Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2026
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 001-38676
BANK FIRST CORPORATION
(Exact name of registrant as specified in its charter)
WISCONSIN
39-1435359
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
402 North 8th Street, Manitowoc, Wisconsin
54220
(Address of principal executive offices)
(Zip Code)
(920) 652-3100
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ⌧
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name on each exchange on which registered
Common Stock, par value $0.01 per share
BFC
The Nasdaq Stock Market LLC
The number of shares of the issuer’s common stock, par value $0.01, outstanding as of November 6, 2026 was 11,045,182 shares.
TABLE OF CONTENTS
Page Number
Part I. Financial Information
3
ITEM 1.
Financial Statements
Consolidated Balance Sheets – September 30, 2026 (unaudited) and December 31, 2025
Consolidated Statements of Income – Three and Nine Months Ended September 30, 2026 and 2025 (unaudited)
4
Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2026 and 2025 (unaudited)
5
Consolidated Statements of Changes in Stockholders’ Equity – Three and Nine Months Ended September 30, 2026 and 2025 (unaudited)
6
Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2026 and 2025 (unaudited)
7
Notes to Unaudited Consolidated Financial Statements
9
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
55
ITEM 4.
Controls and Procedures
57
Part II. Other Information
Legal Proceedings
ITEM 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
58
Defaults Upon Senior Securities
Mine Safety Disclosures
ITEM 5.
Other Information
ITEM 6.
Exhibits
59
Signatures
60
2
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets
(In thousands, except share and per share data)
September 30, 2026
December 31, 2025
(Unaudited)
(Audited)
Assets
Cash and due from banks
$
64,492
55,345
Interest-bearing deposits
147,730
187,862
Cash and cash equivalents
212,222
243,207
Securities held to maturity, at amortized cost ($128,009 and $105,146 fair value at September 30, 2026 and December 31, 2025, respectively)
132,892
103,726
Securities available for sale, at fair value ($480,779 and $171,796 amortized cost at September 30, 2026 and December 31, 2025, respectively)
455,398
164,422
Loans held for sale
3,555
6,243
Loans
4,595,886
3,604,651
Allowance for credit losses - loans ("ACL-Loans")
(56,828)
(44,374)
Loans, net
4,539,058
3,560,277
Premises and equipment, net
97,805
79,217
Goodwill
244,726
175,106
Other investments
31,130
23,613
Cash value of life insurance
98,674
61,085
Core deposit intangibles, net
40,489
16,200
Mortgage servicing rights ("MSR")
18,870
13,650
Other real estate owned (“OREO”)
2,420
—
Investment in Ansay and Associates, LLC ("Ansay")
36,024
35,444
Other assets
34,249
23,905
TOTAL ASSETS
5,947,512
4,506,095
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
3,517,397
2,692,711
Noninterest-bearing deposits
1,484,426
1,003,076
Total deposits
5,001,823
3,695,787
Notes payable
55,000
109,966
Subordinated notes
16,589
12,000
Junior subordinated debenture
8,250
Other liabilities
39,412
44,506
Total liabilities
5,121,074
3,862,259
Stockholders’ equity:
Serial preferred stock - $0.01 par value
Authorized - 5,000,000 shares
Common stock - $0.01 par value
Authorized - 20,000,000 shares
Issued - 12,898,070 and 11,515,130 shares as of September 30, 2026 and December 31, 2025, respectively
Outstanding - 11,083,124 and 9,834,623 shares as of September 30, 2026 and December 31, 2025, respectively
129
115
Additional paid-in capital
501,970
333,836
Retained earnings
467,051
416,997
Treasury stock, at cost - 1,814,946 and 1,680,507 shares as of September 30, 2026 and December 31, 2025, respectively
(123,444)
(102,088)
Accumulated other comprehensive loss
(19,268)
(5,024)
Total stockholders’ equity
826,438
643,836
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
See accompanying notes to consolidated financial statements.
ITEM 1. Financial Statements Continued:
Consolidated Statements of Income
(In thousands, except per share data) (Unaudited)
Three months ended September 30,
Nine months ended September 30,
2026
2025
Interest income:
Loans, including fees
67,216
51,897
198,769
151,052
Securities:
Taxable
6,231
2,764
18,643
8,564
Tax-exempt
266
234
810
707
Other
2,275
561
7,090
4,756
Total interest income
75,988
55,456
225,312
165,079
Interest expense:
Deposits
19,614
15,772
58,850
48,823
Borrowed funds
1,156
1,431
2,995
4,764
Total interest expense
20,770
17,203
61,845
53,587
Net interest income
55,218
38,253
163,467
111,492
Provision for credit losses
750
650
1,250
Net interest income after provision for credit losses
54,468
37,603
162,717
110,242
Noninterest income:
Service charges
4,100
2,106
12,892
6,170
Income from Ansay
1,314
2,591
3,648
Loan servicing income
973
736
2,882
2,201
Valuation adjustment on MSR
852
250
1,468
326
Net gain on sales of mortgage loans
558
482
2,295
1,154
Trust and wealth management
1,606
14
4,801
47
1,272
1,051
3,716
3,916
Total noninterest income
10,111
5,953
30,645
17,462
Noninterest expense:
Salaries, commissions, and employee benefits
15,760
10,498
54,371
31,910
Occupancy
2,691
1,567
7,886
5,080
Data processing
5,432
2,506
12,887
7,570
Postage, stationery, and supplies
456
165
1,738
641
Net gain on sales and valuations of OREO
(219)
(159)
Net loss on sale of securities
31
Advertising and public relations
485
360
1,656
1,387
Federal deposit insurance
900
540
2,465
1,800
Outside service fees
2,766
1,818
7,156
3,741
Amortization of intangibles
2,501
1,228
7,620
3,799
3,688
2,404
12,544
6,677
Total noninterest expense
34,679
21,086
108,135
62,446
Income before provision for income taxes
29,900
22,470
85,227
65,258
Provision for income taxes
6,091
4,480
16,739
12,152
Net Income
23,809
17,990
68,488
53,106
Earnings per share - basic
2.15
1.83
6.14
5.36
Earnings per share - diluted
See accompanying notes to unaudited consolidated financial statements.
Consolidated Statements of Comprehensive Income
(In thousands) (Unaudited)
Three Months Ended
Nine Months Ended
September 30,
Other comprehensive income (loss):
Unrealized gains (losses) on available for sale securities:
Unrealized holding gains (losses) arising during period
(13,081)
2,028
(18,039)
4,038
Reclassification adjustment for losses included in net income
Income tax (expense) benefit
2,732
(426)
3,764
(846)
Total other comprehensive income (loss)
(10,349)
1,602
(14,244)
3,192
Comprehensive income
13,460
19,592
54,244
56,298
Consolidated Statement of Stockholders’ Equity
(In thousands, except share and per share data) (Unaudited)
Accumulated
Serial
Additional
Total
Preferred
Common
Paid-in
Retained
Treasury
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income (loss)
Equity
Balance at January 1, 2025
333,842
398,002
(82,925)
(9,351)
639,683
Net income
18,241
Other comprehensive income
747
Purchase of treasury stock
(6,381)
Sale of treasury stock
64
Cash dividends ($0.45 per share)
(4,491)
Amortization of stock-based compensation
551
Vesting of restricted stock awards
(2,143)
2,143
Balance at March 31, 2025
332,250
411,752
(87,099)
(8,604)
648,414
16,875
843
(15,662)
527
Cash dividends ($3.95 per share)
(39,148)
484
Balance at June 30, 2025
332,734
389,479
(102,234)
(7,761)
612,333
74
(4,425)
Balance at September 30, 2025
333,285
403,044
(102,160)
(6,159)
628,125
Balance at January 1, 2026
19,988
Other comprehensive loss
(4,421)
(3,076)
88
Cash dividends ($0.50 per share)
(5,611)
579
(2,244)
2,244
Shares issued in the acquisition of Centre 1 Bancorp, Inc. (1,382,940 shares)
168,456
168,470
Balance at March 31, 2026
500,627
431,374
(102,832)
(9,445)
819,853
24,691
526
(20,364)
Cash dividends ($0.55 per share)
(6,094)
624
Balance at June 30, 2026
501,251
449,971
(123,122)
(8,919)
819,310
(412)
90
Cash dividends ($0.60 per share)
(6,729)
719
Balance at September 30, 2026
Consolidated Statements of Cash Flows
Nine Months Ended September 30,
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment
2,288
1,795
Termination of lease
1,586
Net accretion of securities
(6,183)
(2,786)
1,923
Accretion of purchase accounting valuations
(8,477)
(2,359)
Net change in deferred loan fees and costs
(592)
(317)
Change in fair value of MSR and other investments
(2,103)
(1,239)
Loss from sale and disposal of premises and equipment
1
36
Net gain on sale of OREO and valuation allowance
Proceeds from sales of mortgage loans
181,603
105,893
Originations of mortgage loans held for sale
(176,620)
(105,827)
Gain on sales of mortgage loans
(2,295)
(1,154)
Realized loss on sale of securities
Undistributed income of Ansay joint venture
(2,591)
(3,648)
Net earnings on life insurance
(2,297)
(1,131)
Decrease in other assets
8,684
26
Decrease in other liabilities
(30,214)
(15,398)
Net cash provided by operating activities
41,383
33,473
Cash flows from investing activities, net of effects of business combination:
Activity in securities available for sale and held to maturity:
Sales
8,920
Maturities, prepayments, and calls
66,501
274,461
Purchases
(71,569)
(207,768)
Net increase in loans
(3,093)
(110,563)
Dividends received from Ansay
2,011
1,902
Proceeds from sale of OREO
1,789
Net sales (purchase) of Federal Home Loan Bank (“FHLB”) stock
4,279
(3,411)
Net purchases of Federal Reserve Bank (“FRB”) stock
(4,027)
Proceeds from life insurance
155
1,899
Proceeds from sale of premises and equipment
76
Purchases of premises and equipment
(11,546)
(8,751)
Net cash received in business combination
169,493
Net cash provided by (used in) investing activities
162,989
(51,330)
Consolidated Statements of Cash Flows (Continued)
Cash flows from financing activities, net of effects of business combination:
Net decrease in deposits
(70,508)
(122,341)
Proceeds from advances of notes payable
100,000
Repayment of notes payable
(122,814)
(25,508)
Dividends paid
(18,434)
(48,064)
Proceeds from sales of common stock
251
665
Repurchase of common stock
(23,852)
(22,043)
Net cash used in financing activities
(235,357)
(117,291)
Net decrease in cash and cash equivalents
(30,985)
(135,148)
Cash and cash equivalents at beginning of period
261,332
Cash and cash equivalents at end of period
126,184
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest
59,699
54,266
Income taxes
14,188
11,369
Supplemental schedule of noncash activities:
Closed branch buildings transferred to OREO
3,990
MSR resulting from sale of loans
2,060
1,218
Change in unrealized loss on investment securities available for sale, net of tax
Acquisition:
Fair value of assets acquired
1,581,684
Fair value of liabilities assumed
1,482,541
Net assets acquired
99,143
Common stock issued in acquisition
8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTE 1 – BASIS OF PRESENTATION
Bank First Corporation (the “Company”) provides a variety of financial services to individual and corporate customers through its wholly-owned subsidiary, Bank First, N.A. (the “Bank”). The Bank operates as a full-service financial institution with a primary market area including, but not limited to, the counties in which the Bank’s branches are located. The Bank has thirty-eight 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 the State of Wisconsin and Winnebago county in the State of Illinois. The Company and Bank are subject to the regulations of certain federal agencies and undergo periodic examinations by those regulatory authorities.
These interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures required by GAAP have been omitted or abbreviated. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (“Annual Report”).
The unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.
Critical Accounting Policies and Estimates
The accounting and reporting policies of the Company conform to GAAP in the United States and general practices within the financial institution industry. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement. As disclosed in the Company’s Annual Report, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements. These include accounting for business combinations (primarily related to core deposit intangibles and acquired loans) and accounting for the ACL-Loans.
There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as previously disclosed in the Company’s Annual Report.
Reclassifications
Certain 2025 amounts have been reclassified to conform to the presentation used in 2026. These reclassifications had no effect on the operations, financial condition or cash flows of the Company.
Updates to Significant Accounting Policies
Effective January 1, 2026, the Company early adopted Accounting Standards Update (“ASU”) 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Financial Assets. Any financial assets purchased after January 1, 2026 (including those acquired as part of the acquisition of Centre 1 Bancorp. Inc. (“Centre”) on January 1, 2026) reflect the application of ASU 2025-08, while financial assets purchased prior to this date will continue to be reported in accordance with previously applicable accounting standards.
