Bank First Corp (BFC)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2025, included in our Annual Report and with our unaudited condensed accompanying notes set forth in this Quarterly Report on Form 10-Q for the quarterly period March 31, 2026.

FORWARD-LOOKING STATEMENTS

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

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

OVERVIEW

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

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​

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

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

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The Company accounted for this transaction under the acquisition method of accounting, and thus, the financial position and results of operations of the acquired institution prior to the consummation date are not included in the accompanying consolidated financial statements. The acquisition method of accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determines the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities, deposits and borrowings with the assistance of third-party valuations, appraisals, and third-party advisors. The acquisition accounting is provisional for up to one year after the acquisition and could be adjusted in subsequent quarters during 2026 if additional relevant information to the fair values becomes available.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

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

[[GREPCENT_TABLE]]
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[Excerpt truncated for page length; source filing is linked above.]

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

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

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

OVERVIEW

Bank First Corporation is a Wisconsin corporation that was organized primarily to serve as the holding company for Bank First, N.A. Bank First, N.A., which was incorporated in 1894, is a nationally-chartered bank headquartered in Manitowoc, Wisconsin. It is a member of the Federal Reserve, and is regulated by the OCC. Including its headquarters in Manitowoc, Wisconsin, the Bank has 38 banking locations in Brown, Columbia, Dane, Door, Fond du Lac, Green, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Rock, Shawano, Sheboygan, Walworth, Waupaca, Waushara, and Winnebago counties in Wisconsin and Winnebago county in Illinois. The Bank offers loan, deposit and treasury management products at each of its banking locations.

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

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

As of December 31, 2025, the Company had total consolidated assets of $4.51 billion, total loans of $3.60 billion, total deposits of $3.70 billion and total stockholders’ equity of $643.8 million. The Company employs approximately 380 full-time equivalent employees (“FTE”) and has an assets-to-FTE ratio of approximately $11.9 million. For more information, see the Company’s website at www.bankfirst.com.

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Recent acquisitions

Centre 1 Bancorp, Inc.

On January 1, 2026, the Company completed a merger with Centre, a bank holding company headquartered in Beloit, Wisconsin, pursuant to the merger agreement, dated as of July 17, 2025, by and between the Company and Centre, whereby Centre merged with and into the Company, and First National Bank and Trust, Centre's wholly-owned banking subsidiary, merged with and into the Bank. The acquisition expanded the Company’s presence in Wisconsin and Illinois and added trust and wealth management capabilities. Centre's principal activity was the ownership and operation of First National Bank and Trust, a federal-chartered banking institution that operated seventeen (17) branches in Wisconsin and Illinois at the time of closing. The merger consideration totaled approximately $168.8 million.

Pursuant to the Merger Agreement, Centre shareholders were entitled to receive, for each share of Centre common stock that was outstanding immediately prior to the Merger, 0.9200 of a share of the Company’s common stock and cash in lieu of fractional shares.  Company stock issued totaled 1,382,940 shares valued at approximately $168.5 million, with cash of $0.3 million comprising the remainder of merger consideration.

Full integration and system conversion activities are expected to be completed in the second quarter of 2026. The

Company continues to manage integration activities with a focus on operational continuity, client retention, risk

management, and capital and liquidity discipline.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K.

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

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

​

Further, the valuation of acquired loans involves significant estimates and assumptions based on information available as of the acquisition date. Loans acquired in a business combination are evaluated either individually or in pools of loans with similar characteristics; including consideration of a credit component. A number of factors are considered in determining the

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estimated fair value of purchased loans including, among other things, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, estimated holding periods, contractual interest rates compared to market interest rates, and net present value of cash flows expected to be received.

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

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

RESULTS OF OPERATIONS

The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2025 and 2024 and results of operations for each of the years then ended. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 28, 2025 for a discussion and analysis of the more significant factors that affected periods prior to 2024.

General.  Net income increased $5.9 million, or 9.0%, to $71.5 million for the year ended December 31, 2025, from $65.6 million for the year ended December 31, 2024. Net interest income increased by $13.9 million and noninterest income increased by $2.5 million from 2024 to 2025. These increases were offset by an increase in the provision for credit losses of $2.1 million and an increase in noninterest expenses of $5.7 million year-over-year.

