BFC 10-K & 10-Q changes, risk factors and insider trading

We are operating in an uncertain economic environment. Our business and financial performance are vulnerable to weak economic conditions in the financial markets generally and specifically in the statestates of Wisconsin,Wisconsin and Illinois, the principal marketmarkets in which we conduct business. A deterioration in economic conditions in the global and financial markets as well as our primary market areas caused by inflation, recession, pandemics, outbreaks of hostilities or other international or domestic occurrences, unemployment, trade policies and tariffs, plant or business closings or downsizing, changes in securities markets or other factors could result in the following consequences, any of which could materially and adversely affect our business: increased loan delinquencies; problem assets and foreclosures; significant write-downs of asset values; lower demand for our products and services; reduced low cost or noninterest-bearing deposits or increased volatility in customer deposit balances; intangible asset impairment; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing our customers’ ability to repay outstanding loans, and reducing the value of assets and collateral associated with our existing loans. Additionally, all our operating locations are within the states of Wisconsin and Illinois, and a significant majority of our loans and deposits are made to borrowers or received from depositors who live and/or primarily conduct business in Wisconsin and Illinois. Therefore, our success will depend in large part upon the general economic conditions in this area, which we cannot predict with certainty. This geographic concentration imposes risks from lack of geographic diversification, as adverse economic developments in Wisconsin or Illinois, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio. Any regional or local economic downturn that affects Wisconsin or Illinois or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and adversely than our competitors whose operations are less geographically concentrated. In addition, regulatorythe scrutinyfinancial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict or trade wars. Sanctions or tariffs imposed by the industryUnited has increasedStates and couldother continuecountries in response to increase,such leadingconflict tocould increasedfurther regulationadversely ofimpact the industryfinancial thatmarkets and the global economy, and any economic countermeasures by the affected countries or others could leadexacerbate to a higher cost of compliance, limit our ability to pursue business opportunitiesmarket and increaseeconomic our exposure to litigation or fines.instability.

A mortgage servicing right is the right to service a mortgage loan - collect principal, interest and escrow amounts - for a fee. We measure and carry our residential mortgage servicing rights using the fair value measurement method. Fair value is determined as the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers. The primary risk associated with mortgage servicing rights is that in a declining interest rate environment, they will likely lose a substantial portion of their value as a result of higher than anticipated prepayments. Moreover, if prepayments are greater than expected, the cash we receive over the life of the mortgage loans would be reduced. Conversely, these assets generally increase in value in a rising interest rate environment to the extent that prepayments are slower than previously estimated. An increase in the size of our mortgage servicing rights portfolio may increase our interest rate risk.risk and may result in increased volatility in reported earnings due to non-cash fair value adjustments. Depending on the interest rate environment, it is possible that the fair value of our mortgage servicing rights may be reduced in the future. If such changes in fair value significantly reduce the carrying value of our mortgage servicing rights, our business, financial condition and results of operations could be adversely affected.

Inflation continued rising in the fourth quarter of 2024,2025, and inflationary pressures may remain elevated into 2025.2026. Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expense related to talent acquisition and retention, and negatively impacting the demand for our products and services. Additionally, inflation may lead to a decrease in consumer and clients’ purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses which could decrease our appetite for new credit extensions. Inflationary pressures may also adversely affect the valuation of certain balance sheet assets. These inflationary pressures could result in missed earnings and budgetary projections causing our stock price to suffer.

In addition to bank level liquidity management, we must manage liquidity at holding company for various needs including potential capital infusions into subsidiaries, the servicing of debt, the payment of dividends on our common stock, and share repurchases. The primary source of liquidity for us consists of dividends from the Bank which are governed by certain rules and regulations of our supervising agencies. Bank First’s ability to receive dividends from the Bank in future periods will depend on a number of factors, including, without limitation, the Bank's future profits, asset quality, liquidity, and overall condition. If Bank First does not receive dividends from the Bank as needed, its liquidity could be adversely affected, and it may not be able to continue to execute its current capital plan to return capital to its shareholders. In addition to dividends from the Bank, we have historically had access to a number of alternative sources of liquidity, including the capital markets, but there is no assurance that we will be able to obtain such liquidity on terms that are favorable to us, or at all.all, particularly during periods of market stress. If our access to these traditional and alternative sources of liquidity is diminished or only available on unfavorable terms, then our overall liquidity and financial condition will be adversely affected.

The total amount that we pay for funding costs is dependent, in part, on the Bank’s ability to grow and retain its deposits. If the Bank is unable to sufficiently grow and retain its deposits at competitive rates to meet liquidity needs, it may be subject to paying higher funding costs to meet these liquidity needs. The Bank competes with banks and other financial services companies for deposits. As a result of monetary policy and the broader market for interest rates and funding, we were required to raise rates on our deposits to keep pace with our competition. Furthermore, if the Bank were to lose deposits, it must rely on more expensive sources of funding. This could result in a failure to maintain adequate liquidity and higher funding costs, reducing our net interest margin and net interest income. In addition, our access to deposits may be affected by the liquidity needs of our depositors.depositors and by changes in customer confidence, market sentiment or perceptions regarding the financial services industry. In particular, a substantial majority of our liabilities in 20242025 were checking accounts and other liquid deposits, which are payable on demand or upon several days' notice, while by comparison, a substantial majority of our assets were loans, which cannot be called or sold in the same time frame. Moreover, our clients could withdraw their deposits in favor of alternative investments.investments or non-bank financial products. While we have historically been able to replace maturing deposits and advances as necessary, we may not be able to replace such funds in the future, especially if a large number of our depositors seek to withdraw their accounts, regardless of the reason.

We make various assumptions and judgments about the collectability of our loan and lease portfolio and utilize these assumptions and judgments when determining the provision and allowance for credit losses. The determination of the appropriate level of the provision for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes, as we have experienced. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the amount reserved in the allowance for credit losses. Due to the declining economic conditions, our customers may not be able to repay their loans according to the original terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. While we maintain our allowance to provide for loan defaults and non-performance, losses may exceed the value of the collateral securing the loans and the allowance may not fully cover any excess loss. In addition, bank regulatory agencies periodically review our provision and the total allowance for credit losses and may require an increase in the allowance for credit losses or future provisions for credit losses, based on judgments different than those of management. Any increases in the provision or allowance for credit losses will result in a decrease in our net income and, potentially, capital, and may have a material adverse effect on our financial condition or results of operations. In addition, we expect that the allowance for credit losses under the CECL standard to be more volatile and sensitive to changes in economic conditions, portfolio composition, and model assumptions, and as such could have an impact on our results of operations. For a discussion of changes in accounting standards and regulatory capital implications, see “Business—Supervision and Regulation—Capital Requirements.”

Making any loan involves various risks, including risks inherent in dealing with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to service debt, and risks resulting from changes in economic and market conditions. Our credit risk approval and monitoring procedures may fail to identify or reduce these credit risks, as some of these risks are outside of our control, and they cannot completely eliminate all credit risks related to our loan portfolio. Changes in the composition, growth or concentration of our loan portfolio may also increase our exposure to credit risk. If the overall economic climate, including employment rates, real estate markets, interest rates and general economic growth, in the United States, generally, or Wisconsin,Wisconsin or Illinois specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the levels of nonperforming loans, charge-offs and delinquencies could rise and require additional provisions for credit losses, which would cause our net income and return on equity to decrease. The future effects of the continued elevated inflationary and interest rate environment on economic activity could negatively affect the collateral values associated with our existing loans, the ability to liquidate the real estate collateral securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to obtain additional financing, the future demand for or profitability of our lending and services, and the financial condition and credit risk of our customers. Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making our business decisions or may result in a delay in our taking certain remediation actions, such as foreclosure. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected. Additionally, potential future actions such as the proposed consumer credit card interest rate cap may lead to unprofitable products, especially for riskier borrowers, and could lead to cutting credit lines or eliminating cards, increased reliance on fees and increased debt burdens for those needing credit most, thereby having the potential to negatively impact bank asset quality.

