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What changed in FIRST BUSINESS FINANCIAL SERVICES, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of FIRST BUSINESS FINANCIAL SERVICES, INC.'s 2024 and 2025 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 2025 report.

+446 added−443 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-26)

Top changes in FIRST BUSINESS FINANCIAL SERVICES, INC.'s 2025 10-K

446 paragraphs added · 443 removed · 355 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

95 edited+28 added−28 removed141 unchanged
Biggest changeOn 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 .
Biggest changeSpecifically, such institutions may deduct from Common Equity Tier 1 Capital any amount of MSAs, temporary difference DTAs, and investments in the capital of unconsolidated financial institutions that individually exceeds 25 percent of Common Equity Tier 1 Capital. 8 Table of Contents 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; based on our asset size the Basel III standards do not apply to the Corporation and the 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.
We maintain an Internet website at www.firstbusiness.bank. The contents of our website are not incorporated by reference into this Form 10-K.
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.
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 $25 million with terms of 24 to 60 months.
On October 18, 2022, the FDIC adopted a final rule increasing the initial base deposit insurance rate schedules by 2 basis points, beginning with the first quarterly assessment period of 2023, which increase will remain in effect until the level of the DIF reserve ratios to insured deposits meets the FDIC's long-term goals.
On October 18, 2022, the FDIC adopted a final rule increasing the initial base deposit insurance rate schedules by 2 basis points, beginning with the first quarterly assessment period of 2023, which will remain in effect until the level of the DIF reserve ratios to insured deposits meets the FDIC's long-term goals.
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.
Well-Capitalized 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.
C&I Lending - Accounts Receivable Financing Our Accounts Receivable Financing team serves clients nationwide by purchasing accounts receivable on full recourse and limited non-recourse basis. We provide working capital to support client growth and other client cash flow needs. Accounts receivable financing typically generates higher yields than traditional commercial lending and complements our traditional commercial portfolio.
C&I Lending - Accounts Receivable Financing Our Accounts Receivable Financing team serves clients nationwide by purchasing accounts receivable on full recourse and limited non-recourse basis. We provide working capital to support client growth and other client cash flow needs. Accounts receivable financing typically generates higher yields than traditional commercial lending and complements our traditional commercial loan portfolio.
FBB’s commercial banking products and services include commercial loans, commercial real estate loans, asset-based loans, accounts receivable financing, SBA lending and servicing, floorplan financing, equipment loans and leases, commercial deposit accounts, company retirement solutions, and treasury management services. FBB offers a variety of deposit accounts and personal loans to business owners, executives, professionals, and high net worth individuals.
FBB’s business banking products and services include commercial loans, commercial real estate loans, asset-based loans, accounts receivable financing, SBA lending and servicing, floorplan financing, equipment loans and leases, commercial deposit accounts, company retirement solutions, and treasury management services. FBB offers a variety of deposit accounts and loans to business owners, executives, professionals, and high net worth individuals.
Private Wealth Management FBB acts as fiduciary and investment manager for individual clients, creating and executing asset allocation strategies tailored to each client’s unique situation. FBB has full fiduciary powers and offers trust and estate administration, financial planning, and investment management, acting in a trustee or agent capacity.
Private Wealth Management FBB acts as fiduciary and investment manager for individual clients, creating and executing asset allocation strategies tailored to each client’s unique situation. FBB has full fiduciary powers and offers trust and estate administration, financial planning, and investment management, and acts in a trustee or agent capacity.
In addition, institutions that seek the freedom to make capital distributions (including for dividends and repurchases of stock) and pay discretionary bonuses to executive officers without restriction must also maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer.
Institutions that seek the freedom to make capital distributions (including for dividends and repurchases of stock) and pay discretionary bonuses to executive officers without restriction must also maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer.
If dividends declared and paid in either of the two immediately preceding years exceeded net income for either of those two years respectively, the bank may not declare or pay any dividend in the current year that exceeds year-to-date net income except with the written consent of the WDFI.
If dividends declared and paid in either of the two preceding years exceeded net income for either of those two years respectively, the bank may not declare or pay any dividend in the current year that exceeds year-to-date net income except with the written consent of the WDFI.
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.
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 Basel III, does not qualify as Common Equity Tier 1 Capital, but qualifies as Additional Tier 1 Capital.
However, under federal law and FDIC regulations, FDIC-insured state banks are prohibited, subject to certain exceptions, from making or retaining equity investments of a type, or in an amount, which are not permissible for a national bank.
Under federal law and FDIC regulations, FDIC-insured state banks are prohibited, subject to certain exceptions, from making or retaining equity investments of a type, or in an amount, which are not permissible for a national bank.
Moreover, recent cyberattacks against banks and other financial institutions that resulted in unauthorized access to confidential customer information have prompted the federal banking regulators to issue more extensive guidance on cybersecurity risk management.
Recent cyberattacks against banks and other financial institutions that resulted in unauthorized access to confidential customer information have prompted the federal banking regulators to issue more extensive guidance on cybersecurity risk management.
The Dodd-Frank Act enhanced the requirements for certain transactions with affiliates, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained.
The Dodd-Frank Act enhanced the requirements for certain transactions with affiliates, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained. Insider Transactions.
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.
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. 9 Table of Contents Community Bank Capital Simplification .
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.
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.
In addition to numerous disclosure requirements, the Dodd‑Frank Act imposed new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing a presumption of compliance for certain “qualified mortgages.” The Regulatory Relief Act provided relief in connection with mortgages for banks with assets of less than $10 billion, and, as a result, mortgages the Bank makes are now considered to be qualified mortgages if they are held in portfolio for the life of the loan.
In addition to numerous 16 Table of Contents disclosure requirements, the Dodd‑Frank Act imposed new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing a presumption of compliance for certain “qualified mortgages.” The Regulatory Relief Act provided relief in connection with mortgages for banks with assets of less than $10 billion, and, as a result, mortgages the Bank makes are now considered to be qualified mortgages if they are held in portfolio for the life of the loan.
In contrast to capital requirements historically, which were in the form of guidelines, Basel III was released in the form of enforceable regulations by each of the regulatory agencies.
In contrast to capital requirements historically, which were in the form of guidelines, the Basel III Rule was released in the form of enforceable regulations by each of the regulatory agencies.
Community Bank Capital Simplification . Community banks have long raised concerns with bank regulators about the regulatory burden, complexity, and costs associated with certain provisions of the Basel III Rule. In response, Congress provided a potential Basel III “off-ramp” for certain institutions, like us, under Section 201 of the Regulatory Relief Act.
Community banks have long raised concerns with bank regulators about the regulatory burden, complexity, and costs associated with certain provisions of the Basel III Rule. In response, Congress provided a potential Basel III “off-ramp” for certain institutions, like us, under Section 201 of the Regulatory Relief Act.
The area is home to several major hospitals, providing health services to the greater Southeast Wisconsin market, several large academic institutions including the University of Wisconsin-Milwaukee and Marquette University, and a wide variety of small- to medium-sized firms with representatives in nearly every industrial classification.
The area is home to several major hospitals, providing healthcare services to the greater Southeast Wisconsin market, several large academic institutions including the University of Wisconsin-Milwaukee and Marquette University, and a wide variety of small- to medium-sized firms with representatives in nearly every industrial classification.
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.
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; • 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.
They also impact the Bank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact clients with marketing offers. Moreover, given the increased focus on privacy and data security in the United States and internationally, laws and regulations related to the same are evolving.
The laws also impact the Bank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact clients with marketing offers. Given the increased focus on privacy and data security in the United States and internationally, laws and regulations related to the same are evolving.
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.
The Corporation and the Bank opted out of the CBLR framework for each reporting period in 2025 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.
Markets Although certain of our commercial banking products and services are marketed nationwide, our primary markets lie in Wisconsin, Kansas, and Missouri. Specifically, our three markets in Wisconsin consist of South Central Wisconsin, Southeast Wisconsin, and Northeast Wisconsin. We serve these markets primarily through our offices in Madison, Brookfield, and Appleton, respectively.
Markets Although certain of our commercial banking products and services are marketed nationwide, our primary markets are Wisconsin, Kansas, and Missouri. Specifically, our three primary markets in Wisconsin are South Central Wisconsin, Southeast Wisconsin, and Northeast Wisconsin. We serve these markets primarily through our offices in Madison, Brookfield, and Appleton, respectively.
Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of non-banking activities, including securities and insurance underwriting and sales, merchant banking, and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or that the Federal Reserve determines by order to be complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of FDIC-insured institutions or the financial system generally.
Bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of non-banking activities, including securities and insurance underwriting and sales, merchant banking, and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or that the Federal 10 Table of Contents Reserve determines by order to be complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of FDIC-insured institutions or the financial system generally.
Banks’ service providers are required under the rule to notify any affected bank to or on behalf of which the service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.
Banks’ service providers are required under the rule to notify any affected bank to or on behalf of which the 15 Table of Contents service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.
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.
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. 2 Table of Contents 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.
Liquidity is a measure of the ability and ease with which bank assets may be converted to cash. Liquid assets are those that can be converted to cash quickly if needed to meet financial obligations. To remain viable, FDIC-insured institutions must have enough liquid assets to meet their near-term obligations, such as withdrawals by depositors.
Liquidity is a measure of the ability and ease with which bank assets may be converted to cash. Liquid assets are those that can be converted to cash quickly if needed to meet financial obligations. To remain viable, FDIC-insured institutions 12 Table of Contents must have enough liquid assets to meet their near-term obligations, such as withdrawals by depositors.
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.
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.
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 .
As of December 31, 2025: (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. The Corporation had regulatory capital in excess of the Federal Reserve’s requirements as of December 31, 2025. Prompt Corrective Action .
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.
As of December 31, 2025, private wealth loans represented approximately 2.0% 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.
The area is known for the diversity of its economic base, with major employers in manufacturing and distribution, architecture and engineering, technology, telecommunications, financial services, and bioscience, as well as local and federal government. EXECUTIVE OFFICERS OF THE REGISTRANT The following contains certain information about the executive officers of FBFS.
The area is known for the diversity of its economic base, with major employers in manufacturing and distribution, architecture and engineering, technology, telecommunications, financial services, and bioscience, as well as local and federal government. 5 Table of Contents EXECUTIVE OFFICERS OF THE REGISTRANT The following contains certain information about the executive officers of FBFS.
