UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 001-38676

BANK FIRST CORPORATION

(Exact name of registrant as specified in its charter)

WISCONSIN	39-1435359
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

402 North 8th Street, Manitowoc, Wisconsin	54220
(Address of principal executive offices)	(Zip Code)

(920) 652-3100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ⌧    No  ◻

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ⌧    No  ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ⌧	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name on each exchange on which registered
Common Stock, par value $0.01 per share	BFC	The Nasdaq Stock Market LLC

The number of shares of the issuer’s common stock, par value $0.01, outstanding as of November 12, 2024 was 10,012,057 shares.

TABLE OF CONTENTS

		Page Number
Part I. Financial Information		3
ITEM 1.	Financial Statements	3
	Consolidated Balance Sheets – September 30, 2024 (unaudited) and December 31, 2023	3
	Consolidated Statements of Income – Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	4
	Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity – Three and Nine Months Ended September 30, 2024 and 2023  (unaudited)	6
	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2024 and 2023 (unaudited)	7
	Notes to Unaudited Consolidated Financial Statements	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	55
ITEM 4.	Controls and Procedures	57
Part II. Other Information		57
ITEM 1.	Legal Proceedings	57
ITEM 1A.	Risk Factors	57
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
ITEM 3.	Defaults Upon Senior Securities	58
ITEM 4.	Mine Safety Disclosures	58
ITEM 5.	Other Information	58
ITEM 6.	Exhibits	59
Signatures		60

2

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS:

BANK FIRST CORPORATION

Consolidated Balance Sheets

(In thousands, except share and per share data)

	September 30, 2024		December 31, 2023
		(Unaudited)		(Audited)
Assets
Cash and due from banks	$	63,985	$	69,973
Interest-bearing deposits		140,443		177,495
Cash and cash equivalents		204,428		247,468
Securities held to maturity, at amortized cost ($110,993 and $103,626 fair value at September 30, 2024 and December 31, 2023, respectively)		109,236		103,324
Securities available for sale, at fair value ($137,642 and $154,318 amortized cost at September 30, 2024 and December 31, 2023, respectively)		128,438		142,197
Loans held for sale		4,371		3,012
Loans		3,470,920		3,342,974
Allowance for credit losses - loans ("ACL-Loans")		(45,212)		(43,609)
Loans, net		3,425,708		3,299,365
Premises and equipment, net		69,710		69,891
Goodwill		175,106		175,106
Other investments		22,567		21,366
Cash value of life insurance		61,119		61,292
Core deposit intangibles, net		22,592		26,996
Mortgage servicing rights ("MSR")		13,351		13,668
Other real estate owned (“OREO”)		712		2,573
Investment in Ansay and Associates, LLC ("Ansay")		34,747		32,926
Other assets		22,413		22,658
TOTAL ASSETS	$	4,294,498	$	4,221,842
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Interest-bearing deposits	$	2,463,084	$	2,382,185
Noninterest-bearing deposits		1,021,657		1,050,735
Total deposits		3,484,741		3,432,920
Securities sold under repurchase agreements		—		75,747
Notes payable		135,346		35,270
Subordinated notes		12,000		12,000
Junior subordinated debenture		—		4,124
Other liabilities		33,516		41,983
Total liabilities		3,665,603		3,602,044
Stockholders’ equity:
Serial preferred stock - $0.01 par value
Authorized - 5,000,000 shares		—		—
Common stock - $0.01 par value
Authorized - 20,000,000 shares
Issued - 11,515,130 shares as of September 30, 2024 and December 31, 2023
Outstanding - 10,011,428 and 10,365,131 shares as of September 30, 2024 and December 31, 2023, respectively		115		115
Additional paid-in capital		333,303		333,815
Retained earnings		384,936		348,001
Treasury stock, at cost - 1,503,702 and 1,149,999 shares as of September 30, 2024 and December 31, 2023, respectively		(82,983)		(53,387)
Accumulated other comprehensive loss		(6,476)		(8,746)
Total stockholders’ equity		628,895		619,798
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,294,498	$	4,221,842

See accompanying notes to consolidated financial statements.

3

ITEM 1. Financial Statements Continued:

BANK FIRST CORPORATION

Consolidated Statements of Income

(In thousands, except per share data) (Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Interest income:
Loans, including fees	$	49,442	$	43,552	$	140,666	$	124,308
Securities:
Taxable		2,651		2,384		7,800		6,405
Tax-exempt		238		243		724		789
Other		1,701		810		3,461		2,318
Total interest income		54,032		46,989		152,651		133,820
Interest expense:
Deposits		16,484		11,644		47,671		29,177
Securities sold under repurchase agreements		—		252		22		1,383
Borrowed funds		1,665		1,035		2,719		2,696
Total interest expense		18,149		12,931		50,412		33,256
Net interest income		35,883		34,058		102,239		100,564
Provision for credit losses		—		—		200		4,182
Net interest income after provision for credit losses		35,883		34,058		102,039		96,382
Noninterest income:
Service charges		2,189		1,821		5,924		5,186
Income from Ansay		1,062		791		3,420		2,812
Income from UFS, LLC (“UFS”)		—		784		—		2,444
Loan servicing income		733		734		2,194		2,119
Valuation adjustment on MSR		(344)		229		(317)		460
Net gain on sales of mortgage loans		377		248		873		624
Other		876		647		3,073		2,012
Total noninterest income		4,893		5,254		15,167		15,657
Noninterest expense:
Salaries, commissions, and employee benefits		10,118		10,216		31,015		29,998
Occupancy		1,598		1,455		4,512		4,363
Data processing		2,502		2,153		7,005		6,111
Postage, stationery, and supplies		213		244		656		848
Net (gain) loss on sales and valuations of OREO		—		53		(508)		542
Net loss on sale of securities		—		—		34		75
Advertising		61		60		235		226
Charitable contributions		183		229		593		680
Outside service fees		1,598		1,438		4,780		4,987
Amortization of intangibles		1,429		1,626		4,404		4,720
Other		2,398		2,173		6,755		6,707
Total noninterest expense		20,100		19,647		59,481		59,257
Income before provision for income taxes		20,676		19,665		57,725		52,782
Provision for income taxes		4,124		4,861		9,702		13,166
Net Income	$	16,552	$	14,804	$	48,023	$	39,616
Earnings per share - basic	$	1.65	$	1.43	$	4.75	$	3.89
Earnings per share - diluted	$	1.65	$	1.43	$	4.75	$	3.89

See accompanying notes to unaudited consolidated financial statements.

4

ITEM 1. Financial Statements Continued:

BANK FIRST CORPORATION

Consolidated Statements of Comprehensive Income

(In thousands) (Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Net Income	$	16,552	$	14,804	$	48,023	$	39,616
Other comprehensive income (loss):
Unrealized gains (losses) on available for sale securities:
Unrealized holding gains (losses) arising during period		3,664		(6,093)		2,883		(5,308)
Amortization of unrealized holding gains on securities transferred from available for sale to held to maturity		—		—		(1)		—
Reclassification adjustment for losses included in net income		—		—		34		75
Income tax benefit (expense)		(769)		1,276		(646)		1,044
Total other comprehensive income (loss)		2,895		(4,817)		2,270		(4,189)
Comprehensive income	$	19,447	$	9,987	$	50,293	$	35,427

See accompanying notes to unaudited consolidated financial statements.

5

ITEM 1. Financial Statements Continued:

BANK FIRST CORPORATION

Consolidated Statement of Stockholders’ Equity

(In thousands, except share and per share data) (Unaudited)

											Accumulated
	Serial				Additional						Other		Total
	Preferred		Common		Paid-in		Retained		Treasury		Comprehensive		Stockholders'
	Stock		Stock		Capital		Earnings		Stock		Income (loss)		Equity
Balance at January 1, 2023	$	—	$	101	$	218,263	$	295,496	$	(45,191)	$	(15,566)	$	453,103
Net income		—		—		—		10,680		—		—		10,680
Other comprehensive income		—		—		—		—		—		2,410		2,410
Purchase of treasury stock		—		—		—		—		(6,727)		—		(6,727)
Sale of treasury stock		—		—		—		—		37		—		37
Cash dividends ($0.25 per share)		—		—		—		(2,616)		—		—		(2,616)
Amortization of stock-based compensation		—		—		456		—		—		—		456
Vesting of restricted stock awards		—		—		(1,585)		—		1,585		—		—
Adoption of new accounting pronouncement		—		—		—		(10,050)		—		—		(10,050)
Shares issued in the acquisition of Hometown Bancorp, Ltd. (1,450,272 shares)		—		14		115,065		—		—		—		115,079
Balance at March 31, 2023		—		115		332,199		293,510		(50,296)		(13,156)		562,372
Net income		—		—		—		14,132		—		—		14,132
Other comprehensive loss		—		—		—		—		—		(1,782)		(1,782)
Purchase of treasury stock		—		—		—		—		(1,341)		—		(1,341)
Sale of treasury stock		—		—		—		—		44		—		44
Cash dividends ($0.30 per share)		—		—		—		(3,117)		—		—		(3,117)
Amortization of stock-based compensation		—		—		564		—		—		—		564
Vesting of restricted stock awards		—		—		(45)		—		45		—		—
Balance at June 30, 2023		—		115		332,718		304,525		(51,548)		(14,938)		570,872
Net income		—		—		—		14,804		—		—		14,804
Other comprehensive loss		—		—		—		—		—		(4,817)		(4,817)
Purchase of treasury stock		—		—		—		—		(1,037)		—		(1,037)
Sale of treasury stock		—		—		—		—		63		—		63
Cash dividends ($0.30 per share)		—		—		—		(3,117)		—		—		(3,117)
Amortization of stock-based compensation		—		—		561		—		—		—		561
Vesting of restricted stock awards		—		—		(25)		—		25		—		—
Balance at September 30, 2023	$	—	$	115	$	333,254	$	316,212	$	(52,497)	$	(19,755)	$	577,329
Balance at January 1, 2024	$	—	$	115	$	333,815	$	348,001	$	(53,387)	$	(8,746)	$	619,798
Net income		—		—		—		15,412		—		—		15,412
Other comprehensive loss		—		—		—		—		—		(665)		(665)
Purchase of treasury stock		—		—		—		—		(22,283)		—		(22,283)
Sale of treasury stock		—		—		—		—		55		—		55
Cash dividends ($0.35 per share)		—		—		—		(3,541)		—		—		(3,541)
Amortization of stock-based compensation		—		—		554		—		—		—		554
Vesting of restricted stock awards		—		—		(2,145)		—		2,145		—		—
Balance at March 31, 2024		—		115		332,224		359,872		(73,470)		(9,411)		609,330
Net income		—		—		—		16,059		—		—		16,059
Other comprehensive income		—		—		—		—		—		40		40
Purchase of treasury stock		—		—		—		—		(7,943)		—		(7,943)
Sale of treasury stock		—		—		—		—		65		—		65
Cash dividends ($0.35 per share)		—		—		—		(3,511)		—		—		(3,511)
Amortization of stock-based compensation		—		—		539		—		—		—		539
Balance at June 30, 2024		—		115		332,763		372,420		(81,348)		(9,371)		614,579
Net income		—		—		—		16,552		—		—		16,552
Other comprehensive income		—		—		—		—		—		2,895		2,895
Purchase of treasury stock		—		—		—		—		(1,701)		—		(1,701)
Sale of treasury stock		—		—		—		—		66		—		66
Cash dividends ($0.40 per share)		—		—		—		(4,036)		—		—		(4,036)
Amortization of stock-based compensation		—		—		540		—		—		—		540
Balance at September 30, 2024	$	—	$	115	$	333,303	$	384,936	$	(82,983)	$	(6,476)	$	628,895

See accompanying notes to unaudited consolidated financial statements.

6

ITEM 1. Financial Statements Continued:

BANK FIRST CORPORATION

Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net income	$	48,023	$	39,616
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		200		4,182
Depreciation and amortization of premises and equipment		1,689		1,398
Amortization of intangibles		4,404		4,720
Net accretion of securities		(2,597)		(1,705)
Amortization of stock-based compensation		1,633		1,581
Accretion of purchase accounting valuations		(4,014)		(6,460)
Net change in deferred loan fees and costs		(573)		(1,159)
Change in fair value of MSR and other investments		364		(686)
Loss from sale and disposal of premises and equipment		375		135
Net (gain) loss on sale of OREO and valuation allowance		(508)		542
Proceeds from sales of mortgage loans		78,340		56,942
Originations of mortgage loans held for sale		(78,826)		(56,825)
Gain on sales of mortgage loans		(873)		(624)
Realized loss on sale of securities		34		75
Undistributed income of UFS joint venture		—		(2,444)
Undistributed income of Ansay joint venture		(3,420)		(2,812)
Net earnings on life insurance		(1,238)		(1,131)
Increase in other assets		(402)		(1,026)
Decrease in other liabilities		(7,567)		(1,676)
Net cash provided by operating activities		35,044		32,643
Cash flows from investing activities, net of effects of business combination:
Activity in securities available for sale and held to maturity:
Sales		10,206		34,197
Maturities, prepayments, and calls		101,821		123,968
Purchases		(98,701)		—
Net increase in loans		(122,846)		(51,761)
Dividends received from UFS		—		1,748
Dividends received from Ansay		1,599		1,485
Proceeds from sale of OREO		1,936		1,827
Net (purchase) sales of Federal Home Loan Bank (“FHLB”) stock		(1,247)		262
Net purchases of Federal Reserve Bank (“FRB”) stock		—		(3,880)
Proceeds from life insurance		1,411		—
Proceeds from sale of premises and equipment		2,380		—
Purchases of premises and equipment		(3,830)		(11,312)
Net cash received in business combination		—		89,959
Net cash (used in) provided by investing activities		(107,271)		186,493

7

ITEM 1. Financial Statements Continued:

BANK FIRST CORPORATION

Consolidated Statements of Cash Flows (Continued)

(In thousands) (Unaudited)

	Nine Months Ended September 30,
	2024		2023
Cash flows from financing activities, net of effects of business combination:
Net increase (decrease) in deposits	$	51,887	$	(194,088)
Net decrease in securities sold under repurchase agreements		(75,747)		(80,005)
Proceeds from advances of notes payable		140,000		121,700
Repayment of notes payable		(40,000)		(92,507)
Repayment of junior subordinated debentures		(4,124)		—
Dividends paid		(11,088)		(8,850)
Proceeds from sales of common stock		187		144
Repurchase of common stock		(31,928)		(9,105)
Net cash provided by (used in) financing activities		29,187		(262,711)
Net decrease in cash and cash equivalents		(43,040)		(43,575)
Cash and cash equivalents at beginning of period		247,468		119,351
Cash and cash equivalents at end of period	$	204,428	$	75,776
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	48,391	$	29,487
Income taxes		10,286		12,606
Supplemental schedule of noncash activities:
MSR resulting from sale of loans		908		597
Change in unrealized gains and losses on investment securities available for sale, net of tax		2,270		(4,246)
Acquisition:
Fair value of assets acquired	$	—	$	615,105
Fair value of liabilities assumed		—		549,564
Net assets acquired	$	—	$	65,541
Common stock issued in acquisition	$	—	$	115,079

See accompanying notes to consolidated financial statements.

8

BANK FIRST CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

NOTE 1 – BASIS OF PRESENTATION

Bank First Corporation (the “Company”) provides a variety of financial services to individual and corporate customers through its wholly-owned subsidiary, Bank First, N.A. (the “Bank”). The Bank operates as a full-service financial institution with a primary market area including, but not limited to, the counties in which the Bank’s branches are located. The Bank has twenty-six locations located in Manitowoc, Outagamie, Brown, Winnebago, Sheboygan, Shawano, Waupaca, Ozaukee, Monroe, Fond du Lac, Waushara, Dane, Columbia and Jefferson counties in Wisconsin. The Company and Bank are subject to the regulations of certain federal agencies and undergo periodic examinations by those regulatory authorities.

These interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures required by GAAP have been omitted or abbreviated. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“Annual Report”).

The unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.

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. As disclosed in the Company’s Annual Report, 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. These include accounting for business combinations (primarily related to core deposit intangibles and acquired loans), accounting for the ACL-Loans, and the valuation and recording of deferred tax assets and liabilities.

There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as previously disclosed in the Company’s Annual Report.

Recently Issued Not Yet Effective Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying GAAP to contracts hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In December 2022, the FASB issued ASU 2022-06, Reference rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which defers the sunset date of the original guidance from December 31, 2022 to December 31, 2024. The Company has been diligent in responding to reference rate reform and does not anticipate a significant impact to its financial statements as a result.