We conduct our banking operations primarily in Wisconsin.Wisconsin and Illinois. Many of our competitors offer the same, or a wider variety of, banking services within our market areas, and we compete with them for the same customers. These competitors include banks with nationwide operations, regional banks and community banks. In many instances these national and regional banks have greater resources than we do, and the smaller community banks may have stronger ties in local markets than we do, which may put us at a competitive disadvantage. We also face competition from many other types of financial institutions, including fintech companies, thrift institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In addition, a number of out-of-state financial institutions have opened offices and solicit deposits in our market areas. Increased competition in our markets may result in reduced loans and deposits, as well as reduced net interest margin and profitability. We compete with many forms of payments offered by both bank and non-bank providers, including a variety of new and evolving alternative payment mechanisms, systems and products, such as aggregators and web-based and wireless payment platforms or technologies, digital or “crypto” currencies, prepaid systems and payment services targeting users of social networks, communications platforms and online gaming. Competition is increasingly focused on digital capabilities, customer experience, speed, and convenience, and failure to meet evolving customer expectations may adversely affect our competitive position. Our future success may depend, in part, on our ability to use technology competitively to offer products and services that provide convenience to customers and create additional efficiencies in our operations. In addition, some competitors may offer banking and payment services through embedded or platform-based models that reduce the need for customers to maintain traditional banking relationships. If we are unable to attract and retain banking clients, we may be unable to continue to grow our loan and deposit portfolios, and our business, financial condition and results of operations may be adversely affected. Furthermore, the financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Finally, our credit union competitors benefit from competitive advantages, including the credit union exemption from paying federal income tax and can, therefore, more aggressively price many products and services. The impact of the existing regulatory framework and any future changes to it could negatively affect our ability to compete with these institutions, which could have a material adverse effect on our results of operations and prospects. Further, as a result of the GENIUS Act, passed in 2025 to provide a regulatory framework for stablecoins in the U.S., increased competition may emerge from issuers of stablecoins and providers of related technology.

As of December 31, 2024,2025, approximately 75.8%74.1% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. This includes collateral consisting of income producing and residential construction properties, which properties tend to be more sensitive to general economic conditions and downturns in real estate markets. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the area in which the real estate is located. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, and could result in losses that would adversely affect credit quality, financial condition, and results of operation. Negative changes in the economy affecting real estate values and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. In addition, declines in real estate or disruptions in credit markets could impair borrowers’ ability to refinance or extend loans at maturity, increasing the risk of default or loss. Such declines and losses could have a material adverse impact on our business, results of operations and growth prospects. Certain real estate sectors or property types may be more adversely affected by economic downturns, changes in interest rates, or shifts in market demand, which could further increase credit risk. If real estate values decline, it is also more likely that we would be required to increase our ACL-Loans, which could adversely affect our financial condition, results of operations and cash flows.

Our future success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our management team to execute on our long-term business strategy, which is subject to various internal and external factors, and which requires them to, among other things: maintain and enhance our reputation; attract and retain experienced and talented bankers in each of our markets; maintain adequate funding sources, including by continuing to attract stable, low-cost deposits; enhance our market penetration in our metropolitan markets and maintain our leadership position in our community markets; improve our operating efficiency; implement new technologies to enhance the client experience and keep pace with our competitors; identify attractive acquisition targets, close on such acquisitions on favorable terms and successfully integrate acquired businesses; attract and maintain commercial banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; attract sufficient loans that meet prudent credit standards; originate conforming residential mortgage loans for resale into secondary market to provide mortgage banking income; maintain adequate liquidity and regulatory capital and comply with applicable federal and state banking regulations; manage our credit, interest rate and liquidity risks; develop new, and grow our existing, streams of noninterest income; oversee the performance of third-party service providers that provide material services to our business; and control expenses in line with current projections. Failure to achieve these strategic goals could adversely affect our ability to successfully implement our business strategies and could negatively impact our business, growth prospects, financial condition and results of operations. Further, if we do not manage our growth effectively, our business, financial condition, results of operations and future prospects could be negatively affected, and we may not be able to continue to implement our business strategy and successfully conduct our operations. Furthermore, our strategic initiatives may result in an increase in expense, divert management attention, take away from other opportunities that may have proved more successful, negatively impact operational effectiveness or impact employee morale. Pursuing multiple strategic initiatives simultaneously, including acquisitions, technology investments or geographic expansion, may place additional strain on management, personnel, systems, and controls. Additionally, there can be no assurance that we will ultimately realize the anticipated benefits of these strategic initiatives, or that these strategic initiatives will positively impact our organization.

We believe that our continued growth and future success will depend in large part on the skills of our management team and our ability to motivate and retain these individuals and other key individuals.individuals in a competitive labor market for experienced banking and financial services professionals. The loss of any of their service could reduce our ability to successfully implement our long-term business strategy, disrupt key client or business relationships, or result in a loss of institutional knowledge, our business could suffer and the value of our common stock could be materially adversely affected. There can be no assurance that we would be able to identify and retain qualified replacements on a timely basis or on terms acceptable to us.

While we continue to focus on organic growth opportunities, we may pursue attractive bank or non-bank acquisition and consolidation opportunities that arise in our core markets and beyond. The number of financial institutions headquartered in Wisconsin, Illinois the Midwest United States, and across the country continues to decline through merger and other consolidation activity. In the event that attractive acquisition opportunities arise, we would likely face competition for such acquisitions from other banking and financial companies, many of which have significantly greater resources and may have more attractive valuations. This competition could either prevent us from being able to complete attractive acquisition opportunities or increase prices for potential acquisitions which could reduce our potential returns and reduce the attractiveness of these opportunities. In addition, the completion of acquisitions is subject to regulatory approvals, which may be delayed, conditioned or denied, and regulatory conditions may reduce the anticipated benefits of a transaction. Furthermore, our pursuit of acquisitions may disrupt our business, and any equity that we issue as merger consideration may have the effect of diluting the value of your investment. In addition, we may fail to realize some or all of the anticipated benefits of completed acquisitions. We anticipate that the integration of businesses that we may acquire in the future will be a time-consuming and expensive process, even if the integration process is effectively planned and implemented. In addition, our acquisition activities could be material to our business and involve a number of significant risks, including the following: incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in our attention being diverted from the operating of our existing business; using inaccurate estimates and judgments to evaluate credit, operations, management, and market risks with respect to the target company or the assets and liabilities that we seek to acquire; exposure to potential asset quality issues of the target company; intense competition from other banking organizations and other potential acquirers, many of which have substantially greater resources than we do; potential exposure to unknown or contingent liabilities of banks and businesses we acquire, including, without limitation, liabilities for regulatory and compliance issues; inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and other projected benefits of the acquisition; incurring time and expense required to integrate the operations and personnel of the combined businesses; inconsistencies in standards, procedures, and policies that would adversely affect our ability to maintain relationships with customers and employees; experiencing higher operating expenses relative to operating income from the new operations; creating an adverse short-term effect on our results of operations; losing key employees and customers; significant problems related to the conversion of the financial and customer data of the entity; integration of acquired customers into our financial and customer product systems; potential changes in banking or tax laws or regulations that may affect the target company; or risks of impairment to goodwill or litigation risk. If difficulties arise with respect to the integration process, the economic benefits expected to result from acquisitions might not occur. As with any merger of financial institutions, there also may be business disruptions that cause us to lose customers or cause customers to move their business to other financial institutions. Pursuing acquisitions concurrently with other strategic initiatives may place additional strain on management, personnel, systems and controls. Failure to successfully integrate businesses that we acquire could have an adverse effect on our profitability, return on equity, return on assets, or our ability to implement our strategy, any of which in turn could have a material adverse effect on our business, financial condition, and results of operations.

The financial services industry is undergoing rapid technological changeschanges, and we may not have the resources to implement new technology to stay current with these changes.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services (including those related to or involving artificial intelligence, machine learning, blockchain and other distributed ledger technologies) and a growing demand for mobile and other phone and computer banking applications. In addition to better serving clients, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our clients by using technology to provide products and services that will satisfy client demands for convenience as well as to provide secure electronic environments and create additional efficiencies in our operations as we continue to grow and expand our market area. Many of our larger competitors have substantially greater resources to invest in technological improvements and have invested significantly more than us in technological improvements. As a result, they may be able to offer additional or more convenient products compared to those that we will be able to provide, which would put us at a competitive disadvantage. Some of these competitors consist of financial technology providers who are beginning to offer more traditional banking products and may either acquire a bank charter or obtain a bank-like charter, such as the Fintech charter provided by the OCC. Accordingly, we may not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our clients, which could impair our growth and profitability. We also rely in part on third-party vendors and service providers for certain technology solutions, and any failure or disruption involving these vendors could further limit our ability to compete effectively. In addition, some of our competitors are subject to less regulation and/or more favorable tax treatment, which may put us at a competitive disadvantage.