Among other things, financial institutions are expected to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risks posed by compromised customer credentials, including security measures to authenticate customers accessing internet-based services.
Financial institutions are expected to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risks posed by compromised customer credentials, including security measures to authenticate customers accessing internet-based services.
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”).
As of December 31, 2025, floorplan financing represented approximately 4.7% 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”).
South Central Wisconsin is also home to technology and research and development-related companies, which benefit from the area’s strong governmental and academic ties, as well as several major health care systems and hospitals, which provides healthcare services to South Central Wisconsin.
South Central Wisconsin is home to technology and research and development-related companies, which benefit from the area’s strong governmental and academic ties, as well as several major health care systems and hospitals, which provide healthcare services to South Central Wisconsin.
The minimums have been expressed in terms of ratios of “capital” divided by “total assets.” As discussed below, bank capital measures have become more sophisticated over the years and have focused more on the quality of capital and the risk of assets.
The minimums have been expressed in terms of ratios of “capital” divided by “total assets.” As discussed below, bank capital measures have become more sophisticated over the years and have focused more on the quality of 7 Table of Contents capital and the risk of assets.
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.
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, 2025, asset-based lending represented approximately 4.9% of our total gross loans and leases receivable.
These restrictions have not had, and are not currently expected to have, a material impact on the operations of the Bank. Insider Transactions.
These restrictions have not had, and are not currently expected to have, a material impact on the operations of the Bank. Affiliate Transactions.
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.
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.
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.
Treasury Management Services FBB provides comprehensive treasury management services for 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.
We serve the greater Kansas City Metro through our Leawood, Kansas office, which is located in the Kansas City metropolitan area. Each of our primary markets provides a unique set of economic and demographic characteristics which provide us with a variety of strategic opportunities. A brief description of each of our primary markets is as follows.
We serve the greater Kansas City Metro through our Leawood, Kansas office. Each of our primary markets provides a unique set of economic and demographic characteristics which provide us with a variety of strategic opportunities. A brief description of each of our primary markets is as follows.
If an FDIC-insured institution fails to submit an acceptable compliance plan or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency.
If an FDIC-insured institution fails to submit an acceptable compliance plan or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is 13 Table of Contents required to issue an order directing the institution to cure the deficiency.
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including our primary regulators, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Bank’s state regulator, the Wisconsin Department of Financial Institutions (“WDFI”), and its primary federal regulator, the FDIC.
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Bank’s state regulator, the Wisconsin Department of Financial Institutions (“WDFI”), and the Bank's primary federal regulator, the FDIC, and the Consumer Financial Protection Bureau ("CFPB").
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.
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.
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.
There are no family relationships between any directors or executive officers of FBFS. Corey A. Chambas, age 63 , 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.
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.
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.
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.
The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses deemed by the Federal Reserve 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.
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.
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.
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.
FBB also provides access to brokerage and custody-only services, for which it administers and safeguards assets. As of December 31, 2025, FBB had $3.332 billion of private wealth assets under management and administration. The Bank also offers private banking to its private wealth clients.
Sanctions laws prohibit persons of the United States from engaging in any transaction with a restricted person or restricted country. Depository institutions are required by their respective federal regulators to maintain policies and procedures in order to ensure compliance with the above obligations.
Sanctions laws prohibit persons of the United States from engaging in any transaction with a restricted person or restricted country. Depository institutions are required by their respective federal regulators to maintain policies and procedures in order to ensure compliance with the above obligations. Federal regulators regularly examine AML/CFT and sanctions compliance programs to ensure their adequacy and effectiveness.
These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits. Federal Securities Regulation. The Corporation’s common stock is registered with the SEC under the Securities Act of 1933, as amended, and the Exchange Act.
These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits. Federal Securities Regulation. The Corporation’s common stock is registered with the SEC under the Exchange Act and traded on the Nasdaq Global Select Market.
Quade, age 59 , has served as Chief Credit Officer ("CCO") of FBFS since April 2020 and as Executive Vice President of FBFS since August 2024. Mr. Quade had been serving as the Corporation’s Deputy Chief Credit Officer since October 2019. He also currently serves as a director for our subsidiary FBSF. Mr.
Quade, age 60 , has served as Chief Credit Officer ("CCO") of FBFS and the Bank since April 2020 and as Executive Vice President of FBFS since May 2024. Mr. Quade had been serving as the Corporation’s Chief Credit Officer since October 2019. He also currently serves as a director for our FBFS subsidiary. Mr.
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.
As of December 31, 2025, the on-balance sheet portion of SBA loans represented approximately 1.9% of our total gross loans and leases receivable.
Consequently, we are subject to the information, proxy solicitation, insider trading, and other restrictions and requirements of the SEC under the Exchange Act. Corporate Governance . The Dodd-Frank Act addressed many investor protection, corporate governance, and executive compensation matters that affect most U.S. publicly traded companies.
Consequently, we are subject to the information, proxy solicitation, insider trading, and other restrictions and requirements of the SEC under the Exchange Act and the listing requirements of the Nasdaq Global Select Market. 11 Table of Contents Corporate Governance . The Dodd-Frank Act addressed many investor protection, corporate governance, and executive compensation matters that affect most U.S. publicly traded companies.
The Corporation believes these reforms are generally favorable to its operations. The supervisory framework for U.S. banking organizations subjects banks and bank holding companies to regular examination by their respective regulatory agencies, which results in examination reports and ratings that are not publicly available and can impact the conduct and growth of their business.
The supervisory framework for U.S. banking organizations subjects banks and bank holding companies to regular examination by their respective regulatory agencies, which results in examination reports and ratings that are not publicly available and can impact the conduct and growth of their business.
As of December 31, 2024, FBB had six wholly-owned subsidiaries and total gross loans and leases receivable of $3.114 billion, total deposits of $3.107 billion, and total stockholders’ equity of $379.6 million. 4 Table of Contents Corporate Information Our principal executive offices are located at 401 Charmany Drive, Madison, Wisconsin 53719 and our telephone number is (608) 238-8008.
As of December 31, 2025, FBB had six wholly-owned subsidiaries and total gross loans and leases receivable of $3.375 billion, total deposits of $3.380 billion, and total stockholders’ equity of $423.8 million. 4 Table of Contents Corporate Information Our principal executive offices are located at 401 Charmany Drive, Madison, Wisconsin 53719 and our telephone number is (608) 238-8008.
Our private wealth management services include trust and estate administration, financial planning, investment management, and private banking. Our bank consulting experts provide investment portfolio administrative services, and asset liability management services. We do not utilize a branch network to attract retail clients.
Our private wealth management services include trust and estate administration, financial planning, investment management, and private banking. Our bank consulting experts provide investment portfolio administrative services and asset liability management services. We are not a retail bank and do not rely on a traditional branch network to gather deposits or attract clients.
Chandler, age 60 , has served as Chief Human Resources Officer of FBFS since January 2010. Prior to that, she held the position of Senior Vice President-Human Resources for several years. She has been an employee of FBFS for over 30 years. Laura M. Garcia , age 52, has served as Chief Risk Officer ("CRO") for FBFS since March 2022.
Chandler, age 61 , has served as Chief Human Resources Officer of FBFS and the Bank since January 2010. Prior to that, she held the position of Senior Vice President-Human Resources for several years. She has been an employee of FBFS for over 30 years. Laura M.
An institution’s CRA assessment may be used by its regulators in their evaluation of certain applications, including a merger, acquisition, or the establishment of a branch office. An unsatisfactory rating may be used as a basis for denial of such an application.
An institution’s CRA assessment may be used by its regulators in their evaluation of certain applications, including a merger, acquisition, or the establishment of a branch office.
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.
FBB also acts as a discretionary trustee and investment fiduciary, sharing responsibility for monitoring assets to match the client’s specifications. FBB only offers non-proprietary funds which removes any potential conflicts of interest and provides cost-effective company retirement plans with a competitive return. As of December 31, 2025, FBB had $482.5 million of company retirement plan assets under management and administration.
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.
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, 2025, our commercial and industrial portfolio (“C&I”) represented approximately 37.7% of our total gross loans and leases receivable.
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.
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. Mr. Chambas announced his intention to retire as CEO effective May 2, 2026. Brian D. Spielmann, age 43, has served as Chief Financial Officer ("CFO") of FBFS since April 2023. Mr.
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.
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.
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.
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.
Because the global financial crisis was in part a liquidity crisis, Basel III also includes a liquidity framework that requires FDIC-insured institutions to measure their liquidity against specific liquidity tests.
Basel III also includes a liquidity framework that requires FDIC-insured institutions to measure their liquidity against specific liquidity tests.
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.
As of December 31, 2025, on a consolidated basis, we had total assets of $4.082 billion, total gross loans and leases of $3.375 billion, total deposits of $3.380 billion, and total stockholders’ equity of $371.6 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.
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, term loans, deposit accounts and treasury management services. Through FBB, we serve Wisconsin and the greater Kansas City Metro, and other clients through products with national channels.
Not only did the Basel III Rule increase most of the required minimum capital ratios in effect prior to January 1, 2015, but it introduced the concept of Common Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of treasury stock), retained earnings, and Common Equity Tier 1 minority interests subject to certain regulatory adjustments.
The Basel III Rule also introduced the concept of Common Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of treasury stock), retained earnings, and Common Equity Tier 1 minority interests subject to certain regulatory adjustments.
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.
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. These financings generally range between $200,000 and $5 million with terms of 10 to 25 years.
The Bank is required to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information. These security and privacy policies and procedures, for the protection of personal and confidential information, are in effect across the Bank and its subsidiaries.
The Bank is required to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information.
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.
Spielmann also serves as the Chief Financial Officer of the Bank. 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.
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.
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. Bradley A.
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.
Our Commitment Since our inception, our commitment to employees, clients, and communities has been the foundation of our long-term success. Our Belief Statement expresses this: At FBB, 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 operating model is predicated on deep client relationships, financial expertise, and an efficient, centralized administration function delivering best in class client satisfaction. Our focused model allows experienced staff to provide the level of financial expertise needed to develop and maintain long-term relationships with our clients. We conduct our commercial banking operations through one operating segment.
Instead, our operating model is built on deep client relationships, specialized financial expertise, and an efficient, centralized administrative structure designed to deliver best-in-class client satisfaction. This focused approach enables our experienced professionals to provide the level of insight and service required to develop and sustain long-term client relationships. We conduct our commercial banking operations through one operating segment.
