Bridgewater Bancshares, Inc._2023 Annual Report

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

The following commitments were outstanding at December 31, 2023 and 2022:

December 31, December 31,

(dollars in thousands) 2022 Unfunded Commitments Under Lines of Credit. . . . . . . . . . . . . . . . . $ 546,632 $ 848,734 Letters of Credit .......................................... 103,289 115,769 Totals.................................................. $ 649,921 $ 964,503 2023

Commitments to extend credit are agreements to lend to a customer at fixed or variable rates as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The amount of collateral obtained upon extension of credit is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable; inventory; property, plant, and equipment; real estate; and stocks and bonds. Unfunded commitments under commercial lines of credit, home equity lines of credit, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit may or may not require collateral and may or may not contain a specific maturity date. Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, all standby letters of credit issued have expiration dates within two years. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting these commitments. The Company had outstanding letters of credit with the FHLB in total amounts of $114.4 million and $78.4 million at December 31, 2023 and 2022, respectively, on behalf of customers and to secure public deposits. The ACL for off-balance sheet credit exposures was $3.0 million at December 31, 2023 and is separately classified on the balance sheet within other liabilities. Prior to the adoption of CECL, the Company’s ACL for off balance sheet credit exposures was not material. The following table presents the balance and activity in the allowance for credit losses for off-balance sheet credit exposures for the year ended December 31, 2023:

(dollars in thousands)

December 31, 2023

Allowance for Credit Losses: Beginning Balance, Prior to Adoption of CECL . . . . . . . . . . . . . . . . . . . . . . . . $ ImpactofAdoptingCECL ........................................ Provision for (Recovery of) Off-Balance Sheet Credit Exposures . . . . . . . . . . . TotalEndingBalance ............................................ $

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4,850 (2,225) 2,985

Legal Contingencies Various legal claims arise from time to time in the normal course of business. In the opinion of management, any liability resulting from such proceedings would not have a material impact on the consolidated financial statements. Note 17: Stock Options and Restricted Stock In 2012, the Company adopted the Bridgewater Bancshares, Inc. 2012 Combined Incentive and Non-Statutory Stock Option Plan (the “2012 Plan”) under which the Company was able to grant options to its directors, officers, and employees for up to 750,000 shares of common stock. Both incentive stock options and nonqualified stock options were granted under the 2012 Plan. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant, and the maximum term of each outstanding option is ten years. All outstanding options have been

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