Bridgewater Bancshares, Inc._2023 Annual Report

The following table presents a summary of nonperforming assets, by category, at the dates indicated:

December 31,

(dollars in thousands)

2023

2022

2021

2020

2019

Total Nonaccrual Loans ................................ $ TotalNonperformingLoans............................. $ Total Nonperforming Assets (1) .......................... $ Total Modified Accruing Loans (2) ........................ Total Nonperforming Assets and Modified Accruing Loans (2) . $ 10,528 Nonaccrual Loans to Total Loans ........................ Nonperforming Loans to Total Loans ..................... 0.02 Nonperforming Assets to Total Loans Plus Foreclosed Assets (1) ................................... 0.02 919 919 919 9,609

$ 639 $ 639 $ 639

$ 722 $ 722 $ 722 1,304 $ 2,026

$ 775 $ 775 $ 775

$ 461 $ 461 $ 461

82

265

276

$ 721

$ 1,040

$ 737

0.02 % 0.02 %

0.03 %

0.03 % 0.02 %

0.02

0.03

0.03

0.02

0.02

0.03

0.03

0.02

(1) Nonperforming assets are defined as nonaccrual loans and loans greater than 90 days past due still accruing plus foreclosed assets. There were no loans greater than 90 days past due still accruing for any period shown. (2) Reflects the balance outstanding at December 31, 2023 of accruing modified loans to borrowers experiencing financial difficulty since adoption of ASU 2022-02. See “Note 1 – Description of the Business and Summary of Significant Accounting Policies” of the Company’s Consolidated Financial Statements included as part of this report for a discussion for this standard. Periods presented prior to that date reflect the outstanding balance of accruing troubled debt restructures as defined by superseded accounting guidance of ASC 310-40. Accruing loans are those where the Company expects to collect all amounts contractually due. The balance of nonperforming assets can fluctuate due to changes in economic conditions. The Company has established a policy to discontinue accruing interest on a loan (that is, place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent unless management believes that the collection of interest is expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. If management believes that a loan will not be collected in full, an increase to the allowance for credit losses on loans is recorded to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal. There are no loans, outside of those included in the tables above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms. Due to the low levels of nonaccrual loans, gross income that would have been recorded on nonaccrual loans during the years ended December 31, 2023 and 2022 was approximately $79,000 and $60,000, respectively. Allowance for Credit Losses The allowance for credit losses on loans is a reserve established through charges to earnings in the form of a provision for credit losses. The Company maintains an allowance for credit losses at a level management considers adequate to provide for expected lifetime losses in the portfolio. Although management strives to maintain an allowance it deems adequate, future economic changes, deterioration of borrowers’ creditworthiness, and the impact of examinations by regulatory agencies, among other factors, all could cause changes to the allowance for credit losses on loans. At December 31, 2023 the allowance for credit losses on loans was $50.5 million, an increase of $2.5 million from $48.0 million at December 31, 2022. Net charge-offs (recoveries) totaled $202,000 during the year ended December 31, 2023 and ($276,000) during the year ended December 31, 2022. The allowance for credit losses on loans as a percentage of total loans was 1.36% at December 31, 2023, compared to 1.34% at December 31, 2022.

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