BFC

MKT CAP $1.6BP/E 18.5DIV YIELD —FCF YIELD 2.70%REV TTM —NET INCOME $81.1M +17.1%NET CASH $264M52W 119.08 – 158.42SEC XBRL · TTM TO Invalid Date

How BFC rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

69%

of sentences unchanged

Added

new sentences

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sentences removed

Length

+754

words, now 13,795

New in FY2025

In 2023, the Federal Reserve, OCC, and FDIC issued a final rule to modernize their respective CRA regulations.
The revised rules would substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026, and revised data reporting requirements taking effect January 1, 2027.
The revised CRA regulations have been subject to an injunction since March 29, 2024.
On July 16, 2025, the Federal Reserve, OCC, and FDIC issued a joint proposal to rescind the 2023 modernization rule.
The agencies continue to apply the CRA rules as they existed before the 2023 modernization, considering the injunction and pending finalization of the recission of the modernization rule.
Our business and financial performance are vulnerable to weak economic conditions in the financial markets generally and specifically in the states of Wisconsin and Illinois, the principal markets in which we conduct business.
A deterioration in economic conditions in the global and financial markets as well as our primary market areas caused by inflation, recession, pandemics, outbreaks of hostilities or other international or domestic occurrences, unemployment, trade policies and tariffs, plant or business closings or downsizing, changes in securities markets or other factors could result in the following consequences, any of which could materially and adversely affect our business: increased loan delinquencies; problem assets and foreclosures; significant write-downs of asset values; lower demand for our products and services; reduced low cost or noninterest-bearing deposits or increased volatility in customer deposit balances; intangible asset impairment; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing our customers’ ability to repay outstanding loans, and reducing the value of assets and collateral associated with our existing loans.
Additionally, all our operating locations are within the states of Wisconsin and Illinois, and a significant majority of our loans and deposits are made to borrowers or received from depositors who live and/or primarily conduct business in Wisconsin and Illinois.
This geographic concentration imposes risks from lack of geographic diversification, as adverse economic developments in Wisconsin or Illinois, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio.
Any regional or local economic downturn that affects Wisconsin or Illinois or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and adversely than our competitors whose operations are less geographically concentrated.
In addition, the financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict or trade wars.
Narrowing interest rate spreads could adversely affect our earnings and financial condition.
We cannot control or predict changes in interest rates with certainty.
Regional and local economic conditions, competitive pressures, and the policies of regulatory authorities, including monetary policies of the Federal Reserve Board (“FRB”), affect interest income and interest expense and may influence customer deposit behavior, pricing sensitivity and competitive dynamics.
We are currently operating in an environment in which the Federal Reserve has shifted toward reducing interest rates, although modestly, with cuts implemented in September, October and December 2025, with future interest rate changes, either increases or decreases uncertain, and dependent on the Federal Reserve's assessment of economic conditions and inflation.
In addition, as interest rates rise, we may have to offer more attractive interest rates to depositors to compete for deposits, or pursue other sources of liquidity, such as wholesale funds, and may experience changes in the market value of our interest-earnings assets, including our investment securities portfolio.
On the other hand, decreasing interest rates reduce our yield on our variable rate loans and on our new loans, which reduces our net interest income.
An increase in the size of our mortgage servicing rights portfolio may increase our interest rate risk and may result in increased volatility in reported earnings due to non-cash fair value adjustments.
Inflation continued rising in the fourth quarter of 2025, and inflationary pressures may remain elevated into 2026.
Inflationary pressures may also adversely affect the valuation of certain balance sheet assets.
In addition to dividends from the Bank, we have historically had access to a number of alternative sources of liquidity, including the capital markets, but there is no assurance that we will be able to obtain such liquidity on terms that are favorable to us, or at all, particularly during periods of market stress.
In addition, our access to deposits may be affected by the liquidity needs of our depositors and by changes in customer confidence, market sentiment or perceptions regarding the financial services industry.