Recently Issued Not Yet Effective Accounting Standards
In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-06, Disclosure Improvements. This ASU modifies the disclosure or presentation requirements of a variety of Topics in the Codification. The amendments in this ASU are expected to clarify or improve disclosure and presentation requirements for certain codification topics. The effective date for each amendment will be the date on which the Securities and Exchange Commission’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If, by June 30, 2027, the Securities and Exchange Commission has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company does not anticipate a significant impact to its financial statement disclosures as a result of this ASU.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This ASU is intended to improve the disclosures about a public entity’s income statement expense categories and addresses requests from investors and other decision makers for additional, more detailed information about income statement expense categories. The amendment applies to all public entities that are required to report income statement categories in accordance with Topic 280. The effective date for this update was amended by ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, and is now effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) – Narrow Scope Improvements. This ASU is intended to better clarify interim disclosure requirements and the applicability of Topic 270 by improving the navigability of the required interim disclosures and clarifying what guidance is applicable. The amendments also provide additional guidance on what disclosures would be provided in interim reporting periods. This update is effective for annual periods beginning after December 15, 2027, with early adoption permitted. The Company anticipates that this standard may impact the specific disclosures it utilizes in interim reports but will not cause any change in the accounting for operational results.
NOTE 2 – ACQUISITIONS
On January 1, 2026, the Company completed a merger with Centre, a bank holding company headquartered in Beloit, Wisconsin, pursuant to the merger agreement, dated as of July 17, 2025, by and between the Company and Centre, whereby Centre merged with and into the Company, and First National Bank and Trust, Centre’s wholly-owned banking subsidiary, merged with and into the Bank. Centre’s principal activity was the ownership and operation of First National Bank and Trust, a federally-chartered banking institution that operated seventeen (17) branches in Wisconsin and Illinois at the time of closing. The merger consideration totaled approximately $168.8 million.
Pursuant to the Merger Agreement, Centre shareholders were entitled to receive, for each share of Centre common stock that was outstanding immediately prior to the merger, 0.9200 shares of the Company’s common stock and cash in lieu of fractional shares. Company stock issued totaled 1,382,940 shares valued at approximately $168.5 million, with cash of $0.3 million comprising the remainder of merger consideration. After close the combined company had total assets of approximately $6.2 billion, loans of approximately $4.6 billion, and deposits of approximately $5.0 billion.
10
The fair value of the assets acquired and liabilities assumed on January 1, 2026 was as follows:
As Recorded by
Fair Value
Centre
Adjustments
the Company
Cash, cash equivalents and securities
508,129
(2,493)
505,636
6,660
6,724
987,951
(19,247)
968,704
17,672
(2,689)
14,983
Core deposit intangible
17
31,893
80,754
(27,027)
53,727
Total assets acquired
1,601,183
(19,499)
1,376,635
(393)
1,376,242
Other borrowings
67,841
1,323
69,164
Subordinated debentures
4,500
110
4,610
Junior subordinated debentures
25,781
137
25,918
Total liabilities assumed
1,483,007
1,177
1,484,184
Excess of assets acquired over liabilities assumed
118,176
(20,676)
97,500
Less: purchase price
168,763
71,263
Refinement to fair value estimates (1)
(1,643)
Goodwill (after refinement)
69,620
(1) Refinements consist of adjustments to the initial fair value estimates of other liabilities.
The Company purchased loans through the acquisition of Centre for which there was, at the date of acquisition, more than insignificant deterioration of credit quality since origination (PCD Loans). The carrying amount of these loans at acquisition was as follows:
January 1, 2026
Purchase price of PCD loans at acquisition
55,284
Non-credit discount on PCD loans at acquisition
2,742
Allowance for credit losses on PCD loans at acquisition
4,971
Par value of PCD acquired loans at acquisition
62,997
All other loans purchased through this acquisition were classified as Purchased Seasoned Loans under the guidance of ASU 2025-08.
The following unaudited pro forma information is presented for illustrative purposes only. The pro forma information should not be relied upon as being indicative of the historical results of operations the Company would have had if the Centre merger had occurred before such periods or the future results of operations that the Company will experience as a result of the merger. The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related expenses, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results. The unaudited pro forma information set forth below gives effect to the merger as if it had occurred on January 1, 2025, the beginning of the earliest period presented.
Year Ended
(in thousands, except per share data)
Total revenue, net of interest expense
233,694
72,250
Diluted earnings per common share
6.41
11
The Company accounted for this transaction under the acquisition method of accounting, and thus, the financial position and results of operations of Centre prior to the consummation dates were not included in the accompanying consolidated financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities and deposits with the assistance of third-party valuations, appraisals and third-party advisors. The acquisition accounting is provisional for up to one year after the acquisition and could be adjusted in subsequent quarters during 2026 if additional relevant information to the fair values listed above becomes available.
On May 19, 2026, the Company entered into an Agreement and Plan of Merger with PSB Holdings, Inc. (“Peoples”), the parent company of Peoples State Bank, a community bank headquartered in Wausau, Wisconsin. Under the terms of the agreement, Peoples will merge with and into the Company, and Peoples State Bank will merge with and into the Bank. The transaction is expected to close on December 4, 2026. All required regulatory and shareholder approvals have been obtained. Merger consideration will consist of common stock of the Company, with final terms based on the fair market value of the Company’s common stock at closing. Based on combined results as of September 30, 2026, the merged entity would have total assets of approximately $7.5 billion, loans of approximately $5.7 billion, and deposits of approximately $6.2 billion.
NOTE 3 – EARNINGS PER SHARE
The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. There were no anti-dilutive stock options for the three or nine months ended September 30, 2026 and 2025.
The following table presents the factors used in the earnings per share computations for the period indicated:
Three Months Ended September 30,
Basic
Net income available to common shareholders
Less: Earnings allocated to participating securities
(110)
(86)
(302)
(259)
Net income allocated to common shareholders
23,699
17,904
68,186
52,847
Weighted average common shares outstanding including participating securities
11,083,897
9,834,002
11,150,043
9,911,522
Less: Participating securities (1)
(50,977)
(46,727)
(49,178)
(48,383)
Average shares
11,032,920
9,787,275
11,100,865
9,863,139
Basic earnings per common share
Diluted
Weighted average common shares outstanding for basic earnings per common share
Add: Dilutive effects of stock-based compensation awards
20,669
21,419
19,809
21,459
Average shares and dilutive potential common shares
11,053,589
9,808,694
11,120,674
9,884,598
12
NOTE 4 – SECURITIES
The following is a summary of available for sale securities:
Gross
Amortized
Unrealized
Estimated
Cost
Gains
Losses
U.S. Treasury securities
100,796
(3,520)
97,276
Obligations of U.S. Government sponsored agencies
143,018
(6,511)
136,507
Obligations of states and political subdivisions
81,118
25
(9,133)
72,010
Mortgage-backed securities
140,189
(6,016)
134,177
Corporate notes
15,658
(230)
15,428
Total available for sale securities
480,779
(25,410)
23,226
(1,947)
21,279
61,511
95
(4,187)
57,419
71,384
337
(965)
70,756
15,675
(707)
14,968
171,796
432
(7,806)
The following is a summary of held to maturity securities:
129,283
(4,884)
124,400
3,609
Total held to maturity securities
128,009
101,331
1,590
(170)
102,751
2,395
105,146
13
The following table shows the fair value and gross unrealized losses of securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
Less Than 12 Months
Greater Than 12 Months
Number
Fair
of
Value
Securities
September 30, 2026 - Available for Sale
118,968
(4,018)
17,539
45
36,442
(1,893)
35,087
(7,240)
71,529
97
112,452
(4,350)
21,324
(1,666)
133,776
106
500
8,770
9,270
Totals
365,638
(13,781)
82,720
(11,629)
448,358
268
September 30, 2026 - Held to Maturity
109,472
(4,379)
9,966
(505)
119,438
38
December 31, 2025 - Available for Sale
929
(8)
20,350
(1,939)
24
45,131
10,911
(45)
24,636
(920)
35,547
92
13,801
11,840
(53)
103,918
(7,753)
115,758
180
December 31, 2025 - Held to Maturity
997
22,156
23,153
As of September 30, 2026, and December 31, 2025, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to these securities. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. As of September 30, 2026, the Company did not intend to sell these securities and it was more likely than not that the Company would not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration.
Furthermore, based on its analysis the Company has determined that held to maturity securities have zero expected credit losses. U.S. Treasury securities have the full faith and credit backing of the United States Government.
The following is a summary of amortized cost and estimated fair value of securities by contractual maturity as of September 30, 2026. Contractual maturities will differ from expected maturities for mortgage-backed securities because borrowers may have the right to call or prepay obligations without penalties.
Available for Sale
Held to Maturity
Due in one year or less
23,734
23,625
15,154
15,106
Due after one year through 5 years
205,879
198,765
39,765
38,786
Due after 5 years through 10 years
78,413
71,367
77,973
74,117
Due after 10 years
32,564
27,464
Subtotal
340,590
321,221
As of September 30, 2026 and December 31, 2025, the carrying values of securities pledged to secure public deposits and for other purposes required or permitted by law were approximately $220.0 million and $249.7 million, respectively.
Sales of securities available for sale produced $8.9 million in proceeds with immaterial gross gains and losses for the nine months ended September 30, 2026. There were no sales of securities available for sale during the three months ended September 30, 2026 or the three and nine months ended September 30, 2025.
Proceeds from sales of securities
Gross gains on sales
37
Gross losses on sales
(68)
NOTE 5 – LOANS, ALLOWANCE FOR CREDIT LOSSES, AND CREDIT QUALITY
The following table presents total loans by portfolio segment and class of loan as of September 30, 2026 and December 31, 2025:
Commercial/industrial
871,592
647,552
Commercial real estate - owner occupied
1,107,001
881,037
Commercial real estate - non-owner occupied
694,808
492,635
Multi-family
478,440
402,622
Construction and development
238,236
215,599
Residential 1‑4 family
1,130,110
894,633
Consumer
56,545
54,618
19,550
16,941
Subtotals
4,596,282
3,605,637
ACL - Loans
Loans, net of ACL - Loans
4,539,454
3,561,263
Deferred loan fees, net
(396)
(986)
The ACL - Loans is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. More information regarding the Company’s methodology related to the ACL-Loans can be found in the Company’s Annual Report.
15
The Company utilized the high-end range of the Federal Reserve Bank Open Market Committee forecast for national unemployment and the low-end range for national GDP growth at September 30, 2026 and December 31, 2025. As of September 30, 2026, the Company anticipates the national unemployment rate to rise nominally during the forecast period and the national GDP growth rate to decrease. The Company utilized long-term averages for the remaining loss drivers. There were no changes made to the qualitative factors applied to individual loan pools during the third quarter of 2026.
A roll forward of the ACL-Loans is summarized as follows:
September 30, 2025
Beginning Balance
56,029
44,292
44,374
44,151
ACL on loans acquired
-
12,826
1,050
1,200
Charge-offs
(274)
(52)
(1,517)
(911)
(1,145)
Recoveries
23
61
168
Net charge-offs
(251)
(41)
(1,422)
(850)
(977)
Ending Balance
56,828
44,501
A summary of the activity in the ACL - Loans by loan type for the nine months ended September 30, 2026 is summarized as follows:
Commercial
Real Estate -
Construction
Commercial /
Owner
Non - Owner
Multi-
and
Residential
Industrial
Occupied
Family
Development
1-4 Family
ACL - Loans - January 1, 2026
7,264
9,691
4,581
4,088
3,814
13,644
1,074
218
ACL - Loans on loans acquired
2,646
2,346
2,573
2,104
2,930
51
39
(176)
(82)
(348)
Provision
(78)
1,225
(84)
(625)
(99)
355
354
ACL - Loans - September 30, 2026
8,959
13,262
7,070
5,567
3,852
16,761
1,047
310
A summary of the activity in the ACL – Loans by loan type for the nine months ended September 30, 2025 is summarized as follows:
ACL - Loans - January 1, 2025
6,737
9,334
5,213
3,739
5,223
12,684
1,084
(23)
(802)
(1)
(42)
(43)
321
1,423
(338)
437
(506)
(236)
48
ACL - Loans - September 30, 2025
7,040
9,955
4,875
4,176
4,717
12,483
1,102
153
In addition to the ACL-Loans, the Company has established an allowance for credit losses on unfunded commitments (“ACL-Unfunded Commitments”), classified in other liabilities on the consolidated balance sheets. This allowance is maintained to absorb losses arising from unfunded loan commitments, and is determined quarterly based on methodology similar to the methodology for determining the ACL-Loans. The ACL-Unfunded Commitments was $3.7 million and $3.0 million at September 30, 2026 and December 31, 2025, respectively. See Note 11 for further information on commitments.
