Cover - USD ($) $ in Millions	12 Months Ended
Cover - USD ($) $ in Millions	Dec. 31, 2023	Feb. 26, 2024	Jun. 30, 2023
Cover [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2023
Document Transition Report	false
Entity File Number	001-34095
Entity Registrant Name	FIRST BUSINESS FINANCIAL SERVICES, INC.
Entity Central Index Key	0001521951
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Incorporation, State or Country Code	WI
Entity Tax Identification Number	39-1576570
Entity Address, Address Line One	401 Charmany Drive
Entity Address, City or Town	Madison
Entity Address, State or Province	WI
Entity Address, Postal Zip Code	53719
City Area Code	608
Local Phone Number	238-8008
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	FBIZ
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Entity Shell Company	false
Entity Public Float			$ 245.2
Entity Common Stock, Shares Outstanding		8,306,543
Documents Incorporated by Reference
Document Financial Statement Error Correction [Flag]	false

Audit Information	12 Months Ended
Audit Information	Dec. 31, 2023
Auditor Information [Abstract]
Auditor Name	Crowe LLP
Auditor Location	Oak Brook, Illinois
Auditor Firm ID	173

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Assets
Cash and due from banks	$ 32,348	$ 25,811
Short-term investments	107,162	76,871
Cash and cash equivalents	139,510	102,682
Securities available-for-sale, at fair value	297,006	212,024
Securities held-to-maturity, at amortized cost	8,503	12,635
Loans held for sale	4,589	2,632
Loans and leases receivable, net of allowance for credit losses of $31,275 and $24,230, respectively	2,818,986	2,418,836
Premises and equipment, net	6,190	4,340
Repossessed assets	247	95
Right-of-use assets, net	6,559	7,690
Bank-owned life insurance	55,536	54,018
Federal Home Loan Bank stock, at cost	12,042	17,812
Goodwill and other intangible assets	12,023	12,159
Derivative Asset	55,597	68,581
Accrued interest receivable and other assets	91,058	63,107
Total assets	3,507,846	2,976,611
Liabilities and Stockholders’ Equity
Deposits	2,796,779	2,168,206
Federal Home Loan Bank advances and other borrowings	330,916	456,808
Lease liabilities	8,954	10,175
Derivatives	51,949	61,419
Accrued interest payable and other liabilities	29,660	19,363
Total liabilities	3,218,258	2,715,971
Stockholders’ equity:
Preferred stock, $0.01 par value, 2,500,000 shares authorized, 12,500 shares of 7% non-cumulative perpetual preferred stock, Series A, outstanding at December 31, 2023 and 2022, respectively	11,992	11,992
Common stock, $0.01 par value, 25,000,000 shares authorized, 9,418,463 and 9,371,078 shares issued, 8,314,778 and 8,362,085 shares outstanding at December 31, 2023 and 2022, respectively	95	94
Additional paid-in capital	90,616	87,512
Retained earnings	230,728	203,507
Accumulated other comprehensive loss	(13,717)	(15,310)
Treasury stock, 1,103,685 and 1,008,993 shares at December 31, 2023 and 2022, respectively, at cost	(30,126)	(27,155)
Total stockholders’ equity	289,588	260,640
Total liabilities and stockholders’ equity	$ 3,507,846	$ 2,976,611

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2023
Statement of Financial Position [Abstract]
Allowance for loan and lease losses	$ 24,230	$ 31,275
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	2,500,000	2,500,000
Preferred Stock, Shares Issued	12,500	12,500
Preferred Stock, Shares Outstanding	12,500	12,500
Preferred Stock, Dividend Rate, Percentage	7.00%
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	25,000,000	25,000,000
Common Stock, Shares, Issued	9,371,078	9,418,463
Common Stock, Shares, Outstanding	8,362,085	8,314,778
Treasury Stock, Common, Shares	1,008,993	1,103,685

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
Consolidated Statements of Income - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Interest income
Loans and leases	$ 182,650	$ 115,368	$ 91,844
Interest and Dividend Income, Securities, Operating	8,203	4,472	3,410
Short-term investments	4,075	1,531	741
Total interest income	194,928	121,371	95,995
Interest expense
Deposits	71,418	13,178	3,553
Federal Home Loan Bank advances and other borrowings	10,922	9,267	6,667
Junior subordinated notes	0	504	1,113
Total interest expense	82,340	22,949	11,333
Net interest income	112,588	98,422	84,662
Provision for credit losses	8,182	(3,868)	(5,803)
Net interest income after provision for credit losses	104,406	102,290	90,465
Non-interest income
Private wealth management service fees	11,425	10,881	10,784
Gain on sale of Small Business Administration loans	2,055	2,537	4,044
Service charges on deposits	3,131	3,849	3,837
Loan fees	3,363	3,010	2,506
Increase in cash surrender value of bank-owned life insurance	1,494	2,227	1,413
Net (loss) gain on sale of securities	(45)	0	29
Swap fees	2,964	1,793	1,368
Other non-interest income	6,921	5,131	4,119
Total non-interest income	31,308	29,428	28,100
Non-interest expense
Compensation	61,059	57,742	51,710
Occupancy	2,381	2,358	2,180
Professional fees	5,325	4,881	3,736
Data processing	3,826	3,197	3,087
Marketing	2,889	2,354	2,022
Equipment	1,340	1,091	990
Computer software	4,985	4,416	4,260
FDIC insurance	2,238	1,042	1,143
Other non-interest expense	4,532	2,393	2,407
Total non-interest expense	88,575	79,474	71,535
Income before income tax expense	47,139	52,244	47,030
Income tax expense	10,112	11,386	11,275
Net income	37,027	40,858	35,755
Preferred Stock Dividends and Other Adjustments	875	683	0
Net Income (Loss) Available to Common Stockholders, Basic	$ 36,152	$ 40,175	$ 35,755
Earnings per common share:
Basic	$ 4.33	$ 4.75	$ 4.17
Diluted	4.33	4.75	4.17
Dividends declared per share	$ 0.91	$ 0.79	$ 0.72

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Statement of Comprehensive Income [Abstract]
Net income	$ 37,027	$ 40,858	$ 35,755
Other comprehensive income (loss)
Unrealized securities gains (losses) arising during the period	5,606	(27,730)	(4,312)
Reclassification adjustment for net losses (gains) realized in net income	45	0	(29)
Amortization of net unrealized losses transferred from available-for-sale	4	14	26
Unrealized losses on interest rate swaps arising during the period	(3,514)	9,102	3,610
Income tax (expense) benefit	548	(4,761)	(181)
Total other comprehensive gain (loss)	1,593	(13,853)	(524)
Comprehensive income	$ 38,620	$ 27,005	$ 35,231

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Cumulative Effect, Period of Adoption, Adjusted Balance	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Retained Earnings Cumulative Effect, Period of Adoption, Adjustment	Retained Earnings Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive Loss	Treasury Stock
Common Stock, Shares, Outstanding					8,566,960
Beginning balance at Dec. 31, 2020	$ 206,162			$ 0	$ 92	$ 83,125	$ 140,431			$ (933)	$ (16,553)
Net income	35,755						35,755
Other comprehensive loss	(524)									(524)
Share-based compensation - restricted shares, shares					85,370
Share-based compensation - restricted shares and employee stock purchase plan	2,513				$ 1	2,512
Stock Issued During Period, Shares, Employee Stock Purchase Plans					6,531
APIC, Share-based Payment Arrangement, ESPP, Increase for Cost Recognition	160					160
Dividends, Preferred Stock, Cash	0
Cash dividends ($0.72 per share during 2021, $0.79 per share during 2022, $0.91 per share during 2023)	(6,166)						(6,166)
Treasury stock purchased, shares					(201,297)
Treasury stock purchased	(5,478)										(5,478)
Ending balance at Dec. 31, 2021	$ 232,422			0	$ 93	85,797	170,020			(1,457)	(22,031)
Dividends declared per share	$ 0.72
Common Stock, Shares, Outstanding					8,457,564
Net income	$ 40,858						40,858
Other comprehensive loss	(13,853)									(13,853)
Stock Issued During Period, Value, New Issues	11,992			11,992
Share-based compensation - restricted shares, shares					75,564
Share-based compensation - restricted shares and employee stock purchase plan	2,584				$ 1	2,583
Stock Issued During Period, Shares, Employee Stock Purchase Plans					4,535
APIC, Share-based Payment Arrangement, ESPP, Increase for Cost Recognition	134					134
Stock Issued During Period, Value, Treasury Stock Reissued	0					(1,002)					1,002
Dividends, Preferred Stock, Cash	(683)						683
Cash dividends ($0.72 per share during 2021, $0.79 per share during 2022, $0.91 per share during 2023)	(6,688)						(6,688)
Treasury stock purchased, shares					(175,578)
Treasury stock purchased	(6,126)										(6,126)
Ending balance at Dec. 31, 2022	$ 260,640	$ 1,353	$ 259,287	11,992	$ 94	87,512	$ 203,507	$ (1,353)	$ 202,154	(15,310)	(27,155)
Dividends declared per share	$ 0.79						$ 0.79
Common Stock, Shares, Outstanding	8,362,085				8,362,085
Net income	$ 37,027						$ 37,027
Other comprehensive loss	1,593									1,593
Share-based compensation - restricted shares, shares					43,057
Share-based compensation - restricted shares and employee stock purchase plan	$ 2,977				$ 1	2,976
Stock Issued During Period, Shares, Employee Stock Purchase Plans	4,328				4,328
APIC, Share-based Payment Arrangement, ESPP, Increase for Cost Recognition	$ 128					128
Dividends, Preferred Stock, Cash	(875)						(875)
Cash dividends ($0.72 per share during 2021, $0.79 per share during 2022, $0.91 per share during 2023)	(7,578)						(7,578)
Treasury stock purchased, shares					(94,692)
Treasury stock purchased	(2,971)										2,971
Ending balance at Dec. 31, 2023	$ 289,588			$ 11,992	$ 95	$ 90,616	$ 230,728			$ (13,717)	$ (30,126)
Dividends declared per share	$ 0.91						$ 0.91
Common Stock, Shares, Outstanding	8,314,778				8,314,778

Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended								12 Months Ended
	Dec. 31, 2023	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Common Stock, Dividends, Per Share, Declared	$ 0.2275	$ 0.2275	$ 0.2275	$ 0.2275	$ 0.1975	$ 0.1975	$ 0.1975	$ 0.1975	$ 0.91	$ 0.79	$ 0.72
Retained Earnings
Common Stock, Dividends, Per Share, Declared									$ 0.91	$ 0.79

Consolidated Statements of Cash Flows $ in Thousands	12 Months Ended
Consolidated Statements of Cash Flows $ in Thousands	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Operating activities
Net income	$ 37,027	$ 40,858	$ 35,755
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes, net	2,120	(775)	1,223
Impairment of Tax Credit Investments	0	(351)	0
Provision for credit losses	8,182	(3,868)	(5,803)
Depreciation, amortization and accretion, net	3,636	4,066	3,554
Share-based compensation	2,977	2,584	2,513
Net loss on disposal of fixed assets	73	0	78
Amortization of tax credit investments	4,053	1,035	0
Bank-owned life insurance policy income	(1,494)	(2,227)	(1,413)
Origination of loans held-for-sale	(149,669)	(124,915)	(99,266)
Sale of loans originated for sale	149,767	128,391	108,435
Gain on sale of loans originated for sale	(2,055)	(2,537)	(4,044)
Net loss (gain) on repossessed assets	13	(429)	15
Return on investment in limited partnerships	4,922	721	371
Excess tax benefit from share-based compensation	194	264	48
Net payments on operating lease liabilities	(1,425)	(1,470)	(1,431)
Net increase in accrued interest receivable and other assets	(21,497)	(7,728)	(6,774)
Net increase in accrued interest payable and other liabilities	15,468	5,026	2,731
Net cash provided by operating activities	52,292	38,645	35,992
Investing activities
Proceeds from maturities, redemptions and paydowns of available-for-sale securities	22,114	40,835	51,166
Proceeds from maturities, redemptions and paydowns of held-to-maturity securities	4,115	7,080	6,586
Proceeds from sale of available-for-sale securities	5,085	0	14,955
Purchases of available-for-sale securities	(106,967)	(75,740)	(93,019)
Proceeds from sale of repossessed assets	25	71	0
Net increase in loans and leases	(408,618)	(199,467)	(86,660)
Investments in limited partnerships	(1,413)	(1,508)	(1,059)
Returns of investments in limited partnerships	7	17	32
Investment in tax credit investments	(24,160)	(11,454)	(2,964)
Distribution from tax credit investments	101	474	57
Investment in Federal Home Loan Bank and Federal Reserve Bank Stock	(32,069)	(45,660)	(7,439)
Proceeds from the sale of Federal Home Loan Bank Stock	37,839	41,184	7,680
Purchases of leasehold improvements and equipment, net	(2,884)	(3,223)	(391)
Proceeds from sale of leasehold improvements and equipment, net	0	0	44
Premium payment on bank owned life insurance policies	(24)	(50)	0
Proceeds from Life Insurance Policy	0	1,859	0
Proceeds from redemption of Trust II stock	0	315	0
Net cash used in investing activities	(506,849)	(245,267)	(111,012)
Financing activities
Net increase in deposits	628,573	210,283	102,407
Repayment of Federal Home Loan Bank advances	(1,698,730)	(2,374,849)	(814,000)
Proceeds from Federal Home Loan Bank advances	1,563,851	2,422,429	788,300
Proceeds from issuance of subordinated notes payable	15,000	20,000	0
Repayment of subordinated notes payable	0	(9,090)	0
Repayment of junior subordinated debt	0	(10,076)	0
Net (decrease) increase in long-term borrowed funds	(6,013)	(5,132)	9,998
Cash dividends paid	(7,578)	(6,688)	(6,166)
Preferred stock dividends paid	(875)	(683)	0
Proceeds from issuance of common stock under the Employee Stock Purchase Plan	128	134	160
Proceeds from Issuance of Preferred Stock and Preference Stock	0	11,992	0
Purchase of treasury stock	(2,971)	(6,126)	(5,478)
Net cash provided by financing activities	491,385	252,194	75,221
Net decrease in cash and cash equivalents	36,828	45,572	201
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents	139,510	102,682	57,110
Supplementary cash flow information
Interest paid on deposits and borrowings	75,533	20,110	13,206
Income Taxes Paid	7,456	8,038	14,519
Transfer of loans to foreclosed properties	190	50	146
Lease liability in exchange for right-of-use-asset	$ 0	$ 6,265	$ 316

Nature of Operations and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations. The accounting and reporting practices of First Business Financial Services, Inc. (“FBFS” or the “Corporation”), through our wholly-owned subsidiary, First Business Bank (“FBB” or the “Bank”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). FBB operates as a commercial banking institution primarily in Wisconsin and the greater Kansas City metropolitan area. The Bank provides a full range of financial services to businesses, business owners, executives, professionals, and high net worth individuals. FBB also offers bank consulting services to community financial institutions. The Bank is subject to competition from other financial institutions and service providers, and is also subject to state and federal regulations. As of December 31, 2023, FBB had the following wholly-owned subsidiaries: First Business Specialty Finance, LLC (“FBSF”), First Madison Investment Corp. (“FMIC”), ABKC Real Estate, LLC (“ABKC”), FBB Real Estate 2, LLC (“FBB RE 2”), Mitchell Street Apartments Investment, LLC (“Mitchell Street”), and FBB Tax Credit Investment LLC (“FBB Tax Credit”).

Basis of Presentation. The Consolidated Financial Statements include the accounts of the Corporation and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates. Management of the Corporation is required to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that could significantly change in the near-term include the value of securities and interest rate swaps, level of the allowance for credit losses, lease residuals, property under operating leases, goodwill, and income taxes.

Subsequent Events. Subsequent events have been evaluated through the date of the issuance of the Consolidated Financial Statements. No significant subsequent events have occurred through this date requiring adjustment to the financial statements or disclosures.

Cash and Cash Equivalents. The Corporation considers federal funds sold, interest-bearing deposits, and short-term investments that have original maturities of three months or less to be cash equivalents.

Securities. The Corporation classifies its investment and mortgage-related securities as available-for-sale, held-to-maturity, and trading. Debt securities that the Corporation has the positive intent and ability to hold to maturity are classified as held-to-maturity and are stated at amortized cost. Debt securities bought expressly for the purpose of selling in the near term are classified as trading securities and are measured at fair value with unrealized gains and losses reported in earnings. Debt securities not classified as held-to-maturity or as trading are classified as available-for-sale. Available-for-sale securities are measured at fair value with unrealized gains and losses reported as a separate component of stockholders’ equity, net of tax. Realized gains and losses are included in the Consolidated Statements of Income as a component of non-interest income. Credit losses for securities are recorded as an allowance for credit losses through the provision for credit losses. The cost of securities sold is based on the specific identification method. The Corporation did not hold any trading securities at December 31, 2023 or 2022.

Discounts and premiums on securities are accreted and amortized into interest income using the effective yield method over the estimated life (based on maturity date, call date, or weighted average life) of the related security.

Allowance for Credit Loss (“ACL”) - Available For Sale (“AFS”) Debt Securities. For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any decline in fair value that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.

Changes in the ACL are recorded as a provision for (or recovery of) credit loss expense. Losses are charged against allowance when management believes that uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on AFS debt securities totaled $1.3 million at December 31, 2023 and is excluded from the estimate of credit losses.

ACL - Held To Maturity (“HTM”) Debt Securities. Management measures expected credit losses on HTM debt securities on a collective basis by major security type. Accrued interest receivable on HTM debt securities totaled $38,000 at December 31, 2023 and is excluded from the estimate of credit losses. The HTM securities portfolio includes residential mortgage backed securities (“MBS”) commercial MBS, and municipal securities. All residential and commercial MBS are U.S. government issued or U.S. government sponsored and substantially all municipal bonds are rated A or above.

Loans Held for Sale. The guaranteed portions of SBA loans which are originated and intended for sale in the secondary market are classified as held for sale. These loans are carried at the lower of cost or fair value in the aggregate. Unrealized losses on such loans are recognized through a valuation allowance by a charge to other non-interest income. Gains and losses on the sale of loans are also included in other non-interest income. As assets specifically originated for sale, the origination of, disposition of, and gain/loss on these loans are classified as operating activities in the Consolidated Statement of Cash Flows. Fees received from the borrower and direct costs to originate the loans are deferred and recognized as part of the gain or loss on sale. There were $4.6 million and $2.6 million in loans held for sale outstanding at December 31, 2023 and 2022, respectively.

Loans and Leases. Loans and leases which management has the intent and ability to hold for the foreseeable future or until maturity are reported at their outstanding principal balance with adjustments for partial charge-offs, the allowance for credit losses, deferred fees or costs on originated loans and leases, and unamortized premiums or discounts on any purchased loans.

Occasionally, the Corporation modifies loans or leases to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-significant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit loss.

