UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

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 (State or other jurisdiction of incorporation or organization)	26‑0113412 (I.R.S. Employer Identification No.)
3800 American Boulevard West, Suite 100 Bloomington, Minnesota (Address of principal executive offices)	55431 (Zip Code)

(952) 893‑6868

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been 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 pursuant to Rule 405 of Regulation S‑T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required 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, smaller reporting company, 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 for complying 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 is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐  No ☒

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

The number of shares of the Common Stock outstanding as of November 5, 2019 was 28,781,162. 

Table of Contents

PART I FINANCIAL INFORMATION	3
Item 1. Consolidated Financial Statements (unaudited)	3
Consolidated Balance Sheets	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Shareholders’ Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	58
Item 4. Controls and Procedures	59
PART II OTHER INFORMATION	60
Item 1. Legal Proceedings	60
Item 1A. Risk Factors	60
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3. Defaults Upon Senior Securities	60
Item 4. Mine Safety Disclosures	60
Item 5. Other Information	60
Item 6. Exhibits	61
SIGNATURES	62

2

PART 1 – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except share data)

	September 30,		December 31,
	2019		2018
	(Unaudited)
ASSETS
Cash and Cash Equivalents	$	89,619	$	28,444
Bank-Owned Certificates of Deposit		2,654		3,305
Securities Available for Sale, at Fair Value		263,803		253,378
Loans, Net of Allowance for Loan Losses of $22,124 at September 30, 2019 (unaudited) and $20,031 at December 31, 2018		1,818,306		1,640,385
Federal Home Loan Bank (FHLB) Stock, at Cost		8,024		7,614
Premises and Equipment, Net		25,764		13,074
Accrued Interest		6,519		6,589
Goodwill		2,626		2,626
Other Intangible Assets, Net		909		1,052
Other Assets		14,115		17,274
Total Assets	$	2,232,339	$	1,973,741
LIABILITIES AND EQUITY
LIABILITIES
Deposits:
Noninterest Bearing	$	478,493	$	369,203
Interest Bearing		1,323,743		1,191,731
Total Deposits		1,802,236		1,560,934
Federal Funds Purchased		—		18,000
Notes Payable		13,500		15,000
FHLB Advances		141,500		124,000
Subordinated Debentures, Net of Issuance Costs		24,707		24,630
Accrued Interest Payable		1,763		1,806
Other Liabilities		12,574		8,373
Total Liabilities		1,996,280		1,752,743
SHAREHOLDERS' EQUITY
Preferred Stock- $0.01 par value
Authorized 10,000,000; None Issued and Outstanding at September 30, 2019 (unaudited) and December 31, 2018		—		—
Common Stock- $0.01 par value
Common Stock - Authorized 75,000,000; Issued and Outstanding 28,781,162 at September 30, 2019 (unaudited) and 30,097,274 at December 31, 2018		288		301
Additional Paid-In Capital		111,670		126,031
Retained Earnings		119,066		96,234
Accumulated Other Comprehensive Income (Loss)		5,035		(1,568)
Total Shareholders' Equity		236,059		220,998
Total Liabilities and Equity	$	2,232,339	$	1,973,741

See accompanying notes to consolidated financial statements.

3

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2019		2018		2019		2018
INTEREST INCOME
Loans, Including Fees	$	24,220	$	20,207	$	69,720	$	56,055
Investment Securities		1,910		1,790		5,739		4,830
Other		442		139		900		353
Total Interest Income		26,572		22,136		76,359		61,238
INTEREST EXPENSE
Deposits		6,209		4,322		17,932		10,853
Notes Payable		127		144		378		442
FHLB Advances		908		488		2,510		1,159
Subordinated Debentures		393		401		1,163		1,167
Federal Funds Purchased		—		147		172		321
Total Interest Expense		7,637		5,502		22,155		13,942
NET INTEREST INCOME		18,935		16,634		54,204		47,296
Provision for Loan Losses		900		1,275		2,100		2,775
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		18,035		15,359		52,104		44,521
NONINTEREST INCOME
Customer Service Fees		184		184		564		539
Net Gain (Loss) on Sales of Available for Sale Securities		58		(49)		516		(108)
Net Gain (Loss) on Sales of Foreclosed Assets		69		(88)		69		(225)
Other Income		635		767		1,565		1,480
Total Noninterest Income		946		814		2,714		1,686
NONINTEREST EXPENSE
Salaries and Employee Benefits		5,915		4,910		15,841		13,534
Occupancy and Equipment		761		596		2,202		1,767
Other Expense		2,408		2,020		8,400		5,221
Total Noninterest Expense		9,084		7,526		26,443		20,522
INCOME BEFORE INCOME TAXES		9,897		8,647		28,375		25,685
Provision for Income Taxes		2,092		2,184		5,543		6,526
NET INCOME	$	7,805	$	6,463	$	22,832	$	19,159
EARNINGS PER SHARE
Basic	$	0.27	$	0.22	$	0.77	$	0.67
Diluted		0.27		0.21		0.76		0.66
Dividends Paid Per Share		—		—		—		—

