10q10k10q10k.net

What changed in FIRST BUSINESS FINANCIAL SERVICES, INC.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of FIRST BUSINESS FINANCIAL SERVICES, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+428 added−457 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-28)

Top changes in FIRST BUSINESS FINANCIAL SERVICES, INC.'s 2024 10-K

428 paragraphs added · 457 removed · 358 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

92 edited+14 added−24 removed158 unchanged
Biggest changeFurther, on August 8, 2023, the Federal Reserve announced the establishment of a Novel Activities Supervision Program, which is designed in part to enhance the Federal Reserve’s supervision processes in respect of banking organizations’ crypto-asset related activities and use of distributed ledger technologies and other novel technologies in the delivery of financial products and services. 16 Although the federal banking agencies have not developed formal regulations governing the digital asset activities of banking organizations, the supervisory framework summarized above dictates that, in order to effectively identify and manage digital asset-related risks and obtain supervisory non-objection to the proposed engagement in digital asset activities, banking organizations must implement appropriate risk management practices, including with respect to board and management oversight, policies and procedures, risk assessments, internal controls and monitoring.
Biggest changeAlthough the federal banking agencies have not developed formal regulations governing the digital asset activities of banking organizations, the supervisory framework summarized above dictates that, in order to effectively identify and manage digital asset-related risks and obtain supervisory non-objection to the proposed engagement in digital asset activities, banking organizations must implement appropriate risk management practices, including with respect to board and management oversight, policies and procedures, risk assessments, internal controls and monitoring. 17 Table of Contents
This program typically provides a guaranty of 75% of loan the balance. In the event of default on the loan, the lender may request that the SBA purchase the guaranteed portion of the loan for an amount equal to outstanding principal plus accrued interest permissible under SBA guidelines.
This program typically provides a guaranty of 75% of the loan balance. In the event of default on the loan, the lender may request that the SBA purchase the guaranteed portion of the loan for an amount equal to the outstanding principal plus accrued interest permissible under SBA guidelines.
While the economy of the South Central Wisconsin is driven in large part by the government and education sectors, there is also a diverse array of industries outside of these segments.
While the economy of South Central Wisconsin is driven in large part by the government and education sectors, there is also a diverse array of industries outside of these segments.
As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should eliminate, defer, or significantly reduce dividends to shareholders if: (i) the company’s net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the 10 prospective rate of earnings retention is inconsistent with the company’s capital needs and overall current and prospective financial condition; or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should eliminate, defer, or significantly reduce dividends to shareholders if: (i) the company’s net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the prospective rate of earnings retention is inconsistent with the company’s capital needs and overall current and prospective financial condition; or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
As a Wisconsin corporation, we are subject to the limitations of Wisconsin law, which allows us to pay dividends unless, after giving effect to a dividend, any of the following would occur: (i) we would not be able to pay our debts as they become due in the usual course of business or (ii) the total assets would be less than the sum of its total liabilities plus any amount that would be needed if we were to be dissolved at the time of the dividend payment, to satisfy the preferential rights upon dissolution of shareholders whose rights are superior to the rights of the shareholders receiving the distribution.
As a Wisconsin corporation, we are subject to the limitations of Wisconsin law, which allows us to pay dividends unless, after giving effect to a dividend, any of the following would occur: (i) we would not be able to pay our debts as they become due in the usual course of business or (ii) our total assets would be less than the sum of our total liabilities plus any amount that would be needed if we were to be dissolved at the time of the dividend payment, to satisfy the preferential rights upon dissolution of shareholders whose rights are superior to the rights of the shareholders receiving the distribution.
In addition, the SBA will share on a pro-rata basis in certain costs of collection, subject to SBA rules and limits, as well as the proceeds of liquidation. SBA lending is designed to generate new business opportunities for the Bank by meeting the needs of clients that cannot be met with conventional bank loans.
In addition, the SBA will share on a pro-rata basis in certain costs of collection, subject to SBA rules and limits, as well as the proceeds of liquidation. The Bank's SBA lending is designed to generate new business opportunities for the Bank by meeting the needs of clients that cannot be met with conventional bank loans.
The ratios described above are minimum standards in order for banking organizations to be considered “adequately capitalized.” Bank regulatory agencies uniformly encourage banks to hold more capital and be 8 “well-capitalized” and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements.
The ratios described above are minimum standards in order for banking organizations to be considered “adequately capitalized.” Bank regulatory agencies uniformly encourage banks to hold more capital and be “well-capitalized” and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements.
He also currently serves as a director of our FBSF subsidiary. Mr. Spielmann had been serving as the Corporation’s Deputy Chief Financial Officer and Chief Accounting Officer since May 2022. Mr. 5 Spielmann joined FBFS in 2006 and has held various positions including Chief Accounting Officer, Director of Finance, Financial Reporting Manager, and Senior Financial Accountant. David R.
He also currently serves as a director of our FBSF subsidiary. Mr. Spielmann had been serving as the Corporation’s Deputy Chief Financial Officer and Chief Accounting Officer since May 2022. Mr. Spielmann joined FBFS in 2006 and has held various positions including Chief Accounting Officer, Director of Finance, Financial Reporting Manager, and Senior Financial Accountant. David R.
The CFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to all providers of consumer products and services, including the Bank, as well as the authority to prohibit 15 “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over providers with more than $10 billion in assets.
The CFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to all providers of consumer products and services, including the Bank, as well as the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over providers with more than $10 billion in assets.
We elected to use the 2020 Capital Transition Relief as permitted under the applicable regulations. As a result, the three-year phase-out period described above commenced in 2023. Digital Asset Regulation. The federal banking agencies have issued interpretive guidance and statements regarding the engagement by banking organizations in certain digital asset activities.
We elected to use the 2020 Capital Transition Relief as permitted under the applicable regulations. As a result, the three-year phase-in period described above commenced in 2023. Digital Asset Regulation. The federal banking agencies have issued interpretive guidance and statements regarding the engagement by banking organizations in certain digital asset activities.
Furthermore, taxation laws administered by the Internal Revenue Service (“IRS”) and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (“FASB”), securities laws administered by the SEC and state securities authorities, and anti-money laundering 6 laws enforced by the U.S. Department of the Treasury (“Treasury”) have an impact on our business.
Furthermore, taxation laws administered by the Internal Revenue Service (“IRS”) and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (“FASB”), securities laws administered by the SEC and state securities authorities, and anti-money laundering laws enforced by the U.S. Department of the Treasury (“Treasury”) have an impact on our business.
As implemented by federal banking and securities regulators and the Department of the Treasury, AML laws obligate depository institutions to verify their customers’ identity, conduct customer due diligence, report on suspicious activity, file reports of transactions in currency, and conduct enhanced due diligence on certain accounts.
As implemented by federal banking and securities regulators and the Department of the Treasury, AML/CFT laws obligate depository institutions to verify their customers’ identity, conduct customer due diligence, report on suspicious activity, file reports of transactions in currency, and conduct enhanced due diligence on certain accounts.
The CRA requires the Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of the entire community, including low- and moderate-income (“LMI”) neighborhoods. Federal regulators regularly assess the Bank’s record of meeting the credit needs of its communities.
The CRA requires the Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of the entire community, including low- and moderate-income (“LMI”) neighborhoods. Federal regulators regularly assess the Bank’s record of meeting the credit and investment needs of its communities.
The Basel III Rule . In July 2013, the U.S. federal banking agencies approved the implementation of the Basel III regulatory capital reforms in pertinent part, and, at the same time, promulgated rules effecting certain changes required by the Dodd-Frank Act (the “Basel III Rule”).
In July 2013, the U.S. federal banking agencies approved the implementation of the Basel III regulatory capital reforms in pertinent part, and, at the same time, promulgated rules effecting certain changes required by the Dodd-Frank Act (the “Basel III Rule”).
Competition FBB encounters strong competition across all of our commercial banking products and services. Such competition includes banks, savings institutions, mortgage banking companies, credit unions, finance companies, equipment finance companies, mutual funds, insurance companies, brokerage firms, investment banking firms, and FinTech companies.
Competition FBB encounters competition across all of our commercial banking products and services. Such competition includes banks, savings institutions, mortgage banking companies, credit unions, finance companies, equipment finance companies, mutual funds, insurance companies, brokerage firms, investment banking firms, and FinTech companies.
Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its 9 Table of Contents activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate that the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.
On November 16, 2023, the FDIC issued a final rule to implement a special assessment to recover the loss DIF associated with protecting uninsured depositors following these bank failures.
On November 16, 2023, the FDIC issued a final rule to implement a special assessment to recover the loss in the DIF associated with protecting uninsured depositors following these bank failures.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.” This authority permits the Corporation to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development), and mortgage banking and brokerage services.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.” This authority permits the Corporation to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau 10 Table of Contents (including software development), and mortgage banking and brokerage services.
As of December 31, 2023: (i) the Bank is not subject to a directive from the WDFI or the FDIC to increase its capital; and (ii) the Bank was well-capitalized, as defined by FDIC regulations. Additionally, the Corporation had regulatory capital in excess of the Federal Reserve’s requirements as of December 31, 2023. Prompt Corrective Action .
As of December 31, 2024: (i) the Bank is not subject to a directive from the WDFI or the FDIC to increase its capital; and (ii) the Bank was well-capitalized, as defined by FDIC regulations. Additionally, the Corporation had regulatory capital in excess of the Federal Reserve’s requirements as of December 31, 2024. Prompt Corrective Action .
These restrictions have not had, and are not currently expected to have, a material impact on the operations of the Bank. 12 Insider Transactions.
These restrictions have not had, and are not currently expected to have, a material impact on the operations of the Bank. Insider Transactions.
Seiler has over 25 years of financial services experience including his previous position as Managing Director (formerly Senior Vice President/Manager) of the Correspondent Banking Division with BMO Bank, N.A. in Milwaukee, Wisconsin which he held from 2007 to 2016.
Seiler has over 30 years of financial services experience including his previous position as Managing Director (formerly Senior Vice President/Manager) of the Correspondent Banking Division with BMO Bank, N.A. in Milwaukee, Wisconsin which he held from 2007 to 2016.
On December 18, 2015, the federal banking agencies issued a statement to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards.
On December 18, 2023, the federal banking agencies issued a statement to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards.
Prior to that, he held the position of Senior Vice President/Team Leader, Correspondent Real Estate Division from 2005 to 2007 and Vice President, Relationship Manager, Commercial Real Estate from 2002 to 2005. Mark J. Meloy, age 62, has served as Executive Vice President of FBFS since January 2023. Mr.
Prior to that, he held the position of Senior Vice President/Team Leader, Correspondent Real Estate Division from 2005 to 2007 and Vice President, Relationship Manager, Commercial Real Estate from 2002 to 2005. Mark J. Meloy, age 63, has served as Executive Vice President of FBFS since January 2023. Mr.
A number of instruments that historically qualified as Tier 1 Capital under Basel I do not qualify, or their qualifications changed. For example, noncumulative perpetual preferred stock, which qualified as simple Tier 1 Capital, does not qualify as Common Equity Tier 1 Capital, but qualifies as Additional Tier 1 Capital.
A number of instruments that historically qualified as Tier 1 Capital under Basel I do not qualify under Basel III, or their qualifications changed. For example, noncumulative perpetual preferred stock, which qualified as simple Tier 1 Capital under Base III, does not qualify as Common Equity Tier 1 Capital, but qualifies as Additional Tier 1 Capital.
This category of laws includes the Bank Secrecy Act (the “BSA”), the Money Laundering Control Act, the USA PATRIOT Act (collectively, “AML laws”) and implementing regulations as administered by the United States Treasury Department’s Office of Foreign Assets Control (“sanctions laws”).
This category of laws includes the Bank Secrecy Act, the Money Laundering Control Act, the USA PATRIOT Act (collectively, “AML/CFT laws”) and implementing regulations as administered by the United States Treasury Department’s Office of Foreign Assets Control (“sanctions laws”).
He served as Chief Operating Officer of FBFS from February 2005 to September 2006 and as Executive Vice President from July 2002 to February 2005. He served as Chief Executive Officer of FBB from July 1999 to September 2006 and as President of FBB from July 1999 to February 2005. Mr. Chambas has over 35 years of commercial banking experience.
He served as Chief Operating Officer of FBFS from February 2005 to September 2006 and as Executive Vice President from July 2002 to February 2005. He served as Chief Executive Officer of FBB from July 1999 to September 2006 and as President of FBB from July 1999 to February 2005. Mr. Chambas has over 40 years of commercial banking experience.
These laws, and the regulations of the bank regulatory agencies issued under them, affect, among other things, the scope of our business, the kinds and amounts of investments the Corporation and the Bank may make, limits on the Bank’s loans to any one borrower, reserve requirements, required capital levels relative to assets, the nature and amount of collateral for loans, the establishment of branches, the ability to merge, consolidate and acquire, dealings with the Corporation’s and the Bank’s insiders and affiliates, and payment of dividends.
These laws, and the regulations of the bank regulatory agencies issued under them, affect, among other things, the scope of our business, the kinds and amounts of investments the Corporation and the Bank may make, limits on the Bank’s loans to any one borrower, reserve requirements, required capital levels relative to assets, the nature and amount of collateral for loans, the establishment of branches, the ability to merge with, consolidate with, and acquire other financial institutions and related businesses, dealings with the Corporation’s and the Bank’s insiders and affiliates, and payment of dividends.
Prior to joining FBFS in 1993, he was a Vice President of Commercial Lending with M&I Bank, now known as BMO Bank, N.A. , in Madison, Wisconsin. Brian D. Spielmann, age 41, has served as Chief Financial Officer of FBFS since April 2023. Mr. Spielmann also serves as the Chief Financial Officer of the Bank.
Prior to joining FBFS in 1993, he was a Vice President of Commercial Lending with M&I Bank, now known as BMO Bank, N.A. , in Madison, Wisconsin. Brian D. Spielmann, age 42, has served as Chief Financial Officer ("CFO") of FBFS since April 2023. Mr. Spielmann also serves as the Chief Financial Officer of the Bank.
Federal regulators regularly examine BSA/AML and sanctions compliance programs to ensure their adequacy and effectiveness, and the frequency and extent of such examinations and the remedial actions resulting therefrom have been increasing.
Federal regulators regularly examine AML/CFT and sanctions compliance programs to ensure their adequacy and effectiveness, and the frequency and extent of such examinations and the remedial actions resulting therefrom have been increasing.
Treasury Management Services FBB provides comprehensive treasury management services for commercial banking and specialized lending clients to manage their cash and liquidity, including a variety of deposit accounts, accounts receivable collection services, electronic 2 Table of Contents payment solutions, fraud detection and protection, information reporting, reconciliation, data integration solutions, and account balance optimization solutions.
Treasury Management Services FBB provides comprehensive treasury management services for commercial banking and specialized lending clients to manage their cash and liquidity, including a variety of deposit accounts, accounts receivable collection services, electronic payment solutions, fraud detection and protection, information reporting, reconciliation, data integration solutions, and account balance optimization solutions.
The federal banking agencies have adopted operational and managerial standards to promote the safety and soundness of FDIC-insured institutions. The standards apply to internal controls, information systems, internal audit systems, risk mitigation, bank operations, compliance, credit underwriting, interest rate exposure, asset growth, compensation, fiduciary risk, asset quality, and earnings.
The federal banking agencies have adopted operational and managerial standards to promote the safety and soundness of FDIC-insured institutions. The standards apply to internal controls, information 13 Table of Contents systems, internal audit systems, risk mitigation, bank operations, compliance, credit underwriting, interest rate exposure, asset growth, compensation, fiduciary risk, asset quality, and earnings.
As of December 31, 2023, private wealth loans represented approximately 2% of total gross loans and leases receivable. Bank Consulting Services FBB provides outsourced treasury services to assist banks and other financial institutions with balance sheet management. These services include investment portfolio management and administrative services, and asset liability management services.
As of December 31, 2024, private wealth loans represented approximately 2% of total gross loans and leases receivable. Bank Consulting Services FBB provides outsourced treasury services to assist banks and other financial institutions with balance sheet management. These services include balance sheet, investment portfolio, and asset liability management services.
He also served as Director of IT for Aurora Health Care from 2006 to 2010 and Manager of IT for the American Transmission Company from 2000 to 2006. SUPERVISION AND REGULATION Below is a brief description of certain laws and regulations that relate to us and the Bank.
He also served as Director of IT for Aurora Health Care from 2006 to 2010 and Manager of IT for the American Transmission Company from 2000 to 2006. 6 Table of Contents SUPERVISION AND REGULATION Below is a brief description of certain laws and regulations that relate to us and the Bank.
A result of this change is that the proceeds of hybrid instruments, such as trust preferred securities, were excluded from capital over a phase-out period. However, 7 if such securities were issued prior to May 19, 2010 by bank holding companies with less than $15 billion of assets, they may be retained, subject to certain restrictions.
A result of this change is that the proceeds of hybrid instruments, such as trust preferred securities, were excluded from capital over a phase-out period. However, if such securities were issued prior to May 19, 2010 by bank holding companies with less than $15 billion of assets, they may be retained, subject to certain restrictions. The Basel III Rule .
The Corporation and the Bank opted out of the CBLR framework for each reporting period in 2023 and has the option to opt into the framework for future reporting periods. The decision to opt into or out of the CBLR framework is monitored on an ongoing basis. 9 First Business Financial Services, Inc. General.