16
The provision for credit losses is determined by the Company as the amount to be added to the ACL accounts for various types of financial instruments including loans, investment securities, and off-balance sheet credit exposures after net charge-offs have been deducted to bring the ACL to a level that, in management’s judgment, is necessary to absorb expected credit losses over the lives of the respective financial instruments. The following table presents the components of the provision for credit losses.
Provision for credit losses on:
Unfunded Commitments
(300)
400
50
Total provision for credit losses
The Company’s past due and non-accrual loans as of September 30, 2026 is summarized as follows:
90 Days
Non-Accrual
30-89 Days
or more
with no
Past Due
Non-
related
Accruing
and Accruing
Accrual
allowance
75
584
2,272
2,931
525
1,856
616
4,224
6,696
1,251
365
409
3,826
4,600
1,715
11,994
123
338
461
3,123
904
1,317
5,344
1,274
138
359
567
5,760
2,516
24,676
32,952
5,241
The Company’s past due and non-accrual loans as of December 31, 2025 is summarized as follows:
894
1,754
2,648
2,791
2,330
5,458
974
720
3,198
425
1,643
5,266
1,642
277
79
381
6,399
3,242
5,806
15,447
1,858
Interest recognized on non-accrual loans is considered immaterial to the consolidated financial statements for the nine months ended September 30, 2026 and 2025.
A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial
difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. For collateral dependent loans, expected credit losses are based on amortized cost of the loan less the estimated fair value of the collateral at the balance sheet date, with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral.
The following tables present collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation. Real estate collateral primarily consists of operating facilities of the underlying borrowers. Other business assets collateral primarily consists of equipment, receivables and inventory of the underlying borrowers.
Collateral Type
As of September 30, 2026
Without an
With an
Allowance
Real Estate
Business Assets
Allocation
1,842
1,493
5,475
1,123
4,352
688
3,437
1,325
2,112
796
952
42
669
103
Total Loans
21,286
2,511
23,797
2,828
20,969
4,032
As of December 31, 2025
1,618
1,611
5,121
594
6,739
3,948
2,205
The Company utilizes a numerical risk rating system for commercial relationships. All other types of relationships (ex: residential, consumer, other) are assigned a “Pass” rating, unless they have fallen 90 days past due or more, at which time they are assessed for a rating of 5, 6 or 7. The Company uses split ratings for government guaranties on loans. The portion of a loan that is supported by a government guaranty is included with other Pass credits.
The determination of a commercial loan risk rating begins with completion of a matrix, which assigns scores based on the strength of the borrower’s debt service coverage, collateral coverage, balance sheet leverage, industry outlook, and customer concentration. A weighted average is taken of these individual scores to arrive at the overall rating. This rating is subject to adjustment by the loan officer based on facts and circumstances pertaining to the borrower. Risk ratings are subject to independent review.
Commercial borrowers with ratings between 1 and 5 are considered Pass credits, with 1 being most acceptable and 5 being just above the minimum level of acceptance. Commercial borrowers rated 6 have potential weaknesses which may jeopardize repayment ability. Borrowers rated 7 have a well-defined weakness or weaknesses such as the inability to demonstrate significant cash flow for debt service based on analysis of the company’s financial information. These loans remain on accrual status provided full collection of principal and interest is reasonably expected. Otherwise they are deemed impaired and placed on nonaccrual status. Borrowers rated 8 are the same as 7 rated credits with one exception: collection or liquidation in full is not probable.
18
The following tables present total loans by risk ratings and year of origination. Loans acquired from other previously acquired institutions have been included in the table based upon the actual origination date.
Amortized Cost Basis by Origination Year
Revolving
2024
2023
2022
Prior
to Term
Grades 1-4
178,079
128,716
42,819
38,082
38,883
73,981
267,177
767,737
Grade 5
8,072
9,752
6,859
4,833
3,445
11,082
34,558
78,601
Grade 6
2,301
823
2,407
5,531
Grade 7
1,833
492
1,756
1,227
816
7,627
5,972
19,723
Grade 8
187,984
141,261
52,257
44,142
43,144
92,690
310,114
Current-period gross charge-offs
887
911
112,210
121,559
119,765
49,648
96,437
359,872
18,905
878,396
13,649
32,620
31,345
21,216
16,677
46,400
572
162,479
845
1,308
3,959
10,690
16,802
7,222
6,640
3,105
12,842
18,775
740
49,324
125,859
162,246
159,058
73,969
129,915
435,737
20,217
63,743
62,260
37,878
61,753
81,493
267,877
15,342
590,346
20,819
9,550
4,929
3,340
6,533
29,117
74,288
176
5,641
12,049
195
18,061
768
263
12,113
84,562
71,810
42,983
71,502
88,289
320,125
15,537
29,391
41,785
2,443
36,807
71,040
240,777
4,491
426,734
3,000
757
25,806
737
9,412
39,712
32,391
15,194
62,613
71,777
250,189
45,596
58,193
16,991
15,114
24,928
14,012
7,294
182,128
10,158
16,745
15,184
12,432
54,519
574
677
1,589
56,328
75,276
32,175
27,546
14,689
101,921
86,166
71,160
94,480
179,710
395,547
165,549
1,094,533
8,287
8,126
4,089
1,811
2,300
1,242
1,527
27,382
174
292
466
105
388
2,495
3,706
1,017
7,729
110,208
94,397
75,267
96,853
184,505
400,495
168,385
163
17,849
14,611
10,921
6,162
2,540
3,573
648
56,304
104
67
19
241
17,953
14,618
10,988
6,198
2,548
3,592
32
33
82
1,062
469
1,930
444
193
275
13,785
40
3,611
396
1,147
5,194
460
571
4,080
547
201
9,808
1,882
335
348
616,387
605,473
389,852
383,370
545,307
1,527,325
528,568
Total current-period gross charge-offs
34
70
27
1,517
2021
114,479
62,065
42,402
48,707
38,384
46,256
116,076
468,369
36,459
7,301
7,241
3,059
4,538
3,282
46,643
108,523
4,919
6,622
435
40,958
3,236
56,170
94
644
215
4,772
4,147
4,438
14,490
156,037
76,082
50,722
92,939
47,694
53,685
170,393
222
21
243
56,839
88,734
47,080
93,492
121,105
203,633
25,080
635,963
54,267
47,403
20,150
14,008
29,065
33,682
199,343
1,963
1,336
4,042
2,078
1,772
11,191
6,167
960
1,443
988
5,454
19,328
200
34,540
119,236
138,433
68,673
112,530
157,702
258,415
26,048
802
50,036
31,783
51,896
57,947
110,640
110,192
8,464
420,958
7,466
19,428
3,502
3,878
13,134
685
64,770
393
818
5,753
336
6,089
57,502
51,211
55,398
62,250
129,920
127,205
9,149
Commercial real estate - multi-family
23,407
3,101
37,493
61,885
97,100
142,757
479
366,222
767
21,924
758
23,449
12,951
16,819
59,417
62,643
78,556
25,539
18,880
27,815
8,407
6,877
2,419
168,493
16,830
16,849
12,449
136
120
46,384
722
95,386
42,388
31,329
7,735
2,539
87,038
82,270
75,340
151,412
146,848
200,686
125,733
869,327
4,750
2,508
1,935
3,042
1,152
725
14,797
178
1,610
171
3,209
108
113
170
1,069
617
3,690
1,533
7,300
91,896
84,891
77,623
157,133
148,150
205,699
129,241
22,082
14,613
8,133
4,344
439
54,476
80
30
142
22,091
14,693
8,149
4,347
1,939
2,960
347
950
91
309
20
9,797
642
12,156
3,818
412
408
4,638
127
147
4,165
329
569,720
425,467
351,529
519,986
591,344
808,253
339,338
1,145
Loans that were both experiencing financial difficulty and were modified during the nine months ended September 30, 2026 and 2025, were insignificant to these consolidated financial statements.
NOTE 6 – MORTGAGE SERVICING RIGHTS
Loans serviced for others are not included in the accompanying consolidated balance sheets. MSRs are recognized as separate assets when loans sold in the secondary market are sold with servicing retained. The Company utilizes a third-party valuation specialist to assist management in estimating the fair value of its MSRs. The third-party firm collects relevant data points from numerous sources. Some of these data points relate directly to the pricing level or relative value of the mortgage servicing while other data points relate to the assumptions used to derive fair value. In addition, the valuation evaluates specific collateral types, and current and historical performance of the collateral in question. The valuation process focuses on the non-distressed secondary servicing market, common industry practices and current regulatory standards. The primary determinants of the fair value of MSRs are servicing fee percentage, ancillary income, expected loan life or prepayment speeds, discount rates, costs to service, delinquency rates, foreclosure losses and recourse obligations. The valuation data also contains interest rate shock analyses for monitoring fair value changes in differing interest rate environments.
Following is an analysis of activity in the MSR asset:
Fair value at beginning of period
13,369
Servicing asset additions
1,954
Loan payments and payoffs
(2,195)
(2,071)
Changes in valuation inputs and assumptions used in the valuation model
1,603
398
Amount recognized through earnings
281
MSR asset acquired
3,752
Fair value at end of period
Unpaid principal balance of loans serviced for others
1,557,051
1,202,991
Mortgage servicing rights as a percent of loans serviced for others
1.21
1.13
The primary economic assumptions utilized by the Company in measuring the value of MSRs were constant prepayment speeds of 7.2% and 8.5% and discount rates of 10.14% and 10.17% as of September 30, 2026 and December 31, 2025, respectively. The constant prepayment speeds are obtained from publicly available sources for each of the loan programs the Company originates under.
NOTE 7 – NOTES PAYABLE
The Company utilizes FHLB advances to fund liquidity. The Company had outstanding balances borrowed from the FHLB of $55.0 million and $110.0 million at September 30, 2026 and December 31, 2025, respectively. The advances, rate, and maturities of FHLB advances were as follows:
December 31,
Maturity
Rate
Fixed rate, fixed term
03/23/2026
4.02%
10,000
05/26/2026
1.95%
5,000
06/29/2026
4.77%
15,000
03/23/2027
3.91%
06/28/2027
4.57%
03/23/2028
3.85%
07/05/2028
4.41%
20,000
07/09/2029
4.31%
25,000
110,000
Adjustment due to purchase accounting
(34)
Future maturities of borrowings were as follows:
1 year or less
30,000
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
As of September 30, 2026, the Company had borrowing availability at the FHLB totaling $626.7 million in addition to the existing borrowings noted in the tables above. The Company has also issued $21.2 million in letters of credit through the FHLB with expiration dates through November 2026.
The Company assumed $65.0 million of FHLB borrowings as part of the Centre acquisition on January 1, 2026. The Company repaid these borrowings in full on January 23, 2026, prior to the contractual maturity. As a result, the Company recognized $1.3 million of purchase accounting fair value adjustment related to the borrowings, which reduced interest expense from borrowed funds, and incurred a $1.1 million prepayment penalty paid to the FHLB which is reflected in other noninterest expense.
NOTE 8 – SUBORDINATED NOTES AND JUNIOR SUBORDINATED DEBENTURES
During July 2020, the Company entered into subordinated note agreements with two separate commercial banks. The Company had through December 31, 2020, to borrow funds up to a maximum availability of $6.0 million under each agreement, or $12.0 million total. These notes were issued with 10-year maturities, carried interest at a fixed rate of 5.0% through June 30, 2025, and carry a variable rate thereafter, payable quarterly. These notes became callable by the Company on January 1, 2026 and qualify for Tier 2 capital for regulatory purposes. The Company had outstanding balances of $6.0 million under these agreements at September 30, 2026 and December 31, 2025.
During August 2022, the Company entered into subordinated note agreements with an individual. The Company had outstanding balances of $6.0 million under these agreements as of September 30, 2026 and December 31, 2025. These notes were issued with 10-year maturities, carry interest at a fixed rate of 5.25% through August 6, 2027, and at a variable rate thereafter, payable quarterly. These notes are callable on or after August 6, 2027 and qualify for Tier 2 capital for regulatory purposes.
The Company assumed $4.5 million in subordinated note agreements with an individual as part of the Centre acquisition January 1, 2026. These notes were entered into by Centre during January 2025. They contain 10-year maturities and carry interest at a fixed rate of 6.75% through January 1, 2030, and at a variable rate thereafter, payable quarterly. These notes are callable on or after January 2030 and qualify for Tier 2 capital for regulatory purposes.