9

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. This ASU modifies the disclosure or presentation requirements of a variety of Topics in the Codification. The amendments in this ASU are expected to clarify or improve disclosure and presentation requirements for certain codification topics. The effective date for each amendment will be the date on which the Security and Exchange Commission’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If, by June 30, 2027, the Securities and Exchange Commission has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company does not anticipate a significant impact to its financial statement disclosures as a result of this ASU.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU is intended to improve the disclosures about a public entity’s reportable segments and addresses requests from investors and other decision makers for additional, more detailed information about a reportable segment’s expenses. The amendment applies to all public entities that are required to report segment information in accordance with Topic 280. This update is effective for annual periods beginning after December 15, 2023, applied retrospectively to all periods presented. The Company does not currently expect adoption of the amendment to have a material impact on its consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU is intended to improve the transparency and decision usefulness of income tax disclosures by requiring specific categories in the rate reconciliation table and disaggregation of taxes paid by jurisdiction. All public entities must also provide additional information for reconciling items that meet a specific quantitative threshold. This update is effective for annual periods beginning after December 15, 2024.

NOTE 2 – ACQUISITIONS

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 Agreement and Plan of Bank Merger (“Merger Agreement”), dated as of July 25, 2022 by and among 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 shares 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.

10

The fair value of the assets acquired and liabilities assumed on February 10, 2023 was as follows:

	As Recorded by		Fair Value		As Recorded by
	Hometown		Adjustments		the Company
Cash, cash equivalents and securities	$	174,582	$	(1,010)	$	173,572
Other investments		1,195		—		1,195
Loans, net		406,168		(10,367)		395,801
Premises and equipment, net		7,577		(1,109)		6,468
Core deposit intangible		405		16,085		16,490
Other assets		28,011		(6,432)		21,579
Total assets acquired	$	617,938	$	(2,833)	$	615,105
Deposits	$	532,165	$	209	$	532,374
Other borrowings		5,000		(331)		4,669
Junior subordinated debentures		12,372		(1,464)		10,908
Other liabilities		469		1,144		1,613
Total liabilities assumed	$	550,006	$	(442)	$	549,564
Excess of assets acquired over liabilities assumed	$	67,932	$	(2,391)	$	65,541
Less: purchase price						130,452
Goodwill						64,911
Refinement to fair value estimates (1)						(30)
Goodwill (after refinement)					$	64,881

(1) Refinement consists of adjustments to the initial fair value estimates of other assets and liabilities.

The Company purchased loans through the acquisition of Hometown for which there was, at the date of acquisition, more than insignificant deterioration of credit quality since origination (PCD Loans). The carrying amount of these loans at acquisition was as follows:

	February 10, 2023
Purchase price of PCD loans at acquisition	$	25,778
Non-credit discount on PCD loans at acquisition		4,498
Allowance for credit losses on PCD loans at acquisition		5,534
Par value of PCD acquired loans at acquisition	$	35,810

The Company accounted for this transaction under the acquisition method of accounting, and thus, the financial position and results of operations of Hometown prior to the consummation date was not included in the accompanying consolidated financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities and deposits with the assistance of third-party valuations, appraisals and third-party advisors. The estimated fair values were subject to refinement for up to one year after deal consummation as additional information became available relative to the closing date fair values.

For more information concerning the Company’s acquisitions, see “Note 2 – Acquisition” in the Company’s audited consolidated financial statements included in the Company’s Annual Report.

NOTE 3 – EARNINGS PER SHARE

The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. There were no anti-dilutive stock options for the nine months ended September 30, 2024 or 2023.

11

The following table presents the factors used in the earnings per share computations for the period indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Basic
Net income available to common shareholders	$	16,552	$	14,804	$	48,023	$	39,616
Less: Earnings allocated to participating securities		(87)		(83)		(257)		(228)
Net income allocated to common shareholders	$	16,465	$	14,721	$	47,766	$	39,388
Weighted average common shares outstanding including participating securities		10,012,190		10,388,909		10,107,700		10,186,107
Less: Participating securities (1)		(52,634)		(58,130)		(54,024)		(58,399)
Average shares		9,959,556		10,330,779		10,053,676		10,127,708
Basic earnings per common share	$	1.65	$	1.43	$	4.75	$	3.89
Diluted
Net income available to common shareholders	$	16,552	$	14,804	$	48,023	$	39,616
Weighted average common shares outstanding for basic earnings per common share		9,959,556		10,330,779		10,053,676		10,127,708
Add: Dilutive effects of stock based compensation awards		20,988		22,842		22,214		23,282
Average shares and dilutive potential common shares		9,980,544		10,353,621		10,075,890		10,150,990
Diluted earnings per common share	$	1.65	$	1.43	$	4.75	$	3.89

(1) Participating securities are restricted stock awards whereby the stock certificates have been issued, are included in outstanding shares, receive dividends and can be voted, but have not vested.

NOTE 4 – SECURITIES

The following is a summary of available for sale securities:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
September 30, 2024
Obligations of U.S. Government sponsored agencies	$	28,120	$	4	$	(2,330)	$	25,794
Obligations of states and political subdivisions		62,999		136		(4,671)		58,464
Mortgage-backed securities		30,856		23		(912)		29,967
Corporate notes		15,667		—		(1,454)		14,213
Total available for sale securities	$	137,642	$	163	$	(9,367)	$	128,438
December 31, 2023
Obligations of U.S. Government sponsored agencies	$	31,453	$	4	$	(3,163)	$	28,294
Obligations of states and political subdivisions		63,929		77		(5,760)		58,246
Mortgage-backed securities		37,789		5		(1,664)		36,130
Corporate notes		20,657		—		(1,619)		19,038
Certificates of deposit		490		—		(1)		489
Total available for sale securities	$	154,318	$	86	$	(12,207)	$	142,197

12

The following is a summary of held to maturity securities:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
September 30, 2024
U.S. Treasury securities	$	106,040	$	2,139	$	(382)	$	107,797
Obligations of states and political subdivisions		3,196		—		—		3,196
Total held to maturity securities	$	109,236	$	2,139	$	(382)	$	110,993
December 31, 2023
U.S. Treasury securities	$	99,173	$	1,372	$	(1,070)	$	99,475
Obligations of states and political subdivisions		4,151		—		—		4,151
Total held to maturity securities	$	103,324	$	1,372	$	(1,070)	$	103,626

The following table shows the fair value and gross unrealized losses of securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	Less Than 12 Months				Greater Than 12 Months				Total
													Number
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		of
	Value		Losses		Value		Losses		Value		Losses		Securities
September 30, 2024 - Available for Sale
Obligations of U.S. Government sponsored agencies	$	698	$	(2)	$	22,412	$	(2,328)	$	23,110	$	(2,330)	23
Obligations of states and political subdivisions		4,198		(13)		46,574		(4,658)		50,772		(4,671)	63
Mortgage-backed securities		—		—		25,647		(912)		25,647		(912)	89
Corporate notes		—		—		13,072		(1,454)		13,072		(1,454)	9
Totals	$	4,896	$	(15)	$	107,705	$	(9,352)	$	112,601	$	(9,367)	184
September 30, 2024 - Held to Maturity
U.S. Treasury securities	$	—	$	—	$	34,266	$	(382)	$	34,266	$	(382)	21
December 31, 2023 - Available for Sale
Obligations of U.S. Government sponsored agencies	$	6,519	$	(173)	$	19,519	$	(2,990)	$	26,038	$	(3,163)	24
Obligations of states and political subdivisions		6,806		(71)		40,959		(5,689)		47,765		(5,760)	65
Mortgage-backed securities		5,751		(95)		28,693		(1,569)		34,444		(1,664)	104
Corporate notes		4,926		(68)		12,487		(1,551)		17,413		(1,619)	9
Certificate of deposits		—		—		489		(1)		489		(1)	2
Totals	$	24,002	$	(407)	$	102,147	$	(11,800)	$	126,149	$	(12,207)	204
December 31, 2023 - Held to Maturity
U.S. Treasury securities	$	31,785	$	(99)	$	35,362	$	(971)	$	67,147	$	(1,070)	49
Obligations of states and political subdivisions		—		—		220		—		220		—	1
Totals	$	31,785	$	(99)	$	35,582	$	(971)	$	67,367	$	(1,070)	50

13

As of September 30, 2024, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to these securities. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. As of September 30, 2024, the Company did not intend to sell these securities and it was more likely than not that the Company would not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration.

Furthermore, based on its analysis the Company has determined that held to maturity securities have zero expected credit losses. U.S. Treasury securities have the full faith and credit backing of the United States Government.

The following is a summary of amortized cost and estimated fair value of securities by contractual maturity as of September 30, 2024. Contractual maturities will differ from expected maturities for mortgage-backed securities because borrowers may have the right to call or prepay obligations without penalties.

	Available for Sale				Held to Maturity
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	1,828	$	1,833	$	22,949	$	22,841
Due after one year through 5 years		18,112		18,004		45,125		45,247
Due after 5 years through 10 years		41,077		37,683		41,162		42,905
Due after 10 years		45,769		40,951		—		—
Subtotal		106,786		98,471		109,236		110,993
Mortgage-backed securities		30,856		29,967		—		—
Total	$	137,642	$	128,438	$	109,236	$	110,993

As of September 30, 2024 and December 31, 2023, the carrying values of securities pledged to secure public deposits, securities sold under repurchase agreements, and for other purposes required or permitted by law were approximately $140.0 million and $204.8 million, respectively.

There were no sales of securities available for sale during the three months ended September 30, 2024 or 2023. Sales of securities available for sale produced $10.2 million in proceeds with immaterial gross losses for the nine months ended September 30, 2024. Sales of securities available for sale produced $34.2 million in proceeds, $0.1 million in gross gains and $0.2 million in gross losses for the nine months ended September 30, 2023.

NOTE 5 – LOANS, ALLOWANCE FOR CREDIT LOSSES, AND CREDIT QUALITY

The following table presents total loans by portfolio segment and class of loan as of September 30, 2024 and December 31, 2023:

	2024		2023
Commercial/industrial	$	518,263	$	488,498
Commercial real estate - owner occupied		939,385		893,977
Commercial real estate - non-owner occupied		463,415		473,829
Multi-family		329,631		332,959
Construction and development		247,150		201,823
Residential 1‑4 family		904,099		888,412
Consumer		55,427		50,741
Other		15,225		14,980
Subtotals		3,472,595		3,345,219
ACL - Loans		(45,212)		(43,609)
Loans, net of ACL - Loans		3,427,383		3,301,610
Deferred loan fees, net		(1,675)		(2,245)
Loans, net	$	3,425,708	$	3,299,365

14

The 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. More information regarding the Company’s methodology related to the ACL-Loans can be found in the Company’s Annual Report.

The Company utilized the high-end range of the Federal Reserve Bank Open Market Committee forecast for national unemployment and the low-end range for national GDP growth at September 30, 2024 and December 31, 2023. As of September 30, 2024, the Company anticipates the national unemployment rate to rise during the forecast period and the national GDP growth rate to decline. The Company utilized long-term averages for the remaining loss drivers.

A roll forward of the ACL-Loans is summarized as follows:

	Three Months Ended				Nine Months Ended				Year Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023		December 31, 2023
Beginning Balance	$	45,118	$	43,409	$	43,609	$	22,680	$	22,680
Adoption of ASU 2016-13		-		-		-		10,972		10,972
ACL on PCD loans acquired		-		-		-		5,534		5,534
Provision for credit losses		400		-		1,100		4,092		4,292
Charge-offs		(366)		(15)		(444)		(70)		(88)
Recoveries		60		10		947		196		219
Net (charge-offs) recoveries		(306)		(5)		503		126		131
Ending Balance	$	45,212	$	43,404	$	45,212	$	43,404	$	43,609

A summary of the activity in the ACL - Loans by loan type for the nine months ended September 30, 2024 is summarized as follows:

			Commercial		Commercial
			Real Estate -		Real Estate  -				Construction
	Commercial /		Owner		Non - Owner		Multi-		and		Residential
	Industrial		Occupied		Occupied		Family		Development		1-4 Family		Consumer		Other		Total
ACL - Loans - January 1, 2024	$	5,965	$	12,285	$	5,700	$	4,754	$	3,597	$	10,620	$	615	$	73	$	43,609
Charge-offs		(26)		(294)		—		—		—		(44)		(7)		(73)		(444)
Recoveries		3		909		—		—		—		9		7		19		947
Provision		(2)		(131)		(147)		(130)		846		522		27		115		1,100
ACL - Loans - September 30, 2024	$	5,940	$	12,769	$	5,553	$	4,624	$	4,443	$	11,107	$	642	$	134	$	45,212

A summary of the activity in the ACL – Loans by loan type for the nine months ended September 30, 2023 is summarized as follows:

			Commercial		Commercial
			Real Estate -		Real Estate -				Construction
	Commercial /		Owner		Non - Owner		Multi-		and		Residential
	Industrial		Occupied		Occupied		Family		Development		1-4 Family		Consumer		Other		Total
ACL - Loans - January 1, 2023	$	4,071	$	5,204	$	2,644	$	2,761	$	1,592	$	5,944	$	314	$	150	$	22,680
Adoption of ASU 2016-13		1,859		1,982		1,161		753		2,063		2,567		620		(33)		10,972
ACL - Loans on PCD loans acquired		1,082		4,424		—		—		—		28		—		—		5,534
Charge-offs		—		—		—		—		—		—		(1)		(69)		(70)
Recoveries		5		70		—		—		—		104		4		13		196
Provision		538		(220)		857		388		(87)		2,509		70		37		4,092
ACL - Loans - September 30, 2023	$	7,555	$	11,460	$	4,662	$	3,902	$	3,568	$	11,152	$	1,007	$	98	$	43,404

In addition to the ACL-Loans, the Company has established an allowance for credit losses on unfunded commitments (“ACL-Unfunded Commitments”), classified in other liabilities on the consolidated balance sheets. This allowance is maintained to absorb losses arising from unfunded loan commitments, and is determined quarterly based on methodology similar to the methodology for determining the ACL-Loans. The ACL - Unfunded Commitments was $2.9 million and $3.8 million at September 30, 2024 and December 31, 2023, respectively. See Note 10 for further information on commitments.

15

The provision for credit losses is determined by the Company as the amount to be added to the ACL accounts for various types of financial instruments including loans, investment securities, and off-balance sheet credit exposures after net charge-offs have been deducted to bring the ACL to a level that, in management’s judgment, is necessary to absorb expected credit losses over the lives of the respective financial instruments. The following table presents the components of the provision for credit losses.

	Three Months Ended				Nine Months Ended				Year Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023		December 31, 2023
Provision for credit losses on:
Loans	$	400	$	—	$	1,100	$	4,092	$	4,292
Unfunded Commitments		(400)		—		(900)		90		390
Total provision for credit losses	$	—	$	—	$	200	$	4,182	$	4,682

The Company’s past due and non-accrual loans as of September 30, 2024 is summarized as follows:

			90 Days						Non-Accrual
	30-89 Days		or more						with no
	Past Due		Past Due		Non-				specifically
	Accruing		and Accruing		Accrual		Total		allocated ACL
Commercial/industrial	$	333	$	15	$	4,117	$	4,465	$	20
Commercial real estate - owner occupied		116		—		5,382		5,498		812
Commercial real estate - non-owner occupied		—		79		—		79		—
Multi-family		—		—		—		—		—
Construction and development		—		86		—		86		—
Residential 1‑4 family		987		1,282		176		2,445		176
Consumer		109		14		18		141		19
Other		—		—		—		—		—
	$	1,545	$	1,476	$	9,693	$	12,714	$	1,027

The Company’s past due and non-accrual loans as of December 31, 2023 is summarized as follows:

			90 Days						Non-Accrual
	30-89 Days		or more						with no
	Past Due		Past Due		Non-				specifically
	Accruing		and Accruing		Accrual		Total		allocated ACL
Commercial/industrial	$	4,303	$	106	$	1,344	$	5,753	$	365
Commercial real estate - owner occupied		180		252		3,877		4,309		343
Commercial real estate - non-owner occupied		14		—		—		14		—
Multi-family		—		—		—		—		—
Construction and development		—		—		—		—		—
Residential 1‑4 family		871		507		429		1,807		394
Consumer		68		28		12		108		11
Other		—		—		—		—		—
	$	5,436	$	893	$	5,662	$	11,991	$	1,113

Interest recognized on non-accrual loans is considered immaterial to the consolidated financial statements for the nine months ended September 30, 2024 and 2023.