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

Net interest income increased to $151.7 million for the year ended December 31, 2025, from $137.8 million for the year ended December 31, 2024. Total average interest-earning assets increased to $4.02 billion for the year ended December 31, 2025 from $3.81 billion for the year ended December 31, 2024. The Bank’s net interest margin increased seventeen basis points to 3.82% for the year ended December 31, 2025, up from 3.65% for the year ended December 31, 2024.

Interest Income.  Total interest income increased $15.3 million, or 7.4%, to $221.7 million for the year ended December 31, 2025, up from $206.4 million for the year ended December 31, 2024. This increase was driven by an increase in average rates earned on interest-earning assets, rising from 5.45% during 2024 to 5.56% during 2025, and a $209.6 million increase in average interest-earning assets during 2025 when compared to 2024.

Interest Expense.  Total interest expense increased $1.5 million, or 2.1%, to $70.1 million for the year ended December 31, 2025, up from $68.6 million for the year ended December 31, 2024. This increase was driven by a $205.2 million increase in average interest-bearing liabilities which offset a decrease in the average rates paid on interest-bearing liabilities from 2.69% during 2024 to 2.54% during 2025.

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Interest expense on interest-bearing deposits decreased by $0.5 million to $63.7 million for the year ended December 31, 2025, from $64.2 million for the year ended December 31, 2024. This decrease was due to a lower interest rate environment driving a decrease in average rates paid on interest-bearing deposits from 2.61% during 2024 to 2.43% during 2025. This decline in average rates paid more than offset growth of $163.2 million year-over-year in average interest-bearing deposits.

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

We recorded a provision for credit losses of $1.3 million for the year ended December 31, 2025, compared to a negative provision of $0.8 million for the year ended December 31, 2024. Metrics regarding the credit quality of the Bank’s loan portfolio continued to show very little in terms of credit stress during 2025. The positive provision for credit losses during 2025 related to the growth of the loan portfolio. The negative provision for credit losses during 2024 related to improvement in financial trends related to two relationships that were part of a previous institution acquisition, which allowed for a reduction in specific reserves related to them. The ACL-Loans was $44.4 million, or 1.23% of total loans, at December 31, 2025 compared to $44.2 million, or 1.26% of total loans, at December 31, 2024.

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

Noninterest income increased by $2.5 million, or 12.9% to $22.2 million for 2025, up from $19.7 million during 2024. Service charge income increased by $0.4 million for 2025 compared to 2024, the result of normal inflationary impacts on a slightly larger customer base. Income from Ansay increased by $0.4 million, or 11.8%, for the full year of 2025 compared to 2024 as recent acquisitions by Ansay have enhanced its profitability. Net gains on sale of mortgage loans increased $0.5 million year-over-year due to a rise in secondary market loan origination activity resulting from lower prevailing mortgage interest rates during 2025. The valuation of the Company’s mortgage servicing rights (“MSR”) is impacted by many factors and can be volatile year-to-year, but the overall valuation adjustments were not material to 2025 or 2024. Proceeds on Company owned life insurance policies, which increased from $0.5 million in 2024 to $1.1 million in 2025, drove the increase in other noninterest income. The major components of our noninterest income are listed in the table below:

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Noninterest Expense.  Noninterest expense increased $5.7 million to $84.5 million for the year ended December 31, 2025, up from $78.8 million for the year ended December 31, 2024. Personnel expense increased $1.6 million, or 3.8%, due to customary pay raises year-over-year. Occupancy expense increased $1.9 million, or 31.8%, due to construction of one new branch location in Sturgeon Bay, Wisconsin as well as the razing and rebuilding of a branch location in Denmark, Wisconsin. The razing of the former branch in Denmark led to a loss of $0.9 million which is included in occupancy expense. Data processing expense increased by $0.6 million during 2025 compared to 2024. Expenses related to the Centre acquisition totaled $1.5 million during 2025. The lack of a similar acquisition during 2024 caused increases in the areas of outside service fees and other noninterest expense. Amortization of intangibles decreased by $0.8 million year-over-year, the result of using the sum-of-the-years-digits method of amortization on core deposit intangibles which takes more expense in years immediately following the acquisition which created them. The major components of our noninterest expense are listed in the table below:

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Income Tax Expense.  We recorded a provision for income taxes of $16.7 million for the year ended December 31, 2025, compared to $14.0 million for the year ended December 31, 2024, reflecting effective tax rates of 18.9% and 17.5%, respectively. The Company’s home state passed tax legislation during the third quarter of 2023 which exempted income produced by a significant portion of the Company’s loans from taxation in Wisconsin. Final rules relating to qualifying loans under this legislation were published during the first quarter of 2024 and allowed the Company to reduce its estimated tax liability by $1.3 million, resulting in the lower provision for income taxes and effective tax rate during 2024. The effective tax rates were reduced from the statutory federal and state income tax rates during both periods as a result of tax-exempt interest income produced by certain qualifying loans and investments in the Bank’s portfolios.