Interest on non-performing loans and leases is accrued and credited to income on a daily basis based on the unpaid principal balance and is calculated using the effective interest method. Per policy, a loan or a lease is considered non-performing and placed on non-accrual status when it becomes 90 days past due or it is doubtful that contractual principal and interest will be collected in accordance with the terms of the contract. A loan or lease is determined to be past due if the borrower fails to meet a contractual payment and will continue to be considered past due until all contractual payments are received. When a loan or leases is placed on non-accrual, the interest accrual is discontinued and previously accrued but uncollected interest is deducted from interest income. If collectability of the contractual principal and interest is in doubt, payments received are first applied to reduce the loan principal. If collectability of the contractual payments is not in doubt, payments may be applied to interest for interest amounts due on a cash basis. As soon as it is determined with certainty that the principal of a non-performing loan or lease is uncollectible, either through collections from the borrower or disposition of the underlying collateral, the portion of the carrying balance that exceeds the estimated measurement value of the loan or lease is charged off. Loans or leases are returned to accrual status when they are brought current in terms of both principal and accrued interest due, have performed in accordance with contractual terms for a reasonable period of time, and when the ultimate collectability of total contractual principal and interest is no longer doubtful.

Transfers of assets, including but not limited to the guaranteed portions of SBA loans and participation interests in other, non-SBA originated loans, that upon completion of the transfer satisfy the conditions to be reported as a sale, including legal isolation, are derecognized from the Consolidated Financial Statements. Transfers of assets that upon completion of the transfer do not meet the conditions of a sale are recorded on a gross basis with a secured borrowing identified to reflect the amount of the transferred interest.

Loan and lease origination fees as well as certain direct origination costs are deferred and amortized as an adjustment to loan yields over the stated term of the loan. Loans or leases that result from a refinance or restructuring, other than modified loans or leases to borrowers in financial distress, where terms are at least as favorable to the Corporation as the terms for comparable loans to other borrowers with similar collection risks and result in an essentially new loan, are accounted for as a new loan. Any unamortized net fees, costs, or penalties are recognized when the new loan or lease is originated. Unamortized net loan or lease fees or costs for loans and leases that result from a refinance or restructure with only minor modifications to the original loan or lease contract are carried forward as a part of the net investment in the new loan. For modified loans or leases to borrowers in financial distress, all fees received in connection with a modification of terms are applied as a reduction of the loan or lease and any related costs, including direct loan origination costs, are charged to expense as incurred.

ACL - Loans. The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amounts expected to be collected on the loans. Loans are charged off against the allowance when management believes that the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as changes in external conditions, such as changes in unemployment rates, property values, or other relevant factors.

Accrued interest receivable on loans totaled $11.1 million at December 31, 2023 and is excluded from the estimate of credit losses.

ACL - Loans - Collectively Evaluated. The ACL is measured on a collective pool basis when similar risk characteristics exist. The Corporation has identified the following portfolio segments:

Commercial Real Estate: Commercial real estate portfolio segments utilize substantially similar processes and controls. Due to the collateral types, availability of data, and results of the Loss Driver Analysis (“LDA”), management utilizes a unique forecast model for each portfolio segment along with a separate analysis of subjective factors.

•Construction - Loans secured by real estate used to finance land development or construction.

•1-4 Family - Loans secured by 1-4 family residential property

•Multi-family - Loans secured by multi-family residential property

•Owner Occupied - Loans secured by nonfarm, nonresidential owner-occupied property

•Non-owner Occupied - Loans secured by other nonfarm, nonresidential property

Commercial and Industrial Lending: Commercial and industrial lending is a portfolio segment where management uses a common forecast due to common risk management, similarity in collateral types, availability of data, and results of the LDA. Management has distinct processes, controls, and procedures which enable more precise development of subjective factors at the pool level.

•Commercial - Loans to small- to medium-sized companies in our primary markets in Wisconsin, Kansas, and Missouri, predominantly through lines of credit and term loans to businesses with annual sales of up to $150 million.

•Asset Based Lending - Products include revolving lines of credit and term loans for strategic acquisitions, capital expenditures, working capital, bank debt refinancing, debt restructuring, and corporate turnaround strategies.

•Floorplan - Floor plan financing for independent auto dealerships nationwide.

•SBA - Loans originated in accordance with the guidelines of the Small Business Administration (“SBA”). As the Corporation prefers to sell the guaranteed portion, the on-balance sheet loans are primarily unguaranteed.

•Equipment finance - Loans and leases secured by a broad range of equipment to commercial clients in a variety of industries.

Consumer and other: Consumer loans consisted of marketable security loans and other personal loans for executives and high net-worth individuals. The Corporation uses a unique forecast model and subjective factors for this portfolio segment due to the client type and data availability.

Measures of the ACL are as follows:

Portfolio Segment

Pool

Measurement Method

Loss Driver

Commercial real estate

Owner occupied

Discounted Cash Flow

National unemployment, National GDP

Non-owner occupied

Discounted Cash Flow

National unemployment, National GDP

Construction

Discounted Cash Flow

National unemployment, National GDP

Multi-family

Discounted Cash Flow

National unemployment, National GDP

1-4 Family

Discounted Cash Flow

National unemployment, National GDP

Commercial and industrial

Commercial

Discounted Cash Flow

National unemployment, National GDP

ABL

Discounted Cash Flow

National unemployment, National GDP

Floorplan

Discounted Cash Flow

National unemployment, National GDP

SBA

Weighted Average Remaining Maturity

N/A

Equipment Finance

Discounted Cash Flow

National unemployment, National GDP

Consumer and other

Discounted Cash Flow

National unemployment, National GDP

The Corporation utilized a discounted cash flow (DCF) or Weighted Average Remaining Maturity (WARM) method to estimate the quantitative portion of the allowance for credit losses for loans evaluated on a collective pooled basis. For each segment, a LDA was performed in order to identify loss drivers and create a regression model for use in forecasting cash flows. For all DCF-based pools, the LDA analyses utilized the Corporation’s and peer data from the Federal Financial Institutions Examination Council's (“FFIEC”) Call Report filings.

In creating the DCF model, the Corporation has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average. Due to the infrequency of losses, the Corporation elected to use peer data for a more statistically sound calculation.

Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, loss history, and forecasted loss drivers. The Corporation utilizes a third party to provide economic forecasts under various scenarios, which are assessed quarterly considering the scenarios in the context of the current economic environment and presumed risk of loss.

Expected credit losses are estimated over the contractual term of the loans, adjusted for prepayments when appropriate. The contractual term excludes extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Corporation.

Additional key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment rates. The Corporation utilizes the model-driven PD and a LGD derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the forecast period, reversion period and long-term historical average. Prepayment and curtailment rates were calculated through third party studies of the Corporation’s own data.

When the DCF method is used to determine the allowance for credit losses, management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

For the WARM-based SBA pool, Corporation-specific data was used to develop the model assumptions. The Corporation developed a reasonable and supportable estimate for the remaining maturity and estimated loss through analysis of historical data. The remaining maturity calculation excludes loans originated under the Paycheck Protection Program as such loans are inconsistent with the current portfolio composition. The quarterly loss rate data includes 2017 to current as the SBA lending policies and procedures were realigned in 2016 following the acquisition of Alterra Bank. Only the unguaranteed portion of the SBA loans are assessed via WARM. The risk of a failed guarantee claim is captured under ASC 450 contingency accounting.

Qualitative factors for DCF and WARM methodologies include the following:

•The Corporation’s lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries;

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Corporation operates that affect the collectability of financial assets;

•The experience, ability, and depth of the Corporation’s lending, investment, collection, and other relevant management and staff;

•The volume of past due financial assets, the volume of non-performing assets, and the volume and severity of adversely classified or graded assets;

•The existence and effect of industry concentrations of credit;

•The nature and volume of the portfolio segment or class;

•The quality of the Corporation’s credit review function and;

•The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics

ACL - Loans - Individually Evaluated. Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation. The Corporation has determined that all loans which have been placed on non-performing status and other performing loans that have been identified due to non-conforming characteristics will be individually evaluated. Individual analysis will evaluate the required specific reserve for loans in scope. Specific reserves on non-performing loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as appropriate.

ACL - Off-Balance Sheet Credit Exposures. The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The allowance for credit losses on off-balance sheet credit exposure is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Funding rates are based on a historical analysis of the Corporation’s portfolio, while estimates of credit losses are determined using the same loss rates as funded loans.

Premises and Equipment, net. The cost of capitalized leasehold improvements is amortized on the straight-line method over the lesser of the term of the respective lease or estimated economic life. Equipment is stated at cost less accumulated depreciation and amortization which is calculated by the straight-line method over the estimated useful lives of 3 to 10 years. Maintenance and repair costs are charged to expense as incurred. Improvements which extend the useful life are capitalized and depreciated over the remaining useful life of the assets.

Repossessed Assets. Property acquired by repossession, foreclosure, or by deed in lieu of foreclosure is recorded at the fair value of the underlying property, less costs to sell. This fair value becomes the new cost basis for the repossessed asset. Any write-down in the carrying value of a loan or lease at the time of acquisition is charged to the allowance for credit losses. Any subsequent write-downs to reflect current fair value, as well as gains and losses on disposition and revenues are recorded in non-interest expense. Any required or prudent costs incurred relating to the development and improvement of the property are capitalized while holding period costs are charged to other non-interest expense.

Leases. At contract inception, the Corporation determines whether the arrangement is or contains a lease and determines the lease classification. The lease term is determined based on the non-cancellable term of the lease adjusted to the extent optional renewal terms and termination rights are reasonably certain. Lease expense is recognized evenly over the lease term. Variable lease payments are recognized as period costs. The present value of remaining lease payments is recognized as a liability on the balance sheet with a corresponding right-of-use asset adjusted for prepaid or accrued lease payments. The Corporation uses the Federal Home Loan Bank fixed advance rate as of the lease inception date that most closely resembles the remaining term of the lease as the incremental borrowing rate, unless the interest rate implicit in the lease contract is readily determinable. The Corporation has elected to exclude short-term leases as well as all non-lease items, such as common area maintenance, from being included in the lease liability on the Consolidated Balance Sheets.

Bank-Owned Life Insurance. Bank-owned life insurance (“BOLI”) is reported at the amount that would be realized if the life insurance policies were surrendered on the balance sheet date. BOLI policies owned by the Bank are purchased with the objective to fund certain future employee benefit costs with the death benefit proceeds. The cash surrender value of such policies is recorded in bank-owned life insurance on the Consolidated Balance Sheets and changes in the value are recorded in non-interest income. The total death benefit of all BOLI policies was $133.7 million and $133.8 million as of December 31, 2023 and 2022, respectively. There are no restrictions on the use of BOLI proceeds nor are there any contractual restrictions on the ability to surrender the policy. As of December 31, 2023 and 2022, there were no borrowings against the cash surrender value of the BOLI policies.

Federal Home Loan Bank Stock. The Bank is required to maintain Federal Home Loan Bank (“FHLB”) stock as members of the FHLB, and in amounts as required by the FHLB. This equity security is “restricted” in that it can only be sold back to the FHLB or another member institution at par. Therefore, it is less liquid than other marketable equity securities and the fair value is equal to cost. The Corporation periodically evaluates its holding in FHLB stock for impairment. Should the stock be impaired, it would be written down to its estimated fair value. There were no impairments recorded on FHLB stock during the years ended December 31, 2023 or 2022.

Goodwill and Other Intangible Assets. Goodwill and other intangible assets consist primarily of goodwill and loan servicing rights. Core deposit intangibles have estimated finite lives and are amortized on an accelerated basis to expense over a period of seven years. Loan servicing rights, when originated, are initially recorded at fair value and subsequently amortized in proportion to and over the period of estimated net servicing income. The Corporation reviews other intangible assets for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in which case an impairment charge would be recorded.

Goodwill is not amortized but is subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount (including goodwill). An initial qualitative evaluation is made to assess the likelihood of impairment and determine whether further quantitative testing to calculate the fair value is necessary. When the qualitative evaluation indicates that impairment is more likely than not, quantitative testing is required whereby the fair value of each reporting unit is calculated and compared to the recorded book value. If the calculated fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired. If the carrying value of a reporting unit exceeds its calculated fair value, an impairment charge is recognized in earnings in an amount equal to the difference.

Other Investments. The Corporation owns certain equity investments in other corporate organizations which are not consolidated because the Corporation does not own more than a 50% interest or exercise control over the organization. Investments in corporations representing at least a 20% interest are generally accounted for using the equity method and investments in corporations representing less than 20% interest are generally accounted for at cost. Investments in limited partnerships representing from at least a 3% up to a 50% interest in the entity are generally accounted for using the equity method and investments in limited partnerships representing less than 3% are generally accounted for at cost. All of these investments are periodically evaluated for impairment. Should an investment be impaired, it would be written down to its estimated fair value. The equity investments are reported in other assets and the income and expense from such investments, if any, is reported in non-interest income and non-interest expense.

Derivative Instruments. The Corporation uses derivative instruments to protect against the risk of adverse price or interest rate movements on the value of certain assets, liabilities, future cash flows, and economic hedges for written client derivative contracts. Derivative instruments represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash to the other party based on a notional amount and an underlying variable, as specified in the contract, and may be subject to master netting agreements.

Market risk is the risk of loss arising from an adverse change in interest rates, exchange rates, or equity prices. The Corporation’s primary market risk is interest rate risk. Instruments designed to manage interest rate risk include interest rate swaps, interest rate options, and interest rate caps and floors with indices that relate to the pricing of specific assets and liabilities. The nature and volume of the derivative instruments used to manage interest rate risk depend on the level and type of assets and liabilities on the balance sheet and the risk management strategies for the current and anticipated rate environments. Counterparty risk with respect to derivative instruments occurs when a counterparty to a derivative contract with an unrealized gain fails to perform according to the terms of the agreement. Counterparty risk is managed by limiting the counterparties to highly rated dealers, requiring collateral postings when values are in deficit positions, applying uniform credit standards to all activities with credit risk, and monitoring the size and the maturity structure of the derivative portfolio.

All derivative instruments are to be carried at fair value on the Consolidated Balance Sheets. The accounting for the gain or loss due to changes in the fair value of a derivative instrument depends on whether the derivative instrument qualifies as a hedge. If the derivative instrument does not qualify as a hedge, the gains or losses are reported in earnings when they occur. However, if the derivative instrument qualifies as a hedge, the accounting varies based on the type of risk being hedged. The Corporation utilizes interest rate swaps offered directly to qualified commercial borrowers, which do not qualify for hedge accounting, and therefore, all changes in fair value and gains and losses on these instruments are reported in earnings as they occur. The effects of netting arrangements are disclosed within the Notes of the Consolidated Financial Statements. The Corporation offers interest rate swap products directly to qualified commercial borrowers. The Corporation economically hedges client derivative transactions by entering into offsetting interest rate swap contracts executed with a third party. Derivative transactions executed as part of this program are not considered hedging instruments and are marked-to-market through earnings each period. The derivative contracts have mirror-image terms, which results in the positions’ changes in fair value offsetting through earnings each period. The credit risk and risk of non-performance embedded in the fair value calculations is different between the dealer

counterparties and the commercial borrowers which may result in a difference in the changes in the fair value of the mirror-image swaps. The Corporation incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the counterparty’s risk in the fair value measurements. When evaluating the fair value of its derivative contracts for the effects of non-performance and credit risk, the Corporation considers the impact of netting and any applicable credit enhancements such as collateral postings, thresholds and guarantees.

The Corporation also enters into interest rate swaps to manage interest rate risk and reduce the cost of match-funding certain long-term fixed rate loans. These derivative contracts are designated as a cash flow hedge as the receipt of floating interest from the counterparty is used to manage interest rate risk associated with forecasted issuances of short-term FHLB advances. The change in fair value of the hedging instrument is recorded in accumulated other comprehensive income.

SBA Recourse Reserve. The Corporation establishes SBA recourse reserves on the guaranteed portions of sold SBA loans. The recourse reserve is reported in accrued interest payable and other liabilities on the Consolidated Balance Sheets. A reserve is established for loans that present a collateral shortfall and it is probable that the guaranty associated with the sold portion of the SBA loan is ineligible.

In the ordinary course of business, the Corporation sells the guaranteed portions of SBA loans to third parties. The Corporation has a continuing involvement in each of the transferred lending arrangements by way of relationship management, servicing the loans, as well as being subject to normal and customary requirements of the SBA loan program; however, there are no further obligations to the third-party participant required of the Corporation, other than standard representations and warranties related to sold amounts. In the event of a loss resulting from default and a determination by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Corporation, the SBA may require the Corporation to repurchase the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from the Corporation. The Corporation must comply with applicable SBA regulations in order to maintain the guaranty. In addition, the Corporation retains the option to repurchase the sold guaranteed portion of an SBA loan if the loan defaults.

Income Taxes. Deferred income tax assets and liabilities are computed for temporary differences in timing between the financial statement and tax basis of assets and liabilities that result in taxable or deductible amounts in the future based on enacted tax law and rates applicable to periods in which the differences are expected to affect taxable income. The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, appropriate tax planning strategies, and projections for future taxable income over the period which the deferred tax assets are deductible. When necessary, valuation allowances are established to reduce deferred tax assets to the realizable amount. In July 2023, the state of Wisconsin incorporated a Commercial loan interest exemption (2023 Wis. Act. 19 - Section 71.26(1)(i)) into its tax law. The exemption applies to the income of a financial institution including interest, fees ,and penalties, derived from a commercial loan of $5 million or less provided to borrowers residing or located in the state and used primarily for a business or agricultural purposes. The addition of the new state commercial income exclusion is expected to result in a taxable loss at the state level considering pre-tax book income and expected permanent adjustments to state income. This state taxable loss is expected to produce state net operating losses that will not be realizable in the future barring any further state tax law change, or a change in the Corporation’s mix of products. The Corporation also does not expect its deferred tax liabilities to be a substantial source of taxable income at the state level. The Corporation does not currently have a tax planning technique in process to generate Wisconsin taxable income to overcome the losses. Therefore, management recorded a valuation allowance against the Corporation’s Wisconsin deferred tax assets as of December 31, 2023.

Income tax expense or benefit represents the tax payable or tax refundable for a period, adjusted by the applicable change in deferred tax assets and liabilities for that period. The Corporation also invests in certain development entities that generate federal and state historic tax credits. The tax benefits associated with these investments are accounted for under the flow-through method and are recognized when the respective project is placed in service. The Corporation and its subsidiaries file a consolidated federal income tax return and separate state income tax returns. Tax sharing agreements allocate taxes to each legal entity for the settlement of intercompany taxes. The Corporation applies a more likely than not standard to each of its tax positions when determining the amount of tax expense or benefit to record in its financial statements. Unrecognized tax benefits are recorded in other liabilities. The Corporation recognizes accrued interest relating to unrecognized tax benefits in income tax expense and penalties in other non-interest expense.