We continue to invest significant resources in our core information technology systems in order to provide functionality and security at an appropriate level, and to improve our operating efficiency and to streamline our client experience. These initiatives significantly increase the complexity of our relationships with third-party service providers and such relationships may be difficult to unwind. We may not be able to successfully implement and integrate such system enhancements and initiatives, which could adversely impact our ability to comply with a number of legal and regulatory requirements, which could result in sanctions from regulatory authorities. Systems conversions or enhancements may also result in data inaccuracies, service disruptions, or other operational issues that could negatively affect our customers or internal processes. In addition, these projects could have higher than expected costs and/or result in operating inefficiencies, which could increase the costs associated with the implementation as well as ongoing operations. Failure to properly utilize system enhancements that are implemented in the future could result in impairment charges that adversely impact our financial condition and results of operations, could result in significant costs to remediate or replace the defective components, and could impact our ability to compete. In addition, we may incur significant training, licensing, maintenance, consulting, and amortization expense during and after implementation, and any such costs may continue for an extended period of time. As such, we cannot guarantee that the anticipated long-term benefits of these system enhancements and operational initiatives will be realized.

We rely extensively on information technology systems to operate our business and an interruption or security breachincident may disrupt our business operations, result in reputational harm, and have an adverse effect on our operations.

As a complex financial institution, we rely extensively on our information technology systems to operate our business, including to process, record, and monitor a large number of client transactions on a continuous basis. As client, public, and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions, and breakdowns. Our business, financial, accounting, data processing systems, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control. For example, there could be sudden increases in client transaction volume; electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes, and hurricanes; disease pandemics; events arising from local or larger scale political or social matters, including terrorist acts; and, as described below, cyber-attacks. While we have policies, procedures, and systems designed to prevent or limit the effect of possible failures, interruptions, or breachescompromises in the security of information systems and business continuity programs designed to provide services in the case of such events, there is no guarantee that these safeguards or programs will address all of the threats that continue to evolve.

The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to the Company’s business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, security, consumer protection, employment, and other laws applicable to the use of AI. These evolving laws and regulations could require changes in the Company’s implementation of AI technology and increase the Company’s compliance costs and the risk of non-compliance. AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made. Further, the Company may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which the Company may have limited visibility. Any of these risks could expose the Company to liability or adverse legal or regulatory consequences and harm the Company’s reputation and the public perception of its business or the effectiveness of its security measures. Negative public perception or loss of customer trust arising from the actual or perceived misuse or failure of AI technologies could adversely affect the Company’s relationships with customers or other stakeholders.

System failure or breachescompromises of our network security, or the security of our third-party data processing partner, including as a result of cyberattacks, could subject us to increased operating costs as well as litigation and other liabilities.

The computer systems and network infrastructure we use, including those we maintain with our service providers and vendors may be vulnerable to physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as cyberattacks, including through, for example, phishing attempts, brute force attacks, denial of service attacks, viruses or other malicious code, exploiting software vulnerabilities (including “zero-day attacks”), ransomware or other malware and supply chain attacks, and other disruptive problems caused by criminal threat actors. Any damage or failure that causes breakdowns or disruptions in our client relationship management, general ledger, deposit, loan and other systems could damage our reputation, result in a loss of client business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on us. Cyberattacks and other technology disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, and those we maintain with our services providers and vendors. Information security risks have generally increased in recent years in part because of the proliferation of new technologies, including artificial intelligence, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. Our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks. Although we believe we have appropriate information security procedures and controls in place, our technologies, systems, networks, devices, and our clients’ devices may become the target of cyberattacks that could result in the unauthorized access, release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information, or otherwise disrupt our or our clients’ business operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs. We are under continuous threat of loss due to hacking and cyberattacks especially as we continue to expand client capabilities to utilize internet and other remote channels to transact business. While we are not aware of any actual or reasonably likely material cybersecurity incidents on our computer or other information technology systems, there can be no assurance that we will not be the victim of successful cyberattacks in the future that could cause us to suffer material losses. The occurrence of any cyberattack could result in potential liability to clients, reputational damage, disclosure obligations, the disruption of our operations, and regulatory concerns, all of which could adversely affect our business, financial condition or results of operations.

Employee errors and employee and client misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our clients or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence. We maintain a system of internal controls and insurance coverage to mitigate against operational risks. If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations. In addition, we rely heavily upon information supplied by third parties, including the information contained in credit applications, property appraisals, title information, equipment pricing and valuation and employment and income documentation, in deciding which loans we will originate, as well as the terms of those loans. If any of the information upon which we rely is misrepresented, either fraudulently or inadvertently, and the misrepresentation is not detected prior to asset funding, the value of the asset may be significantly lower than expected, or we may fund a loan that we would not have funded or on terms we would not have extended.

In recent years, fraud risk increased significantly for us and for all banks. Deposit fraud (check kiting, wire fraud, etc.) and card fraud continue to be significant sources of fraud attempts and losses in our consumer banking business. Moreover, our commercial clients have experienced increased levels of financial fraud risk as well, often requiring our involvement and assistance because of our banking relationship with these clients. The methods used to perpetrate and combat fraud continue to evolve as technology changes and more tools for access to financial services emerge, such as real-time payments. In addition to cybersecurity risks, new techniques have made it easier for bad actors to obtain and use client personal information, mimic signatures, and otherwise create false documents that look genuine. Fraud schemes are broad and can include debit card/credit card fraud, check fraud, NSF fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information, impersonation of our clients through the use of falsified or stolen credentials, employee fraud, information fraud, and other malfeasance. Criminals are turning to new sources to steal personally identifiablepersonally-identifiable information in order to impersonate our clients to commit fraud. Fraudulent activity may also originate outside of our systems, including through merchants, payment networks, counterparties or third-party service providers, which may limit our ability to prevent or detect such activity. Our anti-fraud actions are both preventative (anticipating lines of attack, educating employees and clients, making operational changes) and responsive (remediating actual attacks). We have established policies, processes, and procedures to identify, measure, monitor, mitigate, report, and analyze these risks. We continue to invest in systems, resources, and controls to detect and prevent fraud. There are inherent limitations, however, to our risk management strategies, systems, and controls as they may exist, or develop in the future. We may not appropriately anticipate, monitor, or identify these risks. If our risk management framework proves ineffective, we could suffer unexpected losses, we may have to expend resources detecting and correcting the failure in our systems, and we may be subject to potential claims from third parties and government agencies. In certain circumstances, we may also face legal, regulatory or reputational pressure to reimburse customers for fraud losses, even where we are not legally obligated to do so. We may also suffer reputational damage. Any of these consequences could adversely affect our business, financial condition, or results of operations. Our regulators require us to report fraud promptly, and regulators often advise banks of new schemes to enable the entire industry to adapt as quickly as possible. However, some level of fraud loss is unavoidable, and the risk of loss cannot be eliminated.

Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing shareholder value. We have established processes and procedures intended to identify, measure, monitor, report, and analyze the types of risk to which we are subject, including strategic, market, credit, liquidity, capital, cybersecurity, operational, regulatory compliance, litigation, and reputational.reputation. However, as with any risk management framework, there are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that we have not appropriately anticipated or identified. For example, the financial and credit crisis and resulting regulatory reform highlighted both the importance and some of the limitations of managing unanticipated risks. If our risk management framework proves ineffective, we could suffer unexpected losses and our business and results of operations could be materially adversely affected.

Our reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring, and retaining and providing growth opportunities for employees who share our core values of being an integral part of the communities we serve, delivering superior service to our clients, caring about our clients and employees, and investing in our information technology and other systems. If our reputation is negatively affected by the actions of our employees or otherwise, including as a result of operational errors, clerical or record-keeping errors, or those resulting from faulty or disabled computer or telecommunications systems or a successful cyberattack against us or other unauthorized release or loss of client information, or by the actions or failures of third-party service providers or business partners, our reputation, business, and our operating results may be materially adversely affected. Damage to our reputation could also negatively impact our credit ratings and impede our access to the capital markets. In addition, negative publicity or adverse public perception, whether or not factually accurate, may spread rapidly and be difficult to remediate, which could further exacerbate reputational harm.