As a result of the acquisition of Centre on January 1, 2026, the Company acquired all of the common securities of Centre’s wholly-owned subsidiary, Centre 1 Capital Trust I (“Trust I”). The Company also assumed an adjustable rate junior subordinated note agreement with this trust. The junior subordinated debenture issued to Trust I totals $8.3 million, carries interest at a floating rate resetting on each quarterly payment date, and is due in January 2039. The junior subordinated debenture is redeemable by the Company, subject to prior approval by the Federal Reserve Bank, on any quarterly payment date. The junior subordinated debenture represents the sole asset of Trust I. The trust is not included in the consolidated financial statements. The net effect of all agreements assumed with respect to Trust I is that the Company, through payments on its debenture, is liable for the distributions and other payments required on the trust’s preferred securities. Trust I also provides the Company with $8.0 million in Tier 1 capital for regulatory capital purposes.
22
NOTE 9 – REGULATORY MATTERS
Banks and certain bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.
Under regulatory guidance for non-advanced approaches institutions, the Bank and Company are required to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets, including an additional conservation buffer determined by banking regulators. As of September 30, 2026 and December 31, 2025, this buffer was 2.5%. The Bank met all capital adequacy requirements to which they are subject as of September 30, 2026 and December 31, 2025.
Actual and required capital amounts and ratios are presented below at period-end:
To Be Well
Minimum Capital
Capitalized Under
For Capital
Adequacy with
Prompt Corrective
Actual
Adequacy Purposes
Capital Buffer
Action Provisions
Amount
Ratio
Total capital (to risk-weighted assets):
Company
641,592
13.14
%
390,568
8.00
512,620
10.50
NA
Bank
591,341
12.12
390,164
512,090
487,705
10.00
Tier 1 capital (to risk-weighted assets):
567,991
11.63
292,926
6.00
414,978
8.50
534,329
10.96
292,623
414,549
Common Equity Tier 1 capital (to risk-weighted assets):
560,491
11.48
219,694
4.50
341,747
7.00
219,467
341,393
317,008
6.50
Tier 1 capital (to average assets):
9.97
227,884
4.00
9.33
228,974
286,218
5.00
515,461
13.80
298,764
392,128
460,199
12.33
298,541
391,835
373,177
460,067
12.32
224,073
317,437
416,805
11.17
223,906
317,200
168,055
261,419
167,929
261,224
242,565
10.87
169,339
9.85
169,277
211,597
NOTE 10 – SEGMENT INFORMATION
The Company’s single reportable segment is determined by the Chief Executive Officer, who is the designated chief operating decision maker (“CODM”), based upon information provided by the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the CODM, who uses such information to review the performance of various components of the business such as branches, which are then aggregated as operating performance, products and services, and customers are similar. The CODM will then evaluate the financial performance of the Company’s business components such as by evaluating significant revenues and expenses and budget to actual results in assessing the Company’s segment and in the determination of allocating resources. The CODM uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The CODM uses consolidated net income and return on assets to benchmark the Company against its competitors. The benchmarking analysis, coupled with monitoring of budget to actual results, are used in the assessment of performance and in establishing compensation. Loans, investments, service charges, and deposits in other banks provide the significant revenues in the banking operation. Interest expense, provisions for credit losses, data processing and payroll provide the significant expenses in the banking operation. All operations are domestic. Information reported internally for performance assessment by the chief operating decision maker is identical to that which is shown in the Consolidated Statements of Income.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate-lock commitments). Rate-lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements and for fixed rate commitments also considers the difference between current levels of interest rates and committed rates. The notional amount of rate-lock commitments at September 30, 2026 and December 31, 2025 was approximately $11.1 million and $16.9 million, respectively. The fair value of these rate-lock commitments are not material to these financial statements.
The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.
The Company’s exposure to credit loss is represented by the contractual or notional amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments. Since some of the commitments are expected to expire without being drawn upon and some of the commitments may not be drawn upon to the total extent of the commitment, the notional amount of these commitments does not necessarily represent future cash requirements.
The following commitments were outstanding:
Notional Amount
Commitments to extend credit:
Fixed
74,873
41,721
Variable
960,744
723,821
Credit card arrangements
26,975
26,217
Letters of credit
14,445
11,708
NOTE 12 – FAIR VALUE MEASUREMENTS
Accounting guidance establishes a fair value hierarchy to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.
Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Information regarding the fair value of assets measured at fair value on a recurring basis is as follows:
Instruments
Markets
Significant
Measured
for Identical
Observable
Unobservable
At Fair
Inputs
(Level 1)
(Level 2)
(Level 3)
Securities available for sale
Mortgage servicing rights
There were no assets measured on a recurring basis using significant unobservable inputs (Level 3) during these periods. Furthermore, there were no liabilities measured on a recurring basis during the periods.
Information regarding the fair value of assets measured at fair value on a non-recurring basis is as follows:
Quoted Prices
In Active
OREO
Loans individually evaluated, net of reserve
16,937
19,357
1,743
The following is a description of the valuation methodologies used by the Company for the items noted in the table above, including the general classification of such instruments in the fair value hierarchy. For loans individually evaluated, the amount of reserve is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note. For OREO, the fair value is based upon the estimated fair value of the underlying collateral adjusted for the expected costs to sell.
The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets:
Weighted
Range of
Average
Valuation Technique
Discounts
Discount
Third party appraisals, sales contracts or brokered price options
Collateral discounts and estimated costs to sell
0
Loans individually evaluated
Third party appraisals and discounted cash flows
Collateral discounts and discount rates
0% - 99
The carrying value and estimated fair value of financial instruments not measured and reported at fair value on a recurring or non-recurring basis at September 30, 2026 and December 31, 2025 are as follows:
Carrying
amount
Level 1
Level 2
Level 3
Financial assets:
Securities held to maturity
4,429,031
Financial liabilities:
4,511,288
3,447,489
3,466,151
The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.
Deposits with no stated maturities are defined as having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair value derived from retaining those deposits for an expected future period of time. This component, commonly referred to as a deposit base intangible, is neither considered in the above amounts nor is it recorded as an intangible asset on the consolidated balance sheet. Significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
NOTE 13 – STOCK BASED COMPENSATION
The Company has made restricted share grants pursuant to the Bank First Corporation 2011 Equity Plan and the Bank First Corporation 2020 Equity Plan, which replaced the 2011 Plan. The purpose of the Plan is to provide financial incentives for selected employees and for the non-employee Directors of the Company, thereby promoting the long-term growth and financial success of the Company. The number of shares of Company stock that may be issued pursuant to awards under the 2020 Plan shall not exceed, in the aggregate, 700,000. As of September 30, 2026, 156,729 shares of Company stock have been awarded under the 2020 Plan. Compensation expense for restricted stock is based on the fair value of the awards of Bank First Corporation common stock at the time of grant. The value of restricted stock grants that are expected to vest is amortized into expense over the vesting periods. For the three months ended September 30, 2026 and 2025, compensation expense of $0.7 million and $0.6 million, respectively, was recognized related to restricted stock awards. For the nine months ended September 30, 2026 and 2025, compensation expense of $1.9 million and $1.6 million, respectively, was recognized related to restricted stock awards.
As of September 30, 2026, there was $4.6 million of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan. That cost is expected to be recognized over a weighted average period of 2.1 years. The aggregate grant date fair value of restricted stock awards that vested during the nine months ended September 30, 2026, was approximately $2.2 million.
For the period ended
Weighted-
Average Grant-
Shares
Date Fair Value
Restricted Stock
Outstanding at beginning of period
46,727
94.77
52,634
79.27
Granted
32,159
136.44
23,616
105.76
Vested
(24,406)
91.96
(28,290)
75.74
Forfeited or cancelled
(557)
97.55
(1,233)
80.17
Outstanding at end of period
53,923
120.87
re
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 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 September 30, 2026.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are forward-looking statements within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements relating to the Company’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives, potential future acquisitions, disposition and other growth opportunities. These statements, which are based upon certain assumptions and estimates and describe the Company’s future plans, results, strategies and expectations, can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “projection” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates and projections will be achieved. Accordingly, the Company cautions investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict and that are beyond the Company’s control. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date of this report, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statement in this report including, without limitation, the risks and other factors set forth in the Company’s 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.
A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this Quarterly Report on Form 10-Q and the following:
We qualify all of our forward-looking statements by these cautionary statements.
OVERVIEW
Bank First Corporation is a Wisconsin corporation that was organized primarily to serve as the holding company for Bank First, N.A. Bank First, N.A., which was incorporated in 1894, is a nationally-chartered bank headquartered in Manitowoc, Wisconsin. It is a member of the Board of Governors of the Federal Reserve System (“Federal Reserve”), and is regulated by the Office of the Comptroller of the Currency (“OCC”). Including its headquarters in Manitowoc, Wisconsin, the Bank has thirty-eight 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 the State of Wisconsin and Winnebago county in the State of Illinois. The Bank offers loan, deposit, treasury management, trust, and wealth management services at each of its banking locations.
As with most community banks, the Bank derives a significant portion of its income from interest received on loans and investments. The Bank’s primary source of funding is deposits, both interest-bearing and noninterest-bearing. In order to maximize the Bank’s net interest income, or the difference between the income on interest-earning assets and the expense of interest-bearing liabilities, the Bank must not only manage the volume of these balance sheet items, but also the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities. To account for credit risk inherent in all loans, the Bank maintains an ACL - Loans to absorb possible losses on existing loans that may become uncollectible. The Bank establishes and maintains this allowance by charging a provision for credit losses against operating earnings. Beyond its net interest income, the Bank further receives income through the net gain on sale of loans held for sale as well as servicing income which is retained on those sold loans. In order to maintain its operations and bank locations, the Bank incurs various operating expenses which are further described within the “Results of Operations” later in this section.
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 were rebranded under the Bank First name when the core systems were consolidated during the second quarter of 2026.
The Company accounted for this transaction under the acquisition method of accounting, and thus, the financial position and results of operations of the acquired institution prior to the consummation date are not included in the accompanying consolidated financial statements. The acquisition method of accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determines the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities, deposits and borrowings with the assistance of third-party valuations, appraisals, and third-party advisors. The acquisition accounting is provisional for up to one year after the acquisition and could be adjusted in subsequent quarters during 2026 if additional relevant information to the fair values becomes available.