Noncompliance with safety and soundness may also constitute grounds for other enforcement action by the federal bank regulatory agencies, including cease and desist orders and civil money penalty assessments.
Noncompliance with safety and soundness may also constitute grounds for other enforcement action by the federal bank regulatory agencies, including cease and desist orders and civil money penalty assessments. The bank regulatory agencies have emphasized the importance of sound risk management processes and strong internal controls when evaluating the activities of the FDIC-insured institutions they supervise.
The Bank is subject to certain restrictions imposed by federal law on “covered transactions” between the Bank and its “affiliates.” We are an affiliate of the Bank for purposes of these restrictions, and covered transactions subject to the restrictions include extensions of credit to the Corporation, investments in the stock or other securities of the Corporation, and the acceptance of the stock or other securities of the Corporation as collateral for loans made by the Bank.
Covered transactions subject to the restrictions include extensions of credit to the affiliate, investments in the stock or other securities of the affiliate, issuance of a guarantee on behalf of an affiliate, and the acceptance of the stock or other securities of the affiliate as collateral for loans made by the Bank.
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.
Garcia , age 53, has served as Chief Risk Officer ("CRO") for FBFS and the Bank 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.
The Bank also competes with regional and national financial institutions, many of which have greater liquidity, higher lending limits, greater access to capital, more established market recognition, and more resources than the Bank. We believe the experience, expertise, and responsiveness of our banking professionals, as well as our focus on fostering long-lasting relationships, sets us apart from our competitors.
The Bank also competes with regional and national financial institutions, many of which have greater liquidity, higher lending limits, greater access to capital, more established market recognition, and more resources than the Bank.
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.
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. C&I Lending - Asset-Based Lending We provide asset-based lending to small- to medium-sized companies.
The Equipment Finance team also partners with a select group of third-party origination sources that specialize in small ticket equipment finance transactions. These equipment vendors and third-party originators specialize primarily in healthcare, manufacturing, automotive repair, technology equipment, agriculture, construction, and specialty vehicles. Small ticket vendor equipment financing typically generates higher yields than traditional commercial lending.
These equipment vendors and third-party originators specialize primarily in healthcare, manufacturing, automotive repair, technology equipment, agriculture, construction, and specialty vehicles. Small ticket vendor equipment financing typically generates higher yields than traditional commercial lending. As of December 31, 2025, equipment financing represented approximately 9.9% of our total gross loans and leases receivable.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe 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.
Biggest changeCredit 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. • Our allowance for credit losses may not be adequate to cover actual losses. • 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. • Real estate construction and land development loans are based upon estimates of costs and values associated with the completed project.
Although management believes the ACL is appropriate, we may be required to take additional provisions for losses in the future to further supplement the allowance, either due to management’s assessment of credit conditions, or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our ACL and the value attributed to non-performing loans and leases.
Although management believes the ACL is appropriate, we may be required to take additional provisions for losses in the future to further supplement the allowance, either due to management’s assessment of credit conditions, or requirements by our banking regulators. Bank regulatory agencies will periodically review our ACL and the value attributed to non-performing loans and leases.
In the event of a loss resulting from default and a determination by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Bank, the SBA may require the Bank to repurchase the previously sold portion of the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from the Bank.
In the event of a default and a determination by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Bank, the SBA may require the Bank to repurchase the previously sold portion of the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from the Bank.
We encounter heavy competition in attracting commercial loan, specialty finance, deposit, and private wealth management clients. We believe the principal factors that are used to attract quality clients and distinguish one financial institution from another include value-added relationships, interest rates and rates of return, types of accounts and product offerings, service fees, and quality of service.
We encounter heavy competition in attracting commercial loan, specialty finance, deposit, and private wealth management clients. We believe the principal factors that are used to attract quality clients and distinguish one financial institution from another include value-added relationships, competitive interest rates and rates of return, types of accounts and product offerings, service fees, and quality of service.
Some larger financial institutions that have not historically competed with us directly have substantial excess liquidity and have sought, and may continue to seek, smaller lending relationships in our primary markets. Furthermore, tax-exempt credit unions operate in our market areas and aggressively price their products and services to a large portion of the market.
Some larger financial institutions that have not historically competed with us directly have substantial excess liquidity and have sought, and may continue to seek, smaller lending relationships in our primary markets. Tax-exempt credit unions operate in our market areas and aggressively price their products and services to a large portion of the market.
Payments on such loans are often dependent on the successful operation or development of the property or business involved; therefore, repayment of such loans is sensitive to conditions in the real estate market or the general economy, which are outside the borrower’s control.
Payments on such loans are often dependent on the successful operation or development of the property or business involved. Repayment of such loans is sensitive to conditions in the real estate market or the general economy, which are outside the borrower’s 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.
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.
Item 1A. Risk Factors An investment in our common stock is subject to risks inherent to our business. Before making an investment decision, you should carefully read and consider the following risks and uncertainties.
Item 1A. Risk Factors Risk Factors Summary An investment in our common stock is subject to risks inherent to our business. Before making an investment decision, you should carefully read and consider the following risks and uncertainties.
Many of these loans have real estate as a primary or secondary component of collateral. The market value of real estate can fluctuate significantly in a short period of time as a result of economic conditions.
These loans have real estate as a primary or secondary component of collateral. The market value of real estate can fluctuate significantly in a short period of time as a result of economic conditions.
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.
As of December 31, 2025, 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.
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).
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 2025, our annual impairment test conducted July 1, 2025 indicated that the estimated fair value of the reporting unit exceeded the carrying value (including goodwill).
As with any risk management framework, there are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that we have not appropriately anticipated or identified. Our ability to successfully identify and manage risks facing us is an important factor that can significantly impact our results.
As with any risk management framework, there are inherent limitations to our risk management practices as there may exist, or develop in the future, risks that we have not appropriately anticipated or identified. Our ability to successfully identify and manage risks facing us is an important factor that can significantly impact our results.
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.
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, 2026.
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.
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.
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.
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.
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.
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.
If a significant individual counterparty defaults on an obligation to us, we could incur financial losses that have a material and adverse effect on our business, financial condition and results of operations. We could be required to establish a deferred tax asset valuation allowance and a corresponding charge against earnings if we experience a decrease in earnings.
If a significant individual counterparty defaults on an obligation to us, we could incur financial losses that have a material and adverse effect on our business, financial condition and results of operations. 29 Table of Contents We could be required to establish a deferred tax asset valuation allowance and a corresponding charge against earnings if we experience a decrease in earnings.
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.
The FinCEN, established 32 Table of Contents 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.
Adverse developments affecting real estate values in one or more of our markets could impact the collateral coverage associated with the commercial real estate segment of our portfolio, possibly leading to increased specific reserves or charge-offs, which may adversely affect our business, results of operations, and financial condition.
Adverse developments affecting real estate values in one or more of our markets could impact the collateral 21 Table of Contents coverage associated with the commercial real estate segment of our portfolio, possibly leading to increased specific reserves or charge-offs, which may adversely affect our business, results of operations, and financial condition.
Net interest income is the difference between the amounts we receive on our interest-bearing assets and the amounts we pay on our 21 Table of Contents interest-bearing liabilities. Interest rates are highly sensitive to a variety of factors that are beyond our control, including general economic conditions and policies of governmental and regulatory agencies and, in particular, the Federal Reserve.
Net interest income is the difference between the amounts we receive on our interest-bearing assets and the amounts we pay on our interest-bearing liabilities. Interest rates are highly sensitive to a variety of factors that are beyond our control, including general economic conditions and policies of governmental and regulatory agencies and, in particular, the Federal Reserve.
If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capital ratios. The proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.
If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capital ratios. 24 Table of Contents The proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.
An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in non-performing assets and a reduction of income recognized, which could have an adverse effect on our results of operations and cash flows.
An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in non-performing assets, credit loss provision, and a reduction of income recognized, which could have an adverse effect on our results of operations and cash flows.
In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.
We may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.
These and other potential tariffs and trade restrictions, along with the retaliatory responses they may prompt, could cause price increases in our clients’ products, reducing the demand for such products, or reduce our clients’ margins and adversely affect their revenues, financial results and ability to service their debt.
Tariffs and trade restrictions, along with the retaliatory responses they may prompt, could cause price increases in our clients’ products, reducing the demand for such products, or reduce our clients’ margins and adversely affect their revenues, financial results and ability to service their debt.
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.
Federal banking agencies have concluded that the proportion of the deposits that exceeded FDIC insurance limits was a significant factor in the failure of several banking institutions in the first half of 2023.
If we are unable to meet the expectations of employees and prospective employees, and thus, retain or attract employees, it could have a substantial adverse effect on our business. We rely on our management and the loss of one or more of those managers may harm our business.
If we 34 Table of Contents are unable to meet the expectations of employees and prospective employees, and thus, retain or attract employees, it could have a substantial adverse effect on our business. We rely on our management and the loss of one or more of those managers may harm our business.
Any changes to the SBA program, including changes to the level of guaranty provided by the federal government on SBA loans or changes to the level of funds appropriated by the federal government to the various SBA programs, may also have an adverse effect on our business, results of operations, and financial condition.
Any changes to the SBA program, including changes to the level of 22 Table of Contents guaranty provided by the federal government on SBA loans or changes to the level of funds appropriated by the federal government to the various SBA programs, may also have an adverse effect on our business, results of operations, and financial condition.
Uncertain domestic political conditions, including prior federal government shutdowns and potential future federal government shutdowns or other unresolved political issues, may pose credit default and liquidity risks with respect to investments in financial instruments issued or guaranteed by the federal government and loans to the federal government.
Uncertain domestic political conditions, including prior federal government shutdowns and potential future federal government shutdowns, debt ceiling impasses or other unresolved political issues, may pose credit default and liquidity risks with respect to investments in financial instruments issued or guaranteed by the federal government and loans to the federal government.
These third-party service providers are sources of operational and informational security risk to us, including risks associated with operational errors, information system interruptions or outages, unauthorized access or disclosure of sensitive or confidential information.
These third-party service providers are sources of operational and informational security risk to us, including risks 25 Table of Contents associated with operational errors, information system interruptions or outages, unauthorized access or disclosure of sensitive or confidential information.
Businesses and 27 Table of Contents 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.
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.
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.
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.
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 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 management contracts generally provide for fees payable for services based on the market value of assets under management; therefore, declines in securities prices will generally have an adverse effect on our results of operations from this business.