See accompanying notes to consolidated financial statements.

4

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net Income	$	7,805	$	6,463	$	22,832	$	19,159
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Available for Sale Securities		2,014		(2,253)		10,218		(6,551)
Unrealized Gains (Losses) on Cash Flow Hedge		(326)		5		(1,344)		155
Reclassification Adjustment for (Gains) Losses Realized in Income		(58)		49		(516)		108
Income Tax Impact		(343)		462		(1,755)		1,374
Total Other Comprehensive Income (Loss), Net of Tax		1,287		(1,737)		6,603		(4,914)
Comprehensive Income	$	9,092	$	4,726	$	29,435	$	14,245

See accompanying notes to consolidated financial statements.

5

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Three and Nine Months Ended September 30, 2019 and 2018

(dollars in thousands, except share data)

(Unaudited)

											Accumulated
							Additional				Other
	Shares		Common Stock				Paid-In		Retained		Comprehensive
Three Months Ended	Voting	Nonvoting	Voting		Nonvoting		Capital		Earnings		Income (Loss)		Total
BALANCE June 30, 2018	27,235,832	2,823,542	$	272	$	28	$	125,516	$	82,010	$	(1,899)	$	205,927
Stock-based Compensation	—	—		—		—		199		—		—		199
Comprehensive Income (Loss)	—	—		—		—		—		6,463		(1,737)		4,726
BALANCE September 30, 2018	27,235,832	2,823,542	$	272	$	28	$	125,715	$	88,473	$	(3,636)	$	210,852
BALANCE June 30, 2019	28,986,729	—	$	290	$	—	$	113,838	$	111,261	$	3,748	$	229,137
Stock-based Compensation	—	—		—		—		175		—		—		175
Comprehensive Income	—	—		—		—		—		7,805		1,287		9,092
Stock Options Exercised	—	—		—		—		—		—		—		—
Stock Repurchases	(205,567)	—		(2)		—		(2,343)		—		—		(2,345)
BALANCE September 30, 2019	28,781,162	—	$	288	$	—	$	111,670	$	119,066	$	5,035	$	236,059
											Accumulated
							Additional				Other
	Shares		Common Stock				Paid-In		Retained		Comprehensive
Nine Months Ended	Voting	Nonvoting	Voting		Nonvoting		Capital		Earnings		Income (Loss)		Total
BALANCE December 31, 2017	20,834,001	3,845,860	$	208	$	38	$	66,324	$	69,508	$	1,084	$	137,162
Stock-based Compensation	—	—		—		—		588		—		—		588
Comprehensive Income (Loss)	—	—		—		—		—		19,159		(4,914)		14,245
Issuance of Common Stock, Net of Issuance Costs	5,379,513	—		54		—		58,803		—		—		58,857
Conversion of Non-voting Stock to Voting Stock	1,022,318	(1,022,318)		10		(10)		—		—		—		—
Reclassification of the Income Tax Effects of the Tax Cuts and Jobs Act to Retained Earnings	—	—		—		—		—		(194)		194		—
BALANCE September 30, 2018	27,235,832	2,823,542	$	272	$	28	$	125,715	$	88,473	$	(3,636)	$	210,852
BALANCE December 31, 2018	30,097,274	—	$	301	$	—	$	126,031	$	96,234	$	(1,568)	$	220,998
Stock-based Compensation	—	—		—		—		524		—		—		524
Comprehensive Income	—	—		—		—		—		22,832		6,603		29,435
Stock Options Exercised	15,400	—		—		—		61		—		—		61
Stock Repurchases	(1,331,512)	—		(13)		—		(14,946)		—		—		(14,959)
BALANCE September 30, 2019	28,781,162	—	$	288	$	—	$	111,670	$	119,066	$	5,035	$	236,059

See accompanying notes to consolidated financial statements.

