Bridgewater Bancshares, Inc._2023 Annual Report

2022 Compared to 2021 Noninterest expense totaled $56.6 million for the year ended December 31, 2022, an $8.5 million, or 17.7%, increase from $48.1 million for the year ended December 31, 2021. The increase was primarily driven by a $6.1 million increase in salaries and employee benefits as the result of merit increases and increased staff to meet the needs of the Company’s growth, a $684,000 increase in derivative collateral fees, and a $796,000 increase in other expense, offset partially by a decrease in debt prepayment fees. The Company had 246 full-time equivalent employees at December 31, 2022, compared to 220 employees at December 31, 2021. The efficiency ratio was 41.5% for the year ended December 31, 2022, compared to 42.0% for the year ended December 31, 2021. The following table presents the major components of noninterest expense 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: Noninterest Expense: Salaries and Employee Benefits. . . . . . . . . . . . . . . . $ 36,538 $ 36,941 $ (403) $ 36,941 $ 30,889 $ 6,052 OccupancyandEquipment.................... 4,447 4,390 57 4,390 3,916 474 FDIC Insurance Assessment .................. 3,690 1,365 2,325 1,365 1,305 60 DataProcessing............................. 1,574 1,396 178 1,396 1,222 174 Professional and Consulting Fees .............. 3,081 2,664 417 2,664 2,520 144 Derivative Collateral Fees .................... 1,900 687 1,213 687 3 684 Information Technology and Telecommunications 2,889 2,495 394 2,495 2,163 332 MarketingandAdvertising.................... 1,129 2,032 (903) 2,032 1,487 545 Intangible Asset Amortization . . . . . . . . . . . . . . . . . 100 191 (91) 191 191 — Amortization of Tax Credit Investments . . . . . . . . . — 408 (408) 408 562 (154) Debt Prepayment Fees ....................... — — — — 582 (582) OtherExpense.............................. 3,972 4,051 (79) 4,051 3,255 796 Totals.................................... $59,320 $56,620 $ 2,700 $56,620 $48,095 $ 8,525 Income Tax Expense The provision for income taxes includes both federal and state taxes. Fluctuations in effective tax rates reflect the differences in the inclusion or deductibility of certain income and expenses for income tax purposes and the recognition of tax credits. The Company’s future effective income tax rate will fluctuate based on the mix of taxable and tax-free investments and loans, the recognition and availability of tax credit investments, and overall taxable income. 2023 Compared to 2022 Income tax expense was $12.6 million for the year ended December 31, 2023, compared to $18.3 million for the year ended December 31, 2022. The effective combined federal and state income tax rate for the year ended December 31, 2023 was 23.9%, compared to 25.5% for the year ended December 31, 2022. The lower effective tax rate was primarily due to an increase in tax credits recognized. The Company early adopted ASU 2023-02 applying the modified retrospective method which reclassified noninterest expense to income tax expense effective January 1, 2023. Year Ended December 31, Year Ended December 31, Increase/ (Decrease) Increase/ (Decrease) (dollars in thousands) 2023 2022 2022 2021

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