DEF 14A of First Business Financial Services, Inc., Mar 8, 2024

DEF 14A of First Business Financial Services, Inc.

Filed Mar 8, 2024 · FY20230001521951-24-000025

Open on EDGAR

  1. cda_peer_group

    (1)Amount Previously Paid: (2)Form, Schedule or Registration Statement No.: (3)Filing Party: (4)Date Filed: FIRST BUSINESS FINANCIAL SERVICES, INC. 401 Charmany Drive Madison, WI 53719 March 8, 2024 Dear Fellow Shareholder: We are pleased to invite you to attend the 2024 Annual Meeting of Shareholders ("Annual Meeting") of First Business Financial Services, Inc. (the "Company"), to be held in a virtual meeting format only on Friday, April 26, 2024 at 10:00 a.m. CDT. Shareholders will be provided an opportunity to ask questions, to consider matters described in the proxy statement, and to receive an update on the Company's activities and performance. In connection with the Annual Meeting, we want to share with you some of the recent highlights of the work of the Board of Directors and Company. 2023 marked the culmination of our five-year strategic plan in which the Company committed to growing loans, deposits, and revenues at a 10% annual pace. We surpassed our own expectations by achieving a 17% increase in loans, a 19% increase in in-market deposits, and a 13% increase in operating revenue during the year. We outperformed our peers and delivered significant value to our shareholders by growing pre-tax, pre-provision adjusted earnings by 17% over 2022, while tangible book value per share – arguably the most meaningful measure of our success – rose 13%. Our team executed our plan with consistency and efficiency, producing outstanding results even as our industry confronted the persistent headwinds of a challenging interest rate environment. We introduced our five-year plan in 2019 with the view that long-term success would mean achieving our primary end goal of shareholder returns that consistently outperform peers. Over the five-year period ended December 31, 2023, the Company generated cumulative total shareholder returns ("TSR") exceeding 135%. Over the same period, our peer group(1) delivered a median TSR measuring 32%. The Russell 2000 – a benchmark group including small-cap companies across all industries – returned 60%. Even the large cap S&P 500 Bank index returned only 47% over this time period. We are delighted to share this success with our shareholders. Comprehensive planning has been underway to develop our strategies and establish our goals for the next five-year period. The new strategic plan will be rolled out Company-wide in 2024. We expect our team to prioritize quality balance sheet and revenue growth while optimizing technology for the benefit of our clients and shareholders, evolving with our industry in a manner that stays true to the Company's deep-rooted culture. On behalf of the Board of Directors and Management team, we thank you for your continued support. Your vote is important, no matter how large or small your holdings may be. We hope you join us in supporting the proposals presented at the Annual Meeting. Whether or not you attend, it is very important that your shares are represented at the meeting. Accordingly, please vote your shares by following the instructions on the Notice of Annual Meeting of Shareholders. Sincerely,

  2. cda_peer_group

    | (1) Peer group consists of publicly traded banks with assets between $1.5 billion and $5.5 billion. |

  3. Proxy Statement For Annual Meeting Of Shareholders To Be Held April 26, 2024

    | Laurie S. Benson Executive Director Nurses on Boards Coalition Age: 70 Independent Director since 2018 COMMITTEES •Compensation •Corporate Governance and Nominating, Chair | Experience •Executive Director, Nurses on Boards Coalition (since 2016) •CEO, LSB Unlimited, LLC (since 2009) •Co-Founder and CEO, Inacom Information Services (1984-2009) Qualifications •Technology/Information Security expertise as the co-founder and CEO of an IT systems integrator, from inception until its sale to CORE BTS in 2009 •Governance and Human Resources/Compensation and Strategic Planning expertise acquired through her extensive experience as a CEO and C-Suite advisor on complex issues including board governance, strategy, business growth, innovation, high performance teams, human resources and succession planning; supporting the mission to improve health in communities through the service of nurses on boards, commissions and appointments; and through service on public and private boards •Strategic Planning expertise and Entrepreneurial focus as the co-founder of Inacom Information Services, growing the company from start-up to over 150 employees and three office locations and as the founder of LSB Unlimited, LLC Education •BS, Nursing, University of Wisconsin-Madison Other Boards and Organizations •Director, FBB Board of Directors (since 2009) •Member, FBB Northeast Wisconsin Advisory Board (2012-2021) •Member of the boards of other private organizations | | Corey A. Chambas Chief Executive Officer First Business Financial Services, Inc. Age: 61 Director since 2002 COMMITTEES •None | Experience •Chief Executive Officer (since 2006), President (2005-2023), Chief Operating Officer (2005-2006), Executive Vice President (2002-2005), First Business Financial Services, Inc. •Chief Executive Officer (1999-2006), President (1999-2005), First Business Bank Qualifications •Financial Services Industry and Financial Reporting, Accounting and Financial Controls expertise acquired over more than 35 years in the financial services industry, with a specific focus in the commercial banking sector and leadership roles with responsibility for oversight of all aspects of financial management •Enterprise Risk Management and Strategic Planning expertise developed while serving as CEO of both the Company and FBB with responsibility for enterprise-wide risk, development and execution of the strategic planning process and oversight for six distinct financial services businesses •Human Resources/Compensation expertise through his experience as CEO with responsibility for senior management recruitment and succession planning, oversight of human resources leadership, and Company culture Education •BBA, Finance, Investment & Banking, Wisconsin School of Business, University of Wisconsin-Madison Other Boards and Organizations •Director, FBB Board of Directors (since 2018, 2009-2011, 1999-2006) •Advisory board member and advisor to the board of other private organizations |

