# Bank First Corp (BFC) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Bank First Corp's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1746109/000155837025001937/bfc-20241231x10k.htm
Accession: 0001558370-25-001937
Filing date: 2025-02-28
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/BFC/
All MD&A years: /company/BFC/mda/
Previous year: /company/BFC/mda/fy2023/ (FY 2023)
Next year: /company/BFC/mda/fy2025/ (FY 2025)

ITEM 7.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or results of operations for any future periods. We are a bank holding company and we conduct all of our material business operations through the Bank. As a result, the discussion and analysis above relates to activities primarily conducted at the Bank level.

We have made, and will continue to make, various forward-looking statements with respect to financial and business matters. Comments regarding our business that are not historical facts are considered forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information regarding our cautionary disclosures, see the  “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Annual Report.

OVERVIEW

Bank First Corporation is a Wisconsin corporation that was organized primarily to serve as the holding company for Bank First, N.A. Bank First, N.A., which was incorporated in 1894, is a nationally-chartered bank headquartered in Manitowoc, Wisconsin. It is a member of the Federal Reserve, and is regulated by the OCC. Including its headquarters in Manitowoc, Wisconsin, the Bank has 26 banking locations in Brown, Columbia, Dane, Fond du Lac, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Shawano, Sheboygan, Waupaca, Waushara, and Winnebago counties in Wisconsin. The Bank offers loan, deposit and treasury management products at each of its banking locations.

As with most community banks, the Bank derives a significant portion of its income from interest received on loans and investments. The Bank’s primary source of funding is deposits, both interest-bearing and noninterest-bearing. In order to maximize the Bank’s net interest income, or the difference between the income on interest-earning assets and the expense of interest-bearing liabilities, the Bank must not only manage the volume of these balance sheet items, but also the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities. To account for credit risk inherent in all loans, the Bank maintains an allowance for credit losses (“ACL – Loans”) to absorb possible losses on existing loans that may become uncollectible. The Bank establishes and maintains this allowance by charging a provision for credit losses against operating earnings. Beyond its net interest income, the Bank further receives income through the net gain on sale of loans held for sale as well as servicing income which is retained on those sold loans. In order to maintain its operations and bank locations, the Bank incurs various operating expenses which are further described within the “Results of Operations” later in this section.

The Bank, through its 100% owned subsidiary TVG Holdings, Inc., holds a 40% ownership interest in Ansay & Associates, LLC, an insurance agency providing clients primarily located in Wisconsin with insurance and risk management solutions. The Bank owned 49.8% of UFS, LLC through October 1, 2023. On that date it sold 100% of its member interest in UFS to a third party. These unconsolidated subsidiary interests contribute noninterest income to the Bank through their underlying annual earnings.

As of December 31, 2024, the Company had total consolidated assets of $4.50 billion, total loans of $3.52 billion, total deposits of $3.66 billion and total stockholders’ equity of $639.7 million. The Company employs approximately 366 full-time equivalent employees (“FTE”) and has an assets-to-FTE ratio of approximately $11.5 million. For more information, see the Company’s website at www.bankfirst.com.

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Recent acquisitions

Hometown Bancorp, Ltd.

On February 10, 2023, the Company completed a merger with Hometown Bancorp, Ltd. ("Hometown"), a bank holding company headquartered in Fond du Lac, Wisconsin, pursuant to the merger agreement, dated as of July 25, 2022, by and between the Company and Hometown, whereby Hometown merged with and into the Company, and Hometown Bank, Hometown's wholly-owned banking subsidiary, merged with and into the Bank. Hometown's principal activity was the ownership and operation of Hometown Bank, a state-chartered banking institution that operated ten (10) branches in Wisconsin at the time of closing. The merger consideration totaled approximately $130.5 million.

Pursuant to the terms of the merger agreement, Hometown shareholders could elect to receive either 0.3962 of a share of the Company’s common stock or $29.16 in cash for each outstanding share of Hometown common stock, subject to a maximum of 30% cash consideration in total, with cash paid in lieu of any remaining fractional share. Company stock issued totaled 1,450,272 shares valued at approximately $115.1 million, with cash of $15.4 million comprising the remainder of merger consideration.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting and reporting policies of the Company conform to GAAP in the United States and general practices within the financial institution industry. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our consolidated financial statements as of December 31, 2024, included elsewhere in this Annual Report on Form 10-K.

Business Combinations, Core Deposit Intangible and Acquired Loans. We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). We recognize the full fair value of the assets acquired and liabilities assumed and immediately expense transaction costs. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Results of operations of the acquired business are included in the statement of income from the effective date of the acquisition.

​

The primary identifiable intangible asset we typically record in connection with a whole bank or branch acquisition is the value of the core deposit intangible which represents the estimated value of the long-term deposit relationships acquired in the transaction. Determining the amount of identifiable intangible assets and their average lives involves multiple assumptions and estimates and is typically determined by performing a discounted cash flow analysis, which involves a combination of any or all of the following assumptions: customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates.

​

Further, the valuation of acquired loans involves significant estimates and assumptions based on information available as of the acquisition date. Loans acquired in a business combination are evaluated either individually or in pools of loans with similar characteristics; including consideration of a credit component. A number of factors are considered in determining the estimated fair value of purchased loans including, among other things, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, estimated holding periods, contractual interest rates compared to market interest rates, and net present value of cash flows expected to be received.

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Allowance for Credit Losses — Loans. The ACL – Loans represents management’s estimate of expected credit losses in the Company’s loan portfolio at the balance sheet date. The Company estimates the ACL – Loans based on the amortized cost basis of the underlying loan using a current expected credit loss methodology (“CECL”). To estimate the amount of ACL-Loans, the Company considers historical loss rates and other qualitative adjustments, as well as a forward-looking component that considers reasonable and supportable forecasts over the expected life of each loan. The Company’s ACL - Loans is calculated using collectively evaluated and individually evaluated loans.  This evaluation is inherently subjective as it requires material estimates that are susceptible to significant change including the amounts and timing of future cash flows expected to be received on loans.

Recent Accounting Pronouncements. For a discussion of recent accounting pronouncements, see “Note 1 – Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements in Item 8 of this report on Form 10-K for further discussion.

RESULTS OF OPERATIONS

The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2024 and 2023 and results of operations for each of the years then ended. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 29, 2024 for a discussion and analysis of the more significant factors that affected periods prior to 2023.

General.  Net income decreased $8.9 million, or 12.0%, to $65.6 million for the year ended December 31, 2024, from $74.5 million for the year ended December 31, 2023. During 2023, the Company sold 100% of its member interest in UFS, LLC, creating a pre-tax gain on sale of $38.9 million. There was no corresponding similar event during 2024. Offsetting this year-over-year decline in earnings, net interest income increased by $4.3 million, provision for credit losses declined by $5.5 million, and noninterest expenses declined by $9.4 million from 2023 to 2024.

Net Interest Income.  The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of the Company’s total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing the Company to an excessive level of interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities. Our net interest margin can also be adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments.

Net interest income increased by $4.3 million to $137.8 million for the year ended December 31, 2024, from $133.5 million for the year ended December 31, 2023. Total average interest-earning assets increased to $3.81 billion for the year ended December 31, 2024 from $3.66 billion for the year ended December 31, 2023. The Bank’s net interest margin decreased four basis points to 3.65% for the year ended December 31, 2024, down from 3.69% for the year ended December 31, 2023.

Interest Income.  Total interest income increased $23.9 million, or 13.1%, to $206.4 million for the year ended December 31, 2024, up from $182.5 million for the year ended December 31, 2023. This increase was driven by an increase in average rates earned on interest-earning assets, rising from 5.03% during 2023 to 5.45% during 2024, and a $153.9 million increase in average interest-earning assets during 2024 when compared to 2023.

Interest Expense.  Interest expense increased $19.6 million, or 40.0%, to $68.6 million for the year ended December 31, 2024, up from $49.0 million for the year ended December 31, 2023. This increase was driven by a combination of increases in the average rates paid on interest-bearing liabilities, rising from 2.04% during 2023 to 2.69% during 2024, and a $152.1 million increase in average interest-bearing liabilities.

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Interest expense on interest-bearing deposits increased by $21.8 million to $64.2 million for the year ended December 31, 2024, from $42.4 million for the year ended December 31, 2023. This increase was due to a higher interest rate environment driving an increase in average rates paid on interest-bearing deposits, rising from 1.84% during 2023 to 2.61% during 2024, and growth of $151.2 million year-over-year in average interest-bearing deposits. While the Bank continued to see average rates paid on interest-bearing deposits rise through the first three quarters of 2024, they declined during the fourth quarter.

Provision for Credit Losses.  Credit risk is inherent in the business of making loans. We establish an allowance for credit losses through charges to earnings, which are shown in the statements of income as the provision for credit losses. When reductions in the allowance for credit losses are deemed appropriate, a negative provision for credit losses may be necessary.

We recorded a negative provision for credit losses of $0.8 million for the year ended December 31, 2024, compared to a positive provision of $4.7 million for the year ended December 31, 2023. Metrics regarding the credit quality of the Bank’s loan portfolio continued to show very little in terms of credit stress during 2024. The negative provision for credit losses during 2024 related to improvement in financial trends related to two relationships that were part of the Hometown acquisition, which allowed for a reduction in specific reserves related to them. The elevated positive provision for credit losses during 2023 was primarily result of ASU 2016-13, which was adopted at the beginning of 2023. Under ASU 2016-13 a provision for credit losses totaling $5.5 million was recorded related to loans acquired from Hometown. The ACL-Loans was $44.2 million, or 1.26% of total loans, at December 31, 2024 compared to $43.6 million, or 1.30% of total loans, at December 31, 2023.