A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial

difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. For collateral dependent loans, expected credit losses are based on amortized cost of the loan less the estimated fair value of the collateral at the balance sheet date, with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral.

16

The following tables present collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation. A significant portion of the loan balances in these tables and essentially all of the allowance allocations relate to PCD loans which were acquired from Hometown. Real estate collateral primarily consists of operating facilities of the underlying borrowers. Other business assets collateral primarily consists of equipment, receivables and inventory of the underlying borrowers.

	Collateral Type
As of September 30, 2024			Other				Without an		With an		Allowance
	Real Estate		Business Assets		Total		Allowance		Allowance		Allocation
Commercial/industrial	$	—	$	4,142	$	4,142	$	—	$	4,142	$	820
Commercial real estate - owner occupied		10,298		—		10,298		—		10,298		3,552
Commercial real estate - non-owner occupied		—		—		—		—		—		—
Multi-family		—		—		—		—		—		—
Construction and development		700		—		700		700		—		—
Residential 1‑4 family		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total Loans	$	10,998	$	4,142	$	15,140	$	700	$	14,440	$	4,372

	Collateral Type
As of December 31, 2023			Other				Without an		With an		Allowance
	Real Estate		Business Assets		Total		Allowance		Allowance		Allocation
Commercial/industrial	$	—	$	5,320	$	5,320	$	47	$	5,273	$	1,089
Commercial real estate - owner occupied		8,131		—		8,131		794		7,337		3,156
Commercial real estate - non-owner occupied		—		—		—		—		—		—
Multi-family		—		—		—		—		—		—
Construction and development		—		—		—		—		—		—
Residential 1‑4 family		35		—		35		35		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total Loans	$	8,166	$	5,320	$	13,486	$	876	$	12,610	$	4,245

The Company utilizes a numerical risk rating system for commercial relationships. All other types of relationships (ex: residential, consumer, other) are assigned a “Pass” rating, unless they have fallen 90 days past due or more, at which time they are assessed for a rating of 5, 6 or 7. The Company uses split ratings for government guaranties on loans. The portion of a loan that is supported by a government guaranty is included with other Pass credits.

The determination of a commercial loan risk rating begins with completion of a matrix, which assigns scores based on the strength of the borrower’s debt service coverage, collateral coverage, balance sheet leverage, industry outlook, and customer concentration. A weighted average is taken of these individual scores to arrive at the overall rating. This rating is subject to adjustment by the loan officer based on facts and circumstances pertaining to the borrower. Risk ratings are subject to independent review.

Commercial borrowers with ratings between 1 and 5 are considered Pass credits, with 1 being most acceptable and 5 being just above the minimum level of acceptance. Commercial borrowers rated 6 have potential weaknesses which may jeopardize repayment ability. Borrowers rated 7 have a well-defined weakness or weaknesses such as the inability to demonstrate significant cash flow for debt service based on analysis of the company’s financial information. These loans remain on accrual status provided full collection of principal and interest is reasonably expected. Otherwise they are deemed impaired and placed on nonaccrual status. Borrowers rated 8 are the same as 7 rated credits with one exception: collection or liquidation in full is not probable.

17

The following tables present total loans by risk ratings and year of origination. Loans acquired from other previously acquired institutions have been included in the table based upon the actual origination date.

	Amortized Cost Basis by Origination Year
As of September 30, 2024																Revolving
		2024		2023		2022		2021		2020		Prior		Revolving		to Term		Total
Commercial/industrial
Grades 1-4	$	68,144	$	62,018	$	69,838	$	52,307	$	42,744	$	22,243	$	81,623	$	-	$	398,917
Grade 5		13,028		6,858		50,781		5,868		2,469		1,566		20,519		-		101,089
Grade 6		258		621		114		19		124		188		1,835		-		3,159
Grade 7		425		406		291		6,130		1,112		769		5,965		-		15,098
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	81,855	$	69,903	$	121,024	$	64,324	$	46,449	$	24,766	$	109,942	$	-	$	518,263
Current-period gross charge-offs	$	-	$	-	$	9	$	15	$	-	$	2	$	-	$	-	$	26
Commercial real estate - owner occupied
Grades 1-4	$	52,323	$	62,815	$	104,181	$	163,438	$	98,179	$	187,342	$	40,690	$	-	$	708,968
Grade 5		42,926		20,155		19,342		19,966		10,109		37,418		10,260		-		160,176
Grade 6		-		791		6,871		2,800		4,762		6,319		3,025		-		24,568
Grade 7		-		868		7,290		3,457		1,645		29,591		2,822		-		45,673
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	95,249	$	84,629	$	137,684	$	189,661	$	114,695	$	260,670	$	56,797	$	-	$	939,385
Current-period gross charge-offs	$	-	$	-	$	-	$	293	$	-	$	1	$	-	$	-	$	294
Commercial real estate - non-owner occupied
Grades 1-4	$	22,334	$	54,985	$	61,100	$	127,796	$	48,103	$	98,862	$	9,485	$	-	$	422,665
Grade 5		1,562		1,953		4,666		8,544		3,565		13,191		-		-		33,481
Grade 6		-		-		1,502		-		-		2,627		2,015		-		6,144
Grade 7		-		-		-		62		354		709		-		-		1,125
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	23,896	$	56,938	$	67,268	$	136,402	$	52,022	$	115,389	$	11,500	$	-	$	463,415
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Multi-family
Grades 1-4	$	1,134	$	26,240	$	33,118	$	100,112	$	72,048	$	83,996	$	2,493	$	-	$	319,141
Grade 5		781		1,018		1,317		4,207		-		122		-		-		7,445
Grade 6		-		-		-		-		-		-		-		-		-
Grade 7		-		-		-		-		-		3,045		-		-		3,045
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	1,915	$	27,258	$	34,435	$	104,319	$	72,048	$	87,163	$	2,493	$	-	$	329,631
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction and development
Grades 1-4	$	40,787	$	70,062	$	66,126	$	12,015	$	4,521	$	5,468	$	586	$	-	$	199,565
Grade 5		4,529		32,120		1,078		1,128		628		54		1,155		-		40,692
Grade 6		210		2,561		-		-		-		-		-		-		2,771
Grade 7		-		700		-		2,494		162		766		-		-		4,122
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	45,526	$	105,443	$	67,204	$	15,637	$	5,311	$	6,288	$	1,741	$	-	$	247,150
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Residential 1‑4 family
Grades 1-4	$	69,493	$	100,975	$	183,771	$	181,644	$	144,159	$	107,227	$	91,426	$	-	$	878,695
Grade 5		2,780		2,862		6,336		2,304		3,123		2,066		293		-		19,764
Grade 6		-		153		679		-		-		202		-		-		1,034
Grade 7		-		-		12		1,022		879		2,508		185		-		4,606
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	72,273	$	103,990	$	190,798	$	184,970	$	148,161	$	112,003	$	91,904	$	-	$	904,099
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	44	$	-	$	-	$	44
Consumer
Grades 1-4	$	22,821	$	13,967	$	8,963	$	4,372	$	3,110	$	1,778	$	397	$	-	$	55,408
Grade 5		-		-		-		-		-		-		-		-		-
Grade 6		-		-		-		-		-		-		-		-		-
Grade 7		-		-		-		-		-		19		-		-		19
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	22,821	$	13,967	$	8,963	$	4,372	$	3,110	$	1,797	$	397	$	-	$	55,427
Current-period gross charge-offs	$	-	$	-	$	4	$	-	$	3	$	-	$	-	$	-	$	7
Other
Grades 1-4	$	1,770	$	175	$	620	$	491	$	445	$	9,319	$	2,324	$	-	$	15,144
Grade 5		-		-		-		-		-		-		81		-		81
Grade 6		-		-		-		-		-		-		-		-		-
Grade 7		-		-		-		-		-		-		-		-		-
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	1,770	$	175	$	620	$	491	$	445	$	9,319	$	2,405	$	-	$	15,225
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	73	$	-	$	73
Total Loans	$	345,305	$	462,303	$	627,996	$	700,176	$	442,241	$	617,395	$	277,179	$	-	$	3,472,595
Total current-period gross charge-offs	$	-	$	-	$	13	$	308	$	3	$	47	$	73	$	-	$	444

18

	Amortized Cost Basis by Origination Year
As of December 31, 2023																Revolving
		2023		2022		2021		2020		2019		Prior		Revolving		to Term		Total
Commercial/industrial
Grades 1-4	$	59,526	$	133,469	$	62,894	$	54,552	$	10,380	$	20,575	$	78,439	$	-	$	419,835
Grade 5		6,127		5,367		11,641		4,208		1,180		3,039		21,420		-		52,982
Grade 6		671		93		61		206		-		-		627		-		1,658
Grade 7		365		271		5,756		2,351		30		1,687		3,563		-		14,023
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	66,689	$	139,200	$	80,352	$	61,317	$	11,590	$	25,301	$	104,049	$	-	$	488,498
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial real estate - owner occupied
Grades 1-4	$	55,239	$	105,187	$	167,124	$	108,680	$	47,115	$	178,586	$	33,220	$	-	$	695,151
Grade 5		7,586		24,734		24,890		12,955		11,168		26,179		21,519		-		129,031
Grade 6		-		1,161		1,694		110		867		6,552		699		-		11,083
Grade 7		3,143		9,988		10,061		2,313		14,775		15,777		2,655		-		58,712
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	65,968	$	141,070	$	203,769	$	124,058	$	73,925	$	227,094	$	58,093	$	-	$	893,977
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial real estate - non-owner occupied
Grades 1-4	$	54,774	$	72,336	$	127,450	$	53,341	$	45,898	$	84,129	$	9,870	$	-	$	447,798
Grade 5		944		4,819		2,872		3,516		97		10,081		-		-		22,329
Grade 6		-		-		-		-		-		-		-		-		-
Grade 7		-		-		64		366		2,722		550		-		-		3,702
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	55,718	$	77,155	$	130,386	$	57,223	$	48,717	$	94,760	$	9,870	$	-	$	473,829
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial real estate - multi-family
Grades 1-4	$	25,099	$	28,144	$	103,804	$	74,083	$	25,640	$	61,589	$	2,149	$	-	$	320,508
Grade 5		672		1,092		10,660		-		-		27		-		-		12,451
Grade 6		-		-		-		-		-		-		-		-		-
Grade 7		-		-		-		-		-		-		-		-		-
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	25,771	$	29,236	$	114,464	$	74,083	$	25,640	$	61,616	$	2,149	$	-	$	332,959
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction and development
Grades 1-4	$	65,134	$	67,396	$	35,017	$	5,013	$	1,853	$	4,281	$	779	$	-	$	179,473
Grade 5		11,796		1,190		6,060		743		-		84		808		-		20,681
Grade 6		-		-		-		-		-		-		-		-		-
Grade 7		707		-		-		172		-		790		-		-		1,669
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	77,637	$	68,586	$	41,077	$	5,928	$	1,853	$	5,155	$	1,587	$	-	$	201,823
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Residential 1‑4 family
Grades 1-4	$	102,529	$	199,295	$	197,713	$	160,489	$	44,411	$	77,644	$	80,659	$	-	$	862,740
Grade 5		3,816		4,819		6,269		119		612		2,465		604		-		18,704
Grade 6		158		319		810		-		-		180		249		-		1,716
Grade 7		316		366		29		1,022		400		2,947		172		-		5,252
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	106,819	$	204,799	$	204,821	$	161,630	$	45,423	$	83,236	$	81,684	$	-	$	888,412
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer
Grades 1-4	$	23,711	$	12,497	$	6,570	$	4,498	$	1,194	$	1,326	$	925	$	-	$	50,721
Grade 5		-		-		-		-		-		-		-		-		-
Grade 6		-		-		-		-		-		-		-		-		-
Grade 7		-		-		-		-		-		20		-		-		20
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	23,711	$	12,497	$	6,570	$	4,498	$	1,194	$	1,346	$	925	$	-	$	50,741
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	4	$	-	$	4
Other
Grades 1-4	$	347	$	663	$	551	$	1,076	$	38	$	9,697	$	2,520	$	-	$	14,892
Grade 5		-		-		-		-		-		-		88		-		88
Grade 6		-		-		-		-		-		-		-		-		-
Grade 7		-		-		-		-		-		-		-		-		-
Grade 8		-		-		-		-		-		-		-		-		-
Total	$	347	$	663	$	551	$	1,076	$	38	$	9,697	$	2,608	$	-	$	14,980
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	84	$	-	$	84
Total Loans	$	422,660	$	673,206	$	781,990	$	489,813	$	208,380	$	508,205	$	260,965	$	-	$	3,345,219
Total current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	88	$	-	$	88

Loans that were both experiencing financial difficulty and were modified during the nine months ended September 30, 2024 and 2023, were insignificant to these consolidated financial statements.

19

NOTE 6 – MORTGAGE SERVICING RIGHTS

Loans serviced for others are not included in the accompanying consolidated balance sheets. MSRs are recognized as separate assets when loans sold in the secondary market are sold with servicing retained. The Company utilizes a third-party consulting firm to assist with determining an accurate assessment of the MSRs fair value. The third-party firm collects relevant data points from numerous sources. Some of these data points relate directly to the pricing level or relative value of the mortgage servicing while other data points relate to the assumptions used to derive fair value. In addition, the valuation evaluates specific collateral types, and current and historical performance of the collateral in question. The valuation process focuses on the non-distressed secondary servicing market, common industry practices and current regulatory standards. The primary determinants of the fair value of MSRs are servicing fee percentage, ancillary income, expected loan life or prepayment speeds, discount rates, costs to service, delinquency rates, foreclosure losses and recourse obligations. The valuation data also contains interest rate shock analyses for monitoring fair value changes in differing interest rate environments.

Following is an analysis of activity in the MSR asset:

	Nine Months Ended		Year Ended
	September 30, 2024		December 31, 2023
Fair value at beginning of period	$	13,668	$	9,582
Servicing asset additions		908		879
Loan payments and payoffs		(1,240)		(1,624)
Changes in valuation inputs and assumptions used in the valuation model		15		1,140
Amount recognized through earnings		(317)		395
MSR asset acquired		—		3,691
Fair value at end of period	$	13,351	$	13,668
Unpaid principal balance of loans serviced for others	$	1,167,070	$	1,175,709
Mortgage servicing rights as a percent of loans serviced for others		1.14		1.16

The primary economic assumptions utilized by the Company in measuring the value of MSRs were constant prepayment speeds of 8.4 and 7.5 months as of September 30, 2024 and December 31, 2023, respectively, and discount rates of 10.19% as of each of those periods. The constant prepayment speeds are obtained from publicly available sources for each of the loan programs the Company originates under.

20

NOTE 7 – NOTES PAYABLE

The Company utilizes FHLB advances to fund liquidity. The Company had outstanding balances borrowed from the FHLB of $135.5 million at September 30, 2024 and $35.5 million as of December 31, 2023. The advances, rate, and maturities of FHLB advances were as follows:

			September 30,		December 31,
	Maturity	Rate	2024		2023
Fixed rate, fixed term	06/30/2025	5.16%	$	25,000	$	—
Fixed rate, fixed term	03/23/2026	4.02%		10,000		10,000
Fixed rate, fixed term	05/26/2026	1.95%		5,000		5,000
Fixed rate, fixed term	06/29/2026	4.77%		15,000		—
Fixed rate, fixed term	03/23/2027	3.91%		10,000		10,000
Fixed rate, fixed term	06/28/2027	4.57%		15,000		—
Fixed rate, fixed term	03/23/2028	3.85%		10,000		10,000
Fixed rate, fixed term	07/05/2028	4.41%		20,000		—
Fixed rate, fixed term	07/09/2029	4.31%		25,000		—
Fixed rate, fixed term	04/22/2030	0.00%		508		508
				135,508		35,508
Adjustment due to purchase accounting				(162)		(238)
			$	135,346	$	35,270

Future maturities of borrowings were as follows:

	September 30,		December 31,
	2024		2023
1 year or less	$	25,000	$	—
1 to 2 years		30,000		—
2 to 3 years		25,000		15,000
3 to 4 years		30,000		10,000
4 to 5 years		25,000		10,000
Over 5 years		508		508
	$	135,508	$	35,508

As of September 30, 2024, the Company had borrowing availability at the FHLB totaling $672.8 million in addition to the existing borrowings noted in the tables above.

21

NOTE 8 – SUBORDINATED NOTES AND JUNIOR SUBORDINATED DEBENTURES

During July 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 September 30, 2024 and December 31, 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 September 30, 2024 and December 31, 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.