  4. Proxy Statement For Annual Meeting Of Shareholders To Be Held April 26, 2024

    | John J. Harris Retired Managing Director Stifel Nicolaus Weisel Age: 71 Independent Director since 2012 COMMITTEES •Audit •Operational Risk | Experience •Managing Director, Investment Banking Financial Institutions Group, Stifel Nicolaus Weisel (2007-2010) and Piper Jaffray & Co. (2005-2007) •Principal, Investment Banking Financial Institutions Group, William Blair & Co., LLC (2000-2005) •Investment Banking Professional, various banking financial institutions (1982-2000) Qualifications •Financial Services Industry experience and Financial Reporting, Accounting and Financial Controls expertise acquired in his over 25 years providing financial advisory services to senior management and boards of publicly traded and privately held companies •Strategic Planning, Legal/Regulatory, and Mergers and Acquisitions expertise acquired over his substantial career serving as an investment banking professional advising clients on mergers and acquisitions, capital formation and execution of public and private capital raises Education •BSSE, Systems Engineering, US Naval Academy •MBA, University of Chicago Other Boards and Organizations •Director, FBB Board of Directors (since 2018) |

  5. Proxy Statement For Annual Meeting Of Shareholders To Be Held April 26, 2024

    | W. Kent Lorenz Owner and Managing Director Lakeside Consulting, LLC Age: 61 Independent Director since 2018 COMMITTEES •Audit •Operational Risk | Experience •Owner and Managing Director, Lakeside Consulting, LLC (since 2017) •Chairman and CEO, Acieta LLC (2014-2017) •President, Midwest Region, Ellison Technologies (2006-2014) and President, Ellison Machinery & Robotics of Wisconsin (1998-2006) Qualifications •Financial Reporting, Accounting and Financial Controls, Strategic Planning and Mergers and Acquisitions expertise developed through acquisitions with Ellison Technologies and the merger to form Acieta, LLC and as Chairman and CEO of Acieta, LLC with responsibility for the company's business strategy development and implementation and oversight of financial management •Technology/Information Security expertise developed through integration of new technologies and robotic automation systems to North American manufacturers and their global affiliates •Entrepreneurial focus as Owner and Managing Director of Lakeside Consulting, LLC and his previous affiliation as a partner in a commercial real estate investment company Education •BS, Engineering Mechanics, University of Wisconsin-Madison Other Boards and Organizations •Director, FBB Board of Directors (since 2017) •Member, FBB Southeast Wisconsin Advisory Board (2017-2021) •Director, FBB-Milwaukee Board of Directors (2010-2017) •Member of the boards and advisory boards of other private organizations | | Carol P. Sanders President Carol P. Sanders Consulting, LLC Age: 57 Independent Director since 2016 COMMITTEES •Audit, Chair •Compensation | Experience •President, Carol P. Sanders Consulting LLC (since 2015) •EVP, Chief Financial Officer and Treasurer, Sentry Insurance (2013-2015) •EVP and Chief Operating Officer (2012-2013) and other executive positions (2004-2012), Jewelers Mutual Insurance Company Qualifications •Financial Services Industry, Financial Reporting, Accounting and Financial Controls, Enterprise Risk Management, and Strategic Planning expertise acquired in over 25 years in the insurance industry primarily in executive vice president ("EVP"), chief financial officer, chief operating officer and treasurer roles with responsibility for strategic financial planning, oversight of the firm’s internal audits, enterprise risk management, and actuarial services and through her experience as a designated financial expert and audit committee chair for publicly traded companies •Governance experience acquired through service on other public company boards, including serving as lead independent director and chair of audit, compensation, and nominating and governance committees Education •BBA, Accounting and Economics, University of Wisconsin-Oshkosh Other Public Company Boards •Lead independent Director, Alliant Energy Corporation, a Wisconsin-based public utility holding company (since 2005) •Director, RenaissanceRe Holdings Ltd., a global provider of reinsurance and insurance (since 2016) Other Boards and Organizations •Director, FBB Board of Directors (since 2018) •Member of the board of a private organization |

