Bridgewater Bancshares, Inc._2023 Annual Report

As of and for the year ended December 31,

(dollars in thousands)

2023

2022

2021

2020

2019

Selected Asset Quality Data Loans30-89DaysPastDue ........................................... Loans30-89DaysPastDuetoTotalLoans................................. NonperformingLoans ............................................... $ NonperformingLoanstoTotalLoans..................................... ForeclosedAssets.................................................. $ NonaccrualLoanstoTotalLoans ....................................... Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans . . . . . . Nonperforming Assets (4) ............................................. $ Nonperforming Assets to Total Assets (4) .................................. Allowance for Credit Losses on Loans to Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for Credit Losses on Loans to Total Loans, Excluding PPP Loans . . . . . . . . . Allowance for Credit Losses on Loans to Nonaccrual Loans . . . . . . . . . . . . . . . . . . . . . NetLoanCharge-OffstoAverageLoans ..................................

$ 15,110

$

186

$

49

$

13

$

403

0.41 %

0.01 %

— %

— %

0.02 %

919

$

639

$

722

$

775

$

461

0.02 %

0.02 %

0.03 %

0.03 %

0.02 %

—

$

—

$

—

$

—

$

—

0.02 %

0.02 %

0.03 %

0.03 %

0.02 %

0.02 919 1.36 1.36

0.02 639 1.34 1.35

0.03 722 1.42 1.43

0.03 775 1.50 1.59

0.02 461 1.18 N/A

$

$

$

$

0.02 %

0.01 %

0.02 %

0.03 %

0.02 %

5,494.45

7,511.11

5,542.94

4,495.61

4,886.33

0.01 0.01 (1) Represents a non-GAAP financial measure. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for further details. (2) Ratio excludes the amortization of tax credit investments, debt prepayment fees and represents a non-GAAP financial measure. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for further details. (3) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%. (4) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due plus foreclosed assets. (5) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. Overview The Company is a financial holding company headquartered in St. Louis Park, Minnesota. The principal sources of funds for loans and investments are transaction, savings, time, and other deposits, and short-term and long term borrowings. The Company’s principal sources of income are interest and fees collected on loans, interest and dividends earned on investment securities and service charges. The Company’s principal expenses are interest paid on deposit accounts and borrowings, employee compensation and other overhead expenses. The Company’s simple, efficient business model of providing responsive support and unconventional experiences to clients continues to be the underlying principle that drives the Company’s profitable growth. Critical Accounting Policies and Estimates The consolidated financial statements of the Company are prepared based on the application of certain accounting policies, the most significant of which are described in “Note 1 – Description of the Business and Summary of Significant Accounting Policies” of the notes to the consolidated financial statements included as a part of this report. Certain policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect the reported results and financial position for the current period or in future periods. The use of estimates, assumptions, and judgments are necessary when financial assets and liabilities are required to be recorded or adjusted to reflect fair value. Assets carried at fair value inherently result in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on either quoted market prices or are provided by other independent third-party sources, when available. When such information is not available, management estimates valuation adjustments. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on the future financial condition and results of operations. Management has discussed each critical accounting policy and the methodology for the identification and determination of critical accounting policies with the Company’s Audit Committee. The following is a discussion of the critical accounting policies and significant estimates that require the Company to make complex and subjective judgments. Allowance for Credit Losses In accordance with ASC 326, Financial Instruments - Credit Losses , the allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans are charged against the allowance for credit losses on loans when management determines all or a portion of the loan balance is uncollectible. Subsequent recoveries, if any, are credited to the allowance. The allowance is increased (decreased) by provisions (or recovery of) reported in the income statement as a component of (0.01) 0.00 0.02

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