We may be involved from time to time in a variety of litigation, investigations, inquiries, or similar matters arising out of our business. Furthermore, litigation against banks tend to increase during economic downturns and periods of credit deterioration, which may occur or worsen as a result of current economic uncertainty. Most recently there has been an increase in class action lawsuits filed claiming deceptive practices or violations of account terms in connection with non-sufficient fees or overdraft charges and violations of the Fair Labor Standards Act (FLSA). We may also be subject to regulatory investigations, examinations or enforcement actions that could result in fines, penalties, customer remediation requirements, or other supervisory actions. We manage these risks through internal controls, personnel training, insurance, litigation management, our compliance and ethics processes, and other means. However, the commencement, outcome, and magnitude of litigation cannot be predicted or controlled with any certainty.

The Company, primarily through the Bank and certain non-bank subsidiaries, are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds and the safety and soundness of the banking system as a whole, and not shareholders. These regulations affect the Bank’s lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Company and/or the Bank in substantial and unpredictable ways. Such changes could subject the Company and/or the Bank to additional costs, limit the types of financial services and products the Company and/or the Bank may offer, and/or limit the pricing the Company and/or the Bank may charge on certain banking services, among other things. Compliance personnel and resources may increase our costs of operations and adversely impact our earnings. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the potential erosion of Federal Reserve independence could negatively impact financial markets and impact our profitability. While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. See “Business - Supervision and Regulation”.

Federal regulatory agencies, including the Federal Reserve and the OCC, periodically conduct examinations of our business, including our compliance with laws and regulations. If, as a result of an examination, an agency was to determine thatwhether the financial, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or violates any law or regulation, such agency may take certain remedial or enforcement actions it deems appropriate to correct any deficiency. Remedial or enforcement actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced against a bank, to direct an increase in the bank’s capital, to restrict the bank’s growth, to assess civil monetary penalties against a bank’s officers or directors, and to remove officers and directors. The CFPB also has authority to take enforcement actions, including cease-and-desist orders or civil monetary penalties, if it finds that we offer consumer financial products and services in violation of federal consumer financial protection laws. If we were unable to comply with future regulatory directives, or if we were unable to comply with the terms of any future supervisory requirements to which we may become subject, then we could become subject to a variety of supervisory actions and orders, including cease-and-desist orders, prompt corrective actions, memoranda of understanding and other regulatory enforcement actions. Such supervisory actions could, among other things, impose greater restrictions on our business, as well as our ability to develop any new business. We could also be required to raise additional capital, dispose of certain assets and liabilities within a prescribed time period, or both. Failure to implement remedial measures as required by financial regulatory agencies could result in additional orders or penalties from federal and state regulators, which could trigger one or more of the remedial actions described above. The terms of any supervisory action and associated consequences with any failure to comply with any supervisory action could have a material negative effect on our business, operating flexibility and overall financial condition. Further, bank failures have and may in the future diminish public confidence in small and regional banks’ abilities to safeguard deposits in excess of federally insured limits, which could prompt customers to maintain their deposits with larger financial institutions. Concerns over rapid, large-scale deposit movement have and could in the future heighten regulatory scrutiny surrounding liquidity and increase competition for deposits and the resulting cost of funding, which could create pressure on net interest margin and results of operations. In addition, bank failures have and could in the future prompt the FDIC to increase deposit insurance costs. Increases in funding, deposit insurance or other costs as a result of these types of events have and could in the future materially adversely affect our financial condition and results of operations. Further, the disruption following these types of events have and could in the future generate significant market trading volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.

A substantial portion of our loan portfolio is secured by real estate. In weak economies, or in areas where real estate market conditions are distressed, we may experience a higher than normal level of nonperforming real estate loans. The collateral value of the portfolio and the revenue stream from those loans could come under stress, and additional provisions for the allowance for credit losses could be necessitated. Our ability to dispose of foreclosed real estate at prices at or above the respective carrying values could also be impaired, causing additional losses. Commercial real estate (“CRE”) is cyclical and poses risks of loss to us due to our concentration levels and risk of the asset, especially during a difficult economy, including the current stressed economy. As of December 31, 2025, 49.3% of our loan portfolio was comprised of loans secured by commercial real estate. The banking regulators continue to give CRE lending greater scrutiny, and banks with higher levels of CRE loans are expected to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels as a result of CRE lending growth and exposures. Although we are actively working to manage our CRE concentration and believe that our underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are currently sufficient to address the CRE Concentration Guidance, the OCC or other federal regulators could become concerned about our CRE loan concentrations, and they could limit our ability to grow by, among other things, restricting their approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities. Our loan portfolio contains several industry and collateral concentrations including, but not limited to, commercial and residential real estate. Due to the exposure in these concentrations, disruptions in markets, economic conditions, changes in laws or regulations or other events could cause a significant impact on the ability of borrowers to repay and may have a material adverse effect on our business, financial condition and results of operations.

The Federal Reserve, which examines us and the Bank, requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to the Bank if it experiences financial distress. A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of its note obligations. Regulatory authorities have broad discretion in enforcing “source of strength” obligations, and any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of the discount rate and changes in reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits. The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Rapid, significant or unexpected changes in Federal Reserve policy may increase interest rate volatility and make it more difficult to manage our business and plan for future growth. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

The FDIC insures deposits at FDIC-insured depository institutions, such as the Bank, up to applicable limits. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. The FDIC may also impose special assessments, increase assessment rates, or require prepayments from insured institutions from time to time. Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities or otherwise negatively impact our operations.

Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The Department of Justice, CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, costly remediation or monitoring requirements, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.

Bank First Corporation is a Wisconsin corporation that was organized primarily to serve as the holding company for Bank First, N.A. Bank First, N.A., which was incorporated in 1894, is a nationally-chartered bank headquartered in Manitowoc, Wisconsin. It is a member of the Federal Reserve, and is regulated by the OCC. Including its headquarters in Manitowoc, Wisconsin, the Bank has 2638 banking locations in Brown, Columbia, Dane, Door, Fond du Lac, Green, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Rock, Shawano, Sheboygan, Walworth, Waupaca, Waushara, and Winnebago counties in Wisconsin.Wisconsin and Winnebago county in Illinois. The Bank offers loan, deposit and treasury management products at each of its banking locations.

HometownCentre 1 Bancorp, Ltd.Inc.

On FebruaryJanuary 10,1, 2023,2026, the Company completed a merger with Hometown Bancorp, Ltd. ("Hometown"),Centre, a bank holding company headquartered in Fond du Lac,Beloit, Wisconsin, pursuant to the merger agreement, dated as of July 25,17, 2022,2025, by and between the Company and Hometown,Centre, whereby HometownCentre merged with and into the Company, and HometownFirst Bank,National Hometown'sBank and Trust, Centre's wholly-owned banking subsidiary, merged with and into the Bank. Hometown'sThe acquisition expanded the Company’s presence in Wisconsin and Illinois and added trust and wealth management capabilities. Centre's principal activity was the ownership and operation of HometownFirst Bank,National Bank and Trust, a state-charteredfederal-chartered banking institution that operated tenseventeen (1017) branches in Wisconsin and Illinois at the time of closing. The merger consideration totaled approximately $130.5$168.8 million.

Pursuant to the termsMerger Agreement, Centre shareholders were entitled to receive, for each share of theCentre mergercommon agreement,stock Hometownthat shareholderswas couldoutstanding electimmediately prior to receivethe eitherMerger, 0.39620.9200 of a share of the Company’s common stock or $29.16 inand 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.shares. Company stock issued totaled 1,450,2721,382,940 shares valued at approximately $115.1$168.5 million, with cash of $15.4$0.3 million comprising the remainder of merger consideration.