Noninterest Income.  Noninterest income is an important component of our total revenues. A significant portion of our noninterest income has historically been associated with service charges and income from the Bank’s unconsolidated subsidiaries, Ansay and UFS. Other typical sources of noninterest income include loan servicing fees and gains on sales of mortgage loans.

Noninterest income decreased by $38.4 million, or 66.1% to $19.7 million for 2024, down from $58.1 million during 2023. The primary driver of this decline was the aforementioned $38.9 million pre-tax gain on sale of UFS during 2023, while there was no corresponding similar event in 2024. Service charge income increased by $1.0 million for 2024 compared to 2023, which was the result of increased operating scale for the Company as well as renegotiated contractual agreements related to credit and debit card payment processing. Income from Ansay increased by $0.6 million for the full year of 2024 compared to 2023. Net gains on sale of mortgage loans increased $0.4 million year-over-year due to a rise in secondary market  loan origination activity resulting from lower prevailing mortgage interest rates during periods of 2024. This increase in mortgage origination activity negatively impacted the valuation of the Company’s mortgage servicing rights (“MSR”) during 2024, leading to $0.3 million in negative valuation adjustments compared to positive adjustments totaling $0.4 million during 2023. Other noninterest income is comprised of many nonmaterial items, several of which increased from 2023 to 2024, though none of these increases were individually significant. The major components of our noninterest income are listed in the table below:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

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Noninterest Expense.  Noninterest expense decreased $9.3 million to $78.8 million for the year ended December 31, 2024, down from $88.1 million for the year ended December 31, 2023. During 2023 the Company sold a significant number of available for sale securities, resulting a $7.9 million pre-tax loss, compared to negligible losses on sales of securities during 2024. The securities sold during 2023 had an average yield of 1.36%. Proceeds of these sales were reinvested in a combination of short and long-term investments with an average yield of 4.98%. Personnel expense increased $0.5 million, or 1.4%, due to customary pay raises year-over-year, offset by certain efficiencies realized from further integration of recent acquisitions made by the Company. Data processing expense increased by $1.7 million during 2024 compared to 2023 due to project-related costs for upgrading the Bank’s digital banking platform and the increased scale from recent acquisitions. Expenses related to the Hometown acquisition totaled $1.6 million during 2023. The lack of a similar acquisition during 2024 caused decreases in the areas of postage, stationary, supplies and advertising expense year-over-year. Finally, gains on sales and valuations of OREO totaling $0.7 million during 2024 compared favorably to losses of $2.1 million during 2023. Amortization of intangibles decreased by $0.5 million year-over-year, the result of using the sum-of-the-years-digits method of amortization on core deposit intangibles which takes more expense in years immediately following the acquisition which created them. The major components of our noninterest expense are listed in the table below:

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[[/GREPCENT_TABLE]]

​

Income Tax Expense.  We recorded a provision for income taxes of $14.0 million for the year ended December 31, 2024, compared to $24.3 million for the year ended December 31, 2023, reflecting effective tax rates of 17.5% and 24.6%, respectively. The Company’s home state passed tax legislation during the third quarter of 2023 which exempted income produced by a significant portion of the Company’s loans from taxation in Wisconsin. As a result of the lower anticipated future effective tax rate, the Company determined that a $2.9 million allowance was required to be made against its deferred tax asset, creating a one-time increase in tax expense for 2023. Final rules relating to qualifying loans under this legislation were not published until the first quarter of 2024. Based on these final rules, the Company was able to further reduce its estimated tax liability from 2023 by $1.3 million, resulting in the lower provision for income taxes and effective tax rate during 2024. The effective tax rates were reduced from the statutory federal and state income tax rates during both periods as a result of tax-exempt interest income produced by certain qualifying loans and investments in the Bank’s portfolios.

NET INTEREST MARGIN

Net interest income represents the difference between interest earned, primarily on loans and investments, and interest paid on funding sources, primarily deposits and borrowings. Interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate paid on total interest-bearing liabilities. Net interest margin is the amount of net interest income, on a fully taxable-equivalent basis, expressed as a percentage of average interest-earning assets. The average rate earned on earning assets is the amount of annualized taxable equivalent interest income

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expressed as a percentage of average earning assets. The average rate paid on interest-bearing liabilities is equal to annualized interest expense as a percentage of average interest-bearing liabilities.

The following tables set forth the distribution of our average assets, liabilities and shareholders’ equity, and average rates earned or paid on a fully taxable equivalent basis for each of the periods indicated:

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assets","\u200b","","443,691","\u200b","","","","","\u200b","","447,934","\u200b","","","","","\u200b","","280,249","\u200b","","","","","\u200b"],["Allowance for loan losses","\u200b","","(44,511)","\u200b","","","","","\u200b","","(41,714)","\u200b","","","","","\u200b","","(22,152)","\u200b","","","","","\u200b"],["Total assets","\u200b","$","4,208,236","\u200b","","","","","\u200b","$","4,061,358","\u200b","","","","","\u200b","$","3,347,857","\u200b","","","","","\u200b"],["LIABILITIES AND SHAREHOLDERS\u2019 EQUITY","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","","\u200b","\u200b","\u200b","\u200b","","\u200b","","","\u200b"],["Interest-bearing deposits","\u200b","","\u200b","\u200b","\u200b","\u200b","","","\u200b","","\u200b","\u200b","\u200b","\u200b","","","\u200b","","\u200b","\u200b","","\u200b","","","\u200b"],["Checking accounts","\u200b","$","401,990","\u200b","$","11,132","","2.77","%","$","293,568","\u200b","$","5,362","","1.83","%","$","253,443","\u200b","$","1,075","","0.42","%"],["Savings accounts","\u200b","","816,410","\u200b","","12,240","","1.50","%","","833,360","\u200b","","9,796","","1.18","%","","691,599","\u200b","","3,099","","0.45","%"],["Money market accounts","\u200b","","616,964","\u200b","","14,880","","2.41","%","","665,988","\u200b","","12,722","","1.91","%","","666,717","\u200b","","3,025","","0.45","%"],["Certificates of deposit","\u200b","","613,593","\u200b","","25,613","","4.17","%","","509,273","\u200b","","14,396","","2.83","%","","286,054","\u200b","","2,818","","0.99","%"],["Brokered Deposits","\u200b","","7,662","\u200b","","303","","3.95","%","","3,184","\u200b","","90","","2.83","%","","8,587","\u200b","","251","","2.92","%"],["Total interest-bearing deposits","\u200b","","2,456,619","\u200b","","64,168","","2.61","%","","2,305,373","\u200b","","42,366","","1.84","%","","1,906,400","\u200b","","10,268","","0.54","%"],["Other borrowed funds","\u200b","","98,241","\u200b","","4,437","","4.52","%","","97,384","\u200b","","6,637","","6.82","%","","185,329","\u200b","","2,181","","1.18","%"],["Total interest-bearing liabilities","\u200b","","2,554,860","\u200b","","68,605","","2.69","%","","2,402,757","\u200b","","49,003","","2.04","%","","2,091,729","\u200b","","12,449","","0.60","%"],["Non-interest bearing liabilities","\u200b","","","\u200b","","","","","\u200b","","","\u200b","","","","","\u200b","","","\u200b","","","","","\u200b"],["Demand Deposits","\u200b","","1,000,772","\u200b","","","","","\u200b","","1,078,468","\u200b","","","","","\u200b","","878,727","\u200b","","","","","\u200b"],["Other liabilities","\u200b","","32,820","\u200b","","","","","\u200b","","10,533","\u200b","","","","","\u200b","","4,971","\u200b","","","","","\u200b"],["Total Liabilities","\u200b","","3,588,452","\u200b","","","","","\u200b","","3,491,758","\u200b","","","","","\u200b","","2,975,427","\u200b","","","","","\u200b"],["Shareholders\u2019 equity","\u200b","","619,784","\u200b","","","","","\u200b","","569,600","\u200b","","","","","\u200b","","372,430","\u200b","","","","","\u200b"],["Total liabilities & shareholders' equity","\u200b","$","4,208,236","\u200b","","","","","\u200b","$","4,061,358","\u200b","","","","","\u200b","$","3,347,857","\u200b","","","","","\u200b"],["Net interest income on a fully taxable equivalent basis","\u200b","","\u200b","\u200b","","139,160","","","\u200b","","\u200b","\u200b","","134,739","","","\u200b","","\u200b","\u200b","","105,452","","","\u200b"],["Less taxable equivalent adjustment","\u200b","\u200b","\u200b","\u200b","","(1,360)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","(1,259)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","(1,366)","\u200b","\u200b","\u200b"],["Net interest income","\u200b","","","\u200b","$","137,800","","","\u200b","","","\u200b","$","133,480","","","\u200b","","","\u200b","$","104,086","","","\u200b"],["Net interest spread (3)","\u200b","","","\u200b","\u200b","\u200b","","2.77","%","","","\u200b","\u200b","\u200b","","2.99","%","","","\u200b","\u200b","\u200b","","3.22","%"],["Net interest margin (4)","\u200b","","","\u200b","","","","3.65","%","","","\u200b","","","","3.69","%","","","\u200b","","","","3.41","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21%."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Nonaccrual loans are included in average amounts outstanding."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets."]]
[[/GREPCENT_TABLE]]

48

Table of Contents

Rate/Volume Analysis

The following tables describe the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volumes (changes in average balance multiplied by prior year average rate) and (ii) changes attributable to changes in rate (change in average interest rate multiplied by prior year average balance), while (iii) changes attributable to the combined impact of volumes and rates have been allocated proportionately to separate volume and rate categories.