On May 19, 2026, the Company entered into an Agreement and Plan of Merger with Peoples, pursuant to which Peoples will merge with and into the Company and Peoples banking subsidiary, Peoples State Bank, will merge with and into the Bank. The transaction is expected to close on December 4, 2026 and is subject to, among other items, approval by the shareholders of Peoples and regulatory agencies. Merger consideration will consist of 100% common stock of the Company, and will total approximately $202.9 million, subject to the fair market value of the Company's common stock on the date of closing. Based on combined results as of September 30, 2026, the merged entity would have total assets of approximately $7.5 billion, loans of approximately $5.7 billion, and deposits of approximately $6.2 billion.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables present certain selected historical consolidated financial data as of the dates or for the period indicated:
At or for the Three Months Ended
At or for the Nine Months Ended
(In thousands, except per share data)
9/30/2026
6/30/2026
3/31/2026
12/31/2025
9/30/2025
Results of Operations:
Interest income
75,719
73,605
56,636
Interest expense
20,686
20,389
16,470
55,033
53,216
40,166
Noninterest income
10,002
10,532
4,758
Noninterest expense
34,400
39,056
22,012
Income before income tax expense
30,635
24,692
22,912
Income tax expense
5,944
4,704
4,522
18,390
Earnings per common share - basic
2.21
1.78
1.87
Earnings per common share - diluted
Common Shares:
Basic weighted average
11,101,854
11,168,335
9,787,840
Diluted weighted average
11,116,399
11,187,262
9,814,225
Outstanding
11,083,124
11,079,310
11,222,442
9,834,623
9,834,083
Noninterest income / noninterest expense:
4,102
4,690
2,255
866
975
267
954
955
Valuation adjustment on mortgage servicing rights
534
661
1,076
649
1,620
1,575
Other noninterest income
1,265
1,179
859
Personnel expense
16,822
21,789
10,565
Occupancy, equipment and office
2,639
2,556
2,769
4,045
3,410
2,685
Postage, stationery and supplies
Net gain on sales and valuations of other real estate owned
(28)
(191)
Net loss on sales of securities
569
602
247
849
716
510
1,990
2,400
1,490
2,547
2,572
1,204
Other noninterest expense
4,124
4,732
2,233
Period-end balances:
266,523
398,638
Investment securities available-for-sale, at fair value
494,571
483,235
167,125
Investment securities held-to-maturity, at cost
114,061
117,929
106,823
4,521,687
4,515,626
3,629,663
Allowance for credit losses - loans
(56,029)
(57,067)
(44,501)
Premises and equipment
96,066
93,140
78,027
Goodwill and other intangibles, net
285,215
288,342
291,908
191,306
192,510
Mortgage Servicing Rights
18,019
17,484
13,696
Other Assets
206,052
204,272
208,120
150,290
150,884
Total assets
6,069,013
4,420,411
4,987,582
5,086,816
3,538,761
Borrowings
79,839
104,846
124,845
121,966
221,941
35,774
37,499
31,584
5,128,202
5,249,160
3,792,286
Stockholders’ equity
Book value per common share
74.57
73.95
73.05
65.47
63.87
Tangible book value per common share (1)
48.83
47.92
47.04
46.01
44.30
Average balances:
4,555,239
4,514,298
4,560,355
3,615,930
3,600,259
4,543,278
3,567,946
Interest-earning assets
5,425,749
5,388,799
5,489,866
4,019,999
3,948,304
5,434,569
4,018,150
6,007,709
5,966,393
6,052,695
4,421,837
4,350,555
6,009,305
4,418,310
5,043,021
4,983,283
5,043,273
3,602,826
3,573,341
5,023,190
3,613,685
Interest-bearing liabilities
3,639,299
3,608,897
3,750,264
2,732,417
2,709,808
3,638,429
2,769,379
286,910
290,473
292,757
192,061
193,250
290,025
194,493
826,208
819,933
801,987
636,418
620,153
816,131
629,813
Financial ratios (2):
Return on average assets
1.57
1.66
1.34
1.65
1.64
1.52
1.61
Return on average common equity
11.43
12.08
10.11
11.46
11.51
11.22
11.27
Average equity to average assets
13.75
13.74
13.25
14.39
14.25
13.58
Stockholders’ equity to assets
13.90
13.78
13.51
14.29
14.21
Tangible equity to tangible assets (1)
9.56
9.38
9.14
10.49
10.30
Loan yield
5.88
5.98
5.77
5.81
5.76
5.70
Earning asset yield
5.59
5.67
5.47
5.63
5.61
5.57
5.53
Cost of funds
2.26
2.30
2.20
2.39
2.52
2.27
2.59
Net interest margin, taxable equivalent
4.07
4.13
3.96
4.01
3.88
4.05
3.75
Net loan charge-offs to average loans
0.02
0.09
0.01
0.04
0.03
Nonperforming loans to total loans
0.59
0.56
0.60
0.25
0.38
Nonperforming assets to total assets
0.50
0.47
0.20
0.31
Allowance for credit losses - loans to total loans
1.24
1.26
1.23
GAAP RECONCILIATION AND MANAGEMENT EXPLANATION OF NON-GAAP FINANCIAL MEASURES
We identify certain financial measures discussed in the Report as being “non-GAAP financial measures.” The non-GAAP financial measures presented in this Report are tangible book value per common share and tangible equity to tangible assets.
In accordance with the SEC’s rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.
The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our selected historical consolidated financial data may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have presented in our selected historical consolidated financial data when comparing such non-GAAP financial measures. The following discussion and reconciliations provide a more detailed analysis of these non-GAAP financial measures.
Tangible book value per common share and tangible equity to tangible assets are non-GAAP measures that exclude the impact of goodwill and other intangibles used by the Company’s management to evaluate capital adequacy. Because intangible assets such as goodwill and other intangibles vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare the Company’s capital position to other companies. The most directly comparable financial measures calculated in accordance with GAAP are book value per common share, return on average common equity and stockholders’ equity to total assets.
Tangible Assets
Adjustments:
(244,726)
(245,351)
(246,370)
(175,106)
Core deposit intangible, net of amortization
(40,489)
(42,991)
(45,538)
(16,200)
(17,404)
Tangible assets
5,662,297
5,659,170
5,777,105
4,314,789
4,227,901
Tangible Common Equity
Tangible common equity
541,223
530,968
527,945
452,530
435,615
Tangible book value per common share
Total stockholders’ equity to total assets
Tangible common equity to tangible assets
RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended September 30, 2026 and September 30, 2025
General. Net income increased $5.8 million to $23.8 million for three months ended September 30, 2026, compared to $18.0 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 Income. The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of the Company’s total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing the Company to an excessive level of interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities. Our net interest margin can also be adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments.
Net interest and dividend income increased by $17.0 million to $55.2 million for the three months ended September 30, 2026 compared to $38.3 million for three months ended September 30, 2025. The increase in net interest income was primarily due to growth in interest earning assets resulting from the acquisition of Centre, as well as increasing net interest margin in the year-over-year third quarter. Total average interest-earning assets were $5.43 billion for the three months ended September 30, 2026, up from $3.95 billion for the same period in 2025. In addition, growth of $929.5 million in interest-bearing liabilities, from $2.71 billion for the three months ended September 30, 2025 to $3.64 billion for the three months ended September 30, 2026, was partially offset by average rates paid on these liabilities declining from 2.52% for the three months ended September 30, 2025, to 2.26% for the three months ended September 30, 2026.
Interest Income. Total interest income increased $20.5 million, or 37.0%, to $76.0 million for the three months ended September 30, 2026 compared to $55.5 million for the same period in 2025. The increase in total interest income was primarily due to the aforementioned growth in interest earning assets resulting from the acquisition of Centre. The average balance of interest-earning assets increased by $1.48 billion during the three months ended September 30, 2026 compared to the same period in 2025 and the average rate earned on these balances decreased from 5.61% for the quarter ended September 30, 2025 to 5.59% for the quarter ended September 30, 2026. Interest income from the accretion of purchase accounting fair value marks increased by $1.5 million in the third quarter of 2026 compared to the prior-year third quarter.
Interest Expense. Interest expense increased $3.6 million, or 20.7%, to $20.8 million for the three months ended September 30, 2026 compared to $17.2 million for the same period in 2025.
Interest expense on interest-bearing deposits increased by $3.8 million to $19.6 million for the three months ended September 30, 2026 compared to $15.8 million for the same period in 2025. The increase in interest expense was primarily due to elevated interest-bearing liabilities from the Centre acquisition, offset partially by lower crediting rates on these balances. The average balance and rate of interest-bearing deposits was $3.54 billion and 2.20% for the three months ended September 30, 2026, compared to $2.59 billion and 2.42% for the same period in 2025.
Other borrowed funds, the Company’s highest-cost source of funding, saw average balances decline by $28.2 million to $95.6 million during the third quarter of 2026 compared to $123.8 million during the same period in the prior year.
Provision for Credit Losses. Credit risk is inherent in the business of making loans. We establish an allowance for credit losses through charges to earnings, which are shown in the statements of operations as the provision for credit losses. The provision for credit losses and level of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market area. The determination of the amount is complex and involves a high degree of judgment and subjectivity.
We recorded a provision of $0.8 million for credit loss during the three months ended September 30, 2026 compared to recording a $0.7 million provision for credit loss during the same period in 2025. Economic forecasts, primarily US gross domestic product projections, increased during the third quarter of 2026 while projections for unemployment declined. We incurred $0.3 million net charge-offs during the three months ended September 30, 2026 compared to minimal net charge-offs during the three months ended September 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 provision recorded during the third quarter of 2026 was the result of growth of the loan portfolio. The ACL - Loans was $56.8 million, or 1.24% of total loans, at September 30, 2026 compared to $44.5 million, or 1.23% of total loans at September 30, 2025.
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 subsidiary, Ansay. The Centre acquisition introduced a new Trust and Wealth Management business line in the first quarter of 2026. Other sources of noninterest income include loan servicing fees and gains on sales of mortgage loans.
Noninterest income increased $4.2 million to $10.1 million for the three months ended September 30, 2026 compared to $6.0 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 as well as the introduction of the Trust and Wealth Management business line. Income provided by the Bank’s investment in Ansay totaled $0.8 million during the third quarter of 2026, down $0.6 million from the prior-year third quarter. Income provided by Trust and Wealth Management was $1.6 million during the third quarter of 2026. Assets under management of this department totaled $853.8 million as of September 30, 2026. The rising interest rate environment during 2026 resulted in a $0.9 million positive valuation adjustment to the Bank’s mortgage servicing rights during the third quarter of 2026, compared to a $0.2 million positive valuation adjustment in the prior-year third 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 $0.6 million during the third quarter of 2026, up from $0.5 million in the prior-year third quarter.
The major components of our noninterest income are listed below:
$ Change
% Change
(in thousands)
(In thousands)
Noninterest Income
1,994
(564)
237
1,592
NM
221
4,158
Noninterest Expense. Noninterest expense increased $13.6 million to $34.7 million for the three months ended September 30, 2026 compared to $21.1 million for the same period in 2025. Most categories of noninterest expense increased during the third quarter of 2026, reflecting the additional operating scale following the Centre acquisition, along with acquisition-related expenses of $2.7 million, compared with $0.9 million in the third quarter of 2025. These acquisition-related expenses were primarily incurred in the areas of personnel expense, outside service fees, 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 third quarter of 2026.
The major components of our noninterest expense are listed below:
Noninterest Expense
5,262
1,124
72
2,926
117
291
125
35
948
52
1,273
1,284
53
Total noninterest expenses
13,593
Income Tax Expense. We recorded a provision for income taxes of $6.1 million for the three months ended September 30, 2026 compared to a provision of $4.5 million for the same period during 2025, reflecting effective tax rates of 20.4% for the third quarter of 2026 compared to 19.9% during third 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.
Results of Operations for the Nine Months Ended September 30, 2026 and September 30, 2025
General. Net income increased $15.4 million to $68.5 million for the nine months ended September 30, 2026, compared to $53.1 million for the same period in 2025. This increase was primarily due to the added scale of operations resulting from the Centre acquisition during the first quarter of 2026. Additionally, the Bank’s net income continues to benefit from new and renewed loans being priced at higher yields, while deposits continue to reprice lower.
Net Interest Income. Net interest and dividend income increased by $52.0 million to $163.5 million for the nine months ended
September 30, 2026 compared to $111.5 million for nine months ended September 30, 2025. The increase in net interest income was primarily due to growth in interest earning assets over the last six months, resulting from the acquisition of Centre, as well as increasing net interest margin in the first nine months of 2026 compared to the same period in 2025. Comparing the first nine months of 2026 to the first nine months of 2025, rates earned on interest-earning assets increased by 0.04% while average interest-earning assets increased by $1.42 billion. Tax equivalent net interest margin increased 30 basis points to 4.05% for the nine months ended September 30, 2026, up from 3.75% for the same period in 2025. Bank First repaid $65.0 million in FHLB borrowings assumed from Centre prior to contractual maturity during the first quarter of 2026, triggering the recognition of $1.3 million in purchase accounting fair value adjustments, reducing interest expense and elevating net interest margin during that period. 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 $60.2 million, or 36.5%, to $225.3 million for the nine months ended September 30, 2026 compared to $165.1 million for the same period in 2025. The increase in total interest income was primarily due to the aforementioned growth in interest earnings assets over the last nine months along with an increase in the average interest rate earned on these assets.
Interest Expense. Interest expense increased $8.3 million, or 15.4%, to $61.8 million for the nine months ended September 30, 2026 compared to $53.6 million for the same period in 2025. The increase in interest expense was primarily due to elevated interest bearing liabilities from the Centre acquisition. The average balance of interest-bearing liabilities increased by $869.1 million during the first nine months of 2026 compared to the same period in 2025. Offsetting the cost of these higher levels of average interest-bearing liabilities was a decline in the average interest rate paid on these balances which declined from 2.59% for the first three quarters of 2025 to 2.27% for the first three quarters of 2026.
Interest expense on interest-bearing deposits totaled $58.9 million and $48.8 million for the nine months ended September 30, 2026 and 2025, respectively. The average cost of interest-bearing deposits was 2.24% for the nine months ended September 30, 2026, compared to 2.48% for the same period in 2025.
Provision for Credit Losses. We recorded a provision for credit losses of $0.8 million for the nine months ended September 30, 2026 compared to $1.3 million for the same period in 2025. We recorded net charge-offs of $1.4 million for the nine months ended September 30, 2026 compared to net charge-offs of $0.8 million for the same period in 2025. Provision expense was limited in the first nine months of 2026 as legacy-market loan production was offset by the planned exit of certain acquired Stateline (former Centre) loans that did not align with Bank First’s lending philosophy. The ACL - Loans was $56.8 million, or 1.24% of total loans, at September 30, 2026, compared to $44.5 million, or 1.23% of total loans at September 30, 2025.
Noninterest Income. Noninterest income is an important component of our total revenues.
