Bridgewater Bancshares, Inc._2023 Annual Report

As of and for the year ended December 31,

(dollars in thousands)

2023

2022

2021

2020

2019

Tangible Common Equity and Tangible Common Equity/Tangible Assets TotalShareholders'Equity................................. $ 425,515 Less:PreferredStock..................................... (66,514) Total Common Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . 359,001 Less:IntangibleAssets ................................... (2,814) Tangible Common Equity ................................ $ 356,187 TotalAssets ........................................... $ 4,611,990 Less:IntangibleAssets ................................... (2,814) Tangible Assets ........................................ $ 4,609,176 Tangible Book Value Per Share BookValuePerCommonShare............................. $ Less:EffectsofIntangibleAssets............................ Tangible Book Value Per Common Share ..................... $ Return on Average Tangible Common Equity Net Income Available to Common Shareholders . . . . . . . . . . . . . . . . . $ 12.94 (0.10) 12.84 35,906 AverageShareholders'Equity............................... $ 410,478 Less:AveragePreferredStock.............................. (66,514) AverageCommonEquity.................................. Less: Effects of Average Intangible Assets . . . . . . . . . . . . . . . . . . . . . Average Tangible Common Equity .......................... $ 341,117 343,964 (2,847) Tangible Common Equity/Tangible Assets ....................

$ 394,064

$ 379,272

$

265,405

$

244,794

(66,514) 327,550 (2,914)

(66,514) 312,758 (3,105)

—

—

265,405

244,794

(3,296)

(3,487)

$ 324,636

$ 309,653

$

262,109

$

241,307

$ 4,345,662

$ 3,477,659

$ 2,927,345

$ 2,268,830

(2,914)

(3,105)

(3,296)

(3,487)

$ 4,342,748

$ 3,474,554

$ 2,924,049

$ 2,265,343

7.73 %

7.48 %

8.91 %

8.96 %

10.65 %

$

11.80 (0.11) 11.69

$

11.09 (0.11) 10.98

$

9.43 (0.12)

$

8.45 (0.12)

$

$

$

9.31

$

8.33

$

49,338

$

44,516

$

27,194

$

31,403

$ 384,033

$ 316,237

$

258,736

$

232,539

(66,514)

(24,915)

—

—

317,519 (3,012)

291,322

258,736

232,539

(3,204)

(3,395)

(3,582)

$ 314,507

$ 288,118

$

255,341

$

228,957

Return on Average Tangible Common Equity ..................

10.53 %

15.69 %

15.45 %

10.65 %

13.72 %

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk As a financial institution, the Company’s primary market risk is interest rate risk, which is defined as the risk of loss of net interest income or net interest margin because of changes in interest rates. The Company continually seeks to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when interest earning assets and interest bearing liabilities mature or re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when assets and liabilities each respond differently to changes in interest rates. The Company’s management of interest rate risk is overseen by its ALM Committee, based on a risk management infrastructure approved by the board of directors that outlines reporting and measurement requirements. In particular, this infrastructure sets limits and management targets for various metrics, including net interest income simulation involving parallel shifts in interest rate curves, steepening and flattening yield curves, and various prepayment and deposit duration assumptions. The Company’s risk management infrastructure also requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis and noninterest bearing and interest bearing transaction deposit durations based on historical analysis. The Company does not engage in speculative trading activities relating to interest rates, foreign exchange rates, commodity prices, equities or credit. The Company manages the interest rate risk associated with interest earning assets by managing the interest rates and terms associated with the investment securities portfolio by purchasing and selling investment securities from time to time. The Company manages the interest rate risk associated with interest bearing liabilities by managing the interest rates and terms associated with wholesale borrowings and deposits from customers which the Company relies on for funding. For example, the Company occasionally uses special offers on deposits to alter the interest rates and terms associated with interest bearing liabilities.

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