The Corporation and the Bank opted out of the CBLR framework for each reporting period in 2024 and has the option to opt into the framework for future reporting periods. The decision to opt into or out of the CBLR framework is monitored on an ongoing basis. First Business Financial Services, Inc. General.
Full compliance with the amended brokered deposits regulation was required by January 1, 2022. The FDIC staff continues to implement the final rule through the issuance of interpretative guidance and other administrative actions. Community Reinvestment Act (“CRA”) Requirements.
Full compliance with the amended brokered deposits regulation was required by January 1, 2022. The FDIC staff continues to implement the final rule through the issuance of interpretative guidance and other administrative actions. 14 Table of Contents Community Reinvestment Act (“CRA”) Requirements.
Non–compliance with sanctions laws and/or AML laws or failure to maintain an adequate BSA/AML compliance program can lead to significant monetary penalties and reputational damage, and federal regulators evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank merger, acquisition, restructuring, or other expansionary activity.
Non–compliance with sanctions laws and/or AML/CFT laws or failure to maintain an adequate AML/CFT compliance program can lead to significant monetary penalties and reputational damage, and federal regulators evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank merger, acquisition, restructuring, or other expansionary activity. Privacy and Cybersecurity.
It does not describe all of the statutes, regulations, and regulatory policies that apply, nor does it restate all of the requirements of those that are described. The descriptions are qualified in their entirety by reference to the particular statutory and regulatory provision.
It does not describe all of the 7 Table of Contents statutes, regulations, and regulatory policies that apply, nor does it restate all of the requirements of those that are described. The descriptions are qualified in their entirety by reference to the particular statutory and regulatory provision.
As a bank-owned, asset-based lender with strong underwriting standards, our team is positioned to provide cost-effective financing solutions to companies which do not have the established, stable cash flows necessary to qualify for traditional commercial lending products. These borrowing relationships generally range between $2 million and $18 million with terms of 24 to 60 months.
As an asset-based lender with strong underwriting standards, our team is positioned to provide cost-effective financing solutions to companies which do not have the established, stable cash flows necessary to qualify for traditional commercial lending products. These borrowing relationships generally range between $2 million and $24 million with terms of 24 to 60 months.
FBB also acts as a discretionary trustee and investment fiduciary, sharing responsibility for monitoring assets to match the client’s specifications. Offering only non-proprietary funds removes conflict of interest while designing cost-effective company retirement plans which provide a competitive return. As of December 31, 2023, FBB had $395.9 million of company retirement plan assets under management and administration.
FBB also acts as a discretionary trustee and investment fiduciary, sharing responsibility for monitoring assets to match the client’s specifications. Offering only non-proprietary funds removes conflict of interest while designing cost-effective company retirement plans which provide a competitive return. As of December 31, 2024, FBB had $421 million of company retirement plan assets under management and administration.
Seiler, age 59 , has served as Chief Operating Officer of FBFS since April 2016 and as President of FBFS since January 2023. He also currently serves as a director for our subsidiary FBSF. Mr.
Seiler, age 60 , has served as Chief Operating Officer ("COO") of FBFS since April 2016 and as President of FBFS since January 2023. He also currently serves as a director for our subsidiary FBSF. Mr.
It is also authorized to terminate a depository bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the bank’s regulatory agency.
It is also authorized to terminate a depository bank’s deposit insurance upon a finding by the FDIC that the bank’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition 12 Table of Contents enacted or imposed by the bank’s regulatory agency.
FBB also provides access to brokerage and custody-only services, for which it administers and safeguards assets. As of December 31, 2023, FBB had $2.726 billion of private wealth assets under management and administration. The Bank also offers private banking to its Private Wealth Management clients.
FBB also provides access to brokerage and custody-only services, for which it administers and safeguards assets. As of December 31, 2024, FBB had $2.998 billion of private wealth assets under management and administration. The Bank also offers private banking to its private wealth clients.
On November 18, 2021, the FDIC, the Federal Reserve System, and the OCC (collectively, the agencies) issued a joint final rule, to establish computer-security incident notification requirements for banking organizations and their bank service providers.
On 15 Table of Contents November 18, 2021, the FDIC, the Federal Reserve System, and the OCC (collectively, the agencies) issued a joint final rule, to establish computer-security incident notification requirements for banking organizations and their bank service providers.
Through FBB, we service South Central Wisconsin, Southeast Wisconsin, Northeast Wisconsin, the greater Kansas City Metro, and other borrowers through products with national channels. Commercial Real Estate Lending We originate loans secured by commercial real estate, including owner-occupied, non owner-occupied facilities, primarily market-rent multifamily developments, 1-4 family residential developments, and construction loans for these types of buildings.
Through FBB, we service South Central Wisconsin, Southeast Wisconsin, Northeast Wisconsin, the greater Kansas City Metro, and other clients through products with national channels. Commercial Real Estate Lending We originate loans secured by commercial real estate, including owner-occupied properties, non-owner-occupied facilities, multifamily developments, 1-4 family residential developments, and construction loans for these types of buildings.
As of December 31, 2023, our commercial and industrial portfolio (“C&I”) represented approximately 39% of our total gross loans and leases receivable. The C&I portfolio includes conventional commercial and industrial loans as well as asset-based lending, accounts receivable financing, equipment financing, floorplan financing, and SBA lending. These C&I lending niches are described below.
As of December 31, 2024, our commercial and industrial portfolio (“C&I”) represented approximately 37.0% of our total gross loans and leases receivable. The C&I portfolio includes conventional commercial and industrial loans as well as asset-based lending, accounts receivable financing, equipment financing, floorplan financing, and SBA lending. These C&I lending niches are described below.
Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities, changes in the discount rate on bank borrowings, and changes in reserve requirements against bank deposits.
Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities, changes in the discount rate on bank borrowings, and changes in reserve 11 Table of Contents requirements against bank deposits.
Kansas City Metro Geographically located in the center of the U.S., the greater Kansas City Metro includes 15 counties and more than 50 communities in Missouri and Kansas, including a central business district located in Kansas City, Missouri and communities on both sides of the state line.
Kansas City Metro The greater Kansas City Metro includes 15 counties and more than 50 communities in Missouri and Kansas, including a central business district located in Kansas City, Missouri and communities on both sides of the state line.
As of December 31, 2023, our commercial real estate portfolio (“CRE”) represented approximately 60% of our total gross loans and leases receivable. Commercial and Industrial Lending Our commercial loans are typically secured by various types of business assets, including inventory, receivables, and equipment.
As of December 31, 2024, our commercial real estate portfolio (“CRE”) represented approximately 61.6% of our total gross loans and leases receivable. Commercial and Industrial Lending Our commercial loans are typically secured by various types of business assets, including inventory, receivables, and equipment.
There are no family relationships between any directors or executive officers of FBFS. Corey A. Chambas, age 61 , has served as a director of FBFS since July 2002, as Chief Executive Officer since December 2006 and as President from February 2005 until January 2023.
There are no family relationships between any directors or executive officers of FBFS. 5 Table of Contents Corey A. Chambas, age 62 , has served as a director of FBFS since July 2002, as Chief Executive Officer ("CEO") since December 2006 and as President from February 2005 until January 2023.
These tests provide an incentive for banks and holding companies to increase their holdings in Treasury securities and other sovereign debt as a component of assets, increase the use of long-term debt as a funding source, and rely on stable funding like core deposits (in lieu of brokered deposits). Dividend Payments.
These tests provide an incentive for banks and holding companies to increase their holdings in Treasury securities and other sovereign debt as a component of assets, increase the use of long-term debt as a funding source, and rely on stable funding such as core deposits. Management defines core deposits as other than wholesale or brokered deposits. Dividend Payments.
Commercial Banking Products and Services We strive to meet the specific commercial lending needs of small- to medium-sized companies in our primary markets in Wisconsin, Kansas, and Missouri, predominantly through lines of credit and term loans to businesses with annual sales of up to $150 million.
Commercial Banking Products and Services We strive to meet the specific commercial banking needs of small- to medium-sized companies in our primary markets in Wisconsin, Kansas, and Missouri, predominantly through lines of credit and term loans to businesses.
Item 1. Business BUSINESS General First Business Financial Services, Inc.
Item 1. B usiness BUSINESS General First Business Financial Services, Inc.
As of December 31, 2023, the on-balance sheet portion of SBA loans represented approximately 2% of our total gross loans and leases receivable.
As of December 31, 2024, the on-balance sheet portion of SBA loans represented approximately 1.87% of our total gross loans and leases receivable.
A brief description of each of our primary markets is as follows: South Central Wisconsin As the capital of Wisconsin and home of the University of Wisconsin-Madison, the greater Madison area, specifically Dane County and surrounding counties, offers an appealing economic environment populated by a highly educated workforce.
South Central Wisconsin As the capital of Wisconsin and home of the University of Wisconsin-Madison, the greater Madison area, specifically Dane County and surrounding counties, offers an appealing economic environment populated by a highly educated workforce.
These floorplan programs generally range from $500,000 to $10 million for larger, well-established independent car dealers. Floorplan financing typically generates higher yields than traditional commercial lending. As of December 31, 2023, floorplan financing represented approximately 3% of our total gross loans and leases receivable.
As of December 31, 2024, equipment financing represented approximately 10.54% of our total gross loans and leases receivable. C&I Lending - Floorplan Financing We offer floorplan financing for larger, well established, independent car dealerships nationwide. These floorplan programs generally range from $500,000 to $15 million. Floorplan financing typically generates higher yields than traditional commercial lending.
In particular, well-capitalized and well-rated institutions are not required to treat reciprocal deposits as brokered deposits up to the lesser of 20% of their total liabilities or $5 billion.
In particular, well-capitalized and well-rated institutions are not required to treat reciprocal deposits as brokered deposits up to the lesser of 20% of their total liabilities or $5 billion. Institutions that are not both well-capitalized and well-rated may also exclude reciprocal deposits from their brokered deposits under certain circumstances.
Although the reforms primarily targeted systemically important financial service providers, their influence filtered down in varying degrees to community banks over time and caused our compliance and risk management processes, and the costs thereof, to increase. After the 2016 federal elections, momentum to decrease the regulatory burden on community banks gathered strength.
Although the reforms primarily targeted systemically important financial service providers, their influence filtered down in varying degrees to community banks over time and caused our compliance and risk management processes, and the costs thereof, to increase.
This Form 10-K and all of our other filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through that website, including copies of our proxy statement, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we file those materials with, or furnish them to, the Securities and Exchange Commission (“SEC”). 4 Table of Contents Markets Although certain of our commercial banking products and services are marketed throughout the Midwest and beyond, our primary markets lie in Wisconsin, Kansas, and Missouri.
This Form 10-K and all of our other filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through that website, including copies of our proxy statement, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we file those materials with, or furnish them to, the Securities and Exchange Commission (“SEC”).
Our Equipment Finance team, with business development officers located in several states, provides financing solutions for manufacturing equipment, industrial assets, construction and transportation equipment, agriculture equipment, medical equipment, and a variety of other commercial equipment. These financings generally range between $25,000 and $1 million with terms of 36 to 84 months.
Our Equipment Finance team provides financing solutions nationwide for manufacturing equipment, industrial assets, construction equipment, agriculture equipment, medical equipment, and a variety of other commercial equipment. These financings generally range between $10,000 and $1 million with terms of 12 to 84 months.
The Basel III Rule required minimum capital ratios beginning as of January 1, 2015, as follows: • A ratio of minimum Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets; • An increase in the minimum required amount of Tier 1 Capital from 4% to 6% of risk-weighted assets; • A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8% of risk-weighted assets; and • A minimum leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.
The Basel III Rule currently requires minimum capital ratios as follows: • A ratio of minimum Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets; • A ratio of minimum Tier 1 Capital equal to 6% of risk-weighted assets; 8 Table of Contents • A ratio of minimum Total Capital (Tier 1 plus Tier 2) equal to 8% of risk-weighted assets; and • A minimum leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.
Under the final rule, the assessment base for an insured depository institution will be equal to the institution’s estimated uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits.
Under the final rule, the assessment base for an insured depository institution will be equal to the institution’s estimated uninsured deposits as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits. Our estimated level of uninsured deposits was below that threshold, and therefore, the Bank was not subject to the special assessment.
In 1990, FBB relocated its home office to Madison, Wisconsin, and began focusing on providing high-quality banking services to small- to medium-sized businesses located in Madison and the surrounding area.
Subsidiaries First Business Bank FBB is a state bank chartered in 1909 in Wisconsin under the name Kingston State Bank. In 1990, FBB relocated its home office to Madison, Wisconsin, and began focusing on providing high-quality banking services to small- to medium-sized businesses located in Madison and the surrounding area.
C&I Lending - SBA Lending and Servicing SBA loans are made through programs designed by the federal government to assist the small business community in obtaining financing. We are an approved participant in the SBA’s Preferred Lender Program (“PLP”).
As of December 31, 2024, floorplan financing represented approximately 4.47% of our total gross loans and leases receivable. C&I Lending - SBA Lending and Servicing SBA loans are made through programs designed by the federal government to assist the small business community in obtaining financing. We are an approved participant in the SBA’s Preferred Lender Program (“PLP”).
We earn interest income from these loans, generally at variable rates higher than those of our traditional commercial loans. We have a history of recognizing gains on the sale of the guaranteed portion of the loans. We also regularly earn treasury management fee income from the borrower and servicing income from the owner of the sold portion of these loans.
We earn interest income from these loans, generally at variable rates higher than those of our 2 Table of Contents traditional commercial loans. We have a history of recognizing gains on the sale of the guaranteed portion of the loans.
Employee Turnover was 9.33% – well below the employee turnover average of 17.7% in the banking industry, as reported in a survey conducted by Aon in 2023. e.
Employee Turnover was 10.54% – well below the employee turnover average of 17.7% in the industry, as reported in a survey conducted by Aon in 2024. 4.
As of December 31, 2023, on a consolidated basis, we had total assets of $3.508 billion, total gross loans and leases of $2.850 billion, total deposits of $2.797 billion, and total stockholders’ equity of $289.6 million.
As of December 31, 2024, on a consolidated basis, we had total assets of $3.853 billion, total gross loans and leases of $3.114 billion, total deposits of $3.107 billion, and total stockholders’ equity of $328.6 million.
C&I Lending - Equipment Financing The Bank finances a broad range of equipment, through loans and leases, to address the financing needs of commercial clients in a variety of industries.
As of December 31, 2024, accounts receivable financing represented approximately 2.12% of our total gross loans and leases receivable. C&I Lending - Equipment Financing The Bank finances a broad range of equipment, through loans and leases, to address the financing needs of commercial clients in a variety of industries.
Meloy was a Vice President and Senior Relationship Manager with Firstar Bank, NA, in Cedar Rapids, Iowa and Milwaukee, Wisconsin, now known as U.S. Bank, working in their financial institutions group with mergers and acquisition financing. Bradley A. Quade, age 58 , has served as Chief Credit Officer of FBFS since April 2020. Mr.
Meloy was a Vice President and Senior Relationship Manager with Firstar Bank, NA, in Cedar Rapids, Iowa and Milwaukee, Wisconsin, now known as U.S. Bank, working in their financial institutions group with mergers and acquisition financing. Mr. Meloy is retiring on May 1, 2025. Bradley A.
The Corporation’s commitment is best expressed in the words of our Belief Statement: At First Business Bank, we believe visionary, determined entrepreneurs and investors create a thriving economy and, in turn, social and economic advancement for their employees, investors, families, and communities.
Our Belief Statement expresses this: At First Business Bank, we believe visionary, determined entrepreneurs and investors create a thriving economy and, in turn, social and economic advancement for their employees, investors, families and communities. Built by driven entrepreneurs, First Business Bank has the experience to create both wealth and a wealth of good in the world.
Asset-based lending typically generates higher yields than traditional commercial lending. This line of business complements our traditional commercial loan portfolio and provides us with more diverse income opportunities.
Asset-based lending typically generates higher yields than traditional commercial lending. This line of business complements our 1 Table of Contents traditional commercial loan portfolio and provides us with more diverse income opportunities. As of December 31, 2024, asset-based lending represented approximately 4.50% of our total gross loans and leases receivable.
On July 27, 2023, the federal banking agencies issued a proposed rule to implement the final components of the Basel III standards set by the Basel Committee on Banking Supervision in 2017.
On July 27, 2023, the federal banking agencies issued a proposed rule to implement the final components of the Basel III standards set by the Basel Committee on Banking Supervision in 2017, referred to as the Basel III Endgame. The proposed Basel III Endgame rules, which, if enacted, would not apply to the Corporation and the Bank. Well-Capitalized Requirements .
The Bank is subject to several federal laws that are designed to combat money laundering and terrorist financing, and to restrict transactions with persons, companies, or foreign governments sanctioned by United States authorities.
The final rule is on hold pending resolution through the federal courts which delayed implementation. Anti-Money Laundering/Counting the Financing of Terrorism ("CFT"). The Bank is subject to several federal laws that are designed to combat money laundering and countering the financing of terrorism, and restrict transactions with persons, companies, or foreign governments sanctioned by United States authorities.
She has been an employee of FBFS for over 30 years. Laura M. Garcia , age 51, has served as Chief Risk Officer for FBFS since March 2022. Prior to joining FBFS, she held the position of Head of North American Risk and Compliance, Managing Director for BMO Bank, N.A. in Chicago, Illinois, from 2018 to 2022. Ms.