Our management contracts generally provide for fees payable for services based on the market value of assets under management; therefore, declines in asset values will generally have an adverse effect on our results of operations from this business.
As of December 31, 2024, the Wisconsin state deferred tax valuation allowance was $1.6 million, reducing our Wisconsin deferred tax assets to $2.1 million. The Corporation believes it will fully realize its Federal and non-Wisconsin deferred tax assets.
As of December 31, 2025, the Wisconsin state deferred tax valuation allowance was $1.5 million, reducing our Wisconsin deferred tax assets to $2.1 million. The Corporation believes it will fully realize its Federal and non-Wisconsin deferred tax assets.
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.
The total outstanding balance of sold SBA loans as of December 31, 2025 was $82.0 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.
This would, in turn, require increases in the provision for credit losses, which may adversely affect our business, results of operations, and financial condition. Our allowance for credit losses may not be adequate to cover actual losses.
In turn, this would require increases in the provision for credit losses and reversals of interest earned but unpaid, which may adversely affect our business, results of operations, and financial condition. Our allowance for credit losses may not be adequate to cover actual losses.
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.
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. These laws and regulations address a range of issues.
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.
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 $248.6 million, or 7.36%, of our gross loan and lease portfolio, respectively, as of December 31, 2025.
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.
We could recognize impairment losses on securities held in our securities portfolio, goodwill, or other long-lived assets. As of December 31, 2025, the fair value of our securities portfolio was approximately $427.2 million.
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.
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.
There can be substantial risks and uncertainties associated with these efforts, particularly in instances where the markets for such services are still developing or due diligence is not fully vetted. In developing and marketing new lines of business and/or new products or services, we invest significant time and resources.
Periodically, we implement new lines of business and/or offer new products and services within existing lines of business. There can be substantial risks and uncertainties associated with these efforts, particularly in instances where the markets for such services are still developing or due diligence is not fully vetted.
In response, many large depositors across the industry withdrew deposits in excess of applicable deposit insurance limits and deposited these funds in other financial institutions and low-risk securities accounts in an effort to mitigate the risk of potential further bank failures.
In response to the 2023 bank failures, many large depositors across the industry withdrew deposits in excess of applicable deposit insurance limits and deposited these funds in other financial institutions and low-risk securities accounts in an effort to mitigate the risk of potential bank failures. The Bank did not experience significant withdrawal activity in connection with the 2023 bank failures.
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 – which could include delayed loan approvals, processing backlogs, and interruptions in program funding -- 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.
The occurrence of any failure, interruption, or security breach of our information systems could damage our reputation, result in a loss of clients, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, results of operations, and financial condition.
The occurrence of any failure, interruption, or security breach of our information systems could damage our reputation, result in a loss of clients, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, results of operations, and financial condition. 26 Table of Contents New lines of business, products, and services are essential to our ability to compete but may subject us to additional risks.
If the appraisal of the completed project’s value proves to be overstated or market values decline, we may have inadequate security for the repayment of the loan upon completion of construction of the project.
If the appraisal of the completed project’s value proves to be overstated or market values decline, we may have inadequate security for the repayment of the loan upon completion of construction of the project. If we are forced to foreclose on a project prior to or at completion due to a default.
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.
Non-performing assets take time to resolve, adversely affect our results of operations and financial condition, and could result in losses. At December 31, 2025, our non-accrual loans totaled $43.9 million, or 1.30% of our gross loan and lease portfolio, and our non-performing assets (which include non-performing loans and repossessed assets) totaled $43.9 million, or 1.07% of total assets.
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.
A number of 30 Table of Contents 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.
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.
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.
Delinquency may negatively affect non-performing assets and increase the provision for credit losses. Any new line of business and/or new product or service could also have a significant impact on the effectiveness of our system of internal controls.
In instances of new lines of businesses offering credit services, weaknesses relating to underwriting and operations may impact credit and capital. Delinquency may negatively affect non-performing assets and increase the provision for credit losses. Any new line of business and/or new product or service could also have a significant impact on the effectiveness of our system of internal controls.
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.
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. 33 Table of Contents General market fluctuations, industry factors, and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, or credit loss trends, could also cause our stock price to decrease regardless of our operating results.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could cause us to report a material weakness in internal control over financial reporting and conclude that our controls and procedures are not effective, which could have a material adverse effect on our business, results of operations, and financial condition.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could cause us to report a material weakness in internal control over financial reporting and conclude that our controls and procedures are not effective, which could have a material adverse effect on our business, results of operations, and financial condition. 27 Table of Contents Strategic and External Risks Our business may be adversely affected by conditions in the financial markets and economic conditions generally.
Such losses may exceed current estimates. At December 31, 2024, our ACL as a percentage of total loans and leases was 1.20% and as a percentage of total non-performing loans and leases was 131.38%.
Such credit losses may exceed current estimates. At December 31, 2025, our ACL as a percentage of total loans and leases was 1.12% and as a percentage of total non-performing loans and leases was 85.95%.
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.
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.
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.
If we fail to maintain appropriate, enhanced risk management policies, procedures and controls in response to regulatory expectations, our ability to increase this portfolio going forward could be adversely affected and the rate of delinquencies in, and losses from, this portfolio could increase.
As a result, we could suffer financial loss, be subject to regulatory action, and 23 Table of Contents experience reputational damage, any of which could have a material adverse effect on our business, results of operations, and financial condition.
Any such losses could also lead to litigation against the Corporation and the Bank. As a result, we could suffer financial loss, be subject to regulatory action, and experience reputational damage, any of which could have a material adverse effect on our business, results of operations, and financial condition.
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.
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.
As a result of these interconnections, we and many of our clients have counterparty exposure to other financial institutions. This counterparty exposure presents risks to us and to our clients because the failure or perceived weakness of any of our counterparties has the potential to expose us to risk of loss.
This counterparty exposure presents risks to us and to our clients because the failure or perceived weakness of any of our counterparties has the potential to expose us to risk of loss.
When weaknesses are identified, the SBA may request corrective actions or impose other restrictions, including revocation of the lender’s Preferred Lender status. If we lose our status as a Preferred Lender, we may lose our ability to compete effectively with other SBA Preferred Lenders, and as a result we could experience a material adverse effect to our financial results.
If we lose our status as a Preferred Lender, we may lose our ability to compete effectively with other SBA Preferred Lenders, and as a result we could experience a material adverse effect to our financial results.
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.
Technology and other changes are allowing consumers and businesses to complete financial transactions through alternative methods that historically involved 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.
Our preferred source of funding consists of client deposits, which we supplement with other sources, such as wholesale deposits made up of brokered deposits and deposits gathered through internet listing services. Such account and deposit balances can decrease when clients perceive alternative investments as providing a better risk/return profile.
Our preferred source of funding consists of client deposits, which we supplement with other sources, such as wholesale deposits made up of brokered deposits and deposits gathered through internet listing services.
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.
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. The failure or perceived weakness of any of our significant counterparties could expose us to loss.
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.
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 and these funding sources may have an adverse effect on the Corporation’s net interest margin.
If the Bank is unable to maintain its capital levels at “well capitalized” minimums, we could lose a significant source of funding, which would force us to utilize different wholesale funding or potentially sell assets at a time when pricing may be unfavorable, increasing our funding costs and reducing our net interest income and net income.
If the Bank is unable to maintain its capital levels at “well capitalized” minimums, we could lose a significant source of funding, which would force us to utilize different wholesale funding or potentially sell assets at a time when pricing may be unfavorable, increasing our funding costs and reducing our net interest income and net income. 23 Table of Contents Our access to funding sources could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets, credit quality, capital adequacy, or negative views and expectations about the prospects for the financial services industry.
Such changes could subject us to additional costs, tax filing requirements, employment practices, and limit the types of financial services and products we may offer, among other things. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional costs.
Changes to federal and state laws, income and property tax regulations, or regulatory guidance, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, tax filing requirements, employment practices, and limit the types of financial services and products we may offer, among other things.
These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity markets, broad trends in industry and finance, the strength of the U.S. economy and uncertainty in financial markets globally, all of which are beyond our control.
These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity markets, broad trends in industry and finance, the strength of the U.S. economy and uncertainty in financial markets globally, including with respect to geopolitical instability and international conflicts that may affect energy prices, supply chains, inflation, market volatility, or investor confidence.
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.
Our operations and profitability are impacted by general business and economic conditions in the U.S. and, to some extent, abroad, all of which are beyond our control.
Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. New technologies needed to support the new line of business or product may result in incremental operating costs and system defects.
In developing and marketing new lines of business and/or new products or services, we invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible.
Compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. In instances of new lines of businesses offering credit services, weaknesses relating to underwriting and operations may impact credit and capital.
New technologies needed to support the new line of business or product may result in incremental operating costs and system defects. Compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.
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.
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.
Although we do not have any current definitive plans to do so, we may expand into additional communities or attempt to strengthen our position in our current markets through opportunistic acquisitions of similar or complementary financial services organizations.
While we believe we have the management resources and internal systems in place to successfully execute our strategic plan, we cannot guarantee that opportunities will be available and that the strategic plan will be successful or effectively executed. 28 Table of Contents Although we do not have any current definitive plans to do so, we may expand into additional communities or attempt to strengthen our position in our current markets through opportunistic acquisitions of similar or complementary financial services organizations.
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.
Commercial real estate markets have been facing downward pressure since 2022. Although commercial real estate markets showed some signs of stabilization in 2024, the prospects for commercial real estate markets and property valuation remain uncertain and continue to be influenced by market rate volatility, capital availability and evolving demand for certain property types, such as office and retail properties.
Our industry has recently experienced an increase in the incidence of check fraud, wire fraud, peer-to-peer payment fraud, and the use of AI technology to facilitate identity theft. Insurance coverage may not be available for such losses, or such losses may exceed insurance limits. Any such losses could also lead to litigation against the Corporation and the Bank.
Our industry has recently experienced an increase in the incidence of check fraud, wire fraud, peer-to-peer payment fraud. Advances in artificial intelligence and other technologies have increased the sophistication of fraud schemes, including identity theft or impersonation, deepfake communications, and social engineering attacks. Insurance coverage may not be available for such losses, or such losses may exceed insurance limits.