6

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	22,832	$	19,159
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Net Amortization on Securities Available for Sale		1,865		2,309
Net (Gain) Loss on Sales of Securities Available for Sale		(516)		108
Provision for Loan Losses		2,100		2,775
Depreciation and Amortization of Premises and Equipment		662		560
Amortization of Other Intangible Assets		143		143
Amortization of Subordinated Debt Issuance Costs		77		77
Net (Gain) Loss on Sale of Foreclosed Assets		(69)		225
Stock-based Compensation		524		588
Changes in Operating Assets and Liabilities:
Accrued Interest Receivable and Other Assets		129		(4,897)
Accrued Interest Payable and Other Liabilities		4,158		1,176
Net Cash Provided by Operating Activities		31,905		22,223
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) Decrease in Bank-owned Certificates of Deposit		651		(233)
Proceeds from Sales of Securities Available for Sale		42,864		21,590
Proceeds from Maturities, Paydowns, Payups and Calls of Securities Available for Sale		28,693		17,298
Purchases of Securities Available for Sale		(73,628)		(59,043)
Net Increase in Loans		(181,054)		(252,975)
Net Increase in FHLB Stock		(410)		(2,667)
Purchases of Premises and Equipment		(13,352)		(1,832)
Proceeds from Sales of Foreclosed Assets		1,102		356
Net Cash Used in Investing Activities		(195,134)		(277,506)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits		241,302		139,738
Net Increase (Decrease) in Federal Funds Purchased		(18,000)		30,000
Principal Payments on Notes Payable		(1,500)		(1,500)
Proceeds from FHLB Advances		37,500		35,000
Principal Payments on FHLB Advances		(20,000)		(9,000)
Stock Options Exercised		61		58,857
Stock Repurchases		(14,959)		—
Net Cash Provided by Financing Activities		224,404		253,095
NET CHANGE IN CASH AND CASH EQUIVALENTS		61,175		(2,188)
Cash and Cash Equivalents Beginning		28,444		23,725
Cash and Cash Equivalents Ending	$	89,619	$	21,537
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash Paid for Interest	$	22,121	$	14,043
Cash Paid for Income Taxes		3,800		5,590
Loans Transferred to Foreclosed Assets		1,033		—

See accompanying notes to consolidated financial statements.

7

Bridgewater Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Note 1: Description of the Business and Summary of Significant Accounting Policies

Organization

Bridgewater Bancshares, Inc. (the “Company”) is a financial holding company whose operations consist of the ownership of its wholly-owned subsidiaries, Bridgewater Bank (the “Bank”) and Bridgewater Risk Management, Inc. The Bank commenced operations in 2005 and provides retail and commercial loan and deposit services, principally to customers within the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area. In 2008, the Bank formed BWB Holdings, LLC, a wholly owned subsidiary of the Bank, for the purpose of holding repossessed property. In 2018, the Bank formed Bridgewater Investment Management, Inc., a wholly owned subsidiary of the Bank, for the purpose of holding certain municipal securities and to engage in municipal lending activities.

Bridgewater Risk Management, a subsidiary of the Company, was incorporated in 2016 as a wholly owned insurance company. It insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. Bridgewater Risk Management pools resources with several other insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.

Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10‑Q and, therefore, do not include all disclosures necessary for a complete presentation of the consolidated balance sheets, consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of shareholders’ equity and consolidated statements of cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). However, all normal recurring adjustments which are, in the opinion of management, necessary for the fair presentation of the interim financial statements have been included. The results of operations for the nine-month period ended September 30, 2019 are not necessarily indicative of the results which may be expected for the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 14, 2019.