In particular, a substantial majority of our liabilities in 2025 were checking accounts and other liquid deposits, which are payable on demand or upon several days' notice, while by comparison, a substantial majority of our assets were loans, which cannot be called or sold in the same time frame.
Moreover, our clients could withdraw their deposits in favor of alternative investments or non-bank financial products.
In addition, we expect that the allowance for credit losses under the CECL standard to be more volatile and sensitive to changes in economic conditions, portfolio composition, and model assumptions, and as such could have an impact on our results of operations.
Changes in the composition, growth or concentration of our loan portfolio may also increase our exposure to credit risk.
If the overall economic climate, including employment rates, real estate markets, interest rates and general economic growth, in the United States, generally, or Wisconsin or Illinois specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the levels of nonperforming loans, charge-offs and delinquencies could rise and require additional provisions for credit losses, which would cause our net income and return on equity to decrease.
Additionally, potential future actions such as the proposed consumer credit card interest rate cap may lead to unprofitable products, especially for riskier borrowers, and could lead to cutting credit lines or eliminating cards, increased reliance on fees and increased debt burdens for those needing credit most, thereby having the potential to negatively impact bank asset quality.
We conduct our banking operations primarily in Wisconsin and Illinois.
Competition is increasingly focused on digital capabilities, customer experience, speed, and convenience, and failure to meet evolving customer expectations may adversely affect our competitive position.
In addition, some competitors may offer banking and payment services through embedded or platform-based models that reduce the need for customers to maintain traditional banking relationships.
Further, as a result of the GENIUS Act, passed in 2025 to provide a regulatory framework for stablecoins in the U.S., increased competition may emerge from issuers of stablecoins and providers of related technology.
As of December 31, 2025, approximately 74.1% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral.
In addition, declines in real estate or disruptions in credit markets could impair borrowers’ ability to refinance or extend loans at maturity, increasing the risk of default or loss.
Certain real estate sectors or property types may be more adversely affected by economic downturns, changes in interest rates, or shifts in market demand, which could further increase credit risk.
Our future success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our management team to execute on our long-term business strategy, which is subject to various internal and external factors, and which requires them to, among other things: maintain and enhance our reputation; attract and retain experienced and talented bankers in each of our markets; maintain adequate funding sources, including by continuing to attract stable, low-cost deposits; enhance our market penetration in our metropolitan markets and maintain our leadership position in our community markets; improve our operating efficiency; implement new technologies to enhance the client experience and keep pace with our competitors; identify attractive acquisition targets, close on such acquisitions on favorable terms and successfully integrate acquired businesses; attract and maintain commercial banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; attract sufficient loans that meet prudent credit standards; originate conforming residential mortgage loans for resale into secondary market to provide mortgage banking income; maintain adequate liquidity and regulatory capital and comply with applicable federal and state banking regulations; manage our credit, interest rate and liquidity risks; develop new, and grow our existing, streams of noninterest income; oversee the performance of third-party service providers that provide material services to our business; and control expenses in line with current projections.
Pursuing multiple strategic initiatives simultaneously, including acquisitions, technology investments or geographic expansion, may place additional strain on management, personnel, systems, and controls.
We believe that our continued growth and future success will depend in large part on the skills of our management team and our ability to motivate and retain these individuals and other key individuals in a competitive labor market for experienced banking and financial services professionals.
The loss of any of their service could reduce our ability to successfully implement our long-term business strategy, disrupt key client or business relationships, or result in a loss of institutional knowledge, our business could suffer and the value of our common stock could be materially adversely affected.
There can be no assurance that we would be able to identify and retain qualified replacements on a timely basis or on terms acceptable to us.