Recent changes in the U.S. political landscape may result in deregulation of certain aspects of the financial services sector, including a more relaxed enforcement policy with respect to digital assets and FinTech companies. Our profitability depends, in part, upon our ability to successfully compete with these other financial service providers and to maintain and increase market share.
While these offerings may appeal to certain clients, they are not subject to the same level of supervision and regulation that governs our operations. Recent changes in the U.S. political landscape may result in deregulation of certain aspects of the financial services sector, including a more relaxed enforcement policy with respect to digital assets and FinTech companies.
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.
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 success depends to a significant extent upon the business activity, population, income levels, and real estate activity in these markets.
As a result, our financial condition, results of operations, and cash flows are significantly impacted by changes in the economic conditions in those areas. Our success depends to a significant extent upon the business activity, population, income levels, and real estate activity in these markets.
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.
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.
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.
Technology has also reduced barriers to entry, allowing non-bank financial service providers to offer many of the products and services we have traditionally provided. These include automatic funds transfer, automatic payment systems, and transactions involving digital assets such as cryptocurrencies.
Such regulatory agencies may require us to adjust our determination of the value for these items.
Such regulatory agencies may require us to adjust our determination of the value for these items. Any significant increases to the ACL may materially decrease our net income, which may adversely affect our business, results of operations, and financial condition.
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.
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. At December 31, 2025 we had $2.060 billion of commercial real estate loans, which represented 61.0% of our total loan and lease portfolio.
If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses. From time to time, the FASB and SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our financial statements.
From time to time, the FASB and SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our financial statements. 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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThird-Party Risk Management: We maintain a comprehensive, risk-based approach to identifying and monitoring cybersecurity risks presented by third parties, including vendors, service providers and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.
Biggest changeIncident 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. 35 Table of Contents Third-Party Risk Management: We maintain a comprehensive, risk-based approach to identifying and monitoring cybersecurity risks presented by third parties, including vendors, service providers and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.
Their 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.
Their background is summarized in Part I, 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.
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.
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.
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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.
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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.
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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

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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.
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, 2025: 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 For the purpose of generating business development opportunities in our specialized lending and consulting businesses, as of December 31, 2025, office space was also leased in several states nationwide under shorter-term lease agreements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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.
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. 36 Table of Contents Item 4. Mine Safety D isclosures Not applicable. PAR T II.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 34 PART II 34 Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 34 Item 6. [Reserved] 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 63 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 37 PART II 37 Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 37 Item 6. [Reserved] 39 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 40 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 67 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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, 2025 - October 31, 2025 — $ — — — November 1, 2025 - November 30, 2025 304 52.27 — — December 1, 2025 - December 31, 2025 — — — — Total 304 $ 52.27 — 92,081 38 Table of Contents (1) During the fourth quarter of 2025, the Corporation repurchased an aggregate 304 shares of the Corporation’s common stock, all of which were surrendered to us to satisfy income tax withholding obligations in connection with the vesting of restricted awards.
However, the timing and amount of future dividends are at the discretion of the Board of Directors of the Corporation (the “Board”) and will depend upon the consolidated earnings, financial condition, liquidity, and capital requirements of the Corporation and the Bank, the amount of cash dividends paid to the Corporation by the Bank, applicable government regulations and policies, supervisory actions, and other factors considered relevant by the Board.
The timing and amount of future dividends are at the discretion of the Board of Directors of the Corporation (the “Board”) and will depend upon the consolidated earnings, financial condition, liquidity, and capital requirements of the Corporation and the Bank, the amount of cash dividends paid to the Corporation by the Bank, applicable government regulations and policies, supervisory actions, and other factors considered relevant by the Board.
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.
As of December 31, 2025, 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, 2025.
Refer to Item 1 - Business - Supervision and Regulation - Regulation and Supervision of the Bank - Dividend Payments for additional discussion regarding the limitations on dividends and other capital contributions by the Bank to the Corporation. The Board anticipates it will continue to declare dividends as appropriate based on the above factors.
Refer to Part I, Item 1 - Business - Supervision and Regulation - The Bank - Dividend Payments for additional discussion regarding the limitations on dividends and other capital contributions by the Bank to the Corporation. The Board anticipates it will continue to declare dividends as appropriate based on the above factors.
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.
Stock Performance Graph The chart shown below depicts total return to shareholders during the period beginning December 31, 2020 and ending December 31, 2025. 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 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.
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 19, 2026, there were 287 registered shareholders of record of the Corporation’s common stock.
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.
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. 37 Table of Contents As of December 31, Index 2020 2021 2022 2023 2024 2025 First Business Financial Services, Inc. $ 100.00 $ 162.83 $ 208.72 $ 235.71 $ 279.17 $ 335.22 NASDAQ Composite Index 100.00 122.18 82.43 119.22 154.48 187.14 KBW NASDAQ Bank Index 100.00 138.33 108.73 107.76 147.85 196.00 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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeIncrease (Decrease) for the Year Ended December 31, 2024 Compared to 2023 2023 Compared to 2022 Rate Volume Net Rate Volume Net (In Thousands) Interest-earning assets Commercial real estate and other mortgage loans (1) $ 6,643 $ 13,326 $ 19,969 $ 26,551 $ 4,902 $ 31,453 Commercial and industrial loans (1) 2,240 11,579 13,819 18,329 17,059 35,388 Consumer and other loans (1) 314 147 461 546 (106 ) 440 Total loans and leases receivable 9,197 25,052 34,249 45,426 21,855 67,281 Mortgage-related securities 1,586 2,386 3,972 2,341 606 2,947 Other investment securities (83 ) (180 ) (263 ) 538 246 784 FHLB and FRB Stock (47 ) (51 ) (98 ) 325 (83 ) 242 Short-term investments 47 294 341 1,664 639 2,303 Total net change in income on interest-earning assets 10,700 27,501 38,201 50,294 23,263 73,557 Interest-bearing liabilities Transaction accounts 2,832 7,237 10,069 17,816 1,948 19,764 Money market accounts 5,242 4,809 10,051 16,612 (724 ) 15,888 Certificates of deposit 1,245 (1,575 ) (330 ) 5,105 4,746 9,851 Wholesale deposits (197 ) 6,910 6,713 507 12,230 12,737 Total deposits 9,122 17,381 26,503 40,040 18,200 58,240 FHLB advances (315 ) (847 ) (1,162 ) 3,033 (1,176 ) 1,857 Other borrowings 520 723 1,243 56 (258 ) (202 ) Junior subordinated debentures — — — — (504 ) (504 ) Total net change in expense on interest-bearing liabilities 9,327 17,257 26,584 43,129 16,262 59,391 Net change in net interest income $ 1,373 $ 10,244 $ 11,617 $ 7,165 $ 7,001 $ 14,166 (1) The average balances of loans and leases include non-accrual loans and leases and loans held for sale.
Biggest changeIncrease (Decrease) for the Year Ended December 31, 2025 Compared to 2024 2024 Compared to 2023 Rate Volume Net Rate Volume Net (In Thousands) Interest-earning assets Commercial real estate and other mortgage loans (1) $ (6,583 ) $ 11,357 $ 4,774 $ 6,643 $ 13,326 $ 19,969 Commercial and industrial loans (1) (2,273 ) 8,053 5,780 2,240 11,579 13,819 Consumer and other loans (1) (23 ) (118 ) (141 ) 314 147 461 Total loans and leases receivable (8,879 ) 19,292 10,413 9,197 25,052 34,249 Mortgage-related securities 886 3,077 3,963 1,586 2,386 3,972 Other investment securities (266 ) (234 ) (500 ) (83 ) (180 ) (263 ) FHLB and FRB Stock — (117 ) (117 ) 165 (263 ) (98 ) Short-term investments (745 ) 1,167 422 47 294 341 Total net change in income on interest-earning assets (9,004 ) 23,185 14,181 10,912 27,289 38,201 Interest-bearing liabilities Transaction accounts (5,985 ) 4,732 (1,253 ) 2,832 7,237 10,069 Money market accounts (6,007 ) 1,553 (4,454 ) 5,242 4,809 10,051 Certificates of deposit (1,624 ) (17 ) (1,641 ) 1,245 (1,575 ) (330 ) Wholesale deposits (315 ) 8,950 8,635 (197 ) 6,910 6,713 Total deposits (13,931 ) 15,218 1,287 9,122 17,381 26,503 FHLB advances 102 59 161 697 (1,859 ) (1,162 ) Other borrowings 11 237 248 520 723 1,243 Total net change in expense on interest-bearing liabilities (13,818 ) 15,514 1,696 10,339 16,245 26,584 Net change in net interest income $ 4,814 $ 7,671 $ 12,485 $ 573 $ 11,044 $ 11,617 (1) The average balances of loans and leases include non-accrual loans and leases and loans held for sale. 46 Table of Contents The change in yield of the respective interest-earning assets or the rate paid on interest-bearing liability compared to the change in short-term market rates is commonly referred to as a beta.
Changes in these estimates and assumptions could adversely affect future consolidated results of operations. The Corporation believes the tax assets, liabilities, and allowances are properly recorded in the Consolidated Financial Statements. The Corporation also invests in certain development entities that generate federal historic, low income housing, and renewable energy tax credits.
Changes in these estimates and assumptions could adversely affect future consolidated results of operations. The Corporation believes the tax assets, liabilities, and allowances are properly recorded in the Consolidated Financial Statements. The Corporation also invests in certain development entities that generate federal historic, low income housing, or renewable energy tax credits.
Treasuries represent treasury bonds issued by the United States Treasury. U.S. government agency securities - government-sponsored enterprises represent securities issued by FNMA and the SBA. Municipal securities include securities issued by various municipalities located primarily within Wisconsin and are primarily general obligation bonds that are tax-exempt in nature.
Treasuries represent treasury bonds issued by the United States Treasury. U.S. government agency securities - government-sponsored enterprises represent securities issued by FNMA. Municipal securities include securities issued by various municipalities located primarily within Wisconsin and are primarily general obligation bonds that are tax-exempt in nature.
