vote of the Board at a meeting called and held for that purpose. Executive shall be provided with reasonable notice of such meeting and shall be given the opportunity to be heard, with the presence of counsel, prior to such vote being taken by the Board. (l) “Voting Securities” means any securities that ordinarily possess the power to vote in the election of directors without the happening of any precondition or contingency. 18. Survival. The provisions of Sections 5 through 18 shall survive the termination of this Agreement. [Signature page follows]
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-13- I N WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date. B RIDGEWATER B ANCSHARES , I NC . L ISA S ALAZAR By: Jerry Baack, President and CEO (Signature) (Date) 4116 Lavender Ave North (Address) Lake Elmo, MN 55042 (Address) B RIDGEWATER B ANK By: Jerry Baack, President and CEO
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-14- EXHIBIT A R ELEASE AND W AIVER OF C LAIMS This Release and Waiver of Claims (“Agreement”) is made and entered into by and among Bridgewater Bancshares, Inc. (the “Company”), Bridgewater Bank (the “Bank and together with the Company, the “Employer”) and [______________] (“Executive,” and together with the Company, the “Parties”). R ECITALS A. The Parties desire to settle fully and amicably all issues between them, including any issues arising out of Executive’s employment with the Employer and the termination of that employment. B. Executive and the Employer are parties to that certain Employment Agreement, made and entered into [_______________], as amended (the “Employment Agreement”). A GREEMENTS For and in consideration of the mutual promises contained herein, and for other good and sufficient consideration, the receipt of which is hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows: 1. Termination of Employment. Executive’s employment with the Employer shall be terminated effective as of the close of business on [_______________] (the “Termination Date”). 2. Compensation and Benefits. Subject to the terms of this Agreement, the Employer shall compensate Executive under this Agreement as follows (collectively, the “Severance Payments”): (a) Severance Amount. [_______________]. (b) Accrued Salary and Paid Time Off. Executive shall be entitled to a lump sum payment in an amount equal to Executive’s earned but unpaid annual base salary and accrued but unused paid time off for the period ending on the Termination Date, with such payment to be made on the first payroll date following the Termination Date. (c) COBRA Benefits. Executive and Executive’s qualified beneficiaries, as applicable, shall be entitled to continuation of group health coverage following the Termination Date under the Employer’s group health plan, to the extent required under the Consolidated Omnibus Budget Reconciliation Act of 1986, with Executive required to pay the same amount as Executive would pay if Executive continued in employment with the Employer during such period as described in Section 4(e) of the Employment Agreement. (d) Executive Acknowledgement. Executive acknowledges that, subject to fulfillment of all obligations provided for herein, Executive has been fully compensated by the Employer, including under all applicable laws, and that nothing further is owed to Executive with respect to wages, bonuses, severance, other compensation, or benefits. Executive further acknowledges that the Severance Payments (other than (b) and (c) immediately above) are consideration for Executive’s promises contained in this Agreement, and that the Severance Payments are above and beyond any wages, bonuses, severance, other compensation, or benefits to which Executive is entitled from the Employer under the terms of Executive’s
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-15- employment or under any other contract or law that Executive would be entitled to absent execution of this Agreement. (e) Withholding. The Severance Payments shall be subject to all taxes and other payroll deductions required by law. 3. Termination of Benefits. Except as provided in Section 2 above or as may be required by law, Executive’s participation in all employee benefit (pension and welfare) and compensation plans of the Employer shall cease as of the Termination Date. Nothing contained herein shall limit or otherwise impair Executive’s right to receive pension or similar benefit payments that are vested as of the Termination Date under any applicable tax-qualified pension or other plans, pursuant to the terms of the applicable plan. 4. Release of Claims and Waiver of Rights. Executive, on Executive’s own behalf and that of Executive’s heirs, executors, attorneys, administrators, successors, and assigns, fully and forever releases and discharges the Company, its predecessors, successors, parents, subsidiaries, affiliates, and assigns, and its and their directors, officers, trustees, employees, agents, and shareholders, both in their individual and official capacities, and the current and former trustees and administrators of each retirement and other benefit plan applicable to the employees and former employees of the Employer, both in their official and individual capacities (the “Releasees”), from all liability, claims, demands, actions, and causes of action Executive now has, may have had, or may ever have, whether currently known or unknown, relating to acts or omissions as of or prior to