Prior to joining FBFS, she held the position of Head of North American Risk and Compliance, Managing Director for BMO Bank, N.A. in Chicago, Illinois, from 2018 to 2022. Ms. Garcia has over 30 years of experience in the financial services industry, centered in commercial banking, credit, compliance, and risk management. James E.
Daniel S. Ovokaitys, age 50 , has served as Chief Information Officer since June 2014. Prior to joining FBFS, Mr. Ovokaitys held the position of Head of Corporate IT (North/South America) for Merz Pharmaceuticals, located in Frankfurt, Germany, from 2010 to 2014.
Ovokaitys held the position of Head of Corporate IT (North/South America) for Merz Pharmaceuticals, located in Frankfurt, Germany, from 2010 to 2014.
C&I Lending - Asset-Based Lending We provide asset-based lending to small- to medium-sized companies. Our asset-based lending team serves clients on a nationwide basis through business development officers located in several states.
C&I Lending - Asset-Based Lending We provide asset-based lending to small- to medium-sized companies. Our asset-based lending team serves clients on a nationwide basis through business development officers located in several states. We primarily provide revolving lines of credit and term loans for financial and strategic acquisitions, capital expenditures, working capital, bank debt refinancing, debt restructuring, and corporate turnaround strategies.
Institutions that are not both well-capitalized and well-rated may also exclude reciprocal deposits from their brokered deposits under certain circumstances. 13 On December 15, 2020, the FDIC issued a final rule on brokered deposits. The rule aims to clarify and modernize the FDIC’s existing regulatory framework for brokered deposits.
On December 15, 2020, the FDIC issued a final rule on brokered deposits. The rule aims to clarify and modernize the FDIC’s existing regulatory framework for brokered deposits.
Corporate Information Our principal executive offices are located at 401 Charmany Drive, Madison, Wisconsin 53719 and our telephone number is (608) 238-8008. The contents of our website are not incorporated by reference into this Form 10-K. We maintain an Internet website at www.firstbusiness.bank.
The contents of our website are not incorporated by reference into this Form 10-K. We maintain an Internet website at www.firstbusiness.bank.
The agencies have identified a spectrum of risks facing a banking institution including, but not limited to, credit, market, liquidity, operational, compliance, and reputational risk. In particular, recent regulatory pronouncements have focused on operational risk, which arises from the potential that inadequate information systems, operational problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses.
In particular, recent regulatory pronouncements have focused on operational risk, which arises from the potential that inadequate information systems, operational problems, breaches in internal controls or failures of internal controls due to human error, insufficient staffing, or insufficiently trained or skilled personnel, fraud, or unforeseen catastrophes will result in unexpected losses.
In particular, the final rule is intended to provide a better understanding of the facts and circumstances that the Federal Reserve considers most relevant when assessing whether control exists. Dividend Payments. Our ability to pay dividends to our shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.
Our ability to pay dividends to our shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.

… 50 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

86 edited+22 added−7 removed135 unchanged
Biggest changeThe additional cost to the Corporation of our cyber security monitoring and protection systems and controls includes the cost of hardware and software, third party technology providers, consulting and forensic testing firms, and insurance premium costs, in addition to the incremental cost of our personnel who focus a substantial portion of their responsibilities on fraud and cyber security. 21 Table of Contents Any successful cyber-attack or other security breach involving the misappropriation, loss or other unauthorized disclosure of confidential client information or funds or that compromises our ability to function could erode confidence in the security of our systems, products and services, result in monetary losses, potentially subject us to regulatory investigation with fines and penalties, expose us to litigation and liability, disrupt our operations and have a material adverse effect on our business, financial condition or results of operations and damage our reputation.
Biggest changeAny successful cyber-attack or other security breach on the Corporation, third party service providers, or clients involving the misappropriation, loss or other unauthorized disclosure of confidential client information or funds or that compromises our ability to function could erode confidence in the security of our systems, products and services.
Management has estimated losses in the outstanding guaranteed portions of SBA loans and recorded an ACL and a SBA recourse reserve at a level determined to be appropriate. Significant increases to the ACL and the recourse reserve may materially decrease our net income, which may adversely affect our business, results of operations, and financial condition.
Management has estimated losses in the outstanding guaranteed portions of SBA loans and recorded an ACL and a SBA recourse reserve at a level determined to be appropriate. Significant increases to the ACL and the SBA recourse reserve may materially decrease our net income, which may adversely affect our business, results of operations, and financial condition.
We may encounter risks in addition to those described below, including risks and uncertainties not currently known to us or those we currently deem to be immaterial. The risks described below, as well as such additional risks and uncertainties, may impair or materially and adversely affect our business, results of operations, and financial condition.
We may encounter risks in addition to those described below, including risks and uncertainties not currently known to us or those we currently deem to be immaterial. The risks described below, as well as such additional risks and uncertainties, may materially affect or impair our business, results of operations, and financial condition.
Accordingly, the federal banking agencies have expressed concerns about weaknesses in the current commercial real estate market and have applied increased regulatory scrutiny to institutions with commercial real estate loan portfolios that are fast growing or large relative to the institutions' total capital.
The federal banking agencies have expressed concerns about weaknesses in the current commercial real estate market and have applied increased regulatory scrutiny to institutions with commercial real estate loan portfolios that are fast growing or large relative to the institutions' total capital.
We face risks related to cyber-attacks and other security breaches that typically involve the transmission of sensitive information regarding our clients and monetary transactions through various third parties. Some of these parties have in the past been the target of security breaches and cyber-attacks.
We face risks related to cyber-attacks, ransomware attacks and other security breaches that typically involve the transmission of sensitive information regarding our clients and monetary transactions through various third parties. Some of these third parties have in the past been the target of security breaches and cyber-attacks.
Consumers and businesses are increasingly using non-banks to complete their financial transactions, which could adversely affect our business and results of operations. Technology and other changes are allowing consumers and businesses to complete financial transactions that historically have involved financial institutions through alternative methods.
Consumers and businesses are increasingly using non-banks to complete their financial transactions, which could adversely affect our business and results of operations. Technology and other changes are allowing consumers and businesses to complete financial transactions through alternative methods that historically involved financial institutions.
Our private wealth management results of operations may be negatively impacted by changes in general economic conditions and the conditions in the financial and securities markets, including the values of assets held under management, which are beyond our control.
Our Private Wealth management results of operations may be negatively impacted by changes in economic and market conditions. Our private wealth management results of operations may be negatively impacted by changes in general economic conditions and the conditions in the financial and securities markets, including the values of assets held under management, which are beyond our control.
The risks are organized in the following categories: • Credit Risk • Liquidity and Interest Rate Risk • Operational Risk • Strategic and External Risk • Regulatory, Compliance, Legal, and Reputational Risk • Risks Related to Investing in Our Common Stock • General Risk Factors Credit Risks If we do not effectively manage our credit risk, we may experience increased levels of delinquencies, non-performing loans, and charge-offs, which would require increases in our provision for credit losses.
The risks are organized in the following categories: • Credit Risk • Liquidity and Interest Rate Risk • Operational Risk • Strategic and External Risk • Regulatory, Compliance, Legal, and Reputational Risk • Risks Related to Investing in Our Common Stock • General Risk Factors Credit Risks If we do not effectively manage our credit risk, we may experience increased levels of delinquencies, non-accrual loans, and charge-offs, which would require increases in our provision for credit losses.
As of December 31, 2023, the Corporation had goodwill of $10.7 million. Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
As of December 31, 2024, the Corporation had goodwill of $10.7 million. Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
There is also increased scrutiny of compliance with the rules enforced by the FinCEN, Federal, and State regulators. Federal and state bank regulators also focus on compliance with AML laws.
There is also increased scrutiny of compliance with the rules enforced by the FinCEN, Federal, and State regulators. Federal and state bank regulators also focus on compliance with AML/CFT laws.
A decline in our stock price, decline in the performance of our acquired operations, or the occurrence of another triggering event could, under certain circumstances, result in an impairment charge being recorded. During 2023, our annual impairment test conducted July 1, 2023 indicated that the estimated fair value of the reporting unit exceeded the carrying value (including goodwill).
A decline in our stock price, decline in the performance of our acquired operations, or the occurrence of another triggering event could, under certain circumstances, result in an impairment charge being recorded. During 2024, our annual impairment test conducted July 1, 2024 indicated that the estimated fair value of the reporting unit exceeded the carrying value (including goodwill).
Any significant increases to the ACL may materially decrease our net income, which may adversely affect our business, results of operations, and financial condition. 17 Table of Contents A significant portion of our loan and lease portfolio is comprised of commercial real estate loans, which involve risks specific to real estate values and the real estate markets in general.
Any significant increases to the ACL may materially decrease our net income, which may adversely affect our business, results of operations, and financial condition. 18 Table of Contents A significant portion of our loan and lease portfolio is comprised of commercial real estate loans, which involve risks specific to real estate values and the real estate markets in general.
Our success depends to a significant extent upon the business activity, population, income levels, deposits, and real estate activity in these markets.
Our success depends to a significant extent upon the business activity, population, income levels, and real estate activity in these markets.
Our stock price can fluctuate significantly in response to a variety of factors including, among other things: • actual or anticipated variations in our quarterly results of operations; • recommendations by securities analysts; • operating and stock price performance of other companies that investors deem comparable to us; • news reports relating to trends, concerns, and other issues in the financial services industry; • perceptions in the marketplace regarding us or our competitors and other financial services companies; • new technology used, or services offered, by competitors; and • changes in government regulations.
Our stock price can fluctuate significantly in response to a variety of factors including, among other things: • actual or anticipated variations in our quarterly results of operations; • recommendations by securities analysts; • operating and stock price performance of other companies that investors deem comparable to us; 30 Table of Contents • news reports relating to trends, concerns, and other issues in the financial services industry; • perceptions in the marketplace regarding us or our competitors and other financial services companies; • new technology used, or services offered, by competitors; and • changes in government regulations.
While the Bank has not experienced significant withdrawal activity in connection with the recent bank failures, if a significant portion of the Bank’s deposits were to be withdrawn within a short period of time in connection with a similar future crisis, additional sources of funding may be required to meet withdrawal demands.
While the Bank has not experienced significant withdrawal activity in connection with the 2023 bank failures, if a significant portion of the Bank’s deposits were to be withdrawn within a short period of time in connection with a similar future crisis, additional sources of funding may be required to meet withdrawal demands.
For example, the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank, which were caused by specific risk management and industry issues, negatively impacted customer, investor and media perception of the entire sector, resulting in declines in depositor confidence and stock prices throughout the industry.
For example, the 2023 failures of Silicon Valley Bank, Signature Bank and First Republic Bank, which were caused by specific risk management and industry issues, negatively impacted customer, investor and media perception of the entire sector, resulting in declines in depositor confidence and stock prices throughout the industry.
Because of changing economic and market conditions affecting issuers, the Corporation may be required to recognize impairments on the securities it holds. Furthermore, the demand for the Corporation’s products and services may be impacted, which could materially adversely affect the Corporation’s revenue.
Because of changing economic and market conditions affecting issuers, the Corporation may be required to recognize impairments on the investments it holds. Furthermore, the demand for the Corporation’s products and services may be impacted, which could materially adversely affect the Corporation’s revenue.
When we take collateral in repossession and similar proceedings, we are required to mark the collateral to its then net realizable value, less estimated selling costs, which may result in a loss. These non-performing loans and repossessed assets also increase our risk profile and the capital our regulators believe is appropriate in light of such risks.
When we take collateral in repossession and similar proceedings, we are required to mark the collateral 20 Table of Contents to its then net realizable value, less estimated selling costs, which may result in a loss. These non-performing loans and repossessed assets also increase our risk profile and the capital our regulators believe is appropriate in light of such risks.
Although we employ detection and response mechanisms designed to detect and mitigate security incidents, early detection may be thwarted by persistent sophisticated attacks and malware designed to avoid detection. We train employees and our business and consumer clients on fraud risks and mitigation strategies.
Although we employ detection and response mechanisms designed to detect and mitigate security incidents, early detection may be thwarted by persistent sophisticated attacks and malware designed to avoid detection. We train employees and our clients on fraud risks and mitigation strategies.
Future widespread public health epidemics could result in the continued and increased recognition of credit losses in the Corporation’s loan portfolio and increases in the Corporation’s ACL, particularly to the extent that there is a significant negative impact on the global economy.
Public health epidemics could result in the continued and increased recognition of credit losses in the Corporation’s loan portfolio and increases in the Corporation’s ACL, particularly to the extent that there is a significant negative impact on the global economy.
Thus, an increase in the amount of non-performing assets would have an adverse impact on net interest income. 20 Table of Contents Rising interest rates may also result in a decline in value of our fixed-rate debt securities. The unrealized losses resulting from holding these securities would be recognized in other comprehensive income and reduce total stockholders’ equity.
Thus, an increase in the amount of non-performing assets would have an adverse impact on net interest income. Rising interest rates may also result in a decline in value of our fixed-rate debt securities. The unrealized losses resulting from holding these securities would be recognized in other comprehensive income and reduce total stockholders’ equity.
Future events of this nature could result in a material adverse effect on our performance and a decline in our stock priced for reasons that would not otherwise affect the Bank or which are outside of our control. General Risk Factors Our ability to attract and retain talented employees is critical to our success.
Future events of this nature could result in a material adverse effect on our performance and a decline in our stock priced for reasons that would not otherwise affect the Bank or which are outside of our control. 31 Table of Contents General Risk Factors Our ability to attract and retain talented employees is critical to our success.
Any such adverse impact could have a material adverse effect on our liquidity, financial condition, and results of operations. 26 Table of Contents Regulatory, Compliance, Legal and Reputational Risks We operate in multiple states and in a highly regulated industry and the federal and state laws and regulations that govern our operations, corporate governance, executive compensation, and accounting principles.
Any such adverse impact could have a material adverse effect on our liquidity, financial condition, and results of operations. Regulatory, Compliance, Legal and Reputational Risks We operate in multiple states and in a highly regulated industry and the federal and state laws and regulations that govern our operations, corporate governance, executive compensation, and accounting principles.
Operational Risks Information security risks for financial institutions like us continue to increase in part because of new technologies, the increased use of the internet and telecommunications technologies (including mobile devices and cloud computing) to conduct financial and other business transactions, political activism, and the increased sophistication and activities of organized crime, terrorist, hackers, and perpetrators of fraud.
Operational Risks 22 Table of Contents Information security risks for financial institutions like us continue to increase in part because of new technologies, the increased use of the internet and telecommunications technologies (including mobile devices and cloud computing) to conduct financial and other business transactions, political activism, and the increased sophistication and activities of organized crime, terrorist, hackers, and perpetrators of fraud.
Negative publicity can adversely affect our ability to keep and attract clients, employees, and shareholders and can expose us to litigation and regulatory action, all of which could have a material adverse effect on our business, financial condition, and results of operations. Item 1B. Unresolved Staff Comments None.
Negative publicity can adversely affect our ability to keep and attract clients, employees, and shareholders and can expose us to litigation and regulatory action, all of which could have a material adverse effect on our business, financial condition, and results of operations. Item 1B. Unre solved Staff Comments None.
If we experience increases in non-performing loans and non-performing assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which may adversely affect our business, results of operations, and financial condition. 19 Table of Contents Liquidity and Interest Rate Risks Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations.
If we experience increases in non-performing loans and non-performing assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which may adversely affect our business, results of operations, and financial condition. Liquidity and Interest Rate Risks Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations.
Our credit risk approval and monitoring procedures may not have identified or will identify all of these credit risks, and they cannot be expected to completely eliminate our credit risks.
Our credit risk underwriting and monitoring procedures may not have identified, or will identify, all of these credit risks, and they cannot be expected to completely eliminate our credit risks.
If our risk management framework proves ineffective, we could suffer unexpected losses which could adversely affect our business, results of operations, and financial condition. 22 Table of Contents We are subject to changes in accounting principles, policies, or guidelines. Our financial performance is impacted by accounting principles, policies, and guidelines.
If our risk management framework proves ineffective, we could suffer unexpected losses which could adversely affect our business, results of operations, and financial condition. We are subject to changes in accounting principles, policies, or guidelines. Our financial performance is impacted by accounting principles, policies, and guidelines.
There are risks inherent in making any loan or lease, including risks inherent in dealing with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to service debt, and risks resulting from changes in economic and market conditions.
There are risks inherent in making any loan or lease, including risks inherent in dealing with borrowers, including, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to repay debt, and risks resulting from changes in economic and market conditions.
As with many other companies, we outsource certain information systems, data management, and processing functions to third-party providers, including key components of our business infrastructure like internet and network access, and core application processing. While we have selected these third-party vendors carefully, we do not control their actions, nor is any vendor due diligence perfect.
As with many other financial institutions, we outsource certain information systems, data management, and processing functions to third-party providers, including key components of our business infrastructure like internet and network access, and core application processing. While we have selected these third-party service providers carefully, we do not control their actions, nor is any vendor due diligence perfect.
Other effects of engaging in such strategies may include potential diversion of our management’s time and attention and general disruption to our business. To the extent that we grow through new locations, we cannot ensure that we will be able to adequately and profitably manage this growth.
Other effects of engaging in such strategies may include potential diversion of our management’s time and attention and general disruption to our business. To the extent that we grow through new locations, we may incur certain one-time expenses and we cannot ensure that we will be able to adequately and profitably manage this growth.
Investments in these projects are designed to generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, over specified time periods.
Investments in these projects are designed to generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, over specified time 28 Table of Contents periods.
Changes in them or our failure to comply with them, may adversely affect us. We are subject to extensive regulation and supervision that govern almost all aspects of our operations.