Such statements are subject to risks and uncertainties, including among other things: • Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, economic downturn, labor shortages, wage pressures, and the adverse effects of public health events on the global, national, and local economy. • Uncertainty created by potential federal government actions relating to the authority of regulatory agencies (including bank regulators), international trade policy, and other significant policy matters. • Competitive pressures among depository and other financial institutions nationally and in our markets. • Increases in defaults by borrowers and other delinquencies. • Our ability to manage growth effectively, including the successful expansion of our client support, administrative infrastructure, and internal management systems. • Fluctuations in interest rates and market prices. • Changes in legislative or regulatory requirements applicable to us and our subsidiaries. • Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations. • Fraud, including client and system failure or breaches of our network security, including our internet banking activities. • Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portions of SBA loans. • Ongoing volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Corporation and the Bank to increased government regulation and supervision. • The proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk. • The Corporation may be subject to increases in FDIC insurance assessments.
Such statements are subject to risks and uncertainties, including among other things: • Adverse changes in the economy or business conditions, either nationally or in the Corporation's markets including, without limitation, inflation, economic downturn, labor shortages, wage pressures, and the adverse effects of public health events on the global, national, and local economy. • Uncertainty created by potential federal government actions relating to the authority of regulatory agencies (including bank regulators), international trade policy, prolonged shutdown of the federal government, and other significant policy matters. • Competitive pressures among depository and other financial institutions nationally and in the Corporation's markets. • Increases in defaults by borrowers and other delinquencies. • Management's ability to manage growth effectively, including the successful expansion of client support, administrative infrastructure, and internal management systems. • Fluctuations in interest rates and market prices. • Changes in legislative or regulatory requirements applicable the Corporation and its subsidiaries. • Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations. • Fraud, including client and system failure or breaches of the Corporation's network security, including the Corporation's internet banking activities. • Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portions of SBA loans. • Ongoing volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Corporation and the Bank to increased government regulation and supervision. • The proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk. • The Corporation may be subject to increases in FDIC insurance assessments.
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.
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, 2025.
Information pertaining to 2023 in comparison to 2022 was included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023, on page 37 under Part II, Item 7, "Management's Discussion and Analysis of Financial and Result of Operations," which was filed with the SEC on February 26, 2024.
Information pertaining to 2024 in comparison to 2023 was included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2024, on page 37 under Part II, Item 7, "Management's Discussion and Analysis of Financial and Result of Operations," which was filed with the SEC on February 26, 2025.
As of December 31, 2024, the Corporation has not repurchased any shares under this repurchase program. Liquidity and Capital Resources The Corporation expects to meet its liquidity needs through existing cash on hand, established cash flow sources, its third party senior line of credit, and dividends received from the Bank.
As of December 31, 2025, the Corporation has not repurchased any shares under this repurchase program. Liquidity and Capital Resources The Corporation expects to meet its liquidity needs through existing cash on hand, established cash flow sources, its third party senior line of credit, and dividends received from the Bank.
Net interest income is sensitive to changes in market rates of interest and the asset/liability management processes to prepare for and respond to such changes. The table below shows average balances, interest, average rates, net interest margin and the spread between combined average rates earned on our interest-earning assets and cost of interest-bearing liabilities for the periods indicated.
Net interest income is sensitive to changes in market rates of interest and the asset/liability management processes to prepare for and respond to such changes. 44 Table of Contents The table below shows average balances, interest, average rates, net interest margin and the spread between combined average rates earned on our interest-earning assets and cost of interest-bearing liabilities for the periods indicated.
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.
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, 2025, the aggregate notional value of interest rate swaps designated as fair value hedges was $12.5 million.
The Bank’s construction loans generally have terms of six to 24 months with fixed or adjustable interest rates and fees that are due at the time of origination. Loan proceeds are disbursed in increments as construction progresses and as project inspections warrant.
The Bank’s construction loans generally have terms of six to 24 months with fixed or adjustable interest rates and fees that are due at the time of origination. Loan proceeds are disbursed in increments as construction progresses and as project inspections warrant. Commercial and Industrial.
On April 26, 2024, 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, in such quantities, at such prices and on such other terms and conditions as the Corporation’s Chief Executive Officer or Chief Financial Officer determine in their discretion to be in the best interests of the 59 Table of Contents Corporation and its shareholders, any time with no expiration date.
On April 26, 2024, 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, in such quantities, at such prices and on such other terms and conditions as the Corporation’s Chief Executive Officer 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.
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.
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, 2025, the readily available liquidity was in excess of the stated policy minimum.
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.
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 core deposits) and FHLB advances with contractual maturity terms and no call provisions.
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.
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 12 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.
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.
Management also evaluates debt securities for credit losses when a default or decline in fair value is identified. 65 Table of Contents 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.
On a quarterly basis, we validate the reasonableness of prices received from this source through independent verification of the portfolio, data integrity validation through comparison of current price to prior period prices, and an expectation-based analysis of movement in prices based upon the changes in the related yield curves and other market factors.
On a quarterly basis, we validate the reasonableness of prices received from this source through independent verification of the portfolio, data integrity 51 Table of Contents validation through comparison of current price to prior period prices, and an expectation-based analysis of movement in prices based upon the changes in the related yield curves and other market factors.
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 capital ratios of the Bank met all applicable regulatory capital adequacy requirements in effect on December 31, 2025, and continue to meet the heightened requirements imposed by Basel III, including the capital conservation buffer.
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.
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.
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.
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, 2025.
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.
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, 2025, and 2024.
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.
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.
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.
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, 2025, and 2024.
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.
As of December 31, 2025, approximately 14.3% of the CRE loans were owner-occupied CRE, compared to 14.3% as of December 31, 2024. 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.
On March 4, 2022, the Corporation issued 12,500 shares, or $12.5 million in aggregate liquidation preference, of 7.0% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”) in a private placement to institutional investors.
The Corporation issued 12,500 shares, or $12.5 million in aggregate liquidation preference, of 7.0% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”) in a private placement to institutional investors.
However, given ongoing complexities with current workout situations and the uncertainty surrounding future economic conditions, further charge-offs, and increased provisions for credit losses may be recorded if additional facts and circumstances lead us to a different conclusion. The table below shows our allocation of the allowance for loan losses by loan portfolio segments.
However, given complexities of workout situations and the uncertainty surrounding future economic conditions, further charge-offs, and increased provisions for credit losses may be recorded if additional facts and circumstances lead us to a different conclusion. 59 Table of Contents The table below shows our allocation of the allowance for loan losses by loan portfolio segments.
These interest rate swaps mature between January 2025 and February 2041. A pre-tax unrealized loss of $4.7 million was recognized in other comprehensive income for the year ended December 31, 2024, respectively, and there was no ineffective portion of these hedges. The Corporation also enters into interest rate swaps to mitigate market value volatility on certain long-term fixed securities.
These interest rate swaps mature between January 2026 and February 2041. A pre-tax unrealized loss of $8.9 million was recognized in other comprehensive income for the year ended December 31, 2025, respectively, and there was no ineffective portion of these hedges. The Corporation also enters into interest rate swaps to mitigate market value volatility on certain long-term fixed securities.
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. 66 Table of Contents
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, 2025, the aggregate amortizing notional value of interest rate swaps with various commercial borrowers was approximately $1.167 billion, compared to $1.022 billion as of December 31, 2024. 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 2026 and July 2041.
Reserves on individually-evaluated loans are estimated based on one or a combination of estimates of fair value of the underlying collateral less cost to sell, seniority of the Bank’s claim, and borrower repayment forecasts. For loans and leases less than $1,000,000 in the Equipment Finance pool, the recovery value is based on historical experience rather than specific asset appraisals.
Reserves on individually-evaluated loans are estimated based on one or a combination of estimates of fair value of the underlying collateral less cost to sell, seniority of the Bank’s claim, and borrower repayment forecasts. For loans and leases less than $500,000 in the Equipment Finance pool, the recovery value is based on historical experience.
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.
The Corporation’s principal liquidity requirements at December 31, 2025, were the interest payments due on subordinated notes and cash dividends payable to both common and preferred stockholders. During 2025 and 2024, FBB declared and paid cash dividends totaling $13.5 million and $11.5 million, respectively.
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.
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, 2025, the aggregate notional value of interest rate swaps designated as cash flow hedges was $497.5 million.
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.
The gross amount of dealer counterparty swaps as of December 31, 2025, without regard to the enforceable master netting agreement, was a gross derivative liability of $9.7 million and gross derivative asset of $34.6 million, compared to a gross derivative liability of $2.0 million and gross derivative asset of $56.6 million as of December 31, 2024.
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.
Efficiency Ratio and Pre-Tax, Pre-Provision Adjusted Earnings Efficiency ratio measured 58.78% for the year ended December 31, 2025, compared to 60.61% for the year ended December 31, 2024. Efficiency ratio is a non-GAAP measure representing operating expense divided by operating revenue.
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.
We view ROATCE 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.
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.
Relating to 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 2026 and July 2041.
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.
Although we believe that the ACL was appropriate as of December 31, 2025, 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. Income Taxes.
The increase in ROAA was due to the increase in net interest income and a lower effective tax rate, partially offset by a decrease in non-interest income. We consider ROAA a critical metric to measure the profitability of our organization and how efficiently our assets are deployed.
The increase in ROAA was due to the increase in net interest income and non-interest income, partially offset by an increase in operating expenses and a higher effective tax rate. We consider ROAA a critical metric to measure the profitability of our organization and how efficiently our assets are deployed.
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.
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, 2025, we recognized unrealized holding gains of $11.6 million before income taxes through other comprehensive income.
Treasury management business development efforts remain robust as gross treasury management service charges increased $647,000, or 11.1%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. Management believes growth in gross analyzed service charges is a strong indicator of success for the Corporation given the direct correlation to adding and expanding core business relationships.
Treasury management business development efforts remain robust as gross treasury management service charges increased $473,000, or 7.3%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. Management believes growth in gross analyzed service charges is a strong indicator of success for the Corporation given the direct correlation to adding and expanding core business relationships.
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.
Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and were reported on the Consolidated Balance Sheets as a net derivative asset of $24.9 million as of December 31, 2025, compared to a net derivative asset of $54.5 million as of December 31, 2024. In both periods, the counterparties pledged U.S.
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.
These interest rate swaps mature between February 2031 and October 2034. A 54 Table of Contents pre-tax unrealized loss of $175,000 was recognized in other comprehensive income for the year ended December 31, 2025, and there was no ineffective portion of these hedges.
Financial Condition General Total assets increased by $345.4 million, or 9.8%, to $3.853 billion as of December 31, 2024, compared to $3.508 billion at December 31, 2023. The increase in total assets was primarily driven by an increase in loans and leases receivable and available-for-sale securities, partially offset by a reduction in short-term investments.