and 45 more.

Gone since FY2024

On October 24, 2023, the Office of the Comptroller of the Currency (“OCC”), Federal Reserve, and FDIC issued a final rule to modernize their respective CRA regulations.
The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026, and revised data reporting requirements taking effect January 1, 2027.
Among other things, the revised rules evaluate lending outside traditional assessment areas generated by the growth of non-branch delivery systems, such as online and mobile banking, apply a metrics-based benchmarking approach to assessment, and clarify eligible CRA activities.
The final rules were challenged in federal court and a preliminary injunction was granted in March 2024 enjoining implementation of the rules.
The effective dates will be extended for each day the injunction remains in place, pending the resolution of the lawsuit.
If the final rules are reinstated, they are likely to make it more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on its CRA exam.
Our business and financial performance are vulnerable to weak economic conditions in the financial markets generally and specifically in the state of Wisconsin, the principal market in which we conduct business.
A deterioration in economic conditions in the global and financial markets as well as our primary market areas caused by inflation, recession, pandemics, outbreaks of hostilities or other international or domestic occurrences, unemployment, trade policies and tariffs, plant or business closings or downsizing, changes in securities markets or other factors could result in the following consequences, any of which could materially and adversely affect our business: increased loan delinquencies; problem assets and foreclosures; significant write-downs of asset values; lower demand for our products and services; reduced low cost or noninterest-bearing deposits; intangible asset impairment; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing our customers’ ability to repay outstanding loans, and reducing the value of assets and collateral associated with our existing loans.
In addition, regulatory scrutiny of the industry has increased and could continue to increase, leading to increased regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or fines.
Additionally, all of our operating locations are within the state of Wisconsin, and a significant majority of our loans and deposits are made to borrowers or received from depositors who live and/or primarily conduct business in Wisconsin.
This geographic concentration imposes risks from lack of geographic diversification, as adverse economic developments in Wisconsin, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio.
Any regional or local economic downturn that affects Wisconsin or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and adversely than our competitors whose operations are less geographically concentrated.
Moreover, the financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict or trade wars.
Narrowing of interest rate spreads could adversely affect our earnings and financial condition.
We cannot control or predict with certainty changes in interest rates.
Regional and local economic conditions, competitive pressures, and the policies of regulatory authorities, including monetary policies of the Federal Reserve Board (“FRB”), affect interest income and interest expense. Beginning in early 2022, in response to growing signs of inflation, the FRB increased interest rates rapidly and made a number of adjustments to monetary policy and liquidity, including quantitative tightening and other balance sheet actions.
Beginning in the third quarter of 2024, the FRB began slowly decreasing interest rates, with future interest rate changes, either increases or decreases uncertain, and dependent on the Federal Reserve's assessment of economic conditions and inflation.
In addition, as interest rates rise, we may have to offer more attractive interest rates to depositors to compete for deposits, or pursue other sources of liquidity, such as wholesale funds. On the other hand, decreasing interest rates reduce our yield on our variable rate loans and on our new loans, which reduces our net interest income.
An increase in the size of our mortgage servicing rights portfolio may increase our interest rate risk.
Inflation continued rising in the fourth quarter of 2024, and inflationary pressures may remain elevated into 2025.
In addition to dividends from the Bank, we have historically had access to a number of alternative sources of liquidity, including the capital markets, but there is no assurance that we will be able to obtain such liquidity on terms that are favorable to us, or at all.
In addition, our access to deposits may be affected by the liquidity needs of our depositors.
In particular, a substantial majority of our liabilities in 2024 were checking accounts and other liquid deposits, which are payable on demand or upon several days' notice, while by comparison, a substantial majority of our assets were loans, which cannot be called or sold in the same time frame.
Moreover, our clients could withdraw their deposits in favor of alternative investments.
In addition, we expect that the allowance for credit losses under the CECL standard to be more volatile and as such could have an impact on our results of operations.
If the overall economic climate, including employment rates, real estate markets, interest rates and general economic growth, in the United States, generally, or Wisconsin, specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the levels of nonperforming loans, charge-offs and delinquencies could rise and require additional provisions for credit losses, which would cause our net income and return on equity to decrease.
We conduct our banking operations primarily in Wisconsin.
As of December 31, 2024, approximately 75.8% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral.
Our future success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our management team to execute on our long-term business strategy, which requires them to, among other things: maintain and enhance our reputation; attract and retain experienced and talented bankers in each of our markets; maintain adequate funding sources, including by continuing to attract stable, low-cost deposits; enhance our market penetration in our metropolitan markets and maintain our leadership position in our community markets; improve our operating efficiency; implement new technologies to enhance the client experience and keep pace with our competitors; identify attractive acquisition targets, close on such acquisitions on favorable terms and successfully integrate acquired businesses; attract and maintain commercial banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; attract sufficient loans that meet prudent credit standards; originate conforming residential mortgage loans for resale into secondary market to provide mortgage banking income; maintain adequate liquidity and regulatory capital and comply with applicable federal and state banking regulations; manage our credit, interest rate and liquidity risks; develop new, and grow our existing, streams of noninterest income; oversee the performance of third-party service providers that provide material services to our business; and control expenses in line with current projections.
We believe that our continued growth and future success will depend in large part on the skills of our management team and our ability to motivate and retain these individuals and other key individuals.
The loss of any of their service could reduce our ability to successfully implement our long-term business strategy, our business could suffer and the value of our common stock could be materially adversely affected.
The number of financial institutions headquartered in Wisconsin, the Midwest United States, and across the country continues to decline through merger and other consolidation activity.
The fair value of our investment securities may decline.
As of December 31, 2024, the fair value of our available for sale securities portfolio was approximately $223.1 million.
As such, we cannot guarantee that the anticipated long-term benefits of these system enhancements and operational initiatives will be realized. We rely extensively on information technology systems to operate our business and an interruption or security breach may disrupt our business operations, result in reputational harm, and have an adverse effect on our operations. As a complex financial institution, we rely extensively on our information technology systems to operate our business, including to process, record, and monitor a large number of client transactions on a continuous basis.
While we have policies, procedures, and systems designed to prevent or limit the effect of possible failures, interruptions, or breaches in security of information systems and business continuity programs designed to provide services in the case of such events, there is no guarantee that these safeguards or programs will address all of the threats that continue to evolve. The development and use of artificial intelligence (AI) presents risks and challenges that may adversely impact our business. The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products.
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI.
Any of these risks could expose the Company to liability or adverse legal or regulatory consequences and harm the Company’s reputation and the public perception of its business or the effectiveness of its security measures. System failure or breaches of our network security, or the security of our third-party data processing partner, including as a result of cyberattacks, could subject us to increased operating costs as well as litigation and other liabilities.
Information security risks have generally increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties.
Although we believe we have appropriate information security procedures and controls in place, our technologies, systems, networks, and our clients’ devices may become the target of cyberattacks that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information, or otherwise disrupt our or our clients’ business operations.

and 20 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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