Other Comprehensive Income or Loss. Comprehensive income or loss, shown as a separate financial statement, includes net income or loss, changes in unrealized gains and losses on available-for-sale securities, changes in deferred gains and losses on investment securities transferred from available-for-sale to held-to-maturity, if any, changes in unrealized gains and losses associated with cash flow hedging instruments, if any, and the amortization of deferred gains and losses associated with terminated cash flow hedges, if any. For the year ended December 31, 2023, $45,000 of realized securities losses were

recognized and reclassified out of accumulated other comprehensive loss. For the year ended December 31, 2022, no realized securities gains or losses were recognized.

Earnings Per Common Share. Earnings per common share (“EPS”) is computed using the two-class method. Basic EPS is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding for the period, excluding any participating securities. Participating securities include unvested restricted shares. Unvested restricted shares are considered participating securities because holders of these securities receive non-forfeitable dividends at the same rate as the holders of the Corporation’s common stock. Diluted EPS is computed by dividing net income allocated to common shares adjusted for reallocation of undistributed earnings of unvested restricted shares by the weighted average number of common shares determined for the basic EPS plus the dilutive effect of common stock equivalents using the treasury stock method based on the average market price for the period.

Segments and Related Information. The Corporation is required to report each operating segment based on materiality thresholds of ten percent or more of certain amounts, such as revenue. Additionally, the Corporation is required to report separate operating segments until the revenue attributable to such segments is at least 75 percent of total consolidated revenue. The Corporation provides a broad range of financial services to individuals and companies. These services include demand, time, and savings products, the sale of certain non-deposit financial products, and commercial and retail lending, leasing and private wealth management services. While the Corporation’s chief decision-maker monitors the revenue streams of the various products, services, and locations, operations are managed and financial performance is evaluated on a corporate-wide basis. The Corporation’s business units have similar basic characteristics in the nature of the products, production processes and type or class of client for products or services; therefore, these business units are considered one operating segment.

Share-Based Compensation. The Corporation may grant restricted stock awards, restricted stock units, and other stock based awards to plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement. The Corporation accounts for forfeitures as they occur. While restricted stock is subject to forfeiture, restricted stock award participants may exercise full voting rights and will receive all dividends and other distributions paid with respect to the restricted shares. Dividend equivalent units with respect to restricted stock grants made after January 2023 will be deferred and paid at the time of vesting. Restricted stock units do not have voting rights and are provided dividend equivalents. The restricted stock granted under the 2019 Equity Incentive Plan (the “Plan”) is typically subject to a three or four year vesting period. Compensation expense for restricted stock is recognized over the requisite service period of three or four years for the entire award on a straight-line basis. Upon vesting of restricted stock, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the Consolidated Statements of Income.

The Corporation issues a combination of performance-based restricted stock units and restricted stock awards to plan participants. Vesting of the performance-based restricted stock units will be measured on Total Shareholder Return (“TSR”) and Return on Average Equity (“ROAE”) prior to 2023 or Return on Average Common Equity (“ROACE”) for issuances after 2022, and will cliff-vest after a three-year measurement period based on the Corporation’s performance relative to a custom peer group. At the end of the performance period, the number of actual shares to be awarded varies between 0% and 200% of target amounts. Compensation expense is recognized for performance-based restricted stock units over the requisite service and performance period of generally three years for the entire expected award on a straight-line basis. The compensation expense for the awards expected to vest for the percentage of performance-based restricted stock units subject to the metric will be adjusted if there is a change in the expectation of metric. The compensation expense for the awards expected to vest for the percentage of performance-based restricted stock units subject to the TSR metric are never adjusted, and are amortized utilizing the accounting fair value provided using a Monte Carlo pricing model.

The Corporation offers an Employee Stock Purchase Plan (“ESPP”) to all qualifying employees. The plan qualifies as an ESPP under section 423 of the Internal Revenue Code of 1986. Under the ESPP, eligible employees may enroll in a three month offer period that begins January, April, July, and October of each year. Employees may purchase a limited number of shares of the Corporation’s common stock at 90% of the fair market value on the last day of the offering period. The ESPP is treated as a compensatory plan for purposes of share-based compensation expense.

Recent Accounting Pronouncements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments- Credit Losses (Topic 326),” which is often referred to as CECL. The ASU replaces the incurred loss impairment methodology for recognizing credit losses with a methodology that reflects all expected credit losses. Entities will apply the amendments in the ASU through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” The ASU delays the effective date for the credit losses standard from January 1, 2020 to January 1, 2023 for certain entities, including certain Securities and Exchange Commission filers, public business entities, and private companies. As a smaller reporting company, the Corporation elected to defer

adoption. The Corporation has established a cross-functional committee and has implemented a third-party software solution to assist with the adoption of the standard. During the fourth quarter of 2022 and first quarter of 2023, management had the model validated by a third party, performed a full parallel run, and finalized the methodology, processes and internal controls. Management’s model utilizes national GDP and unemployment as inputs to the reasonable and supportable forecast. On January 1,2023, the Corporation adopted ASC 326 using the modified retrospective method for all financial assets measuring at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. The Corporation recorded a net decrease to retained earnings of $1.4 million as of January 1, 2023 for the cumulative effect of adopting ASC 326. The transition adjustment to allowance for credit losses (“ACL”) includes $1.3 million related to off-balance sheet credit exposures and $484,000 related to loans.

In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary, optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. In January 2021, the FASB issued ASU 2021-01 which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The Corporation adopted this standard in the fourth quarter 2022. The Corporation utilized available optional expedients to simplify accounting analyses for contract modifications and allow hedging relationships to continue without de-designation where there are qualifying changes in the critical terms. The adoption of this standard did not have a material effect on the Corporation’s operating results or financial condition.

In March 2022, the FASB issued ASU No. 2022-02 "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." The amendments in this update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, for public business entities, the amendments in this update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6. The Corporation adopted this standard in the first quarter 2023. The adoption did not have a material impact on the consolidated financial statements.

In March 2023, the FASB issued ASU No. 2023-02 “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force).” The amendments in this Update permit reporting entities to elect to account for their tax equity investments, regardless of the program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. This update is effective for fiscal years beginning after December 15, 2023. We are currently assessing the impact of the standard.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This update enhances the transparency and decision usefulness of income tax disclosures by providing better information regarding exposure to potential changes in jurisdictional tax legislation and related forecasting and cash flow opportunities. This update is effective for fiscal years beginning after December 15, 2024. We are currently assessing the impact of the standard.

In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This update is intended to improve the relevance and usefulness of financial information for investors and other users by incorporating certain SEC disclosure requirements into the FASB Accounting Standards Codification. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. We are currently assessing the impact of the standard.

In November 2023 the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosures.” This update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024. We are currently assessing the impact of the standard.

Reclassifications. Certain amounts in the 2022 consolidated financial statements have been reclassified to conform to the 2023 presentation. These reclassifications were not material and did not impact previously reported net income or comprehensive income.

Cash and Cash Equivalents	12 Months Ended
Cash and Cash Equivalents	Dec. 31, 2023
Cash and Cash Equivalents [Abstract]
Cash and Cash Equivalents	Cash and Cash EquivalentsCash and due from banks was approximately $32.3 million and $25.8 million at December 31, 2023 and 2022, respectively. As of March 26, 2020, the Federal Reserve Bank (“FRB”) reduced reserve requirement ratios to zero percent for all depository institutions. FRB balances were $106.8 million and $76.5 million at December 31, 2023 and 2022, respectively, and are included in short-term investments on the Consolidated Balance Sheets. Short-term investments, considered cash equivalents, were $107.2 million and $76.9 million at December 31, 2023 and 2022, respectively.

Securities

12 Months Ended

Dec. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Securities

The amortized cost and fair value of securities available-for-sale and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:


	As of December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
Available-for-sale:
U.S. treasuries	$	14,158	$	7	$	(389)	$	13,776
U.S. government agency securities - government-sponsored enterprises	27,986		35		(455)		27,566
Municipal securities	40,407		—		(4,526)		35,881

Residential mortgage-backed securities - government issued	69,441		1,000		(2,385)		68,056
Residential mortgage-backed securities - government-sponsored enterprises	131,321		281		(10,769)		120,833
Commercial mortgage-backed securities - government issued	2,995		—		(470)		2,525
Commercial mortgage-backed securities - government-sponsored enterprises	32,774		65		(4,470)		28,369

	$	319,082	$	1,388	$	(23,464)	$	297,006


	As of December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
Available-for-sale:
U.S. treasuries	$	4,977	$	—	$	(532)	$	4,445
U.S. government agency securities - government-sponsored enterprises	13,666		70		(531)		13,205
Municipal securities	45,088		90		(5,867)		39,311

Residential mortgage-backed securities - government issued	21,790		—		(2,359)		19,431
Residential mortgage-backed securities - government-sponsored enterprises	119,265		—		(12,942)		106,323
Commercial mortgage-backed securities - government issued	3,450		—		(518)		2,932
Commercial mortgage-backed securities - government-sponsored enterprises	31,515		—		(5,138)		26,377

	$	239,751	$	160	$	(27,887)	$	212,024

The amortized cost and fair value of securities held-to-maturity and the corresponding amounts of gross unrecognized gains and losses were as follows:


	As of December 31, 2023
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-maturity:

Municipal securities	$	4,210	$	4	$	(41)	$	4,173

Residential mortgage-backed securities - government issued	1,211		—		(76)		1,135
Residential mortgage-backed securities - government-sponsored enterprises	1,078		—		(53)		1,025
Commercial mortgage-backed securities - government-sponsored enterprises	2,004		—		(82)		1,922
	$	8,503	$	4	$	(252)	$	8,255


	As of December 31, 2022
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
	(In Thousands)
Held-to-maturity:

Municipal securities	$	7,467	$	7	$	(70)	$	7,404

Residential mortgage-backed securities - government issued	1,625		—		(107)		1,518
Residential mortgage-backed securities - government-sponsored enterprises	1,537		—		(93)		1,444
Commercial mortgage-backed securities - government-sponsored enterprises	2,006		—		(102)		1,904
	$	12,635	$	7	$	(372)	$	12,270

U.S. Treasuries contain treasury bonds issued by the United States Treasury. U.S. government agency securities - government-sponsored enterprises represent securities issued by Federal National Mortgage Association (“FNMA”) and the SBA. Municipal securities include securities issued by various municipalities located primarily within Wisconsin and are primarily general obligation bonds that are tax-exempt in nature. Residential and commercial mortgage-backed securities - government issued represent securities guaranteed by the Government National Mortgage Association. Residential and commercial mortgage-backed securities - government-sponsored enterprises include securities guaranteed by the Federal Home Loan Mortgage Corporation, FNMA, and the FHLB. There were 16 and seven sales of available-for-sale securities that occurred during the years ended December 31, 2023 and 2021, respectively. There were no sales of available-for-sale securities that occurred during the year ended December 31, 2022.

Total proceeds and gross realized gains and losses from sales of securities available-for-sale were as follows:


	For the Year Ended December 31,
	2023		2022		2021
	(In Thousands)
Gross gains	$	68	$	—	$	92
Gross losses	(113)		—		(63)
Net (losses) gains on sale of available-for-sale securities	$	(45)	$	—	$	29
Proceeds from sale of available-for-sale securities	$	5,085	$	—	$	14,955

At December 31, 2023 and 2022, securities with a fair value of $45.4 million and $35.9 million, respectively, were pledged to secure various obligations, including interest rate swap contracts and municipal deposits.

The amortized cost and fair value of securities by contractual maturity at December 31, 2023 are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay certain obligations with or without call or prepayment penalties.


	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
Due in one year or less	$	22,576	$	22,569	$	1,060	$	1,057
Due in one year through five years	18,970		17,646		3,150		3,116
Due in five through ten years	12,653		11,915		—		—
Due in over ten years	28,352		25,093		—		—
	82,551		77,223		4,210		4,173
Residential mortgage-backed securities	200,762		188,889		2,289		2,160
Commercial mortgage-backed securities	35,769		30,894		2,004		1,922
	$	319,082	$	297,006	$	8,503	$	8,255

The tables below show the Corporation’s gross unrealized losses and fair value of available-for-sale investments, aggregated by investment category and length of time that individual investments were in a continuous loss position at December 31, 2023 and 2022.

The Corporation also has not specifically identified available-for-sale securities in a loss position that it intends to sell in the near term and does not believe that it will be required to sell any such securities. The Corporation reviews its securities on a quarterly basis to assess declines in fair value for credit losses. Consideration is given to such factors as the credit rating of the borrower, market conditions such as current interest rates, any adverse conditions specific to the security and delinquency status on contractual payments. For the years ended December 31, 2023 and 2022, management concluded that in all instances securities with fair value less than carrying value was due to market and other factors; thus no credit loss provision was required.

A summary of unrealized loss information for securities available-for-sale, categorized by security type and length of time for which the security has been in a continuous unrealized loss position, follows:


	December 31, 2023
	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Available-for-sale:
U.S. treasuries	$	—	$	—	$	4,595	$	389	$	4,595	$	389
U.S. government agency securities - government-sponsored enterprises	13,370		30		3,076		425		16,446		455
Municipal securities	—		—		35,881		4,526		35,881		4,526

Residential mortgage-backed securities - government issued	13,178		160		13,819		2,225		26,997		2,385
Residential mortgage-backed securities - government-sponsored enterprises	19,925		285		78,086		10,484		98,011		10,769
Commercial mortgage-backed securities - government issued	—		—		2,525		470		2,525		470
Commercial mortgage-backed securities - government-sponsored enterprises	893		20		26,465		4,450		27,358		4,470

	$	47,366	$	495	$	164,447	$	22,969	$	211,813	$	23,464


	December 31, 2022
	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Available-for-sale:
U.S. treasuries	$	—	$	—	$	4,446	$	532	$	4,446	$	532
U.S. government agency obligations - government-sponsored enterprises	—		—		2,969		531		2,969		531
Municipal securities	26,759		3,132		10,133		2,735		36,892		5,867

Residential mortgage-backed securities - government issued	9,624		436		9,807		1,923		19,431		2,359
Residential mortgage-backed securities - government-sponsored enterprises	71,474		6,433		34,849		6,509		106,323		12,942
Commercial mortgage-backed securities - government issued	1,236		112		1,696		406		2,932		518
Commercial mortgage-backed securities - government-sponsored enterprises	7,758		984		18,619		4,154		26,377		5,138

	$	116,851	$	11,097	$	82,519	$	16,790	$	199,370	$	27,887

The tables below show the Corporation’s gross unrealized losses and fair value of held-to-maturity investments, aggregated by investment category and length of time that individual investments were in a continuous loss position at December 31, 2023 and 2022. At December 31, 2023, the Corporation held 29 held-to-maturity securities that were in an unrealized loss position, 24 of which have been in a continuous loss position for twelve months or greater. Management assesses held-to-maturity securities for credit losses on a quarterly basis. The assessment includes review of credit ratings, identification of delinquency and evaluation of market factors. Based on this analysis, management concludes the decline in fair value is due to market factors, specifically changes in interest rates. Accordingly, no credit loss provision was recorded in the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021.

A summary of unrecognized loss information for securities held-to-maturity, categorized by security type and length of time for which the security has been in a continuous unrealized loss position, follows:


	December 31, 2023
	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Held-to-maturity:

Municipal securities	$	1,424	$	4	$	2,234	$	37	$	3,658	$	41

Residential mortgage-backed securities - government issued	—		—		1,135		76		1,135		76
Residential mortgage-backed securities - government-sponsored enterprises	—		—		1,025		53		1,025		53
Commercial mortgage backed securities - government-sponsored enterprises	—		—		1,922		82		1,922		82
	$	1,424	$	4	$	6,316	$	248	$	7,740	$	252


	December 31, 2022
	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Held-to-maturity:

Municipal securities	$	6,035	$	52	$	267	$	18	$	6,302	$	70

Residential mortgage-backed securities - government issued	1,518		107		—		—		1,518		107
Residential mortgage-backed securities - government-sponsored enterprises	1,444		93		—		—		1,444		93
Commercial mortgage-backed securities - government-sponsored enterprises	1,904		102		—		—		1,904		102
	$	10,901	$	354	$	267	$	18	$	11,168	$	372

On January 1, 2023, the Corporation adopted ASU 2016-13, which replaced the legacy GAAP other-than-temporary impairment (“OTTI”) model with a credit loss model. ASU 2016-13 requires an allowance on lifetime expected credit losses on held to maturity debt securities. As of January 1, 2023 and December 31, 2023, the Corporation estimated the expected credit losses to be immaterial based on the composition of the securities portfolio.

Loan and Lease Receivables, Impaired Loans and Leases and Allowance for Loan and Lease Losses

12 Months Ended

Dec. 31, 2023

Receivables [Abstract]

Loan and Lease Receivables, Impaired Loans and Leases and Allowance for Loan and Lease Losses

Loans, Leases Receivable, and Allowance for Credit Losses

Loan and leases receivable consist of the following:


	December 31, 2023		December 31, 2022
	(In Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	256,479	$	268,354
Commercial real estate — non-owner occupied	773,494		687,091
Construction	193,080		218,751
Multi-family	450,529		350,026
1-4 family	26,289		17,728
Total commercial real estate	1,699,871		1,541,950
Commercial and industrial	1,105,835		853,327
Consumer and other	44,312		47,938
Total gross loans and leases receivable	2,850,018		2,443,215
Less:
Allowance for loan losses	31,275		24,230
Deferred loan fees and costs, net	(243)		149
Loans and leases receivable, net	$	2,818,986	$	2,418,836

Loans transferred to third parties consist of the guaranteed portions of SBA loans which the Corporation sold in the secondary market and participation interests in other, non-SBA originated loans. The total principal amount of the guaranteed portions of SBA loans sold during the year ended December 31, 2023 and 2022 was $23.6 million and $29.9 million, respectively. Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore, all of the loans transferred during the year ended December 31, 2023 and 2022 have been derecognized in the Consolidated Financial Statements. The guaranteed portions of SBA loans were transferred at their fair value and the related gain was recognized upon the transfer as non-interest income in the Consolidated Financial Statements. The total outstanding balance of sold SBA loans at December 31, 2023 and 2022 was $84.2 million and $88.5 million, respectively.

The total principal amount of transferred participation interests in other, non-SBA originated loans during the year ended December 31, 2023 and 2022 was $120.0 million and $96.0 million, respectively, all of which were treated as sales and

derecognized under the applicable accounting guidance at the time of transfer. No gain or loss was recognized on participation interests in other, non-SBA originated loans as they were transferred at or near the date of loan origination and the payments received for servicing the portion of the loans participated represents adequate compensation. The total outstanding balance of these transferred loans at December 31, 2023 and 2022 was $279.5 million and $222.9 million, respectively. As of December 31, 2023 and 2022, the total amount of the Corporation’s partial ownership of these transferred loans on the Consolidated Balance Sheets was $367.4 million and $339.0 million, respectively. As of December 31, 2023 and 2022, the non-SBA originated participation portfolio contained no non-performing loans. The Corporation does not share in the participant’s portion of any potential charge-offs. There were no loans purchased on the Consolidated Balance Sheets as of December 31, 2023 and 2022.