Executive’s execution of this Agreement (the “Release and Waiver”), including liability, claims, demands, actions, and causes of action: (a) Relating to Executive’s employment or other association with the Employer, or the termination of such employment; (b) Relating to wages, bonuses, other compensation, or benefits; (c) Relating to any employment or change in control contract; (d) Relating to any employment law, including (i) The United States and State of Minnesota Constitutions, (ii) The Minnesota Human Rights Act, (iii) The Civil Rights Act of 1964, (iv) The Civil Rights Act of 1991, (v) The Equal Pay Act, (vi) The Employee Retirement Income Security Act of 1974, (vii) The Age Discrimination in Employment Act (the “ADEA”), (viii) The Older Workers Benefit Protection Act, (ix) The Worker Adjustment and Retraining Notification Act, (x) The Americans with Disabilities Act, (xi) The Family and Medical Leave Act, (xii) The Occupational Safety and Health Act, (xiii) The Fair Labor Standards Act, (xiv) The National Labor Relations Act, (xv) The Genetic Information Nondiscrimination Act, (xvi) The Rehabilitation Act, (xvii) The Fair Credit Reporting Act, (xviii) Executive Order 11246, (xix) Executive Order 11141, and (xx) Each other federal, state, and local statute, ordinance, and regulation relating to employment; (e) Relating to any right of payment for disability; (f) Relating to any statutory or contractual right of payment; and (g) For relief on the basis of any alleged tort or breach of contract under the common law of the State of Minnesota or any other state, including defamation, intentional or negligent infliction of
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-16- emotional distress, breach of the covenant of good faith and fair dealing, promissory estoppel, and negligence. Executive acknowledges that statutes exist that render null and void releases and waivers of any claims, rights, demands, liabilities, actions, and causes of action that are unknown to the releasing or waiving party at the time of execution of the release and waiver. Executive waives, surrenders, and shall forego any protection to which Executive would otherwise be entitled by virtue of the existence of any such statutes in any jurisdiction, including the State of Minnesota. 5. Exclusions from General Release. Excluded from the Release and Waiver are any claims or rights arising pursuant to this Agreement and any claims or rights that cannot be waived by law, as well as Executive’s right to file a charge with an administrative agency or participate in any agency investigation, including with the Equal Employment Opportunity Commission. Executive is, however, waiving the right to recover any money in connection with a charge or investigation and the right to recover any money in connection with a charge filed by any other individual or by the Equal Employment Opportunity Commission or any other federal or state agency, except where such waivers are prohibited by law. 6. Covenant Not to Sue. (a) A “covenant not to sue” is a legal term that means Executive promises not to file a lawsuit in court. It is different from the Release and Waiver. Besides waiving and releasing the claims covered by Section 4 above, Executive shall never sue the Releasees in any forum for any reason covered by the Release and Waiver. Notwithstanding this covenant not to sue, Executive may bring a claim against the Employer to enforce this Agreement or to challenge the validity of this Agreement under the ADEA. If Executive sues any of the Releasees in violation of this Agreement, Executive shall be liable to them for their reasonable attorneys’ fees and costs (including the costs of experts, evidence, and counsel) and other litigation costs incurred in defending against Executive’s suit. In addition, if Executive sues any of the Releasees in violation of this Agreement, the Employer can require Executive to return all but a sum of $100 of the Severance Payments, which sum is, by itself, adequate consideration for the promises and covenants in this Agreement. In that event, the Employer shall have no obligation to make any further Severance Payments. (b) If Executive has previously filed any lawsuit against any of the Releasees, Executive shall immediately take all necessary steps and execute all necessary documents to withdraw or dismiss such lawsuit to the extent Executive’s agreement to withdraw, dismiss, or not file a lawsuit would not be a violation of any applicable law or regulation. 7. Restrictive Covenants. Section 7 of the Employment Agreement (entitled “Restrictive Covenants”), shall continue in full force and effect as if fully restated herein. 8. No Admissions. The Employer denies that any of the Releasees have taken any improper action against Executive, and this Agreement shall not be admissible in any proceeding as evidence of improper action by any of the Releasees. 9. Confidentiality of Agreement. Executive shall keep the existence and the terms of this Agreement confidential, except for Executive’s immediate family members and Executive’s legal and tax advisors in connection with services related hereto and except as may be required by law or in connection with the preparation of tax returns. 10. Non-Waiver. The Employer’s waiver of a breach of this Agreement by Executive shall not be construed or operate as a waiver of any subsequent breach by Executive of the same or of any other provision of this Agreement.