Changes in applicable laws or regulations, or our failure to comply with them, may adversely affect us. We are subject to extensive regulation and supervision that govern almost all aspects of our operations.
Our results of operations, including revenue, non-interest income, expenses and net interest income, would be adversely affected in the event of widespread financial and business disruption due to a default by the United States on U.S. government obligations or a prolonged failure to maintain significant U.S. government operations.
Our results of operations, including revenue, non-interest income, expenses and net interest income, would be adversely affected in the event of widespread financial and business disruption due to a default by the United States on U.S. government obligations or a prolonged failure to maintain significant U.S. government operations. Of particular impact to the Corporation are the operations of the SBA.
Our competition includes banks, savings institutions, mortgage banking companies, credit unions, finance companies, equipment finance companies, mutual funds, insurance companies, brokerage firms, investment banking firms, and financial technology (“FinTech”) companies.
Our competition includes banks, savings institutions, mortgage banking companies, credit unions, finance companies, equipment finance companies, mutual funds, insurance companies, brokerage firms, investment banking firms, financial technology (“FinTech”) companies, and digital asset providers.
To the extent that we do so, we may experience higher operating expenses relative to operating income from the new operations or certain one-time expenses associated with the closure of offices, all of which may have an adverse effect on our business, results of operations, and financial condition.
To the extent that we do so, we may experience higher operating expenses relative to operating income from the new operations or certain one-time expenses associated with the discontinuation of a product or business, all of which may have an adverse effect on our business, results of operations, and financial condition.
The total outstanding balance of sold SBA loans as of December 31, 2023 was $84.2 million. In order for a borrower to be eligible to receive an SBA loan, it must be established that the borrower would not be able to secure a bank loan without the credit enhancements provided by a guaranty under the SBA program.
The total outstanding balance of sold SBA loans as of December 31, 2024 was $79.4 million. In order for a borrower to be eligible to receive an SBA loan, it must be established that the borrower would not be able to secure a bank loan without the credit enhancements provided by a guaranty under the SBA program.
Depending on market conditions, economic forecasts, results of operations, additional adverse circumstances or other factors, the goodwill 24 Table of Contents impairment analysis may require additional review of assumptions and outcomes prior to our next annual impairment testing date of July 1, 2024.
Depending on market conditions, economic forecasts, results of operations, additional adverse circumstances or other factors, the goodwill impairment analysis may require additional review of assumptions and outcomes prior to our next annual impairment testing date of July 1, 2025.
We are dependent upon third parties for certain information systems, data management and processing services, and key components of our business infrastructure, which are subject to operational, security, and other risks.
We are dependent upon third party service providers for certain information systems, data management and processing services, and key components of our business infrastructure, which are subject to operational, security, and other risks.
If we determine that it is more likely than not that some portion or all of the remaining deferred tax assets will not be realized, a valuation allowance will need to be recognized and this would result in a corresponding charge against our earnings. Competition from other financial services providers could adversely affect our profitability.
If we determine that it is more likely than not that some portion or all of the remaining deferred tax assets will not be realized, we will be required to recognize a valuation allowance, which would result in a corresponding charge against our earnings. Competition from other financial services providers could adversely affect our profitability.
If our policies, procedures, and systems are deemed deficient or the policies, procedures, and systems of the financial institutions that we may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions, such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan which would adversely affect our business, results of operations, and financial condition.
If our policies, procedures, and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan which would adversely affect our business, results of operations, and financial condition.
If the overall economic climate in the U.S., generally, or in our markets, specifically, deteriorates, or if the financial condition of our borrowers otherwise declines, then our borrowers may experience difficulties in repaying their loans and leases, and the level of non-performing loans and leases, charge-offs, and delinquencies could rise.
If the overall economic conditions in the U.S., generally, or in our specific markets, deteriorates, or if the financial condition of our borrowers otherwise declines, then our borrowers may experience difficulties in repaying their loans and leases, and delinquencies, the level of non-accrual loans and leases, and charge-offs could rise.
Of particular impact to the Corporation are the operations regulated by the SBA. Any failure to maintain such U.S. government operations, and the after-effects of such shutdown, could impede our ability to originate SBA loans and sell such loans in the secondary market, and would materially adversely affect our business, results of operations, and financial condition.
Any failure to maintain such U.S. government operations, and the after-effects of such shutdown, could impede our ability to originate SBA loans and sell such loans in the secondary market, and would materially adversely affect our business, results of operations, and financial condition.
These estimates may be inaccurate and we may be exposed to significant losses on loans for these projects. Real estate construction loans, a subset of commercial real estate loans, comprised approximately $193.1 million, or 6.8%, of our gross loan and lease portfolio, respectively, as of December 31, 2023.
These estimates may be inaccurate and we may be exposed to significant losses on loans for these projects. Real estate construction loans, a subset of commercial real estate loans, comprised approximately $221.1 million, or 7.1%, of our gross loan and lease portfolio, respectively, as of December 31, 2024.
We could recognize impairment losses on securities held in our securities portfolio, goodwill, or other long-lived assets. As of December 31, 2023, the fair value of our securities portfolio was approximately $305.3 million.
We could recognize impairment losses on securities held in our securities portfolio, goodwill, or other long-lived assets. As of December 31, 2024, the fair value of our securities portfolio was approximately $347.9 million.
Additions to the ACL, which are charged to earnings through the provision for credit losses, are determined based on a variety of factors, including an analysis of our loan and lease portfolio by segment, historical loss experience, subjective factors, and an evaluation of current economic conditions in our markets.
Additions to the ACL, which are charged to earnings through the provision for credit losses, are determined based on a variety of factors, including an analysis of our loan and lease portfolio by segment, historical loss experience, subjective factors, and an evaluation of changes in economic, operating, and other conditions within our markets, which may be beyond our control.
The Corporation believes it will fully realize its Federal and non-Wisconsin deferred tax assets. These determinations were based on the evaluation of several factors, including relevant tax law changes, our recent earnings history, expected future taxable earnings, and appropriate tax planning strategies. A decrease in taxable earnings could adversely impact our ability to fully utilize our remaining deferred tax assets.
These determinations were based on the evaluation of several factors, including relevant tax law changes, our recent earnings history, expected future taxable earnings, and appropriate tax planning strategies. A decrease in taxable earnings could adversely impact our ability to fully utilize our remaining deferred tax assets.
The Financial Crimes Enforcement Network (“FinCEN”), established by Treasury to administer the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and IRS.
The FinCEN, established by Treasury to administer the AML/CFT laws, is authorized to impose significant civil money penalties for violations of those requirements and has engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration, and IRS.
If we or our regulators determine that this concentration is approaching or exceeds appropriate limits, we may need to reduce or cease the origination of additional commercial real estate loans, which could adversely affect our growth plans and profitability.
Because of the risks associated with commercial real estate loans, we closely monitor the concentration of such loans in our portfolio. If we or our regulators determine that this concentration is approaching or exceeds appropriate limits, we may need to reduce or cease the origination of additional commercial real estate loans, which could adversely affect our growth plans and profitability.
In the event that we conclude that all or a portion of our goodwill may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or regulatory capital.
In the event that we conclude that all or a portion of our goodwill may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings.
Among other effects, such laws and regulations can increase or decrease the cost of doing business, limit or expand the scope of permissible activities, or affect the competitive balance among banks and other financial institutions.
Such laws and regulations can affect our operating environment in substantial and unpredictable ways. Among other effects, such laws and regulations can increase or decrease the cost of doing business, limit or expand the scope of permissible activities, or affect the competitive balance among banks and other financial institutions.
A number of our competitors have substantially greater resources to invest in technological improvements, as well as significant economies of scale. There can be no assurance that we will be able to implement and offer new technology-driven products and services to our clients.
A number of our competitors have substantially greater resources to invest in technological improvements, as well as significant economies of scale. There can be no assurance that we will be able to implement and offer new technology-driven products and services to our clients. If we fail to do so, our ability to attract and retain clients may be adversely affected.
At December 31, 2023 we had $1.700 billion of commercial real estate loans, which represented 59.6% of our total loan and lease portfolio.
At December 31, 2024 we had $1.917 billion of commercial real estate loans, which represented 61.6% of our total loan and lease portfolio.
Non-performing assets take time to resolve, adversely affect our results of operations and financial condition, and could result in losses. At December 31, 2023, our non-performing loans totaled $20.6 million, or 0.72% of our gross loan and lease portfolio, and our non-performing assets (which include non-performing loans and repossessed assets) totaled $20.8 million, or 0.59% of total assets.
Non-performing assets take time to resolve, adversely affect our results of operations and financial condition, and could result in losses. At December 31, 2024, our non-accrual loans totaled $28.4 million, or 0.91% of our gross loan and lease portfolio, and our non-performing assets (which include non-performing loans and repossessed assets) totaled $28.4 million, or 0.74% of total assets.
These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the asset composition of our portfolio or balance sheet, to assess civil monetary penalties against our officers 27 Table of Contents or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance.
These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the asset composition of our portfolio or balance sheet, to assess civil monetary penalties against our officers or directors, to remove officers and directors.
We cannot predict how further outbreaks, new variants, the efficacy of vaccines or future widespread public health epidemics, should they occur, might impact our financial condition and results of operation.
We cannot predict how future widespread public health epidemics, should they occur, might impact our financial condition and results of operation.
The extent to which any future pandemic impacts the Corporation’s business, results of operations, and financial condition, as well as the Corporation’s regulatory capital, liquidity ratios, and stock price, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any responsive actions taken by governmental authorities and other third parties. 23 Table of Contents Our business may be adversely affected by conditions in the financial markets and economic conditions generally.
The extent to which any future pandemic impacts the Corporation’s business, results of operations, and financial condition, as well as the Corporation’s regulatory capital, liquidity ratios, and stock price, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any responsive actions taken by governmental authorities and other third parties. 25 Table of Contents Our business is concentrated in and largely dependent upon the continued growth and welfare of the general geographical markets in which we operate.
Some of our accounting policies are critical because they require management to make difficult, subjective, and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses.
Some of our accounting policies are critical because they require management to make difficult, subjective, and complex judgments about matters that are inherently 24 Table of Contents uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.
In a declining interest rate environment, there may be an increase in prepayments on certain loans as borrowers refinance at lower rates. Changes in interest rates also can affect the value of loans.
In a declining interest rate environment, there may be an increase in prepayments on certain loans as borrowers refinance at lower rates. This increase in pre-payments may reduce interest income which may not be fully offset by pre-payment fees. Changes in interest rates also can affect the value of loans.
Our operations and profitability are impacted by general business and economic conditions in the U.S. and, to some extent, abroad.
Strategic and External Risks Our business may be adversely affected by conditions in the financial markets and economic conditions generally. Our operations and profitability are impacted by general business and economic conditions in the U.S. and, to some extent, abroad.
An increase in specific reserves and charge-offs may adversely affect our business, results of operations, and financial condition. 18 Table of Contents The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as a Preferred Lender under the SBA loan programs, our ability to effectively compete and originate new SBA loans, and our ability to comply with applicable SBA lending requirements.
The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as a Preferred Lender under the SBA loan programs, our ability to effectively compete and originate new SBA loans, and our ability to comply with applicable SBA lending requirements.
Because the Corporation’s available-for-sale investment securities may lose value when interest rates rise, proceeds from the sale of such assets may be diminished during periods of elevated interest rates.
Because the Corporation’s available-for-sale investment securities may lose value when interest rates rise, proceeds from the sale of such assets may be diminished during periods of elevated interest rates. Under such circumstances, the Corporation may be required to access funding from alternative liquidity sources in order to manage our liquidity risk.
In addition, some financial institutions have exposure of an extremely broad range of risks, or outsized exposure to specific industries such as startup and early-stage, pharmaceutical, or oil & gas companies.
The industry in which we compete is diverse, with participants ranging from community-based banks to global financial institutions with assets in the trillions of dollars. In addition, some financial institutions have exposure of an extremely broad range of risks, or outsized exposure to specific industries such as startup and early-stage, pharmaceutical, or oil & gas companies.
We establish our allowance for credit losses (“ACL”) and maintain it at a level considered appropriate by management based on an analysis of our portfolio and market environment. The ACL represents our estimate of probable losses inherent in the portfolio at each balance sheet date and is based upon relevant information available to us.
We establish our allowance for credit losses (“ACL”) and maintain it at a level considered appropriate by management based on an analysis of our portfolio and market environment.
From time to time, third parties could make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities.
Some of the services we provide, such as private wealth management services, require us to act as fiduciaries for our clients and others. From time to time, third parties could make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities.
SBA loans, excluding SBA loans made under the Paycheck Protection Program (“PPP Loans”), consisting of both commercial real estate and commercial loans, comprised approximately $53.4 million, or 1.9%, of our gross loan and lease portfolio as of December 31, 2023.
SBA loans consisting of both commercial real estate and commercial loans, comprised approximately $58.1 million, or 1.87%, of our gross loan and lease portfolio as of December 31, 2024.
These modifications often, but not always, occur in response to crises or significant events, such as the several bank failures in early 2023, the COVID-19 pandemic, or political transitions. Such laws and regulations can affect our operating environment in substantial and unpredictable ways.
From time to time, federal and state governments and bank regulatory agencies modify the laws and regulations that govern financial institutions and the financial system generally. These modifications often, but not always, occur in response to crises or significant events, such as the several bank failures in early 2023, the COVID-19 pandemic, or political transitions.
Volatility or events impacting a subset of the banking industry, such as larger banks or institutions that serve to specific markets, can impact the entire sector, including the Corporation, which could affect the confidence of our clients and investors and result in a material adverse effect on our performance and a decline in our stock price for reasons outside of our control. 28 Table of Contents The industry in which we compete is diverse, with participants ranging from community-based banks to global financial institutions with assets in the trillions of dollars.
Volatility or events impacting a subset of the banking industry can impact the entire sector, including the Corporation, which could affect the confidence of our clients and investors and result in a material adverse effect on our performance and a decline in our stock price for reasons outside of our control.
Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio. Because of the risks associated with commercial real estate loans, we closely monitor the concentration of such loans in our portfolio.
Our failure to maintain appropriate, enhanced risk management policies, procedures and controls in response to regulatory expectations could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio.
A large portion of our loan and lease portfolio is comprised of commercial loans secured by various business assets, the deterioration in value of which could increase our exposure to future probable losses.
A large portion of our loan and lease portfolio is comprised of commercial loans secured by various business assets, the deterioration in value of which could increase our exposure to future probable losses. 19 Table of Contents At December 31, 2024, approximately $1.152 billion, or 37.0%, of our loan portfolio was comprised of commercial loans to businesses collateralized by general business assets, including accounts receivable, inventory, and equipment.
Changes in these standards are continuously occurring and more changes may occur in the future. The implementation of such changes could have a material adverse effect on our business, results of operations, and financial condition. Our internal controls may be ineffective. Management regularly reviews and updates its internal controls, disclosure controls and procedures, and corporate governance policies and procedures.
These changes are beyond our control, can be difficult to predict, and could materially impact how we report our financial condition and results of operations. Changes in these standards are continuously occurring and more changes may occur in the future. The implementation of such changes could have a material adverse effect on our business, results of operations, and financial condition.
We face a risk of noncompliance and enforcement action with the Bank Secrecy Act (“BSA”) and other anti-money laundering (“AML”) statutes and regulations. AML laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate.
AML/CFT laws and regulations require FBB, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate.
Additionally, some of our niche commercial lending clients are highly leveraged and/or have inconsistent historical earnings. Significant adverse changes in various industries could cause rapid declines in values and collectability associated with those business assets resulting in inadequate collateral coverage that may expose us to future losses.
Significant adverse changes in various industries could cause rapid declines in values and collectability associated with those business assets resulting in inadequate collateral coverage that may expose us to future losses. An increase in specific reserves and charge-offs may adversely affect our business, results of operations, and financial condition.
Commercial real estate markets have been facing downward pressure since 2022 due in large part to increasing interest rates and declining property values.
Commercial real estate markets have been facing downward pressure since 2022 due in large part to high interest rates. Although commercial real estate markets showed some signs of stabilization in 2024, the prospects for commercial real estate markets and property valuation remain uncertain.
The wide acceptance of Internet-based and person-to-person commerce has resulted in a number of alternative payment processing systems and lending platforms in which banks play only minor roles. Businesses and consumers can now maintain funds in social payment applications, prepaid debit cards or digital currencies, and pay bills and transfer funds directly without the direct assistance of financial institutions.
The wide acceptance of Internet-based and person-to-person commerce has resulted in a number of alternative payment processing systems and lending platforms in which banks play only minor roles.
Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the controls are met. In addition, as we continue to grow the Corporation, our controls need to be updated to keep up with such growth.
Our internal controls may be ineffective. Management regularly reviews and updates its internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the controls are met.
There is growing consensus that the proportion of the deposits that exceeded FDIC insurance limits at Silicon Valley Bank, Signature Bank, and First Republic Bank was a significant factor in the failure of these institutions in the first half of 2023.
Federal banking agencies have concluded that the proportion of the deposits that exceeded FDIC insurance limits was a significant factor in the failure of certain banking institutions in the first half of 2023.
In addition, any changes in monetary policy, fiscal policy, tax laws, and other policies can affect the broader economic environment, interest rates, and patterns of trade. Any of these changes could affect our company and the banking industry as a whole in ways that are difficult to predict, and could adversely impact our business, financial condition, or results of operations.