Noninterest income increased $13.2 million to $30.6 million for the nine months ended September 30, 2026 compared to $17.5 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 as well as the introduction of the Trust and Wealth Management business line. Income provided by Trust and Wealth Management was $4.8 million during the first nine months of 2026. Income provided by the Bank’s investment in Ansay & Associates, LLC totaled $2.6 million through the third quarter of 2026, down $1.1 million from the first nine months of the prior year. Ansay’s 2026 profitability has been impacted by investments in automation and operational efficiency, along with industry-wide softening in insurance pricing. Positive valuation adjustments to the Bank’s MSRs totaling $1.5 million during the first three quarters of 2026 compared favorably to $0.3 million in positive valuation adjustments during the first three quarters of 2025. Net gain on sales of mortgage loans totaled $2.3 million through the first nine months of 2026, up $1.1 million from the first nine months of 2025.
Service Charges
6,722
109
(1,057)
(29)
Loan Servicing income
681
1,142
350
1,141
99
4,754
(200)
(5)
13,183
Noninterest Expense. Noninterest expense increased $45.7 million to $108.1 million for the nine months ended September 30, 2026 compared to $62.4 million for the same period in 2025. Most areas of noninterest expense increased over the past three quarters as a result of added operational scale from the acquisition of Centre. Expenses directly related to the Bank’s acquisition of Centre and Peoples totaled $12.5 million during the first nine months of 2026. These significant transaction related expenses caused large increases in salaries, data processing, supplies, and outside service fees. Amortization of the core deposit intangible asset associated with the acquisition of Centre contributed to the higher amortization expense recorded during the first nine months of 2026. As earlier 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, which was recorded in other noninterest expense.
22,461
2,806
5,317
1,097
(60)
269
3,415
3,821
101
5,867
45,689
73
Income Tax Expense. We recorded a provision for income taxes of $16.7 million for the nine months ended September 30, 2026 compared to a provision of $12.2 million for the same period during 2025, reflecting effective tax rates of 19.6% and 18.6%, respectively. 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. Additional tax-exempt income during the first nine months of 2025 resulted from death benefits on life insurance, further reducing the effective tax rate for that period.
NET INTEREST MARGIN
Net interest income represents the difference between interest earned, primarily on loans and investments, and interest paid on funding sources, primarily deposits and borrowings. Interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate paid on total interest-bearing liabilities. Net interest margin is the amount of net interest income, on a fully taxable-equivalent basis, expressed as a percentage of average interest-earning assets. The average rate earned on earning assets is the amount of annualized taxable-equivalent interest income expressed as a percentage of average earning assets. The average rate paid on interest-bearing liabilities is equal to annualized interest expense as a percentage of average interest-bearing liabilities.
The following tables set forth the distribution of our average assets, liabilities and stockholders’ equity, and average rates earned or paid on a fully taxable equivalent basis for each of the periods indicated:
Income/
Rate Earned/ Paid
Balance
Expenses (1)
(dollars in thousands)
ASSETS
Loans (2)
4,423,856
261,618
5.91
3,475,420
200,735
5.78
131,383
6,396
4.87
124,839
6,532
5.23
Taxable (available for sale)
474,326
19,800
4.17
158,821
6,747
4.25
Tax-exempt (available for sale)
32,759
1,238
3.78
31,172
1,109
3.56
Taxable (held to maturity)
118,074
4,954
4.20
106,160
4,248
Tax-exempt (held to maturity)
2.69
65
2.71
241,742
8,995
3.72
49,497
2,199
4.44
Total interest-earning assets
303,098
221,635
Non interest-earning assets
638,015
446,841
(56,055)
(44,590)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Checking accounts
638,530
14,196
2.22
424,093
9,549
2.25
Savings accounts
1,158,713
15,550
845,872
12,397
1.47
Money market accounts
936,115
20,951
2.24
660,912
16,086
2.43
Certificates of deposit
797,443
26,612
3.34
637,208
23,820
3.74
Brokered deposits
12,894
507
3.93
17,929
4.02
Total interest-bearing deposits
3,543,695
77,816
2,586,014
62,572
2.42
Other borrowed funds
95,604
4,587
4.80
123,794
5,678
4.59
Total interest-bearing liabilities
82,403
68,250
Non-interest bearing liabilities
Demand deposits
1,499,326
987,327
42,876
33,267
5,181,501
3,730,402
Shareholders’ equity
Total liabilities & shareholders’ equity
Net interest income on a fully taxable equivalent basis
220,695
153,385
Less taxable equivalent adjustment
(1,623)
(1,619)
219,072
151,766
Net interest spread (3)
3.32
3.09
Net interest margin (4)
Earned/
Paid (1)
4,410,910
260,569
3,439,635
196,628
5.72
132,368
6,562
4.96
128,311
6,744
5.26
487,227
20,397
4.19
166,060
7,203
4.34
34,185
1,267
3.71
31,569
111,632
4,602
4.12
106,856
4,266
3.99
3,973
2.64
2,662
2.70
254,274
9,406
3.70
143,057
6,340
4.43
302,908
222,377
630,723
444,452
Allowance for loan losses
(55,987)
(44,292)
629,229
15,562
2.47
464,551
11,239
1,135,306
14,730
1.30
838,609
12,226
1.46
932,624
20,148
2.16
670,599
16,302
806,319
27,675
3.43
637,211
24,726
14,367
3.95
19,365
783
4.04
3,517,845
78,682
2,630,335
65,276
2.48
120,584
4,005
139,044
6,369
4.58
82,687
71,645
1,505,345
983,350
49,400
35,768
5,193,174
3,788,497
Total liabilities & shareholders' equity
220,221
150,732
(1,667)
218,555
149,065
3.30
2.95
Rate/Volume Analysis
The following tables describe the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volumes (changes in average balance multiplied by prior year average rate) and (ii) changes attributable to changes in rate (change in average interest rate multiplied by prior year average balance), while (iii) changes attributable to the combined impact of volumes and rates have been allocated proportionately to separate volume and rate categories.
Three Months Ended September 30, 2026
Nine Months Ended September 30, 2026
Compared with
Three Months Ended September 30, 2025
Nine Months Ended September 30, 2025
Increase/(Decrease) Due to Change in
Volume
55,983
4,900
60,883
57,181
6,760
63,941
332
(468)
(136)
209
(391)
(182)
Taxable (AFS)
13,172
(119)
13,053
13,454
(260)
13,194
Tax-exempt (AFS)
71
96
143
Taxable (HTM)
493
213
706
194
Tax-exempt (HTM)
(2)
7,209
(413)
6,796
4,257
(1,191)
3,066
77,280
4,183
81,463
75,426
5,105
80,531
4,769
(122)
4,647
4,068
255
4,323
4,270
(1,117)
3,153
3,962
(1,458)
2,504
6,247
(1,382)
4,865
5,818
(1,972)
3,846
5,539
(2,747)
2,792
6,034
(3,085)
2,949
Brokered Deposits
(198)
(15)
(213)
(18)
(216)
Total interest bearing deposits
20,627
(5,383)
15,244
19,684
(6,278)
13,406
(1,343)
252
(1,091)
(770)
(1,594)
(2,364)
19,284
(5,131)
14,153
18,914
(7,872)
11,042
Change in net interest income
57,996
9,314
67,310
56,512
12,977
69,489
CHANGES IN FINANCIAL CONDITION
Total Assets. Total assets increased $1.44 billion, or 32.0%, to $5.95 billion at September 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 decreased by $31.0 million to $212.2 million at September 30, 2026, from $243.2 million at December 31, 2025.
Investment Securities. The carrying value of total investment securities increased by $320.1 million to $588.3 million at September 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 $978.8 million, totaling $4.54 billion at September 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 $1.31 billion, or 35.3%, to $5.00 billion at September 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 September 30, 2026, borrowings consisted of advances from the FHLB and junior subordinated debentures and other subordinated debt to other banks and an individual. FHLB borrowings decreased $55.0 million, or 50.0%, to $55.0 million at September 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 September 30, 2026. The Company assumed $4.6 million of subordinated debt at fair value in the Centre transaction, increasing total subordinated debt to $16.6 million at September 30, 2026, up from $12.0 million at December 31, 2025.
Stockholders’ Equity. Total stockholders’ equity increased $182.6 million, or 28.4%, to $826.4 million at September 30, 2026 from $643.8 million at December 31, 2025. Repurchases of the Company’s common stock totaling $23.9 million and dividends declared totaling $18.4 million offset the positive impact of earnings totaling $68.5 million during the first nine months of 2026. The largest contributor to the increase in stockholder’s equity during the first nine months of 2026 was the Centre acquisition, which added $168.5 million.
LOANS
Our lending activities are principally conducted in the states of Wisconsin and Illinois. The Bank makes commercial and industrial loans, commercial real estate loans, construction and development loans, residential real estate loans, and a variety of consumer loans and other loans. Much of the loans made by the Bank are secured by real estate collateral. The Bank’s commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower, with liquidation of the underlying real estate collateral typically being viewed as the primary source of repayment in the event of borrower default. Although commercial business loans are also often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment. Repayment of the Bank’s residential loans are generally dependent on the health of the employment market in the borrowers’ geographic areas and that of the general economy with liquidation of the underlying real estate collateral being typically viewed as the primary source of repayment in the event of borrower default.
Our loan portfolio is our most significant earning asset, comprising 77.3% and 80.1% of our total assets as of September 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 $991.2 million, or 27.5%, to $4.60 billion as of September 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 $1.00 billion 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.
41
The following table presents the balance and associated percentage of each major category in our loan portfolio:
% of Total
Commercial & industrial
871,273
647,086
654,452
Commercial real estate
Owner occupied
1,106,628
880,723
861,651
Non-owner occupied
694,654
492,525
510,535
477,970
402,053
372,031
Construction & development
238,135
215,518
262,439
Residential 1-4 family
1,130,864
894,979
897,518
56,810
54,826
57,371
Other loans
19,552
13,666
100
Loan categories
The principal categories of our loan portfolio are discussed below:
Commercial and Industrial (C&I). Our C&I portfolio totaled $871.3 million and $647.1 million and represented 19% and 18% of our total loans as of September 30, 2026 and December 31, 2025, respectively.
Our C&I loan customers represent various small and middle-market established businesses involved in professional services, accommodation and food services, health care, financial services, wholesale trade, manufacturing, distribution, retailing and non-profits. Most clients are privately owned with markets that range from local to national in scope. Many of the loans to this segment are secured by liens on corporate assets and the personal guarantees of the principals. The regional economic strength or weakness impacts the relative risks in this loan category. There is little concentration in any one business sector, and loan risks are generally diversified among many borrowers. We actively communicate with our C&I loan customers regarding their operations, including the impacts of recently implemented tariffs on their input costs and customer relationships. We have not noted significant pressure on our customer base from the current uncertain economic environment, but we will continue to monitor the impact of these items on our loan portfolio and its credit quality.
Commercial Real Estate (CRE). Our CRE loan portfolio totaled $2.28 billion and $1.78 billion at September 30, 2026 and December 31, 2025, respectively, and represented 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 $238.1 million and $215.5 million at September 30, 2026 and December 31, 2025, respectively, and represented 5% of our total loans as of September 30, 2026 and 6% of our total loans as of December 31, 2025.
Our C&D loans are generally for the purpose of creating value out of real estate through construction and development work, and also include loans used to purchase recreational use land. Borrowers typically provide a copy of a construction or development contract which is subject to bank acceptance prior to loan approval. Disbursements are handled by a title company. Borrowers are required to inject their own equity into the project prior to any note proceeds being disbursed. These loans are, by their nature, intended to be short term and are refinanced into other loan types at the end of the construction and development period. This short term and transitory nature causes the total balances in this loan category to increase and decrease from period-to-period.
Residential 1 – 4 Family. Residential 1 – 4 family loans held in portfolio amounted to $1.13 billion and $895.0 million at September 30, 2026 and December 31, 2025, respectively, and represented 25% of our total loans as of September 30, 2026 and December 31, 2025.
We offer fixed and adjustable-rate residential mortgage loans with maturities up to 30 years. One-to-four family residential mortgage loans are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which is generally $832,750 for one-unit properties. In addition, we also offer loans above conforming lending limits typically referred to as “jumbo” loans. These loans are typically underwritten to the same guidelines as conforming loans; however, we may choose to hold a jumbo loan within its portfolio with underwriting criteria that does not exactly match conforming guidelines.
We do not offer reverse mortgages nor do we offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on his loan, resulting in an increased principal balance during the life of the loan. We also do not offer “subprime loans” (loans that are made with low down payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (defined as loans having less than full documentation).
