Bridgewater Bancshares, Inc._2023 Annual Report

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

The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows as of December 31, 2023, 2022 and 2021:

2023

2022

2021

Amount

Percent

Amount

Percent

Amount

Percent

(dollars in thousands)

Amount of Statutory Rate .......................... $11,030 State Income Taxes (Net of Federal Income Tax Benefit) 3,511 Interest on Investment Securities and Loans Exempt From Federal Income Tax ............................... TaxCredits....................................... (91) Other Differences ................................. Totals ........................................ $12,562

21.0 % $15,059

21.0 % $12,930

21.0 %

6.6

5,349

7.5

4,647

7.6

(1,175) (2.3)

(899) (1.3) (835) (1.2) (356) (0.5)

(657) (1.1) (540) (0.9) (494) (0.8)

0.0

(713)(1.4)

23.9 % $18,318

25.5 % $15,886

25.8 %

The Company’s effective tax rate may fluctuate as it is impacted by the level and timing of the Company’s utilization of historic tax credits, low - income housing tax credits, the level of tax - exempt investments and loans, and the overall level of pre - tax income. The following table presents the components of the net deferred tax asset included in other assets, as of December 31, 2023 and 2022:

(dollars in thousands) 2022 Depreciation ................................................ $ (279) $ (325) Allowance for Credit Losses ................................... 14,261 13,639 Unrealized Loss on Securities Available for Sale .................. 12,793 13,759 UnrealizedGainonCashFlowHedges........................... (5,434) (6,527) Prepaid Expenses ............................................ (221) (886) Deferred Compensation ....................................... — 510 DeferredLoanFees........................................... 1,856 2,745 Reserve for Off-Balance Sheet Credit Exposures. . . . . . . . . . . . . . . . . . . 843 — Other ...................................................... 108 2 Totals ................................................... $ 23,927 $ 22,917 2023

Note 15: Tax Credit Investments The Company invests in qualified affordable housing projects and federal historic projects for the purpose of community reinvestment and obtaining tax credits. The Company’s tax credit investments are limited to existing lending relationships with well-known developers and projects within the Company’s market area.

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