Any of these changes could affect our company and the banking industry as a whole in ways that are difficult to predict, and could adversely impact our business, financial condition, or results of operations. 29 Table of Contents We face a risk of noncompliance and enforcement action with various statutes and regulations.
Finally, technology has also lowered the barriers to entry and made it possible for non-bank financial service providers to offer products and services we have traditionally offered, such as automatic funds transfer and automatic payment systems. Our profitability depends, in part, upon our ability to successfully maintain and increase market share.
Finally, technology has also lowered the barriers to entry and made it possible for non-bank financial service providers to offer products and services we have traditionally offered, such as automatic funds transfer and automatic payment systems, as well as transactions and products such as digital assets (including cryptocurrencies and similar assets) that may appeal to certain clients, but which are not subject to supervision and regulation comparable to that which we are subject.
If it becomes more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance must be recognized. As a result of a Wisconsin state tax law change in 2023, the Corporation has recorded a valuation allowance of $2.8 million against related state deferred tax assets.
Deferred tax assets are reported as assets on our balance sheet and represent the decrease in taxes expected to be paid in the future. If it becomes more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance must be recognized.

… 35 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+0 added−2 removed8 unchanged
Biggest changeOur Chief Risk and Chief Information Officers have 30 and 24 years of experience, respectively. Their background is summarized in Item 1, Executive Officers of the Registrant. To date, we have not been materially affected by cybersecurity threats, including our business strategy, results of operations or financial condition.
Biggest changeTheir background is summarized in Item 1, Executive Officers of the Registrant. To date, we believe we have not been materially affected, or are reasonably likely to be materially affected, by cybersecurity threats, including our business strategy, results of operations or financial condition. Please refer to Risk Factors in Item 1A for discussion of possible impacts from future cybersecurity events.
Item 1C. Cybersecurity Cybersecurity is an important component of our overall approach to Enterprise Risk Management (“ERM”). Our cybersecurity policies, standards, processes and practices are fully integrated in our ERM program which are based on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization and other applicable industry standards.
Item 1C. Cy bersecurity Cybersecurity is an important component of our overall approach to Enterprise Risk Management (“ERM”). Our cybersecurity policies, standards, processes and practices are fully integrated in our ERM program which are based on recognized frameworks established by the National Institute of Standards and Technology, the International Organization for Standardization and other applicable industry standards.
Incident Response and Recovery Planning: We have established and maintain a comprehensive incident response and recovery plan that fully addresses our response to a potential cybersecurity incident, and such plans are tested and evaluated on a regular basis.
These safeguards are evaluated and improved through vulnerability assessments, penetration testing, and cybersecurity threat intelligence. Incident Response and Recovery Planning: We have established and maintain a comprehensive incident response and recovery plan that fully addresses our response to a potential cybersecurity incident, and such plans are tested and evaluated on a regular basis.
The Board and the ORC also receive prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds. The Board and the ORC coordinate the approach to cybersecurity management with the Chief Risk Officer and the Chief Information Officer, as well as our CFO and CEO.
The Board and the ORC also would receive prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds. The Board and the ORC coordinate the approach to cybersecurity management with the CRO and the CIO, as well as our CFO and CEO. Our CRO and CIO have 30 and 24 years of experience, respectively.
Collaborative Approach: We have implemented a comprehensive approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of 29 Table of Contents certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
Collaborative Approach: We have implemented a comprehensive approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. 32 Table of Contents Technical Safeguards: We deploy technical safeguards that are designed to continuously protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls.
Removed
Technical Safeguards: We deploy technical safeguards that are designed to continuously protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls. These safeguards are evaluated and improved through vulnerability assessments, penetration testing, and cybersecurity threat intelligence.
Removed
Please refer to Risk Factors in Item 1A for discussion of possible impacts from future cybersecurity events.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeProperties The following table provides certain summary information with respect to the principal properties in which we conduct our operations, all of which were leased, as of December 31, 2023: Location Function Expiration Date 401 Charmany Drive, Madison, WI Full-service banking location of FBB - South Central Region and office of FBFS 2028 17335 Golf Parkway, Brookfield, WI Full-service banking location of FBB - Southeast Region 2032 11141 Overbrook Road, Leawood, KS Full-service banking location of FBB - Kansas City Region 2033 3913 West Prospect Avenue, Appleton, WI Full-service banking location of FBB - Northeast Region 2025 For the purpose of generating business development opportunities in our specialized lending and consulting businesses, as of December 31, 2023, office space was also leased in several states nationwide under shorter-term lease agreements, which generally have terms of one year or less. 30 Table of Contents
Biggest changeP roperties The following table provides certain summary information with respect to the principal properties in which we conduct our operations, all of which were leased, as of December 31, 2024: Location Function Expiration Date 401 Charmany Drive, Madison, WI Full-service banking location of FBB - South Central Region and office of FBFS 2028 17335 Golf Parkway, Brookfield, WI Full-service banking location of FBB - Southeast Region 2032 11141 Overbrook Road, Leawood, KS Full-service banking location of FBB - Kansas City Region 2033 3913 West Prospect Avenue, Appleton, WI Full-service banking location of FBB - Northeast Region 2030 33 Table of Contents For the purpose of generating business development opportunities in our specialized lending and consulting businesses, as of December 31, 2024, office space was also leased in several states nationwide under shorter-term lease agreements, a majority of which have terms of one year or less.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed0 unchanged
Biggest changeThis and other litigation is ordinary, routine litigation incidental to our business. Item 4. Mine Safety Disclosures Not applicable. 31 Table of Contents PART II.
Biggest changeSince our subsidiaries act as depositories of funds, lenders, and fiduciaries, they are occasionally named as defendants in lawsuits involving a variety of claims. This and other litigation is ordinary, routine litigation incidental to our business. Item 4. Mine Safety D isclosures Not applicable. PAR T II.
Item 3. Legal Proceedings We believe no litigation is threatened or pending in which we face potential loss or exposure which could materially affect our consolidated financial position, consolidated results of operations, or consolidated cash flows. Since our subsidiaries act as depositories of funds, lenders, and fiduciaries, they are occasionally named as defendants in lawsuits involving a variety of claims.
Item 3. Lega l Proceedings We believe no litigation is threatened or pending in which we face potential loss or exposure which could materially affect our consolidated financial position, consolidated results of operations, or consolidated cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−4 removed3 unchanged
Biggest changePeriod Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Total Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 - October 31, 2023 — $ — — November 1, 2023 - November 30, 2023 458 34.30 — December 1, 2023 - December 31, 2023 — — — Total 458 — 74,813 (1) During the fourth quarter of 2023, the Corporation repurchased an aggregate 458 shares of the Corporation’s common stock in open-market transactions, of which no shares were purchased pursuant to the repurchase program publicly announced on January 27, 2023, and of which 458 shares were surrendered to us to satisfy income tax withholding obligations in connection with the vesting of restricted awards.
Biggest changePeriod Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Total Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2024 - October 31, 2024 — $ — — — November 1, 2024 - November 30, 2024 282 49.82 — — December 1, 2024 - December 31, 2024 — — — — Total 282 $ 49.82 — 108,015 35 Table of Contents (1) During the fourth quarter of 2024, the Corporation repurchased an aggregate 282 shares of the Corporation’s common stock in open-market transactions, all of which were surrendered to us to satisfy income tax withholding obligations in connection with the vesting of restricted awards.
Stock Performance Graph The chart shown below depicts total return to shareholders during the period beginning December 31, 2018 and ending December 31, 2023. The total return includes appreciation or depreciation in market value of the Corporation’s common stock as well as actual cash and stock dividends paid to common stockholders.
Stock Performance Graph The chart shown below depicts total return to shareholders during the period beginning December 31, 2019 and ending December 31, 2024. The total return includes appreciation or depreciation in market value of the Corporation’s common stock as well as actual cash and stock dividends paid to common stockholders.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Holders The common stock of the Corporation is traded on the Nasdaq Global Select Market under the symbol “FBIZ.” As of February 15, 2024, there were 361 registered shareholders of record of the Corporation’s common stock.
Item 5. Market for Registrant’s Co mmon Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Holders The common stock of the Corporation is traded on the Nasdaq Global Select Market under the symbol “FBIZ.” As of February 20, 2025, there were 323 registered shareholders of record of the Corporation’s common stock.
The Corporation did not repurchase any shares pursuant to the publicly announced program described above during the quarter. 33 Table of Contents Item 6. [Reserved]
The Corporation did not repurchase any shares pursuant to the publicly announced program described above during the quarter.
The following table sets forth information about the Corporation's purchases of its common stock during the three months ended December 31, 2023.
As of December 31, 2024, the Corporation has not repurchased any shares under this repurchase program. The following table sets forth information about the Corporation's purchases of its common stock during the three months ended December 31, 2024.
Removed
Indices shown below, for comparison purposes only, are the Total Return Index for the Nasdaq Composite, which is a broad nationally recognized index of stock performance by publicly traded companies, and the SNL Bank Nasdaq, which is an index that contains securities of Nasdaq-listed companies classified according to the Industry Classification Benchmark as banks.
Added
Indices shown below, for comparison purposes only, are the Total Return Index for the Nasdaq Composite, which is a broad nationally recognized index of stock performance by publicly traded companies, and the KBW Bank Nasdaq, which is an index that contains securities of Nasdaq-listed companies classified according to the Industry Classification Benchmark as banks. 34 Table of Contents As of December 31, Index 2019 2020 2021 2022 2023 2024 First Business Financial Services, Inc. $ 100.00 $ 72.55 $ 118.14 $ 151.43 $ 171.01 $ 202.55 NASDAQ Composite Index 100.00 144.92 177.06 119.45 172.77 223.87 KBW NASDAQ Bank Index 100.00 89.69 124.06 97.52 96.65 132.60 Issuer Purchases of Securities As previously announced, on April 26, 2024, the Corporation’s Board of Directors authorized the repurchase by the Corporation of shares its common stock with a maximum aggregate purchase price of $5.0 million, in such quantities, at such prices and on such other terms and conditions as the Corporation's Chief Executive Office or Chief Financial Officer determine in their discretion to be in the best interests of the Corporation and its shareholders, any time with no expiration date.
Removed
The chart assumes that the value of the investment in FBIZ common stock and each of the three indices was $100 on December 31, 2018 and that all dividends were reinvested in FBIZ common stock. 32 Table of Contents As of December 31, Index 2018 2019 2020 2021 2022 2023 First Business Financial Services, Inc. $ 100.00 $ 138.56 $ 100.53 $ 163.69 $ 209.82 $ 236.96 NASDAQ Composite Index 100.00 136.69 198.10 242.03 163.28 236.17 KBW NASDAQ Bank Index 100.00 136.13 122.09 168.88 132.75 131.57 Issuer Purchases of Securities As previously announced, effective January 27, 2023, the Corporation’s Board of Directors authorized the repurchase by the Corporation of shares of its common stock with a maximum aggregate purchase price of $5.0 million, effective January 31, 2023 through January 31, 2024.
Removed
As of December 31, 2023, the Corporation had repurchased a total of 65,112 shares for approximately $2.0 million at an average cost of $30.72 per share. At this time, the Corporation does not expect to adopt a new plan upon its expiration to replace the recently expired plan due to strong balance sheet growth.
Removed
Under the recently expired share repurchase program, the Corporation was authorized to repurchase shares from time to time in the open market or negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

163 edited+32 added−61 removed66 unchanged
Biggest changeThe average balances are derived from average daily balances. 38 Table of Contents For the Year Ended December 31, 2023 2022 2021 Average Balance Interest Average Yield/ Rate Average Balance Interest Average Yield/ Rate Average Balance Interest Average Yield/ Rate (Dollars in Thousands) Interest-earning assets Commercial real estate and other mortgage loans (1) $ 1,586,967 $ 98,370 6.20 % $ 1,484,239 $ 66,917 4.51 % $ 1,387,434 $ 51,930 3.74 % Commercial and industrial loans (1) 1,013,866 81,963 8.08 % 771,056 46,575 6.04 % 747,514 38,342 5.13 % Consumer and other loans (1) 47,018 2,316 4.93 % 49,695 1,876 3.78 % 44,206 1,572 3.56 % Total loans and leases receivable (1) 2,647,851 182,649 6.90 % 2,304,990 115,368 5.01 % 2,179,154 91,844 4.21 % Mortgage-related securities (2) 200,383 6,433 3.21 % 173,495 3,486 2.01 % 159,242 2,633 1.65 % Other investment securities (3) 62,921 1,770 2.81 % 51,700 986 1.91 % 44,739 777 1.74 % FHLB stock 15,162 1,231 8.12 % 16,462 989 6.01 % 13,066 651 4.98 % Short-term investments 54,311 2,845 5.24 % 30,845 542 1.76 % 64,308 90 0.14 % Total interest-earning assets 2,980,628 194,928 6.54 % 2,577,492 121,371 4.71 % 2,460,509 95,995 3.90 % Non-interest-earning assets 231,521 175,424 144,499 Total assets $ 3,212,149 $ 2,752,916 $ 2,605,008 Interest-bearing liabilities Transaction accounts $ 689,500 23,727 3.44 % $ 503,668 3,963 0.79 % $ 506,693 988 0.19 % Money market accounts 681,336 22,129 3.25 % 761,469 6,241 0.82 % 693,608 1,183 0.17 % Certificates of deposit 273,387 11,209 4.10 % 97,448 1,358 1.39 % 47,020 396 0.84 % Wholesale deposits 346,285 14,353 4.14 % 48,825 1,616 3.31 % 119,831 986 0.82 % Total interest-bearing deposits 1,990,508 71,418 3.59 % 1,411,410 13,178 0.93 % 1,367,152 3,553 0.26 % FHLB advances 351,990 8,881 2.52 % 414,191 7,024 1.70 % 376,781 4,908 1.30 % Other borrowings 38,891 2,041 5.25 % 43,818 2,243 5.12 % 31,935 1,759 5.51 % Junior subordinated notes (4) — — — % 2,429 504 20.75 % 10,068 1,113 11.05 % Total interest-bearing liabilities 2,381,389 82,340 3.46 % 1,871,848 22,949 1.23 % 1,785,936 11,333 0.63 % Non-interest-bearing demand deposit accounts 453,930 566,230 536,981 Other non-interest-bearing liabilities 102,668 65,611 61,580 Total liabilities 2,937,987 2,503,689 2,384,497 Stockholders’ equity 274,162 249,227 220,511 Total liabilities and stockholders’ equity $ 3,212,149 $ 2,752,916 $ 2,605,008 Net interest income $ 112,588 $ 98,422 $ 84,662 Net interest spread 3.08 % 3.48 % 3.27 % Net interest-earning assets $ 599,239 $ 705,644 $ 674,573 Net interest margin 3.78 % 3.82 % 3.44 % Average interest-earning assets to average interest-bearing liabilities 125.16 % 137.70 % 137.77 % Return on average assets 1.13 % 1.46 % 1.37 % Return on average equity 13.79 % 16.79 % 16.21 % Average equity to average assets 8.54 % 9.05 % 8.46 % Non-interest expense to average assets 2.76 % 2.89 % 2.75 % (1) The average balances of loans and leases include non-accrual loans and leases and loans held for sale.
Biggest changeFor the Year Ended December 31, 2024 2023 2022 Average Balance Interest Average Yield/ Rate Average Balance Interest Average Yield/ Rate Average Balance Interest Average Yield/ Rate (Dollars in Thousands) Interest-earning assets Commercial real estate and other mortgage loans (1) $1,793,041 $118,339 6.60% $1,586,967 $98,370 6.20% $1,484,239 $66,917 4.51% Commercial and industrial loans (1) 1,153,955 95,782 8.30% 1,013,866 81,963 8.08% 771,056 46,575 6.04% Consumer and other loans (1) 49,885 2,777 5.57% 47,018 2,316 4.93% 49,695 1,876 3.78% Total loans and leases receivable (1) 2,996,881 216,898 7.24% 2,647,851 182,649 6.90% 2,304,990 115,368 5.01% Mortgage-related securities (2) 266,098 10,405 3.91% 200,383 6,433 3.21% 173,495 3,486 2.01% Other investment securities (3) 56,301 1,507 2.68% 62,921 1,770 2.81% 51,700 986 1.91% FHLB and FRB stock 12,167 1,133 9.31% 15,162 1,231 8.12% 16,462 989 6.01% Short-term investments 59,853 3,186 5.32% 54,311 2,845 5.24% 30,845 542 1.76% Total interest-earning assets 3,391,300 233,129 6.87% 2,980,628 194,928 6.54% 2,577,492 121,371 4.71% Non-interest-earning assets 234,973 231,521 175,424 Total assets $3,626,273 $3,212,149 $2,752,916 Interest-bearing liabilities Transaction accounts $884,321 33,796 3.82% $689,500 23,727 3.44% $503,668 3,963 0.79% Money market accounts 815,603 32,180 3.95% 681,336 22,129 3.25% 761,469 6,241 0.82% Certificates of deposit 237,228 10,879 4.59% 273,387 11,209 4.10% 97,448 1,358 1.39% Wholesale deposits 515,197 21,066 4.09% 346,285 14,353 4.14% 48,825 1,616 3.31% Total interest-bearing deposits 2,452,349 97,921 3.99% 1,990,508 71,418 3.59% 1,411,410 13,178 0.93% FHLB advances 282,437 7,719 2.73% 351,990 8,881 2.52% 414,191 7,024 1.70% Other borrowings 51,072 3,284 6.43% 38,891 2,041 5.25% 43,818 2,243 5.12% Junior subordinated notes (4) — — — — — — 2,429 504 20.75% Total interest-bearing liabilities 2,785,858 108,924 3.91% 2,381,389 82,340 3.46% 1,871,848 22,949 1.23% Non-interest-bearing demand deposit accounts 441,313 453,930 566,230 Other non-interest-bearing liabilities 92,708 102,668 65,611 Total liabilities 3,319,879 2,937,987 2,503,689 Stockholders’ equity 306,394 274,162 249,227 Total liabilities and stockholders’ equity $3,626,273 $3,212,149 $2,752,916 Net interest income $124,205 $112,588 $98,422 Interest rate spread 2.96% 3.08% 3.48% Net interest-earning assets $605,442 $599,239 $705,644 Net interest margin 3.66% 3.78% 3.82% Average interest-earning assets to average interest-bearing liabilities 121.73% 125.16% 137.70% Return on average assets 1.20% 1.13% 1.46% Return on average common equity 14.73% 13.79% 16.79% Average equity to average assets 8.45% 8.54% 9.05% Non-interest expense to average assets (4) 2.58% 2.76% 2.89% 42 Table of Contents (1) The average balances of loans and leases include non-accrual loans and leases and loans held for sale.