Residential real estate loans are originated both for sale to the secondary market as well as for retention in the Bank’s loan portfolio. The decision to sell a loan to the secondary market or retain within the portfolio is determined based on a variety of factors including but not limited to our asset/liability position, the current interest rate environment, and customer preference. Servicing rights are retained on all loans sold to the secondary market.
We were servicing mortgage loans sold to others without recourse of approximately $1.56 billion and $1.20 billion at September 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 $18.9 million at September 30, 2026 and $13.7 million December 31, 2025.
Consumer Loans. Our consumer loan portfolio totaled $56.8 million and $54.8 million at September 30, 2026 and December 31, 2025, respectively, and represented 1% of our total loans as of September 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.
Consumer loans generally have greater risk compared to longer-term loans secured by improved, owner-occupied real estate, particularly consumer loans that are secured by rapidly depreciable assets. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. As a result, consumer loan repayments are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.
Other Loans. Our other loans totaled $19.6 million and $16.9 million at September 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.
43
Loan Portfolio Maturities.
The following tables summarize the dollar amount of loans maturing in our portfolio based on their loan type, fixed or variable rate of interest, and contractual terms to maturity at September 30, 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.
One Year or
One to Five
Five to Fifteen
Over Fifteen
Less
Years
310,697
425,452
132,219
2,905
Owner Occupied
155,672
588,418
288,939
73,599
Non-owner Occupied
131,626
480,388
81,554
1,086
22,740
323,454
131,294
Construction & Development
67,252
51,490
50,665
68,728
43,824
114,507
234,175
738,358
Consumer and other
10,267
34,149
25,292
6,654
76,362
742,078
2,017,858
944,138
891,812
Fixed Rate Loans:
36,919
316,702
45,836
399,457
110,820
466,898
117,877
18,443
714,038
114,884
396,287
17,030
528,201
22,733
250,812
85,624
359,169
33,238
24,407
11,458
35,693
104,796
23,042
92,790
175,330
285,194
576,356
8,152
31,650
24,132
70,588
349,788
1,579,546
477,287
345,984
2,752,605
Floating Rate Loans:
273,778
108,750
86,383
471,816
44,852
121,520
171,062
55,156
392,590
16,742
84,101
64,524
166,453
72,642
45,670
118,801
34,014
27,083
39,207
33,035
133,339
20,782
21,717
58,845
453,164
554,508
2,115
2,499
1,160
5,774
392,290
438,312
466,851
545,828
1,843,281
NONPERFORMING ASSETS
In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. We generally do not forgive principal or interest on loans or modify the interest rates on loans to rates that are below market rates. Furthermore, we are committed to collecting on all of our loans and, as a result, at times have lower net charge-offs compared to many of our peer banks. We believe that our commitment to collecting on all of our loans results in higher loan recoveries.
44
Our nonperforming assets consist of nonperforming loans and foreclosed real estate. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. The composition of our nonperforming assets is as follows:
As of September 30,
As of December 31,
Nonperforming loans
Nonaccrual loans
5,393
3,579
1,348
705
Total nonaccrual loans
10,371
Loans past due > 90 days, but still accruing
2,785
633
Total loans past due > 90 days, but still accruing
3,492
Total nonperforming loans
27,192
9,048
13,863
Commercial real estate owned
Residential real estate owned
Acquired bank property real estate owned
Total OREO
Total nonperforming assets ("NPAs")
29,612
Accruing modified loans to borrowers experiencing financial difficulty
2,148
239
448
Ratios
Nonaccrual loans to total loans
0.54
0.16
0.29
NPAs to total loans plus OREO
0.64
NPAs to total assets
ACL - Loans to nonaccrual loans
230
764
429
ACL - Loans to total loans
Nonaccrual Loans
Loans are typically placed on nonaccrual status when any payment of principal and/or interest is 90 days or more past due, unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. Loans are also placed on nonaccrual status when management believes, after considering economic and business conditions, that the principal or interest will not be collectible in the normal course of business. We monitor closely the performance of our loan portfolio. In addition to the monitoring and review of loan performance internally, we have also contracted with an independent organization to review our commercial and retail loan portfolios. The status of delinquent loans, as well as situations identified as potential problems, are reviewed on a regular basis by senior management. The increase in nonaccrual loans through the first nine months of 2026 was primarily due to relationships acquired during the Centre acquisition.
ALLOWANCE FOR CREDIT LOSSES - LOANS
The Company assesses the adequacy of its ACL - Loans at the end of each calendar quarter. The level of ACL - Loans is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL - Loans is increased by a provision for credit losses, which is charged to expense, when the analysis shows that an increase is warranted. The ACL – Loans is reduced by charge-offs, net of recoveries, when they occur. The ACL is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.
For further details on the Company’s ACL – Loans, refer to the footnotes along with the consolidated financial statements elsewhere in this report.
At September 30, 2026, the ACL - Loans was $56.8 million (representing 1.24% of period end loans). The Bank recorded a provision for credit losses of $0.8 million and transferred $0.3 million from unfunded commitments during the third quarter of 2026. In addition, the ACL - Loans increased due to the acquisition of Centre, which required a $7.8 million allowance for credit losses on non-PCD loans and a $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 $1.4 million during the first nine months of 2026.
The following table summarizes the changes in our ACL - Loans for the periods indicated:
Nine months ended
Year ended
Balance of ACL - Loans at the beginning of period
Net loans charged-off (recovered):
873
214
771
(76)
(35)
Other Loans
301
Total net loans charged-off (recovered)
1,422
977
850
Provision charged to operating expense
Transfer from (to) ACL - Unfunded Commitments
300
(50)
Balance of ACL - Loans at end of period
Ratio of net charge-offs (recoveries) to average loans by loan composition
0.10
0.08
(0.01)
0.13
0.06
0.30
0.22
Total net charge-offs (recoveries) to average loans
46
The following table summarizes an allocation of the ACL - Loans and the related percentage of loans outstanding in each category for the periods below.
% of
(in thousands, except %)
Loan Type:
Total allowance
SOURCES OF FUNDS
General. Deposits have traditionally been our primary source of funds for our investment and lending activities. We also borrow from the FHLB of Chicago to supplement cash needs, to lengthen the maturities of liabilities for interest rate risk management purposes and to manage our cost of funds. Our additional sources of funds are scheduled payments and prepayments of principal and interest on loans and investment securities and fee income and proceeds from the sales of loans and securities.
Deposits. Our current deposit products include non-interest bearing and interest-bearing checking accounts, savings accounts, money market accounts, and certificate of deposits. As of September 30, 2026, deposit liabilities accounted for approximately 84.1% of our total liabilities and equity. We accept deposits primarily from customers in the communities in which our branches and offices are located, as well as from small businesses and other customers throughout our lending area. We rely on our competitive pricing and products, quality customer service, and convenient locations and hours to attract and retain deposits. Deposit rates and terms are based primarily on current business strategies, market interest rates, liquidity requirements and our deposit growth goals.
Total deposits were $5.00 billion and $3.70 billion as of September 30, 2026 and December 31, 2025, respectively. Noninterest-bearing deposits at September 30, 2026 and December 31, 2025, were $1.48 billion and $1.00 billion, respectively, while interest-bearing deposits were $3.52 billion and $2.69 billion at September 30, 2026 and December 31, 2025, respectively.
At September 30, 2026, we had a total of $805.4 million in certificates of deposit, including $10.1 million of brokered deposits. Based on historical experience and our current pricing strategy, we believe we will retain a majority of the 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 tables set forth the average balances of our deposits for the periods indicated:
Percent
Noninterest-bearing demand deposits
29.9
991,160
27.5
27.2
Interest-bearing checking deposits
12.5
451,898
12.9
Savings deposits
22.6
841,486
23.3
23.2
18.6
668,106
18.5
16.1
640,004
17.7
17.6
0.3
18,292
0.5
3,610,946
The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of September 30, 2026:
Time Deposits over FDIC
Portion of Time Deposits in
Insurance Limits
Excess of FDIC Insurance Limits
3 months or less remaining
82,022
45,522
Over 3 to 6 months remaining
43,546
20,796
Over 6 to 12 months remaining
42,997
21,997
Over 12 months or more remaining
33,292
12,542
201,857
100,857
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 $55.0 million and $110.0 million of advances outstanding from the FHLB at September 30, 2026 and December 31, 2025, respectively.
The total loans pledged as collateral were $1.37 billion and $1.10 billion at September 30, 2026 and December 31, 2025. There were $21.2 million letters of credit from the FHLB at September 30, 2026 compared to no letters of credit at December 31, 2025.
The following table summarizes borrowings from the FHLB, and the weighted average interest rates paid:
Average daily amount of borrowings outstanding during the period
96,364
128,275
127,044
Weighted average interest rate on average daily borrowing
2.50
4.45
4.48
Maximum outstanding borrowings at any month-end
109,983
209,941
Borrowing outstanding at period end
Weighted average interest rate on borrowing at period end
4.26
4.21
4.23
Lines of credit and other borrowings.
During July 2020, the Company entered into subordinated note agreements with two separate commercial banks. As of September 30, 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 September 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.
INVESTMENT SECURITIES
Our securities portfolio consists of securities available for sale and securities held to maturity. Securities are classified as held to maturity or available for sale at the time of purchase. Obligations of states and political subdivisions, obligations of U.S. government sponsored agencies, and mortgage-backed securities, all of which are issued by U.S. government agencies or U.S. government-sponsored enterprises, along with U.S. Treasuries make up the largest components of the securities portfolio. We manage our investment portfolio to provide an adequate level of liquidity as well as to maintain neutral interest rate-sensitive positions, while earning an adequate level of investment income without taking undue or excessive risk.
Securities available for sale consist of U.S. 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 $455.4 million and included negligible gross unrealized gains and gross unrealized losses of $25.4 million at September 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 $132.9 million at September 30, 2026 and $103.7 million at December 31, 2025.
The Company had negligible recognized net losses on sales of securities during the nine months ended September 30, 2026. The Company did not have any sales of securities during the nine months ended September 30, 2025.
The following tables set forth the composition and maturities of investment securities as of September 30, 2026 and December 31, 2025. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
After One, But
After Five, But
Within One Year
Within Five Years
Within Ten Years
After Ten Years
At September 30, 2026
Yield (1)
Available for sale securities
9,785
3.5
76,288
3.6
14,723
4.4
3.7
9,960
97,050
30,428
5,580
2.2
3,489
4.1
25,541
4.0
30,835
3.2
21,253
8,528
4.3
57,653
8,020
65,988
3.9
7,000
6.7
2,427
5,731
9.4
7.2
32,262
3.8
263,532
86,433
98,552
Held to maturity securities
14,321
36,989
4.2
833
2.7
2,776
0.9
1.3
47,416
303,297
164,406
613,671
49
At December 31, 2025
3.3
11,942
1.9
9,628
2.1
830
15,507
23,375
3.0
21,799
2.9
6,200
4.5
49,166
6,490
9,528
8.7
9,593
1,082
9.7
5.4
7,030
71,329
51,400
42,037
3.1
21,767
32,763
46,801
691
2.6
1,704
2.8
22,458
34,467
29,488
105,796
98,201
275,522
Weighted Average Yield is shown on a fully taxable equivalent basis using a federal tax rate of 21% and includes the amortization of premiums and discounts.
As of September 30, 2026 and December 31, 2025, no allowance for credit losses on securities AFS was recognized. The Company does not consider its securities AFS with unrealized losses to be attributable to credit-related factors, as the unrealized losses in each category have occurred as a result of changes in noncredit-related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration. Furthermore, as of September 30, 2026, the Company did not have the intent to sell any of these securities AFS and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost.
The Company does not believe there are any expected credit losses in its HTM securities portfolio at September 30, 2026 or December 31, 2025. All U.S. Treasury securities have the full faith and credit backing of the United States government.
As of September 30, 2026, 268 debt securities had gross unrealized losses, with an aggregate depreciation of 4.9% from our amortized cost basis. The largest unrealized loss percentage of any single security was 29.0% (or $0.6 million) of its amortized cost. The largest unrealized dollar loss of any security was $0.9 million (or 4.4%).
As of December 31, 2025, 180 debt securities had gross unrealized losses, with an aggregate depreciation of 2.2% from our amortized cost basis. The largest unrealized loss percentage of any single security was 19.1% (or $0.4 million) of its amortized cost. The largest unrealized dollar loss of any single security was $0.6 million (or 11.0%).
The unrealized losses on these debt securities arose primarily due to changing interest rates and are considered to be temporary.
LIQUIDITY AND CAPITAL RESOURCES
Impact of Inflation and Changing Prices. Our consolidated financial statements and related notes have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on our performance than they would on industrial companies.