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.statements. Changes in these estimates or assumptions could have a material effect on the Company’s financial condition or results of operations. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

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

Net interest income increased byto $4.3$151.7 million tofor the year ended December 31, 2025, from $137.8 million for the year ended December 31, 2024,2024. fromTotal $133.5average millioninterest-earning assets increased to $4.02 billion for the year ended December 31, 2023.2025 Total average interest-earning assets increased tofrom $3.81 billion for the year ended December 31, 20242024. fromThe $3.66Bank’s billionnet interest margin increased seventeen basis points to 3.82% for the year ended December 31, 2023.2025, Theup Bank’s net interest margin decreased four basis points tofrom 3.65% for the year ended December 31, 2024, down from 3.69% for the year ended December 31, 2023.2024.

Interest Expense. InterestTotal interest expense increased $19.6$1.5 million, or 40.0%,2.1%, to $70.1 million for the year ended December 31, 2025, up from $68.6 million for the year ended December 31, 2024, up from $49.0 million for the year ended December 31, 2023.2024. This increase was driven by a combination$205.2 ofmillion increasesincrease in average interest-bearing liabilities which offset a decrease in the average rates paid on interest-bearing liabilities, risingliabilities from 2.04% during 2023 to 2.69% during 2024,2024 andto a2.54% $152.1during million increase in average interest-bearing liabilities.2025.

Interest expense on interest-bearing deposits increaseddecreased by $21.8$0.5 million to $63.7 million for the year ended December 31, 2025, from $64.2 million for the year ended December 31, 2024, from $42.4 million for the year ended December 31, 2023.2024. This increasedecrease was due to a higherlower interest rate environment driving ana increasedecrease in average rates paid on interest-bearing deposits, risingdeposits from 1.84% during 2023 to 2.61% during 2024,2024 andto 2.43% during 2025. This decline in average rates paid more than offset growth of $151.2$163.2 million year-over-year in average interest-bearing deposits. While the Bank continued to see average rates paid on interest-bearing deposits rise through the first three quarters of 2024, they declined during the fourth quarter.

We recorded a negative provision for credit losses of $1.3 million for the year ended December 31, 2025, compared to a negative provision of $0.8 million for the year ended December 31, 2024, compared to a positive provision of $4.7 million for the year ended December 31, 2023.2024. Metrics regarding the credit quality of the Bank’s loan portfolio continued to show very little in terms of credit stress during 2024.2025. The positive provision for credit losses during 2025 related to the growth of the loan portfolio. The negative provision for credit losses during 2024 related to improvement in financial trends related to two relationships that were part of thea Hometownprevious institution acquisition, which allowed for a reduction in specific reserves related to them. The elevated positive provision for credit losses during 2023ACL-Loans was primarily$44.4 resultmillion, or 1.23% of ASUtotal 2016-13, which was adoptedloans, at theDecember beginning31, of2025 2023. Under ASU 2016-13 a provision for credit losses totaling $5.5 million was recorded relatedcompared to loans acquired from Hometown. The ACL-Loans was $44.2 million, or 1.26% of total loans, at December 31, 2024 compared to $43.6 million, or 1.30% of total loans, at December 31, 2023.2024.

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,subsidiary, Ansay and UFS.Ansay. Other typical sources of noninterest income include loan servicing fees and gains on sales of mortgage loans.

Noninterest income decreasedincreased by $38.4$2.5 million, or 66.1%12.9% to $22.2 million for 2025, up from $19.7 million for 2024, down from $58.1 million during 2023. The primary driver of this decline was the aforementioned $38.9 million pre-tax gain on sale of UFS during 2023, while there was no corresponding similar event in 2024. Service charge income increased by $1.0$0.4 million for 20242025 compared to 2023, which was2024, the result of increasednormal operatinginflationary scaleimpacts foron thea Companyslightly aslarger wellcustomer as renegotiated contractual agreements related to credit and debit card payment processing.base. Income from Ansay increased by $0.6$0.4 millionmillion, or 11.8%, for the full year of 20242025 compared to 2023.2024 as recent acquisitions by Ansay have enhanced its profitability. Net gains on sale of mortgage loans increased $0.4$0.5 million year-over-year due to a rise in secondary market loan origination activity resulting from lower prevailing mortgage interest rates during periods2025. of 2024. This increase in mortgage origination activity negatively impacted theThe valuation of the Company’s mortgage servicing rights (“MSR”) duringis 2024,impacted leadingby tomany $0.3factors millionand incan negativebe volatile year-to-year, but the overall valuation adjustments comparedwere not material to positive2025 adjustmentsor totaling2024. $0.4Proceeds millionon duringCompany 2023.owned Otherlife noninterestinsurance income is comprised of many nonmaterial items, several ofpolicies, which increased from 2023$0.5 million in 2024 to 2024,$1.1 thoughmillion nonein of2025, thesedrove increasesthe wereincrease individuallyin significant.other noninterest income. The major components of our noninterest income are listed in the table below:

Noninterest Expense. Noninterest expense decreasedincreased $9.3$5.7 million to $84.5 million for the year ended December 31, 2025, up from $78.8 million for the year ended December 31, 2024, down from $88.1 million for the year ended December 31, 2023. During 2023 the Company sold a significant number of available for sale securities, resulting a $7.9 million pre-tax loss, compared to negligible losses on sales of securities during 2024. The securities sold during 2023 had an average yield of 1.36%. Proceeds of these sales were reinvested in a combination of short and long-term investments with an average yield of 4.98%. Personnel expense increased $0.5$1.6 million, or 1.4%,3.8%, due to customary pay raises year-over-year,year-over-year. offsetOccupancy byexpense certainincreased efficiencies$1.9 realizedmillion, fromor further31.8%, integrationdue to construction of recentone acquisitionsnew madebranch bylocation in Sturgeon Bay, Wisconsin as well as the Company.razing and rebuilding of a branch location in Denmark, Wisconsin. The razing of the former branch in Denmark led to a loss of $0.9 million which is included in occupancy expense. Data processing expense increased by $1.7$0.6 million during 20242025 compared to 2023 due to project-related costs for upgrading the Bank’s digital banking platform and the increased scale from recent acquisitions.2024. Expenses related to the HometownCentre acquisition totaled $1.6$1.5 million during 2023.2025. The lack of a similar acquisition during 2024 caused decreasesincreases in the areas of postage,outside stationary,service suppliesfees and advertisingother expensenoninterest year-over-year. Finally, gains on sales and valuations of OREO totaling $0.7 million during 2024 compared favorably to losses of $2.1 million during 2023.expense. Amortization of intangibles decreased by $0.5$0.8 million year-over-year, the result of using the sum-of-the-years-digits method of amortization on core deposit intangibles which takes more expense in years immediately following the acquisition which created them. The major components of our noninterest expense are listed in the table below:

Income Tax Expense. We recorded a provision for income taxes of $16.7 million for the year ended December 31, 2025, compared to $14.0 million for the year ended December 31, 2024, compared to $24.3 million for the year ended December 31, 2023, reflecting effective tax rates of 17.5%18.9% and 24.6%,17.5%, respectively. The Company’s home state passed tax legislation during the third quarter of 2023 which exempted income produced by a significant portion of the Company’s loans from taxation in Wisconsin. As a result of the lower anticipated future effective tax rate, the Company determined that a $2.9 million allowance was required to be made against its deferred tax asset, creating a one-time increase in tax expense for 2023. Final rules relating to qualifying loans under this legislation were not published untilduring the first quarter of 2024.2024 Basedand on these final rules,allowed the Company was able to further reduce its estimated tax liability from 2023 by $1.3 million, resulting in the lower provision for income taxes and effective tax rate during 2024. The effective tax rates were reduced from the statutory federal and state income tax rates during both periods as a result of tax-exempt interest income produced by certain qualifying loans and investments in the Bank’s portfolios.

Total Assets. Total assets increased $273.2$11.0 million, or 6.5%,0.3%, to $4.51 billion at December 31, 2025 from $4.50 billion at December 31, 20242024. from $4.22 billion at December 31, 2023. A significantAn increase in customer deposits during the fourth quarter of 2024, funding cash, investment, andCompany’s loan growthportfolio was theoffset primaryby causea ofdecrease thisin year-over-yearits increase.investment portfolio, leading to little growth in total assets year-over-year.

Cash and Cash Equivalents. Cash and cash equivalents increaseddecreased by $13.8$18.1 million, or 5.6%,6.9%, to $243.2 million at December 31, 2025 from $261.3 million at December 31, 2024 from $247.5 million at December 31, 2023.2024.