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Twelve Months Ended December 31, 2024","","Twelve Months Ended December 31, 2023"],["\u200b","\u200b","Compared with","\u200b","Compared with"],["\u200b","\u200b","Twelve Months Ended December 31, 2023","\u200b","Twelve Months Ended December 31, 2022"],["\u200b","\u200b","Increase/(Decrease)","\u200b","Increase/(Decrease)"],["\u200b","\u200b","Due to Change in","\u200b","Due to Change in"],["\u200b","\u200b","Volume","\u200b","Rate","\u200b","Total","\u200b","Volume","\u200b","Rate","\u200b","Total"],["\u200b","\u200b","(dollars in thousands)","\u200b","(dollars in thousands)"],["Interest income","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Loans","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Taxable","","$","7,401","","$","12,339","","$","19,740","","$","35,439","","$","26,062","","$","61,501"],["Tax-exempt","\u200b","\u200b","348","\u200b","\u200b","224","\u200b","\u200b","572","\u200b","\u200b","348","\u200b","\u200b","111","\u200b","\u200b","459"],["Securities","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Taxable (AFS)","\u200b","\u200b","(2,097)","\u200b","\u200b","2,392","\u200b","\u200b","295","\u200b","\u200b","(1,065)","\u200b","\u200b","1,686","\u200b","\u200b","621"],["Tax-exempt (AFS)","\u200b","\u200b","(117)","\u200b","\u200b","52","\u200b","\u200b","(65)","\u200b","\u200b","(1,366)","\u200b","\u200b","421","\u200b","\u200b","(945)"],["Taxable (HTM)","\u200b","\u200b","1,434","\u200b","\u200b","130","\u200b","\u200b","1,564","\u200b","\u200b","1,696","\u200b","\u200b","312","\u200b","\u200b","2,008"],["Tax-exempt (HTM)","\u200b","\u200b","(26)","\u200b","\u200b","1","\u200b","\u200b","(25)","\u200b","\u200b","(25)","\u200b","\u200b","1","\u200b","\u200b","(24)"],["Cash and due from banks","\u200b","\u200b","1,702","\u200b","\u200b","240","\u200b","\u200b","1,942","\u200b","\u200b","(1,884)","\u200b","\u200b","4,105","\u200b","\u200b","2,221"],["Total interest income","\u200b","\u200b","8,645","\u200b","\u200b","15,378","\u200b","\u200b","24,023","\u200b","$","33,143","\u200b","$","32,698","\u200b","$","65,841"],["Interest expense","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Deposits","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Checking accounts","\u200b","$","2,407","\u200b","$","3,363","\u200b","$","5,770","\u200b","$","196","\u200b","$","4,091","\u200b","$","4,287"],["Savings accounts","","\u200b","(203)","","\u200b","2,647","","\u200b","2,444","","\u200b","751","","\u200b","5,946","","\u200b","6,697"],["Money market accounts","","\u200b","(990)","","\u200b","3,148","","\u200b","2,158","","\u200b","(3)","","\u200b","9,700","","\u200b","9,697"],["Certificates of deposit","","\u200b","3,371","","\u200b","7,846","","\u200b","11,217","","\u200b","3,410","","\u200b","8,168","","\u200b","11,578"],["Brokered Deposits","","\u200b","166","","\u200b","47","","\u200b","213","","\u200b","(153)","","\u200b","(8)","","\u200b","(161)"],["Total interest bearing deposits","","\u200b","4,751","","\u200b","17,051","","\u200b","21,802","","\u200b","4,201","","\u200b","27,897","","\u200b","32,098"],["Other borrowed funds","","\u200b","58","","\u200b","(2,258)","","\u200b","(2,200)","","\u200b","(1,482)","","\u200b","5,938","","\u200b","4,456"],["Total interest expense","","\u200b","4,809","","\u200b","14,793","","\u200b","19,602","","\u200b","2,719","","\u200b","33,835","","\u200b","36,554"],["Change in net interest income","\u200b","$","3,836","\u200b","$","585","\u200b","$","4,421","\u200b","$","30,424","\u200b","$","(1,137)","\u200b","$","29,287"]]
[[/GREPCENT_TABLE]]

​

CHANGES IN FINANCIAL CONDITION

Total Assets.  Total assets increased $273.2 million, or 6.5%, to $4.50 billion at December 31, 2024 from $4.22 billion at December 31, 2023. A significant increase in customer deposits during the fourth quarter of 2024, funding cash, investment, and loan growth was the primary cause of this year-over-year increase.

Cash and Cash Equivalents.  Cash and cash equivalents increased by $13.8 million, or 5.6%, to $261.3 million at December 31, 2024 from $247.5 million at December 31, 2023.

Investment Securities.  The carrying value of total investment securities increased by $88.3 million to $333.8 million at December 31, 2024 from $245.5 million at December 31, 2023. A significant portion of the deposit increase during the fourth quarter of 2024 required collateralization by investments in the Company’s portfolio. As a result of this heightened need for collateral,  the Company invested $100.0 million into a 30-day US Treasury note during December 2024 which matured at the end of January 2025.

49

Table of Contents

Loans.  Net loans increased by $173.7 million, or 5.3%, to $3.47 billion at December 31, 2024 from $3.30 billion at December 31, 2023. This increase was due to the addition of new customer relationships as well as inflationary impacts on the loan requirements of existing customers.

Bank-Owned Life Insurance.  At December 31, 2024, our investment in bank-owned life insurance was $61.5 million, an increase of $0.2 million from $61.3 million at December 31, 2023.

Deposits.  Deposits increased $228.2 million, or 6.7%, to $3.66 billion at December 31, 2024 from $3.43 billion at December 31, 2023. As previously mentioned, much of the growth during 2024 resulted during the fourth quarter and is anticipated to be seasonal.

Borrowings.  At December 31, 2024, borrowings consisted of advances from the FHLB of Chicago and subordinated debt to other banks and individuals. FHLB borrowings increased to $135.4 million at December 31, 2024 from $35.3 million at December 31, 2023. These additional borrowings were intended to provide liquidity to support near-term loan growth. Subordinated debt remained stable at $12.0 million at December 31, 2024 and December 31, 2023. A junior subordinated debenture totaling $4.1 million, which was part of the acquisition of Hometown, was repaid in full during the first quarter of 2024.

Stockholders’ Equity.  Total stockholders’ equity increased $19.9 million, or 3.2%, to $639.7 million at December 31, 2024 from $619.8 million at December 31, 2023. Repurchases of the Company’s common stock totaling $31.2 million and dividends declared totaling $15.6 million offset the positive impact of earnings totaling $65.6 million during 2024.

LOANS

Our lending activities are conducted principally in Wisconsin. The Bank makes commercial and industrial loans, commercial real estate loans, construction and development loans, residential real estate loans, and a variety of consumer loans and other loans. Much of the loans made by the Bank are secured by real estate collateral. The Bank’s commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower, with liquidation of the underlying real estate collateral typically being viewed as the primary source of repayment in the event of borrower default. Although commercial business loans are also often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment. Repayment of the Bank’s residential loans are generally dependent on the health of the employment market in the borrowers’ geographic areas and that of the general economy with liquidation of the underlying real estate collateral being typically viewed as the primary source of repayment in the event of borrower default.

Our loan portfolio is our most significant earning asset, comprising 78.3%, 79.3% and 79.1% of our total assets as of December 31, 2024, 2023 and 2022, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.

Total loans increased $174.2 million, or 5.2%, to $3.52 billion as of December 31, 2024 as compared to $3.34 billion as of December 31, 2023. This loan growth was comprised of an increase of $12.5 million, or 2.6%, in commercial and industrial loans, an increase of $55.0 million, or 3.2%, in commercial real estate loans, an increase of $77.1 million, or 38.4%, in construction and development loans, an increase of $24.5 million, or 2.8%, in residential 1-4 family loans and an increase of $5.1 million, or 7.7%, in consumer and other loans.

50

Table of Contents

The following table presents the balance and associated percentage of each major category in our loan portfolio at December 31, 2024, 2023, and 2022:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","December 31,","\u200b"],["\u200b","\u200b","\u200b","\u200b","% of","\u200b","\u200b","\u200b","% of","\u200b","\u200b","\u200b","% of","\u200b"],["(In thousands)","\u200b","2024","\u200b","Total","\u200b","2023","\u200b","Total","\u200b","2022","\u200b","Total","\u200b"],["\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["Commercial & industrial","\u200b","$","500,352","\u200b","14","%","$","487,893","\u200b","15","%","$","492,450","\u200b","17","%"],["Commercial real estate","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Owner Occupied","\u200b","\u200b","968,837","\u200b","28","%","\u200b","894,596","\u200b","27","%","\u200b","716,963","\u200b","25","%"],["Non-owner occupied","\u200b","\u200b","459,431","\u200b","13","%","\u200b","472,321","\u200b","14","%","\u200b","391,040","\u200b","13","%"],["Multi-family","\u200b","\u200b","326,408","\u200b","9","%","\u200b","332,757","\u200b","10","%","\u200b","290,580","\u200b","10","%"],["Construction & Development","\u200b","\u200b","277,971","\u200b","8","%","\u200b","200,835","\u200b","6","%","\u200b","199,708","\u200b","7","%"],["Residential 1-4 family","\u200b","\u200b","913,187","\u200b","26","%","\u200b","888,639","\u200b","27","%","\u200b","739,514","\u200b","25","%"],["Consumer","\u200b","\u200b","55,387","\u200b","2","%","\u200b","50,950","\u200b","1","%","\u200b","44,963","\u200b","2","%"],["Other Loans","\u200b","\u200b","15,595","\u200b","\u2014","%","\u200b","14,983","\u200b","\u2014","%","\u200b","18,760","\u200b","1","%"],["Total Loans","\u200b","$","3,517,168","\u200b","100","%","$","3,342,974","\u200b","100","%","$","2,893,978","\u200b","100","%"]]
[[/GREPCENT_TABLE]]

​

Our directors and officers and their affiliates are customers of, and have other transactions with, the Bank in the normal course of business. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collection or present other unfavorable features. At December 31, 2024 and December 31, 2023, total loans outstanding to such directors and officers and their affiliates were $62.9 million and $63.9 million, respectively. During the year ended December 31, 2024, the Bank had $19.0 million in net increases due to changes in the composition of directors and officers, $56.3 million of additional loan advances, and $76.4 million in repayments of these loans, compared to $24.5 million of additional loan advances and $30.8 million in repayments of these loans during the year ended December 31, 2023. At December 31, 2024 and December 31, 2023, all of the loans to directors and officers were performing according to their original terms.

