Bridgewater Bancshares, Inc._2023 Annual Report

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

financial statements. With the adoption of ASU 2016-02, operating lease agreements were required to be recognized on the consolidated balance sheets as an ROU asset and a corresponding lease liability. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Operating lease ROU assets represent the Company’s right to use the underlying asset during the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using the rate implicit in the lease. As the rate implicit in the lease is rarely determinable, the Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments. The Company's incremental borrowing rate is based on the FHLB amortizing advance rate, adjusted for the lease term and other factors. As the Company elected not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance, property taxes and other costs associated with the lease. These variable payments are not included in the lease liability and are expensed as incurred. The following table presents the components of lease expense and cash flow information related to operating leases as of the periods indicated:

December 31,

(dollars in thousands)

2023

2022

Operating Lease Cost .............................. $ Variable Lease Cost ............................... TotalLeaseCost................................ $

557 $

538 253 791

262

819 $

Prior to the adoption of ASU 2016-02, rent expense, net of rental income, including common area maintenance pertaining to banking premises totaled $52,000 for the year ended December 31, 2021. The following table presents other information on the Company’s operating leases for the years ended December 31, 2023 and 2022:

December 31,

(dollars in thousands)

2023

2022

Operating Lease Right-of-Use Assets ................................... $ OperatingLeaseLiabilities............................................ Weighted Average Remaining Lease Term (in Years). . . . . . . . . . . . . . . . . . . . . . Weighted Average Discount Rate ...................................... Other Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases .............................. $

1,938 1,972 4.95

$

2,472 2,496 6.12

1.68 %

1.46 %

543

$

513

111