The following table presents loans and loan participations sold during the year by portfolio segment:


December 31, 2023	Owner Occupied		Non-Owner Occupied		Construction		Multi-Family		1-4 Family		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Sales	$	17,390	$	—	$	75,532	$	11,382	$	—	$	39,290	$	—	$	143,594


December 31, 2022	Owner Occupied		Non-Owner Occupied		Construction		Multi-Family		1-4 Family		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Sales	$	—	$	5,000	$	58,586	$	3,184	$	—	$	59,085	$	—	$	125,855

Certain of the Corporation’s executive officers, directors, and their related interests are loan clients of the Bank. These loans to related parties are summarized below:


	December 31, 2023		December 31, 2022
	(In Thousands)
Balance at beginning of year	$	224	$	1,288
New loans	349		656
Repayments	(310)		(1,560)
Change due to status of executive officers and directors	—		(160)
Balance at end of year	$	263	$	224

The Corporation’s net investment in direct financing leases consists of the following:


	December 31, 2023		December 31, 2022
	(In Thousands)
Minimum lease payments receivable	$	9,660	$	10,673
Estimated unguaranteed residual values in leased property	1,468		2,776
Unearned lease and residual income	(1,362)		(1,300)
Investment in commercial direct financing leases	$	9,766	$	12,149

The Corporation leases equipment under direct financing leases expiring in future years. Some of these leases provide for additional rents and generally allow the lessees to purchase the equipment for fair value at the end of the lease term.

Future aggregate maturities of minimum lease payments to be received are as follows:


(In Thousands)
Maturities during year ended December 31,
2024	$	3,268
2025	2,425
2026	1,788
2027	1,301
2028	626
Thereafter	252
	$	9,660

The following tables illustrate ending balances of the Corporation’s loan and lease portfolio, including non-performing loans by class of receivable, and considering certain credit quality indicators:


December 31, 2023	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial real estate — owner occupied
Category
I	$	31,637	$	43,156	$	38,803	$	44,704	$	22,078	$	72,774	$	451	$	253,603
II	—		—		—		260		—		—		—		260
III	—		—		—		—		—		2,616		—		2,616
IV	—		—		—		—		—		—		—		—
Total	$	31,637	$	43,156	$	38,803	$	44,964	$	22,078	$	75,390	$	451	$	256,479

Commercial real estate — non-owner occupied
Category
I	$	71,857	$	76,689	$	72,660	$	78,212	$	66,262	$	314,970	$	32,478	$	713,128
II	—		—		2,302		2,252		19,838		16,274		—		40,666
III	—		—		—		—		—		19,700		—		19,700
IV	—		—		—		—		—		—		—		—
Total	$	71,857	$	76,689	$	74,962	$	80,464	$	86,100	$	350,944	$	32,478	$	773,494

Construction
Category
I	$	63,660	$	83,161	$	8,542	$	744	$	433	$	6,528	$	15,011	$	178,079
II	—		—		9,289		5,712		—		—		—		15,001
III	—		—		—		—		—		—		—		—
IV	—		—		—		—		—		—		—		—
Total	$	63,660	$	83,161	$	17,831	$	6,456	$	433	$	6,528	$	15,011	$	193,080


December 31, 2023	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Multi-family
Category
I	$	84,932	$	41,068	$	70,054	$	113,294	$	22,925	$	115,243	$	3,013	$	450,529
II	—		—		—		—		—		—		—		—
III	—		—		—		—		—		—		—		—
IV	—		—		—		—		—		—		—		—
Total	$	84,932	$	41,068	$	70,054	$	113,294	$	22,925	$	115,243	$	3,013	$	450,529

1-4 family
Category
I	$	4,242	$	7,684	$	2,672	$	2,359	$	443	$	2,805	$	6,062	$	26,267
II	—		—		—		—		—		—		—		—
III	—		—		—		—		—		—		—		—
IV	—		—		—		—		—		22		—		22
Total	$	4,242	$	7,684	$	2,672	$	2,359	$	443	$	2,827	$	6,062	$	26,289

Commercial and industrial
Category
I	$	302,612	$	144,167	$	85,504	$	38,164	$	20,151	$	26,490	$	415,301	$	1,032,389
II	1,496		5,280		785		353		94		219		5,706		13,933
III	1,093		7,168		1,882		5,919		3,861		3,957		15,058		38,938
IV	1,482		6,519		1,319		321		133		1,644		9,157		20,575
Total	$	306,683	$	163,134	$	89,490	$	44,757	$	24,239	$	32,310	$	445,222	$	1,105,835

Consumer and other
Category
I	$	5,920	$	8,786	$	3,167	$	12,193	$	2,049	$	3,485	$	8,712	$	44,312
II	—		—		—		—		—		—		—		—
III	—		—		—		—		—		—		—		—
IV	—		—		—		—		—		—		—		—
Total	$	5,920	$	8,786	$	3,167	$	12,193	$	2,049	$	3,485	$	8,712	$	44,312

Total Loans
Category
I	$	564,860	$	404,711	$	281,402	$	289,670	$	134,341	$	542,295	$	481,028	$	2,698,307
II	1,496		5,280		12,376		8,577		19,932		16,493		5,706		69,860
III	1,093		7,168		1,882		5,919		3,861		26,273		15,058		61,254
IV	1,482		6,519		1,319		321		133		1,666		9,157		$	20,597
Total	$	568,931	$	423,678	$	296,979	$	304,487	$	158,267	$	586,727	$	510,949	$	2,850,018


December 31, 2022	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial real estate — owner occupied
Category
I	$	50,705	$	34,896	$	55,096	$	25,583	$	15,583	$	72,091	$	2,287	$	256,241
II	—		560		300		—		399		1,344		—		2,603
III	—		494		5,489		299		417		2,811		—		9,510
IV	—		—		—		—		—		—		—		—
Total	$	50,705	$	35,950	$	60,885	$	25,882	$	16,399	$	76,246	$	2,287	$	268,354

Commercial real estate — non-owner occupied
Category
I	$	88,752	$	74,615	$	60,216	$	64,847	$	84,053	$	232,405	$	25,508	$	630,396
II	—		—		—		15,099		11,390		7,534		—		34,023
III	—		—		3,891		—		—		18,566		215		22,672
IV	—		—		—		—		—		—		—		—
Total	$	88,752	$	74,615	$	64,107	$	79,946	$	95,443	$	258,505	$	25,723	$	687,091

Construction
Category
I	$	39,942	$	70,257	$	39,048	$	457	$	8,052	$	22,603	$	27,601	$	207,960
II	—		—		—		—		—		—		—		—
III	—		—		—		10,791		—		—		—		10,791
IV	—		—		—		—		—		—		—		—
Total	$	39,942	$	70,257	$	39,048	$	11,248	$	8,052	$	22,603	$	27,601	$	218,751

Multi-family
Category
I	$	21,698	$	46,894	$	121,199	$	23,293	$	32,611	$	93,723	$	2,612	$	342,030
II	—		—		—		—		—		7,996		—		7,996
III	—		—		—		—		—		—		—		—
IV	—		—		—		—		—		—		—		—
Total	$	21,698	$	46,894	$	121,199	$	23,293	$	32,611	$	101,719	$	2,612	$	350,026

1-4 family
Category
I	$	7,659	$	3,087	$	2,525	$	632	$	98	$	2,250	$	1,447	$	17,698
II	—		—		—		—		—		—		—		—
III	—		—		—		—		—		—		—		—
IV	—		—		—		—		—		30		—		30
Total	$	7,659	$	3,087	$	2,525	$	632	$	98	$	2,280	$	1,447	$	17,728


December 31, 2022	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Category
I	$	199,293	$	109,901	$	56,590	$	30,000	$	13,838	$	19,367	$	364,817	$	793,806
II	5,499		801		3,021		1,108		92		239		9,846		20,606
III	1,809		5,607		6,691		6,699		133		5,451		8,896		35,286
IV	601		1,015		589		446		102		876		—		3,629
Total	$	207,202	$	117,324	$	66,891	$	38,253	$	14,165	$	25,933	$	383,559	$	853,327

Consumer and other
Category
I	$	11,086	$	3,556	$	13,870	$	2,433	$	2,600	$	4,193	$	10,200	$	47,938
II	—		—		—		—		—		—		—		—
III	—		—		—		—		—		—		—		—
IV	—		—		—		—		—		—		—		—
Total	$	11,086	$	3,556	$	13,870	$	2,433	$	2,600	$	4,193	$	10,200	$	47,938

Total Loans
Category
I	$	419,135	$	343,206	$	348,544	$	147,245	$	156,835	$	446,632	$	434,472	$	2,296,069
II	5,499		1,361		3,321		16,207		11,881		17,113		9,846		65,228
III	1,809		6,101		16,071		17,789		550		26,828		9,111		78,259
IV	601		1,015		589		446		102		906		—		3,659
Total	$	427,044	$	351,683	$	368,525	$	181,687	$	169,368	$	491,479	$	453,429	$	2,443,215

Each credit is evaluated for proper risk rating upon origination, at the time of each subsequent renewal, upon receipt and evaluation of updated financial information from the Corporation’s borrowers or as other circumstances dictate. The Corporation primarily uses a nine grade risk rating system to monitor the ongoing credit quality of its loans and leases. The risk rating grades follow a consistent definition and are then applied to specific loan types based on the nature of the loan. Each risk rating is subjective and, depending on the size and nature of the credit, subject to various levels of review and concurrence on the stated risk rating. In addition to its nine grade risk rating system, the Corporation groups loans into four loan and related risk categories which determine the level and nature of review by management.

Category I — Loans and leases in this category are performing in accordance with the terms of the contract and generally exhibit no immediate concerns regarding the security and viability of the underlying collateral, financial stability of the borrower, integrity or strength of the borrowers’ management team or the industry in which the borrower operates. The Corporation monitors Category I loans and leases through payment performance, continued maintenance of its personal relationships with such borrowers and continued review of such borrowers’ compliance with the terms of their respective agreements.

Category II — Loans and leases in this category are beginning to show signs of deterioration in one or more of the Corporation’s core underwriting criteria such as financial stability, management strength, industry trends or collateral values. Management will place credits in this category to allow for proactive monitoring and resolution with the borrower to possibly mitigate the area of concern and prevent further deterioration or risk of loss to the Corporation. Category II loans are considered performing but are monitored frequently by the assigned business development officer and by asset quality review committees.

Category III — Loans and leases in this category are identified by management as warranting special attention. However, the balance in this category is not intended to represent the amount of adversely classified assets held by the Bank. Category III

loans and leases generally exhibit undesirable characteristics, such as evidence of adverse financial trends and conditions, managerial problems, deteriorating economic conditions within the related industry or evidence of adverse public filings and may exhibit collateral shortfall positions. Management continues to believe that it will collect all contractual principal and interest in accordance with the original terms of the contracts relating to the loans and leases in this category, and therefore Category III loans are considered performing with no specific reserves established for this category. Category III loans are monitored by management and asset quality review committees on a monthly basis.

Category IV — Loans and leases in this category are non-performing loans. Management has determined that it is unlikely that the Bank will receive the contractual principal and interest in accordance with the original terms of the agreement. Non-performing loans are individually evaluated to assess the need for the establishment of specific reserves or charge-offs. When analyzing the adequacy of collateral, the Corporation obtains external appraisals at least annually. External appraisals are obtained from the Corporation’s approved appraiser listing and are independently reviewed to monitor the quality of such appraisals. To the extent a collateral shortfall position is present, a specific reserve or charge-off will be recorded. Loans and leases in this category are monitored by management and asset quality review committees on a monthly basis.

The delinquency aging of the loan and lease portfolio by class of receivable was as follows:


	December 31, 2023
	30-59 Days Past Due			60-89 Days Past Due			Greater Than 90 Days Past Due			Total Past Due			Current			Total Loans and Leases
	(Dollars in Thousands)
Performing loans and leases
Commercial real estate:
Owner occupied	$	—		$	—		$	—		$	—		$	256,479		$	256,479
Non-owner occupied	—			—			—			—			773,494			773,494
Construction	—			—			—			—			193,080			193,080
Multi-family	—			—			—			—			450,529			450,529
1-4 family	—			—			—			—			26,267			26,267
Commercial and industrial	3,026			491			—			3,517			1,081,743			1,085,260
Consumer and other	—			—			—			—			44,312			44,312
Total	3,026			491			—			3,517			2,825,904			2,829,421
Non-performing loans and leases
Commercial real estate:
Owner occupied	—			—			—			—			—			—
Non-owner occupied	—			—			—			—			—			—
Construction	—			—			—			—			—			—
Multi-family	—			—			—			—			—			—
1-4 family	—			—			—			—			22			22
Commercial and industrial	404			550			18,347			19,301			1,274			20,575
Consumer and other	—			—			—			—			—			—
Total	404			550			18,347			19,301			1,296			20,597
Total loans and leases
Commercial real estate:
Owner occupied	—			—			—			—			256,479			256,479
Non-owner occupied	—			—			—			—			773,494			773,494
Construction	—			—			—			—			193,080			193,080
Multi-family	—			—			—			—			450,529			450,529
1-4 family	—			—			—			—			26,289			26,289
Commercial and industrial	3,430			1,041			18,347			22,818			1,083,017			1,105,835
Consumer and other	—			—			—			—			44,312			44,312
Total	$	3,430		$	1,041		$	18,347		$	22,818		$	2,827,200		$	2,850,018
Percent of portfolio	0.12		%	0.04		%	0.64		%	0.80		%	99.20		%	100.00		%


	December 31, 2022
	30-59 Days Past Due			60-89 Days Past Due			Greater Than 90 Days Past Due			Total Past Due			Current			Total Loans and Leases
	(Dollars in Thousands)
Performing loans and leases
Commercial real estate:
Owner occupied	$	—		$	—		$	—		$	—		$	268,354		$	268,354
Non-owner occupied	215			—			—			215			686,876			687,091
Construction	—			—			—			—			218,751			218,751
Multi-family	—			—			—			—			350,026			350,026
1-4 family	—			—			—			—			17,698			17,698
Commercial and industrial	1,437			403			—			1,840			847,858			849,698
Consumer and other	—			—			—			—			47,938			47,938
Total	1,652			403			—			2,055			2,437,501			2,439,556
Non-performing loans and leases
Commercial real estate:
Owner occupied	—			—			—			—			—			—
Non-owner occupied	—			—			—			—			—			—
Construction	—			—			—			—			—			—
Multi-family	—			—			—			—			—			—
1-4 family	—			—			—			—			30			30
Commercial and industrial	439			126			2,464			3,029			600			3,629
Consumer and other	—			—			—			—			—			—
Total	439			126			2,464			3,029			630			3,659
Total loans and leases
Commercial real estate:
Owner occupied	—			—			—			—			268,354			268,354
Non-owner occupied	215			—			—			215			686,876			687,091
Construction	—			—			—			—			218,751			218,751
Multi-family	—			—			—			—			350,026			350,026
1-4 family	—			—			—			—			17,728			17,728
Commercial and industrial	1,876			529			2,464			4,869			848,458			853,327
Consumer and other	—			—			—			—			47,938			47,938
Total	$	2,091		$	529		$	2,464		$	5,084		$	2,438,131		$	2,443,215
Percent of portfolio	0.09		%	0.02		%	0.10		%	0.21		%	99.79		%	100.00		%

The Corporation’s total non-performing assets consisted of the following:


	December 31, 2023		December 31, 2022
	(In Thousands)
Non-performing loans and leases
Commercial real estate:
Commercial real estate — owner occupied	$	—	$	—
Commercial real estate — non-owner occupied	—		—
Construction	—		—
Multi-family	—		—
1-4 family	22		30
Total non-performing commercial real estate	22		30
Commercial and industrial	20,575		3,629
Consumer and other	—		—
Total non-performing loans and leases	20,597		3,659
Repossessed assets, net	247		95
Total non-performing assets	$	20,844	$	3,754


	December 31, 2023		December 31, 2022
Total non-performing loans and leases to gross loans and leases	0.72	%	0.15	%
Total non-performing assets to total gross loans and leases plus repossessed assets, net	0.73		0.15
Total non-performing assets to total assets	0.59		0.13
Allowance for credit losses to gross loans and leases	1.16		0.99
Allowance for credit losses to non-performing loans and leases	160.21		662.20

Non-performing loans, which are collateral dependent, are primarily secured by inventory $8.9 million, equipment $3.7 million, and accounts receivable and other assets $1.7 million. Occasionally, the Corporation modifies loans to borrowers in financial distress. There were three commercial and industrial loans for a total of $882,000 modified during the year ended December 31, 2023. The modifications consisted of payment deferrals. These loans are included in total non-performing loans and are currently between zero and 209 days past due as of December 31, 2023. No loans were modified during the year ended December 31, 2022. There was one commercial and industrial loan to a borrower experiencing financial distress for a total of $382,000 that was modified during the previous 12 months and which subsequently defaulted during the year ended December 31, 2023. There were no loans to borrowers experiencing financial distress that were modified during the previous 12 months and which subsequently defaulted during the year ended December 31, 2022. There were no unfunded commitments associated with loans modified for borrowers experiencing financial distress as of December 31, 2023.

The following represents additional information regarding the Corporation’s non-accrual loans and leases, by portfolio segment:


	As of and for the Year Ended December 31, 2023
	Amortized Cost(1)		Unpaid Principal Balance		Individual Reserve		Average Recorded Investment(2)		Foregone Interest Income		Interest Income Recognized		Net Foregone Interest Income
	(In Thousands)
With no individual reserve recorded:
Commercial real estate:
Owner occupied	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Non-owner occupied	—		—		—		—		—		—		—
Construction	—		—		—		—		—		—		—
Multi-family	—		—		—		—		—		—		—
1-4 family	—		—		—		4		—		23		(23)
Commercial and industrial	9,691		9,695		—		4,989		786		214		572
Consumer and other	—		—		—		—		—		—		—
Total	9,691		9,695		—		4,993		786		237		549
With individual reserve recorded:
Commercial real estate:
Owner occupied	—		—		—		—		—		—		—
Non-owner occupied	—		—		—		—		—		—		—
Construction	—		—		—		—		—		—		—
Multi-family	—		—		—		—		—		—		—
1-4 family	22		27		22		22		4		—		4
Commercial and industrial	10,884		10,890		5,968		5,435		641		29		612
Consumer and other	—		—		—		—		—		—		—
Total	10,906		10,917		5,990		5,457		645		29		616
Total:
Commercial real estate:
Owner occupied	—		—		—		—		—		—		—
Non-owner occupied	—		—		—		—		—		—		—
Construction	—		—		—		—		—		—		—
Multi-family	—		—		—		—		—		—		—
1-4 family	22		27		22		26		4		23		(19)
Commercial and industrial	20,575		20,585		5,968		10,424		1,427		243		1,184
Consumer and other	—		—		—		—		—		—		—
Grand total	$	20,597	$	20,612	$	5,990	$	10,450	$	1,431	$	266	$	1,165

(1)The amortized cost represents the unpaid principal balance net of any partial charge-offs.