New federal tax legislation was signed into law on July 4, 2025, which includes a broad range of tax reform provisions, and

extends or makes permanent various tax provisions that were originally enacted in the 2017 Tax Cuts and Jobs Act.

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NET INTEREST MARGIN

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

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

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Rate/Volume Analysis

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

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CHANGES IN FINANCIAL CONDITION

Total Assets.  Total assets increased $11.0 million, or 0.3%, to $4.51 billion at December 31, 2025 from $4.50 billion at December 31, 2024. An increase in the Company’s loan portfolio was offset by a decrease in its investment portfolio, leading to little growth in total assets year-over-year.

Cash and Cash Equivalents.  Cash and cash equivalents decreased by $18.1 million, or 6.9%, to $243.2 million at December 31, 2025 from $261.3 million at December 31, 2024.

Investment Securities.  The carrying value of total investment securities decreased by $65.7 million to $268.1 million at December 31, 2025 from $333.8 million at December 31, 2024. Proceeds from maturing investments were utilized to fund the Company’s growing loan portfolio during 2025.

Loans.  Net loans increased by $87.3 million, or 2.5%, to $3.56 billion at December 31, 2025 from $3.47 billion at December 31, 2024. Strong growth in the Company’s commercial and industrial loan portfolio during 2025 was offset by a concerted effort to reduce commercial and residential real estate loans as a percentage of overall balances.

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Company-Owned Life Insurance.  At December 31, 2025, our investment in company-owned life insurance was $61.1 million, a decrease of $0.4 million from $61.5 million at December 31, 2024.

Deposits.  Deposits increased $34.7 million, or 1.0%, to $3.70 billion at December 31, 2025 from $3.66 billion at December 31, 2024. Elevated seasonal deposit balances at the end of 2024 led to a high beginning portfolio balance to start 2025. While the seasonal component of deposits was lower at the end of 2025, growth in the core deposit portfolio allowed for some growth year-over-year.

Borrowings.  At December 31, 2025, borrowings consisted of advances from the FHLB of Chicago and subordinated debt to other banks and individuals. FHLB borrowings decreased by $25.4 million to $110.0 million at December 31, 2025 from $135.4 million at December 31, 2024, as maturing FHLB borrowings were not reissued. Subordinated debt remained stable at $12.0 million at December 31, 2025 and December 31, 2024.

Stockholders’ Equity.  Total stockholders’ equity increased $4.1 million, or 0.6%, to $643.8 million at December 31, 2025 from $639.7 million at December 31, 2024. Repurchases of the Company’s common stock totaling $22.0 million and dividends declared totaling $52.5 million offset the positive impact of earnings totaling $71.5 million during 2025.

LOANS

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

Our loan portfolio is our most significant earning asset, comprising 80.0%, 78.3% and 79.3% of our total assets as of December 31, 2025, 2024 and 2023, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.

Total loans increased $87.5 million, or 2.5%, to $3.60 billion as of December 31, 2025 as compared to $3.52 billion as of December 31, 2024. This loan growth was comprised of an increase of $56.9 million, or 9.6%, in commercial and industrial loans, an increase of $93.2 million, or 5.5%, in commercial real estate loans, a decrease of $62.5 million, or 22.5%, in construction and development loans (much of which moved into commercial real estate loans), a decrease of $0.9 million, or 0.1%, in residential 1-4 family loans and an increase of $0.8 million, or 1.1%, in consumer and other loans.

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The following table presents the balance and associated percentage of each major category in our loan portfolio at December 31, 2025, 2024, and 2023:

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Loan segments

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

Commercial and Industrial (C&I).  Our C&I portfolio totaled $647.1 million and $590.2 million at December 31, 2025 and 2024, respectively, and represented 18% and 17% of our total loans, respectively. C&I loans increased 9.6% during 2025 due to the increased business needs of customers in our markets in response to strong economic conditions.