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 and the junior subordinated debenture related to Trust I during January 2024, resulting in the trusts’ dissolution. As a result of the redemption of the junior subordinated debenture related to Trust II and notification of the Company’s intent to redeem the junior subordinated debenture of Trust I prior to December 31, 2023, the Company amortized the remaining original fair value discounts into interest expense during December 2023.

22

NOTE 9 – REGULATORY MATTERS

Banks and certain bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

Under regulatory guidance for non-advanced approaches institutions, the Bank and Company are required to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets, including an additional conservation buffer determined by banking regulators. As of September 30, 2024 and December 31, 2023, this buffer was 2.5%. The Bank met all capital adequacy requirements to which they are subject as of September 30, 2024 and December 31, 2023.

Actual and required capital amounts and ratios are presented below at period-end:

													To Be Well
									Minimum Capital				Capitalized Under
					For Capital				Adequacy with				Prompt Corrective
	Actual				Adequacy Purposes				Capital Buffer				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2024
Total capital (to risk-weighted assets):
Company	$	495,493	13.87	%	$	285,833	8.00	%	$	375,156	10.50	%		NA	NA
Bank	$	434,920	12.18	%	$	285,664	8.00	%	$	374,934	10.50	%	$	357,080	10.00	%
Tier 1 capital (to risk-weighted assets):
Company	$	442,697	12.39	%	$	214,375	6.00	%	$	303,698	8.50	%		NA	NA
Bank	$	394,124	11.04	%	$	214,248	6.00	%	$	303,518	8.50	%	$	285,664	8.00	%
Common Equity Tier 1 capital (to risk-weighted assets):
Company	$	442,697	12.39	%	$	160,781	4.50	%	$	250,104	7.00	%		NA	NA
Bank	$	394,124	11.04	%	$	160,686	4.50	%	$	249,956	7.00	%	$	232,102	6.50	%
Tier 1 capital (to average assets):
Company	$	442,697	10.94	%	$	161,935	4.00	%	$	161,935	4.00	%		NA	NA
Bank	$	394,124	9.74	%	$	161,835	4.00	%	$	161,835	4.00	%	$	202,294	5.00	%
December 31, 2023
Total capital (to risk-weighted assets):
Company	$	484,398	13.99	%	$	276,904	8.00	%	$	363,437	10.50	%		NA	NA
Bank	$	446,634	12.91	%	$	276,726	8.00	%	$	363,202	10.50	%	$	345,907	10.00	%
Tier 1 capital (to risk-weighted assets):
Company	$	437,979	12.65	%	$	207,678	6.00	%	$	294,211	8.50	%		NA	NA
Bank	$	412,215	11.92	%	$	207,544	6.00	%	$	294,021	8.50	%	$	276,726	8.00	%
Common Equity Tier 1 capital (to risk-weighted assets):
Company	$	433,979	12.54	%	$	155,759	4.50	%	$	242,291	7.00	%		NA	NA
Bank	$	412,215	11.92	%	$	155,658	4.50	%	$	242,135	7.00	%	$	224,840	6.50	%
Tier 1 capital (to average assets):
Company	$	437,979	11.05	%	$	158,581	4.00	%	$	158,581	4.00	%		NA	NA
Bank	$	412,215	10.40	%	$	158,585	4.00	%	$	158,585	4.00	%	$	198,231	5.00	%

23

NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate-lock commitments). Rate-lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements and for fixed rate commitments also considers the difference between current levels of interest rates and committed rates. The notional amount of rate-lock commitments at September 30, 2024 and December 31, 2023 was approximately $15.7 million and $5.9 million, respectively. The fair value of these rate-lock commitments are not material to these financial statements and have not been recorded.

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual or notional amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments. Since some of the commitments are expected to expire without being drawn upon and some of the commitments may not be drawn upon to the total extent of the commitment, the notional amount of these commitments does not necessarily represent future cash requirements.

The following commitments were outstanding:

	Notional Amount
	September 30, 2024		December 31, 2023
Commitments to extend credit:
Fixed	$	53,863	$	92,113
Variable		708,036		707,285
Credit card arrangements		22,884		21,213
Letters of credit		15,447		9,785

NOTE 11 – FAIR VALUE MEASUREMENTS

Accounting guidance establishes a fair value hierarchy to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

Level 1:        Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:        Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:        Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

24

Information regarding the fair value of assets measured at fair value on a recurring basis is as follows:

	Instruments		Markets		Other		Significant
	Measured		for Identical		Observable		Unobservable
	At Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2024
Assets
Securities available for sale
Obligations of U.S. Government sponsored agencies	$	25,794	$	—	$	25,794	$	—
Obligations of states and political subdivisions		58,464		—		58,464		—
Mortgage-backed securities		29,967		—		29,967		—
Corporate notes		14,213		—		14,213		—
Mortgage servicing rights		13,351		—		13,351		—
December 31, 2023
Assets
Securities available for sale
Obligations of U.S. Government sponsored agencies	$	28,294	$	—	$	28,294	$	—
Obligations of states and political subdivisions		58,246		—		58,246		—
Mortgage-backed securities		36,130		—		36,130		—
Corporate notes		19,038		—		19,038		—
Certificates of deposit		489		—		489		—
Mortgage servicing rights		13,668		—		13,668		—

There were no assets measured on a recurring basis using significant unobservable inputs (Level 3) during these periods. Furthermore, there were no liabilities measured on a recurring basis during the periods.

Information regarding the fair value of assets measured at fair value on a non-recurring basis is as follows:

			Quoted Prices
			In Active		Significant
	Assets		Markets		Other		Significant
	Measured		for Identical		Observable		Unobservable
	At Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2024
OREO	$	712	$	—	$	—	$	712
Loans individually evaluated, net of reserve		10,768		—		—		10,768
	$	11,480	$	—	$	—	$	11,480
December 31, 2023
OREO	$	2,573	$	—	$	—	$	2,573
Loans individually evaluated, net of reserve		9,242		—		—		9,242
	$	11,815	$	—	$	—	$	11,815

The following is a description of the valuation methodologies used by the Company for the items noted in the table above, including the general classification of such instruments in the fair value hierarchy. For loans individually evaluated, the amount of reserve is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note. For OREO, the fair value is based upon the estimated fair value of the underlying collateral adjusted for the expected costs to sell.

25

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets:

					Weighted
		Unobservable	Range of		Average
	Valuation Technique	Inputs	Discounts		Discount
As of September 30, 2024
OREO	Third party appraisals, sales contracts or brokered price options	Collateral discounts and estimated costs to sell	61	%	61	%
Loans individually evaluated	Third party appraisals and discounted cash flows	Collateral discounts and discount rates	0% - 100	%	29	%
As of December 31, 2023
OREO	Third party appraisals, sales contracts or brokered price options	Collateral discounts and estimated costs to sell	3% - 71	%	38	%
Loans individually evaluated	Third party appraisals and discounted cash flows	Collateral discounts and discount rates	0% - 53	%	31	%

The carrying value and estimated fair value of financial instruments not measured and reported at fair value on a recurring or non-recurring basis at September 30, 2024 and December 31, 2023 are as follows:

	Carrying
September 30, 2024	amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	204,428	$	204,428	$	—	$	—	$	204,428
Securities held to maturity		109,236		107,797		3,196		—		110,993
Loans held for sale		4,371		—		4,371		—		4,371
Loans, net		3,425,708		—		—		3,231,867		3,231,867
Other investments		22,567		—		—		22,567		22,567
Financial liabilities:
Deposits	$	3,484,741	$	—	$	—	$	3,280,558	$	3,280,558
Notes payable		135,346		—		135,346		—		135,346
Subordinated notes		12,000		—		12,000		—		12,000

	Carrying
December 31, 2023	amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	247,468	$	247,468	$	—	$	—	$	247,468
Securities held to maturity		103,324		99,475		4,151		—		103,626
Loans held for sale		3,012		—		3,012		—		3,012
Loans, net		3,299,365		—		—		3,168,749		3,168,749
Other investments		21,366		—		—		21,366		21,366
Financial liabilities:
Deposits	$	3,432,920		—		—		3,153,512		3,153,512
Securities sold under repurchase agreements		75,747		—		75,747		—		75,747
Notes payable		35,270		—		35,270		—		35,270
Subordinated notes		12,000		—		12,000		—		12,000
Junior subordinated debentures		4,124		—		4,124		—		4,124

26

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

Deposits with no stated maturities are defined as having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair value derived from retaining those deposits for an expected future period of time. This component, commonly referred to as a deposit base intangible, is neither considered in the above amounts nor is it recorded as an intangible asset on the consolidated balance sheet. Significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

NOTE 12 – STOCK BASED COMPENSATION

The Company has made restricted share grants pursuant to the Bank First Corporation 2011 Equity Plan and the Bank First Corporation 2020 Equity Plan, which replaced the 2011 Plan. The purpose of the Plan is to provide financial incentives for selected employees and for the non-employee Directors of the Company, thereby promoting the long-term growth and financial success of the Company. The number of shares of Company stock that may be issued pursuant to awards under the 2020 Plan shall not exceed, in the aggregate, 700,000. As of September 30, 2024, 100,954 shares of Company stock have been awarded under the 2020 Plan. Compensation expense for restricted stock is based on the fair value of the awards of Bank First Corporation common stock at the time of grant. The value of restricted stock grants that are expected to vest is amortized into expense over the vesting periods. For the three months ended September 30, 2024 and 2023, compensation expense of $0.5 million and $0.6 million, respectively, was recognized related to restricted stock awards. For the nine months ended September 30, 2024 and 2023, compensation expense of $1.6 million and $1.6 million, respectively, was recognized related to restricted stock awards.

As of September 30, 2024, there was $2.5 million of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan. That cost is expected to be recognized over a weighted average period of 1.41 years. The aggregate grant date fair value of restricted stock awards that vested during the nine months ended September 30, 2024, was approximately $2.1 million.

	For the period ended			For the period ended
	September 30, 2024			September 30, 2023
		Weighted-			Weighted-
		Average Grant-			Average Grant-
	Shares	Date Fair Value		Shares	Date Fair Value
Restricted Stock
Outstanding at beginning of period	58,196	$	72.28	59,272	$	65.85
Granted	24,581		85.85	25,506		80.15
Vested	(30,143)		71.14	(25,762)		62.05
Forfeited or cancelled	—		—	(820)		65.09
Outstanding at end of period	52,634	$	79.27	58,196	$	71.42

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2023, included in our Annual Report and with our unaudited condensed accompanying notes set forth in this Quarterly Report on Form 10-Q for the quarterly period September 30, 2024.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report are forward-looking statements within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements relating to the Company’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives, potential future acquisitions, disposition and other growth opportunities. These statements, which are based upon certain assumptions and estimates and describe the Company’s future plans, results, strategies and expectations, can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “projection” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates and projections will be achieved. Accordingly, the Company cautions investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict and that are beyond the Company’s control. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date of this report, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statement in this report including, without limitation, the risks and other factors set forth in the Company’s Registration Statements under the captions “Cautionary Note Regarding Forward-Looking Statements” and “Risk factors.” Many of these factors are beyond the Company’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, investors should not place undue reliance on any such forward-looking statements. Any forward-looking statements speaks only as of the date of this report, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company.

We qualify all of our forward-looking statements by these cautionary statements.

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 Board of Governors of the Federal Reserve System (“Federal Reserve”), and is regulated by the Office of the Comptroller of the Currency (“OCC”). Including its headquarters in Manitowoc, Wisconsin, the Bank has twenty-six banking locations in Manitowoc, Outagamie, Brown, Winnebago, Sheboygan, Shawano, Waupaca, Ozaukee, Monroe, Fond du Lac, Waushara, Dane, Columbia and Jefferson counties in Wisconsin. The Bank offers loan, deposit and treasury management products at each of its banking locations.

28

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 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 loan 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.

On February 10, 2023, the Company consummated its merger with Hometown pursuant to the Agreement and Plan of Bank Merger, dated as of July 25, 2022, by and among the Company and Hometown, whereby Hometown was merged with and into the Company, and Hometown Bank, Hometown’s wholly owned banking subsidiary, was merged with and into the Bank. The system integration was completed, and six branches of Hometown Bank opened on February 13, 2023 as branches of the Bank, expanding the Bank’s presence in Fond du Lac, Columbia, Dane and Waushara County.

The Company accounted for this transaction under the acquisition method of accounting, and thus, the financial position and results of operations of Hometown prior to the consummation date are not included in the accompanying consolidated financial statements. The acquisition method of accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determines the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities, deposits and borrowings with the assistance of third-party valuations, appraisals, and third-party advisors. The estimated fair values were subject to refinement for up to one year after the consummation as additional information becomes available relative to the closing date fair values.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables present certain selected historical consolidated financial data as of the dates or for the period indicated:

	At or for the Three Months Ended										At or for the Nine Months Ended
(In thousands, except per share data)	9/30/2024		6/30/2024		3/31/2024		12/31/2023		9/30/2023		9/30/2024		9/30/2023
Results of Operations:
Interest income	$	54,032	$	49,347	$	49,272	$	48,663	$	46,989	$	152,651	$	133,820
Interest expense		18,149		16,340		15,923		15,747		12,931		50,412		33,256
Net interest income		35,883		33,007		33,349		32,916		34,058		102,239		100,564
Provision for credit losses		—		—		200		500		—		200		4,182
Net interest income after provision for credit losses		35,883		33,007		33,149		32,416		34,058		102,039		96,382
Noninterest income		4,893		5,877		4,397		42,458		5,254		15,167		15,657
Noninterest expense		20,100		19,057		20,324		28,862		19,647		59,481		59,257
Income before income tax expense		20,676		19,827		17,222		46,012		19,665		57,725		52,782
Income tax expense		4,124		3,768		1,810		11,114		4,861		9,702		13,166
Net income	$	16,552	$	16,059	$	15,412	$	34,898	$	14,804	$	48,023	$	39,616
Earnings per common share - basic	$	1.65	$	1.59	$	1.51	$	3.39	$	1.43	$	4.75	$	3.89
Earnings per common share - diluted		1.65		1.59		1.51		3.39		1.43		4.75		3.89
Common Shares:
Basic weighted average		9,959,556		10,025,977		10,177,932		10,308,275		10,330,779		10,053,676		10,127,708
Diluted weighted average		9,980,544		10,039,862		10,201,373		10,338,715		10,353,621		10,075,890		10,150,990
Outstanding		10,011,428		10,031,350		10,129,190		10,365,131		10,379,071		10,011,428		10,379,071
Noninterest income / noninterest expense:
Service charges	$	2,189	$	2,101	$	1,634	$	1,847	$	1,821	$	5,924	$	5,186
Income from Ansay		1,062		1,379		979		110		791		3,420		2,812
Income from UFS		—		—		—		(179)		784		—		2,444
Loan servicing income		733		735		726		741		734		2,194		2,119
Valuation adjustment on mortgage servicing rights		(344)		339		(312)		(65)		229		(317)		460
Net gain on sales of mortgage loans		377		277		219		273		248		873		624
Gain on sale of UFS		—		—		—		38,904		—		—		—
Other noninterest income		876		1,046		1,151		827		647		3,073		2,012
Total noninterest income	$	4,893	$	5,877	$	4,397	$	42,458	$	5,254	$	15,167	$	15,657
Personnel expense	$	10,118	$	10,004	$	10,893	$	10,357	$	10,216	$	31,015	$	29,998
Occupancy, equipment and office		1,598		1,330		1,584		1,307		1,455		4,512		4,363
Data processing		2,502		2,114		2,389		1,900		2,153		7,005		6,111
Postage, stationery and supplies		213		205		238		236		244		656		848
Net gain (loss) on sales and valuations of other real estate owned		—		(461)		(47)		1,591		53		(508)		542
Net loss on sales of securities		—		—		34		7,826		—		34		75
Advertising		61		79		95		99		60		235		226
Charitable contributions		183		234		176		264		229		593		680
Outside service fees		1,598		1,889		1,293		1,363		1,438		4,780		4,987
Amortization of intangibles		1,429		1,475		1,500		1,604		1,626		4,404		4,720
Other noninterest expense		2,398		2,188		2,169		2,315		2,173		6,755		6,707
Total noninterest expense	$	20,100	$	19,057	$	20,324	$	28,862	$	19,647	$	59,481	$	59,257
Period-end balances:
Cash and cash equivalents	$	204,427	$	98,950	$	83,374	$	247,468	$	75,776	$	204,427	$	75,776
Investment securities available-for-sale, at fair value		128,438		127,977		138,420		142,197		179,046		128,438		179,046
Investment securities held-to-maturity, at cost		109,236		110,648		111,732		103,324		77,154		109,236		77,154
Loans		3,470,920		3,428,635		3,383,395		3,342,974		3,355,549		3,470,920		3,355,549
Allowance for credit losses - loans		(45,212)		(45,118)		(44,378)		(43,609)		(43,404)		(45,212)		(43,404)
Premises and equipment		69,710		68,633		69,621		69,891		70,994		69,710		70,994
Goodwill and other intangibles, net		197,698		199,127		200,602		202,102		203,705		197,698		203,705
Mortgage Servicing Rights		13,351		13,694		13,356		13,668		13,733		13,351		13,733
Other Assets		145,930		143,274		143,802		143,827		154,966		145,930		154,966
Total assets		4,294,498		4,145,820		4,099,924		4,221,842		4,087,519		4,294,498		4,087,519
Deposits		3,484,741		3,399,941		3,416,039		3,432,920		3,398,293		3,484,741		3,398,293
Securities sold under repurchase agreements		—		—		—		75,747		17,191		—		17,191
Borrowings		147,346		102,321		47,295		51,394		70,319		147,346		70,319
Other liabilities		33,516		28,979		27,260		41,983		24,387		33,516		24,387
Total liabilities		3,665,603		3,531,241		3,490,594		3,602,044		3,510,190		3,665,603		3,510,190
Stockholders’ equity		628,895		614,579		609,330		619,798		577,329		628,895		577,329
Book value per common share		62.82		61.27		60.16		59.80		55.62		62.82		55.62
Tangible book value per common share (1)		43.07		41.42		40.35		40.30		36.00		43.07		36.00