Loan segments

Changes in the principal segments of our loan portfolio are discussed below. Descriptions of and risks related to these segments can be found in the consolidated financial statements and footnotes presented elsewhere in this report.

Commercial and Industrial (C&I).  Our C&I portfolio totaled $500.4 million and $487.9 million at December 31, 2024 and 2023, respectively, and represented 14% and 15% of our total loans, respectively. C&I loans increased 2.6% during 2024 due to the increased business needs of customers in our markets in response to strong economic conditions. C&I loans decreased 0.9% during 2023 as a result of exiting a few nonperforming borrowers and borrowers from acquired institutions that did not fit the Bank’s lending philosophy.

Commercial Real Estate (CRE).  Our CRE loan portfolio totaled $1.75 billion and $1.70 billion at December 31, 2024 and 2023, respectively, and represented 50% and 51% of our total loans, respectively. Our CRE loans increased 3.2% during 2024, due to organic growth within our markets. Owner occupied CRE loans increased by 8.3% while non-owner occupied CRE loans declined by 2.7% as a result of management’s desire to reduce exposure to non-owner occupied CRE loans from acquired institutions where the bank did not have full relationships with the borrowers. Our CRE loans increased 21.5% during 2023, primarily as a result of loans acquired from Hometown during 2023.

Construction and Development (C&D).  Our C&D loan portfolio totaled $278.0 million and $200.8 million at December 31, 2024 and 2023, respectively, and represented 8% and 6% of our total loans, respectively. C&D loans increased 38.4% during 2024, as a result of a few large multi-family related projects for existing customers with experience in this industry. C&D loans increased 0.6% during 2023, as a result of management making a strategic decision to limit growth in this area.

51

Table of Contents

Residential 1-4 Family. Our residential 1-4 family loan portfolio totaled $913.2 million and $888.6 million at December 31, 2024 and 2023, respectively, and represented 26% and 27% of our total loans, respectively. Residential 1-4 family loans increased 2.8% during 2024, driven by natural growth in our markets. Residential 1-4 family loans increased 20.2% during 2023, primarily as a result of loans acquired from Hometown during 2023.

We do not offer reverse mortgages nor do we offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on his loan, resulting in an increased principal balance during the life of the loan. We also do not offer “subprime loans” (loans that are made with low down payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (defined as loans having less than full documentation).

Residential real estate loans are originated both for sale to the secondary market as well as for retention in the Bank’s loan portfolio. The decision to sell a loan to the secondary market or retain within the portfolio is determined based on a variety of factors including but not limited to our asset/liability position, the current interest rate environment, and customer preference. Servicing rights are retained on all loans sold to the secondary market.

We were servicing mortgage loans sold to others without recourse of approximately $1.17 billion and $1.18 billion at December 31, 2024 and 2023, respectively.

Loans sold with the retention of servicing assets result in the capitalization of servicing rights. Loan servicing rights are subsequently amortized as an offset to other income over the estimated period of servicing. The net balance of capitalized servicing rights amounted to $13.4 million and $13.7 million at December 31, 2024 and 2023, respectively.

Consumer Loans.  Our consumer loan portfolio totaled $55.4 million and $51.0 million at December 31, 2024 and 2023, respectively, and represented 2% and 1% of our total loans, respectively. Consumer loans include secured and unsecured loans, lines of credit and personal installment loans. Our consumer loans increased by 8.7% and 13.3% during 2024 and 2023, respectively.

Other Loans.  Our other loans totaled $15.6 million and $15.0 million at December 31, 2024 and 2023, respectively, and are immaterial to the overall loan portfolio. The other loans category consists primarily of overdrawn depository accounts, loans utilized to purchase or carry securities and loans to nonprofit organizations.

52

Table of Contents

Loan Portfolio Maturities.  

The following tables summarize the dollar amount of loans maturing in our portfolio based on their loan type, fixed or variable rate of interest, and contractual terms to maturity at December 31, 2024. The tables do not include any estimate of prepayments, which can significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","One Year or","\u200b","One to Five","\u200b","Five to Fifteen","\u200b","Over Fifteen","\u200b","\u200b","\u200b"],["\u200b","\u200b","Less","\u200b","Years","\u200b","Years","\u200b","Years","\u200b","Total"],["\u200b","\u200b","(dollars in thousands)"],["Commercial & industrial","","$","141,827","","$","234,323","","$","122,411","\u200b","$","1,791","","$","500,352"],["Commercial real estate","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Owner Occupied","\u200b","\u200b","121,928","\u200b","\u200b","455,155","\u200b","\u200b","319,156","\u200b","\u200b","72,598","\u200b","\u200b","968,837"],["Non-owner Occupied","\u200b","\u200b","51,968","\u200b","\u200b","287,483","\u200b","\u200b","112,239","\u200b","\u200b","7,741","\u200b","\u200b","459,431"],["Multi-family","\u200b","\u200b","19,877","\u200b","\u200b","142,798","\u200b","\u200b","163,240","\u200b","\u200b","493","\u200b","\u200b","326,408"],["Construction & Development","\u200b","\u200b","46,419","\u200b","\u200b","94,462","\u200b","\u200b","71,614","\u200b","\u200b","65,476","\u200b","\u200b","277,971"],["Residential 1-4 family","\u200b","\u200b","21,562","\u200b","\u200b","97,274","\u200b","\u200b","212,643","\u200b","\u200b","581,708","\u200b","\u200b","913,187"],["Consumer and other","\u200b","\u200b","15,534","\u200b","\u200b","32,873","\u200b","\u200b","16,103","\u200b","\u200b","6,472","\u200b","\u200b","70,982"],["Total","\u200b","$","419,115","\u200b","$","1,344,368","\u200b","$","1,017,406","\u200b","$","736,279","\u200b","$","3,517,168"],["Fixed Rate Loans:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Commercial & industrial","\u200b","$","34,663","\u200b","$","170,368","\u200b","$","72,968","\u200b","$","1,757","\u200b","$","279,756"],["Commercial real estate","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Owner Occupied","\u200b","\u200b","64,905","\u200b","\u200b","356,869","\u200b","\u200b","115,893","\u200b","\u200b","20,457","\u200b","\u200b","558,124"],["Non-owner Occupied","\u200b","\u200b","47,573","\u200b","\u200b","242,546","\u200b","\u200b","30,605","\u200b","\u200b","\u2014","\u200b","\u200b","320,724"],["Multi-family","\u200b","\u200b","17,106","\u200b","\u200b","133,927","\u200b","\u200b","113,757","\u200b","\u200b","\u2014","\u200b","\u200b","264,790"],["Construction & Development","\u200b","\u200b","26,377","\u200b","\u200b","81,439","\u200b","\u200b","10,817","\u200b","\u200b","33,266","\u200b","\u200b","151,899"],["Residential 1-4 family","\u200b","\u200b","13,864","\u200b","\u200b","74,708","\u200b","\u200b","167,359","\u200b","\u200b","280,408","\u200b","\u200b","536,339"],["Consumer and other","\u200b","\u200b","14,924","\u200b","\u200b","31,861","\u200b","\u200b","15,026","\u200b","\u200b","6,472","\u200b","\u200b","68,283"],["Total","\u200b","$","219,412","\u200b","$","1,091,718","\u200b","$","526,425","\u200b","$","342,360","\u200b","$","2,179,915"],["Floating Rate Loans:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Commercial & industrial","\u200b","$","107,164","\u200b","$","63,955","\u200b","$","49,443","\u200b","$","34","\u200b","$","220,596"],["Commercial real estate","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Owner Occupied","\u200b","\u200b","57,023","\u200b","\u200b","98,286","\u200b","\u200b","203,263","\u200b","\u200b","52,141","\u200b","\u200b","410,713"],["Non-owner Occupied","\u200b","\u200b","4,395","\u200b","\u200b","44,937","\u200b","\u200b","81,634","\u200b","\u200b","7,741","\u200b","\u200b","138,707"],["Multi-family","\u200b","\u200b","2,771","\u200b","\u200b","8,871","\u200b","\u200b","49,483","\u200b","\u200b","493","\u200b","\u200b","61,618"],["Construction & Development","\u200b","\u200b","20,042","\u200b","\u200b","13,023","\u200b","\u200b","60,797","\u200b","\u200b","32,210","\u200b","\u200b","126,072"],["Residential 1-4 family","\u200b","\u200b","7,698","\u200b","\u200b","22,566","\u200b","\u200b","45,284","\u200b","\u200b","301,300","\u200b","\u200b","376,848"],["Consumer and other","\u200b","\u200b","610","\u200b","\u200b","1,012","\u200b","\u200b","1,077","\u200b","\u200b","\u2014","\u200b","\u200b","2,699"],["Total","\u200b","$","199,703","\u200b","$","252,650","\u200b","$","490,981","\u200b","$","393,919","\u200b","$","1,337,253"]]
[[/GREPCENT_TABLE]]

​

NONPERFORMING ASSETS

In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. We generally do not forgive principal or interest on loans or modify the interest rates on loans to rates that are below market rates. Furthermore, we are committed to collecting on all of our loans and, as a result, at times have lower net charge-offs compared to many of our peer banks. We believe that our commitment to collecting on all of our loans results in higher loan recoveries.