Commercial Real Estate (CRE).  Our CRE loan portfolio totaled $1.78 billion and $1.68 billion at December 31, 2025 and 2024, respectively, and represented 49% and 48% of our total loans, respectively. Our CRE loans increased 5.5% during 2025, with a majority of this growth occurring in the multi-family segment. The growth in multi-family loans during 2025 primarily came through balances that were in construction and development loans at December 31, 2024. Outside of this migration CRE loans saw little growth during 2025 as a result of the aforementioned concerted effort by management to reduce CRE as a percentage of the Company’s overall loan portfolio. Management continues to monitor portfolio concentrations and credit quality metrics to maintain alignment with the Company’s risk appetite.

Construction and Development (C&D).  Our C&D loan portfolio totaled $215.5 million and $278.0 million at December 31, 2025 and 2024, respectively, and represented 6% and 8% of our total loans, respectively. C&D loans decreased 22.5% during 2025 as construction in progress as of December 31, 2024, completed the construction phase and migrated to CRE balances, primarily multi-family.

Residential 1-4 Family. Our residential 1-4 family loan portfolio totaled $895.0 million and $895.9 million at December 31, 2025 and 2024, respectively, and represented 25% of our total loans at both of these dates.

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

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

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We were servicing mortgage loans sold to others without recourse of approximately $1.20 billion and $1.17 billion at December 31, 2025 and 2024, respectively.

Loans sold with the retention of servicing assets result in the capitalization of servicing rights. Loan servicing rights are subsequently amortized as an offset to other income over the estimated period of servicing. The net balance of capitalized servicing rights amounted to $13.7 million and $13.4 million at December 31, 2025 and 2024, respectively.

Consumer Loans.  Our consumer loan portfolio totaled $54.8 million and $55.4 million at December 31, 2025 and 2024, respectively, and represented 2% of our total loans at both dates. Consumer loans include secured and unsecured loans, lines of credit and personal installment loans.

Other Loans.  Our other loans totaled $16.9 million and $15.6 million at December 31, 2025 and 2024, respectively, and are immaterial to the overall loan portfolio. The other loans category consists primarily of overdrawn depository accounts, loans utilized to purchase or carry securities and loans to nonprofit organizations.

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Loan Portfolio Maturities

The following tables summarize the dollar amount of loans maturing in our portfolio based on their loan type, fixed or variable rate of interest, and contractual terms to maturity at December 31, 2025. The tables do not include any estimate of prepayments, which can significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

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NONPERFORMING ASSETS

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

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

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

Nonaccrual Loans

Loans are typically placed on nonaccrual status when any payment of principal and/or interest is 90 days or more past due, unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. Loans are also placed on nonaccrual status when management believes, after considering economic and business conditions, that

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the principal or interest will not be collectible in the normal course of business. We monitor closely the performance of our loan portfolio. In addition to the monitoring and review of loan performance internally, we have also contracted with an independent organization to review our commercial and retail loan portfolios. The status of delinquent loans, as well as situations identified as potential problems, is reviewed on a regular basis by senior management.

ALLOWANCE FOR CREDIT LOSSES - LOANS

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

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

At December 31, 2025, the ACL - Loans was $44.4 million (representing 1.23% of year-end loans). Bank First recorded a provision for credit losses totaling $1.3 million during 2025. While the Bank’s overall credit quality has remained consistently strong, the provision for credit losses was necessary due to growth in the loan portfolio.

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

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

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

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SOURCES OF FUNDS

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

Deposits.  Our current deposit products include noninterest-bearing and interest-bearing checking accounts, savings accounts, money market accounts, and certificate of deposits. As of December 31, 2025, deposit liabilities accounted for approximately 82.0% of our total liabilities and equity. We accept deposits primarily from customers in the communities in which our branches and offices are located, as well as from small businesses and other customers throughout our lending area. We rely on our competitive pricing and products, quality customer service, and convenient locations and hours to attract and retain deposits. Deposit rates and terms are based primarily on current business strategies, market interest rates, liquidity requirements and our deposit growth goals.

Total deposits were $3.70 billion and $3.66 billion as of December 31, 2025 and 2024, respectively. Noninterest-bearing deposits at December 31, 2025 and 2024 were $1.00 billion and $1.02 billion, respectively, while interest-bearing deposits were $2.69 billion and $2.64 billion at December 31, 2025 and 2024, respectively.

