14 unchanged sentences
We cannot assure you that our credit risk approval and monitoring procedures have identified or will identify all of these credit risks, and they cannot be expected to completely eliminate our credit risks.
−Removed: If the overall economic climate in the U.S., generally, or our markets, specifically, deteriorates, or if the financial condition of our borrowers otherwise declines, then our borrowers may experience difficulties in repaying their loans and leases, and the level of non-performing loans and leases, charge-offs, and delinquencies could rise and require increases in the provision for loan and lease losses, which may adversely affect our business, results of operations, and financial condition.
+Added: If the overall economic climate in the U.S., generally, or in our markets, specifically, deteriorates, or if the financial condition of our borrowers otherwise declines, then our borrowers may experience difficulties in repaying their loans and leases, and the level of non-performing loans and leases, charge-offs, and delinquencies could rise.
+Added: This would, in turn, require increases in the provision for loan and lease losses, which may adversely affect our business, results of operations, and financial condition.
Our allowance for loan and lease losses may not be adequate to cover actual losses.
2 unchanged sentences
The allowance contains provisions for probable losses that have been identified relating to specific relationships, as well as probable losses inherent in our loan and lease portfolio that are not specifically identified.
−Removed: Additions to the allowance for loan and lease losses, which are charged to earnings through the provision for loan and lease losses, are determined based on a variety of factors, including an analysis of our loan and lease portfolio by segment, historical loss experience, and an evaluation of current economic conditions in our markets.
+Added: Additions to the allowance for loan and lease losses, which are charged to earnings through the provision for loan and lease losses, are determined based on a variety of factors, including an analysis of our loan and lease portfolio by segment, historical loss experience, subjective factors, and an evaluation of current economic conditions in our markets.
The actual amount of loan and lease losses is affected by changes in economic, operating, and other conditions within our markets, which may be beyond our control, and such losses may exceed current estimates.
27 unchanged sentences
Our commercial loans are typically larger in amount than loans to individual consumers and therefore, have the potential for larger losses on an individual loan basis.
−Removed: Additionally, asset-based borrowers are usually highly leveraged and/or have inconsistent historical earnings.
+Added: Additionally, some of our niche commercial lending clients are highly leveraged and/or have inconsistent historical earnings.
Significant adverse changes in various industries could cause rapid declines in values and collectability associated with those business assets resulting in inadequate collateral coverage that may expose us to future losses.
4 unchanged sentences
The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management.
−Removed: When weaknesses are identified, the SBA may request corrective actions or impose other restrictions, including revocation of
−Removed: the lender’s Preferred Lender status.
+Added: When weaknesses are identified, the SBA may request corrective actions or impose other restrictions, including revocation of the lender’s Preferred Lender status.
If we lose our status as a Preferred Lender, we may lose our ability to compete effectively with other SBA Preferred Lenders, and as a result we could experience a material adverse effect to our financial results.
Any changes to the SBA program, including changes to the level of guaranty provided by the federal government on SBA loans or changes to the level of funds appropriated by the federal government to the various SBA programs, may also have an adverse effect on our business, results of operations, and financial condition.
−Removed: Typically we sell the guaranteed portions of our SBA 7(a) loans in the secondary market.
+Added: We often choose to sell the guaranteed portions of our SBA 7(a) loans in the secondary market.
These sales result in earning premium income and create a stream of future servicing income.
2 unchanged sentences
We also have credit risk on the guaranteed portion if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Bank.
+Added: The total outstanding balance of sold SBA loans as of December 31, 2022 was $88.5 million.
In order for a borrower to be eligible to receive an SBA loan, it must be established that the borrower would not be able to secure a bank loan without the credit enhancements provided by a guaranty under the SBA program.
4 unchanged sentences
Non-performing assets take significant time to resolve, adversely affect our results of operations and financial condition, and could result in losses.
−Removed: At December 31, 2021, our non-performing loans and leases totaled $6.4 million, or 0.28% of our gross loan and lease portfolio, and our non-performing assets (which include non-performing loans and foreclosed properties) totaled $6.5 million, or 0.25% of total assets.
