Bridgewater Bancshares, Inc. Annual Report

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

Professional standards allow entities the irrevocable option to elect to measure certain financial instruments 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. The Company has not elected to measure any existing financial instruments at fair value; however, it may elect 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 assets and liabilities and to determine fair value disclosures. The following table presents the balances of the assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018: Fair Value of Financial Assets: Securities Available for Sale: U.S. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,998 $ — $ — $ 4,998 Municipal Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 105,743 — 105,743 Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 64,728 — 64,728 Corporate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 50,176 — 50,176 SBA Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 49,559 — 49,559 Asset-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 14,673 — 14,673 Interest Rate Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 284 — 284 Total Fair Value of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . $ 4,998 $ 285,163 $ — $ 290,161 Fair Value of Financial Liabilities: Interest Rate Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 902 $ — $ 902 Total Fair Value of Financial Liabilities . . . . . . . . . . . . . . . . . . . . . $ — $ 902 $ — $ 902 December 31, 2019 Level 1 Level 2 Level 3 Total

December 31, 2018 Level 1 Level 2 Level 3

Total

Fair Value of Financial Assets: Securities Available for Sale: U.S. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Municipal Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SBA Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Rate Swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 17,897 $

— $ — $ 17,897

— 118,133 — 47,176 — 21,118 — 49,054

— 118,133 — 47,176 — 21,118 — 49,054

— 352 Total Fair Value of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . $ 17,897 $ 235,833 $ — $ 253,730 Investment Securities When available, the Company uses quoted market prices to determine the fair value of investment 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 an active market, the Company determines fair value utilizing vendors who apply matrix pricing for similar bonds where no price is observable or may compile prices from various sources. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market, and contractual prices for the underlying financial instruments, as well as other relevant 352 —

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