30

Average balances:
Loans	$	3,450,423		$	3,399,906		$	3,355,142		$	3,330,511		$	3,324,729		$	3,402,001		$	3,258,199
Interest-earning assets		3,833,968			3,696,099			3,741,498			3,738,589			3,671,620			3,757,468			3,627,015
Total assets		4,231,112			4,094,542			4,144,896			4,147,859			4,092,565			4,157,121			4,032,308
Deposits		3,435,172			3,401,828			3,446,145			3,406,028			3,404,708			3,427,741			3,367,647
Interest-bearing liabilities		2,583,382			2,466,726			2,512,304			2,426,870			2,411,062			2,521,031			2,394,630
Goodwill and other intangibles, net		198,493			199,959			201,408			202,933			204,556			199,948			190,470
Stockholders’ equity		620,821			610,818			613,190			613,244			576,315			614,965			554,892
Financial ratios (2):
Return on average assets		1.56	%		1.58	%		1.50	%		3.34	%		1.44	%		1.54	%		1.31	%
Return on average common equity		10.61	%		10.57	%		10.11	%		22.58	%		10.19	%		10.43	%		9.55	%
Average equity to average assets		14.67	%		14.92	%		14.79	%		14.78	%		14.08	%		14.79	%		13.76	%
Stockholders’ equity to assets		14.64	%		14.82	%		14.86	%		14.68	%		14.12	%		14.64	%		14.12	%
Tangible equity to tangible assets (1)		10.53	%		10.53	%		10.48	%		10.39	%		9.62	%		10.53	%		9.62	%
Loan yield		5.73	%		5.51	%		5.41	%		5.33	%		5.23	%		5.55	%		5.13	%
Earning asset yield		5.64	%		5.40	%		5.33	%		5.20	%		5.11	%		5.46	%		4.97	%
Cost of funds		2.79	%		2.66	%		2.55	%		2.57	%		2.13	%		2.67	%		1.86	%
Net interest margin, taxable equivalent		3.76	%		3.63	%		3.62	%		3.53	%		3.71	%		3.67	%		3.74	%
Net loan charge-offs to average loans		0.04	%		(0.05)	%		(0.07)	%		—	%		—	%		(0.03)	%		(0.01)	%
Nonperforming loans to total loans		0.32	%		0.31	%		0.29	%		0.20	%		0.10	%		0.32	%		0.10	%
Nonperforming assets to total assets		0.28	%		0.27	%		0.31	%		0.21	%		0.13	%		0.28	%		0.13	%
Allowance for credit losses - loans to total loans		1.30	%		1.32	%		1.31	%		1.30	%		1.29	%		1.30	%		1.29	%

(1) These measures are not measures prepared in accordance with GAAP, and are therefore considered to be non-GAAP financial measures. See “GAAP reconciliation and management explanation of non-GAAP financial measures” for a reconciliation of these measures to their most comparable GAAP measures.

(2) Income statement-related ratios for partial year periods are annualized.

GAAP RECONCILIATION AND MANAGEMENT EXPLANATION OF NON-GAAP FINANCIAL MEASURES

We identify certain financial measures discussed in the Report as being “non-GAAP financial measures.” The non-GAAP financial measures presented in this Report are tangible book value per common share and tangible equity to tangible assets.

In accordance with the SEC’s rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our selected historical consolidated financial data may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have presented in our selected historical consolidated financial data when comparing such non-GAAP financial measures. The following discussion and reconciliations provide a more detailed analysis of these non-GAAP financial measures.

31

Tangible book value per common share and tangible equity to tangible assets are non-GAAP measures that exclude the impact of goodwill and other intangibles used by the Company’s management to evaluate capital adequacy. Because intangible assets such as goodwill and other intangibles vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare the Company’s capital position to other companies. The most directly comparable financial measures calculated in accordance with GAAP are book value per common share, return on average common equity and stockholders’ equity to total assets.

	At or for the Three Months Ended															At or for the Nine Months Ended
(In thousands, except per share data)	9/30/2024			6/30/2024			3/31/2024			12/31/2023			9/30/2023			9/30/2024			9/30/2023
Tangible Assets
Total assets	$	4,294,498		$	4,145,820		$	4,099,924		$	4,221,842		$	4,087,519		$	4,294,498		$	4,087,519
Adjustments:
Goodwill		(175,106)			(175,106)			(175,106)			(175,106)			(175,106)			(175,106)			(175,106)
Core deposit intangible, net of amortization		(22,592)			(24,021)			(25,496)			(26,996)			(28,599)			(22,592)			(28,599)
Tangible assets	$	4,096,800		$	3,946,693		$	3,899,322		$	4,019,740		$	3,883,814		$	4,096,800		$	3,883,814
Tangible Common Equity
Total stockholders’ equity	$	628,895		$	614,579		$	609,330		$	619,798		$	577,329		$	628,895		$	577,329
Adjustments:
Goodwill		(175,106)			(175,106)			(175,106)			(175,106)			(175,106)			(175,106)			(175,106)
Core deposit intangible, net of amortization		(22,592)			(24,021)			(25,496)			(26,996)			(28,599)			(22,592)			(28,599)
Tangible common equity	$	431,197		$	415,452		$	408,728		$	417,696		$	373,624		$	431,197		$	373,624
Book value per common share	$	62.82		$	61.27		$	60.16		$	59.80		$	55.62		$	62.82		$	55.62
Tangible book value per common share		43.07			41.42			40.35			40.30			36.00			43.07			36.00
Total stockholders’ equity to total assets		14.64	%		14.82	%		14.86	%		14.68	%		14.12	%		14.64	%		14.12	%
Tangible common equity to tangible assets		10.53	%		10.53	%		10.48	%		10.39	%		9.62	%		10.53	%		9.62	%

RESULTS OF OPERATIONS

Results of Operations for the Three Months Ended September 30, 2024 and September 30, 2023

General. Net income increased $1.8 million to $16.6 million for three months ended September 30, 2024, compared to $14.8 million for the same period in 2023. This increase is primarily driven by the repricing of new and renewed loans in a higher rate environment, along with steady growth in interest-bearing assets. In addition, due to tax legislation in the Company’s home state, the effective tax rate decreased from 24.7% for the third quarter of 2023 to 19.9% for the third quarter of 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 and dividend income increased by $1.8 million to $35.9 million for the three months ended September 30, 2024 compared to $34.1 million for three months ended September 30, 2023. The increase in net interest income was primarily due to repricing of new and renewed loans in a higher interest rate environment, as well as steady growth in interest-bearing assets. Total average interest-earning assets were $3.83 billion for the three months ended September 30, 2024, up from $3.67 billion for the same period in 2023. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve.

Interest Income. Total interest income increased $7.0 million, or 15.0%, to $54.0 million for the three months ended September 30, 2024 compared to $47.0 million for the same period in 2023. The increase in total interest income was primarily due to an increase in the average interest rate earned on interest-earning assets. The average balance of interest-earning assets increased by $162.3 million during the three months ended September 30, 2024 compared to the same period in 2023 and the average interest rate earned on these assets increased by 0.53% in the year-over-year third quarters. Further, a previously purchased loan with remaining

32

associated purchase accounting adjustments of $0.6 million was fully repaid before maturity during the third quarter of 2024, leading to an elevated impact of purchase accounting during the quarter.

Interest Expense. Interest expense increased $5.2 million, or 40.4%, to $18.1 million for the three months ended September 30, 2024 compared to $12.9 million for the same period in 2023. The increase in interest expense was primarily due to higher crediting interest rates on interest-bearing liabilities.

Interest expense on interest-bearing deposits increased by $4.9 million to $16.5 million for the three months ended September 30, 2024 compared to $11.6 million for the same period in 2023. The average balance and rate of interest-bearing deposits was $2.44 billion and 2.69% for the three months ended September 30, 2024, compared to $2.32 billion and 1.99% for the same period in 2023.

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 operations as the provision for credit losses. The provision for credit losses and level of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market area. The determination of the amount is complex and involves a high degree of judgment and subjectivity.

We did not record a provision for credit loss during the three months ended September 30, 2024 or 2023. Economic forecasts, primarily US gross domestic product and unemployment projections, were little changed during the third quarter of 2024 resulting in consistent economic and qualitative factors in the Current Expected Credit Losses (“CECL”) methodology. We recorded net charge offs of $0.3 million during the three months ended September 30, 2024 compared to net recoveries of $0.1 million during the three months ended September 30, 2023. Other than a $0.3 million charge-off during the third quarter of 2024, related to a single customer relationship, the Bank’s loan portfolio continues to exhibit very little credit stress. Due to a reduction in unfunded loan commitments and an increase in outstanding loans, the Bank moved $0.4 million from its ACL-Unfunded Commitments to its ACL – Loans during the third quarter of 2024. While this move had no impact on the Bank’s profitability for the quarter, it did increase the allowance for potential loan credit losses to correspond with the increase in overall loan portfolio balances. The ACL - Loans was $45.2 million, or 1.30% of total loans, at September 30, 2024 compared to $43.4 million, or 1.29% of total loans at September 30, 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 sources of noninterest income include loan servicing fees and gains on sales of mortgage loans.

Noninterest income decreased $0.4 million to $4.9 million for the three months ended September 30, 2024 compared to $5.3 million for the same period in 2023. Service charges increased by 20.0% from the prior-year third quarter primarily due to prepayment and referral fees on loans. Net gains on the sales of mortgage loans increased by 52.0% from the third quarter of 2023 to the third quarter of 2024, attributed to a rise in secondary market loan origination activity resulting from declining interest rates. Due to the sale of 100% of the Bank’s member interest in UFS on October 1, 2023, no income from UFS was recorded in the third quarter of 2024, compared to income of $0.8 million during the third quarter of 2023. Negative valuation adjustments to the Bank’s MSRs totaling $0.3 million during the third quarter of 2024 compared unfavorably to $0.2 million in positive valuation adjustments during the third quarter of 2023.

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The major components of our noninterest income are listed below:

	Three Months Ended September 30,
	2024		2023		$ Change		% Change
	(In thousands)
Noninterest Income
Service charges	$	2,189	$	1,821	$	368		20	%
Income from Ansay		1,062		791		271		34	%
Income from UFS		—		784		(784)		(100)	%
Loan servicing income		733		734		(1)		(0)	%
Valuation adjustment on MSR		(344)		229		(573)		NM	%
Net gain on sales of mortgage loans		377		248		129		52	%
Other		876		647		229		35	%
Total noninterest income	$	4,893	$	5,254	$	(361)		(7)	%

Noninterest Expense. Noninterest expense increased $0.5 million to $20.1 million for the three months ended September 30, 2024 compared to $19.6 million for the same period in 2023. Most noninterest expenses have remained well-controlled over the past five quarters. However, occupancy, equipment, and office expenses increased this quarter, primarily due to $0.2 million in losses from disposing of outdated equipment. Additionally, data processing expenses included $0.4 million in project-related costs tied to the Bank's ongoing upgrade of its online customer platform.

The major components of our noninterest expense are listed below:

	Three Months Ended September 30,
	2024		2023		$ Change		% Change
	(In thousands)
Noninterest Expense
Salaries, commissions, and employee benefits	$	10,118	$	10,216	$	(98)	(1)	%
Occupancy		1,598		1,455		143	10	%
Data processing		2,502		2,153		349	16	%
Postage, stationary, and supplies		213		244		(31)	(13)	%
Net loss on sales and valuations of other real estate owned		—		53		(53)	(100)	%
Advertising		61		60		1	2	%
Charitable contributions		183		229		(46)	(20)	%
Outside service fees		1,598		1,438		160	11	%
Amortization of intangibles		1,429		1,626		(197)	(12)	%
Other		2,398		2,173		225	10	%
Total noninterest expenses	$	20,100	$	19,647	$	453	2	%

Income Tax Expense. We recorded a provision for income taxes of $4.1 million for the three months ended September 30, 2024 compared to a provision of $4.9 million for the same period during 2023, reflecting effective tax rates of 19.9% and 24.7%, respectively. As previously noted, the Company’s home state passed tax legislation during the third quarter of 2023 which exempted income from a significant portion of the Company’s loans from taxation in Wisconsin. This change allowed the Company to reverse $2.4 million in state related income tax expense which had been recorded during the first two quarters of 2023. 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. The net impact of these two items was an increase in income tax expenses of $0.5 million during the third quarter of 2023.

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Results of Operations for the Nine Months Ended September 30, 2024 and September 30, 2023

General. Net income increased $8.4 million to $48.0 million for nine months ended September 30, 2024, compared to $39.6 million for the same period in 2023. This increase was partially due to the added scale of operations resulting from the Hometown acquisition during the first quarter of 2023. Further, average rates on interest-earning assets have consistently risen, while the rise in rates paid on deposit accounts has started to decelerate. The first nine months of 2023 was also negatively impacted by $1.8 million in acquisition expenses and a $3.6 million provision for credit losses related to the acquired loans from Hometown. The absence of income from UFS during the first nine months of 2024 compared to $2.4 million in income provided by UFS during the first nine months of 2023.

Net Interest Income. Net interest and dividend income increased by $1.6 million to $102.2 million for the nine months ended September 30, 2024 compared to $100.6 million for nine months ended September 30, 2023. As discussed earlier, the rise in net interest income was mainly driven by the repricing of new and renewed loans in a higher interest rate environment and overall growth in interest-earning assets. Comparing the first nine months of 2024 to the first nine months of 2023, rates earned on interest-earning assets increased by 0.49% while rates paid on interest-bearing liabilities increased by 0.81%. Tax equivalent net interest margin decreased 0.07% to 3.67% for the nine months ended September 30, 2024, down from 3.74% for the same period in 2023. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve.

Interest Income. Total interest income increased $18.9 million, or 14.1%, to $152.7 million for the nine months ended September 30, 2024 compared to $133.8 million for the same period in 2023. The increase in total interest income was primarily due to the aforementioned increase in rates earned on interest-earning assets over recent quarters. The average balance of interest-earning assets increased by $130.5 million during the first nine months of 2024 compared to the same period in 2023 and the average interest rate earned on these assets increased from 4.97% for the first three quarters of 2023 to 5.46% during the first three quarters of 2024.

Interest Expense. Interest expense increased $17.1 million, or 51.6%, to $50.4 million for the nine months ended September 30, 2024 compared to $33.3 million for the same period in 2023. The increase in interest expense was primarily due to elevated crediting rates on interest-bearing liabilities. The average balance of interest-bearing liabilities increased by $126.4 million during the first nine months of 2024 compared to the same period in 2023 and the average interest rate paid on these balances was 1.86% for the first three quarters of 2023 compared to 2.67% for the first three quarters of 2024.

Interest expense on interest-bearing deposits totaled $47.7 million and $29.2 million for the nine months ended September 30, 2024 and 2023, respectively. The average cost of interest-bearing deposits was 2.61% for the nine months ended September 30, 2024, compared to 1.70% for the same period in 2023.