Deposits.Loans. DepositsNet loans increased $228.2by $87.3 million, or 6.7%,2.5%, to $3.66$3.56 billion at December 31, 20242025 from $3.43$3.47 billion at December 31, 2023.2024. AsStrong previouslygrowth mentioned,in muchthe Company’s commercial and industrial loan portfolio during 2025 was offset by a concerted effort to reduce commercial and residential real estate loans as a percentage of theoverall growth during 2024 resulted during the fourth quarter and is anticipated to be seasonal.balances.

Borrowings. At December 31, 2024,2025, borrowings consisted of advances from the FHLB of Chicago and subordinated debt to other banks and individuals. FHLB borrowings increaseddecreased by $25.4 million to $110.0 million at December 31, 2025 from $135.4 million at December 31, 20242024, fromas $35.3maturing million at December 31, 2023. These additionalFHLB borrowings were intendednot to provide liquidity to support near-term loan growth.reissued. Subordinated debt remained stable at $12.0 million at December 31, 20242025 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.

Total loans increased $174.2$87.5 million, or 5.2%,2.5%, to $3.60 billion as of December 31, 2025 as compared to $3.52 billion as of December 31, 2024 as compared to $3.34 billion as of December 31, 2023.2024. This loan growth was comprised of an increase of $12.5$56.9 million, or 2.6%,9.6%, in commercial and industrial loans, an increase of $55.0$93.2 million, or 3.2%,5.5%, in commercial real estate loans, ana increasedecrease of $77.1$62.5 million, or 38.4%,22.5%, in construction and development loans,loans an increase(much of $24.5which moved into commercial real estate loans), a decrease of $0.9 million, or 2.8%,0.1%, in residential 1-4 family loans and an increase of $5.1$0.8 million, or 7.7%,1.1%, in consumer and other loans.

Commercial and Industrial (C&I). Our C&I portfolio totaled $500.4$647.1 million and $487.9$590.2 million at December 31, 20242025 and 2023,2024, respectively, and represented 14%18% and 15%17% of our total loans, respectively. C&I loans increased 2.6%9.6% during 20242025 due to the increased business needs of customers in our markets in response to strong economic conditions. C&I loans decreased 0.9% during 2023 as a result of exiting a few nonperforming borrowers and borrowers from acquired institutions that did not fit the Bank’s lending philosophy.

Commercial Real Estate (CRE). Our CRE loan portfolio totaled $1.75$1.78 billion and $1.70$1.68 billion at December 31, 20242025 and 2023,2024, respectively, and represented 50%49% and 51%48% of our total loans, respectively. Our CRE loans increased 3.2%5.5% during 2024,2025, duewith toa organicmajority of this growth withinoccurring ourin markets.the Ownermulti-family occupiedsegment. The growth in multi-family loans during 2025 primarily came through balances that were in construction and development loans at December 31, 2024. Outside of this migration CRE loans increasedsaw bylittle 8.3%growth whileduring non-owner occupied CRE loans declined by 2.7%2025 as a result of management’sthe desireaforementioned concerted effort by management to reduce exposureCRE as a percentage of the Company’s overall loan portfolio. Management continues to non-ownermonitor occupiedportfolio CREconcentrations loansand fromcredit acquiredquality institutionsmetrics whereto themaintain bank did not have full relationshipsalignment with the borrowers.Company’s Ourrisk CRE loans increased 21.5% during 2023, primarily as a result of loans acquired from Hometown during 2023.appetite.

Construction and Development (C&D). Our C&D loan portfolio totaled $278.0$215.5 million and $200.8$278.0 million at December 31, 20242025 and 2023,2024, respectively, and represented 8%6% and 6%8% of our total loans, respectively. C&D loans increaseddecreased 38.4%22.5% during 2024,2025 as aconstruction resultin progress as of aDecember few31, large2024, multi-familycompleted relatedthe projectsconstruction forphase existingand customers with experience in this industry. C&D loans increased 0.6% during 2023, as a result of management making a strategic decisionmigrated to limitCRE growthbalances, inprimarily this area.multi-family.

Residential 1-4 Family. Our residential 1-4 family loan portfolio totaled $913.2$895.0 million and $888.6$895.9 million at December 31, 20242025 and 2023,2024, respectively, and represented 26% and 27%25% of our total loans, respectively. Residential 1-4 family loans increasedat 2.8% during 2024, driven by natural growth in our markets. Residential 1-4 family loans increased 20.2% during 2023, primarily as a resultboth of loansthese acquired from Hometown during 2023.dates.

Consumer Loans. Our consumer loan portfolio totaled $55.4$54.8 million and $51.0$55.4 million at December 31, 20242025 and 2023,2024, respectively, and represented 2% and 1% of our total loans,loans respectively.at both dates. Consumer loans include secured and unsecured loans, lines of credit and personal installment loans. Our consumer loans increased by 8.7% and 13.3% during 2024 and 2023, respectively.

Loan Portfolio Maturities.Maturities

At December 31, 2024,2025, 20232024 and 2022,2023, loans individually evaluated had specific reserves of $2.4$2.2 million, $4.2$2.4 million and a$4.2 negligible amount,million, respectively. Levels of specific reserves are dependent on the specific underlying impaired loans at any given time. Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for credit losses at December 31, 2024.2025.

Total deposits were $3.66$3.70 billion and $3.43$3.66 billion as of December 31, 20242025 and 2023,2024, respectively. Noninterest-bearing deposits at December 31, 20242025 and 20232024 were $1.02$1.00 billion and $1.05$1.02 billion, respectively, while interest-bearing deposits were $2.64$2.69 billion and $2.38$2.64 billion at December 31, 20242025 and 2023,2024, respectively. During 2024 the Bank experienced 6.7% growth in deposits, but also experienced a shift in customer behavior, moving balances from noninterest-bearing accounts to interest-bearing accounts, resulting in the noted decline in noninterest-bearing totals.

The Company had securities sold under repurchase agreements which had contractual maturities up to one year from the transaction date with variable and fixed rate terms. The agreements to repurchase required that the Company (seller) repurchase identical securities as those that were sold. The securities underlying the agreements were under the Company’s control. The Company redeemed all securities sold under repurchase agreements during the first quarter of 2024 and has had no such balances since that time. Management currently does not rely on repurchase agreements as a regular source of funding.

Securities available for sale consist of U.S. Treasury securities, obligations of U.S. Government sponsored agencies, obligations of states and political subdivision, agency mortgage-backed securities, and corporate notes. Securities classified as available for sale, which management has the intent and ability to hold for an indefinite period of time, but not necessarily to maturity, are carried at fair value, with unrealized gains and losses, net of related deferred income taxes, included in stockholders’ equity as a separate component of other comprehensive income. The fair value of securities available for sale totaled $164.4 million and included $0.4 million gross unrealized gains and gross unrealized losses of $7.8 million at December 31, 2025. At December 31, 2024, the fair value of securities available for sale totaled $223.1 million and included negligible gross unrealized gains and gross unrealized losses of $12.9 million at December 31, 2024. At December 31, 2023, the fair value of securities available for sale totaled $142.2 million and included gross unrealized gains of $0.1 million and gross unrealized losses of $12.2 million.

The Company recognizeddid not sell any investment securities during the year ended December 31, 2025 and had a negligible net loss on sale of investment securities during the year ended December 31, 2024 and a net loss on sale of investment securities of $7.9 million during the year ended December 31, 2023.2024.

Net cash flows provided by financingoperating activities totaled $201.0$62.5 million during 20242025 compared to net$65.8 million during 2024. Overall cash flows usedprovided by operations during 2025 was very comparable to 2024, and no single factor contributed materially to an increase or decrease in financingthis activities totaling $193.8 million during 2023. The primary difference in year-over-year cash flows related to financing activities was significant growth in deposits during 2024 compared to significant decreases in deposits during 2023.area.

Capital Adequacy. Total shareholders’ equity was $643.8 million at December 31, 2025, compared to $639.7 million at December 31, 2024, compared to $619.8 million at December 31, 2023.2024. Our total shareholders’ equity increased during 20242025 and 20232024 as a result of our profitability, reduced by dividends paid and common share repurchases. Growth in shareholders’ equity was further stimulated by the acquisition of Hometown during 2023.