53

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Our nonperforming assets consist of nonperforming loans and foreclosed real estate. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. The composition of our nonperforming assets is as follows:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","As of December 31,","\u200b"],["\u200b","\u200b","2024","","2023","","2022"],["\u200b","","(dollars in thousands)"],["Nonperforming loans","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Nonaccrual loans","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Commercial & industrial","\u200b","\u200b","794","\u200b","\u200b","1,344","\u200b","\u200b","418","\u200b"],["Commercial real estate","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Owner Occupied","\u200b","\u200b","4,999","\u200b","\u200b","3,877","\u200b","\u200b","2,688","\u200b"],["Non-owner Occupied","\u200b","\u200b","493","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Multi-family","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Construction & Development","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","17","\u200b"],["Residential 1-4 family","\u200b","\u200b","511","\u200b","\u200b","429","\u200b","\u200b","505","\u200b"],["Consumer and other","\u200b","\u200b","29","\u200b","\u200b","12","\u200b","\u200b","\u2014","\u200b"],["Total nonaccrual loans","\u200b","\u200b","6,826","\u200b","\u200b","5,662","\u200b","\u200b","3,628","\u200b"],["Loans past due 90 days, but still accruing","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Commercial & industrial","\u200b","\u200b","328","\u200b","\u200b","106","\u200b","\u200b","\u2014","\u200b"],["Commercial real estate","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Owner Occupied","\u200b","\u200b","\u2014","\u200b","\u200b","252","\u200b","\u200b","\u2014","\u200b"],["Non-owner Occupied","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Multi-family","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Construction & Development","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Residential 1-4 family","\u200b","\u200b","1,294","\u200b","\u200b","507","\u200b","\u200b","268","\u200b"],["Consumer and other","\u200b","\u200b","48","\u200b","\u200b","28","\u200b","\u200b","5","\u200b"],["Total loans past due 90 days, but still accruing","\u200b","\u200b","1,670","\u200b","\u200b","893","\u200b","\u200b","273","\u200b"],["Total nonperforming loans","\u200b","$","8,496","\u200b","$","6,555","\u200b","$","3,901","\u200b"],["OREO","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Commercial real estate owned","\u200b","$","\u2014","\u200b","$","\u2014","\u200b","$","\u2014","\u200b"],["Residential real estate owned","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Acquired bank property real estate owned","\u200b","\u200b","741","\u200b","\u200b","2,573","\u200b","\u200b","2,520","\u200b"],["Total OREO","\u200b","$","741","\u200b","$","2,573","\u200b","$","2,520","\u200b"],["Total nonperforming assets (\"NPAs\")","\u200b","$","9,237","\u200b","$","9,128","\u200b","$","6,421","\u200b"],["Accruing modified loans to borrowers experiencing financial difficulty (1)","\u200b","$","16","\u200b","$","21","\u200b","$","450","\u200b"],["Ratios","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Nonaccrual loans to total loans","\u200b","\u200b","0.19","%","\u200b","0.17","%","\u200b","0.13","%"],["NPAs to total loans plus OREO","\u200b","\u200b","0.26","%","\u200b","0.27","%","\u200b","0.22","%"],["NPAs to total assets","\u200b","\u200b","0.21","%","\u200b","0.21","%","\u200b","0.18","%"],["ACL - Loans to nonaccrual loans","\u200b","\u200b","647","%","\u200b","770","%","\u200b","625","%"],["ACL - Loans to total loans","\u200b","\u200b","1.26","%","\u200b","1.30","%","\u200b","0.78","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Amounts prior to January 1, 2023 represent accruing troubled debt restructured loans."]]
[[/GREPCENT_TABLE]]

At December 31, 2024, 2023 and 2022, loans individually evaluated had specific reserves of $2.4 million, $4.2 million and a negligible amount, respectively. Levels of specific reserves are dependent on the specific underlying impaired loans at any given time. Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for credit losses at December 31, 2024.

54

Table of Contents

Nonaccrual Loans

Loans are typically placed on nonaccrual status when any payment of principal and/or interest is 90 days or more past due, unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. Loans are also placed on nonaccrual status when management believes, after considering economic and business conditions, that the principal or interest will not be collectible in the normal course of business. We monitor closely the performance of our loan portfolio. In addition to the monitoring and review of loan performance internally, we have also contracted with an independent organization to review our commercial and retail loan portfolios. The status of delinquent loans, as well as situations identified as potential problems, is reviewed on a regular basis by senior management.

ALLOWANCE FOR CREDIT LOSSES - LOANS

The Company assesses the adequacy of its ACL - Loans at the end of each calendar quarter. The level of ACL - Loans is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL - Loans is increased by a provision for credit losses, which is charged to expense, when the analysis shows that an increase is warranted. The ACL – Loans is reduced by charge-offs, net of recoveries, when they occur. The ACL is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.

For further details on the Company’s ACL – Loans, refer to the footnotes presented along with the consolidated financial statements elsewhere in this report.

At December 31, 2024, the ACL - Loans was $44.2 million (representing 1.26% of year-end loans). Bank First recorded a negative provision for credit losses totaling $0.8 million during 2024. While the Bank’s overall credit quality has remained consistently strong over all these periods, improvement in financial trends related to two relationships that were part of the Hometown acquisition allowed for a reduction in specific reserves related to them, causing the decrease in overall required allowance for credit losses related to the loan portfolio. The Company adopted CECL as of January 1, 2023, which increased the ACL - Loans by $11.0 million. In addition, the ACL - Loans increased during 2023 due to the acquisition of Hometown, which required a $3.6 million provision for credit losses on non-Purchase Credit Deteriorated (“PCD”) loans and a $5.5 million reserve related to PCD loans. The reserve related to PCD loans was recorded as an adjustment to the acquisition date fair values on these loans and was not included in the provision for credit losses. The Bank has recorded net loan recoveries over each of the last three years.

55

Table of Contents

The following table summarizes the changes in our ACL - Loans for the years indicated:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year ended","\u200b","Year ended","\u200b","Year ended","\u200b"],["\u200b","\u200b","December 31,","\u200b","December 31,","\u200b","December 31,","\u200b"],["\u200b","\u200b","2024","\u200b","2023","\u200b","2022"],["\u200b","\u200b","(dollars in thousands)"],["Balance of ACL - Loans at the beginning of period","","$","43,609","","$","22,680","","$","20,315"],["Adoption of CECL","\u200b","\u200b","\u2014","\u200b","\u200b","10,972","\u200b","\u200b","\u2014","\u200b"],["ACL - Loans on PCD loans acquired","\u200b","\u200b","\u2014","\u200b","\u200b","5,534","\u200b","\u200b","\u2014","\u200b"],["Net loans charged-off (recovered):","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b"],["Commercial & industrial","","\u200b","2","","\u200b","(22)","","\u200b","(499)"],["Commercial real estate - owner occupied","","\u200b","(615)","","\u200b","(70)","","\u200b","816"],["Commercial real estate - non-owner occupied","","\u200b","\u2014","","\u200b","\u2014","","\u200b","(360)"],["Commercial real estate - multi-family","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Construction & Development","","\u200b","\u2014","","\u200b","\u2014","","\u200b","(152)"],["Residential 1-4 family","","\u200b","31","","\u200b","(106)","","\u200b","26"],["Consumer","","\u200b","73","","\u200b","\u2014","","\u200b","21"],["Other Loans","","\u200b","67","","\u200b","67","","\u200b","(17)"],["Total net loans recovered","","\u200b","(442)","","\u200b","(131)","","\u200b","(165)"],["Provision charged to operating expense","","\u200b","(800)","","\u200b","4,682","","\u200b","2,200"],["Transfer from (to) ACL - Unfunded Commitments","\u200b","\u200b","900","\u200b","\u200b","(390)","\u200b","\u200b","\u2014","\u200b"],["Balance of ACL - Loans at end of period","\u200b","$","44,151","\u200b","$","43,609","\u200b","$","22,680","\u200b"],["Ratio of net charge-offs (recoveries) to average loans by loan composition","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Commercial & industrial","\u200b","","0.00","%","","\u2014","%","","(0.12)","%"],["Commercial real estate - owner occupied","\u200b","","(0.07)","%","","(0.01)","%","","0.13","%"],["Commercial real estate - non-owner occupied","\u200b","","\u2014","%","","\u2014","%","","(0.06)","%"],["Commercial real estate - multi-family","\u200b","\u200b","\u2014","%","\u200b","\u2014","%","\u200b","\u2014","%"],["Construction & Development","\u200b","","\u2014","%","","\u2014","%","","(0.09)","%"],["Residential 1-4 family","\u200b","","0.00","%","","(0.01)","%","","\u2014","%"],["Consumer","\u200b","","0.14","%","","\u2014","%","","0.05","%"],["Other Loans","\u200b","","0.44","%","","0.36","%","","(0.04)","%"],["Total net charge-offs (recoveries) to average loans","\u200b","","(0.01)","%","","\u2014","%","","(0.01)","%"]]
[[/GREPCENT_TABLE]]

​

The level of charge-offs depends on many factors, including the national and regional economy. Cyclical lagging factors may result in charge-offs being higher than historical levels. The dollar amount of the ACL - Loans increased primarily as a result of loan growth and changes in the portfolio composition. Although the allowance is allocated between categories, the entire allowance is available to absorb losses attributable to all loan categories. Management believes that the ACL - Loans is adequate.

56

Table of Contents

The following table summarizes an allocation of the ACL - Loans and the related percentage of loans outstanding in each category for the periods below.