  6. Proxy Statement For Annual Meeting Of Shareholders To Be Held April 26, 2024

    | Carla C. Chavarria Senior Vice President and Chief Human Resources Officer AMC Entertainment, Inc. Age: 58 Independent Director since 2017 COMMITTEES •Compensation, Chair Elect •Corporate Governance and Nominating | Experience •Senior Vice President and Chief Human Resources Officer (since 2014) and various human resources roles (1994-2014), AMC Entertainment Inc., a publicly traded company Qualifications •Human Capital/Compensation and Strategic Planning expertise developed as a member of the executive committee of a publicly traded company and over 30 years serving as a human resources executive with responsibility for strategic development and implementation of total rewards, associate engagement, talent acquisition and development, and community relations •Legal/Regulatory and Enterprise Risk Management expertise acquired over 30 years as a human resources executive with responsibility for managing workforce-related risks, labor relations oversight, ensuring compliance with relevant laws and maintaining fair and ethical workplace practices •Mergers and Acquisitions experience through AMC Entertainment, Inc.’s acquisition of multiple companies during her tenure as Senior Vice President and Chief Human Resources Officer Education •BS, Business Administration, Pennsylvania State University Other Boards and Organizations •Director, FBB Board of Directors (since 2018) | | Ralph R. Kauten Owner Air-Lec Industries Age: 72 Independent Director since 2018 COMMITTEES •Audit •Operational Risk | Experience •Owner, Air-Lec Industries (since 2013) •Co-Owner, Mirus Bio (since 1996) •Biotechnology company executive: Chair and CEO of Lucigen Corporation (2006-2018); Chair and CEO of Quintessence Biosciences, Inc. (2002-2016); Co-Founder, President and CEO of PanVera Corporation (1992-2001); and Vice President, Finance and Treasurer of Promega Corporation (1979-1992) •Faculty Member, University of Wisconsin-Whitewater; Plant Controller, Heublein, Inc.; and Senior Auditor, Grant Thornton, CPAs Qualifications •Enterprise Risk Management and Strategic Planning expertise gained over 40 years in the biotechnology industry, building start-up companies and driving company growth through strategy development and implementation •Financial Reporting, Accounting and Financial Controls expertise acquired in executive roles with responsibility for oversight of all financial matters including private equity and debt financing, experience as a treasurer, controller and senior auditor and as the audit committee chair of a privately held organization •Entrepreneurial focus gained through co-founding and owning multiple businesses and Mergers and Acquisitions experience gained through mergers, joint ventures and sale of biotechnology companies Education •BBA, Accounting, University of Iowa •MBA, Accounting, University of Wisconsin-Madison Other Boards and Organizations •Director, FBB Board of Directors (since 2004); Chair (June 2018-November 2018) •Member of boards of other private organizations |