The Corporation and its wholly owned subsidiaries file a consolidated federal income tax return and a combined Wisconsin state tax return. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Income Taxes. The Corporation and its wholly owned subsidiaries file a consolidated federal income tax return and a combined Wisconsin state tax return. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
For each dividend period from and including March 15, 2027, dividends will be paid at a floating rate of Three-Month Term SOFR plus a spread of 539 basis points per annum. During the year ended December 31, 2023, the Corporation paid $875,000 in preferred cash dividends. The Series A Preferred Stock is perpetual and has no stated maturity.
For each dividend period from and including March 15, 2027, dividends will be paid at a floating rate of Three-Month Term SOFR plus a spread of 539 basis points per annum. During the year ended December 31, 2024, the Corporation paid $875,000 in preferred cash dividends. The Series A Preferred Stock is perpetual and has no stated maturity.
Although we believe that the ACL was appropriate as of December 31, 2023 based upon the evaluation of loan and lease delinquencies, non-performing assets, charge-off trends, economic conditions, and other factors, there can be no assurance that future adjustments to the allowance will not be necessary. Goodwill Impairment Assessment.
Although we believe that the ACL was appropriate as of December 31, 2024, based upon the evaluation of loan and lease delinquencies, non-performing assets, charge-off trends, economic conditions, and other factors, there can be no assurance that future adjustments to the allowance will not be necessary. Goodwill Impairment Assessment.
The Corporation conducted its annual impairment test as of July 1, 2023, utilizing a qualitative assessment, and concluded that it was more likely than not the estimated fair value of the reporting unit exceeded its carrying value, resulting in no impairment. Although no goodwill impairment was noted, there can be no assurances that future goodwill impairment will not occur.
The Corporation conducted its annual impairment test as of July 1, 2024, utilizing a qualitative assessment, and concluded that it was more likely than not the estimated fair value of the reporting unit exceeded its carrying value, resulting in no impairment. Although no goodwill impairment was noted, there can be no assurances that future goodwill impairment will not occur.
Management believes the determination of the ACL involves a high degree of judgment and complexity than its other significant accounting policies. The ACL is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure.
Management believes the determination of the ACL involves a higher degree of judgment and complexity than its other significant accounting policies. The ACL is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure.
The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. As of December 31, 2023, the aggregate notional value of interest rate swaps designated as fair value hedges was $12.5 million.
The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. As of December 31, 2024, the aggregate notional value of interest rate swaps designated as fair value hedges was $12.5 million.
Based on our reserve methodology for individually and collectively evaluated loans, we believe our reserves related to this industry to be appropriate • Transportation and Logistics, other than Equipment Finance - 4% of total loans - Management considered the following: Less than 1% of the Transportation loans outside of Equipment Finance are rated Category IV.
Based on our reserve methodology for individually and collectively evaluated loans, we believe our reserves related to this industry to be appropriate. • Transportation and Logistics, other than Equipment Finance: 3% of total loans - Management considered the following: Less than 1% of the Transportation loans outside of Equipment Finance are rated Category IV.
As of December 31, 2023, no issuer's securities exceeded 10% of our total stockholders' equity. The following table sets forth the contractual maturity and weighted average yield characteristics of the fair value of our available-for-sale securities and the amortized cost of our held-to-maturity securities at December 31, 2023, classified by remaining contractual maturity.
As of December 31, 2024, no issuer's securities exceeded 10% of our total stockholders' equity. The following table sets forth the contractual maturity and weighted average yield characteristics of the fair value of our available-for-sale securities and the amortized cost of our held-to-maturity securities at December 31, 2024, classified by remaining contractual maturity.
Nonetheless, we will continue to use wholesale funds in specific maturity periods, typically three to five years, needed to effectively mitigate the interest rate risk measured through our asset/liability management process or in shorter time periods if in-market deposit balances decline.
Nonetheless, we will continue to use wholesale funds in specific maturity periods, typically three to five years, needed to effectively mitigate the interest rate risk measured through our asset/liability management process or in shorter time periods if core deposit balances decline.
The Bank originates owner-occupied and non-owner-occupied commercial real estate loans which have fixed or adjustable rates and generally terms of three to 10 years and amortizations of up to 30 years on existing commercial real estate. The Bank also originates loans to construct commercial properties and complete land development projects.
The Bank originates owner-occupied and non-owner-occupied commercial real estate loans which have fixed or adjustable rates and generally terms of three to 10 years and amortization of up to 30 years on existing commercial real estate. The Bank also originates loans to construct commercial properties and complete land development projects.
To meet this objective, we identified four key strategies which are linked to corporate financial goals, all business lines, and centralized administration functions to ensure communication and execution are consistent at all levels of the Corporation.
To meet this objective, we identified five key strategies which are linked to corporate financial goals, all business lines, and centralized administration functions to ensure communication and execution are consistent at all levels of the Corporation.
The following table provides information with respect to: (1) the change in net interest income attributable to changes in rate (changes in rate multiplied by prior volume); and (2) the change in net interest income attributable to changes in volume (changes in volume multiplied by prior rate) for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The following table provides information with respect to: (1) the change in net interest income attributable to changes in rate (changes in rate multiplied by prior volume); and (2) the change in net interest income attributable to changes in volume (changes in volume multiplied by prior rate) for the year ended December 31, 2024 compared to the year ended December 31, 2023.
We continue to actively pursue C&I loans across the Corporation as this segment of our loan and lease portfolio provides an attractive yield commensurate with an appropriate level of credit risk and creates opportunities for in-market deposit, treasury management, and private wealth management relationships which generate additional fee revenue.
We continue to actively pursue C&I loans across the Corporation as this segment of our loan and lease portfolio provides an attractive yield commensurate with an appropriate level of credit risk and creates opportunities for core deposit, treasury management, and private wealth management relationships which generate additional fee revenue.
Wholesale funds continue to be an efficient and cost effective source of funding for the Bank and allows it to gather funds across a larger geographic base at price levels and maturities that are more attractive than local time deposits when required to raise a similar level of in-market deposits within a short time period.
Wholesale funds continue to be an efficient and cost effective source of funding for the Bank and allows it to gather funds across a larger geographic base at price levels and maturities that are more attractive than local time deposits when required to raise a similar level of core deposits within a short time period.
The capital ratios of the Bank met all applicable regulatory capital adequacy requirements in effect on December 31, 2023, and continue to meet the heightened requirements imposed by Basel III, including the capital conservation buffer.
The capital ratios of the Bank met all applicable regulatory capital adequacy requirements in effect on December 31, 2024, and continue to meet the heightened requirements imposed by Basel III, including the capital conservation buffer.
The estimated repayment streams associated with this portfolio also allow 45 Table of Contents us to better match short-term liabilities. The Bank’s investment policies allow for various types of investments, including tax-exempt municipal securities. The ability to invest in tax-exempt municipal securities provides for further opportunity to improve our overall yield on the securities portfolio.
The estimated repayment streams associated with this portfolio also allow us to better match short-term liabilities. The Bank’s investment policies allow for various types of investments, including tax-exempt municipal securities. The ability to invest in tax-exempt municipal securities provides for further opportunity to improve our overall yield on the securities portfolio.
However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows, and estimated losses based on historical loss experience and forecasted economic conditions. All of these factors may be susceptible to significant change.
However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows, and estimated losses based on historical loss experience and forecasted 61 Table of Contents economic conditions. All of these factors may be susceptible to significant change.
Our Bank’s in-market deposits are obtained primarily from the South Central, Northeast and Southeast regions of Wisconsin and the greater Kansas City Metro. We measure the success of in-market deposit gathering efforts based on the average balances of our deposit accounts rather than ending balances due to the volatility of some of our larger relationships.
Our Bank’s core deposits are obtained primarily from the South Central, Northeast and Southeast regions of Wisconsin and the greater Kansas City Metro. We measure the success of core deposit gathering efforts based on the average balances of our deposit accounts rather than ending balances due to the volatility of some of our larger relationships.
As a result of this practice, a significant portion of our outstanding balance of non-performing loans or leases may not require additional specific reserves or require only a minimal amount of required specific reserve.
As a result of this practice, a significant portion of our outstanding balance of non-accrual loans or leases may not require additional specific reserves or require only a minimal amount of required specific reserve.
The deterioration of one or a few of these loans could cause a material increase in our level of nonperforming loans, which would result in a loss of revenue from these loans and could result in an increase in the provision for credit losses and an increase in charge-offs, all of which could have a material adverse impact on our net income.
The deterioration of one or a few of these loans could cause a material increase in our level of non-accrual loans, which would result in a loss of revenue from these loans and could result in an increase in the provision for credit losses and an increase in charge-offs, all of which could have a material adverse impact on our net income.
The Bank limits the percentage of wholesale funds to total bank funds in accordance with liquidity policies approved by its Board. The Bank was in compliance with its policy limits as of December 31, 2023.
The Bank limits the percentage of wholesale funds to total bank funds in accordance with liquidity policies approved by its Board. The Bank was in compliance with its policy limits as of December 31, 2024.
We believe the Bank will also have access to the unused federal funds lines, cash flows from borrower repayments, and cash flows from security maturities. The Bank also has the ability to raise local market deposits by offering attractive rates to generate the level required to fulfill its liquidity needs.
We believe the Bank will also have access to the unused federal funds lines, cash flows from borrower repayments, and cash flows from security maturities. The Bank also has the ability to raise core deposits by offering attractive rates to generate the level required to fulfill its liquidity needs.
Refer to Note 12 - Regulatory Capital for additional information regarding the Corporation’s and the Bank’s capital ratios and the ratios required by their federal regulators at December 31, 2023 and 2022.
Refer to Note 12 – Regulatory Capital for additional information regarding the Corporation’s and the Bank’s capital ratios and the ratios required by their federal regulators at December 31, 2024, and 2023.
We evaluate the credit risk of the municipal securities prior to purchase and generally limit exposure to general obligation issuances from municipalities, primarily in Wisconsin. The majority of the securities we hold have active trading markets; therefore, we have not experienced difficulties in pricing our securities.
We evaluate the 48 Table of Contents credit risk of the municipal securities prior to purchase and generally limit exposure to general obligation issuances from municipalities, primarily in Wisconsin. The majority of the securities we hold have active trading markets; therefore, we have not experienced difficulties in pricing our securities.
During the time frames necessary to accumulate wholesale funds in an orderly manner, we will use short-term FHLB advances to meet our temporary funding needs. The short-term FHLB advances will typically have terms of one week to one month to cover the overall expected funding demands.
During the time frames necessary to accumulate wholesale funds in an orderly manner, we will use short-term FHLB advances to meet any temporary funding needs. The short-term FHLB advances will typically have terms of one week to one month to cover expected funding demands.
See Asset Quality for further discussion of industry-specific risks. 51 Table of Contents The following table shows the scheduled contractual maturities of the Bank’s consolidated gross loans and leases receivable, as well as the dollar amount of such loans and leases which are scheduled to mature after one year and have fixed or adjustable interest rates, as of December 31, 2023.
See Asset Quality for further discussion of industry-specific risks. The following table shows the scheduled contractual maturities of the Bank’s consolidated gross loans and leases receivable, as well as the dollar amount of such loans and leases which are scheduled to mature after one year and have fixed or adjustable interest rates, as of December 31, 2024.
The Bank was able to access the wholesale funding market as needed at rates and terms comparable to market standards during the year ended December 31, 2023.
The Bank was able to access the wholesale funding market as needed at rates and terms comparable to market standards during the year ended December 31, 2024.
In order to provide for ongoing liquidity and funding, substantially all of our wholesale funds are certificates of deposit which do not allow for withdrawal at the option of the depositor before the stated maturity (with the exception of deposits accumulated through the internet listing service which have the same early withdrawal privileges and fees as do our other in-market deposits) and FHLB advances with contractual maturity terms and no call provisions.
In order to provide for ongoing liquidity and funding, substantially all of our wholesale funds are certificates of deposit which do not allow for withdrawal at the option of the depositor before the stated 60 Table of Contents maturity (with the exception of deposits accumulated through the internet listing service which have the same early withdrawal privileges and fees as do our other core deposits) and FHLB advances with contractual maturity terms and no call provisions.
We view ROACE as an important measurement for monitoring profitability and continue to focus on improving our return to our shareholders by enhancing the overall profitability of our client relationships, controlling our expenses, and minimizing our costs of credit.
We view 40 Table of Contents ROACE as an important measurement for monitoring profitability and continue to focus on improving our return to our shareholders by enhancing the overall profitability of our client relationships, controlling our expenses, and minimizing our costs of credit.
The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. As of December 31, 2023, the aggregate notional value of interest rate swaps designated as cash flow hedges was $402.7 million.
The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. As of December 31, 2024, the aggregate notional value of interest rate swaps designated as cash flow hedges was $484.7 million.
Total bank funding is defined as total deposits plus FHLB advances. We are committed to raising in-market deposits while utilizing wholesale funds to match-fund our loan portfolio and mitigate interest rate risk.
Total bank funding is defined as total deposits plus FHLB advances. We are committed to raising core deposits while utilizing wholesale funds to match-fund our loan portfolio and mitigate interest rate risk.
Loans that no longer conform to the risk characteristics of any pool are evaluated individually. This includes all non-performing loans and may also include other loans that management identifies as non-conforming.
Loans that no longer conform to the risk characteristics of any pool are evaluated individually. This includes all non-accrual loans and leases and may also include other loans and leases that management identifies as non-conforming.
These gains were the result of an increase in interest rates. No securities within our portfolio were deemed to require an allowance for credit losses as of December 31, 2023. We sold approximately $5.1 million of securities during the year ended December 31, 2023 to proactively manage our securities portfolio and meet our long-term investment objectives.
These losses were the result of an increase in interest rates. No securities within our portfolio were deemed to require an allowance for credit losses as of December 31, 2024. We sold approximately $7.5 million of securities during the year ended December 31, 2024, to proactively manage our securities portfolio and meet our long-term investment objectives.
Adjusted net interest margin is a non-GAAP measure representing net interest income excluding the fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets.
Adjusted net interest margin is a non-GAAP measure representing net interest income excluding the impact of fees in lieu of interest, and other recurring, but volatile, components 44 Table of Contents of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets.
Operating revenue is defined as net interest income plus non-interest income less realized net gains or losses on securities, if any, and other discrete items. PTPP adjusted earnings for the year ended December 31, 2023 was $56.2 million, compared to $47.9 million for the year ended December 31, 2022.
Operating revenue is defined as net interest income plus non-interest income less realized net gains or losses on securities, if any, and other discrete items. PTPP adjusted earnings for the year ended December 31, 2024, was $60.4 million, compared to $56.2 million for the year ended December 31, 2023.
These potential funding sources include deposits maintained at 60 Table of Contents the FRB or Federal Reserve Discount Window utilizing currently unencumbered securities and acceptable loans as collateral. As of December 31, 2023, the available liquidity was in excess of the stated policy minimum.
These potential funding sources include deposits maintained at the FRB or Federal Reserve Discount Window utilizing currently unencumbered securities and acceptable loans as collateral. As of December 31, 2024, the readily available liquidity was in excess of the stated policy minimum.
The Corporation’s principal liquidity requirements at December 31, 2023 were the interest payments due on subordinated notes and cash dividends payable to both common and preferred stockholders. During 2023 and 2022, FBB declared and paid dividends totaling $12.1 million and $2.0 million, respectively.
The Corporation’s principal liquidity requirements at December 31, 2024, were the interest payments due on subordinated notes and cash dividends payable to both common and preferred stockholders. During 2024 and 2023, FBB declared and paid cash dividends totaling $11.5 million and $12.1 million, respectively.
A securities portfolio with a longer average duration will exhibit greater market price volatility than a securities portfolio with a shorter average duration in a changing rate environment. During the year ended December 31, 2023, we recognized unrealized holding gains of $5.6 million before income taxes through other comprehensive income.
A securities portfolio with a longer average duration will exhibit greater market price volatility than a securities portfolio with a shorter average duration in a changing rate environment. During the year ended December 31, 2024, we recognized unrealized holding losses of $2.2 million before income taxes through other comprehensive income.
