Bridgewater Bancshares, Inc._2023 Annual Report

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

Minimum Required For Capital Adequacy

For Capital Adequacy Purposes Plus Capital Conservation Buffer

To be Well Capitalized Under Prompt Corrective Action Regulations

Actual

Purposes

(dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

December 31, 2022 Company (Consolidated): Total Risk-based Capital. . . . $ 536,352 13.15 % $ 326,190

8.00 % $ 428,125

10.50 %

N/A N/A N/A N/A

N/A N/A N/A N/A

Tier 1 Risk-based Capital . . . Common Equity Tier 1 Capital.................. Tier 1 Leverage Ratio . . . . . . Tier 1 Risk-based Capital . . . Common Equity Tier 1 Capital.................. Tier 1 Leverage Ratio . . . . . .

409,092 10.03

244,643

6.00

346,577

8.50

342,578 409,092

8.40 9.55

183,482 171,368

4.50 4.00

285,417 171,368

7.00 4.00

Bank: Total Risk-based Capital. . . . $ 508,760 12.47 % $ 326,288

8.00 % $ 428,253

10.50 % $ 407,860

10.00 %

460,404 11.29

244,716

6.00

346,681

8.50

326,288

8.00

460,404 11.29 460,404 10.76

183,537 171,113

4.50 4.00

285,502 171,113

7.00 4.00

265,109 213,891

6.50

5.00 The Company and the Bank must maintain a capital conservation buffer as defined by Basel III regulatory capital guidelines, in order to avoid limitations on capital distributions, including dividend payments, stock repurchases and certain discretionary bonus payments to executive officers. As of December 31, 2023 and 2022, the capital ratios of the Company and the Bank were in excess of the quantitative capital ratio standards applicable on those dates. However, there can be no assurance that the Company and the Bank will continue to maintain such status in the future. Note 22: Fair Value Measurement The Company categorizes its assets and liabilities measured at fair value into a three-level hierarchy based on the priority of the inputs to the valuation technique used to determine fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used in the determination of the fair value measurement fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. Assets and liabilities valued 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 or liabilities that the Company has the ability to access. Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments. Fair values for these instruments are estimated using pricing models, quoted prices 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 an entity’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 and liabilities measured on a nonrecurring basis to fair value. Adjustments to fair value usually result when certain assets are impaired. Such assets are written down from their carrying amounts to their fair value.

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