Financial Condition General Total assets increased by $228.7 million, or 5.9%, to $4.082 billion as of December 31, 2025, compared to $3.853 billion at December 31, 2024. The increase in total assets was primarily driven by an increase in loans and leases receivable and available-for-sale securities, partially offset by a reduction in short-term investments.
Period-end core deposits increased $57.4 million, or 2.5%, to $2.396 billion at December 31, 2024, from $2.339 billion at December 31, 2023, as core deposit balances increased due to successful business development efforts, partially offset by clients funding their normal course of business. Our core relationships continue to grow; however, deposit balances associated with those relationships will fluctuate.
Period-end core deposits increased $276.6 million, or 11.5%, to $2.673 billion at December 31, 2025, from $2.396 billion at December 31, 2024, as core deposit balances increased due to successful business development efforts, partially offset by clients funding their normal course of business. Our core relationships continue to grow; however, deposit balances associated with those relationships will fluctuate.
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.
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, 2025, was $69.4 million, increasing 14.8%, compared to $60.4 million for the year ended December 31, 2024.
As of December 31, 2024, and 2023, our total securities portfolio had a weighted average estimated remaining maturity of approximately 5.2 years and 5.6 years, respectively.
As of December 31, 2025, and 2024, our total securities portfolio had a weighted average estimated remaining maturity of approximately 4.7 years and 5.2 years, respectively.
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.
As of December 31, 2025, the commercial borrower swaps were reported on the Consolidated Balance Sheets as a derivative asset of $9.7 million and liability of $34.6 million compared to a derivative asset of $2.0 million and liability of $56.6 million as of December 31, 2024.
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.
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 determine the asset quality. Non-performing assets as a percentage of total assets was 1.07% and 0.74% at December 31, 2025, and December 31, 2024, respectively.
We value the safety and soundness provided by the FRB, and therefore, we incorporate short-term investments in our readily accessible liquidity program. As of December 31, 2024, and December 31, 2023, interest-bearing deposits held at the FRB were $127.8 million and $106.8 million, respectively.
Our short-term investments primarily consist of interest-bearing deposits held at the Federal Reserve Bank ("FRB"). We value the safety and soundness provided by the FRB, and therefore, we incorporate short-term investments in our readily accessible liquidity program. As of December 31, 2025, and December 31, 2024, interest-bearing deposits held at the FRB were $7.7 million and $127.8 million, respectively.
The Bank utilizes, from time to time, derivative instruments in the course of its asset/liability management. The Corporation’s derivative financial instruments, under which the Corporation is required to either receive cash from or pay cash to counterparties depending on changes in interest rates applied to notional amounts, are carried at fair value on the consolidated balance sheets.
The Corporation’s derivative financial instruments, under which the Corporation is required to either receive cash from or pay cash to counterparties depending on changes in interest rates applied to notional amounts, are carried at fair value on the consolidated balance sheets.
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.
Private wealth management service fees increased $1.5 million, or 11.0%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The detailed financial discussion that follows focuses on 2025 results compared to 2024.
These strategies are described below: • We will protect and strengthen our unique culture with a growing and geographically diverse team. • We will develop future-ready talent who will thrive in the workplace of the future by continuously investing in our team to elevate their impact and contribution. • We will grow our core deposits by driving a company-wide commitment to adding new relationships and capitalizing on innovative sources and new technologies. • We will achieve operational excellence by fostering a culture of continuous process improvement and utilization of innovative technology. • We will optimize the performance of each business line and market to achieve sustainable profitability and growth. 38 Table of Contents The table below shows the Corporation’s performance for the years ended December 31, 2024, 2023, and 2022 in comparison to the key performance indicators included in the Corporation’s 2024 strategic plan.
These strategies are described below: • We will protect and strengthen our unique culture with a growing and geographically diverse team. • We will develop future-ready talent who will thrive in the workplace of the future by continuously investing in our team to elevate their impact and contribution. • We will grow our core deposits by driving a company-wide commitment to adding new relationships and capitalizing on innovative sources and new technologies. • We will achieve operational excellence by fostering a culture of continuous process improvement and utilization of innovative technology. • We will optimize the performance of each business line and market to achieve sustainable profitability and growth.
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.
For the Year Ended December 31, 2025 2024 2023 (In Thousands) Change in qualitative factors $ (546 ) $ 332 $ 33 Change in quantitative factors 1,526 (977 ) (1,453 ) Charge-offs 9,665 5,255 1,781 Recoveries (1,434 ) (699 ) (548 ) Change in reserves on individually evaluated loans, net (3,368 ) 2,928 4,330 Change due to loan growth, net 2,480 2,227 3,652 Change in unfunded credit commitment reserves 332 (239 ) 387 Total provision for credit losses (a) $ 8,655 $ 8,827 $ 8,182 (a) Management adopted ASC 326 on January 1, 2023.
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.
Where, in any forward-looking statement, an expectation or belief is expressed as to future 40 Table of Contents 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.
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.
For each dividend period from and including March 15, 2027, dividends will be paid at a floating rate of 62 Table of Contents Three-Month Term SOFR plus a spread of 539 basis points per annum. During the year ended December 31, 2025, the Corporation paid $875,000 in preferred cash dividends.
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.
At December 31, 2025, $38.8 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.
These increases were partially offset by decreases of $102.1 million and $9.3 million in certificates of deposits and non-interest-bearing transaction accounts, respectively.
These increases were partially offset by decreases of $57.3 million and $3.3 million in non-interest-bearing transaction accounts and wholesale deposits, respectively.
The allowance for credit losses, including reserve for unfunded credit commitments, was 1.20% of total loans, compared to 1.16% at December 31, 2023. • Period-end core deposits at December 31, 2024, increased $57.4 million, or 2.5%, to $2.396 billion from $2.339 billion as of December 31, 2023.
The allowance for credit losses, including reserve for unfunded credit commitments, was 1.12% of total loans, compared to 1.20% at December 31, 2024. • Period-end core deposits at December 31, 2025, increased $276.6 million, or 11.5%, to $2.673 billion from $2.396 billion as of December 31, 2024.
ROAA also allows us to better benchmark our profitability to our peers without the need to consider different degrees of leverage which can ultimately influence return on equity measures. ROACE for the year ended December 31, 2024, was 14.73%, compared to 13.79% for the year ended December 31, 2023.
ROAA also allows us to better benchmark our profitability to our peers without the need to consider different degrees of leverage which can ultimately influence return on equity measures. ROATCE for the year ended December 31, 2025 was 15.25%, compared to 15.35% for the year ended December 31, 2024.
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.
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 18.9% of total revenues for the year ended December 31, 2025, compared to 19.1% in 2024 as net interest income increased at a greater rate than non-interest income.
As of December 31, Key Performance Indicators 2022 2023 2024 Strategic Plan Return on average tangible common equity (“ROATCE”) (1) 17.7% 14.5% 15.4% ≥ 15% by 2028 Tangible book value (“TBV”) growth 8.6% 12.9% 15.0% ≥ 10% per year Top line revenue growth 13.4% 12.6% 6.6% ≥ 10% per year Efficiency ratio 62.31% 60.99% 60.61% Core deposits to total funding 76.1% 76.0% 71.1% ≥ 75% Employee engagement & participation (2) 87% 90% 86% ≥ 85% Net promoter score (3) 77 78 70 ≥ 70 (1) Excluding tax and SBA recourse benefits, the 2024 ROATCE was 14.6%.
As of December 31, Key Performance Indicators 2023 2024 2025 Strategic Plan Return on average tangible common equity (“ROATCE”) (1) 14.5% 15.4% 15.3% ≥ 15% by 2028 Tangible book value (“TBV”) growth 12.9% 15.0% 13.7% ≥ 10% per year Top line revenue growth 12.6% 6.6% 9.9% ≥ 10% per year Efficiency ratio 60.99% 60.61% 58.78% Core deposits to total funding 76.0% 71.1% 74.7% ≥ 75% Employee engagement & participation (2) 90% 86% 85% ≥ 85% Net promoter score (3) 78 70 78 ≥ 70 (1) Anonymous survey conducted annually.
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 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 following represents additional information regarding our non-accrual loans and leases: As of and for the Year Ended December 31, 2024 2023 (In Thousands) Individually evaluated loans and leases with no specific reserves required $ 13,125 $ 9,691 Individually evaluated loans and leases with specific reserves required 15,242 10,906 Total individually evaluated loans and leases 28,367 20,597 Less: Specific reserves (included in allowance for credit losses) 8,918 5,990 Net non-accrual loans and leases $ 19,449 $ 14,607 Average non-accrual loans and leases $ 19,589 $ 10,450 Loans and leases with no specific reserves represent non-accrual loans where the collateral, less cost to sell, equals or exceeds the net realizable value of the loan.
The following represents additional information regarding our non-accrual loans and leases: As of and for the Year Ended December 31, 2025 2024 (In Thousands) Individually evaluated loans and leases with no specific reserves required $ 29,525 $ 13,125 Individually evaluated loans and leases with specific reserves required 14,330 15,242 Total individually evaluated loans and leases 43,855 28,367 Less: Specific reserves (included in allowance for credit losses) 5,550 8,918 Net non-accrual loans and leases $ 38,305 $ 19,449 Average non-accrual loans and leases $ 26,567 $ 19,589 Loans and leases with no specific reserves represent non-accrual loans where the estimated collateral, less estimated cost to sell, equals or exceeds the net realizable value of the loan.
The following discussion and analysis is intended as a review of significant events and factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with the Consolidated Financial Statements and the Notes thereto.
We do not intend to, and specifically disclaim any obligation to, update any forward-looking statements. The following discussion and analysis is intended as a review of significant events and factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with the Consolidated Financial Statements and the Notes thereto.
As of December 31, 2024, private wealth and trust assets under management and administration totaled $3.419 billion, increasing $297.2 million, or 9.5%, compared to $3.122 billion as of December 31, 2023, due to an increase in market values, new clients, and new money from existing clients.
As of December 31, 2025, private wealth and trust assets under management and administration totaled $3.815 billion, increasing $396.0 million, or 11.6%, compared to $3.419 billion as of December 31, 2024, due to an increase in market values, new clients, and new money from existing clients.
Income tax expense included a $1.6 million net benefit from tax credit investments in both periods. The effective tax rate for the year ended December 31, 2024, was 13.5% compared to 21.5% for the year ended December 31, 2023.