We had $739.2 million of outstanding wholesale funds at December 31, 2023, compared to $618.6 million of wholesale funds as of December 31, 2022, which represented 24.0% and 23.9%, respectively, of period end total bank funding. Wholesale funds include FHLB advances, brokered certificates of deposit, and deposits gathered from internet listing services.
We had $976.1 million of outstanding wholesale funds at December 31, 2024, compared to $739.2 million of wholesale funds as of December 31, 2023, which represented 28.9% and 24.0%, respectively, of period end total bank funding. Wholesale funds include FHLB advances, brokered certificates of deposit, and deposits gathered from internet listing services.
On the offsetting swap contracts with dealer counterparties, we pay fixed rates and receive floating rates based upon designated benchmark interest rates. These interest rate swaps also have maturity dates between May 2024 and July 2040.
On the offsetting swap contracts with dealer counterparties, we pay fixed rates and receive floating rates based upon designated benchmark interest rates. These interest rate swaps also have maturity dates between June 2025 and July 2041.
We use a wide variety of available metrics to assess the overall asset quality of the portfolio and no one metric is used independently to make a final conclusion as to the asset quality of the portfolio. Non-performing assets as a percentage of total assets increased to 0.59% at December 31, 2023 from 0.13% at December 31, 2022.
We use a wide variety of available metrics to assess the overall asset quality of the portfolio and no one metric is used independently to make a final conclusion as to the asset quality of the portfolio. Non-performing assets as a percentage of total assets was 0.74% and 0.59% at December 31, 2024, and December 31, 2023, respectively.
The instruments are designated as cash flow hedges as the receipt of floating rate interest from the counterparty is used to manage interest rate risk associated with forecasted issuances of short-term FHLB advances.
The instruments are designated as cash flow hedges as the receipt of floating rate interest from the counterparty is used to manage interest rate risk associated with forecasted interest payments on short-term FHLB advances or wholesale deposits.
The table below displays the beta calculations for loans and leases, total interest earning assets, in-market deposits, interest-bearing deposits and total interest-bearing liabilities for the year ended December 31, 2023 and 2022.
The table below displays the beta calculations for loans and leases, total interest earning assets, core deposits, interest-bearing deposits and total interest-bearing liabilities for the year ended December 31, 2024, and 2023.
As of December 31, 2023, the aggregate amortizing notional value of interest rate swaps with various commercial borrowers was approximately $939.2 million, compared to $744.2 million as of December 31, 2022. We receive fixed rates and pay floating rates based upon designated benchmark interest rates on the swaps with commercial borrowers. These swaps mature between May 2024 and July 2040.
As of December 31, 2024, the aggregate amortizing notional value of interest rate swaps with various commercial borrowers was approximately $1.022 billion, compared to $939.2 million as of December 31, 2023. We receive fixed rates and pay floating rates based upon designated benchmark interest rates on the swaps with commercial borrowers. These swaps mature between June 2025 and July 2041.
As of December 31, 2023 no securities were classified as trading securities. At December 31, 2023, $45.4 million of our securities were pledged to secure various obligations, including interest rate swap contracts and municipal deposits. 46 Table of Contents The tables below set forth information regarding the amortized cost and fair values of our securities.
As of December 31, 2024, no securities were classified as trading securities. At December 31, 2024, $36.9 million of our securities were pledged to secure various obligations, including interest rate swap contracts and municipal deposits. The tables below set forth information regarding the amortized cost and fair values of our securities.
While we continue to experience significant competition from banks operating in our primary geographic areas, we remain committed to our underwriting standards and will not deviate from those standards for the sole purpose of growing our loan and lease portfolio.
While we continue to experience competition from banks operating in our primary geographic areas, we remain committed to our underwriting standards and will not deviate from those standards for the sole purpose of growing our loan and lease portfolio. We expect our new loan and lease activity to allow us to continue growing in future years.
The gross amount of dealer counterparty swaps as of December 31, 2023, without regard to the enforceable master netting agreement, was a gross derivative asset and liability of $51.1 million and $7.9 million, respectively, compared to a gross derivative asset and liability of $61.4 million and $1.0 million, respectively, as of December 31, 2022.
The gross amount of dealer counterparty swaps as of December 31, 2024, without regard to the enforceable master netting agreement, was a gross derivative liability of $2.0 million and gross derivative asset of $56.6 million, compared to a gross derivative liability of $7.9 million and gross derivative asset of $51.1 million as of December 31, 2023.
These interest rate swaps mature between February 2031 and October 2034. A pre-tax unrealized gain of $22,000 and $602,000 was recognized in other comprehensive income for the year ended December 31, 2023 and 2022, respectively, and there was no ineffective portion of these hedges.
These interest rate swaps mature between February 2031 and October 2034. A pre-tax unrealized loss of $390,000 was recognized in other comprehensive income for the year ended December 31, 2024, and there was no ineffective portion of these hedges.
As of December 31, 2023, the commercial borrower swaps were reported on the Consolidated Balance Sheet as a derivative liability and asset of $51.1 million and $7.9 million, respectively, compared to a derivative liability and asset of $61.4 million and $1.0 million, respectively, as of December 31, 2022.
As of December 31, 2024, the commercial borrower swaps were reported on the Consolidated Balance Sheet as a derivative asset of $2.0 million and liability of $56.6 million compared to a derivative asset of $7.9 million and liability of $51.1 million as of December 31, 2023.
Efficiency Ratio and Pre-Tax, Pre-Provision Adjusted Earnings Efficiency ratio measured 60.99% and 62.31% for the years ended December 31, 2023 and 2022, respectively. Efficiency ratio is a non-GAAP measure representing operating expense divided by operating revenue.
Efficiency Ratio and Pre-Tax, Pre-Provision Adjusted Earnings Efficiency ratio measured 60.61% for the year ended December 31, 2024, compared to 60.99% for the year ended December 31, 2023. Efficiency ratio is a non-GAAP measure representing operating expense divided by operating revenue.
Where, in any forward-looking statement, an expectation or belief is expressed as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished.
Where, in any forward-looking statement, an expectation or belief is expressed as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished. 37 Table of Contents We do not intend to, and specifically disclaim any obligation to, update any forward-looking statements.
We are proactively working with our non-performing loan borrowers to find meaningful solutions to difficult situations that are in the best interests of the Bank.
We proactively work with our loan borrowers experiencing financial difficulty to find meaningful solutions to difficult situations that are in the best interests of the Bank.
The Bank’s commercial and industrial loan portfolio is comprised of loans for a variety of purposes which principally are secured by inventory, accounts receivable, equipment, machinery, and other corporate assets and are advanced within limits prescribed by our loan policy. The majority of such loans are secured and typically backed by personal guarantees of the owners of the borrowing business.
The Bank’s commercial and industrial loan portfolio is comprised of loans for a variety of purposes which principally are secured by inventory, accounts receivable, equipment, machinery, and other corporate assets and are advanced 53 Table of Contents within limits prescribed by our loan policy.
The provision expense for the year ended December 31, 2023 was primarily due to a $4.3 million increase in the specific reserves on individually evaluated loans and a $3.7 million increase in the general reserve due to loan growth.
The provision expense for the year ended December 31, 2024, was primarily due to $4.6 million in net charge-offs, a $2.9 million increase in the specific reserves on individually evaluated loans, and a $2.2 million increase in the general reserve due to loan growth.
Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and were reported on the Consolidated Balance Sheet as a net derivative asset of $43.2 million as of December 31, 2023, compared to a net derivative asset of $60.4 million as of December 31, 2022.
Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and were reported on the Consolidated Balance Sheet as a net derivative asset of $54.5 million as of December 31, 2024, compared to a net derivative asset of $43.2 million as of December 31, 2023. In both periods, the counterparties pledged U.S.
As of December 31, 2023, we have no wholesale certificates of deposit which the Bank has the right to call prior to the scheduled maturity. Borrowings We had total borrowings of $330.9 million as of December 31, 2023, a decrease of $125.9 million, or 27.6%, from $456.8 million at December 31, 2022.
As of December 31, 2024, we have no wholesale certificates of deposit which the Bank has the right to call prior to the scheduled maturity. Borrowings We had total borrowings of $320.0 million as of December 31, 2024, a decrease of $10.9 million, or 3.28%, from $330.9 million at December 31, 2023.
Average in-market deposits for the year ended December 31, 2023 were approximately $2.098 billion, or 75.0% of total bank funding. Total bank funding is defined as total deposits plus FHLB advances. This compares to average in-market deposits of $1.929 billion, or 80.6% of total bank funding, for 2022.
Average core deposits for the year ended December 31, 2024, were approximately $2.378 billion, or 74.9% of total bank funding. Total bank funding is defined as total deposits plus FHLB advances. This compares to average core deposits of $2.098 billion, or 75.0% of total bank funding, for 2023.
Management continues to focus on revenue growth from multiple non-interest income sources in order to maintain a diversified revenue stream through greater contributions from fee-based revenues. Total non-interest income accounted for 21.8% of our total revenues in 2023 compared to 23.0% in 2022.
Management continues to focus on revenue growth from multiple non-interest income sources to maintain a diversified revenue stream through greater contributions from fee-based revenues. Total non-interest income accounted for 19.1% of total revenues for the year ended December 31, 2024, compared to 21.8% in 2023.
Private wealth management service fees increased $544,000, or 5.00%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The detailed financial discussion that follows focuses on 2023 results compared to 2022.
Private wealth management service fees increased $1.8 million, or 16.1%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The detailed financial discussion that follows focuses on 2024 results compared to 2023.
Our in-market relationships continue to grow; however, deposit balances associated with those relationships will fluctuate. We expect to establish new client relationships and continue marketing efforts aimed at increasing the balances in existing clients’ deposit accounts.
We expect to establish new client relationships and continue marketing efforts aimed at increasing the balances in existing clients’ deposit accounts.
Compensation expense increased by $3.3 million, or 5.7%, to $61.1 million for the year ended December 31, 2023 from $57.7 million for the year ended December 31, 2022 principally due to an increase in average FTEs, annual merit increases, growth in employee benefit costs, and increase in incentive compensation.
Compensation expense increased by $2.0 million, or 3.4%, for the year ended December 31, 2024, compared to the year ended December 31, 2024, principally due to an increase in average FTEs, annual merit increases, growth in employee benefit costs, and increase in incentive compensation.
Average gross loans and leases of $2.648 billion increased by $342.9 million, or 14.9% for the year ended December 31, 2023, compared to $2.305 billion for the same period in 2022. Loan fees collected in lieu of interest decreased 38.6% to $3.2 million, compared to $5.3 million during the same period of comparison.
Average gross loans and leases of $2.997 billion increased by $349.0 million, or 13.2%, for the year ended December 31, 2024, compared to $2.648 billion for the same period in 2023. Loan fees collected in lieu of interest increased 59.8% to $5.5 million, compared to $3.5 million during the same period of comparison.
Refer to Asset Quality , below, for further information regarding the overall credit quality of our loan and lease portfolio. Non-Interest Income Non-interest income increased by $1.9 million, or 6.4%, to $31.3 million for the year ended December 31, 2023, from $29.4 million for the year ended December 31, 2022.
Prior periods are presented under the incurred loss model. Refer to Asset Quality , below, for further information regarding the overall credit quality of our loan and lease portfolio. Non-Interest Income Non-interest income decreased by $2.1 million, or 6.6%, to $29.3 million for the year ended December 31, 2024, from $31.3 million for the year ended December 31, 2023.
For the Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Change in general reserve due to subjective factor changes $ 33 $ (384) $ (426) Change in general reserve due to quantitative factor changes (1,453) (2,012) (4,456) Charge-offs 1,781 979 3,508 Recoveries (548) (4,741) (5,126) Change in specific reserves on individually evaluated loans, net 4,330 146 (2,175) Change due to loan growth, net 3,652 2,144 2,872 Change in unfunded credit commitment reserve 387 — — Total provision for credit losses (a) $ 8,182 $ (3,868) $ (5,803) (a) - Management adopted ASC 326 on January 1, 2023.
For the Year Ended December 31, 2024 2023 2022 (In Thousands) Change in qualitative factors $ 332 $ 33 $ (384 ) Change in quantitative factors (977 ) (1,453 ) (2,012 ) Charge-offs 5,255 1,781 979 Recoveries (699 ) (548 ) (4,741 ) Change in reserves on individually evaluated loans, net 2,928 4,330 146 Change due to loan growth, net 2,227 3,652 2,144 Change in unfunded credit commitment reserves (239 ) 387 — Total provision for credit losses (a) $ 8,827 $ 8,182 $ (3,868 ) (a) Management adopted ASC 326 on January 1, 2023.
The Bank’s primary source of funds are principal and interest payments on loans receivable and mortgage-related securities, deposits, and other borrowings, such as federal funds and FHLB advances. The scheduled payments of loans and mortgage-related securities are generally a predictable source of funds. Deposit flows and loan prepayments, however, are greatly influenced by general interest rates, economic conditions, and competition.
The Bank’s primary source of funds are principal and interest payments on loans receivable and mortgage-related securities and deposits and other borrowings, such as federal funds and FHLB advances. The scheduled payments of loans and mortgage-related securities are generally a predictable source of funds.
Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees in lieu of interest. (2) Includes amortized cost basis of assets available-for-sale and held-to-maturity.
Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees in lieu of interest. (2) Includes amortized cost basis of assets available-for-sale and held-to-maturity. (3) Yields on tax-exempt municipal securities are not presented on a tax-equivalent basis in this table.
ROACE was 13.79% for the year ended December 31, 2023, compared to 16.79% for the year ended December 31, 2022. • Pre-tax, pre-provision (“PTPP”) adjusted earnings, which excludes certain one-time and discrete items, and PTPP ROAA were $56.2 million and 1.75%, respectively, for the year ended December 31, 2023, increasing $8.3 million, or 17.3%, and 1 bp, from year ended December 31, 2022. • Fees in lieu of interest, defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization, totaled $3.2 million for the year ended December 31, 2023, decreasing 38.6% compared to $5.3 million for the year ended December 31, 2022. • Net interest margin was 3.78% for the year ended December 31, 2023, declining 4 bps from 3.82% for the year ended December 31, 2022.
ROACE was 14.73% for the year ended December 31, 2024, compared to 13.79% for the year ended December 31, 2023. • Pre-tax, pre-provision (“PTPP”) adjusted earnings, which excludes certain one-time and discrete items, was $60.4 million for the year ended December 31, 2024, compared to $56.2 million for the year ended December 31, 2023. • Fees in lieu of interest, defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization, totaled $5.5 million for the year ended December 31, 2024, compared to $3.5 million for the year ended December 31, 2023. • Net interest margin was 3.66% for the year ended December 31, 2024, compared to 3.78% for the year ended December 31, 2023.
The increase in total liabilities was principally due to an increase in deposits. Cash and cash equivalents Cash and cash equivalents include short-term investments and cash and due from banks. Short-term investments increased by $30.3 million to $107.2 million at December 31, 2023 from $76.9 million at December 31, 2022.
Total liabilities increased by $306.4 million, or 9.5%, to $3.525 billion at December 31, 2024, compared to $3.218 billion at December 31, 2023. The increase in total liabilities was principally due to an increase in deposits. Cash and Cash Equivalents Cash and cash equivalents include short-term investments and cash and due from banks.
Additionally, adjusted total loans and leases and total interest-earning assets excludes the volatile impact of fees in lieu of interest. 40 Table of Contents Asset and Liability Beta Analysis For the Year Ended December 31, 2023 2022 2021 2023 Compared to 2022 2022 Compared to 2021 Average Yield/Rate (3) Increase (Decrease) Total loans and leases receivable (a) 6.90 % 5.01 % 4.21 % 1.89 % 0.80 % Total interest-earning assets (b) 6.54 % 4.71 % 3.90 % 1.83 % 0.81 % Adjusted total loans and leases receivable (1)(c) 6.78 % 4.78 % 3.91 % 2.00 % 0.87 % Adjusted total interest-earning assets (1)(d) 6.43 % 4.50 % 3.61 % 1.93 % 0.89 % Total in-market deposits (e) 2.72 % 0.60 % 0.14 % 2.12 % 0.46 % Total bank funding (f) 2.87 % 0.84 % 0.37 % 2.03 % 0.47 % Net interest margin (g) 3.78 % 3.82 % 3.44 % (0.04) % 0.38 % Adjusted net interest margin (h) 3.63 % 3.63 % 3.21 % — % 0.42 % Effective fed funds rate (2)(i) 5.02 % 1.69 % 0.08 % 3.33 % 1.61 % Beta Calculations: Total loans and leases receivable (a)/(i) 56.76 % 49.69 % Total interest-earning assets (b)/(i) 54.98 % 50.31 % Adjusted total loans and leases receivable (1)(c)/(i) 60.06 % 54.04 % Adjusted total interest-earning assets (1)(d)/(i) 57.87 % 55.28 % Total in-market deposits (e)/(i) 63.66 % 28.57 % Total bank funding (f)/(i) 60.96 % 29.19 % Net interest margin (g)/(i) (1.20) % 23.60 % Adjusted net interest margin (h)/(i) — % 26.09 % (1) Excluding average net PPP loans, PPP loan interest income, and fees in lieu of interest.