Liquidity. Liquidity is defined as the Company’s ability to generate adequate cash to meet its needs for day-to-day operations and material long and short-term commitments. Liquidity is the risk of potential loss if we were unable to meet our funding requirements at a reasonable cost. We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of customers who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our asset and liability management policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain our operations.
We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity based on demand and specific events and uncertainties to meet current and future financial obligations of a short-term nature. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits. Our objective in managing liquidity is to respond to the needs of depositors and borrowers as well as to increase earnings enhancement opportunities in a changing marketplace.
Our liquidity is maintained through our investment portfolio, deposits, borrowings from the FHLB, and lines available from correspondent banks. Our highest priority is placed on growing noninterest bearing deposits through strong community involvement in the markets that we serve. Borrowings and brokered deposits are considered short-term supplements to our overall liquidity but are not intended to be relied upon for long-term needs. We believe that our present position is adequate to meet our current and future liquidity needs, and management knows of no trend or event that will have a material impact on the Company’s ability to maintain liquidity at satisfactory levels.
Capital Adequacy. Total stockholders’ equity was $826.4 million at September 30, 2026 compared to $643.8 million at December 31, 2025.
Our capital management consists of providing adequate equity to support our current and future operations. The Bank is subject to various regulatory capital requirements administered by state and federal banking agencies, including the Federal Reserve and the OCC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measure of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and the classifications are also subject to qualitative judgment by the regulator in regard to components, risk weighting and other factors.
The Bank is subject to the following risk-based capital ratios: a common equity Tier 1 (“CET1”) risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock, retained earnings, and certain qualifying minority interests, less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, tier 1 minority interests and grandfathered trust preferred securities. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt, other preferred stock and certain hybrid capital instruments, and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities and equity holdings.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average assets net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all banks is 4%.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. For example, only a well-capitalized depository institution may accept brokered deposits without prior regulatory approval. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements. FDICIA establishes five regulatory capital tiers: “well capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized”, and “critically undercapitalized”. A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. The FDICIA imposes progressively more restrictive restraints on operations, management and capital distributions, depending on the category in which an institution is classified. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations and are required to submit capital restoration plans for regulatory approval. A depository institution’s holding company must guarantee any required capital restoration plan, up to an amount equal to the lesser of 5 percent of the depository institution’s assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. All of the federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels for federally insured depository institutions. The Bank was well capitalized at September 30, 2026, and brokered deposits are not restricted.
To be well-capitalized, the Bank must maintain at least a 6.5% CET1 to risk-weighted assets ratio, an 8.0% Tier 1 capital to risk-weighted assets ratio, a 10.0% Total capital to risk-weighted assets ratio, and a 5.0% leverage ratio.
The Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the then-applicable capital conservation buffer. Based on current estimates, we believe that the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2026.
As a result of the Economic Growth Act, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s Tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under prompt corrective action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluation whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies set the minimum capital for the new Community Bank Leverage Ratio at 9%. The Bank does not intend to opt into the Community Bank Leverage Ratio Framework.
On December 21, 2018, federal banking agencies issued a joint final rule to revise their regulatory capital rules to (i) address the upcoming implementation of CECL accounting standard under GAAP; (ii) provide an optional three-year phase-in period for the day-one adverse regulatory capital effects that banking organizations are expected to experience upon adopting CECL; and (iii) require the use of CECL in stress tests beginning with the 2020 capital planning and stress testing cycle for certain banking organizations. For more information regarding Accounting Standards Update No. 2016-13, which introduced CECL as the methodology to replace the current “incurred loss” methodology for financial assets measured at amortized cost, and changed the approaches for recognizing and recording credit losses on available-for-sale debt securities and purchased credit impaired financial assets, including the required implementation date for the Company, see the Company’s Annual Report.
Federal banking regulators have issued risk-based capital guidelines, which assign risk factors to asset categories and off-balance-sheet items. The following table reflects capital ratios computed utilizing the implemented Basel III regulatory capital framework discussed above:
Minimum Capital Required
Minimum To Be Well-
for Capital Adequacy Plus
Capitalized Under prompt
Required for Capital
Capital Conservation Buffer
corrective Action
Adequacy
Basel III Phase-In Schedule
Provisions
Bank First Corporation:
Total capital (to risk-weighted assets)
13.1
8.0
10.5
N/A
Tier I capital (to risk-weighted assets)
11.6
6.0
8.5
Common equity tier I capital (to risk-weighted assets)
11.5
7.0
Tier I capital (to average assets)
10.0
Bank First, N.A:
12.1
11.0
6.5
9.3
5.0
13.8
12.3
10.9
11.2
9.9
As previously mentioned, the Company carried subordinated debt totaling $16.6 million as of September 30, 2026, and $12.0 million as of December 31, 2025, which qualifies as Tier II capital. These amounts are included in total capital for the Company in the tables above.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
We are party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments primarily include commitments to originate and sell loans, standby and direct pay letters of credit, unused lines of credit and unadvanced portions of construction and development loans. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in these particular classes of financial instruments.
Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments, standby and direct pay letters of credit and unadvanced portions of construction and development loans is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
Off-Balance Sheet Arrangements. Our significant off-balance-sheet arrangements consist of the following:
Off-balance sheet arrangement means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the registrant is a party, under which the registrant has (1) any obligation under a guarantee contract, (2) retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement, (3) any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument, or (4) any obligation, including a contingent obligation, arising out of a variable interest.
Loan commitments are made to accommodate the financial needs of our customers. Standby and direct pay letters of credit commit us to make payments on behalf of customers when certain specified future events occur. Both arrangements have credit risk essentially the same as that involved in extending loans to clients and are subject to our normal credit policies. Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management’s credit assessment of the customer.
Loan commitments and standby and direct pay letters of credit do not necessarily represent our future cash requirements because while the borrower has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon. Our off-balance sheet arrangements as of September 30, 2026, were as follows:
Amounts of Commitments Expiring - By Period as of September 30, 2026
Less Than One
One to Three
Three to Five
Other Commitments
Year
After Five Years
Unused lines of credit
1,035,617
528,648
149,391
63,209
294,369
Standby and direct pay letters of credit
10,179
947
3,319
Total commitments
1,077,037
538,827
150,338
66,528
321,344
54
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in its lending, investment and deposit-taking activities. To that end, management actively monitors and manages its interest rate risk exposure.
Our profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. We monitor the impact of changes in interest rates on its net interest income using several tools.
Our primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on our net interest income and capital, while configuring our asset-liability structure to obtain the maximum yield-cost spread on that structure. We rely primarily on our asset-liability structure to control interest rate risk.
Interest Rate Sensitivity. Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay home mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries (basis risk).
An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.
The Company actively manages its interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income to risks associated with interest rate movements and to achieve sustainable growth in net interest income. The Company’s ALCO, using policies and procedures approved by the Company’s board of directors, is responsible for the management of the Company’s interest rate sensitivity position. The Company manages interest rate sensitivity by changing the mix, pricing and re-pricing characteristics of its assets and liabilities, through the management of its investment portfolio, its offerings of loan and selected deposit terms and through wholesale funding. Wholesale funding consists of, but is not limited to, multiple sources including borrowings with the FHLB of Chicago, the Federal Reserve Bank of Chicago’s discount window and certificates of deposit from institutional brokers.
The Company uses several tools to manage its interest rate risk including interest rate sensitivity analysis, or gap analysis, market value of portfolio equity analysis, interest rate simulations under various rate scenarios and net interest margin reports. The results of these reports are compared to limits established by the Company’s ALCO policies and appropriate adjustments are made if the results are outside the established limits.
There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic/political/regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, etc.; and, can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Company’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Company’s overall asset/liability management process is to facilitate meaningful strategy development and implementation.
Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios; the collective impact of which will enable the Company to clearly understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.
The following tables demonstrate the annualized result of an interest rate simulation and the estimated effect that gradual, parallel shifts in market rates (equal to the change in prime rates) and subjective adjustments in deposit pricing might have on the Company’s projected net interest income over the next 12 months.
This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months. The changes to net interest income shown below are in compliance with the Company’s policy guidelines.
As of September 30, 2026:
Change in Interest Rates
Percentage Change in
(in Basis Points)
Net Interest Income
+300
(2.5)%
+200
(1.6)%
+100
(0.8)%
-100
0.4%
-200
0.1%
-300
As of December 31, 2025:
(2.4)%
(0.9)%
(0.6)%
(1.1)%
Economic Value of Equity Analysis. We also analyze the sensitivity of the Company’s financial condition to changes in interest rates through our economic value of equity model. This analysis measures the difference between estimated changes in the present value of the Company’s assets and estimated changes in the present value of the Company’s liabilities assuming various changes in current interest rates. The Company’s economic value of equity analysis as of September 30, 2026 estimated that, in the event of an instantaneous 200 basis point increase in interest rates, the Company would experience a 0.79% increase in the economic value of equity. At the same date, our analysis estimated that, in the event of an instantaneous 100 basis point decrease in interest rates, the Company would experience a 1.67% decrease in the economic value of equity. The estimates of changes in the economic value of our equity require us to make certain assumptions including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain and, as a result, we cannot precisely predict the impact of changes in interest rates on the economic value of our equity. Although our economic value of equity analysis provides an indication of our interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on the economic value of our equity and will differ from actual results.
56
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), undertook an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report, and, based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report, in recording, processing, summarizing and reporting in a timely manner the information that the Company is required to disclose in its reports under the Exchange Act and in accumulating and communicating to the Company’s management, including the Company’s CEO and CFO, such information as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
No changes were made to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2026, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to various litigation in the normal course of business. Management, after consulting with our legal counsel, believes that any liability resulting from litigation will not have a material effect on our financial position, results of operations or liquidity.
ITEM 1A. RISK FACTORS
Additional information regarding risk factors appears in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements” of this Form 10-Q and in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes during the quarterly period ended September 30, 2026 to the risk factors previously disclosed in the Company’s Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On April 21, 2026, the Company renewed its share repurchase program, pursuant to which the Company may repurchase up to $60 million of its common stock per year, par value $0.01 per share, for a period of two (2) years, ending on April 20, 2028. The program was announced in a Current Report on Form 8-K on April 22, 2026. The table below sets forth information regarding repurchases of our common stock during the third quarter of 2026 under that program as well as pursuant to the 2020 Equity Plan and other repurchases.
Total Number
Maximum Number
of Shares Repurchased as
of Shares
Part of
that May Yet Be
Total Number of Shares
Average Price Paid per
Publicly Announced
Purchased Under the
Repurchased
Share(1)
Plans or Programs
Plans or Programs(2)
July 2026
371,322
August 2026
151.88
370,499
September 2026
1,848
155.57
368,651
2,671
153.73
The average price paid per share is calculated on a trade date basis for all open market transactions and excludes commissions and other transaction expenses.
Based on the closing per share price as of September 30, 2026 ($148.81).
The Inflation Reduction Act of 2022 (“IRA”) created a new nondeductible 1% excise tax on repurchases of corporate stock by certain publicly traded corporations or their specified affiliates after December 31, 2022. The tax is imposed on the fair value of the stock of a covered corporation that is repurchased in a given year, less the fair market value of any stock issued in that year. The Company falls under the definition of a “covered corporation”. The excise tax applies to all of the stock of a covered corporation regardless of whether the corporation has profits or losses. The impact of the IRA on our consolidated financial statements will be dependent on the extent of stock repurchases made in current and future periods.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
For the quarter ended September 30, 2026, there were no trading arrangements for the sale or purchases of Company securities adopted, terminated or for which the amount, pricing or timing provisions were modified by our directors and officers that was either (1) a contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a “Rule 10b5-1 trading arrangement”) or (2) a “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).
ITEM 6. EXHIBITS
Exhibit Index
Exhibit Number
Description
Agreement and Plan of Merger, dated May 19, 2026, by and between Bank First Corporation and PSB Holdings, Inc. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 19, 2026 and incorporated herein by reference).
10.1
Side Letter Agreement, dated May 19, 2026, by and between Bank First Corporation and PSB Holdings, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 19, 2026 and incorporated herein by reference).
10.2
Change in Control Agreement, dated September 15, 2026 by and between Bank First Corporation and Meghann O. Kasper*
31.1
Rule 13a-14(a) Certification of Chief Executive Officer*
31.2
Rules 13a-14(a) Certification of Chief Financial Officer*
32.1
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer**
101 INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)
*Filed herewith.
**Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE:
November 6, 2026
BY:
/s/Kevin M. LeMahieu
Kevin M. LeMahieu
Chief Financial Officer
(Principal Financial and Accounting Officer)