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-17- 11. Governing Law. This Agreement shall be governed by and construed under the laws of the State of Minnesota, without regard to principles of conflict of laws (whether in the State of Minnesota or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Minnesota. 12. Entire Agreement. This Agreement sets forth the entire agreement of the Parties regarding the subject matter hereof, and shall be final and binding as to all claims that have been or could have been advanced on behalf of Executive pursuant to any claim arising out of or related in any way to Executive’s employment with the Employer and the termination of that employment. This Agreement may not be amended, modified, altered, or changed except by express written consent of the Parties. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. 14. Successors. This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns. 15. Enforcement. The provisions of this Agreement shall be regarded as divisible and separable and if any provision should be declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remaining provisions shall not be affected thereby. If the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent, then such restriction or requirement shall be enforced to the maximum extent permitted by law, and Executive hereby consents that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such restriction or requirement. In addition, Executive stipulates that breach by Executive of restrictions and requirements under this Agreement will cause irreparable damage to the Releasees in the case of Executive’s breach and that the Employer would not have entered into this Agreement without Executive binding Executive to these restrictions and requirements. In the event of Executive’s breach of this Agreement, in addition to any other remedies the Employer may have, and without bond and without prejudice to any other rights and remedies that the Employer may have for Executive’s breach of this Agreement, the Employer shall be relieved of any obligation to provide Severance Payments and shall be entitled to an injunction to prevent or restrain any such violation by Executive and all persons directly or indirectly acting for or with Executive. 16. Construction. In this Agreement, unless otherwise stated, the following uses apply: (a) references to a statute or law refer to the statute or law and any amendments and any successor statutes or laws, and to all regulations promulgated under or implementing the statute or law, as amended, or its successors, as in effect at the relevant time; (b) in computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including, “ and the words “to,” “until,” and “ending on” (and the like) mean “to, and including”; (c) references to a governmental or quasi-governmental agency, authority, or instrumentality also refer to a regulatory body that succeeds to the functions of the agency, authority, or instrumentality; (d) the words “include,” “includes,” and “including” (and the like) mean “include, without limitation,” “includes, without limitation,” and “including, without limitation,” (and the like) respectively; (e) the words “hereof,” “herein,” “hereto,” “hereby,” (and the like) refer to this Agreement as a whole; (f) any reference to a document or set of documents, and the rights and obligations of the parties under any such documents, means such document or documents as amended from time to time, and all modifications, extensions, renewals, substitutions, or replacements thereof; (g) all words used shall be construed to be of such gender or number as the circumstances and context require; and (h) the captions and headings of preambles, recitals, sections, and exhibits appearing in or attached to this Agreement have been inserted solely for convenience of reference and shall not be considered a part of this Agreement, nor shall any of them affect the meaning or interpretation of this Agreement or any of its provisions.
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-18- 17. Future Cooperation. In connection with any and all claims, disputes, or negotiations, or governmental, internal, or other investigations, lawsuits, or administrative proceedings (the “Legal Matters”) involving any of the Releasees (collectively, the “Disputing Parties” and, individually, each a “Disputing Party”), Executive shall make herself reasonably available, upon reasonable notice from the Company and without the necessity of subpoena, to provide information and documents, provide declarations and statements regarding a Disputing Party, meet with attorneys and other representatives of a Disputing Party, prepare for and give depositions and testimony, and otherwise cooperate in the investigation, defense, and prosecution of any and all such Legal Matters, as may, in the good faith and judgment of the Company, be reasonably requested. The Company shall consult with Executive and make reasonable efforts to schedule such assistance so as not to materially disrupt Executive’s business and personal affairs. The Employer shall reimburse all reasonable expenses incurred by Executive in connection with such assistance, including travel, meals, rental car, and hotel expenses, if any; provided such expenses are approved in advance by the Company and are documented in a manner consistent with expense reporting policies of the Employer as may be in effect from time to time. 18. Representations by Executive. Executive acknowledges each of the following: (a) Executive is aware that this Agreement includes a release of all known and unknown claims. (b) Executive is legally competent to execute this Agreement and Executive has not relied on any statements or explanations made by the Employer or its attorneys not otherwise set forth herein. (c) Any modifications, material or otherwise, made to this Agreement shall not restart or affect in any manner the original 21-day consideration period. (d) Executive has been offered at least 21 days to consider this Agreement. (e) Executive has been afforded the opportunity