(2)Average recorded investment is calculated primarily using daily average balances.


	As of and for the Year Ended December 31, 2022
	Recorded Investment(1)		Unpaid Principal Balance		Individual Reserve		Average Recorded Investment(2)		Foregone Interest Income		Interest Income Recognized		Net Foregone Interest Income
	(In Thousands)
With no individual reserve recorded:
Commercial real estate:
Owner occupied	$	—	$	—	$	—	$	180	$	14	$	759	$	(745)
Non-owner occupied	—		—		—		—		—		1		(1)
Construction	—		—		—		—		—		47		(47)
Multi-family	—		—		—		—		—		—		—
1-4 family	30		35		—		112		8		41		(33)
Commercial and industrial	1,037		1,037		—		3,153		277		587		(310)
Consumer and other	—		—		—		—		—		—		—
Total	1,067		1,072		—		3,445		299		1,435		(1,136)
With individual reserve recorded:
Commercial real estate:
Owner occupied	—		—		—		—		—		—		—
Non-owner occupied	—		—		—		—		—		—		—
Construction	—		—		—		—		—		—		—
Multi-family	—		—		—		—		—		—		—
1-4 family	—		—		—		—		—		—		—
Commercial and industrial	2,592		2,612		1,650		1,454		101		1		100
Consumer and other	—		—		—		—		—		—		—
Total	2,592		2,612		1,650		1,454		101		1		100
Total:
Commercial real estate:
Owner occupied	—		—		—		180		14		759		(745)
Non-owner occupied	—		—		—		—		—		1		(1)
Construction	—		—		—		—		—		47		(47)
Multi-family	—		—		—		—		—		—		—
1-4 family	30		35		—		112		8		41		(33)
Commercial and industrial	3,629		3,649		1,650		4,607		378		588		(210)
Consumer and other	—		—		—		—		—		—		—
Grand total	$	3,659	$	3,684	$	1,650	$	4,899	$	400	$	1,436	$	(1,036)

(1)The recorded investment represents the unpaid principal balance net of any partial charge-offs.

(2)Average recorded investment is calculated primarily using daily average balances.


	As of and for the Year Ended December 31, 2021
	Recorded Investment(1)		Unpaid Principal Balance		Individual Reserve		Average Recorded Investment(2)		Foregone Interest Income		Interest Income Recognized		Net Foregone Interest Income
	(In Thousands)
With no individual reserve recorded:
Commercial real estate:
Owner occupied	$	348	$	386	$	—	$	2,217	$	145	$	218	$	(73)
Non-owner occupied	—		—		—		2,281		233		16		217
Construction	—		—		—		7		—		—		—
Multi-family	—		—		—		—		—		—		—
1-4 family	339		344		—		285		60		24		36
Commercial and industrial	3,732		3,834		—		7,916		523		179		344
Consumer and other	—		—		—		48		30		9		21
Total	4,419		4,564		—		12,754		991		446		545
With individual reserve recorded:
Commercial real estate:
Owner occupied	—		—		—		—		—		—		—
Non-owner occupied	—		—		—		—		—		—		—
Construction	—		—		—		—		—		—		—
Multi-family	—		—		—		—		—		—		—
1-4 family	—		—		—		—		—		—		—
Commercial and industrial	2,156		2,156		1,505		1,506		113		8		105
Consumer and other	—		—		—		—		—		—		—
Total	2,156		2,156		1,505		1,506		113		8		105
Total:
Commercial real estate:
Owner occupied	348		386		—		2,217		145		218		(73)
Non-owner occupied	—		—		—		2,281		233		16		217
Construction	—		—		—		7		—		—		—
Multi-family	—		—		—		—		—		—		—
1-4 family	339		344		—		285		60		24		36
Commercial and industrial	5,888		5,990		1,505		9,422		636		187		449
Consumer and other	—		—		—		48		30		9		21
Grand total	$	6,575	$	6,720	$	1,505	$	14,260	$	1,104	$	454	$	650

(1)The recorded investment represents the unpaid principal balance net of any partial charge-offs.

(2)Average recorded investment is calculated primarily using daily average balances.

The difference between the recorded investment of loans and leases and the unpaid principal balance of $15,000 and $26,000 as of December 31, 2023 and 2022, respectively, represents partial charge-offs of loans and leases resulting from losses due to the value of the collateral securing the loans and leases being below the carrying values of the loans and leases. When a loan is placed on non-accrual, interest accrual is discontinued and previously accrued but uncollected interest is deducted from interest income. Cash payments collected on non-accrual loans are first applied to such loan’s principal. Foregone interest represents the interest that was contractually due on the loan but not received or recorded. No principal has been forgiven on modified loans during the years ended December 31, 2023 and 2022. To the extent the amount of principal on a non-accrual loan is fully collected and additional cash is received, the Corporation will recognize interest income.

Allowance for Credit Losses

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.

During the first quarter of 2023, the Corporation adopted ASU 2016-13, including the CECL methodology for estimating the ACL. This standard was adopted using a modified retrospective approach on January 1, 2023, resulting in a $484,000 increase to the ACL and a $1.3 million increase to the unfunded credit commitments reserve. A cumulative effect adjustment resulting in

an $1.4 million decrease to retained earnings and a $465,000 increase to deferred tax assets was also recorded as of the adoption of ASU 2016-13.

Quantitative Considerations

The ACL is primarily calculated utilizing a discounted cash flow (“DCF”) model. Key inputs and assumptions used in this model are discussed below:

•Forecast model - For each portfolio segment, a loss driver analysis (“LDA”) was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized peer FFIEC Call Report data for all pools. The Corporation plans to update the LDA annually.

•Probability of default – PD is the probability that an asset will be in default within a given time frame. The Corporation has defined default as when a charge-off has occurred, a loan goes to non-accrual status, or a loan is greater than 90 days past due. The forecast model is utilized to estimate PDs.

•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. The LGD is derived from using a method referred to as Frye Jacobs which uses industry data.

•Prepayments and curtailments – Prepayments and curtailments are calculated based on the Corporation’s own data. This analysis is updated annually.

•Forecast and reversion – the Corporation has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.

•Economic forecast – the Corporation utilizes a third party to provide economic forecasts under various scenarios, which are assessed against economic indicators and management’s observations in the market. As of December 31, 2023, the Corporation selected a forecast which forecasts unemployment between 3.89% and 4.04% and GDP growth change between 1.29% and 2.32% over the next four quarters. Following the forecast period, the model reverts to long-term averages over four quarters. Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks.

Qualitative Considerations

In addition to the quantitative model, management considers the need for qualitative adjustment for risks not considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:

•The Corporation’s lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries;

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Corporation operates that affect the collectability of financial assets;

•The experience, ability, and depth of the Corporation’s lending, investment, collection, and other relevant management and staff;

•The volume of past due financial assets, the volume of non-performing assets, and the volume and severity of adversely classified or graded assets;

•The existence and effect of industry concentrations of credit;

•The nature and volume of the portfolio segment or class;

•The quality of the Corporation’s credit review function;

•The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics.

ACL Activity

A summary of the activity in the allowance for credit losses by portfolio segment is as follows:


	As of and for the Year Ended December 31, 2023
	Owner Occupied		Non-Owner Occupied		Construction		Multi-Family		1-4 Family		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Beginning balance	$	1,766	$	5,108	$	1,646	$	2,634	$	207	$	12,403	$	466	$	24,230
Impact of adopting ASC 326	(204)		(242)		796		(386)		(45)		1,873		26		1,818
Charge-offs	—		—		—		—		—		(1,781)		—		(1,781)
Recoveries	9		1		—		—		40		478		20		548
Net recoveries (charge-offs)	9		1		—		—		40		(1,303)		20		(1,233)
Provision for credit losses	(31)		769		(317)		1,323		64		6,435		(61)		8,182
Ending balance	$	1,540	$	5,636	$	2,125	$	3,571	$	266	$	19,408	$	451	$	32,997
Components:
Allowance for loan losses	1,525		5,596		1,244		3,562		243		18,710		395		31,275
Allowance for unfunded credit commitments	15		40		881		9		23		698		56		1,722
Total ACL	$	1,540	$	5,636	$	2,125	$	3,571	$	266	$	19,408	$	451	$	32,997


	As of and for the Year Ended December 31, 2022
	Commercial Real Estate		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Beginning balance	$	15,110	$	8,413	$	813	$	24,336
Charge-offs	—		(958)		(21)		(979)
Recoveries	4,262		437		42		4,741
Net recoveries (charge-offs)	4,262		(521)		21		3,762
Provision for credit losses	(6,812)		3,236		(292)		(3,868)

Ending balance	$	12,560	$	11,128	$	542	$	24,230


	As of and for the Year Ended December 31, 2021
	Commercial Real Estate		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Beginning balance	$	17,157	$	10,593	$	771	$	28,521
Charge-offs	(256)		(3,227)		(25)		(3,508)
Recoveries	3,935		1,168		23		5,126
Net recoveries (charge-offs)	3,679		(2,059)		(2)		1,618
Provision for credit losses	(5,726)		(121)		44		(5,803)

Ending balance	$	15,110	$	8,413	$	813	$	24,336

ACL Summary

Loans collectively evaluated for credit losses in the following tables include all performing loans at December 31, 2023 and 2022. Loans individually evaluated for credit losses include all non-performing loans.

The following tables provide information regarding the allowance for credit losses and balances by type of allowance methodology:


	December 31, 2023
	Owner Occupied		Non-Owner Occupied		Construction		Multi-Family		1-4 Family		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Allowance for credit losses:
Collectively evaluated for credit losses	$	1,525	$	5,596	$	1,244	$	3,562	$	221	$	12,743	$	395	$	25,286
Individually evaluated for credit loss	—		—		—		—		22		5,967		—		5,989
Total	$	1,525	$	5,596	$	1,244	$	3,562	$	243	$	18,710	$	395	$	31,275
Loans and lease receivables:
Collectively evaluated for credit losses	$	256,479	$	773,494	$	193,080	$	450,529	$	26,267	$	1,085,260	$	44,312	$	2,829,421
Individually evaluated for credit loss	—		—		—		—		22		20,575		—		20,597
Total	$	256,479	$	773,494	$	193,080	$	450,529	$	26,289	$	1,105,835	$	44,312	$	2,850,018


	December 31, 2022
	Commercial Real Estate		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Allowance for credit losses:
Collectively evaluated for credit losses	$	12,560	$	9,478	$	542	$	22,580
Individually evaluated for credit loss	—		1,650		—		1,650

Total	$	12,560	$	11,128	$	542	$	24,230
Loans and lease receivables:
Collectively evaluated for credit losses	$	1,541,920	$	849,542	$	47,938	$	2,439,400
Individually evaluated for credit loss	30		3,785		—		3,815

Total	$	1,541,950	$	853,327	$	47,938	$	2,443,215

Premises and Equipment

12 Months Ended

Dec. 31, 2023

Property, Plant and Equipment [Abstract]

Leasehold Improvements and Equipment

Premises and Equipment

A summary of premises and equipment was as follows:


	As of December 31,
	2023		2022
	(In Thousands)

Leasehold improvements	$	5,557	$	4,525
Furniture and equipment	9,361		8,250
Total premises and equipment	14,918		12,775
Less: accumulated depreciation	(8,728)		(8,435)
Total premises and equipment, net	$	6,190	$	4,340

Depreciation expense was $961,000, $578,000, and $585,000 for the years ended December 31, 2023, 2022, and 2021, respectively. During 2023, the Corporation relocated its Kansas City metropolitan office. This resulted in additional leasehold improvements and equipment of $1.3 million and $606,000, respectively.

Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Lessee, Operating Leases

Leases

The Corporation leases various office spaces and specialized lending production offices under non-cancellable operating leases which expire on various dates through 2033. The Corporation also leases office equipment. The Corporation recognizes a right-of-use asset and an operating lease liability for all leases, with the exception of short-term leases. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term.

In June 2023, the Corporation relocated its Kansas City metropolitan area office. This resulted in a $2.6 million right-of-use asset and $3.7 million lease liability, which was recorded in October 2022. The Corporation received a $1.1 million tenant improvement allowance related to this lease, which was recognized as a lease incentive and deducted from the right-of-use asset.

The components of total lease expense were as follows:


	For the Year Ended December 31,
	2023		2022		2021
	(In Thousands)
Operating lease cost	$	1,411	$	1,544	$	1,513
Short-term lease cost	200		148		158
Variable lease cost	576		604		492
Less: sublease income	(75)		(179)		(170)
Total lease cost, net	$	2,112	$	2,117	$	1,993

Quantitative information regarding the Corporation’s operating leases was as follows:


	December 31, 2023		December 31, 2022		December 31, 2021
Weighted-average remaining lease term (in years)	7.70		8.06		5.05
Weighted-average discount rate	3.61	%	3.40	%	2.51	%

The following maturity analysis shows the undiscounted cash flows due on the Corporation’s operating lease liabilities:


(In Thousands)
2024	$	1,514
2025	1,408
2026	1,400
2027	1,427
2028	1,113
Thereafter	3,600
Total undiscounted cash flows	10,462
Discount on cash flows	(1,508)
Total lease liability	$	8,954

Goodwill and Intangible Assets	12 Months Ended
Goodwill and Intangible Assets	Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill and Intangible Assets Disclosure	Goodwill and Other Intangible Assets Goodwill Goodwill is not amortized, but is subject to impairment tests on an annual basis and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount (including goodwill). At December 31, 2023 and 2022, the Corporation had goodwill of $10.7 million, which was related to the acquisition of Alterra Bank in 2014. The Corporation conducted its annual impairment test on July 1, 2023, utilizing a qualitative assessment, and concluded that it was more likely than not the estimated fair value of the reporting unit exceeded its carrying value, resulting in no impairment. Other Intangible Assets The Corporation has intangible assets that are amortized consisting of loan servicing rights. Loan servicing rights are recognized upon sale of the guaranteed portions of SBA loans with servicing rights retained. When SBA loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Loan servicing assets are subsequently measured using the amortization method, which requires servicing rights to be amortized into interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. For the years ended December 31, 2023, 2022, and 2021, loan servicing asset amortization totaled $500,000, $634,000, and $412,000, respectively. The estimated fair value of the Corporation’s loan servicing asset was $1.4 million and $1.5 million as of December 31, 2023 and 2022, respectively. The Corporation periodically reviews this portfolio for impairment and engages a third-party valuation firm to assess the fair value of the overall servicing rights portfolio. During the years ended December 31, 2023 and 2022, the Corporation recognized $73,000 and $1,000 of impairment expense, respectively. During the year ended December 31, 2021, the Corporation recognized an impairment recovery of $63,000.

Other Assets

12 Months Ended

Dec. 31, 2023

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

The Corporation is a limited partner in several limited partnership investments. The Corporation is not the general partner, does not have controlling ownership, and is not the primary beneficiary in any of these limited partnerships and the limited partnerships have not been consolidated. These investments are accounted for using the equity and proportional amortization method of accounting and are evaluated for impairment at the end of each reporting period.

Historic Rehabilitation Tax Credits

The Corporation invests in development entities through Mitchell Street and FBB Tax Credit, wholly-owned subsidiaries of FBB, to rehabilitate historic buildings. At December 31, 2023 and 2022, the net carrying value of the investments was $2.4 million and $2.2 million, respectively. During 2023, the Corporation invested $285,000 in these partnerships. During 2022 and 2021, the Corporation had no activity related to these investments.

Low-Income Housing Tax Credits

The Corporation invests in development entities through FBB Tax Credit, a wholly-owned subsidiary of FBB, to develop buildings that offer low-income housing. These investments are accounted for using the proportional amortization method of accounting. At December 31, 2023 and 2022, the net carrying value of the investments were $33.3 million and $13.5 million, respectively. During 2023, 2022, and 2021, the Corporation invested $24.0 million, $11.5 million, and $3.0 million in these partnerships, respectively. During 2023 and 2022, the Corporation recognized $5.3 million and $1.4 million in tax benefit, respectively, and $4.1 million and $1.0 million in amortization, respectively, related to these partnerships. Amortization is included in income tax expense in the accompanying Consolidated Statements of Income. During 2021, the Corporation did not recognize any tax benefit or amortization related to these partnerships.

Other Investments

The Corporation’s equity investment in mezzanine funds, consisting of Aldine Capital Fund II, LP, Aldine Capital Fund III, LP, and Aldine Capital Fund IV, LP, totaled $13.5 million and $12.8 million as of December 31, 2023 and 2022, respectively. As of December 31, 2023, the Corporation has $5.3 million remaining of the original $15.0 million commitment to these partnerships. The Corporation’s share of these partnerships’ income included in other non-interest income in the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021 was $4.8 million, $3.0 million, and $2.5 million, respectively. The Corporation’s share of these partnerships’ losses included in other non-interest expense in the Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 was $101,000, $0, and $24,000, respectively.

The Corporation’s equity investment in Dane Workforce Housing Fund LLC, a Wisconsin limited liability company focused on community development by providing affordable workforce housing units in Dane County, Wisconsin, totaled $916,000 and $653,000 as of December 31, 2023 and 2022, respectively. The Corporation had a $63,000 commitment remaining of the original $1.0 million as of December 31, 2023. The Corporation’s share of the investment fund’s income included in other non-interest income in the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021 was $13,000, $8,000, and $2,000, respectively. The Corporation’s share of this partnerships’ losses included in other non-interest expense in the Consolidated Statements of Income for the year ended December 31, 2021 was $19,000. There were no losses related to this investment during the years ended December 31, 2023 and 2022.

The Corporation’s equity investment in BankTech Ventures, LP, a venture capital fund, focused on the community banking industry through strategic investments in growth-stage startups that directly support community banking needs, totaled $569,000 and $154,000 as of December 31, 2023 and 2022, respectively. The Corporation had a $530,000 commitment remaining of the original $1.0 million as of December 31, 2023. The Corporation’s share of the investment fund’s income included in other non-interest income in the Consolidated Statements of Income for the year ended December 31, 2023 was $211,000. There was no income related to this investment during the years ended December 31, 2022 and 2021. The Corporation’s share of this partnerships’ losses included in other non-interest expense in the Consolidated Statements of Income for the years ended December 31, 2023 and 2022 was $2,000 and $21,000, respectively. There were no losses related to this investment during the year ended December 31, 2021.