Provision for Credit Losses. We recorded a provision for credit losses of $0.2 million for the nine months ended September 30, 2024 compared to $4.2 million for the same period in 2023. The increased provision for the first nine months of 2023 was primarily related to loans acquired from Hometown. We recorded net recoveries of $0.5 million for the nine months ended September 30, 2024 compared to net recoveries of $0.1 million for the same period in 2023. Also, due to a reduction in unfunded loan commitments and an increase in outstanding loans, the Bank moved $0.9 million from its ACL-Unfunded Commitments to its ACL – Loans during the first nine months of 2024. The ACL was $45.2 million, or 1.30% of total loans, at September 30, 2024 compared to $43.4 million, or 1.29% of total loans at September 30, 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 sources of noninterest income include loan servicing fees and gains on sales of mortgage loans.

Noninterest income decreased $0.5 million to $15.2 million for the nine months ended September 30, 2024 compared to $15.7 million for the same period in 2023. Service charges and income provided by the Bank’s member interest in Ansay increased $0.7 million and $0.6 million, respectively, for the first nine months of 2024 compared to the same period in 2023. Offsetting these increases, the sale of 100% of the Bank’s member interest in UFS on October 1, 2023, lead to no income from UFS being recorded in the first three quarters of 2024, compared to income of $2.4 million during the first three quarters of 2023. Negative valuation

35

adjustments to the Bank’s MSR totaling $0.3 million during the first nine months of 2024 also compared unfavorably to $0.5 million in positive valuation adjustments during the first nine months of 2023.

The major components of our noninterest income are listed below:

	Nine Months Ended September 30,
	2024		2023		$ Change		% Change
	(In thousands)
Noninterest Income
Service Charges	$	5,924	$	5,186	$	738	14	%
Income from Ansay		3,420		2,812		608	22	%
Income from UFS		—		2,444		(2,444)	(100)	%
Loan Servicing income		2,194		2,119		75	4	%
Valuation adjustment on MSR		(317)		460		(777)	NM	%
Net gain on sales of mortgage loans		873		624		249	40	%
Other		3,073		2,012		1,061	53	%
Total noninterest income	$	15,167	$	15,657	$	(490)	(3)	%

Noninterest Expense. Noninterest expense increased $0.2 million to $59.5 million for the nine months ended September 30, 2024 compared to $59.3 million for the same period in 2023. Data processing expense increased by $0.9 million, or 14.6%, over the first three quarters of 2024 compared to the first three quarters of 2023 due to the aforementioned project-related costs for upgrading the Bank’s online customer platform and the increased scale from the acquisition of Hometown, completed in February of 2023. Expenses related to this acquisition totaled $1.8 million during the first nine months of 2023. The lack of a similar acquisition during the first three quarters of 2024 caused decreases in the areas of postage, stationary, supplies and outside service fees expense period-over-period. Finally, gains on sales and valuations of OREO totaling $0.5 million during the first three quarters of 2024 compared favorably to losses of $0.5 million during the first three quarters of 2023.

The major components of our noninterest expense are listed below:

	Nine Months Ended September 30,
	2024		2023		$ Change		% Change
	(In thousands)
Noninterest Expense
Salaries, commissions, and employee benefits	$	31,015	$	29,998	$	1,017	3	%
Occupancy		4,512		4,363		149	3	%
Data processing		7,005		6,111		894	15	%
Postage, stationary, and supplies		656		848		(192)	(23)	%
Net loss (gain) on sales and valuations of other real estate owned		(508)		542		(1,050)	NM	%
Net loss on sales of securities		34		75		(41)	(55)	%
Advertising		235		226		9	4	%
Charitable contributions		593		680		(87)	(13)	%
Outside service fees		4,780		4,987		(207)	(4)	%
Amortization of intangibles		4,404		4,720		(316)	(7)	%
Other		6,755		6,707		48	1	%
Total noninterest expenses	$	59,481	$	59,257	$	224	0	%

Income Tax Expense. We recorded a provision for income taxes of $9.7 million for the nine months ended September 30, 2024 compared to a provision of $13.2 million for the same period during 2023, reflecting effective tax rates of 16.8% and 24.9%, respectively. As previously noted, the Company’s home state passed tax legislation during the third quarter of 2023 which exempted income from 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 during the third quarter of 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 the first nine months of 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.

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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 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 stockholders’ equity, and average rates earned or paid on a fully taxable equivalent basis for each of the periods indicated:

	Three Months Ended
	September 30, 2024						September 30, 2023
			Interest						Interest
	Average		Income/		Rate Earned/ Paid		Average		Income/		Rate Earned/ Paid
	Balance		Expenses (1)		(1)		Balance		Expenses (1)		(1)
	(dollars in thousands)
ASSETS
Interest-earning assets
Loans (2)
Taxable	$	3,340,597	$	192,615	5.77	%	$	3,219,654	$	169,083	5.25	%
Tax-exempt		109,826		5,161	4.70	%		105,075		4,691	4.46	%
Securities
Taxable (available for sale)		117,064		6,375	5.45	%		176,363		6,933	3.93	%
Tax-exempt (available for sale)		32,911		1,116	3.39	%		33,629		1,111	3.30	%
Taxable (held to maturity)		106,490		4,211	3.95	%		73,007		2,595	3.55	%
Tax-exempt (held to maturity)		3,196		84	2.63	%		4,152		109	2.63	%
Cash and due from banks		123,884		6,728	5.43	%		59,740		3,140	5.26	%
Total interest-earning assets		3,833,968		216,290	5.64	%		3,671,620		187,662	5.11	%
Non interest-earning assets		442,248						464,357
Allowance for credit losses - loans		(45,104)						(43,412)
Total assets	$	4,231,112					$	4,092,565
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Checking accounts	$	382,388	$	10,680	2.79	%	$	294,961	$	5,762	1.95	%
Savings accounts		820,631		12,656	1.54	%		838,980		10,753	1.28	%
Money market accounts		601,409		14,997	2.49	%		661,274		13,582	2.05	%
Certificates of deposit		625,573		26,890	4.30	%		525,609		16,075	3.06	%
Brokered deposits		8,918		357	4.00	%		874		20	2.29	%
Total interest-bearing deposits		2,438,919		65,580	2.69	%		2,321,698		46,192	1.99	%
Other borrowed funds		144,463		6,622	4.58	%		89,364		5,108	5.72	%
Total interest-bearing liabilities		2,583,382		72,202	2.79	%		2,411,062		51,300	2.13	%
Non-interest bearing liabilities
Demand deposits		996,253						1,083,010
Other liabilities		30,656						22,178
Total liabilities		3,610,291						3,516,250
Shareholders’ equity		620,821						576,315
Total liabilities & shareholders’ equity	$	4,231,112					$	4,092,565
Net interest income on a fully taxable equivalent basis				144,088						136,362
Less taxable equivalent adjustment				(1,336)						(1,241)
Net interest income			$	142,752					$	135,121
Net interest spread (3)					2.85	%					2.98	%
Net interest margin (4)					3.76	%					3.71	%

(1). Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% for the three months ended September 30, 2024 and 2023.

(2). Nonaccrual loans are included in average amounts outstanding.

(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.

(4). Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets.

37

	Nine Months Ended
	September 30, 2024						September 30, 2023
			Interest		Rate				Interest		Rate
	Average		Income/		Earned/		Average		Income/		Earned/
	Balance		Expenses (1)		Paid (1)		Balance		Expenses (1)		Paid (1)
	(dollars in thousands)
ASSETS
Interest-earning assets
Loans (2)
Taxable	$	3,293,762	$	183,971	5.59	%	$	3,155,397	$	162,543	5.15	%
Tax-exempt		108,239		4,970	4.59	%		102,802		4,629	4.50	%
Securities
Taxable (available for sale)		134,281		6,221	4.63	%		199,164		6,234	3.13	%
Tax-exempt (available for sale)		33,242		1,132	3.41	%		38,310		1,218	3.18	%
Taxable (held to maturity)		106,957		4,248	3.97	%		66,895		2,407	3.60	%
Tax-exempt (held to maturity)		3,515		92	2.62	%		4,518		117	2.59	%
Cash and due from banks		77,472		4,573	5.90	%		59,929		3,021	5.04	%
Total interest-earning assets		3,757,468		205,207	5.46	%		3,627,015		180,169	4.97	%
Non interest-earning assets		444,055						446,437
Allowance for loan losses		(44,402)						(41,144)
Total assets	$	4,157,121					$	4,032,308
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Checking accounts	$	401,363	$	11,337	2.82	%	$	294,753	$	5,145	1.75	%
Savings accounts		816,202		12,253	1.50	%		839,459		9,372	1.12	%
Money market accounts		611,257		14,783	2.42	%		664,758		11,883	1.79	%
Certificates of deposit		606,988		25,174	4.15	%		491,544		12,495	2.54	%
Brokered deposits		3,491		131	3.75	%		4,005		115	2.87	%
Total interest-bearing deposits		2,439,301		63,678	2.61	%		2,294,519		39,010	1.70	%
Other borrowed funds		81,730		3,662	4.48	%		100,111		5,453	5.45	%
Total interest-bearing liabilities		2,521,031		67,340	2.67	%		2,394,630		44,463	1.86	%
Non-interest bearing liabilities
Demand deposits		988,440						1,058,668
Other liabilities		32,685						24,118
Total liabilities		3,542,156						3,477,416
Shareholders’ equity		614,965						554,892
Total liabilities & shareholders' equity	$	4,157,121					$	4,032,308
Net interest income on a fully taxable equivalent basis				137,867						135,706
Less taxable equivalent adjustment				(1,301)						(1,252)
Net interest income			$	136,566					$	134,454
Net interest spread (3)					2.79	%					3.11	%
Net interest margin (4)					3.67	%					3.74	%

(1). Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% for the nine months ended September 30, 2024 and 2023.

(2). Nonaccrual loans are included in average amounts outstanding.

(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.

(4). Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets.

38

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.

	Three Months Ended September 30, 2024						Nine Months Ended September 30, 2024
	Compared with						Compared with
	Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
	Increase/(Decrease) Due to Change in						Increase/(Decrease) Due to Change in
	Volume		Rate		Total		Volume		Rate		Total
	(dollars in thousands)						(dollars in thousands)
Interest income
Loans
Taxable	$	6,524	$	17,008	$	23,532	$	7,333	$	14,095	$	21,428
Tax-exempt		217		253		470		248		93		341
Securities
Taxable (AFS)		(2,750)		2,192		(558)		(2,425)		2,412		(13)
Tax-exempt (AFS)		(24)		29		5		(169)		83		(86)
Taxable (HTM)		1,298		318		1,616		1,569		272		1,841
Tax-exempt (HTM)		(25)		—		(25)		(26)		1		(25)
Cash and due from banks		3,480		108		3,588		980		572		1,552
Total interest income		8,720		19,908		28,628		7,510		17,528		25,038
Interest expense
Deposits
Checking accounts	$	2,007	$	2,911	$	4,918	$	2,286	$	3,906	$	6,192
Savings accounts		(240)		2,143		1,903		(266)		3,147		2,881
Money market accounts		(1,308)		2,723		1,415		(1,019)		3,919		2,900
Certificates of deposit		3,453		7,362		10,815		3,437		9,242		12,679
Brokered Deposits		312		25		337		(16)		32		16
Total interest bearing deposits		4,224		15,164		19,388		4,422		20,246		24,668
Other borrowed funds		2,677		(1,163)		1,514		(911)		(880)		(1,791)
Total interest expense		6,901		14,001		20,902		3,511		19,366		22,877
Change in net interest income	$	1,819	$	5,907	$	7,726	$	3,999	$	(1,838)	$	2,161

CHANGES IN FINANCIAL CONDITION

Total Assets. Total assets increased $72.6 million, or 1.7%, to $4.29 billion at September 30, 2024, from $4.22 billion at December 31, 2023.

Cash and Cash Equivalents. Cash and cash equivalents decreased by $43.1 million to $204.4 million at September 30, 2024, from $247.5 million at December 31, 2023. This decline was primarily the result of funds being invested in growth in the Bank’s loan portfolio as well as a reduction in deposits and securities sold under repurchase agreements. Securities sold under repurchase agreements reported in prior periods related to one customer who discontinued this arrangement during the first quarter of 2024. These declines were partially offset by increases in notes payable through the first nine months of 2024.

Investment Securities. The carrying value of total investment securities decreased by $7.8 million to $237.7 million at September 30, 2024, from $245.5 million at December 31, 2023.

Loans. Net loans increased by $126.3 million, totaling $3.43 billion at September 30, 2024 compared to $3.30 billion at December 31, 2023.

39

Deposits. Deposits increased $51.8 million, or 1.5%, to $3.48 billion at September 30, 2024 from $3.43 billion at December 31, 2023.

Borrowings. At September 30, 2024, borrowings consisted of advances from the FHLB of Chicago and subordinated debt to other banks and an individual. FHLB borrowings increased $100.0 million, or 283.7%, to $135.3 million at September 30, 2024 from $35.3 million at December 31, 2023. These additional borrowings are intended to provide liquidity to support near-term loan growth. Subordinated debt remained stable at $12.0 million at September 30, 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 $9.1 million, or 1.5%, to $628.9 million at September 30, 2024 from $619.8 million at December 31, 2023. Repurchases of the Company’s common stock totaling $31.7 million and dividends declared totaling $11.1 million offset the positive impact of earnings totaling $48.0 million during the first nine months of the year.

LOANS

Our lending activities are principally conducted in the state of 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 80.9% and 79.2% of our total assets as of September 30, 2024 and December 31, 2023, 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.

Loans increased $127.9 million, or 3.8%, to $3.47 billion as of September 30, 2024 as compared to $3.34 billion as of December 31, 2023. This increase during the first nine months of 2024 was primarily driven by solid demand for new credit from our existing customer relationships. This growth was comprised of an increase of $29.9 million or 6.1% in commercial and industrial loans, an increase of $44.1 million or 4.9% in owner occupied commercial real estate loans, a decrease of $9.0 million or 1.9% in non-owner occupied commercial real estate, a decrease of $3.3 million or 1.0% in multi-family loans, an increase of $45.6 million or 22.7% in construction and development loans, an increase of $15.6 million or 1.8% in residential 1-4 family loans and an increase of $4.9 million or 7.5% in consumer and other loans.

The following table presents the balance and associated percentage of each major category in our loan portfolio:

	September 30, 2024				December 31, 2023				September 30, 2023
	Amount		% of Total		Amount		% of Total		Amount		% of Total
	(dollars in thousands)
Commercial & industrial	$	517,816	15	%	$	487,893	15	%	$	531,368	16	%
Commercial real estate
Owner occupied		938,730	27	%		894,596	27	%		897,439	27	%
Non-owner occupied		463,323	13	%		472,321	14	%		446,837	13	%
Multi-family		329,458	10	%		332,757	10	%		338,345	10	%
Construction & development		246,445	7	%		200,835	6	%		197,095	6	%
Residential 1-4 family		904,273	26	%		888,639	27	%		879,033	26	%
Consumer		55,647	2	%		50,950	1	%		50,729	2	%
Other loans		15,226	—	%		14,983	—	%		14,702	—	%
Total Loans	$	3,470,918	100	%	$	3,342,974	100	%	$	3,355,548	100	%

40

Our directors and officers and their associates 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 September 30, 2024 and December 31, 2023, total loans outstanding to such directors and officers and their associates were $79.8 million and $63.9 million, respectively. During the nine months ended September 30, 2024, $17.7 million in additions due to director and officer updates, $41.9 million of additions and $43.7 million of repayments were made to these loans. At September 30, 2024 and December 31, 2023, all of the loans to directors and officers were performing according to their original terms.

Loan categories

The principal categories of our loan portfolio are discussed below:

Commercial and Industrial (C&I). Our C&I portfolio totaled $517.8 million and $487.9 million at September 30, 2024 and December 31, 2023, respectively, and represented 15% of our total loans at both of those dates.

Our C&I loan customers represent various small and middle-market established businesses involved in professional services, accommodation and food services, health care, financial services, wholesale trade, manufacturing, distribution, retailing and non-profits. Most clients are privately owned with markets that range from local to national in scope. Many of the loans to this segment are secured by liens on corporate assets and the personal guarantees of the principals. The regional economic strength or weakness impacts the relative risks in this loan category. There is little concentration in any one business sector, and loan risks are generally diversified among many borrowers.