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

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

As previously mentioned, the Company carried $12.0 million of subordinated debt as of December 31, 20242025 and 2023, as well as $4.0 million of junior subordinated debt as of December 31, 2023.2024. These totals are included in total capital for the Company in the tables above.

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

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, 2025. There have been no material changes during the quarterly period ended MarchJune 31,30, 2026 to the risk factors previously disclosed in the Company’s Annual Report.

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, 2025, 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 MarchJune 31,30, 2026.

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 Annual Report on Form 10-K for the year ended December 31, 2025 and 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.

On January 1, 2026, the Company consummated its merger with Centre pursuant to the Agreement and Plan of Bank Merger, dated as of July 17, 2025, by and among the Company and Centre, whereby Centre was merged with and into the Company, and First National Bank and Trust, Centre’s wholly owned banking subsidiary, was merged with and into the Bank. Eleven branches of First National Bank and Trust opened on January 2, 2026, operating under the First National Bank and Trust name as a division of Bank First, expanding the Bank’s presence in Rock County in Wisconsin and Winnebago County in Illinois. These branches will bewere rebranded under the Bank First name when the core systems arewere consolidated during the second quarter of 2026.

Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025

General. Net income increased $1.8$7.8 million to $20.0$24.7 million for three months ended MarchJune 31,30, 2026, compared to $18.2$16.9 million for the same period in 2025. This increase is primarily due to the added scale of operations resulting from the Centre acquisition at the beginning of the first quarter of 2026.

Net interest and dividend income increased by $16.7$18.3 million to $53.2$55.0 million for the three months ended MarchJune 31,30, 2026 compared to $36.5$36.7 million for three months ended MarchJune 31,30, 2025. The increase in net interest income was primarily due to growth in interest earning assets over the last three months, resulting from the acquisition of Centre.Centre, as well as increasing net interest margin in the year-over-year second quarter. Total average interest-earning assets were $5.49$5.39 billion for the three months ended MarchJune 31,30, 2026, up from $4.10$4.01 billion for the same period in 2025. In addition, growth of $0.9$846.4 million in interest-bearing liabilities, from $2.84$2.76 billion for the three months ended MarchJune 31,30, 2025 to $3.75$3.61 billion for the three months ended MarchJune 31,30, 2026, was partially offset by average rates paid on these liabilities declining from 2.65%2.59% for the three months ended MarchJune 31,30, 2025, to 2.20%2.30% for the three months ended MarchJune 31,30, 2026. Bank First repaid $65.0 million in FHLB borrowings assumed from Centre during the first quarter of 2026, triggering the recognition of $1.3 million in purchase accounting fair value adjustments, reducing interest expense and causing the rate paid on other borrowings to decrease to 0.95% on an annualized basis during the first quarter of 2026. 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 $18.6$21.1 million, or 33.7%,38.7%, to $73.6$75.7 million for the three months ended MarchJune 31,30, 2026 compared to $55.0$54.6 million for the same period in 2025. The increase in total interest income was primarily due to the aforementioned growth in interest earningsearning assets resulting from the acquisition of Centre.Centre as well as increasing rates earned on these balances. The average balance of interest-earning assets increased by $1.39$1.38 billion during the three months ended MarchJune 31,30, 2026 compared to the same period in 2025.2025 and the average rate earned on these balances increased from 5.50% for the quarter ended June 30 2025 to 5.67% for the quarter ended June 30, 2026 . Interest income from the accretion of purchase accounting fair value marks increased by $2.7$3.0 million in the firstsecond quarter of 2026 compared to the prior-year firstsecond quarter.

Interest Expense. Interest expense increased $1.9$2.8 million, or 10.2%,15.7%, to $20.4$20.7 million for the three months ended MarchJune 31,30, 2026 compared to $18.5$17.9 million for the same period in 2025.

Interest expense on interest-bearing deposits increased by $3.2$3.0 million to $20.0$19.2 million for the three months ended MarchJune 31,30, 2026 compared to $16.9$16.2 million for the same period in 2025. The increase in interest expense was primarily due to elevated interest-bearing liabilities from the Centre acquisition.acquisition, offset partially by lower crediting rates on these balances. The average balance and rate of interest-bearing deposits was $3.61$3.49 billion and 2.26%2.21% for the three months ended MarchJune 31,30, 2026, compared to $2.69$2.62 billion and 2.54%2.48% for the same period in 2025.

Other borrowed funds, the Company’s highest-cost source of funding, saw average balances decline by $2.3$24.5 million to $144.6$122.1 million during the firstsecond quarter of 2026 compared to $147.0$146.6 million during the same period in the prior year. Rates paid on these funds declined due to the aforementioned recognition of $1.3 million in purchase accounting fair value adjustments on acquired balances that were paid off prior to contractual maturity.

We did not record a provision for credit loss during the three months ended MarchJune 31,30, 2026 compared to recording a $0.4$0.2 million provision for credit loss during the same period in 2025. Economic forecasts, primarily US gross domestic product projections, increased slightlydecreased during the firstsecond quarter of 2026 while projections for unemployment alsoremained increased.consistent. We incurred $0.1$1.0 million net charge-offs during the three months ended MarchJune 31,30, 2026 compared to minimal net charge-offs of $0.8 million during the three months ended MarchJune 31,30, 2025. The Bank’s loan portfolio continues to exhibit very little credit stress. The acquisition of Centre led to an increase of $12.8 million of ACL – Loans related to the acquired portfolio. The ACL - Loans was $57.1$56.0 million, or 1.26%1.24% of total loans, at MarchJune 31,30, 2026 compared to $43.7$44.3 million, or 1.23%1.24% of total loans at MarchJune 31,30, 2025.

Noninterest income increased $3.9$5.1 million to $10.5$10.0 million for the three months ended MarchJune 31,30, 2026 compared to $6.6$4.9 million for the same period in 2025. This increase was primarily the result of higher service charge and loan servicing income provided by added operational scale from the acquisition of Centre. Income provided by the Bank’s investment in Ansay totaled $1.0$0.9 million during the firstsecond quarter of 2026, down $0.2$0.3 million from the prior-year firstsecond quarter. Income provided by Trust and Wealth Management was $1.6 million during the firstsecond quarter of 2026. Assets under management of this department totaled $798.4$873.9 million as of MarchJune 31,30, 2026. The rising interest rate environment during the first half of 2026 resulted in a $0.5 million positive valuation adjustment to the Bank’s mortgage servicing rights during the second quarter of 2026, compared to a $0.1 million negative valuation adjustment in the prior-year second quarter. Higher mortgage rates generally reduce expected mortgage prepayment speeds, which increases the value of mortgage servicing rights. Finally, gains on sales of mortgage loans totaled $1.1$0.7 million during the firstsecond quarter of 2026, up from $0.3 million in the prior-year firstsecond quarter.

Noninterest Expense. Noninterest expense increased $18.5$13.6 million to $39.1$34.4 million for the three months ended MarchJune 31,30, 2026 compared to $20.6$20.8 million for the same period in 2025. Most areas of noninterest expense were elevated in the most recent quarter due to the added operating scale from Centre acquisition.acquisition Expensesas well as expenses directly related to thethis Bank’stransaction, acquisition of Centrewhich totaled $6.5$3.2 million during the firstsecond quarter of 2026. These expenses were primarily incurred in the areas of personnel expense, outside service feesfees, supplies expense, and data processing. Occupancy expense was significantly elevated due to eleven new operating locations added to the Bank’s footprint as part of the Centre acquisition. This acquisition also created a core deposit intangible asset of $31.9 million. Amortization related to this intangible asset, which will be amortized over the next 10 years, led to the elevated amortization expense during the firstsecond quarter of 2026. As mentioned, the Bank incurred a $1.1 million prepayment penalty when it repaid $65.0 million in FHLB borrowings during the first quarter of 2026.

Income Tax Expense. We recorded a provision for income taxes of $4.7$5.9 million for the three months ended MarchJune 31,30, 2026 compared to a provision of $3.9$3.8 million for the same period during 2025, reflecting effective tax rates of 19.1%19.4% for the firstsecond quarter of 2026 compared to 17.5%18.3% during firstsecond quarter 2025. 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. Tax-exemptAdditional tax-exempt income during the firstsecond quarter of 2025 resulted from a death benefit on life insurance, further reducing the effective tax rate for that quarter.