At December 31, 2025, we had a total of $661.0 million in certificates of deposit. This total included $15.1 million of brokered deposits, of which $5.0 million had remaining maturities of one year or less. Based on historical experience and our current pricing strategy, we believe we will retain a large portion of these non-brokered accounts upon maturity.

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

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The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of December 31, 2025:

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Borrowings

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

Securities sold under repurchase agreements

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

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

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Lines of credit and other borrowings

The Company’s other borrowings have historically consisted primarily of short-term FHLB of Chicago advances collateralized by a blanket pledge agreement on the Company’s FHLB capital stock and retail and commercial loans held in the Company’s portfolio. There were $110.0 million and $135.4 million of advances outstanding from the FHLB at December 31, 2025 and 2024, respectively. See Note 14 “Notes Payable” of the Notes to Consolidated Financial Statements under Part II, Item 8 for additional disclosures.

The total loans pledged as collateral were $1.10 billion and $1.47 billion at December 31, 2025 and 2024, respectively.

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

During August 2022, the Company entered into subordinated note agreements with an individual. The Company had outstanding balances of $6.0 million under these agreements as of December 31, 2025 and 2024. These notes were issued with 10-year maturities, carry interest at a fixed rate of 5.25% through August 6, 2027, and at a variable rate thereafter, payable quarterly. These notes are callable on or after August 6, 2027 and qualify for Tier 2 capital for regulatory purposes. The individual associated with these subordinated note agreements is not a related party of the Company.

INVESTMENT SECURITIES

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

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

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separate component of other comprehensive income. The fair value of securities available for sale totaled $164.4 million and included $0.4 million gross unrealized gains and gross unrealized losses of $7.8 million at December 31, 2025. At December 31, 2024, the fair value of securities available for sale totaled $223.1 million and included negligible gross unrealized gains and gross unrealized losses of $12.9 million.

Securities classified as held to maturity consist of U.S. Treasury securities and obligations of states and political subdivisions. These securities, which management has the intent and ability to hold to maturity, are reported at amortized cost of $103.7 million and $110.8 million as of December 31, 2025 and 2024, respectively.

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

The following tables set forth the composition and maturities of investment securities as of December 31, 2025 and December 31, 2024. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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LIQUIDITY, CASH FLOWS, AND CAPITAL RESOURCES

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

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

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

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

Net cash flows provided by operating activities totaled $62.5 million during 2025 compared to $65.8 million during 2024. Overall cash flows provided by operations during 2025 was very comparable to 2024, and no single factor contributed materially to an increase or decrease in this area.

Net cash flows used by investing activities totaled $16.0 million during 2025 compared to $252.9 million during 2024. Lower comparable growth in our loan portfolio along with fewer purchases of securities and more maturing securities during 2025 significantly reduced net cash flows used by investing activities compared to 2024.

Net cash flows used by financing activities totaled $64.6 million during 2025 compared to net cash flows provided by financing activities totaling $201.0 million during 2024. The primary difference in year-over-year cash flows related to financing activities was muted growth in deposits during 2025 compared to significant increases in deposits during 2024 as well as significantly higher dividends paid to common shareholders during 2025 compared to 2024.

See the consolidated statement of cash flows elsewhere in this report for further information regarding cash flow activity during 2025 and 2024.

Capital Adequacy.  Total shareholders’ equity was $643.8 million at December 31, 2025, compared to $639.7 million at December 31, 2024. Our total shareholders’ equity increased during 2025 and 2024 as a result of our profitability, reduced by dividends paid and common share repurchases.

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

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The following table reflects capital ratios computed pursuant to the regulatory capital rules as applicable to the Company and the Bank. For more information, see “Business—Supervision and Regulation—Capital Requirements.”

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As previously mentioned, the Company carried $12.0 million of subordinated debt as of December 31, 2025 and 2024. These totals are included in total capital for the Company in the tables above.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

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

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

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Off-Balance Sheet Arrangements.

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

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

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

Loan commitments and standby and direct pay letters of credit do not necessarily represent our future cash requirements because while the borrower has the ability to draw upon these commitments at any time, these commitments occasionally expire without being drawn upon. Our off-balance sheet arrangements as of December 31, 2025 were as follows:

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

Effects of Inflation

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

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