Additionally, adjusted total loans and leases and total interest-earning assets excludes the volatile impact of fees in lieu of interest. 43 Table of Contents For the Year Ended December 31, 2024 2023 2022 2024 Compared to 2022 Asset and Liability Beta Analysis Average Yield/Rate (4) Increase (Decrease) Total loans and leases receivable (a) 7.24% 6.90% 5.01% 2.23% Total interest-earning assets (b) 6.87% 6.54% 4.71% 2.16% Adjusted total loans and leases receivable (1)(c) 7.05% 6.77% 4.78% 2.27% Adjusted total interest-earning assets (1)(d) 6.71% 6.42% 4.50% 2.21% Total core deposits (e) 3.23% 2.72% 0.60% 2.63% Total bank funding (f) 3.33% 2.87% 0.84% 2.49% Net interest margin (g) 3.66% 3.78% 3.82% -0.16% Adjusted net interest margin (h) 3.47% 3.62% 3.63% -0.16% Effective fed funds rate (3)(i) 5.14% 5.02% 1.69% 3.45% Beta Calculations: Total loans and leases receivable (a)/(i) 64.64% Total interest-earning assets (b)/(i) 62.61% Adjusted total loans and leases receivable (1)(c)/(i) 65.80% Adjusted total interest-earning assets (1)(d)/(i) 64.06% Total core deposits (e)/(i) 76.23% Total bank funding (2)(f)/(i) 72.17% (1) Excluding fees in lieu of interest.
Net cash used in investing activities for the year ended December 31, 2023 was $506.8 million which consisted of $408.6 million in cash outflows to fund net loan growth and $75.7 million in net cash outflows to purchase available-for-sale securities. Net cash provided by financing activities for the year ended December 31, 2023 was $491.4 million.
Net cash used in investing activities for the year ended December 31, 2024, was $328.5 million which consisted of $267.4 million in cash outflows to fund net loan growth and $146.2 million in net cash outflows to purchase available-for-sale securities. Net cash provided by financing activities for the year ended December 31, 2024, was $289.2 million.
Please refer to the Non-Interest Income and Non-Interest Expense sections below for discussion on additional drivers of the year-over-year change in the efficiency ratio and PTPP adjusted earnings. 37 Table of Contents For the Year Ended December 31, Change From Prior Year 2023 2022 2021 $ Change 2023 % Change 2023 $ Change 2022 % Change 2022 (Dollars in Thousands) Total non-interest expense $ 88,575 $ 79,474 $ 71,535 $ 9,101 11.5 % $ 7,939 11.1 % Less: Net loss on repossessed assets 12 49 15 (37) (75.5) 34 226.7 Amortization of other intangible assets — — 25 — NM (25) NM SBA recourse expense (benefit) 775 (188) (76) 963 (512.2) (112) 147.4 Contribution to First Business Charitable Foundation — 809 — (809) NM 809 NM Impairment of tax credit investments — (351) — 351 NM (351) NM Total operating expense (a) $ 87,788 $ 79,155 $ 71,571 $ 8,633 10.9 $ 7,584 10.6 Net interest income $ 112,588 $ 98,422 $ 84,662 $ 14,166 14.4 13,760 16.3 Total non-interest income 31,308 29,428 28,100 1,880 6.4 1,328 4.7 Less: Bank-owned life insurance claim — 809 — (809) NM 809 NM Net gain (loss) on sale of securities (45) — 29 (45) NM (29) NM Adjusted non-interest income 31,353 28,619 28,071 2,734 9.6 548 2.0 Total operating revenue (b) $ 143,941 $ 127,041 $ 112,733 $ 16,900 13.3 $ 14,308 12.7 Efficiency ratio 60.99 % 62.31 % 63.49 % Pre-tax, pre-provision adjusted earnings (b-a) $ 56,153 $ 47,886 $ 41,162 $ 8,267 17.3 $ 6,724 16.3 Average total assets 3,212,149 2,752,916 2,605,008 459,233 16.7 147,908 5.7 Pre-tax, pre-provision adjusted return on average assets 1.75 % 1.74 % 1.58 % NM = Not meaningful Net Interest Income Net interest income levels depend on the amount of and yield on interest-earning assets as compared to the amount of and rate paid on interest-bearing liabilities.
For the Year Ended December 31, Change From Prior Year 2024 2023 2022 $ Change 2024 % Change 2024 $ Change 2023 % Change 2023 (Dollars in Thousands) Total non-interest expense $93,480 $88,575 $79,474 $4,905 5.5% $9,101 11.5% Less: Net (gain) loss on repossessed assets 168 12 49 156 NM (37) (75.5) SBA recourse provision (benefit) (104) 775 (188) (879) NM 963 (512.2) Contribution to First Business Charitable Foundation — — 809 — NM (809) NM Impairment of tax credit investments 400 — (351) 400 NM 351 NM Total operating expense (a) $93,016 $87,788 $79,155 $5,228 6.0 $8,633 10.9 Net interest income $124,206 $112,588 $98,422 $11,618 10.3 $14,166 14.4 Total non-interest income 29,251 31,308 29,428 (2,057) (6.6) 1,880 6.4 Less: Bank-owned life insurance claim — — 809 — NM (809) NM Net loss on sale of securities (8) (45) — 37 NM (45) NM Adjusted non-interest income 29,259 31,353 28,619 (2,094) (6.7) 2,734 9.6 Operating revenue (b) $153,465 $143,941 $127,041 $9,524 6.6 $16,900 13.3 Efficiency ratio 60.61% 60.99% 62.31% Pre-tax, pre-provision adjusted earnings (b-a) $60,449 $56,153 $47,886 $4,296 7.7 $8,267 17.3 Average total assets $3,626,273 $3,212,149 $2,752,916 $414,124 12.9 $459,233 16.7 41 Table of Contents Net Interest Income Net interest income levels depend on the amount of and yield on interest-earning assets as compared to the amount of and rate paid on interest-bearing liabilities.
These increases were partially offset by a decrease bank owned life insurance income and lower service charge income. 42 Table of Contents The components of non-interest income were as follows: For the Year Ended December 31, Change From Prior Year 2023 2022 2021 $ Change 2023 % Change 2023 $ Change 2022 % Change 2022 (Dollars in Thousands) Private wealth management services fee income $ 11,425 $ 10,881 $ 10,784 $ 544 5.0 % $ 97 0.9 Gain on sale of SBA loans 2,055 2,537 4,044 (482) (19.0) (1,507) (37.3) Service charges on deposits 3,131 3,849 3,837 (718) (18.7) 12 0.3 Loan fees 3,363 3,010 2,506 353 11.7 504 20.1 Bank-owned life insurance income 1,494 2,227 1,413 (733) (32.9) 814 57.6 Net (loss) gain on sale of securities (45) — 29 (45) NM (29) (100.0) Swap fees 2,964 1,793 1,368 1,171 65.3 425 31.1 Other non-interest income 6,921 5,131 4,119 1,790 34.9 1,012 24.6 Total non-interest income $ 31,308 $ 29,428 $ 28,100 $ 1,880 6.4 $ 1,328 4.7 Fee income ratio (1) 21.8 % 23.0 % 24.9 % (1) Fee income ratio is fee income, per the above table, divided by top line revenue (defined as net interest income plus non-interest income).
The decrease in total non-interest income for the year ended December 31, 2024, was driven by lower returns on investments in SBIC funds, commercial loan swap fee income, and gains on the sale of SBA loans, partially offset by an increase in private wealth fee income and service charges on deposits. 45 Table of Contents The components of non-interest income were as follows: For the Year Ended December 31, Change From Prior Year 2024 2023 2022 $ Change 2024 % Change 2024 $ Change 2023 % Change 2023 (Dollars in Thousands) Private wealth management services fee income $13,262 $11,425 $10,881 $1,837 16.1% $544 5.0% Gain on sale of SBA loans 1,942 2,055 2,537 (113) (5.5) (482) (19.0) Service charges on deposits 3,771 3,131 3,849 640 20.4 (718) (18.7) Loan fees 3,399 3,363 3,010 36 1.1 353 11.7 Increase in cash surrender value of bank-owned life insurance 1,649 1,494 2,227 155 10.4 (733) (32.9) Net loss on sale of securities (8) (45) — 37 (82.2) (45) NM Swap fees 1,403 2,964 1,793 (1,561) (52.7) 1,171 65.3 Other non-interest income 3,833 6,921 5,131 (3,088) (44.6) 1,790 34.9 Total non-interest income $29,251 $31,308 $29,428 $(2,057) (6.6) $1,880 6.4 Fee income ratio (1) 19.1% 21.8% 23.0% (1) Fee income ratio is fee income, per the above table, divided by top line revenue (defined as net interest income plus non-interest income).
The components of non-interest expense were as follows: For the Year Ended December 31, Change From Prior Year 2023 2022 2021 $ Change 2023 % Change 2023 $ Change 2022 % Change 2022 (Dollars in Thousands) Compensation $ 61,059 $ 57,742 $ 51,710 $ 3,317 5.7 % $ 6,032 11.7 Occupancy 2,381 2,358 2,180 23 1.0 178 8.2 Professional fees 5,325 4,881 3,736 444 9.1 1,145 30.6 Data processing 3,826 3,197 3,087 629 19.7 110 3.6 Marketing 2,889 2,354 2,022 535 22.7 332 16.4 Equipment 1,340 1,091 990 249 22.8 101 10.2 Computer software 4,985 4,416 4,260 569 12.9 156 3.7 FDIC insurance 2,238 1,042 1,143 1,196 114.8 (101) (8.8) Other non-interest expense 4,532 2,393 2,407 2,139 89.4 (14) (0.6) Total non-interest expense $ 88,575 $ 79,474 $ 71,535 $ 9,101 11.5 $ 7,939 11.1 Total operating expense (1) $ 87,788 $ 79,155 $ 71,571 $ 8,633 10.9 $ 7,584 10.6 Full-time equivalent employees 343 337 304 6 1.8 33 10.9 NM = Not meaningful (1) Total operating expense represents total non-interest expense, adjusted to exclude the impact of discrete items as previously defined in the non-GAAP efficiency ratio calculation above.
The components of non-interest expense were as follows: For the Year Ended December 31, Change From Prior Year 2024 2023 2022 $ Change 2024 % Change 2024 $ Change 2023 % Change 2023 (Dollars in Thousands) Compensation $63,105 $61,059 $57,742 $2,046 3.4% $3,317 5.7% Occupancy 2,373 2,381 2,358 (8) (0.3) 23 1.0 Professional fees 5,671 5,325 4,881 346 6.5 444 9.1 Data processing 4,892 3,826 3,197 1,066 27.9 629 19.7 Marketing 3,518 2,889 2,354 629 21.8 535 22.7 Equipment 1,314 1,340 1,091 (26) (1.9) 249 22.8 Computer software 6,166 4,985 4,416 1,181 23.7 569 12.9 FDIC insurance 2,760 2,238 1,042 522 23.3 1,196 114.8 Other non-interest expense 3,681 4,532 2,393 (851) (18.8) 2,139 89.4 Total non-interest expense $93,480 $88,575 $79,474 $4,905 5.5 $9,101 11.5 Total operating expense (1) $93,016 $87,788 $79,155 $5,228 6.0 $8,633 10.9 Actual full-time equivalent employees 349 343 337 6 1.7 6 1.8 (1) Total operating expense represents total non-interest expense, adjusted to exclude the impact of discrete items as previously defined in the non-GAAP efficiency ratio calculation, above.
We also continue to exercise our legal rights and remedies as appropriate in the collection and disposal of non-performing assets, and adhere to rigorous underwriting standards in our origination process in order to achieve strong asset quality.
Management also evaluates debt securities for credit losses when a default or decline in fair value is identified. We also continue to exercise our legal rights and remedies as appropriate in the collection and disposal of non-performing assets and adhere to rigorous underwriting standards in our origination process in order to achieve strong asset quality.
Actual maturities may differ from contractual maturities because issuers have the right to call or prepay securities without call or prepayment penalties.
Actual maturities may differ from contractual maturities because issuers have the right to call or prepay securities without call or prepayment penalties. Yields on tax-exempt securities have not been computed on a tax equivalent basis.
During the year ended December 31, 2023, operating activities resulted in a net cash inflow of $52.3 million driven by net income of $37.0 million.
During the year ended December 31, 2024, operating activities resulted in a net cash inflow of $57.5 million driven by net income of $44.2 million.
We consider owner-occupied CRE more characteristic of the Corporation’s C&I portfolio as, in general, the client’s primary source of repayment is the cash flow from the operating entity occupying the commercial real estate property. Our C&I portfolio increased $252.5 million, or 29.6%, to $1.106 billion at December 31, 2023 from $853.3 million at December 31, 2022.
As of December 31, 2024, approximately 14.3% of the CRE loans were owner-occupied CRE, compared to 15.1% as of December 31, 2023. We consider owner-occupied CRE more characteristic of the Corporation's C&I portfolio as, in general, the client's primary source of repayment is the cash flow from the operating entity occupying the commercial real estate property.
The federal and state taxing authorities who make assessments based on their determination of tax laws may periodically review our interpretation of federal and state income tax laws. Tax liabilities could differ significantly from the estimates and interpretations used in determining the current and deferred income tax liabilities based on the completion of examinations by taxing authorities.
Tax liabilities could differ significantly from the estimates and interpretations used in determining the current and deferred income tax liabilities based on the completion of examinations by taxing authorities.
As of December 31, 2023 2022 Balance % of Total Deposits Balance % of Total Deposits (Dollars in Thousands) Non-interest-bearing transaction accounts $ 445,376 15.9 % $ 537,107 24.8 % Interest-bearing transaction accounts 895,319 32.0 576,601 26.6 Money market accounts 711,245 25.4 698,505 32.2 Certificates of deposit 287,131 10.3 153,757 7.1 Wholesale deposits 457,708 16.4 202,236 9.3 Total deposits $ 2,796,779 100.0 % $ 2,168,206 100.0 % Uninsured deposits 994,687 967,465 Less: uninsured deposits collateralized by pledged assets 17,051 14,326 Total uninsured, net of collateralized deposits $ 977,636 35.0 % $ 953,139 44.0 % Period-end deposit balances associated with in-market relationships will fluctuate based upon maturity of time deposits, client demands for the use of their cash, and our ability to service and maintain existing and new client relationships.
The following table presents the composition of the Bank's consolidated deposits: As of December 31, 2024 2023 Balance % of Total Deposits Balance % of Total Deposits (Dollars in Thousands) Non-interest-bearing transaction accounts $ 436,111 14.0 % $ 445,376 15.9 % Interest-bearing transaction accounts 965,637 31.1 895,319 32.0 Money market accounts 809,695 26.0 711,245 25.4 Certificates of deposit 184,986 6.0 287,131 10.3 Wholesale deposits 710,711 22.9 457,708 16.4 Total deposits $ 3,107,140 100.0 % $ 2,796,779 100.0 % Uninsured deposits 980,278 994,687 Less: uninsured deposits collateralized by pledged assets 6,864 17,051 Total uninsured, net of collateralized deposits $ 973,414 31.3 % $ 977,636 35.0 % 57 Table of Contents Period-end deposit balances associated with core deposit relationships will fluctuate based upon maturity of time deposits, client demands for the use of their cash, and our ability to maintain existing and acquire new client relationships.

… 176 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+1 added−1 removed3 unchanged
Biggest changeFHLB advances and, to a lesser extent, wholesale certificates of deposit are a significant source of funds. We use a variety of maturities to augment our management of interest rate exposure.
Biggest changeFHLB advances and, to a lesser extent, wholesale certificates of deposit are a significant source of funds. We use a variety of maturities to augment our management of interest rate exposure. Management has the authorization, as permitted within applicable approved policies, and ability to utilize derivatives should they be appropriate to manage interest rate exposure.
The committee meets regularly to review the sensitivity of the Bank’s assets and liabilities to changes in interest rates, liquidity needs and sources, and pricing and funding strategies. 62 Table of Contents The primary technique we use to measure interest rate risk is simulation of earnings.
The committee meets regularly to review the sensitivity of the Bank’s assets and liabilities to changes in interest rates, liquidity needs and sources, and pricing and funding strategies. The primary technique we use to measure interest rate risk is simulation of earnings.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Our primary market risk is interest rate risk, which arises from exposure of our financial position to changes in interest rates.
Item 7A. Quantitative and Qualitativ e Disclosures about Market Risk Our primary market risk is interest rate risk, which arises from exposure of our financial position to changes in interest rates.
Impact on Net Interest Income as of December 31, Instantaneous Rate Change in Basis Points 2023 2022 Down 300 (0.20) % (9.90) % Down 200 1.54 (0.88) Down 100 1.92 0.79 No Change — — Up 100 2.11 2.26 Up 200 2.24 4.48 Up 300 2.36 6.65 We manage the structure of interest-earning assets and interest-bearing liabilities by adjusting their mix, yield, maturity and/or repricing characteristics based on market conditions.
Impact on Net Interest Income as of December 31, Instantaneous Rate Change in Basis Points 2024 2023 Down 300 (1.35 )% (0.20 )% Down 200 (0.10 ) 1.54 Down 100 0.10 1.92 No Change — — Up 100 0.37 2.11 Up 200 0.75 2.24 Up 300 1.13 2.36 We manage the structure of interest-earning assets and interest-bearing liabilities by adjusting their mix, yield, maturity and/or repricing characteristics based on market conditions.
Removed
Currently, we do not employ any derivatives to assist in managing our interest rate risk exposure; however, management has the authorization, as permitted within applicable approved policies, and ability to utilize such instruments should they be appropriate to manage interest rate exposure. We maintained our historically neutral balance sheet throughout 2023 and believe we ended the year appropriately positioned.
Added
We maintained our historically neutral balance sheet throughout 2024 and believe we ended the year appropriately positioned. 63 Table of Contents

Other FBIZ 10-K year-over-year comparisons