Total Assets. Total assets increased $1.56$1.44 billion, or 34.7%,32.0%, to $6.07$5.95 billion at MarchJune 31,30, 2026, from $4.51 billion at December 31, 2025, primarily as a result of the Centre acquisition on January 1, 2026.

Cash and Cash Equivalents. Cash and cash equivalents increased by $155.4$23.3 million to $398.6$266.5 million at MarchJune 31,30, 2026, from $243.2 million at December 31, 2025.

Investment Securities. The carrying value of total investment securities increased by $333.0$340.5 million to $601.2$608.6 million at MarchJune 31,30, 2026, from $268.1 million at December 31, 2025. The increase in investments was primarily attributed to the investment portfolio acquired from Centre during the first quarter of 2026.

Loans. Net loans increased by $898.3$905.4 million, totaling $4.46$4.47 billion at MarchJune 31,30, 2026 compared to $3.56 billion at December 31, 2025. The fair value of loans acquired as part of the acquisition of Centre at the beginning of the first quarter of 2026 totaled $968.7 million.

Deposits. Deposits increased $1.39$1.29 billion, or 37.6%,34.9%, to $5.09$4.99 billion at MarchJune 31,30, 2026 from $3.70 billion at December 31, 2025. The fair value of deposits acquired as part of the acquisition of Centre at the beginning of the first quarter of 2026 totaled $1.38 billion.

Borrowings. At MarchJune 31,30, 2026, borrowings consisted of advances from the FHLB and subordinated debt to other banks and an individual. FHLB borrowings decreased $10.0$30.0 million, or 9.1%,27.3%, to $100.0$80.0 million at MarchJune 31,30, 2026 from $110.0 million at December 31, 2025. Junior subordinated debentures, all of which were assumed as part of the acquisition of Centre, totaled $8.3 million at MarchJune 31,30, 2026. The Company assumed $4.5$4.6 million of subordinated debt at fair value in the Centre transaction, increasing total subordinated debt to $16.6 million at MarchJune 31,30, 2026, up from $12.0 million at December 31, 2025.

Stockholders’ Equity. Total stockholders’ equity increased $176.0$175.5 million, or 27.3%, to $819.9$819.3 million at MarchJune 31,30, 2026 from $643.8 million at December 31, 2025. Repurchases of the Company’s common stock totaling $3.1$23.4 million and dividends declared totaling $5.6$11.7 million offset the positive impact of earnings totaling $20.0$44.7 million during the first threesix months of the 2026. The largest contributor to thisthe increase in stockholder’s equity during the first half of 2026 was the Centre acquisition, which added $168.5 million to stockholders’ equity.million.

Our loan portfolio is our most significant earning asset, comprising 74.6%76.1% and 80.1% of our total assets as of MarchJune 31,30, 2026 and December 31, 2025, 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 $911.0$917.0 million, or 25.3%,25.4%, to $4.51$4.52 billion as of MarchJune 31,30, 2026, compared to $3.60 billion as of December 31, 2025. This increase was primarily driven by the acquisition of Centre, which included at acquisition date approximately $1.0$968.7 billionmillion in loan balances, and was comprised of an increase of $157.2 million or 24.3% in commercial and industrial loans, an increase of $76.6 million or 8.7% in owner occupied commercial real estate loans, an increase of $209.9 million or 42.6% in non-owner occupied commercial real estate loans, an increase of $240.1 million or 59.7% in multifamily loans, an increase of $40.4 million or 18.8% in construction and development loans, an increase of $262.6 million or 29.3% in residential 1-4 family loans and an increase of $11.9 million or 16.6% in consumer and other loans.

Commercial and Industrial (C&I). Our C&I portfolio totaled $821.2$848.6 million and $647.1 million at March 31, 2026 and December 31, 2025, respectively, and represented 19% and 18% of our total loans as of MarchJune 31,30, 2026 and December 31, 2025.2025, respectively.

Commercial Real Estate (CRE). Our CRE loan portfolio totaled $2.25 billion and $1.78 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively, and represented 50% and 49% of our total loans at those dates 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 $259.4$241.9 million and $215.5 million at MarchJune 31,30, 2026 and December 31, 2025, respectively, and represented 5% of our total loans as of June 30, 2026 and 6% of our total loans as of March 31, 2026 and December 31, 2025.

Residential 1 – 4 Family. Residential 1 – 4 family loans held in portfolio amounted to $1.10 billion and $895.0 million at MarchJune 31,30, 2026 and December 31, 2025, respectively, and represented 24% of our total loans as of MarchJune 31,30, 2026 and 25% of our total loans as of December 31, 2025.

We were servicing mortgage loans sold to others without recourse of approximately $1.54$1.55 billion and $1.20 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively.

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 $17.5$18.0 million at MarchJune 31,30, 2026 and $13.7 million December 31, 2025.

Consumer Loans. Our consumer loan portfolio totaled $61.4$60.7 million and $54.8 million at MarchJune 31,30, 2026 and December 31, 2025, respectively, and represented 1% of our total loans as of MarchJune 31,30, 2026 and 2% of our total loans as of December 31, 2025. Consumer loans include secured and unsecured loans, lines of credit and personal installment loans.

Other Loans. Our other loans totaled $22.4$19.6 million and $16.9 million at MarchJune 31,30, 2026 and December 31, 2025, 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.

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 MarchJune 31,30, 2026. 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.

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 through the first threesix months of 2026 was primarily due to the deterioration of one customer relationship, which resulted in several loans being moved to nonaccrual status.

At MarchJune 31,30, 2026, the ACL - Loans was $57.1$56.0 million (representing 1.26%1.2% of period end loans). The Bank did not record a provision for credit losses during the firstsecond quarter of 2026. In addition, the ACL - Loans increased due to the acquisition of Centre, which required a $5.1$7.8 million allowance for credit losses on non-PCD loans and a $7.7$5.0 million reserve related to PCD loans. The ACL – Loans has remained consistent over recent quarters as economic conditions have remained stable and the Company’s overall asset quality remain strong. The Company recorded net charge-offs totaling $0.1$1.2 million during the first threesix months of 2026.

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 MarchJune 31,30, 2026, deposit liabilities accounted for approximately 83.8%83.9% 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 $5.09$4.99 billion and $3.70 billion as of MarchJune 31,30, 2026 and December 31, 2025, respectively. Noninterest-bearing deposits at MarchJune 31,30, 2026 and December 31, 2025, were $1.50 billion and $1.00 billion, respectively, while interest-bearing deposits were $3.59$3.49 billion and $2.69 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively.

At MarchJune 31,30, 2026, we had a total of $822.4$813.2 million in certificates of deposit, including $15.1 million of brokered deposits. Based on historical experience and our current pricing strategy, we believe we will retain a majority of thesethe non-brokered 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.

The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of MarchJune 31,30, 2026:

The Company’s borrowings have historically consisted primarily of FHLB 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 $100.0$80.0 million and $110.0 million of advances outstanding from the FHLB at MarchJune 31,30, 2026 and December 31, 2025, respectively.

The total loans pledged as collateral were $839.3$1.36 millionbillion and $1.10 billion at MarchJune 31,30, 2026 and December 31, 2025. There were $102.8$35.8 million letters of credit from the FHLB at MarchJune 31,30, 2026 compared to no letters of credit at December 31, 2025.

During July 2020, the Company entered into subordinated note agreements with two separate commercial banks. As of MarchJune 31,30, 2026 and December 31, 2025, outstanding balances under these agreements totaled $6.0 million. These notes were issued with 10-year maturities, carried interest at a fixed rate of 5.0% through June 30, 2025, and carry a variable rate, 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 MarchJune 31,30, 2026 and December 31, 2025, 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.

Securities available for sale consist of U.S. Treasuries, 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 $483.2$494.6 million and included negligible$0.1 million gross unrealized gains and gross unrealized losses of $13.0$12.4 million at MarchJune 31,30, 2026. At December 31, 2025, the fair value of securities available for sale totaled $164.4 million and included $0.4 million gross unrealized gains and gross unrealized losses of $7.8 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 $117.9$114.1 million at MarchJune 31,30, 2026 and $103.7 million at December 31, 2025.