Bridgewater Bancshares, Inc._2023 Annual Report

(1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Interest Rates and Operating Interest Differential Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest bearing liabilities, as well as changes in average interest rates. The following table presents the effect that these factors had on the interest earned on interest earning assets and the interest incurred on interest bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. The changes not attributable specifically to either volume or rate have been allocated to the changes due to volume. The following table presents the changes in the volume and rate of interest bearing assets and liabilities for the year ended December 31, 2023, compared to the year ended December 31, 2022, and for the year ended December 31, 2022, compared to the year ended December 31, 2021:

Year Ended December 31, 2023

Year Ended December 31, 2022

Compared with

Compared with

Year Ended December 31, 2022

Year Ended December 31, 2021

Change Due To:

Interest Variance

Change Due To:

Interest Variance

(dollars in thousands)

Volume

Rate

Volume

Rate

Interest Earning Assets: Cash Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Investment Securities: Taxable Investment Securities . . . . . . . . . . . . . . . . . . . Tax-Exempt Investment Securities . . . . . . . . . . . . . . . TotalSecurities.............................. Loans: Paycheck Protection Program Loans . . . . . . . . . . . . . . Loans....................................... TotalLoans................................. FederalHomeLoanBankStock..................

477 $ 2,096 $ 2,573 $ (347) $ 745 $ 398

5,615 (1,980) 3,635

5,624

11,239 (1,776)

4,790

2,155

6,945

204

(130)

(11)

(141)

5,828

9,463

4,660

2,144

6,804

(970)

—

(970)

(10,709) 32,429 21,720

5,238

(5,471) 33,270 27,799

26,844 25,874

19,978 19,978

46,822 45,852 1,106

841

6,079

624 173 Total Interest Earning Assets . . . . . . . . . . . . . . . . . . . $ 30,610 $ 28,384 $ 58,994 $ 26,258 $ 8,917 $ 35,174 Interest Bearing Liabilities: Interest Bearing Transaction Deposits . . . . . . . . . . . . . $ 4,498 $ 14,545 $ 19,043 $ 1,093 $ 1,191 $ 2,284 Savings and Money Market Deposits. . . . . . . . . . . . . . (1,337) 22,847 21,510 2,703 2,697 5,400 TimeDeposits................................ (582) 4,382 3,800 (543) (292) (835) BrokeredDeposits............................. 17,702 10,611 28,313 1,146 1,542 2,688 Total Interest Bearing Deposits . . . . . . . . . . . . . . . . . 20,281 52,385 72,666 4,399 5,138 9,537 Federal Funds Purchased . . . . . . . . . . . . . . . . . . . . . . . 1,006 3,008 4,014 4,450 51 4,501 Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 905 36 941 99 42 141 FHLBAdvances.............................. 5,467 801 6,268 254 136 390 Subordinated Debentures . . . . . . . . . . . . . . . . . . . . . . . (528) (177) (705) 277 (219) 58 Total Interest Bearing Liabilities . . . . . . . . . . . . . . . . 27,131 56,053 83,184 9,479 5,148 14,627 Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,479 $ (27,669) $ (24,190) $ 16,779 $ 3,769 $ 20,547 482 225 (51)

Interest Income, Interest Expense, and Net Interest Margin 2023 Compared to 2022

Net interest income was $105.2 million for the year ended December 31, 2023, a decrease of $24.5 million compared to $129.7 million for the year ended December 31, 2022. The decrease in net interest income was due to

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