Bridgewater Bancshares, Inc._2023 Annual Report

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

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 economic measures. Substantially, all of these assumptions are observable in the marketplace and can be derived from observable data or are supported by observable levels at which transactions 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 security being valued. Such methods are generally classified as Level 2. However, when prices from independent sources vary, or cannot be obtained or corroborated, a security is generally classified as Level 3. Interest Rate Caps The fair value of the caps are calculated by determining the total expected asset or liability exposure of the derivatives. Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and volatilities, and accordingly are valued using Level 2 inputs. Interest Rate Swaps Interest rate swaps are traded in over-the-counter markets where quoted market prices are not readily available. For those interest rate swaps, fair value is determined using internally developed models of a third party that uses primarily market observable inputs, such as yield curves and option volatilities, and accordingly are valued using Level 2 inputs. Nonrecurring Basis Certain assets are measured at fair value on a nonrecurring basis. These assets are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment or a change in the amount of previously recognized impairment. The following tables present nonrecurring fair value measurements of certain assets for the periods ended December 31, 2023, 2022 and 2021:

December 31, 2023

(dollars in thousands) Loss IndividuallyEvaluatedLoans......................... $ — $ — $9,602 $ 199 Totals........................................... $ — $ — $9,602 $ 199 Level 1 Level 2 Level 3

December 31, 2022

(dollars in thousands) Loss ImpairedLoans.................................... $ — $ 96 $ — $ 71 Totals........................................... $ — $ 96 $ — $ 71 Level 1 Level 2 Level 3

December 31, 2021

(dollars in thousands) Loss ImpairedLoans.................................... $ — $9,360 $ — $ 625 Totals........................................... $ — $9,360 $ — $ 625 Level 1 Level 2 Level 3

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