Commercial Real Estate (CRE). Our CRE loan portfolio totaled $1.73 billion and $1.70 billion at September 30, 2024 and December 31, 2023, respectively, and represented 50% of our total loans at both of those dates. The growth in our CRE loan portfolio through the first nine months of 2024 consisted primarily of owner occupied commercial real estate while non-owner occupied commercial real estate and multi-family real estate, typically perceived as containing a higher risk of credit losses, declined slightly. Management views owner occupied CRE as an extension of C&I lending as typically the primary repayment source on these loans is operating profits from the underlying business.

Our CRE loans are secured by a variety of property types including multi-family dwellings, retail facilities, office buildings, commercial mixed use, lodging and industrial and warehouse properties. We do not have any specific industry or customer concentrations in our CRE portfolio. Our commercial real estate loans are generally for terms up to ten years, with loan-to-values that generally do not exceed 80%. Amortization schedules are long term and thus a balloon payment is generally due at maturity. Under most circumstances, the Bank will offer to rewrite or otherwise extend the loan at prevailing interest rates.

Construction and Development (C&D). Our C&D loan portfolio totaled $246.4 million and $200.8 million at September 30, 2024 and December 31, 2023, respectively, and represented 7% and 6% of our total loans at September 30, 2024 and December 31, 2023, respectively.

Our C&D loans are generally for the purpose of creating value out of real estate through construction and development work, and also include loans used to purchase recreational use land. Borrowers typically provide a copy of a construction or development contract which is subject to bank acceptance prior to loan approval. Disbursements are handled by a title company. Borrowers are required to inject their own equity into the project prior to any note proceeds being disbursed. These loans are, by their nature, intended to be short term and are refinanced into other loan types at the end of the construction and development period.

41

Residential 1 – 4 Family. Residential 1 – 4 family loans held in portfolio amounted to $904.3 million and $888.6 million at September 30, 2024 and December 31, 2023, respectively, and represented 26% and 27% of our total loans at those dates.

We offer fixed and adjustable-rate residential mortgage loans with maturities up to 30 years. One-to-four family residential mortgage loans are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which is generally $726,200 for one-unit properties. In addition, we also offer loans above conforming lending limits typically referred to as “jumbo” loans. These loans are typically underwritten to the same guidelines as conforming loans; however, we may choose to hold a jumbo loan within its portfolio with underwriting criteria that does not exactly match conforming guidelines.

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 at September 30, 2024 and $1.18 billion at December 31, 2023.

Loans sold with the retention of servicing assets result in the capitalization of servicing rights. Loan servicing rights are carried at fair value. The net balance of capitalized servicing rights amounted to $13.4 million and $13.7 million at September 30, 2024 and December 31, 2023, respectively.

Consumer Loans. Our consumer loan portfolio totaled $55.6 million and $51.0 million at September 30, 2024 and December 31, 2023, respectively, and represented 2% of our total loans at those dates. Consumer loans include secured and unsecured loans, lines of credit and personal installment loans.

Consumer loans generally have greater risk compared to longer-term loans secured by improved, owner-occupied real estate, particularly consumer loans that are secured by rapidly depreciable assets. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. As a result, consumer loan repayments are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Other Loans. Our other loans totaled $15.2 million and $15.0 million at September 30, 2024 and December 31, 2023, respectively, and are immaterial to the overall loan portfolio. The other loans category consists primarily of over-drafted depository accounts, loans utilized to purchase or carry securities and loans to nonprofit organizations.

42

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 September 30, 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.

	One Year or		One to Five		Five to Fifteen		Over Fifteen
	Less		Years		Years		Years		Total
	(dollars in thousands)
Commercial & industrial	$	177,436	$	210,032	$	128,559	$	1,789	$	517,816
Commercial real estate
Owner Occupied		112,220		419,876		331,633		75,001		938,730
Non-owner Occupied		44,650		290,282		120,647		7,744		463,323
Multi-family		17,573		141,262		170,130		493		329,458
Construction & Development		41,995		87,309		54,204		62,937		246,445
Residential 1-4 family		17,552		97,959		217,570		571,192		904,273
Consumer and other		9,590		36,603		18,708		5,972		70,873
Total	$	421,016	$	1,283,323	$	1,041,451	$	725,128	$	3,470,918
Fixed Rate Loans:
Commercial & industrial	$	57,931	$	172,968	$	81,037	$	1,758	$	313,694
Commercial real estate
Owner Occupied		53,383		337,657		112,146		20,612		523,798
Non-owner Occupied		36,788		247,779		36,763		—		321,330
Multi-family		14,408		137,509		116,099		—		268,016
Construction & Development		24,188		82,535		15,794		35,008		157,525
Residential 1-4 family		10,289		76,897		172,256		276,833		536,275
Consumer and other		9,374		35,759		17,608		5,972		68,713
Total	$	206,361	$	1,091,104	$	551,703	$	340,183	$	2,189,351
Floating Rate Loans:
Commercial & industrial	$	119,505	$	37,064	$	47,522	$	31	$	204,122
Commercial real estate
Owner Occupied		58,837		82,219		219,487		54,389		414,932
Non-owner Occupied		7,862		42,503		83,884		7,744		141,993
Multi-family		3,165		3,753		54,031		493		61,442
Construction & Development		17,807		4,774		38,410		27,929		88,920
Residential 1-4 family		7,263		21,062		45,314		294,359		367,998
Consumer and other		216		844		1,100		—		2,160
Total	$	214,655	$	192,219	$	489,748	$	384,945	$	1,281,567

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.

43

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:

	As of September 30,			As of December 31,			As of September 30,
	2024			2023			2023
	(dollars in thousands)
Nonperforming loans
Nonaccrual loans
Commercial & industrial	$	4,117		$	1,344		$	531
Commercial real estate
Owner Occupied		5,382			3,877			1,958
Non-owner Occupied		—			—			—
Multi-family		—			—			—
Construction & Development		—			—			—
Residential 1-4 family		176			429			444
Consumer and other		18			12			13
Total nonaccrual loans		9,693			5,662			2,946
Loans past due > 90 days, but still accruing
Commercial & industrial		15			106			18
Commercial real estate
Owner Occupied		—			252			250
Non-owner Occupied		79			—			—
Multi-family		—			—			—
Construction & Development		86			—			—
Residential 1-4 family		1,282			507			151
Consumer and other		14			28			27
Total loans past due > 90 days, but still accruing		1,476			893			446
Total nonperforming loans	$	11,169		$	6,555		$	3,392
OREO
Commercial real estate owned	$	—		$	—		$	—
Residential real estate owned		—			—			—
Acquired bank property real estate owned		712			2,573			1,844
Total OREO	$	712		$	2,573		$	1,844
Total nonperforming assets ("NPAs")	$	11,881		$	9,128		$	5,236
Accruing modified loans to borrowers experiencing financial difficulty	$	18		$	21		$	21
Ratios
Nonaccrual loans to total loans		0.28	%		0.17	%		0.09	%
NPAs to total loans plus OREO		0.34	%		0.27	%		0.16	%
NPAs to total assets		0.28	%		0.21	%		0.13	%
ACL - Loans to nonaccrual loans		466	%		770	%		1,473	%
ACL - Loans to total loans		1.30	%		1.30	%		1.29	%

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, are reviewed on a regular basis by senior management. The increase in nonaccrual loans during the first nine months of 2024 primarily related to one customer relationship, acquired as part of the Hometown acquisition, that was moved from accrual status during the first quarter.

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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 along with the consolidated financial statements elsewhere in this report.

At September 30, 2024, the ACL - Loans was $45.2 million (representing 1.30% of period end loans). The ACL– Loans has remained consistent over recent quarters as economic conditions and the Company’s overall asset quality remain strong. As previously mentioned, the Bank reallocated $0.9 million of ACL from unfunded commitments to ACL for loans in response to a decrease in unfunded loan commitments and an increase in loan balances. The Company recorded net recoveries totaling $0.5 million during the first nine months of 2024.

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

	Nine months ended			Year ended			Nine months ended
	September 30,			December 31,			September 30,
	2024			2023			2023
	(dollars in thousands)
Balance of ACL - Loans at the beginning of period	$	43,609		$	22,680		$	22,680
Adoption of CECL		—			10,972			10,972
ACL - Loans on PCD loans acquired		—			5,534			5,534
Net loans charged-off (recovered):
Commercial & industrial		23			(22)			(5)
Commercial real estate - owner occupied		(615)			(70)			(70)
Commercial real estate - non-owner occupied		—			—			—
Commercial real estate - multi-family		—			—			—
Construction & Development		—			—			—
Residential 1-4 family		35			(106)			(104)
Consumer		—			—			(3)
Other Loans		54			67			56
Total net loans recovered		(503)			(131)			(126)
Provision charged to operating expense		200			4,292			4,092
Transfer from ACL - Unfunded Commitments		900			—			—
Balance of ACL - Loans at end of period	$	45,212		$	43,609		$	43,404
Ratio of net charge-offs (recoveries) to average loans by loan composition
Commercial & industrial		0.00	%		—	%		—	%
Commercial real estate - owner occupied		(0.07)	%		(0.01)	%		(0.01)	%
Commercial real estate - non-owner occupied		—	%		—	%		—	%
Commercial real estate - multi-family		—	%		—	%		—	%
Construction & Development		—	%		—	%		—	%
Residential 1-4 family		0.00	%		(0.01)	%		(0.01)	%
Consumer		—	%		—	%		(0.01)	%
Other Loans		0.36	%		0.36	%		0.36	%
Total net charge-offs (recoveries) to average loans		(0.01)	%		—	%		—	%

45

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

	September 30,				December 31,				September 30,
	2024				2023				2023
			% of				% of				% of
(in thousands, except %)	Amount		Loans		Amount		Loans		Amount		Loans
Loan Type:
Commercial & industrial	$	5,940	15	%	$	5,965	15	%	$	7,555	16	%
Commercial real estate - owner occupied		12,769	27	%		12,285	27	%		11,460	27	%
Commercial real estate - non-owner occupied		5,553	13	%		5,700	14	%		4,462	13	%
Commercial real estate - multi-family		4,624	10	%		4,754	10	%		3,902	10	%
Construction & development		4,443	7	%		3,597	6	%		3,568	6	%
Residential 1-4 family		11,107	26	%		10,620	27	%		11,152	26	%
Consumer		642	2	%		615	1	%		1,007	2	%
Other loans		134	—	%		73	—	%		98	—	%
Total allowance	$	45,212	100	%	$	43,609	100	%	$	43,204	100	%

SOURCES OF FUNDS

General. Deposits have traditionally been our primary source of funds for our investment and lending activities. 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 non-interest bearing and interest-bearing checking accounts, savings accounts, money market accounts, and certificate of deposits. As of September 30, 2024, deposit liabilities accounted for approximately 81.1% 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 $3.48 billion and $3.43 billion as of September 30, 2024 and December 31, 2023, respectively. Noninterest-bearing deposits at September 30, 2024 and December 31, 2023, were $1.02 billion and $1.05 billion, respectively, while interest-bearing deposits were $2.46 billion and $2.38 billion at September 30, 2024 and December 31, 2023, respectively. Like most in the banking industry, the Bank has seen a shift in its deposit portfolio from noninterest-bearing deposits to interest-bearing deposits as prevailing interest rates have increased over the last several quarters.

At September 30, 2024, we had a total of $649.7 million in certificates of deposit, including $20.1 million of brokered deposits. Based on historical experience and our current pricing strategy, we believe we will retain a majority of these accounts upon maturity, although our long-term strategy is to minimize reliance on certificates of deposits by increasing relationship deposits in lower earning savings and demand deposit accounts.

46

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

	Nine months ended				Year ended				Nine months ended
	September 30, 2024				December 31, 2023				September 30, 2023
	Amount		Percent		Amount		Percent		Amount		Percent
	(dollars in thousands)
Noninterest-bearing demand deposits	$	988,440	28.9	%	$	1,078,468	31.9	%	$	1,058,668	31.6	%
Interest-bearing checking deposits		401,363	11.7	%		293,568	8.7	%		294,753	8.8	%
Savings deposits		816,202	23.8	%		833,360	24.6	%		839,459	25.0	%
Money market accounts		611,257	17.8	%		665,988	19.7	%		664,758	19.8	%
Certificates of deposit		606,988	17.7	%		509,273	15.0	%		491,544	14.7	%
Brokered deposits		3,491	0.1	%		3,184	0.1	%		4,005	0.1	%
Total	$	3,427,741	100	%	$	3,383,841	100	%	$	3,353,187	100	%

The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of September 30, 2024:

	Time Deposits over FDIC		Portion of Time Deposits in
	Insurance Limits		Excess of FDIC Insurance Limits
	(dollars in thousands)
3 months or less remaining	$	57,434	$	25,434
Over 3 to 6 months remaining		64,049		34,799
Over 6 to 12 months remaining		25,770		12,270
Over 12 months or more remaining		16,324		5,824
Total	$	163,577	$	78,327

Borrowings

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.

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

	Nine months ended			Year ended			Nine months ended
(dollars in thousands)	September 30, 2024			December 31, 2023			September 30, 2023
Average daily amount of securities sold under repurchase agreements during the period	$	553		$	36,833		$	38,462
Weighted average interest rate on average daily securities sold under repurchase agreements		5.33	%		4.92	%		4.81	%
Maximum outstanding securities sold under repurchase agreements at any month-end	$	—		$	75,747		$	60,306
Securities sold under repurchase agreements at period end	$	—		$	75,747		$	17,191
Weighted average interest rate on securities sold under repurchase agreements at period end		NA			5.31	%		5.36	%

Borrowings

The Company’s borrowings have historically consisted primarily of 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 $135.3 million and $35.3 million of advances outstanding from the FHLB at September 30, 2024 and December 31, 2023, respectively.

47

The total loans pledged as collateral were $1.45 billion and $1.49 billion at September 30, 2024 and December 31, 2023. There were no outstanding letters of credit from the FHLB at September 30, 2024 or December 31, 2023.

The following table summarizes borrowings from the FHLB, and the weighted average interest rates paid:

	Nine months ended			Year ended			Nine months ended
(dollars in thousands)	September 30, 2024			December 31, 2023			September 30, 2023
Average daily amount of borrowings outstanding during the period	$	69,109		$	30,697		$	29,048
Weighted average interest rate on average daily borrowing		4.35	%		3.92	%		3.91	%
Maximum outstanding borrowings at any month-end	$	135,346		$	36,577		$	36,577
Borrowing outstanding at period end	$	135,346		$	35,270		$	35,847
Weighted average interest rate on borrowing at period end		4.37	%		3.59	%		3.58	%

Lines of credit and other borrowings.

During July 2020, the Company entered into subordinated note agreements with two separate commercial banks. As of September 30, 2024 and December 31, 2023, outstanding balances under these agreements totaled $6.0 million. These notes were issued with 10-year maturities, will 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.

During August 2022, the Company entered into subordinated note agreements with an individual. As of September 30, 2024 and December 31, 2023, outstanding balances under these agreements totaled $6.0 million. These notes were issued with 10-year maturities, will 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.

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 and Trust I during January 2024, resulting in these trusts’ dissolution. As a result of the redemption of the junior subordinated debenture related to Trust II and notification of the Company’s intent to redeem the junior subordinated debenture of Trust I prior to December 31, 2023, the Company amortized the remaining original fair value discounts into interest expense during 2023.

48

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. 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. government sponsored agencies, obligations of states and political subdivision, 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 $128.4 million and included $0.2 gross unrealized gains and gross unrealized losses of $9.4 million at September 30, 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. Securities held to maturity totaled $109.2 million at September 30, 2024 and $103.3 million at December 31, 2023.

The Company had recognized minimal net losses on sales of securities during the nine months ended September 30, 2024. The Company had recognized net losses on sales of securities of $0.1 million during the nine months ended September 30, 2023.

The following tables set forth the composition and maturities of investment securities as of September 30, 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.