to be advised by legal counsel regarding the terms of this Agreement, including the Release and Waiver, and to negotiate such terms. (f) Executive, without coercion of any kind, freely, knowingly, and voluntarily enters into this Agreement. (g) Executive has the right to rescind the Release and Waiver by written notice to the Employer within 15 calendar days after Executive has signed this Agreement, and the Release and Waiver shall not become effective or enforceable until 15 calendar days after Executive has signed this Agreement, as evidenced by the date set forth below Executive’s signature on the signature page hereto. Any such rescission must be in writing and delivered by hand, or sent by U.S. Mail within such 15-day period, to the attention of [_______________]. If delivered by U.S. Mail, the rescission must be: (i) postmarked within the 15-day period and (ii) sent by certified mail, return receipt requested. [Signature page follows]
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-19- I N WITNESS WHEREOF, the Parties have executed this Agreement as of dates set forth below their
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-20- respective signatures below. B RIDGEWATER B ANCSHARES , I NC . E XECUTIVE By: [Name] [Title] Date: [Name] Date: B RIDGEWATER B ANK By: [Name] [Title] Date:
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B RIDGEWATER B ANCSHARES , I NC . F IRST A MENDMENT TO E MPLOYMENT A GREEMENT This First Amendment to Employment Agreement (this “Amendment”) is made and entered into as of January 31, 2025 (the “Effective Date”), by and between Bridgewater Bancshares, Inc. (the “Company”), Bridgewater Bank (the “Bank,” and together with the Company, the “Employer”), and Lisa Salazar (“Executive,” and together with the Employer, the “Parties”). R ECITALS A. Executive and the Employer are parties to that certain Employment Agreement dated January 1, 2022 (the “Employment Agreement”). B. Pursuant to Section 15 of the Employment Agreement, by this writing, the Parties desire to amend the Employment Agreement as provided herein. A GREEMENTS In consideration of the foregoing and of the mutual promises and covenants of the Parties set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby covenant and agree to the following revisions to the Employment Agreement: 1. Section 1 of the Employment Agreement is hereby amended by deleting the existing last sentence thereof and replacing it with the following new sentence: “Notwithstanding any provision of this Agreement to the contrary, if a Change in Control occurs during the Employment Period, this Agreement shall remain in effect for the two (2)- year period following the Change in Control and shall then terminate.” 2. Section 4(c)(ii) of the Employment Agreement is hereby amended by deleting the existing language thereof and replacing it with the following new language: “For purposes of this Agreement, ‘Severance Amount’ means (A) for any Termination other than during a Covered Period, an amount equal to one hundred percent (100%) of Executive’s then-current Annual Base Salary as of the respective Termination; or (B) for a Termination during a Covered Period, an amount equal to two hundred percent (200%) of Executive’s Base Compensation as of the respective Termination.” 3. All other provisions of the Employment Agreement remain in full force and effect. * * * * Exhibit 10.28
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I N WITNESS WHEREOF, the Parties have executed this Amendment as of the Effective Date. B RIDGEWATER B ANCSHARES , I NC . L ISA S ALAZAR By: Jerry Baack, CEO B RIDGEWATER B ANK By: Jerry Baack, CEO
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Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statement (No. 333-271487) on Form S-8, Registration Statement (No. 333-223770) on Form S-8, Registration Statement (No. 333-231068) on Form S-8 and Registration Statement (No. 333-284662) on Form S-3 of Bridgewater Bancshares, Inc. of our reports dated February 25, 2026, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting of Bridgewater Bancshares, Inc., appearing in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K of Bridgewater Bancshares, Inc. for the year ended December 31, 2025. /s/ RSM US LLP Des Moines, Iowa February 25, 2026 Exhibit 23.1
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1 Exhibit 31.1 CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULE 13a-14(a) OR RULE 15d-14(a) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jerry J. Baack, certify that: 1. I have reviewed this annual report on Form 10-K of Bridgewater Bancshares, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 26, 2026 /s/ Jerry J. Baack Jerry J. Baack Chairman and Chief Executive Officer (Principal Executive Officer)
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1 Exhibit 31.2 CERTIFICATIONS OF CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULE 13a-14(a) OR RULE 15d-14(a) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Joe M. Chybowski, certify that: 1. I have reviewed this annual report on Form 10-K of Bridgewater Bancshares, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 26, 2026 /s/ Joe M. Chybowski Joe M. Chybowski President and Chief Financial Officer (Principal Financial Officer)
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1 Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Bridgewater Bancshares, Inc. (the “Company”) on Form 10- K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jerry J. Baack, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 26, 2026 /s/ Jerry J. Baack Jerry J. Baack Chairman and Chief Executive Officer (Principal Executive Officer)
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1 Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Bridgewater Bancshares, Inc. (the “Company”) on Form 10- K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joe M. Chybowski, President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 26, 2026 /s/ Joe M. Chybowski Joe M. Chybowski President and Chief Financial Officer (Principal Financial Officer)