+Added: At December 31, 2022, our non-performing loans and leases totaled $3.7 million, or 0.15% of our gross loan and lease portfolio, and our non-performing assets (which include non-performing loans and repossessed assets) totaled $3.8 million, or 0.13% of total assets.
Our non-performing assets adversely affect our net income in various ways.
We do not record interest income on non-accrual loans, thereby adversely affecting our net income and returns on assets and equity, increasing our loan administration costs, and adversely affecting our efficiency ratio.
−Removed: When we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its then net realizable value, less estimated selling costs, which may result in a loss.
−Removed: These non-performing loans and foreclosed properties also increase our risk profile and the capital our regulators believe is appropriate in light of such risks.
+Added: When we take collateral in repossession and similar proceedings, we are required to mark the collateral to its then net realizable value, less estimated selling costs, which may result in a loss.
+Added: These non-performing loans and repossessed assets also increase our risk profile and the capital our regulators believe is appropriate in light of such risks.
The resolution of non-performing assets requires significant time commitments from management and can be detrimental to the performance of their other responsibilities.
4 unchanged sentences
This will change the current method of providing allowances for loan and lease losses that are probable, which may require us to increase our allowance for loan and lease losses, and to greatly increase the types of data we will need to collect and review to determine the appropriate level of the allowance for loan and lease losses.
−Removed: Any increase in our allowance for loan and lease losses or expenses incurred to determine the appropriate level of the allowance for loan and lease losses may have a material adverse effect on our financial condition and results of operations.
+Added: Any increase in our allowance for loan and lease losses or expenses incurred to determine the appropriate level of the allowance for loan and lease losses may have a material adverse effect on our
+Added: financial condition and results of operations.
See Note 1 – Nature of Operations and Summary of Significant Accounting Policies in the Consolidated Financial Statements for additional information.
5 unchanged sentences
Such account and deposit balances can decrease when clients perceive alternative investments as providing a better risk/return profile.
−Removed: If clients move money out of bank deposits and into other investments, we may increase our utilization of wholesale deposits, FHLB advances, and other wholesale funding sources necessary to fund
−Removed: desired growth levels.
+Added: If clients move money out of bank deposits and into other investments, we may increase our utilization of wholesale deposits, FHLB advances, and other wholesale funding sources necessary to fund desired growth levels.
Because these funds generally are more sensitive to interest rate changes than our targeted in-market deposits, they are more likely to move to the highest rate available.
19 unchanged sentences
However, the structure of our balance sheet and resultant sensitivity to interest rates in various scenarios may change in the future.
−Removed: Additionally, interest rate increases on variable rate loans often result in larger payment requirements for our borrowers, which increases the potential for default.
+Added: Interest rate increases on variable rate loans often result in larger payment requirements for our borrowers, which increases the potential for default.
At the same time, the marketability of underlying collateral may be adversely affected by any reduced demand resulting from higher interest rates.
1 unchanged sentence
Changes in interest rates also can affect the value of loans.
−Removed: An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows.
+Added: An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of
+Added: income recognized, which could have an adverse effect on our results of operations and cash flows.
Further, when we place a loan on non-accrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income.
12 unchanged sentences
The July 27th Announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021.
−Removed: The dissolution of the London Interbank Offered Rate (LIBOR) impacts all borrowers and banks that use LIBOR as a base rate.
+Added: The dissolution of the LIBOR impacts all borrowers and banks that use LIBOR as a base rate.
LIBOR will continue to be published until June 30, 2023, however, banks are no longer allowed to issue new LIBOR-based products after December 31, 2021.
2 unchanged sentences
The Corporation has developed a LIBOR transition team to complete the transition away from LIBOR to an alternative reference rate such as SOFR or Prime.
−Removed: In addition to SOFR or Prime, First Business Bank may also offer other benchmark rates as substitutions for LIBOR, including BSBY and Ameribor.