A summary of accrued interest receivable and other assets was as follows:


	December 31, 2023		December 31, 2022
	(In Thousands)
Accrued interest receivable	$	13,275	$	9,403
Net deferred tax asset	9,508		11,711
Investment in historic development entities	2,393		2,176
Investment in low-income housing development entity	33,303		13,514

Investment in limited partnerships	15,027		13,599
Prepaid expenses	4,269		3,821
Other assets	13,283		8,883
Total accrued interest receivable and other assets	$	91,058	$	63,107

Deposits

12 Months Ended

Dec. 31, 2023

Deposits [Abstract]

Deposit Liabilities Disclosures

Deposits

The composition of deposits is shown below.


	December 31, 2023						December 31, 2022
	Balance		Average Balance		Average Rate		Balance		Average Balance		Average Rate
	(Dollars in Thousands)
Non-interest-bearing transaction accounts	$	445,376	$	453,930	—	%	$	537,107	$	566,230	—	%
Interest-bearing transaction accounts	895,319		689,500		3.44		576,601		503,668		0.79
Money market accounts	711,245		681,336		3.25		698,505		761,469		0.82
Certificates of deposit	287,131		273,387		4.10		153,757		97,448		1.39
Wholesale deposits	457,708		346,285		4.14		202,236		48,825		3.31
Total deposits	$	2,796,779	$	2,444,438	2.92		$	2,168,206	$	1,977,640	0.67

A summary of annual maturities of in-market and wholesale certificates of deposit at December 31, 2023 is as follows:


(In Thousands)
Maturities during the year ended December 31,
2024	$	536,645
2025	19,081
2026	50,416
2027	73,804
2028	12,821
Thereafter	2,072
	$	694,839

Wholesale deposits include $407.7 million and $50.0 million of wholesale certificates of deposit and non-reciprocal interest-bearing transaction accounts, respectively, at December 31, 2023, compared to $187.2 million and $15.0 million of wholesale certificates of deposit and non-reciprocal interest-bearing transaction accounts at December 31, 2022. The Corporation has entered into derivative contracts hedging a portion of the certificates of deposit included in the 2024 maturities above. As of December 31, 2023, the notional amount of derivatives designated as cash flow hedges totaled $306.3 million with a weighted average remaining maturity of 3.9 years and a weighted average rate of 3.95%.

Certificates of deposit and wholesale deposits denominated in amounts greater than $250,000 were $120.2 million and $81.6 million at December 31, 2023 and 2022, respectively.

FHLB Advances, Other Borrowings and Junior Subordinated Notes

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

FHLB Advances, Other Borrowings and Junior Subordinated Notes

FHLB Advances, Other Borrowings and Subordinated Notes and Debentures

The composition of borrowed funds is shown below.


	December 31, 2023						December 31, 2022
	Balance		Weighted Average Balance		Weighted Average Rate		Balance		Weighted Average Balance		Weighted Average Rate
	(Dollars in Thousands)
Federal funds purchased	$	—	$	3	5.37	%	$	—	$	14	7.42	%

FHLB advances	281,500		351,990		2.52		416,380		414,191		1.70
Line of credit	—		38		7.26		—		85		2.78
Other borrowings	20		600		8.33		6,088		8,624		5.23

Subordinated notes and debentures	49,396		38,250		5.16		34,340		35,095		5.06
Junior subordinated notes(1)	—		—		—		—		2,429		20.75
	$	330,916	$	390,881	2.79		$	456,808	$	460,438	2.12

(1) Weighted average rate of junior subordinated notes and debentures reflects the accelerated amortization of subordinated debt issuance costs as a result of the early redemption of the junior subordinated notes during the first quarter of 2022.

A summary of annual maturities of borrowings at December 31, 2023 is as follows:


(In Thousands)
Maturities during the year ended December 31,
2024	$	120,520
2025	48,000
2026	65,000
2027	28,000
2028	—
Thereafter	69,396
	$	330,916

The Corporation has a $649.0 million FHLB line of credit available for advances which is collateralized as noted below. At December 31, 2023, $367.5 million of this line remained unused. There were $281.5 million of term FHLB advances outstanding at December 31, 2023 with stated fixed interest rates ranging from 0.50% to 5.58% compared to $416.4 million of term FHLB advances outstanding at December 31, 2022 with stated fixed interest rates ranging from 0.31% to 4.69%. The term FHLB advances outstanding at December 31, 2023 are due at various dates through May 2030.

The Corporation is required to maintain as collateral mortgage-related securities, unencumbered first mortgage loans and secured small business loans in its portfolio aggregating at least the amount of outstanding advances from the FHLB. Loans totaling approximately $1.172 billion and $1.059 billion were pledged as collateral at December 31, 2023 and 2022, respectively.

The Corporation has a senior line of credit with a third-party financial institution of $10.5 million. As of December 31, 2023, the line of credit carried an interest rate of SOFR + 2.36% that matured on February 19, 2024 and had certain performance debt covenants of which the Corporation was in compliance. The Corporation pays a commitment fee on this senior line of credit. For the years ended December 31, 2023, 2022, and 2021 the Corporation incurred $13,000 additional interest expense due to this fee. There was no outstanding balance on the line of credit as of December 31, 2023. On February 20, 2024, the credit line was renewed for one additional year with pricing terms of 1-month term SOFR + 2.36% and a maturity date of February 19, 2025.

The Corporation issued new subordinated debentures as of September 29, 2023. The aggregate principal amount of the newly issued subordinated debentures was $15.0 million which qualified as Tier 2 capital. The subordinated debentures bear a fixed interest rate of 8.0% with a maturity date of September 29, 2033. The Corporation may, at its option, redeem the debentures, in whole or part, at any time after the fifth anniversary of issuance. As of December 31, 2023, $573,000 of debt issuance costs remain in the subordinated note and debenture payable balance, of which $48,000 was related to the recently issued subordinated debentures.

As of December 31, 2023, the Corporation had other borrowings of $20,000, which consisted of sold tax credit investments accounted for as secured borrowings because they did not qualify for true sale accounting. As of December 31, 2022, the

Corporation had other borrowings of $6.1 million, which consisted of sold loans accounted for as secured borrowings because they did not qualify for true sale accounting. The Corporation has entered into derivative contracts hedging a portion of the borrowings included in the 2024 maturities above. As of December 31, 2023, the notional amount of derivatives designated as cash flow hedges totaled $96.4 million with a weighted average remaining maturity of 2.5 years and a weighted average rate of 1.78%.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 470
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//470/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1E
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

+ Details

Equity	12 Months Ended
Equity	Dec. 31, 2023
Equity [Abstract]
Preferred Stock	Preferred Stock On March 4, 2022, the Corporation issued 12,500 shares, or $12.5 million in aggregate liquidation preference, of 7.0% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”) in a private placement to institutional investors. The net proceeds received from the issuance of the Series A Preferred Stock were $12.0 million. The Corporation expects to pay dividends on the Series A Preferred Stock when and if declared by the Board, at a fixed rate of 7.0% per annum, payable quarterly, in arrears, on March 15, June 15, September 15 and December 15 of each year up to, but excluding, March 15, 2027. For each dividend period from and including March 15, 2027, dividends will be paid at a floating rate of Three-Month Term SOFR plus a spread of 539 basis points per annum. During the years ended December 31, 2023 and 2022, the Board of Directors declared aggregate preferred stock dividends of $875,000 and $683,000, respectively. The Series A Preferred Stock is perpetual and has no stated maturity. The Corporation may redeem the Series A Preferred Stock at its option at a redemption price equal to $1,000 per share, plus any declared and unpaid dividends (without regard to any undeclared dividends), subject to regulatory approval, on or after March 15, 2027 or within 90 days following a regulatory capital treatment event, in accordance with the terms of the Series A Preferred Stock.

Stockholders' Equity and Regulatory Capital

12 Months Ended

Dec. 31, 2023

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

Stockholders' Equity and Regulatory Capital

Regulatory Capital

The Corporation and the Bank are subject to various regulatory capital requirements administered by Federal and Wisconsin banking agencies. Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions on the part of regulators, that if undertaken, could have a direct material effect on the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory practices. The Corporation’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The Corporation regularly reviews and updates, when appropriate, its Capital and Liquidity Action Plans, which is designed to help ensure appropriate capital adequacy, to plan for future capital needs, and to ensure that the Corporation serves as a source of financial strength to the Bank. The Corporation’s and the Bank’s Board and management teams adhere to the appropriate regulatory guidelines on decisions which affect their respective capital positions, including but not limited to, decisions relating to the payment of dividends and increasing indebtedness.

As a bank holding company, the Corporation’s ability to pay dividends is affected by the policies and enforcement powers of the Board of Governors of the Federal Reserve system (the “Federal Reserve”). Federal Reserve guidance urges financial institutions to strongly consider eliminating, deferring, or significantly reducing dividends if: (i) net income available to common shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividend; (ii) the prospective rate of earnings retention is not consistent with the bank holding company’s capital needs and overall current and prospective financial condition; or (iii) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital ratios. Management intends, when appropriate under regulatory guidelines, to consult with the FRB of Chicago and provide it with information on the Corporation’s then-current and prospective earnings and capital position in advance of declaring any cash dividends. As a Wisconsin corporation, the Corporation is subject to the limitations of the Wisconsin Business Corporation Law, which prohibit the Corporation from paying dividends if such payment would: (i) render the Corporation unable to pay its debts as they become due in the usual course of business, or (ii) result in the Corporation’s assets being less than the sum of its total liabilities plus the amount needed to satisfy the preferential rights upon dissolution of any shareholders with preferential rights superior to those shareholders receiving the dividend.

The Bank is also subject to certain legal, regulatory, and other restrictions on their ability to pay dividends to the Corporation. As a bank holding company, the payment of dividends by the Bank to the Corporation is one of the sources of funds the Corporation could use to pay dividends, if any, in the future and to make other payments. Future dividend decisions by the Bank and the Corporation will continue to be subject to compliance with various legal, regulatory, and other restrictions as defined from time to time.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios of Total Common Equity Tier 1 and Tier 1 capital to risk-weighted assets and of Tier 1 capital to

adjusted total assets. These risk-based capital requirements presently address credit risk related to both recorded and off-balance sheet commitments and obligations.

In July 2013, the FRB and the FDIC approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks. These rules are applicable to all financial institutions that are subject to minimum capital requirements, including federal and state banks and savings and loan associations, as well as bank and savings and loan holding companies other than “small bank holding companies” (generally non-publicly traded bank holding companies with consolidated assets of less than $1 billion). Under the final rules, minimum requirements increased for both the quantity and quality of capital held by the Corporation. The rules include a new Common Equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, require a minimum ratio of Total Capital to risk-weighted assets of 8.0%, and require a minimum Tier 1 leverage ratio of 4.0%. The rules also permit banking organizations with less than $15 billion in assets to retain, through a one-time election, the past treatment for accumulated other comprehensive income, which did not affect regulatory capital. The Corporation elected to retain this treatment, which reduces the volatility of regulatory capital ratios. The Corporation also must comply with the 2.5% conservation buffer, which the Corporation met as of December 31, 2023.

As of December 31, 2023, the Corporation’s capital levels exceeded the regulatory minimums and the Bank’s capital levels remained characterized as well capitalized under the regulatory framework. The following tables summarize both the Corporation’s and the Bank’s capital ratios and the ratios required by their federal regulators:


	As of December 31, 2023
	Actual(1)				Minimum Required for Capital Adequacy Purposes				For Capital Adequacy Purposes Plus Capital Conservation Buffer				Minimum Required to Be Well Capitalized Under Prompt Corrective Action Requirements
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
Total capital (to risk-weighted assets)
Consolidated	$	375,440	11.19	%	$	268,500	8.00	%	$	352,406	10.50	%	N/A		N/A
First Business Bank	376,310		11.21		268,595		8.00		352,531		10.50		$	335,744	10.00	%
Tier 1 capital (to risk-weighted assets)
Consolidated	$	293,338	8.74	%	$	201,375	6.00	%	$	285,281	8.50	%	N/A		N/A
First Business Bank	343,604		10.23		201,446		6.00		285,382		8.50		$	268,595	8.00	%
Common equity tier 1 capital (to risk-weighted assets)
Consolidated	$	281,346	8.38	%	$	151,031	4.50	%	$	234,937	7.00	%	N/A		N/A
First Business Bank	343,604		10.23		151,085		4.50		235,021		7.00		$	218,233	6.50	%
Tier 1 leverage capital (to adjusted assets)
Consolidated	$	293,338	8.43	%	$	139,145	4.00	%	$	139,145	4.00	%	N/A		N/A
First Business Bank	343,604		9.87		139,262		4.00		139,262		4.00		$	174,077	5.00	%

(1) 2023 capital amounts include $1.0 million of additional stockholders’ equity as elected by the Corporation and permitted by federal banking regulatory agencies. Risk-weighted assets were also adjusted accordingly.


	As of December 31, 2022
	Actual				Minimum Required for Capital Adequacy Purposes				For Capital Adequacy Purposes Plus Capital Conservation Buffer				Minimum Required to Be Well Capitalized Under Prompt Corrective Action Requirements
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
Total capital (to risk-weighted assets)
Consolidated	$	323,893	11.26	%	$	230,180	8.00	%	$	302,111	10.50	%	N/A		N/A
First Business Bank	323,021		11.22		230,367		8.00		302,357		10.50		$	287,959	10.00	%
Tier 1 capital (to risk-weighted assets)
Consolidated	$	264,843	9.20	%	$	172,635	6.00	%	$	244,566	8.50	%	N/A		N/A
First Business Bank	298,312		10.36		172,775		6.00		244,765		8.50		$	230,367	8.00	%
Common equity tier 1 capital (to risk-weighted assets)
Consolidated	$	252,851	8.79	%	$	129,476	4.50	%	$	201,407	7.00	%	N/A		N/A
First Business Bank	298,312		10.36		129,581		4.50		201,571		7.00		$	187,173	6.50	%
Tier 1 leverage capital (to adjusted assets)
Consolidated	$	264,843	9.17	%	$	115,464	4.00	%	$	115,464	4.00	%	N/A		N/A
First Business Bank	298,312		10.34		115,402		4.00		115,402		4.00		$	144,252	5.00	%

The following table reconciles stockholders’ equity to federal regulatory capital at December 31, 2023 and 2022, respectively:


	As of December 31,
	2023		2022
	(In Thousands)
Stockholders’ equity of the Corporation	$	289,588	$	260,640
Net unrealized and accumulated losses on specific items	13,717		15,310
Disallowed servicing assets	(614)		(706)
Disallowed goodwill and other intangibles	(10,368)		(10,401)
ASC 326 Phase-in	1,015		—
Tier 1 capital	293,338		264,843
Allowable general valuation allowances and subordinated debt	82,102		59,050
Total capital	$	375,440	$	323,893

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details

Earnings per Common Share

12 Months Ended

Dec. 31, 2023

Earnings Per Share [Abstract]

Earnings per Common Share

Earnings per common share are computed using the two-class method. Basic earnings per common share are computed by dividing net income allocated to common shares by the weighted average number of shares outstanding during the applicable period, excluding outstanding participating securities. Participating securities include unvested restricted shares. Unvested restricted shares are considered participating securities because holders of these securities receive non-forfeitable dividends, or dividend equivalents, at the same rate as holders of the Corporation’s common stock. Diluted earnings per share are computed by dividing net income allocated to common shares adjusted for reallocation of undistributed earnings of unvested restricted shares by the weighted average number of shares determined for the basic earnings per common share computation plus the dilutive effect of common stock equivalents using the treasury stock method.


		For the Year Ended December 31,
		2023		2022		2021
	(Dollars in Thousands, Except Share Data)
Basic earnings per common share
Net income		$	37,027	$	40,858	$	35,755
Less: preferred stock dividends		875		683		—
Less: earnings allocated to participating securities		938		1,106		1,053
Basic earnings allocated to common shareholders		$	35,214	$	39,069	$	34,702

Weighted-average common shares outstanding, excluding participating securities		8,131,251		8,226,943		8,314,921

Basic earnings per common share		$	4.33	$	4.75	$	4.17

Diluted earnings per common share
Earnings allocated to common shareholders, diluted		$	35,214	$	39,069	$	34,702





Weighted-average diluted common shares outstanding, excluding participating securities		8,131,251		8,226,943		8,314,921

Diluted earnings per common share		$	4.33	$	4.75	$	4.17

Share-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Share-Based Compensation

The Corporation initially adopted the 2019 Equity Incentive Plan (the “Plan”) during the quarter ended June 30, 2019. The Plan is administered by the Compensation Committee of the Board of Directors (the “Board”) of the Corporation and provides for the grant of equity ownership opportunities through incentive stock options and nonqualified stock options, restricted stock, restricted stock units, dividend equivalent units, and any other type of award permitted by the Plan. As of December 31, 2023, 328,332 shares were available for future grants under the Plan, as amended. Shares covered by awards that expire, terminate, or lapse will again be available for the grant of awards under the Plan.

Restricted Stock

Under the Plan, the Corporation may grant restricted stock awards (“RSA”), restricted stock units (“RSU”), and other stock-based awards to plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement. While restricted stock is subject to forfeiture, RSA participants may exercise full voting rights and will receive all dividends and other distributions paid with respect to the restricted shares. RSUs do not have voting rights. RSUs granted prior to 2023 are provided dividend equivalents concurrent with dividends paid to shareholders while RSUs granted in 2023 and after will accrue dividend equivalents payable upon vesting. The restricted stock granted under the Plan is typically subject to a vesting period. Compensation expense for restricted stock is recognized over the requisite service period of generally three or four years for the entire award on a straight-line basis. Upon vesting of restricted stock, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the Consolidated Statements of Income.

The Corporation may also issue performance-based restricted stock units (“PRSU”). Vesting of the PRSU will be measured on the relative Total Shareholder Return (“TSR”) and relative Return on Average Equity (“ROAE”) for issuances prior to 2023 or Return on Average Common Equity (“ROACE”) for issuances after 2022, and will cliff-vest after a three-year measurement period based on the Corporation’s TSR performance and ROAE or ROACE performance compared to a broad peer group of over 100 banks. At the end of the performance period, the number of actual shares to be awarded varies between 0% and 200% of target amounts. The restricted stock awards and units issued to executive officers will vest ratably over a three-year period. Compensation expense is recognized for PRSU over the requisite service and performance period of generally three years for the entire expected award on a straight-line basis. The compensation expense for the awards expected to vest for the percentage of performance-based restricted stock units subject to the ROAE or ROACE metric will be adjusted if there is a change in the expectation of ROAE or ROACE. The compensation expense for the awards expected to vest for the percentage of PRSU subject to the TSR metric are never adjusted and are amortized utilizing the accounting fair value provided using a Monte Carlo pricing model.