  7. Proxy Statement For Annual Meeting Of Shareholders To Be Held April 26, 2024

    | Jerry L. Kilcoyne Managing Partner Pinnacle Enterprises, LLC Age: 64 Independent Director since 2011 Board Chair since 2018 COMMITTEES •None | Experience •Managing Partner, Pinnacle Enterprises, LLC (since 1997) •President, Northbrook Rail Corporation (1989-1996) Qualifications •Financial Services Industry experience, Financial Reporting, Accounting and Financial Controls, and Strategic Planning expertise acquired in more than 35 years of executive experience with responsibility for all aspects of financial management and strategy implementation and service on the board, committees and as chair of a publicly traded financial institution and its subsidiaries •Mergers and Acquisitions expertise developed through his management role with mergers and acquisitions operations of Northbrook Corporation and the private equity ownership and sale of businesses in the transportation, manufacturing, distribution and other industries throughout his career •Entrepreneurial focus through the acquisition and management of multiple companies Education •AA, Accounting, Madison Area Technical College Other Boards and Organizations •Chair, FBB Board of Directors (since November 2018, May 2010-June 2018) •Director, FBB Board of Directors (since November 2018 and 2005-June 2018) •Director, First Business Equipment Finance, LLC (2006-2017), and Director, First Business Capital Corp. (2006-2013), both FBB entities were merged into First Business Specialty Finance, LLC, a wholly-owned subsidiary of FBB in 2021 •Director, Alterra Bank (2016-2017) until its charter consolidation with FBB in 2017 | | Daniel P. Olszewski Director Weinert Center for Entrepreneurship Age: 59 Independent Director since 2018 COMMITTEES •Operational Risk, Chair •Corporate Governance and Nominating | Experience •Director, Weinert Center for Entrepreneurship, Wisconsin School of Business, University of Wisconsin-Madison (since 2006) •Chair/President, PNA Holdings, LLC, owner of Parts Now! and Katun Corporation (1999-2002, 2003-2005); CEO, Katun Corporation (2003-2005); CEO/President (1999-2003) and COO (1997-1999), Parts Now! •Consultant, McKinsey & Company (1988-1990, 1992-1997) Qualifications •Entrepreneurial expertise as the instructor for the capstone Weinert Applied Ventures in Entrepreneurship graduate course and co-founder of the Morgridge Entrepreneurial Bootcamp program for graduate students in STEM programs •Mergers and Acquisitions expertise serving as an instructor of graduate student mergers and acquisitions courses and through the acquisition of Katun Corporation with the assistance of private equity sponsors •Strategic Planning, Enterprise Risk Management and Financial Services Industry expertise obtained in his role as a strategy and finance consultant at McKinsey, through his CEO and board chair roles, and as an instructor of graduate courses on corporate finance, capital budgeting and structure, valuation methods and entrepreneurial finance Education •BA, Economics and Computer Science, University of Wisconsin-Madison •MBA, Harvard Business School Other Boards and Organizations •Director, FBB Board of Directors (since 2010) •Director, First Business Capital Corp. (2011-2018), FBB entity merged into First Business Specialty Finance, LLC, a wholly-owned subsidiary of FBB in 2021 •Member of the board of a private organization |

  8. Operational Risk Committee

    The Company believes open and transparent communication between management and the Board is essential for effective risk management and oversight. The Board, acting as a whole and through its committees, is responsible for oversight of the Company’s enterprise-wide risk management including, but not limited to, strategic, financial, credit, liquidity, compensation, information security including cybersecurity, regulatory, reputation, and operational risks. Given the critical link between strategy and risk, the Board is also responsible for developing strategies based on an assessment of the Company’s overall risk tolerance, the related opportunities and the capacity to manage the resulting risk. As part of its ongoing planning, the Board discusses with executive management the strategies, key challenges, risks and opportunities facing the Company. Executive management is responsible for the day-to-day management of the Company’s key risks and operates through a Senior Management Risk Committee ("SMRC"). The SMRC monitors key risks, develops and executes mitigation or remediation plans as appropriate, identifies emerging risks, evaluates the effectiveness of the Company’s risk management processes and reports such to the Board or its committees on a regular basis. The SMRC is responsible for the annual review of each key risk indicator ("KRI") included in the Risk Tolerance Dashboard and presents its recommendations to the Operational Risk Committee. The Operational Risk Committee reviews the SMRC's recommendations regarding any potential changes to KRIs and tolerance levels to ensure the Company’s most significant risks along with related metrics/key KRIs have been identified, and risk tolerance thresholds have been established. ERM is a standing agenda item for each of the Board’s regular quarterly meetings. At these meetings the Board reviews the Risk Tolerance Dashboard, the status of each KRI relative to the designated tolerance threshold, and the related remediation plans. The Board has delegated oversight of each of the key risks to either the Audit, Compensation, Corporate Governance and Nominating or Operational Risk Committee in accordance with the committee charters. These charters are reviewed annually to reflect the changing risk environment. Each committee monitors the assigned specific key risks, ensures that appropriate risk mitigation plans are in place, identifies emerging risks, reports back to the Board with recommendations and updates and apprises the Board of any areas of concern. The following table summarizes each committee’s role in the risk oversight function.