					After One, But				After Five, But
	Within One Year				Within Five Years				Within Ten Years				After Ten Years				Total
			Weighted				Weighted				Weighted				Weighted				Weighted
	Amortized		Average		Amortized		Average		Amortized		Average		Amortized		Average		Amortized		Average
At September 30, 2024	Cost		Yield (1)		Cost		Yield (1)		Cost		Yield (1)		Cost		Yield (1)		Cost		Yield (1)
	(dollars in thousands)
Available for sale securities
Obligations of U.S. Government sponsored agencies	$	1,486	5.0	%	$	1,194	4.5	%	$	14,069	2.0	%	$	11,371	2.3	%	$	28,120	2.4	%
Obligations of states and political subdivisions		342	4.9	%		11,918	4.1	%		17,399	3.2	%		33,340	2.8	%		62,999	3.2	%
Mortgage-backed securities		12	4.0	%		10,950	3.4	%		7,907	4.4	%		11,987	3.7	%		30,856	3.8	%
Corporate notes		—	—	%		5,000	9.4	%		9,609	3.3	%		1,058	10.6	%		15,667	5.7	%
Total available for sale securities	$	1,840	4.9	%	$	29,062	4.8	%	$	48,984	3.1	%	$	57,756	3.0	%	$	137,642	3.4	%
Held to maturity securities
U.S. Treasury securities	$	22,148	3.6	%	$	42,730	3.7	%	$	41,162	4.4	%	$	—	—		$	106,040	4.0	%
Obligations of states and political subdivisions		801	2.3	%		2,395	2.7	%		—	—	%		—	—	%		3,196	2.6	%
Total held to maturity securities	$	22,949	3.6	%	$	45,125	3.7	%	$	41,162	4.4	%	$	—	—	%	$	109,236	3.9	%
Total	$	24,789	3.7	%	$	74,187	4.1	%	$	90,146	3.7	%	$	57,756	3.0	%	$	246,878	3.6	%

49

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

(1) Weighted Average Yield is shown on a fully taxable equivalent basis using a federal tax rate of 21% and includes the amortization of premiums and discounts.

As of September 30, 2024 and December 31, 2023, no allowance for credit losses on securities AFS was recognized. The Company does not consider its securities AFS with unrealized losses to be attributable to credit-related factors, as the unrealized losses in each category have occurred as a result of changes in noncredit-related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration. Furthermore, as of September 30, 2024, the Company did not have the intent to sell any of these securities AFS and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost.

The Company does not believe there are any expected credit losses in its HTM securities portfolio at September 30, 2024 or December 31, 2023. All U.S. Treasury securities have the full faith and credit backing of the United States government and the amount of obligations of states and political subdivisions in an unrealized loss position is immaterial to the financial statements.

As of September 30, 2024, 184 debt securities had gross unrealized losses, with an aggregate depreciation of 3.0% from our amortized cost basis. The largest unrealized loss percentage of any single security was 20.1% (or $0.8 million) of its amortized cost. The largest unrealized dollar loss of any security was $0.8 million (or 20.1%).

As of December 31, 2023, 204 debt securities had gross unrealized losses, with an aggregate depreciation of 4.6% from our amortized cost basis. The largest unrealized loss percentage of any single security was 26.5% (or $0.5 million) of its amortized cost. The largest unrealized dollar loss of any single security was $1.0 million (or 16.1%).

The unrealized losses on these debt securities arose primarily due to changing interest rates and are considered to be temporary.

50

LIQUIDITY AND CAPITAL RESOURCES

Impact of Inflation and Changing Prices. Our consolidated financial statements and related notes have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on our performance than they would on industrial companies.

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 our 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. The Company currently has $1.67 billion in availability between borrowings and brokered deposits for future funding if liquidity needs were to develop. 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.

Capital Adequacy. Total stockholders’ equity was $628.9 million at September 30, 2024 compared to $619.8 million at December 31, 2023.

Our capital management consists of providing adequate equity to support our current and future operations. The Bank is 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 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 regard to components, risk weighting and other factors.

51

The Bank is subject to the following risk-based capital ratios: a common equity Tier 1 (“CET1”) risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock, retained earnings, and certain qualifying minority interests, less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, tier 1 minority interests and grandfathered trust preferred securities. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt, other preferred stock and certain hybrid capital instruments, and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities and equity holdings.

The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average assets net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all banks is 4%.

Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. For example, only a well-capitalized depository institution may accept brokered deposits without prior regulatory approval. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements. FDICIA establishes five regulatory capital tiers: “well capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized”, and “critically undercapitalized”. A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. The FDICIA imposes progressively more restrictive restraints on operations, management and capital distributions, depending on the category in which an institution is classified. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations and are required to submit capital restoration plans for regulatory approval. A depository institution’s holding company must guarantee any required capital restoration plan, up to an amount equal to the lesser of 5 percent of the depository institution’s assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. All of the federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels for federally insured depository institutions. The Bank was well capitalized at September 30, 2024, and brokered deposits are not restricted.

52

To be well-capitalized, the Bank must maintain at least a 6.5% CET1 to risk-weighted assets ratio, an 8.0% Tier 1 capital to risk-weighted assets ratio, a 10.0% Total capital to risk-weighted assets ratio, and a 5.0% leverage ratio.

The Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the then-applicable capital conservation buffer. Based on current estimates, we believe that the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2024.

As a result of the Economic Growth Act, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s Tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under prompt corrective action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluation whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies set the minimum capital for the new Community Bank Leverage Ratio at 9%. The Bank does not intend to opt into the Community Bank Leverage Ratio Framework.

On December 21, 2018, federal banking agencies issued a joint final rule to revise their regulatory capital rules to (i) address the upcoming implementation of CECL accounting standard under GAAP; (ii) provide an optional three-year phase-in period for the day-one adverse regulatory capital effects that banking organizations are expected to experience upon adopting CECL; and (iii) require the use of CECL in stress tests beginning with the 2020 capital planning and stress testing cycle for certain banking organizations. For more information regarding Accounting Standards Update No. 2016-13, which introduced CECL as the methodology to replace the current “incurred loss” methodology for financial assets measured at amortized cost, and changed the approaches for recognizing and recording credit losses on available-for-sale debt securities and purchased credit impaired financial assets, including the required implementation date for the Company, see the Company’s Annual Report.

Federal banking regulators have issued risk-based capital guidelines, which assign risk factors to asset categories and off-balance-sheet items. The following table reflects capital ratios computed utilizing the implemented Basel III regulatory capital framework discussed above:

										Minimum Capital Required				Minimum To Be Well-
						Minimum Capital				for Capital Adequacy Plus				Capitalized Under prompt
						Required for Capital				Capital Conservation Buffer				corrective Action
	Actual					Adequacy				Basel III Phase-In Schedule				Provisions
	Amount		Ratio			Amount	Ratio			Amount	Ratio			Amount	Ratio
	(dollars in thousands)
At September 30, 2024
Bank First Corporation:
Total capital (to risk-weighted assets)	$	495,493	13.9	%	$	285,833	8.0	%	$	375,156	10.5	%		N/A	N/A
Tier I capital (to risk-weighted assets)		442,697	12.4	%		214,375	6.0	%		303,698	8.5	%		N/A	N/A
Common equity tier I capital (to risk-weighted assets)		442,697	12.4	%		160,781	4.5	%		250,104	7.0	%		N/A	N/A
Tier I capital (to average assets)		442,697	10.9	%		161,935	4.0	%		161,935	4.0	%		N/A	N/A
Bank First, N.A:
Total capital (to risk-weighted assets)	$	434,920	12.2	%	$	285,664	8.0	%	$	374,934	10.5	%	$	357,080	10.0	%
Tier I capital (to risk-weighted assets)		394,124	11.0	%		214,248	6.0	%		303,518	8.5	%		285,664	8.0	%
Common equity tier I capital (to risk-weighted assets)		394,124	11.0	%		160,686	4.5	%		249,956	7.0	%		232,102	6.5	%
Tier I capital (to average assets)		394,124	9.7	%		161,835	4.0	%		161,835	4.0	%		202,294	5.0	%
At December 31, 2023
Bank First Corporation:
Total capital (to risk-weighted assets)	$	484,398	14.0	%	$	276,904	8.0	%	$	363,437	10.5	%		N/A	N/A
Tier I capital (to risk-weighted assets)		437,979	12.7	%		207,678	6.0	%		294,211	8.5	%		N/A	N/A
Common equity tier I capital (to risk-weighted assets)		433,979	12.5	%		155,759	4.5	%		242,291	7.0	%		N/A	N/A
Tier I capital (to average assets)		437,979	11.1	%		158,581	4.0	%		158,581	4.0	%		N/A	N/A
Bank First, N.A:
Total capital (to risk-weighted assets)	$	446,634	12.9	%	$	276,726	8.0	%	$	363,202	10.5	%	$	345,907	10.0	%
Tier I capital (to risk-weighted assets)		412,215	11.9	%		207,544	6.0	%		294,021	8.5	%		276,726	8.0	%
Common equity tier I capital (to risk-weighted assets)		412,215	11.9	%		155,658	4.5	%		242,135	7.0	%		224,840	6.5	%
Tier I capital (to average assets)		412,215	10.4	%		158,585	4.0	%		158,585	4.0	%		198,231	5.0	%

As previously mentioned, the Company carried $12.0 million of subordinated debt as of September 30, 2024 and December 31, 2023, which qualifies as Tier II capital, and $4.0 million of junior subordinated debt as of December 31, 2023, which qualified as Tier I capital. These amounts are included in total capital for the Company in the tables above.

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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.

Off-Balance Sheet Arrangements. Our significant off-balance-sheet arrangements consist of the following:

● Unused lines of credit

● Standby and direct pay letters of credit

● Credit card arrangements

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 often expire without being drawn upon. Our off-balance sheet arrangements at the dates indicated were as follows:

	Amounts of Commitments Expiring - By Period as of September 30, 2024
			Less Than One		One to Three		Three to Five
Other Commitments	Total		Year		Years		Years		After Five Years
	(dollars in thousands)
Unused lines of credit	$	761,899	$	388,580	$	131,188	$	38,998	$	203,133
Standby and direct pay letters of credit		15,447		13,840		809		615		183
Credit card arrangements		22,884		—		—		—		22,884
Total commitments	$	800,230	$	402,420	$	131,997	$	39,613	$	226,200

	Amounts of Commitments Expiring - By Period as of December 31, 2023
			Less Than		One to		Three to		After Five
Other Commitments	Total		One Year		Three Years		Five Years		Years
	(dollars in thousands)
Unused lines of credit	$	799,398	$	369,800	$	129,181	$	66,070	$	234,347
Standby and direct pay letters of credit		9,785		7,615		1,407		580		183
Credit card arrangements		21,213		—		—		—		21,213
Total commitments	$	830,396	$	377,415	$	130,588	$	66,650	$	255,743

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in its lending, investment and deposit-taking activities. To that end, management actively monitors and manages its interest rate risk exposure.

Our profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. We monitor the impact of changes in interest rates on its net interest income using several tools.

Our primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on our net interest income and capital, while configuring our asset-liability structure to obtain the maximum yield-cost spread on that structure. We rely primarily on our asset-liability structure to control interest rate risk.

Interest Rate Sensitivity. Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay home mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries (basis risk).

An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.

The Company actively manages its interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income to risks associated with interest rate movements and to achieve sustainable growth in net interest income. The Company’s ALCO, using policies and procedures approved by the Company’s board of directors, is responsible for the management of the Company’s interest rate sensitivity position. The Company manages interest rate sensitivity by changing the mix, pricing and re-pricing characteristics of its assets and liabilities, through the management of its investment portfolio, its offerings of loan and selected deposit terms and through wholesale funding. Wholesale funding consists of, but is not limited to, multiple sources including borrowings with the FHLB of Chicago, the Federal Reserve Bank of Chicago’s discount window and certificates of deposit from institutional brokers.

The Company uses several tools to manage its interest rate risk including interest rate sensitivity analysis, or gap analysis, market value of portfolio equity analysis, interest rate simulations under various rate scenarios and net interest margin reports. The results of these reports are compared to limits established by the Company’s ALCO policies and appropriate adjustments are made if the results are outside the established limits.

There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic/political/regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, etc.; and, can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Company’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Company’s overall asset/liability management process is to facilitate meaningful strategy development and implementation.

Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios; the collective impact of which will enable the Company to clearly understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.

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The following tables demonstrate the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock,” in the yield curve and subjective adjustments in deposit pricing might have on the Company’s projected net interest income over the next 12 months.

This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months. The changes to net interest income shown below are in compliance with the Company’s policy guidelines.

As of September 30, 2024:

Change in Interest Rates	Percentage Change in
(in Basis Points)	Net Interest Income
+400	(5.2)%
+300	(3.6)%
+200	(2.5)%
+100	(1.2)%
-100	(1.4)%

As of December 31, 2023:

Change in Interest Rates	Percentage Change in
(in Basis Points)	Net Interest Income
+400	0.1%
+300	0.1%
+200	0.1%
+100	0.2%
-100	(0.1)%

The increased sensitivity to changes in interest rates noted at September 30, 2024 was the result of management’s reconsideration of interest rate betas for its loan and deposit products during the third quarter of 2024.

Economic Value of Equity Analysis. We also analyze the sensitivity of the Company’s financial condition to changes in interest rates through our economic value of equity model. This analysis measures the difference between estimated changes in the present value of the Company’s assets and estimated changes in the present value of the Company’s liabilities assuming various changes in current interest rates. The Company’s economic value of equity analysis as of September 30, 2024 estimated that, in the event of an instantaneous 200 basis point increase in interest rates, the Company would experience a 3.18% increase in the economic value of equity. At the same date, our analysis estimated that, in the event of an instantaneous 100 basis point decrease in interest rates, the Company would experience a 3.02% decrease in the economic value of equity. The estimates of changes in the economic value of our equity require us to make certain assumptions including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain and, as a result, we cannot precisely predict the impact of changes in interest rates on the economic value of our equity. Although our economic value of equity analysis provides an indication of our interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on the economic value of our equity and will differ from actual results.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), undertook an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report, and, based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report, in recording, processing, summarizing and reporting in a timely manner the information that the Company is required to disclose in its reports under the Exchange Act and in accumulating and communicating to the Company’s management, including the Company’s CEO and CFO, such information as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

No changes were made to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

We are a party to various litigation in the normal course of business. Management, after consulting with our legal counsel, believes that any liability resulting from litigation will not have a material effect on our financial position, results of operations or liquidity.

ITEM 1A.     RISK FACTORS

Additional information regarding risk factors appears in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements” of this Form 10-Q and in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes during the quarterly period ended September 30, 2024 to the risk factors previously disclosed in the Company’s Annual Report.

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ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) None.

(c) Issuer Purchases of Equity Securities

On February 21, 2024, the Company renewed its share repurchase program, pursuant to which the Company may repurchase up to $30 million of its common stock, par value $0.01 per share, for a period of one (1) year, ending on February 20, 2025. The program was announced in a Current Report on Form 8-K on February 21, 2024. The table below sets forth information regarding repurchases of our common stock during the third quarter of 2024 under that program as well as pursuant to the 2020 Equity Plan and other repurchases.
​

				Total Number	Maximum Number
				of Shares Repurchased as	of Shares
				Part of	that May Yet Be
	Total Number of Shares	Average Price Paid per		Publicly Announced	Purchased Under the
(in thousands, except per share data)	Repurchased	Share(1)		Plans or Programs	Plans or Programs(2)
July 2024	20,748	$	82.00	20,748	175,611
August 2024	—		—	—	175,611
September 2024	—		—	—	175,611
Total	20,748	$	82.00	20,748	175,611

(1) The average price paid per share is calculated on a trade date basis for all open market transactions and excludes commissions and other transaction expenses.

(2) Based on the closing per share price as of September 30, 2024 ($90.70).

The Inflation Reduction Act of 2022 (“IRA”) created a new nondeductible 1% excise tax on repurchases of corporate stock by certain publicly traded corporations or their specified affiliates after December 31, 2022. The tax is imposed on the fair value of the stock of a covered corporation that is repurchased in a given year, less the fair market value of any stock issued in that year. The Company falls under the definition of a “covered corporation”. The excise tax applies to all of the stock of a covered corporation regardless of whether the corporation has profits or losses. The impact of the IRA on our consolidated financial statements will be dependent on the extent of stock repurchases made in current and future periods.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.       MINE SAFETY DISCLOSURES

None.

ITEM 5.       OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

For the quarter ended September 30, 2024, there were no trading arrangements for the sale or purchases of Company securities adopted, terminated or for which the amount, pricing or timing provisions were modified by our directors and officers that was either (1) a contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a “Rule 10b5-1 trading arrangement”) or (2) a “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).

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ITEM 6.       EXHIBITS

Exhibit Index

Exhibit Number	Description
31.1	Rule 13a-14(a) Certification of Chief Executive Officer*
31.2	Rules 13a-14(a) Certification of Chief Financial Officer*
32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer**
101 INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)

*Filed herewith.

**Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BANK FIRST CORPORATION
DATE:	November 12, 2024	BY:	/s/Kevin M. LeMahieu
			Kevin M. LeMahieu
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

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