Restricted stock activity for the year ended December 31, 2023, 2022, and 2021 was as follows:


	RSA		Weighted Average Grant Price		PRSU		Weighted Average Grant Price		RSU		Weighted Average Grant Price		Total		Weighted Average Grant Price
Nonvested balance as of January 1, 2021	143,246		$	23.04	39,570		$	28.85	4,988		$	24.08	187,804		$	24.29
Granted (1)	67,515		22.39		23,550		27.12		2,065		21.68		93,130		23.57
Vested	(61,384)		22.26		—		—		(2,001)		22.91		(63,385)		22.28
Forfeited	(7,760)		23.24		—		—		—		—		(7,760)		23.24
Nonvested balance as of December 31, 2021	141,617		23.06		63,120		28.20		5,052		23.56		209,789		24.62
Granted (1)	62,560		34.04		37,335		24.71		3,115		27.95		103,010		30.47
Vested	(62,353)		23.21		(43,020)		18.91		(2,062)		23.20		(107,435)		21.49
Forfeited	(8,507)		26.15		—		—		—		—		(8,507)		26.15
Nonvested balance as of December 31, 2022	133,317		27.95		57,435		32.89		6,105		25.92		196,857		29.32
Granted (1)	—		—		34,840		35.79		54,955		34.43		89,795		34.96
Vested	(56,931)		27.03		(36,120)		31.31		(3,253)		26.06		(96,304)		28.60
Forfeited	(4,435)		30.20		—		—		(820)		36.42		(5,255)		31.17
Nonvested balance as of December 31, 2023	71,951		$	28.53	56,155		$	35.70	56,987		$	33.97	185,093		$	32.38
Unrecognized compensation cost (in thousands)	$	1,229			$	879			$	1,393			$	3,501
Weighted average remaining recognition period (in years)	1.80				1.64				2.79				2.15

(1)The number of restricted shares/units shown includes the shares that would be granted if the target level of performance is achieved related to the PRSU. The number of shares actually issued may vary. During the year ended December 31, 2023, an additional 18,060 were issued related to actual performance results of previously granted awards.

Employee Stock Purchase Plan

The Corporation is authorized to issue up to 250,000 shares of common stock under the ESPP. The plan qualifies as an employee stock purchase plan under section 423 of the Internal Revenue Code of 1986. Under the ESPP, eligible employees may enroll in a three month offer period that begins January, April, July, and October of each year. Employees may elect to purchase a limited number of shares of the Corporation's common stock at 90% of the fair market value on the last day of the offering period. The ESPP is treated as a compensatory item for purposes of share-based compensation expense.

During the year ended December 31, 2023, the Corporation issued 4,328 shares of common stock under the ESPP. At December 31, 2023, 230,638 shares remained available for issuance under the ESPP.

Share-based compensation expense related to restricted stock and ESPP included in the Consolidated Statements of Income was as follows:


	For the Year Ended December 31,
	2023		2022		2021
	(In Thousands)
Share-based compensation expense	$	2,977	$	2,584	$	2,513

Employee Benefit Plans	12 Months Ended
Employee Benefit Plans	Dec. 31, 2023
Retirement Benefits [Abstract]
Employee Benefit Plans	Employee Benefit Plans The Corporation maintains a contributory 401(k) defined contribution plan covering substantially all employees. The Corporation matches 100% of amounts contributed by each participating employee, up to 3% of the employee’s compensation. The Corporation may also make discretionary profit sharing contributions up to an additional 6% of salary. Contributions are expensed in the period incurred and recorded in compensation expense in the Consolidated Statements of Income. The Corporation made a matching contribution of 3% to all eligible employees which totaled $1.2 million, $1.1 million, and $987,000 for the years ended December 31, 2023, 2022, and 2021, respectively. Discretionary profit sharing contributions for substantially all employees of 5.9%, or $2.1 million, 5.2%, or $1.6 million, and 4.7%, or $1.3 million, were made in 2023, 2022, and 2021, respectively. As of December 31, 2023, 2022, and 2021, the Corporation had a deferred compensation plan under which it provided contributions to supplement the retirement income of one executive. Under the terms of the plan, benefits to be received are generally payable within six months of the date of the termination of employment with the Corporation. The expense associated with the deferred compensation plan for the years ended December 31, 2023, 2022, and 2021 was $493,000, $382,000, and $237,000, respectively. The deferred compensation liability under the remaining plan of $2.8 million and $2.3 million at December 31, 2023 and 2022, respectively, is included in accrued interest payable and other liabilities on the Consolidated Balance Sheets. The Corporation owned life insurance policies on the life of the executive covered by the deferred compensation plan, which had cash surrender values and death benefits of approximately $3.1 million and $6.2 million, respectively, at December 31, 2023 and cash surrender values and death benefits of approximately $2.9 million and $6.1 million, respectively, at December 31, 2022. The remaining balance of the cash surrender value of bank-owned life insurance of $52.4 million and $51.0 million as of December 31, 2023 and 2022, respectively, is related to policies on a number of then-qualified individuals affiliated with the Bank.

Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income tax expense consists of the following:


	For the Year Ended December 31,
	2023		2022		2021
	(In Thousands)
Current:
Federal	$	7,759	$	9,174	$	6,965
State	233		2,987		3,087
Current tax expense	7,992		12,161		10,052
Deferred:
Federal	(716)		(733)		1,333
State	2,836		(42)		(110)
Deferred tax expense (benefit)	2,120		(775)		1,223
Total income tax expense	$	10,112	$	11,386	$	11,275

Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax basis. Deferred tax assets and liabilities are measured using enacted tax rates to apply to taxable income in the period in which the temporary differences are expected to be recovered or settled. Net deferred tax assets are included in accrued interest receivable and other assets in the Consolidated Balance Sheets.

The significant components of the Corporation’s deferred tax assets and liabilities were as follows:


	December 31, 2023		December 31, 2022
	(In Thousands)
Deferred tax assets:
Allowance for credit losses	$	8,730	$	6,267

Deferred compensation	2,094		2,342
State net operating loss carryforwards	875		265
Write-down of repossessed assets	10		11

Non-accrual loan interest	95		47
Capital loss carryforwards	22		21
Unrealized losses on securities	4,715		5,263
Share-based compensation	788		725
Other	284		125
Total deferred tax assets before valuation allowance	17,613		15,066
Valuation allowance	(3,339)		—
Total deferred tax assets	14,274		15,066
Deferred tax liabilities:
Leasing and fixed asset activities	1,854		2,197
Loan servicing asset	381		393

Other	2,531		765
Total deferred tax liabilities	4,766		3,355
Net deferred tax asset	$	9,508	$	11,711

The tax effects of unrealized gains and losses on securities are components of other comprehensive income. A reconciliation of the change in net deferred tax assets to deferred tax expense is as follows:


	December 31, 2023		December 31, 2022		December 31, 2021
	(In Thousands)
Change in net deferred tax assets	$	(2,203)	$	5,536	$	(1,042)
Deferred taxes allocated to other comprehensive income	548		(4,761)		(181)
Cumulative change in accounting principle	(465)		—		—
Deferred income tax benefit (expense)	$	(2,120)	$	775	$	(1,223)

Realization of the deferred tax asset over time is dependent upon the Corporation generating sufficient taxable earnings in future periods. In making the determination that the realization of the deferred tax was more likely than not, the Corporation considered several factors including its recent earnings history, its expected earnings in the future, appropriate tax planning strategies, and expiration dates associated with operating loss carryforwards.

On July 5, 2023, the Wisconsin legislature enacted 2023 Wisconsin Act 19 (the “Act”). The Act contains a provision that provides financial institutions with a state tax-exemption for interest, fees, and penalties earned on qualifying loans. For the exemption to apply, the loan must be $5 million or less, for primarily a business or agricultural purpose, and made to borrowers residing or located in Wisconsin. The exemption first applies to taxable years beginning after December 31, 2022 and applies to loans on the books as of January 1, 2023 and to new loans made after that meet the qualifications. The Corporation currently projects that its Wisconsin state taxable income will be significantly reduced and/or eliminated in the future as a result of this provision. The Corporation reversed $2.8 million in income tax expense which had been recorded during 2023 and recognized a date of enactment valuation allowance for Wisconsin deferred tax assets of $2.8 million, resulting in a one-time $2.8 million increase in tax expense.

Deferred tax assets are deferred tax consequences attributable to deductible temporary differences and carryforwards. After the deferred tax asset has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance. A valuation allowance is needed when, based on the weight of the

available evidence, it is more likely than not that some portion of the deferred asset will not be realized. The realization of deferred tax assets is dependent on the existence of taxable income of the appropriate character (e.g., ordinary or capital) within the carry-back and carry-forward periods available under tax law, which would consider future reversals of existing taxable temporary differences and available tax planning strategies. As of December 31, 2023, the state deferred tax valuation allowance was $3.3 million, reducing our Wisconsin deferred tax assets to $0. The Corporation had state net operating loss carryforwards of approximately $16.4 million and $6.3 million at December 31, 2023 and 2022, respectively, which it does not expect to offset due to having no expected future state taxable income. The Corporation fully utilized its established deferred tax assets and Wisconsin state net operating losses and therefore no valuation allowance established as of December 31, 2022.

The provision for income taxes differs from that computed at the federal statutory corporate tax rate as follows:


	Year Ended December 31,
	2023			2022			2021
	(Dollars in Thousands)
Income before income tax expense	$	47,139		$	52,244		$	47,030
Tax expense at statutory federal rate of 21% applied to income before income tax expense	$	9,899		$	10,971		$	9,876
State income tax, net of federal effect	(52)			2,337			2,351
Tax-exempt security and loan income, net of TEFRA adjustments	(856)			(704)			(710)

Change in valuation allowance	3,349			—			—
Bank-owned life insurance	(313)			(468)			(297)



Tax credits, net	(1,045)			(338)			—

Share-based compensation	(159)			(392)			—
Section 162(m) limitation	123			118			—
Other	(834)			(138)			55
Total income tax expense	$	10,112		$	11,386		$	11,275
Effective tax rate	21.45		%	21.79		%	23.97		%

There were no uncertain tax positions outstanding as of December 31, 2023 and 2022. As of December 31, 2023, tax years remaining open for the State of Wisconsin tax were 2019 through 2022. Federal tax years that remained open were 2020 through 2022. As of December 31, 2023, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Derivative Financial Instruments

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

The Corporation offers interest rate swap products directly to qualified commercial borrowers. The Corporation economically hedges client derivative transactions by entering into offsetting interest rate swap contracts executed with a third party. Derivative transactions executed as part of this program are not considered hedging instruments and are marked-to-market through earnings each period. The derivative contracts have mirror-image terms, which results in the positions’ changes in fair value offsetting through earnings each period. The credit risk and risk of non-performance embedded in the fair value calculations is different between the dealer counterparties and the commercial borrowers which may result in a difference in the changes in the fair value of the mirror-image swaps. The Corporation incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the counterparty’s risk in the fair value measurements. When evaluating the fair value of its derivative contracts for the effects of non-performance and credit risk, the Corporation considered the impact of netting and any applicable credit enhancements such as collateral postings, thresholds and guarantees. As of December 31, 2023 and 2022 the credit valuation allowance was $117,000 and $38,000, respectively.

The Corporation receives fixed rates and pays floating rates based upon designated benchmark interest rates used on the swaps with commercial borrowers. Commercial borrower swaps are completed independently with each borrower and are not subject to master netting arrangements. The Corporation pays fixed rates and receives floating rates based upon designated benchmark interest rates used on the swaps with dealer counterparties. Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and are reported on the Consolidated Balance Sheet. The gross amount of dealer counterparty swaps, without regard to the enforceable master netting agreement, was a gross derivative asset of $51.1 million and gross derivative liability of $7.9 million. No right of offset existed with the dealer counterparty swaps as of December 31, 2023.

All changes in fair value of these instruments are recorded in other non-interest income. Given the mirror-image terms of the outstanding derivative portfolio, the change in fair value for the years ended December 31, 2023, 2022, and 2021 had an insignificant impact on the Consolidated Statements of Income.

The Corporation also enters into interest rate swaps to manage interest rate risk and reduce the cost of match-funding certain long-term fixed rate loans. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Corporation making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value. The instruments are designated as cash flow hedges as the receipt of floating rate interest from the counterparty is used to manage interest rate risk related to cash outflows attributable to future wholesale deposit or short-term FHLB advance borrowings. The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. A pre-tax unrealized loss of $3.5 million was recognized in other comprehensive income for the year ended December 31, 2023, while a pre-tax unrealized gain of $8.5 million and $3.6 million was recognized in other comprehensive income for the years ended December 31, 2022 and 2021, respectively, and there were no ineffective portions of these hedges.

The Corporation also enters into interest rate swaps to mitigate market value volatility on certain long-term fixed securities. The objective of the hedge is to protect the Corporation against changes in fair value due to changes in benchmark interest rates. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Corporation making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value. The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. Pre-tax unrealized gains of $22,000 and $602,000 were recognized in other comprehensive income for the years ended December 31, 2023 and 2022, and there were no ineffective portions of these hedges. No pre-tax unrealized gain or loss was recognized in other comprehensive income for the year ended December 31, 2021.


	As of December 31, 2023
	Number of Instruments	Notional Amount		Weighted Average Maturity (In Years)	Fair Value
	(Dollars in Thousands)
Included in Derivative assets
Derivatives not designated as hedging instruments
Interest rate swap agreements on loans with commercial loan clients	25	$	249,454	6.33	$	7,904
Interest rate swap agreements on loans with third-party counter parties	106	939,156		6.06	43,234
Derivatives designated as hedging instruments
Interest rate swap related to AFS securities	11	$	12,500	8.28	$	624
Interest rate swap related to wholesale funding	9	96,400		2.47	3,835
Included in Derivative liabilities
Derivatives not designated as hedging instruments
Interest rate swap agreements on loans with commercial loan clients	81	$	689,702	5.96	$	51,138

Derivatives designated as hedging instruments

Interest rate swap related to wholesale funding	29	$	306,255	3.89	$	811


	As of December 31, 2022
	Number of Instruments	Notional Amount		Weighted Average Maturity (In Years)	Fair Value
	(Dollars in Thousands)
Included in Derivative assets
Derivatives not designated as hedging instruments
Interest rate swap agreements on loans with commercial loan clients	2	$	65,352	4.83	$	1,010
Interest rate swap agreements on loans with third-party counter parties	84	744,233		7.37	60,409
Derivatives designated as hedging instruments
Interest rate swap related to AFS securities	11	$	12,500	9.28	$	602
Interest rate swap related to wholesale funding	11	116,400		2.88	6,560
Included in Derivative liabilities
Derivatives not designated as hedging instruments
Interest rate swap agreements on loans with commercial loan clients	82	$	678,881	7.61	$	61,419

Commitments and Contingencies

12 Months Ended

Dec. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

The Bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of clients. These financial instruments include commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Financial Statements. The contract amounts reflect the extent of involvement the Bank has in these particular classes of financial instruments.

In the event of non-performance, the Bank’s exposure to credit loss for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for instruments reflected in the Consolidated Financial Statements. An accrual for credit losses on financial instruments with off-balance sheet risk would be recorded separate from any valuation account related to any such recognized financial instrument. As of December 31, 2023 and 2022, there were no accrued credit losses for financial instruments with off-balance sheet risk.

Financial instruments whose contract amounts represent potential credit risk were as follows:


	At December 31,
	2023		2022
	(In Thousands)
Commitments to extend credit, primarily commercial loans	$	1,198,031	$	913,042
Standby letters of credit	17,938		15,013

Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition in the contract. Commitments generally have fixed expiration dates or other termination clauses and may have a fixed interest rate or a rate which varies with the prime rate or other market indices and may require payment of a fee. Since some commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements of the Bank. The Bank evaluates the creditworthiness of each client on a case-by-case basis and generally extends credit only on a secured basis. Collateral obtained varies but consists primarily of commercial real estate, accounts receivable, inventory, equipment, and securities. There is generally no market for commercial loan commitments, the fair value of which would approximate the present value of any fees expected to be received as a result of the commitment. These are not considered to be material to the financial statements.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a client to a third party. Generally, standby letters of credit expire within one year and are collateralized by accounts receivable, equipment,

inventory, and commercial properties. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients. The fair value of standby letters of credit is recorded as a liability when the standby letter of credit is issued. The fair value has been estimated to approximate the fees received by the Bank for issuance. The fees are recorded into income and the fair value of the guarantee is decreased ratably over the term of the standby letter of credit.

The Corporation sells the guaranteed portions of SBA 7(a) and 504 loans, as well as participation interests in other, non-SBA originated, loans to third parties. The Corporation has a continuing involvement in each of the transferred lending arrangements by way of relationship management and servicing the loans, as well as being subject to normal and customary requirements of the SBA loan program and standard representations and warranties related to sold amounts. In the event of a loss resulting from default and a determination by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Corporation, the SBA may require the Corporation to repurchase the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from the Corporation. The Corporation must comply with applicable SBA regulations in order to maintain the guaranty. In addition, the Corporation retains the option to repurchase the sold guaranteed portion of an SBA loan if the loan defaults.

Management has assessed estimated losses inherent in the outstanding guaranteed portions of SBA loans sold in accordance with ASC 450, Contingencies, and determined a recourse reserve based on the probability of future losses for these loans to be $955,000 and $441,000 at December 31, 2023 and 2022, respectively, which is reported in accrued interest payable and other liabilities on the Consolidated Balance Sheets.

The summary of the activity in the SBA recourse reserve is as follows:


	As of and For the Year Ended December 31,
	2023		2022
	(In Thousands)
Balance at the beginning of the period	$	441	$	635
SBA recourse provision (benefit)	775		(188)
Charge-offs, net	(261)		(6)
Balance at the end of the period	$	955	$	441

In the normal course of business, various legal proceedings involving the Corporation are pending. Management, based upon advice from legal counsel, does not anticipate any significant losses as a result of these actions. Management believes that any liability arising from any such proceedings currently existing or threatened will not have a material adverse effect on the Corporation’s financial position, results of operations, and cash flows.

Fair Value

12 Months Ended

Dec. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value

Fair Value Disclosures

The Corporation determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date and is based on exit prices. Fair value includes assumptions about risk, such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. The standard describes three levels of inputs that may be used to measure fair value.

Level 1 — Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date.

Level 2 — Level 2 inputs are inputs, other than quoted prices included with Level 1, that are observable for the asset or liability either directly or indirectly, 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 for substantially the full term of the assets or liabilities.