Income tax expense included a $1.6 million net benefit from tax credit investments for the years ended December 31, 2025 and 2024. The effective tax rate for the year ended December 31, 2025, was 16.8% compared to 13.5% for the year ended December 31, 2024.
Private wealth fee income is up compared to prior year primarily due to an increase in assets under management and administration, increases in fee rates across the client base, and non-recurring transaction fees in the 2024 period.
Private wealth fee income increased compared to the prior year primarily due to an increase in assets under management and administration and increases in fee rates across the client base.
A summary of the activity in the ACL, inclusive of reserves for unfunded credit commitments, follows: Year Ended December 31, 2024 2023 (Dollars in Thousands) Allowance at beginning of period $ 32,997 $ 24,230 Impact of adoption of ASC 326 — 1,818 Charge-offs: Commercial real estate: Commercial real estate — owner occupied — — Commercial real estate — non-owner occupied — — Construction — — Multi-family — — 1-4 family — — Commercial and industrial (5,233 ) (1,781 ) Consumer and other (22 ) — Total charge-offs (5,255 ) (1,781 ) Recoveries: Commercial real estate: Commercial real estate — owner occupied 5 9 Commercial real estate — non-owner occupied — 1 Construction — — Multi-family — — 1-4 family 132 40 Commercial and industrial 541 478 Consumer and other 21 20 Total recoveries 699 548 Net charge-offs (4,556 ) (1,233 ) Provision for credit losses 8,827 8,182 Allowance at end of period $ 37,268 $ 32,997 Components: Allowance for credit losses on loans $ 35,785 $ 31,275 Allowance for credit losses on unfunded credit commitments 1,483 1,722 Total ACL $ 37,268 $ 32,997 Net charge-offs as a percent of average gross loans and leases 0.15 % 0.05 % The Corporation recognized $8.8 million provision expense for the year ended December 31, 2024, compared to $8.2 million for the year ended December 31, 2023.
A summary of the activity in the ACL, inclusive of reserves for unfunded credit commitments, follows: Year Ended December 31, 2025 2024 (Dollars in Thousands) Allowance at beginning of period $ 37,268 $ 32,997 Charge-offs: Commercial real estate: Commercial real estate — owner occupied — — Commercial real estate — non-owner occupied — — Construction and land development — — Multi-family — — 1-4 family — — Commercial and industrial (9,651 ) (5,233 ) Consumer and other (14 ) (22 ) Total charge-offs (9,665 ) (5,255 ) Recoveries: Commercial real estate: Commercial real estate — owner occupied 2 5 Commercial real estate — non-owner occupied — — Construction — — Multi-family — — 1-4 family 25 132 Commercial and industrial 1,407 541 Consumer and other — 21 Total recoveries 1,434 699 Net charge-offs (8,231 ) (4,556 ) Provision for credit losses 8,655 8,827 Allowance at end of period $ 37,692 $ 37,268 Components: Allowance for credit losses on loans $ 35,877 $ 35,785 Allowance for credit losses on unfunded credit commitments 1,815 1,483 Total ACL $ 37,692 $ 37,268 Net charge-offs as a percent of average gross loans and leases 0.25 % 0.15 % The Corporation recognized $8.7 million of provision expense for the year ended December 31, 2025, compared to $8.8 million for the year ended December 31, 2024.
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.
Net cash used in investing activities for the year ended December 31, 2025, was $373.4 million which consisted of $268.3 million in cash outflows to fund net loan growth and $134.6 million in net cash outflows to purchase available-for-sale securities. Net cash provided by financing activities for the year ended December 31, 2025, was $193.5 million.
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.
The Bank was in compliance with its policy limits as of December 31, 2025. 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, 2025.
Average gross loans and leases of $2.997 billion increased $349.0 million, or 13.2%, for the year ended December 31, 2024, compared to $2.648 billion for the year ended December 31, 2023. • Non-performing assets were $28.4 million and 0.74% of total assets as of December 31, 2024, compared to $20.8 million and 0.59% of total assets as of December 31, 2023. • The allowance for credit losses, including reserve for unfunded credit commitments, increased $4.3 million compared to December 31, 2023.
Average gross loans and leases of $3.272 billion increased $275.0 million, or 9.2%, for the year ended December 31, 2025, compared to $2.997 billion for the year ended December 31, 2024. • Non-performing assets were $43.9 million and 1.07% of total assets as of December 31, 2025, compared to $28.4 million and 0.74% of total assets as of December 31, 2024. • The allowance for credit losses, including reserve for unfunded credit commitments, increased $424,000 compared to December 31, 2024.
The components of top line revenue 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) Net interest income $124,206 $112,588 $98,422 $11,618 10.3% $14,166 14.4% Non-interest income 29,251 31,308 29,428 (2,057) (6.6) $1,880 6.4 Top line revenue $153,457 $143,896 $127,850 $9,561 6.6 $16,046 12.6 Return on Average Assets and Return on Average Common Equity ROAA was 1.20% for the year ended December 31, 2024, compared to 1.13% for the year ended December 31, 2023.
The components of top line revenue were as follows: For the Year Ended December 31, Change From Prior Year 2025 2024 2023 $ Change 2025 % Change 2025 $ Change 2024 % Change 2024 (Dollars in Thousands) Net interest income $136,690 $124,206 $112,588 $12,484 10.1% $11,618 10.3% Non-interest income 31,937 29,251 31,308 2,686 9.2 $(2,057) (6.6) Top line revenue $168,627 $153,457 $143,896 $15,170 9.9 $9,561 6.6 Return on Average Assets and Return on Average Tangible Common Equity ROAA was 1.24% for the year ended December 31, 2025, compared to 1.20% for the year ended December 31, 2024.
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.
The information provided below reconciles the efficiency ratio and PTPP adjusted earnings to their most comparable GAAP measure. 43 Table of Contents 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.
PTPP adjusted earnings allows management to benchmark performance of our model to our peers without the influence of the loan loss provision and tax considerations, which will ultimately influence other traditional financial measurements, including ROA and ROAE. The information provided below reconciles the efficiency ratio to its most comparable GAAP measure.
PTPP adjusted earnings allows management to benchmark performance of our model to our peers without the influence of the loan loss provision and tax considerations, which will ultimately influence other traditional financial measurements, including ROA and ROATCE.
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.
Compensation expense increased by $4.8 million, or 7.6%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, principally due to an increase in average FTEs, salary increases, growth in employee benefit costs, and increase in the annual cash bonus accrual.
The yield on average interest-earning assets for the year ended December 31, 2024, was 6.87%, compared to 6.54% for the year ended December 31, 2023. The increase in yield was primarily due to the reinvestment of cash flows from fixed-rate loan portfolios and securities in a higher rate environment.
The yield on average interest-earning assets for the year ended December 31, 2025, was 6.59%, compared to 6.87% for the year ended December 31, 2024. The decrease in yield was primarily due to lower interest rates, partially offset by the reinvestment of cash flows from the securities and fixed-rate loan portfolios.
The Bank elected to utilize more wholesale deposits in lieu of FHLB advances in consideration of cost, efficiency, managing interest rate risk, and liquidity. Total wholesale funding as a percentage of total bank funding was 28.9% as of December 31, 2024, compared to 24.0% as of December 31, 2023. Total bank funding is defined as total deposits plus FHLB advances.
The Bank elected to utilize more wholesale deposits in lieu of FHLB advances in consideration of liquidity risk management and business strategy. Total wholesale funding as a percentage of total bank funding was 25.3% as of December 31, 2025, compared to 28.9% as of December 31, 2024. Total bank funding is defined as total deposits plus FHLB advances.
The Corporation maintains a shelf registration with the Securities and Exchange Commission that would allow the Corporation to offer and sell, from time to time and in one or more offerings, up to $75.0 million in aggregate initial offering price of common and preferred stock, debt securities, warrants, subscription rights, units, or depository shares, or any combination thereof.
The Corporation has on file a shelf registration with the Securities and Exchange Commission that would allow the Corporation to offer and sell, from time to time and in one or more offerings, up to $75.0 million in aggregate initial offering price of common and preferred stock, debt securities, warrants, subscription rights, units, or depository shares, or any combination thereof. 64 Table of Contents The Bank is required by federal regulation to maintain sufficient liquidity to ensure safe and sound operations.
Deposit terms offered by the Bank vary according to the minimum balance required, the time period the funds must remain on deposit, the rates and products offered by competitors, and the interest rates charged on other sources of funds, among other factors.
Deposit terms offered by the Bank vary according to the minimum balance required, the time period the funds must remain on deposit, the rates and products offered by competitors, and the interest rates charged on other sources of funds, among other factors. Our Bank’s core deposits are obtained primarily from Wisconsin and the greater Kansas City Metro.
Results of Operations Top Line Revenue Top line revenue, comprised of net interest income and non-interest income, increased $9.6 million, or 6.6%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, due to a 10.3% increase in net interest income partially offset by a 6.6% decrease in non-interest income.
Results of Operations Top Line Revenue 42 Table of Contents Top line revenue, comprised of net interest income and non-interest income, increased $15.2 million, or 9.9%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, due to a 10.1% increase in net interest income and a 9.2% increase in non-interest income.
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.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+2 added−1 removed5 unchanged
Biggest changeImpact 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.
Biggest changeThis modeling indicated interest rate sensitivity as follows: Impact on Net Interest Income as of December 31, Instantaneous Rate Change in Basis Points 2025 2024 Down 300 (3.26 )% (1.35 )% Down 200 (0.94 ) (0.10 ) Down 100 (0.47 ) 0.10 No Change — — Up 100 0.72 0.37 Up 200 1.34 0.75 Up 300 1.95 1.13 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.
We maintained our historically neutral balance sheet throughout 2024 and believe we ended the year appropriately positioned. 63 Table of Contents
We maintained our historically neutral balance sheet throughout 2025 and believe we ended the year appropriately positioned. 67 Table of Contents
Removed
The following table illustrates the potential impact of changes in market rates on our net interest income for the next twelve months.
Added
During 2025, the Bank's interest rate risk exposure model incorporated updated assumptions regarding the level of interest rate, including indeterminable maturity deposits (non-interest bearing deposits, interest bearing transaction accounts, and money market accounts). In the current environment of changing short-term rates, deposit pricing can vary by product and client.
Added
These assumptions have been developed through a combination of historical analysis and projection of future expected pricing behavior.

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