+Added: In addition to SOFR or Prime, FBB may also offer other benchmark rates as substitutions for LIBOR, including BSBY and Ameribor.
The transition team has added language to new loan agreements regarding the use of alternative reference rates and the Corporation has evaluated existing loan agreements linked to LIBOR and will work with those parties to modify the agreements.
−Removed: The manner and impact of the transition from LIBOR to an alternative reference rate, as well as the effect of these developments on our compliance costs, funding costs, loan and security portfolios, derivatives, asset-liability management, and business, is uncertain.
+Added: The Corporation does not expect the manner and impact of the transition from LIBOR to an alternative reference rate, as well as the effect of these developments on our compliance costs, funding costs, loan and security portfolios, derivatives, asset-liability management, and business, to have a material impact on the Consolidated Financial Statements.
Operational Risks
1 unchanged sentence
A successful cyber-attack or other breach of our information systems could adversely affect the Corporation’s business, financial condition or results of operations and damage its reputation.
−Removed: In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against our businesses and consumers.
−Removed: Because the methods of cyber-attacks change frequently or, in some cases, are not recognized until launch, we are not able to anticipate or implement effective preventive measures against all possible security breaches and the probability of a successful attack cannot be predicted.
+Added: The methods of cyber-attacks change frequently or, in some cases, are not recognized until launch, we are not able to anticipate or implement effective preventive measures against all possible security breaches and the probability of a successful attack cannot be predicted.
Although we employ detection and response mechanisms designed to detect and mitigate security incidents, early detection may be thwarted by persistent sophisticated attacks and malware designed to avoid detection.
2 unchanged sentences
Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments that we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them.
−Removed: We also rely on numerous other third-party service providers to conduct other aspects of our business operations and face similar risks relating to them.
+Added: We also rely on numerous other third-party
+Added: service providers to conduct other aspects of our business operations and face similar risks relating to them.
While we conduct security assessments on our higher risk third party service providers, we cannot be sure that their information security protocols are sufficient to withstand a cyber-attack or other security breach.
41 unchanged sentences
Strategic and External Risks
−Removed: The COVID-19 pandemic could materially adversely affect the Corporation’s business and financial results, and the extent of any such effects is dependent upon uncertain and unpredictable future events.
+Added: The Corporation’s business and financial results could be materially and adversely affected by widespread public health events.
The COVID-19 pandemic has negatively impacted the global economy, disrupting global supply chains and equity markets and creating significant volatility and disruption in financial and labor markets.
−Removed: In addition, the pandemic resulted in temporary closures of many businesses and the institution of social distancing and stay-at-home requirements in many states and communities, including Wisconsin, Kansas, and Missouri.
−Removed: The pandemic could result in the continued and increased recognition of credit losses in the Corporation’s loan portfolio and increases in the Corporation’s allowance for credit losses, particularly if the impact on the global economy worsens.
−Removed: The COVID-19 pandemic, including, in part, supply chain disruption and the effects of the extensive pandemic-related government stimulus, has caused inflationary pressure in the U.S.
+Added: In addition, the pandemic resulted in temporary closures of many businesses and the institution of social distancing and stay-at-home requirements in many states and communities, including Wisconsin, Kansas, and Missouri, The COVID-19 pandemic, including, in part, supply chain disruption and the effects of the extensive pandemic-related government stimulus, has caused inflationary pressure in the U.S.
We expect to be impacted by elevated levels of inflation and the corresponding upward pressure on interest rates.
+Added: The COVID-19 pandemic, widespread recurrences of COVID-19 or similar pandemics, or other future widespread public health epidemics could result in the continued and increased recognition of credit losses in the Corporation’s loan portfolio and increases in the Corporation’s allowance for credit losses, particularly to the extent that there is a significant negative impact on the global economy.
Because of changing economic and market conditions affecting issuers, the Corporation may be required to recognize impairments on the securities it holds.
−Removed: Furthermore, the demand for the Corporation’s products and services may be impacted, which would adversely affect the Corporation’s revenue.
−Removed: We cannot predict how further outbreaks, new variants, or the efficacy of vaccines might impact our financial condition and results of operation.
−Removed: The extent to which the COVID-19 pandemic impacts the Corporation’s business, results of operations, and financial condition, as well as the Corporation’s regulatory capital, liquidity ratios, and stock price, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.
+Added: Furthermore, the demand for the Corporation’s products and services may be impacted, which could materially adversely affect the Corporation’s revenue.
+Added: We cannot predict how further outbreaks, new variants, the efficacy of vaccines or future widespread public health epidemics, should they occur, might impact our financial condition and results of operation.
+Added: The extent to which the COVID-19 pandemic, or any future pandemic, impacts the Corporation’s business, results of operations, and financial condition, as well as the Corporation’s regulatory capital, liquidity ratios, and stock price, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any responsive actions taken by governmental authorities and other third parties.
Our business may be adversely affected by conditions in the financial markets and economic conditions generally.
5 unchanged sentences
Our business is concentrated in and largely dependent upon the continued growth and welfare of the general geographical markets in which we operate.
−Removed: Our operations are heavily concentrated in South Central Wisconsin and, to a lesser extent, the Southeast and Northeast regions of Wisconsin and the greater Kansas City Metro and, as a result, our financial condition, results of operations, and cash flows are significantly impacted by changes in the economic conditions in those areas.
+Added: Our operations are heavily concentrated in southern Wisconsin and, to a lesser extent, the Northeast regions of Wisconsin and the greater Kansas City Metro and, as a result, our financial condition, results of operations, and cash flows are significantly impacted by changes in the economic conditions in those areas.
Our success depends to a significant extent upon the business activity, population, income levels, deposits, and real estate activity in these markets.
21 unchanged sentences
During 2021, our annual impairment test conducted August 1, 2021 indicated that the estimated fair value of the reporting unit exceeded the carrying value (including goodwill).
−Removed: Depending on market conditions, economic forecasts, results of operations, additional adverse circumstances or other factors, the goodwill impairment analysis may require additional review of assumptions and outcomes prior to our next annual impairment testing date of August 1, 2022.
+Added: on market conditions, economic forecasts, results of operations, additional adverse circumstances or other factors, the goodwill impairment analysis may require additional review of assumptions and outcomes prior to our next annual impairment testing date of August 1, 2022.
In the event that we conclude that all or a portion of our goodwill may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings.
7 unchanged sentences
If we determine that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance will need to be recognized and this would result in a corresponding charge against our earnings.
−Removed: Competition from other financial institutions could adversely affect our profitability.
+Added: Competition from other financial services providers could adversely affect our profitability.
We encounter heavy competition in attracting commercial loan, specialty finance, deposit, and private wealth management clients.
20 unchanged sentences
Our private wealth management results of operations may be negatively impacted by changes in economic and market conditions.
−Removed: Our private wealth management results of operations may be negatively impacted by changes in general economic conditions and the conditions in the financial and securities markets, including the values of assets held under management.
−Removed: Our management contracts generally provide for fees payable for services based on the market value of assets under management;
+Added: Our private wealth management results of operations may be negatively impacted by changes in general economic conditions and the conditions in the financial and securities markets, including the values of assets held under management, which are beyond our control.
+Added: Our management contracts generally provide for fees payable for services based on the market value of trust assets under management;
therefore, declines in securities prices will generally have an adverse effect on our results of operations from this business.
26 unchanged sentences
Any failure to maintain such U.S.
−Removed: government operations, and the after-effects of such shutdown, could impede our ability to originate SBA loans and sell such loans in the secondary market, would materially adversely affect our business, results of operations, and financial condition.
+Added: government operations, and the after-effects of such shutdown, could impede our ability to originate SBA loans and sell such loans in the secondary market, and would materially adversely affect our business, results of operations, and financial condition.
In addition, many of our investment securities are issued by, and some of our loans are made to, the U.S.
29 unchanged sentences
If, as a result of an examination, a federal banking agency was to determine that the financial condition, capital resources, asset quality, asset concentration, earnings prospects, management, liquidity, sensitivity to market risk, or other aspects of any of our operations has become unsatisfactory, or that we or our management is in violation of any law or regulation, it could take a number of different remedial actions as it deems appropriate.
−Removed: These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the asset composition of our portfolio or balance sheet, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance.
+Added: These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the asset composition of our portfolio or balance sheet, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an
+Added: imminent risk of loss to depositors, to terminate our deposit insurance.
If we become subject to such regulatory actions, our business, results of operations, and financial condition may be adversely affected.
21 unchanged sentences
Our ability to raise capital, if needed, will depend in part on our financial performance and conditions in the capital markets at that time, and accordingly, we cannot guarantee our ability to raise capital on terms acceptable to us.
−Removed: In addition, if we decide to raise equity capital in the future, the interests of our shareholders could be diluted.
+Added: If we decide to raise equity capital in the future, the interests of our shareholders could be diluted.
Any issuance of common stock would dilute the ownership percentage of our current shareholders and any issuance of common stock at prices below tangible book value would dilute the tangible book value of each existing share of our common stock held by our current shareholders.
7 unchanged sentences
General Risk Factors
+Added: Our ability to attract and retain talented employees is critical to our success.
+Added: Our success depends on our ability to continue to recruit and retain talented employees.
+Added: Competition for such employees is intense, which has led to an increase in compensation throughout the labor market, and accordingly, an increase in payroll costs for employers.
+Added: Prospective employees are also placing an emphasis on flexible, including remote, work arrangements and other considerations, and such arrangements can provide employees with more employment options and
+Added: mobility, making them more difficult to retain.
+Added: If we are unable to meet the expectations of employees and prospective employees, and thus, retain or attract employees, it could have a substantial adverse effect on our business.
+Added: We rely on our management and the loss of one or more of those managers may harm our business.
+Added: Our success has been and will be greatly influenced by our continuing ability to retain the services of our existing senior management and to attract and retain additional qualified senior and middle management.
+Added: The unexpected loss of key management personnel or the inability to recruit and retain qualified personnel in the future could have an adverse effect on our business and financial results.
+Added: In addition, our failure to develop and/or maintain an effective succession plan will impede our ability to quickly and effectively react to unexpected loss of key management, and in turn, may have an adverse effect on our business, results of operations, and financial condition.
Negative publicity could damage our reputation and adversely impact our business and financial results.
7 unchanged sentences
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could cause us to report a material weakness in internal control over financial reporting and conclude that our controls and procedures are not effective, which could have a material adverse effect on our business, results of operations, and financial condition.
−Removed: We rely on our management and the loss of one or more of those managers may harm our business.
−Removed: Our success has been and will be greatly influenced by our continuing ability to retain the services of our existing senior management and to attract and retain additional qualified senior and middle management.
−Removed: The unexpected loss of key management personnel or the inability to recruit and retain qualified personnel in the future could have an adverse effect on our business and financial results.
−Removed: In addition, our failure to develop and/or maintain an effective succession plan will impede our ability to quickly and effectively react to unexpected loss of key management, and in turn, may have an adverse effect on our business, results of operations, and financial condition.
−Removed: Our ability to attract and retain talented employees is critical to our success.
−Removed: Our success depends on our ability to continue to recruit and retain talented employees.
−Removed: Competition for such employees is intense, particularly as a result of labor market issues caused by the ongoing COVID-19 pandemic, which has led to an increase in compensation throughout the labor market, and accordingly, an increase in payroll costs for employers.
−Removed: Prospective employees are also placing an emphasis on flexible, including remote, work arrangements and other considerations, and such arrangements can provide employees with more employment options and mobility, making them more difficult to retain.
−Removed: If we are unable to meet the expectations of employees and prospective employees, and thus, retain or attract employees, it could have a substantial adverse effect on our business.
Unresolved Staff Comments
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.