Principles of Consolidation

These consolidated financial statements include the amounts of the Company, the Bank, with locations in Bloomington, Greenwood, Minneapolis (2), St. Louis Park, Orono, and St. Paul, Minnesota, BWB Holdings, LLC, Bridgewater Investment Management, Inc., and Bridgewater Risk Management, Inc. All significant intercompany 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 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term include the valuation of securities, determination of the allowance for loan losses, calculation of deferred tax assets, and fair value of financial instruments.

8

Emerging Growth Company

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, even if the Company complies with the greater obligations of public companies that are not emerging growth companies, the Company may avail itself of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as the Company is an emerging growth company. The Company will continue to be an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities under the Company’s Registration Statement on Form S-1, which was declared effective by the SEC on March 13, 2018; (2) the last day of the fiscal year in which the Company has $1.07 billion or more in annual revenues; (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); or (4) the date on which the Company has, during the previous three-year period, issued publicly or privately, more than $1.0 billion in non-convertible debt securities. Management cannot predict if investors will find the Company’s common stock less attractive because it will rely on these exemptions. If some investors find the Company’s common stock less attractive as a result, there may be a less active trading market for its common stock and the Company’s stock price may be more volatile.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to take advantage of the benefits of this extended transition period.

Impact of Recently Issued Accounting Standards

The following accounting standard updates (“ASU”) have been issued by the Financial Accounting Standards Board (“FASB”) and may impact the Company’s consolidated financial statements in future reporting periods.

In May 2014, the FASB issued ASU 2014‑09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014‑09”). ASU 2014‑09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014‑09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2015‑14, Revenue from Contracts with Customers (Topic 606) (“ASU 2015‑14”) was issued in August 2015 which defers adoption to annual reporting periods beginning after December 15, 2018 and interim reporting periods beginning after December 15, 2019. The timing of the Company’s revenue recognition is not expected to materially change. The Company’s largest portions of revenue, interest and fees on loans, are specifically excluded from the scope of the guidance, and the Company currently recognizes the majority of the remaining revenue sources in a manner that management believes is consistent with the new guidance. Management believes that revenue recognized under the new guidance will generally approximate revenue recognized under current GAAP. These observations are subject to change as the evaluation is completed.

In January 2016, the FASB issued ASU 2016‑01, Financial Instruments—Overall (Subtopic 825‑10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016‑01”). This guidance changes how entities account for equity investments that do not result in consolidation and are not accounted for under the equity method of accounting. Entities will be required to measure these investments at fair value at the end of each reporting period and recognize changes in fair value in net income. A practicability exception will be available for equity

9

investments that do not have readily determinable fair values; however, the exception requires the Company to adjust the carrying amount for impairment and observable price changes in orderly transactions for the identical or a similar investment of the same issuer. This guidance also changes certain disclosure requirements and other aspects of current GAAP. This guidance is effective for fiscal years beginning after December 15, 2018 and for interim reporting periods beginning after December 15, 2019. Early adoption is permitted for only one of the six amendments. The Company is evaluating the impact this new standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842) (“ASU 2016‑02”). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. Entities will be required to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. Also, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements which provides an optional transition method to adopt the new requirements of ASU 2016-02 as of the adoption date with no adjustment to the presentation or disclosure of comparative prior periods included in the financial statement in the period of adoption. The guidance is effective for fiscal years beginning after December 15, 2019 and interim reporting periods beginning after December 15, 2020. The Company’s assets and liabilities will increase based on the present value of the remaining lease payments for leases in place at the adoption date; however, this is not expected to be significant to the Company’s results of operations.

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (modified by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments Credit Losses and ASU 2019-05, Financial Instruments Credit Losses – Targeted Transition Relief.)The amendments in this ASU affect all entities that measure credit losses on financial instruments including loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial asset that has a contractual right to receive cash that is not specifically excluded. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this ASU replace the incurred loss impairment methodology required in current GAAP with a methodology that reflects expected credit losses that requires consideration of a broader range of reasonable and supportable information to estimate credit losses. The amendments in this ASU will affect entities to varying degrees depending on the credit quality of the assets held by the entity, the duration of the assets held, and how the entity applies the current incurred loss methodology. In October, 2019, the FASB voted to approve an amendment to the effective date of ASU No. 2016-13 for smaller reporting companies and non-SEC reporting entities. The amendment would delay the effective date to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company can take advantage of this delay. The final ASU is expected to be issued in November 2019.