Level 3 — Level 3 inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Assets and liabilities measured at fair value on a recurring basis, segregated by fair value hierarchy level, are summarized below:


	December 31, 2023
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets:
Securities available-for-sale:
U.S. treasuries	$	—	$	13,776	$	—	$	13,776
U.S. government agency securities - government-sponsored enterprises	—		27,566		—		27,566
Municipal securities	—		35,881		—		35,881
Residential mortgage-backed securities - government issued	—		68,056		—		68,056
Residential mortgage-backed securities - government-sponsored enterprises	—		120,833		—		120,833
Commercial mortgage-backed securities - government issued	—		2,525		—		2,525
Commercial mortgage-backed securities - government-sponsored enterprises	—		28,369		—		28,369

Interest rate swaps	—		55,597		—		55,597
Liabilities:
Interest rate swaps	—		51,949		—		51,949


	December 31, 2022
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets:
Securities available-for-sale:
U.S. treasuries	$	—	$	4,445	$	—	$	4,445
U.S. government agency securities - government-sponsored enterprises	—		13,205		—		13,205
Municipal securities	—		39,311		—		39,311
Residential mortgage-backed securities - government issued	—		19,431		—		19,431
Residential mortgage-backed securities - government-sponsored enterprises	—		106,323		—		106,323
Commercial mortgage-backed securities - government issued	—		2,932		—		2,932
Commercial mortgage-backed securities - government-sponsored enterprises	—		26,377		—		26,377

Interest rate swaps	—		68,581		—		68,581
Liabilities:
Interest rate swaps	—		61,419		—		61,419

For assets and liabilities measured at fair value on a recurring basis, there were no transfers between the levels during the year ended December 31, 2023 or 2022 related to the above measurements.

Assets and liabilities measured at fair value on a non-recurring basis, segregated by fair value hierarchy, are summarized below:


	December 31, 2023
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Collateral-dependent loans	$	—	$	—	$	4,917	$	4,917
Repossessed assets	—		—		247		247
Loan servicing rights	—		—		1,356		1,356


	December 31, 2022
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Impaired loans	$	—	$	—	$	1,022	$	1,022
Repossessed assets	—		—		95		95
Loan servicing rights	—		—		1,491		1,491

Collateral-dependent loans were written down to the fair value of their underlying collateral less costs to sell of $4.9 million and $1.0 million at December 31, 2023 and 2022, respectively, through the establishment of specific reserves or by recording charge-offs when the carrying value exceeded the fair value of the underlying collateral of impaired loans. Valuation techniques consistent with the market approach, income approach, or cost approach were used to measure fair value. These techniques included observable inputs for the individual impaired loans being evaluated such as current appraisals, recent sales of similar assets, or other observable market data, and unobservable inputs, typically when discounts are applied to appraisal values to adjust such values to current market conditions or to reflect net realizable values. The quantification of unobservable inputs for Level 3 impaired loan values range from 10% - 100% as of the measurement date of December 31, 2023. The weighted average of those unobservable inputs was 57%. The majority of the impaired loans are considered collateral dependent loans or are supported by an SBA guaranty.

Repossessed assets, upon initial recognition, are remeasured and reported at fair value through a charge-off to the allowance for credit losses, if deemed necessary, based upon the fair value of the repossessed asset. The fair value of a repossessed asset, upon initial recognition, is estimated using a market approach or based on observable market data, such as a current appraisal, recent sale price of similar assets, or based upon assumptions specific to the individual property or equipment, such as management applied discounts used to further reduce values to a net realizable value when observable inputs become stale.

Loan servicing rights represent the asset retained upon sale of the guaranteed portion of certain SBA loans. When SBA loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. The servicing rights are subsequently measured using the amortization method, which requires amortization into interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

The Corporation periodically reviews this portfolio for impairment and engages a third-party valuation firm to assess the fair value of the overall servicing rights portfolio. Loan servicing rights do not trade in an active, open market with readily observable prices. While sales of loan servicing rights do occur, the precise terms and conditions typically are not readily available to allow for a “quoted price for similar assets” comparison. Accordingly, the Corporation utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of its loan servicing rights. The valuation model incorporates prepayment assumptions to project loan servicing rights cash flows based on the current interest rate scenario, which is then discounted to estimate an expected fair value of the loan servicing rights. The valuation model considers portfolio characteristics of the underlying serviced portion of the SBA loans and uses the following significant unobservable inputs: (1) constant prepayment rate (“CPR”) assumptions based on the SBA sold pools historical CPR as quoted in Bloomberg and (2) a discount rate. Due to the nature of the valuation inputs, loan servicing rights are classified in Level 3 of the fair value hierarchy.

Fair Value of Financial Instruments

The Corporation is required to disclose estimated fair values for its financial instruments. Fair value estimates, methods and assumptions, consistent with exit price concepts for fair value measurements, are set forth below:


	December 31, 2023
	Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	139,510	$	139,510	$	139,510	$	—	$	—
Securities available-for-sale	297,006		297,006		—		297,006		—
Securities held-to-maturity	8,503		8,255		—		8,255		—
Loans held for sale	4,589		4,956		—		4,956		—
Loans and lease receivables, net	2,818,986		2,789,731		—		—		2,789,731

Federal Home Loan Bank stock	12,042		N/A		N/A		N/A		N/A
Accrued interest receivable	13,275		13,275		13,275		—		—
Interest rate swaps	55,597		55,597		—		55,597		—
Financial liabilities:
Deposits	2,796,779		2,795,463		2,101,939		693,524		—
Federal Home Loan Bank advances and other borrowings	330,916		320,287		—		320,287		—

Accrued interest payable	10,860		10,860		10,860		—		—
Interest rate swaps	51,949		51,949		—		51,949		—
Off-balance sheet items:
Standby letters of credit	190		190		—		—		190

N/A = The fair value is not applicable due to restrictions placed on transferability


	December 31, 2022
	Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	102,682	$	102,682	$	102,682	$	—	$	—
Securities available-for-sale	212,024		212,024		—		212,024		—
Securities held-to-maturity	12,635		12,270		—		12,270		—
Loans held for sale	2,632		2,829		—		2,829		—
Loans and lease receivables, net	2,418,836		2,394,702		—		—		2,394,702

Federal Home Loan Bank stock	17,812		N/A		N/A		N/A		N/A
Accrued interest receivable	9,403		9,403		9,403		—		—
Interest rate swaps	68,581		68,543		—		68,543		—
Financial liabilities:
Deposits	2,168,206		2,167,444		1,827,215		340,229		—
Federal Home Loan Bank advances and other borrowings	456,808		440,242		—		440,242		—

Accrued interest payable	4,053		4,053		4,053		—		—
Interest rate swaps	61,419		61,419		—		61,419		—
Off-balance sheet items:
Standby letters of credit	184		184		—		—		184

N/A = The fair value is not applicable due to restrictions placed on transferability

Disclosure of fair value information about financial instruments, for which it is practicable to estimate that value, is required whether or not recognized in the Consolidated Balance Sheets. 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. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not necessarily represent the underlying value of the Corporation.

Securities: The fair value measurements of investment securities are determined by a third-party pricing service which considers observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, trade execution data, market consensus prepayment speeds, credit information and the securities’ terms and conditions, among other things. The fair value measurements are subject to independent verification by another pricing source on a quarterly basis to review for reasonableness. Any significant differences in pricing are reviewed with appropriate members of management who have the relevant technical expertise to assess the results. The Corporation has determined that these valuations are classified in Level 2 of the fair value hierarchy. When the independent pricing service does not provide a fair value measurement for a particular security, the Corporation will estimate the fair value based on specific information about each security. Fair values derived in this manner are classified in Level 3 of the fair value hierarchy.

Loans Held for Sale: Loans held for sale, which consist of the guaranteed portions of SBA 7(a) loans, are carried at the lower of cost or estimated fair value. The estimated fair value is based on what secondary markets are currently offering for portfolios with similar characteristics.

Interest Rate Swaps: The carrying amount and fair value of existing derivative financial instruments are based upon independent valuation models, which use widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative contract. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Corporation incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation considers the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Limitations: Fair value estimates are made at a discrete 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 Corporation’s entire holding of a particular financial instrument. Because no market exists for a significant portion of the Corporation’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 of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing 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. 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 are not considered in the estimates.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Condensed Parent Only Financial Information

12 Months Ended

Dec. 31, 2023

Condensed Financial Information Disclosure [Abstract]

Condensed Parent Only Financial Information

The following represents the condensed financial information of the Corporation only:

Condensed Balance Sheets


	December 31, 2023		December 31, 2022
	(In Thousands)
Assets
Cash and cash equivalents	$	2,027	$	3,129
Investments in subsidiaries, at equity	339,854		294,109
Premises and equipment, net	51		66

Other assets	697		1,239
Total assets	$	342,629	$	298,543
Liabilities and Stockholders’ Equity
Junior subordinated notes and other borrowings	$	49,396	$	34,341

Accrued interest payable and other liabilities	3,645		3,562
Total liabilities	53,041		37,903
Stockholders’ equity	289,588		260,640
Total liabilities and stockholders’ equity	$	342,629	$	298,543

Condensed Statements of Income


	For the Year Ended December 31,
	2023		2022		2021
	(In Thousands)
Net interest expense	$	1,989	$	2,295	$	2,539
Non-interest income
Consulting and rental income from consolidated subsidiaries	5,644		5,794		2,417
Other non-interest income	43		69		34
Total non-interest income	5,687		5,863		2,451
Non-interest expense	8,234		7,633		5,747
Loss before income tax benefit and equity in undistributed net income of consolidated subsidiaries	4,536		4,065		5,835
Income tax benefit	337		1,387		1,483
Loss before equity in undistributed net income of consolidated subsidiaries	4,199		2,678		4,352
Equity in undistributed net income of consolidated subsidiaries	41,226		43,536		40,107
Net income	$	37,027	$	40,858	$	35,755

Condensed Statements of Cash Flows


	For the Year Ended December 31,
	2023		2022		2021
	(In Thousands)
Operating activities
Net income	$	37,027	$	40,858	$	35,755
Adjustments to reconcile net income to net cash used in operating activities:
Equity in undistributed earnings of consolidated subsidiaries	(41,226)		(43,536)		(40,107)
Share-based compensation	2,977		2,584		2,513
Excess tax benefit from share-based compensation	(91)		(91)		(27)

Net (decrease) increase in other liabilities	(1,854)		2,592		(2,090)
Other, net	1,207		(538)		3,413
Net cash (used in) provided by operating activities	(1,960)		1,869		(543)
Investing activities
Dividends received from subsidiaries	12,100		2,008		8,534
Proceeds from redemption of Trust II stock	—		315		—
Capital contributions to subsidiaries	(15,000)		—		—
Net cash (used in) provided by investing activities	(2,900)		2,323		8,534
Financing activities
Net increase (decreases) in long-term borrowed funds	54		(357)		55
Proceeds from issuance of subordinated notes payable	15,000		20,000		—
Repayment of subordinated notes payable	—		(9,090)		—
Repayment of junior subordinated debentures	—		(10,076)		—
Proceeds from issuance of preferred stock	—		11,992		—


Proceeds from purchased funds and other short-term debt	—		(500)		500
Purchase of treasury stock	(2,971)		(6,126)		(5,477)

Preferred stock dividends paid	(875)		(683)		—
Cash dividends paid	(7,578)		(6,688)		(6,166)
Net proceeds from purchases of ESPP shares	128		134		160
Net cash provided by (used in) financing activities	3,758		(1,394)		(10,928)
Net (decrease) increase in cash and due from banks	(1,102)		2,798		(2,937)
Cash and cash equivalents at the beginning of the period	3,129		331		3,268
Cash and cash equivalents at the end of the period	$	2,027	$	3,129	$	331

Condensed Quarterly Earnings (unaudited)

12 Months Ended

Dec. 31, 2023

Quarterly Financial Information Disclosure [Abstract]

Condensed Quarterly Earnings (unaudited)


	2023								2022
	Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
	(Dollars in Thousands, Except Per Share Data)
Interest income	$	54,762	$	50,941	$	47,161	$	42,064	$	38,319	$	31,786	$	27,031	$	24,235
Interest expense	25,222		22,345		19,414		15,359		10,867		5,902		3,371		2,809
Net interest income	29,540		28,596		27,747		26,705		27,452		25,884		23,660		21,426
Provision for credit losses	2,573		1,817		2,231		1,561		702		12		(3,727)		(855)
Non-interest income	7,094		8,430		7,374		8,410		6,973		8,197		6,872		7,386
Non-interest expense	21,588		23,189		22,031		21,767		21,167		20,028		19,456		18,823
Income before income tax expense	12,473		12,020		10,859		11,787		12,556		14,041		14,803		10,844
Income tax expense	2,703		2,079		2,522		2,808		2,400		3,215		3,599		2,172
Net income	9,770		9,941		8,337		8,979		10,156		10,826		11,204		8,672
Preferred stock dividend	219		218		219		219		219		219		245		—
Income available to common shareholders	$	9,551	$	9,723	$	8,118	$	8,760	$	9,937	$	10,607	$	10,959	$	8,672
Per common share:
Basic earnings	$	1.15	$	1.17	$	0.98	$	1.05	$	1.18	$	1.25	$	1.29	$	1.02
Diluted earnings	1.15		1.17		0.98		1.05		1.18		1.25		1.29		1.02
Dividends declared	0.2275		0.2275		0.2275		0.2275		0.1975		0.1975		0.1975		0.1975

Nature of Operations and Summary of Significant Accounting Policies Nature of Operations and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

Basis of Presentation. The Consolidated Financial Statements include the accounts of the Corporation and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates. Management of the Corporation is required to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that could significantly change in the near-term include the value of securities and interest rate swaps, level of the allowance for credit losses, lease residuals, property under operating leases, goodwill, and income taxes.

Reclassification

Reclassifications. Certain amounts in the 2022 consolidated financial statements have been reclassified to conform to the 2023 presentation. These reclassifications were not material and did not impact previously reported net income or comprehensive income.

Subsequent Events

Subsequent Events. Subsequent events have been evaluated through the date of the issuance of the Consolidated Financial Statements. No significant subsequent events have occurred through this date requiring adjustment to the financial statements or disclosures.

Cash and Cash Equivalents

Cash and Cash Equivalents. The Corporation considers federal funds sold, interest-bearing deposits, and short-term investments that have original maturities of three months or less to be cash equivalents.

Securities

Securities. The Corporation classifies its investment and mortgage-related securities as available-for-sale, held-to-maturity, and trading. Debt securities that the Corporation has the positive intent and ability to hold to maturity are classified as held-to-maturity and are stated at amortized cost. Debt securities bought expressly for the purpose of selling in the near term are classified as trading securities and are measured at fair value with unrealized gains and losses reported in earnings. Debt securities not classified as held-to-maturity or as trading are classified as available-for-sale. Available-for-sale securities are measured at fair value with unrealized gains and losses reported as a separate component of stockholders’ equity, net of tax. Realized gains and losses are included in the Consolidated Statements of Income as a component of non-interest income. Credit losses for securities are recorded as an allowance for credit losses through the provision for credit losses. The cost of securities sold is based on the specific identification method. The Corporation did not hold any trading securities at December 31, 2023 or 2022.

Discounts and premiums on securities are accreted and amortized into interest income using the effective yield method over the estimated life (based on maturity date, call date, or weighted average life) of the related security.

Allowance for Credit Loss (“ACL”) - Available For Sale (“AFS”) Debt Securities. For AFS debt securities in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any decline in fair value that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.

Changes in the ACL are recorded as a provision for (or recovery of) credit loss expense. Losses are charged against allowance when management believes that uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on AFS debt securities totaled $1.3 million at December 31, 2023 and is excluded from the estimate of credit losses.

ACL - Held To Maturity (“HTM”) Debt Securities. Management measures expected credit losses on HTM debt securities on a collective basis by major security type. Accrued interest receivable on HTM debt securities totaled $38,000 at December 31, 2023 and is excluded from the estimate of credit losses. The HTM securities portfolio includes residential mortgage backed securities (“MBS”) commercial MBS, and municipal securities. All residential and commercial MBS are U.S. government issued or U.S. government sponsored and substantially all municipal bonds are rated A or above.

Loans Held for Sale

Loans Held for Sale. The guaranteed portions of SBA loans which are originated and intended for sale in the secondary market are classified as held for sale. These loans are carried at the lower of cost or fair value in the aggregate. Unrealized losses on such loans are recognized through a valuation allowance by a charge to other non-interest income. Gains and losses on the sale of loans are also included in other non-interest income. As assets specifically originated for sale, the origination of, disposition of, and gain/loss on these loans are classified as operating activities in the Consolidated Statement of Cash Flows. Fees received from the borrower and direct costs to originate the loans are deferred and recognized as part of the gain or loss on sale. There were $4.6 million and $2.6 million in loans held for sale outstanding at December 31, 2023 and 2022, respectively.

Loans and Leases

Loans and Leases. Loans and leases which management has the intent and ability to hold for the foreseeable future or until maturity are reported at their outstanding principal balance with adjustments for partial charge-offs, the allowance for credit losses, deferred fees or costs on originated loans and leases, and unamortized premiums or discounts on any purchased loans.

Occasionally, the Corporation modifies loans or leases to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-significant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit loss.

Interest on non-performing loans and leases is accrued and credited to income on a daily basis based on the unpaid principal balance and is calculated using the effective interest method. Per policy, a loan or a lease is considered non-performing and placed on non-accrual status when it becomes 90 days past due or it is doubtful that contractual principal and interest will be collected in accordance with the terms of the contract. A loan or lease is determined to be past due if the borrower fails to meet a contractual payment and will continue to be considered past due until all contractual payments are received. When a loan or leases is placed on non-accrual, the interest accrual is discontinued and previously accrued but uncollected interest is deducted from interest income. If collectability of the contractual principal and interest is in doubt, payments received are first applied to reduce the loan principal. If collectability of the contractual payments is not in doubt, payments may be applied to interest for interest amounts due on a cash basis. As soon as it is determined with certainty that the principal of a non-performing loan or lease is uncollectible, either through collections from the borrower or disposition of the underlying collateral, the portion of the carrying balance that exceeds the estimated measurement value of the loan or lease is charged off. Loans or leases are returned to accrual status when they are brought current in terms of both principal and accrued interest due, have performed in accordance with contractual terms for a reasonable period of time, and when the ultimate collectability of total contractual principal and interest is no longer doubtful.

Transfers of assets, including but not limited to the guaranteed portions of SBA loans and participation interests in other, non-SBA originated loans, that upon completion of the transfer satisfy the conditions to be reported as a sale, including legal isolation, are derecognized from the Consolidated Financial Statements. Transfers of assets that upon completion of the transfer do not meet the conditions of a sale are recorded on a gross basis with a secured borrowing identified to reflect the amount of the transferred interest.

Loan and lease origination fees as well as certain direct origination costs are deferred and amortized as an adjustment to loan yields over the stated term of the loan. Loans or leases that result from a refinance or restructuring, other than modified loans or leases to borrowers in financial distress, where terms are at least as favorable to the Corporation as the terms for comparable loans to other borrowers with similar collection risks and result in an essentially new loan, are accounted for as a new loan. Any unamortized net fees, costs, or penalties are recognized when the new loan or lease is originated. Unamortized net loan or lease fees or costs for loans and leases that result from a refinance or restructure with only minor modifications to the original loan or lease contract are carried forward as a part of the net investment in the new loan. For modified loans or leases to borrowers in financial distress, all fees received in connection with a modification of terms are applied as a reduction of the loan or lease and any related costs, including direct loan origination costs, are charged to expense as incurred.

Allowance for Loan and Lease Losses