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31","\u200b"],["\u200b","\u200b","2024","\u200b","2023","\u200b","2022","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","% of","\u200b","\u200b","\u200b","\u200b","% of","\u200b","\u200b","\u200b","\u200b","% of","\u200b"],["(in thousands, except %)","","Amount","","Loans","","Amount","","Loans","","Amount","","Loans"],["Loan Type:","","\u200b","","","","","\u200b","","","","","\u200b"],["Commercial & industrial","\u200b","$","5,394","","15","%","$","5,965","","15","%","$","4,071","","17","%"],["Commercial real estate - owner occupied","\u200b","","11,033","","27","%","","12,285","","27","%","","5,204","","25","%"],["Commercial real estate - non-owner occupied","\u200b","","4,740","","13","%","","5,700","","14","%","","2,644","","13","%"],["Commercial real estate - multi-family","\u200b","\u200b","3,739","\u200b","10","%","\u200b","4,754","\u200b","10","%","\u200b","2,761","\u200b","10","%"],["Construction & development","\u200b","","5,223","","7","%","","3,597","","6","%","","1,592","","7","%"],["Residential 1-4 family","\u200b","","12,801","","26","%","","10,620","","27","%","","5,944","","25","%"],["Consumer","\u200b","","1,084","","2","%","","615","","1","%","","314","","2","%"],["Other loans","\u200b","","137","","\u2014","%","","73","","\u2014","%","","150","","1","%"],["Total allowance","\u200b","$","44,151","","100","%","$","43,609","","100","%","$","22,680","","100","%"]]
[[/GREPCENT_TABLE]]

​

SOURCES OF FUNDS

General.   Deposits traditionally have been our primary source of funds for our investment and lending activities. We continue to focus on growing core deposits through our relationship driven banking philosophy and community-focused marketing programs. We also borrow from the FHLB of Chicago to supplement cash needs, to lengthen the maturities of liabilities for interest rate risk management purposes and to manage our cost of funds. Our additional sources of funds are scheduled payments and prepayments of principal and interest on loans and investment securities and fee income and proceeds from the sales of loans and securities.

Deposits.  Our current deposit products include noninterest-bearing and interest-bearing checking accounts, savings accounts, money market accounts, and certificate of deposits. As of December 31, 2024, deposit liabilities accounted for approximately 81.4% of our total liabilities and equity. We accept deposits primarily from customers in the communities in which our branches and offices are located, as well as from small businesses and other customers throughout our lending area. We rely on our competitive pricing and products, quality customer service, and convenient locations and hours to attract and retain deposits. Deposit rates and terms are based primarily on current business strategies, market interest rates, liquidity requirements and our deposit growth goals.

Total deposits were $3.66 billion and $3.43 billion as of December 31, 2024 and 2023, respectively. Noninterest-bearing deposits at December 31, 2024 and 2023 were $1.02 billion and $1.05 billion, respectively, while interest-bearing deposits were $2.64 billion and $2.38 billion at December 31, 2024 and 2023, respectively. During 2024 the Bank experienced 6.7% growth in deposits, but also experienced a shift in customer behavior, moving balances from noninterest-bearing accounts to interest-bearing accounts, resulting in the noted decline in noninterest-bearing totals.

At December 31, 2024, we had a total of $651.1 million in certificates of deposit. This total included $20.1 million of brokered deposits, of which $5.0 million had remaining maturities of one year or less. Based on historical experience and our current pricing strategy, we believe we will retain a large portion of these non-brokered accounts upon maturity.

57

Table of Contents

The following tables set forth the average balances of our deposits for the periods indicated:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b"],["\u200b","\u200b","2024","\u200b","2023","\u200b","2022","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","","\u200b"],["\u200b","","Amount","","Percent","","Amount","","Percent","","Amount","","Percent","","\u200b"],["\u200b","\u200b","(dollars in thousands)","\u200b"],["Noninterest-bearing demand deposits","\u200b","$","1,000,772","","28.9","%","$","1,078,468","","31.9","%","$","878,727","","31.6","%","\u200b"],["Interest-bearing checking deposits","\u200b","","401,990","","11.6","%","","293,568","","8.7","%","","253,443","","9.1","%","\u200b"],["Savings deposits","\u200b","","816,410","","23.6","%","","833,360","","24.6","%","","691,599","","24.8","%","\u200b"],["Money market accounts","\u200b","","616,964","","17.8","%","","665,988","","19.7","%","","666,717","","23.9","%","\u200b"],["Certificates of deposit","\u200b","","613,593","","17.7","%","","509,273","","15.1","%","","286,054","","10.3","%","\u200b"],["Brokered deposits","\u200b","","7,662","","0.2","%","","3,184","","0.1","%","","8,587","","0.3","%","\u200b"],["Total","\u200b","$","3,457,391","","100","%","$","3,383,841","\u200b","100","%","$","2,785,127","","100.0","%","\u200b"]]
[[/GREPCENT_TABLE]]

​

The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of December 31, 2024:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Time Deposits over FDIC","\u200b","Portion of Time Deposits in"],["\u200b","\u200b","Insurance Limits","","Excess of FDIC Insurance Limits"],["\u200b","","(dollars in thousands)"],["3 months or less remaining","\u200b","$","62,208","\u200b","$","34,458"],["Over 3 to 6 months remaining","\u200b","","61,580","\u200b","","27,580"],["Over 6 to 12 months remaining","\u200b","","25,849","\u200b","","9,599"],["Over 12 months or more remaining","\u200b","","13,689","\u200b","","6,189"],["Total","\u200b","$","163,326","\u200b","$","77,826"]]
[[/GREPCENT_TABLE]]

​

Borrowings

Deposits and investment securities held for sale are the primary source of funds for our lending activities and general business purposes. However, we may also obtain advances from the FHLB, purchase federal funds and engage in overnight borrowing from the Federal Reserve, correspondent banks, or enter into repurchase agreements.

Securities sold under repurchase agreements

The Company had securities sold under repurchase agreements which had contractual maturities up to one year from the transaction date with variable and fixed rate terms. The agreements to repurchase required that the Company (seller) repurchase identical securities as those that were sold. The securities underlying the agreements were under the Company’s control. The Company redeemed all securities sold under repurchase agreements during the first quarter of 2024 and has had no such balances since that time.

The following table summarizes securities sold under repurchase agreements, and the weighted average interest rates paid:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year ended December 31,","\u200b"],["(dollars in thousands)","","2024","","2023","","2022"],["Average daily amount of securities sold under repurchase agreements during the period","\u200b","$","414","\u200b","$","36,833","\u200b","$","25,749","\u200b"],["Weighted average interest rate on average daily securities sold under repurchase agreements","\u200b","","5.33","%","","4.92","%","","2.11","%"],["Maximum outstanding securities sold under repurchase agreements at any month-end","\u200b","$","\u2014","\u200b","$","75,747","\u200b","$","97,196","\u200b"],["Securities sold under repurchase agreements at period end","\u200b","$","\u2014","\u200b","$","75,747","\u200b","$","97,196","\u200b"],["Weighted average interest rate on securities sold under repurchase agreements at period end","\u200b","","NA","\u200b","","5.31","%","","4.31","%"]]
[[/GREPCENT_TABLE]]

​

58

Table of Contents

Lines of credit and other borrowings

The Company’s other borrowings have historically consisted primarily of short-term FHLB of Chicago advances collateralized by a blanket pledge agreement on the Company’s FHLB capital stock and retail and commercial loans held in the Company’s portfolio. There were $135.4 million and $35.3 million of advances outstanding from the FHLB at December 31, 2024 and 2023, respectively. See Note 14 “Notes Payable” of the Notes to Consolidated Financial Statements under Part II, Item 8 for additional disclosures.

The total loans pledged as collateral were $1.47 billion and $1.49 billion at December 31, 2024 and 2023, respectively.

On July 22, 2020, the Company entered into subordinated note agreements with two separate commercial banks. The Company had through December 31, 2020, to borrow funds up to a maximum availability of $6.0 million under each agreement, or $12.0 million total. These notes were issued with 10-year maturities, carry interest at a fixed rate of 5.0% through June 30, 2025, and at a variable rate thereafter, payable quarterly. These notes are callable on or after January 1, 2026 and qualify for Tier 2 capital for regulatory purposes. The Company had outstanding balances of $6.0 million under these agreements at December 31, 2024 and 2023.

During August 2022, the Company entered into subordinated note agreements with an individual. The Company had outstanding balances of $6.0 million under these agreements as of December 31, 2024 and 2023. These notes were issued with 10-year maturities, carry interest at a fixed rate of 5.25% through August 6, 2027, and at a variable rate thereafter, payable quarterly. These notes are callable on or after August 6, 2027 and qualify for Tier 2 capital for regulatory purposes. The individual associated with these subordinated note agreements is not a related party of the Company.

As a result of the acquisition of Hometown during February 2023, the Company acquired all of the common securities of Hometown’s wholly-owned subsidiaries, Hometown Bancorp, Ltd. Capital Trust I (“Trust I”) and Hometown Bancorp, Ltd. Capital Trust II (“Trust II”). The Company also assumed adjustable rate junior subordinated debentures issued to these trusts. The junior subordinated debentures issued to Trust I and Trust II totaled $4.1 million and $8.2 million, respectively, carried interest at floating rates resetting on each quarterly payment date, and were due on January 7, 2034 and December 15, 2036, respectively. Applicable discounts originally totaling $1.5 million were recorded to carry the assumed debentures at their then estimated fair value and were being accreted to interest expense over the remaining life of the debentures. Both junior subordinated debentures were redeemable by the Company, subject to prior approval by the Federal Reserve Bank, on any quarterly payment date. The junior subordinated debentures represented the sole asset of Trust I and Trust II. The trusts were not included in the Company’s consolidated financial statements. The net effect of all agreements assumed with respect to Trust I and Trust II is that the Company, through payments on its debentures, was liable for the distributions and other payments required on the trusts’ preferred securities. Trust I and Trust II also provided the Company with $12.0 million in Tier 1 capital for regulatory capital purposes. The Company redeemed the junior subordinated debenture related to Trust II during December 2023, resulting in Trust II’s dissolution. The Company redeemed the junior subordinated debenture related to Trust I on January 8, 2024, resulting in Trust I’s dissolution.

INVESTMENT SECURITIES

Our securities portfolio consists of securities available for sale and securities held to maturity. Securities are classified as held to maturity or available for sale at the time of purchase. U.S. Treasury securities, obligations of states and political subdivisions, and mortgage-backed securities, all of which are issued by U.S. government agencies or U.S. government-sponsored enterprises, make up the largest components of the securities portfolio. We manage our investment portfolio to provide an adequate level of liquidity as well as to maintain neutral interest rate-sensitive positions, while earning an adequate level of investment income without taking undue or excessive risk.

Securities available for sale consist of U.S. Treasury securities, obligations of U.S. Government sponsored agencies, obligations of states and political subdivision, agency mortgage-backed securities, and corporate notes. Securities classified as available for sale, which management has the intent and ability to hold for an indefinite period of time, but not necessarily to maturity, are carried at fair value, with unrealized gains and losses, net of related deferred income taxes, included in stockholders’ equity as a separate component of other comprehensive income. The fair value of securities available for sale totaled $223.1 million and included negligible gross unrealized gains and gross unrealized losses of $12.9 million at

59

Table of Contents

December 31, 2024. At December 31, 2023, the fair value of securities available for sale totaled $142.2 million and included gross unrealized gains of $0.1 million and gross unrealized losses of $12.2 million.

Securities classified as held to maturity consist of U.S. Treasury securities and obligations of states and political subdivisions. These securities, which management has the intent and ability to hold to maturity, are reported at amortized cost of $110.8 million and $103.3 million as of December 31, 2024 and 2023, respectively.

The Company recognized a negligible net loss on sale of investment securities during the year ended December 31, 2024 and a net loss on sale of investment securities of $7.9 million during the year ended December 31, 2023.

The following tables set forth the composition and maturities of investment securities as of December 31, 2024 and December 31, 2023. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","After One, But","\u200b","After Five, But","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Within One Year","\u200b","Within Five Years","\u200b","Within Ten Years","\u200b","After Ten Years","\u200b","Total"],["\u200b","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted"],["\u200b","\u200b","Amortized","\u200b","Average","\u200b","Amortized","\u200b","Average","\u200b","Amortized","\u200b","Average","\u200b","Amortized","\u200b","Average","\u200b","Amortized","\u200b","Average"],["At December 31, 2024","","Cost","","Yield (1)","","Cost","","Yield (1)","","Cost","","Yield (1)","","Cost","","Yield (1)","","Cost","","Yield (1)"],["\u200b","\u200b","(dollars in thousands)","\u200b"],["Available for sale securities","","\u200b","","","","","\u200b","","","","","\u200b","","","","","\u200b","","","","","\u200b","","","","\u200b"],["U.S. Treasury securities","","$","99,656","","4.2","%","$","\u2014","","\u2014","%","$","\u2014","","\u2014","%","$","\u2014","","\u2014","%","$","99,656","","4.2","%"],["Obligations of U.S. Government sponsored agencies","\u200b","$","1,493","","5.0","%","$","1,200","","4.5","%","$","13,761","","2.0","%","$","11,312","","2.2","%","$","27,766","","2.3","%"],["Obligations of states and political subdivisions","\u200b","","344","","4.9","%","","11,970","","4.1","%","","18,853","","3.1","%","","31,825","","2.8","%","","62,992","","3.2","%"],["Mortgage-backed securities","\u200b","","45","","3.5","%","","10,598","","3.4","%","","7,979","","4.4","%","","11,204","","3.7","%","","29,826","","3.8","%"],["Corporate notes","\u200b","","\u2014","","\u2014","%","","5,000","","8.7","%","","9,606","","3.3","%","","1,063","","10.3","%","","15,669","","5.5","%"],["Total available for sale securities","\u200b","$","101,538","","4.2","%","$","28,768","","4.7","%","$","50,199","","3.0","%","$","55,404","","3.0","%","$","235,909","","3.7","%"],["Held to maturity securities","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b"],["U.S. Treasury securities","\u200b","$","22,671","","3.6","%","$","40,574","","3.7","%","$","44,316","","4.3","%","$","\u2014","","\u2014","%","$","107,561","","3.9","%"],["Obligations of states and political subdivisions","\u200b","\u200b","800","","2.3","%","\u200b","2,395","","2.7","%","\u200b","\u2014","","\u2014","%","\u200b","\u2014","","\u2014","%","\u200b","3,195","\u200b","2.6","%"],["Total held to maturity securities","\u200b","$","23,471","\u200b","3.5","%","$","42,969","\u200b","3.7","%","$","44,316","","4.3","%","$","\u2014","","\u2014","%","$","110,756","\u200b","3.9","%"],["Total","\u200b","$","125,009","","4.1","%","$","71,737","","4.1","%","$","94,515","","3.6","%","$","55,404","","3.0","%","$","346,665","","3.8","%"]]
[[/GREPCENT_TABLE]]

​

60

Table of Contents

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","After One, But","\u200b","After Five, But","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Within One Year","\u200b","Within Five Years","\u200b","Within Ten Years","\u200b","After Ten Years","\u200b","Total"],["\u200b","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted"],["\u200b","\u200b","Amortized","\u200b","Average","\u200b","Amortized","\u200b","Average","\u200b","Amortized","\u200b","Average","\u200b","Amortized","\u200b","Average","\u200b","Amortized","\u200b","Average"],["At December 31, 2023","","Cost","","Yield (1)","","Cost","","Yield (1)","","Cost","","Yield (1)","","Cost","","Yield (1)","","Cost","","Yield (1)"],["\u200b","","(dollars in thousands)","\u200b"],["Available for sale securities","","\u200b","","","","","\u200b","","","","","\u200b","","","","","\u200b","","","","","\u200b","","","","\u200b"],["Obligations of U.S. Government sponsored agencies","\u200b","$","980","","5.1","%","$","1,464","","5.0","%","$","16,202","","2.2","%","$","12,807","","2.2","%","$","31,453","","2.5","%"],["Obligations of states and political subdivisions","\u200b","","\u2014","","\u2014","%","","9,828","","4.1","%","","14,542","","3.5","%","","39,559","","2.8","%","","63,929","","3.1","%"],["Mortgage-backed securities","\u200b","","3,579","","2.6","%","","8,649","","3.3","%","","11,788","","4.1","%","","13,773","","3.7","%","","37,789","","3.6","%"],["Corporate notes","\u200b","","4,995","","3.3","%","","5,000","","6.5","%","","9,119","","3.4","%","","1,543","","6.5","%","","20,657","","4.4","%"],["Certificates of deposit","\u200b","\u200b","490","\u200b","1.3","%","\u200b","\u2014","\u200b","\u2014","%","\u200b","\u2014","\u200b","\u2014","%","\u200b","\u2014","\u200b","\u2014","%","\u200b","490","\u200b","1.3","%"],["Total available for sale securities","\u200b","$","10,044","","3.1","%","$","24,941","","4.4","%","$","51,651","","3.2","%","$","67,682","","2.9","%","$","154,318","","3.3","%"],["Held to maturity securities","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","","\u200b","","\u200b","","","\u200b","","\u200b","","","\u200b","","\u200b","","","\u200b"],["U.S. Treasury securities","","$","16,816","","3.4","%","$","60,714","","3.6","%","$","21,643","","4.7","%","$","\u2014","","\u2014","%","\u200b","99,173","","3.8","%"],["Obligations of states and political subdivisions","\u200b","\u200b","956","","2.7","%","\u200b","2,324","","2.5","%","\u200b","871","","3.0","%","\u200b","\u2014","","\u2014","%","\u200b","4,151","\u200b","2.6","%"],["Total held to maturity securities","\u200b","$","17,772","\u200b","3.4","%","$","63,038","\u200b","3.6","%","$","22,514","","4.6","%","$","\u2014","","\u2014","%","$","103,324","\u200b","3.8","%"],["Total","\u200b","$","27,816","","3.3","%","$","87,979","","3.8","%","$","74,165","","3.7","%","$","67,682","","2.9","%","$","257,642","","3.5","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Weighted Average Yield is shown on a fully taxable equivalent basis using a federal tax rate of 21%."]]
[[/GREPCENT_TABLE]]

LIQUIDITY, CASH FLOWS, AND CAPITAL RESOURCES

Liquidity.    Liquidity is defined as the Company’s ability to generate adequate cash to meet its needs for day-to-day operations and material long and short-term commitments. Liquidity is the risk of potential loss if we were unable to meet our funding requirements at a reasonable cost. We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of customers who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our asset and liability management policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain our operations.

We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity based on demand and specific events and uncertainties to meet current and future financial obligations of a short-term nature. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits. Our objective in managing liquidity is to respond to the needs of depositors and borrowers as well as to increase earnings enhancement opportunities in a changing marketplace.

Our liquidity is maintained through investment portfolio, deposits, borrowings from the FHLB, and lines available from correspondent banks. Our highest priority is placed on growing noninterest bearing deposits through strong community involvement in the markets that we serve. Borrowings and brokered deposits are considered short-term supplements to our overall liquidity but are not intended to be relied upon for long-term needs. We believe that our present position is adequate to meet our current and future liquidity needs, and management knows of no trend or event that will have a material impact on the Company’s ability to maintain liquidity at satisfactory levels. Management further believes that our present position is adequate to assure that securities classified as held to maturity will not need to be sold prior to maturity.

Cash Flows.  Our cash flows consist of operating activities, investing activities, and financing activities.

Net cash flows provided by operating activities totaled $65.8 million during 2024 compared to $52.9 million during 2023. The largest contributing factor to the increase in cash flows provided by operating activities during 2024 was an increase in net income excluding realized gains and losses on the sale of securities and UFS (which are considered investing activities).

61

Table of Contents

Net cash flows used by investing activities totaled $252.9 million during 2024 compared to net cash flows provided by investing activities totaling $269.0 million during 2023. Significant increases in our loan portfolio along with purchases of securities during 2024 created net cash flows used during 2024. The absence of significant increases in these areas added to proceeds from the sales of securities and UFS and $90.0 million in net cash received in the acquisition of Hometown created net cash flows provided by investing activities during 2023.

Net cash flows provided by financing activities totaled $201.0 million during 2024 compared to net cash flows used in financing activities totaling $193.8 million during 2023. The primary difference in year-over-year cash flows related to financing activities was significant growth in deposits during 2024 compared to significant decreases in deposits during 2023.

See the consolidated statement of cash flows elsewhere in this report for further information regarding cash flow activity during 2024 and 2023.

Capital Adequacy.  Total shareholders’ equity was $639.7 million at December 31, 2024, compared to $619.8 million at December 31, 2023. Our total shareholders’ equity increased during 2024 and 2023 as a result of our profitability, reduced by dividends paid and common share repurchases. Growth in shareholders’ equity was further stimulated by the acquisition of Hometown during 2023.

Our capital management consists of providing adequate equity to support our current and future operations. We are subject to various regulatory capital requirements administered by state and federal banking agencies, including the Federal Reserve and the OCC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and Company must meet specific capital guidelines that involve quantitative measure of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and the classifications are also subject to qualitative judgment by the regulator in regards to risk weighting and other factors. See “Business—Supervision and Regulation—Capital Requirements.”

62

Table of Contents

The following table reflects capital ratios computed pursuant to the regulatory capital rules as applicable to the Company and the Bank. As a result of the Economic Growth Act, the Company is no longer required to comply with its risk-based capital rules. For more information, see “Business—Supervision and Regulation—Capital Requirements.”

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Minimum Capital Required","\u200b","\u200b","Minimum To Be Well-"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Minimum Capital","\u200b","\u200b","for Capital Adequacy Plus","\u200b","\u200b","Capitalized Under prompt"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Required for Capital","\u200b","\u200b","Capital Conservation Buffer","\u200b","\u200b","corrective Action"],["\u200b","\u200b","Actual","\u200b","\u200b","Adequacy","\u200b","\u200b","Basel III Phase-In Schedule","\u200b","\u200b","Provisions"],["\u200b","\u200b","Amount","\u200b","Ratio","\u200b","\u200b","Amount","\u200b","Ratio","\u200b","\u200b","Amount","\u200b","Ratio","\u200b","\u200b","Amount","\u200b","Ratio"],["\u200b","\u200b","(dollars in thousands)"],["At December 31, 2024","","\u200b","","","","","\u200b","","","","","\u200b","","","","","\u200b","","","","\u200b"],["Bank First Corporation:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total capital (to risk-weighted assets)","\u200b","$","509,763","","14.1","%","$","288,325","","8.0","%","$","378,427","","10.5","%","\u200b","N/A","","N/A","\u200b"],["Tier I capital (to risk-weighted assets)","\u200b","\u200b","457,749","","12.7","%","\u200b","216,244","","6.0","%","\u200b","306,346","","8.5","%","\u200b","N/A","","N/A","\u200b"],["Common equity tier I capital (to risk-weighted assets)","\u200b","\u200b","457,749","","12.7","%","\u200b","162,183","","4.5","%","\u200b","252,285","","7.0","%","\u200b","N/A","","N/A","\u200b"],["Tier I capital (to average assets)","\u200b","\u200b","457,749","","11.0","%","\u200b","167,134","","4.0","%","\u200b","167,134","","4.0","%","\u200b","N/A","","N/A","\u200b"],["Bank First, N.A:","\u200b","","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","\u200b"],["Total capital (to risk-weighted assets)","\u200b","$","438,549","","12.2","%","$","288,152","","8.0","%","$","378,200","","10.5","%","$","360,190","","10.0","%"],["Tier I capital (to risk-weighted assets)","\u200b","\u200b","398,535","","11.1","%","\u200b","216,114","","6.0","%","\u200b","306,162","","8.5","%","\u200b","288,152","","8.0","%"],["Common equity tier I capital (to risk-weighted assets)","\u200b","\u200b","398,535","","11.1","%","\u200b","162,086","","4.5","%","\u200b","252,133","\u200b","7.0","%","\u200b","234,124","\u200b","6.5","%"],["Tier I capital (to average assets)","\u200b","\u200b","398,535","","9.5","%","\u200b","167,019","","4.0","%","\u200b","167,019","","4.0","%","\u200b","208,774","","5.0","%"],["At December 31, 2023","","\u200b","\u200b","","","","\u200b","","","","","\u200b","","","","","\u200b","","","","\u200b"],["Bank First Corporation:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total capital (to risk-weighted assets)","\u200b","$","484,398","","14.0","%","$","276,904","","8.0","%","$","363,437","","10.5","%","\u200b","N/A","","N/A","\u200b"],["Tier I capital (to risk-weighted assets)","\u200b","\u200b","437,979","","12.7","%","\u200b","207,678","","6.0","%","\u200b","294,211","","8.5","%","\u200b","N/A","","N/A","\u200b"],["Common equity tier I capital (to risk-weighted assets)","\u200b","\u200b","433,979","","12.5","%","\u200b","155,759","","4.5","%","\u200b","242,291","","7.0","%","\u200b","N/A","","N/A","\u200b"],["Tier I capital (to average assets)","\u200b","\u200b","437,979","","11.1","%","\u200b","158,581","","4.0","%","\u200b","158,581","","4.0","%","\u200b","N/A","","N/A","\u200b"],["Bank First, N.A:","\u200b","","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","","\u200b","\u200b","","\u200b","\u200b"],["Total capital (to risk-weighted assets)","\u200b","$","446,634","","12.9","%","$","276,726","","8.0","%","$","363,202","","10.5","%","$","345,907","","10.0","%"],["Tier I capital (to risk-weighted assets)","\u200b","\u200b","412,215","","11.9","%","\u200b","207,544","","6.0","%","\u200b","294,021","","8.5","%","\u200b","276,726","","8.0","%"],["Common equity tier I capital (to risk-weighted assets)","\u200b","\u200b","412,215","","11.9","%","\u200b","155,658","","4.5","%","\u200b","242,135","\u200b","7.0","%","\u200b","224,840","\u200b","6.5","%"],["Tier I capital (to average assets)","\u200b","\u200b","412,215","","10.4","%","\u200b","158,585","","4.0","%","\u200b","158,585","","4.0","%","\u200b","198,231","","5.0","%"]]
[[/GREPCENT_TABLE]]

​

As previously mentioned, the Company carried $12.0 million of subordinated debt as of December 31, 2024 and 2023, as well as $4.0 million of junior subordinated debt as of December 31, 2023. These totals are included in total capital for the Company in the tables above.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

We are party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments primarily include commitments to originate and sell loans, standby and direct pay letters of credit, unused lines of credit and unadvanced portions of construction and development loans. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in these particular classes of financial instruments.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments, standby and direct pay letters of credit and unadvanced portions of construction and development loans is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

​

63

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Off-Balance Sheet Arrangements.

Our significant off-balance-sheet arrangements consist of the following:

[[GREPCENT_TABLE]]
[["","\u25cf","Unused lines of credit"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Standby and direct pay letters of credit"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Credit card arrangements"]]
[[/GREPCENT_TABLE]]

​

Off-balance sheet arrangement means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the registrant is a party, under which the registrant has (1) any obligation under a guarantee contract, (2) retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement, (3) any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument, or (4) any obligation, including a contingent obligation, arising out of a variable interest.

Loan commitments are made to accommodate the financial needs of our customers. Standby and direct pay letters of credit commit us to make payments on behalf of customers when certain specified future events occur. Both arrangements have credit risk essentially the same as that involved in extending loans to clients and are subject to our normal credit policies. Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management’s credit assessment of the customer.

Loan commitments and standby and direct pay letters of credit do not necessarily represent our future cash requirements because while the borrower has the ability to draw upon these commitments at any time, these commitments occasionally expire without being drawn upon. Our off-balance sheet arrangements as of December 31, 2024 were as follows:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Amounts of Commitments Expiring - By Period as of December 31, 2024"],["\u200b","\u200b","\u200b","\u200b","\u200b","Less Than","\u200b","One to","\u200b","Three to","\u200b","After Five"],["Other Commitments","","Total","","One Year","","Three Years","","Five Years","","Years"],["\u200b","\u200b","(dollars in thousands)"],["Unused lines of credit","\u200b","$","753,209","\u200b","$","411,564","\u200b","$","105,345","\u200b","$","37,493","\u200b","$","198,807"],["Standby and direct pay letters of credit","\u200b","","11,055","\u200b","","9,651","\u200b","","599","\u200b","","625","\u200b","","180"],["Credit card arrangements","\u200b","","24,399","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","24,399"],["Total commitments","\u200b","$","788,663","\u200b","$","421,215","\u200b","$","105,944","\u200b","$","38,118","\u200b","$","223,386"]]
[[/GREPCENT_TABLE]]

​

We closely monitor the amount of our remaining future commitments to borrowers in light of prevailing economic conditions and adjust these commitments as necessary. We will continue this process as new commitments are entered into or existing commitments are renewed.

Effects of Inflation

The effect of inflation on a financial institution differs significantly from the effect on an industrial company. While a financial institution’s operating expenses, particularly salary and employee benefits, are affected by general inflation, the asset and liability structure of a financial institution consists largely of monetary items. Monetary items, such as cash, investments, loans, deposits and other borrowings, are those assets and liabilities which are or will be converted into a fixed number of dollars regardless of changes in prices. As a result, changes in interest rates have a more significant impact on a financial institution’s performance than does general inflation. For additional information regarding interest rates and changes in net interest income see “Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Sensitivity.” Inflation may have impacts on the Bank’s customers, on businesses and consumers and their ability or willingness to invest, save or spend, and perhaps on their ability to repay loans. As such, there would likely be impacts on the general appetite of banking products and the credit health of the Bank’s customer base.

64

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