All entities may adopt the amendments in the ASU early as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Amendments should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The Company is evaluating the impact this new standard will have on its consolidated financial statements. A steering committee has been established with representation from various departments across the organization to assess and implement the new standard.

In January 2017, the FASB issued ASU 2017‑04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this ASU were issued to address concerns over the cost and complexity of the two-step goodwill impairment test and resulted in the removal of the second step of the test. The amendments require an entity to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This ASU is intended to reduce the cost and complexity of the two-step goodwill impairment test and is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2021, with early adoption permitted for testing performed after January 1, 2017. Upon adoption, the amendments should be applied on a prospective basis

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and the entity is required to disclose the nature of and reason for the change in accounting principle upon transition. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017‑08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310‑20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount as discounts continue to be accreted to maturity. This ASU is intended to more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities. In most cases, market participants price securities to the call date that produces the worst yield when the coupon is above current market rates and prices securities to maturity when the coupon is below market rates. As a result, the amendments more closely align interest income recorded on bonds held at a premium or a discount with the economics of the underlying instrument. This ASU is intended to reduce diversity in practice and is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Upon adoption, the amendments should be applied using a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principles. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU 2017‑12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments of this ASU better align an entity’s accounting and financial reporting for hedging activities with the economic objectives of those activities. The ASU is effective for fiscal years beginning after December 15, 2019 and interim reporting periods beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the impact this new standard will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments of this ASU modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements. This ASU provides clarifications to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing essential information about leasing transactions. Specifically, this ASU (i) states that for lessors that are not manufacturers or dealers, the fair value of the underlying asset is its cost, less any volume or trade discounts, as long as there isn’t a significant amount of time between acquisition of the asset and lease commencement, (ii) allows for the cash flows received for sales-type and direct financing leases to continue to be presented as results from investing, and (iii) clarifies the transition guidance related to certain interim disclosures provided in the year of adoption. In October, 2019, the FASB voted to approve an amendment to the effective date of ASU No. 2019-01 for smaller reporting companies and non-SEC reporting entities. The amendment would delay the effective date to fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. As an emerging growth company, the Company can take advantage of this delay. The final ASU is expected to be issued in

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November 2019. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

In July 2019, the FASB issued ASU No. 2019-07, Codification Updates to SEC Sections, which amends certain SEC sections or paragraphs within the Accounting Standards Codification to reflect changes in SEC Final Rule Releases No. 33-10532, “Disclosure Update and Simplification,” and 33-10231 and 33-10442, “Investment Company Reporting Modernization.” Other revisions in ASU No. 2019-07update language in the codification to match the electronic Code of Federal Regulations. The amendments became effective upon addition to the FASB Codification and there is no impact on the consolidated financial statements.

Subsequent Events

Subsequent events have been evaluated through November 7, 2019, which is the date the consolidated financial statements were available to be issued.

Note 2: Earnings Per Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share are calculated by dividing net income by the weighted average number of shares adjusted for the dilutive effect of stock options. The dilutive effect was computed using the treasury stock method, which assumes the stock options were exercised and the hypothetical proceeds from the exercise were used by the Company to purchase common stock at the average market price during the period. The calculation of diluted earnings per common share excludes outstanding stock options for which the results would have been anti-dilutive.

The following table presents the numerators and denominators for basic and diluted earnings per share computations for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net Income Available to Common Shareholders	$	7,805	$	6,463	$	22,832	$	19,159
Weighted Average Common Stock Outstanding:
Weighted Average Common Stock Outstanding (Basic)		28,820,144		30,059,374		29,535,589		28,640,601
Stock Options		677,817		430,274		645,967		430,275
Weighted Average Common Stock Outstanding (Dilutive)		29,497,961		30,489,648		30,181,556		29,070,876
Basic Earnings per Common Share	$	0.27	$	0.22	$	0.77	$	0.67
Diluted Earnings per Common Share		0.27		0.21		0.76		0.66

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Note 3: Securities

The following tables present the amortized cost and estimated fair value of securities with gross unrealized gains and losses at September 30, 2019 and December 31, 2018: