Road Notes: Intact Top Tier Attributes Across Various Fronts; Solid L-T Holding

Research evidence excerpt

Road Notes: Intact Top Tier Attributes Across Various Fronts; Solid L-T Holding

C O M P A NY N O TE

J u n e 2 4 , 2 0 2 6

footprint should support low-to-MSD organic loan growth going forward (ex. intentional acquired loan

run-off) with deposit gathering keeping pace given BFC’s highly holistic model with clients.

Credit Outlook Remains Benign; Acquired Portfolios Being Managed Conservatively. Credit

quality remains a key differentiator for BFC, and mgmt. reiterated that they are not seeing any issues

on the horizon. BFC’s credit process continues to begin with character and capacity to repay, while

collateral is secondary. Loan requests above $0.5M are reviewed by a centralized credit committee

that can make more nimble decisions as quickly as one day, which is a differentiator in winning

quality relationships. The 1Q increase in NPLs reflected a handful of identifiable items, including

FNBT-related credits and one legacy BFC nonprofit relationship in Green Bay that is guaranteed by

another nonprofit and is not expected to result in a loss. Mgmt. also remains comfortable with the

fracking/sand/rail car-related credit acquired via the Hometown acquisition and is not seeing loss

content on the foreseeable horizon. Within agriculture, BFC’s portfolio is primarily dairy-oriented,

and dairy prices remain supportive. Row crop and fertilizer borrowers are showing some stress;

however, BFC’s exposure in these areas is relatively limited. With PSBQ, mgmt. is comfortable with

the core franchise but is intentionally more cautious around certain Milwaukee-area non-core loans

and participations where PSBQ is not capturing full relationships. If these credits do not exhibit

stress, mgmt. expects to naturally amortize these down over time vs. forcing immediate exits. We