  9. Operational Risk Committee

    CEO and Executive Officer Succession Planning Succession planning and leadership development are top priorities for the Board and management. Because of the significance of the CEO’s leadership, the Board retains primary responsibility for oversight of CEO succession planning as well as overall executive leadership development and succession planning practices and strategies. The Board has delegated certain responsibility for the ongoing development and monitoring of CEO and executive officer succession planning to the Corporate Governance and Nominating Committee, and at least annually, that committee reviews the policies and principles of selecting a successor to the CEO. The Board participates in the annual review of the CEO succession plan, which includes an assessment of potential CEO candidates, contingency plans in the event of a sudden termination (including death or disability), development plans that are being utilized to strengthen the skills and qualifications of candidates and the Company CEO’s recommendations for contingency and longer term succession planning for the CEO. The Corporate Governance and Nominating Committee in accordance with its charter also reviews succession plans for the other executive officers. Communications with the Board of Directors Shareholders may communicate with the Board by writing to First Business Financial Services, Inc., Board of Directors (or, at the shareholder’s option, to a specific director), c/o Lynn Ann Arians, Corporate Secretary, 401 Charmany Drive, Madison, Wisconsin 53719. The Corporate Secretary will ensure that all appropriate communications are delivered to the Board or the specified director, as the case may be. DIRECTOR COMPENSATION In 2023, the Board meeting fees were incorporated into one cash retainer and the annual retainer was adjusted by the average executive officer merit increase in 2022 and 2023, increasing the annual cash retainer for each non-employee director of the Company from $24,000 to $30,000. As the Company’s Board Chair, Mr. Kilcoyne received additional cash compensation of $60,250. The Compensation Committee Chair, the Corporate Governance and Nominating Committee Chair, and the Operational Risk Committee Chair received additional annual retainers of $5,000, while the Audit Committee Chair received an additional annual retainer of $10,000. All committee members were paid $750 for each committee meeting. Except for the annual restricted stock unit awards described below, director retainer and meeting fees were paid in cash quarterly. The Compensation Committee is responsible for periodically reviewing and making recommendations to the Board with respect to director compensation. As part of that effort, the Compensation Committee regularly engages its independent compensation consultant to analyze the Company's director compensation in comparison to its peers and overall director compensation best practices. The Board has established Director and Named Executive Officer Stock Ownership Guidelines ("the Guidelines") as another means by which to align these individuals' interests with the interests of the Company's shareholders. Directors are allowed five years from the later of the adoption of the Guidelines or their appointment to accumulate the minimum number of shares to meet three times the annual director cash and equity retainer. The directors receive an annual restricted stock unit award in the amount of $22,500. The awards vest annually and as outlined in the Guidelines, directors are required to retain 100% of all vested shares while serving on the Board. All directors are in compliance with the Guidelines. Additional details on the Guidelines are available in the Company’s Corporate Governance Guidelines posted on its website located at https://ir.firstbusiness.bank/corporate-overview/corporate-governance/default.aspx.

  10. Operational Risk Committee

    | Name | Fees Earned Or Paid In Cash(1) | Stock Unit Awards(2) | Total | | Laurie S. Benson | $44,000 | $22,500 | $66,500 | | Mark D. Bugher | $41,000 | $22,500 | $63,500 | | Carla C. Chavarria | $36,000 | $22,500 | $58,500 | | John J. Harris | $37,500 | $22,500 | $60,000 | | Ralph R. Kauten | $36,000 | $22,500 | $58,500 | | Gerald L. Kilcoyne | $91,750 | $22,500 | $114,250 | | W. Kent Lorenz | $39,000 | $22,500 | $61,500 | | Daniel P. Olszewski | $42,500 | $22,500 | $65,000 | | Carol P. Sanders | $47,500 | $22,500 | $70,000 |

  11. Operational Risk Committee

    | What We Do | What We Don't Do | | Pay for performance by having a significant portion of executives' compensation tied to Company performance and weighted toward the long-term. | Have excess perquisites. | | Use long-term incentive pay that is denominated and delivered in equity and does not have a cash component. | Make tax gross-up payments in connection with excise tax or other tax liabilities. | | Use robust incentive plan governance that is reviewed by internal experts, the Compensation Committee, and by an independent third party as needed. | Grant new awards that accumulate dividend equivalents before the end of the performance period. | | Retain an independent compensation consultant selected by the Compensation Committee for executive pay consultation. | Allow hedging or pledging of Company securities by Section 16 Reporting Persons. | | Require a double trigger for vesting of equity awards and severance payments upon a change of control. | | | Have a robust policy to clawback executive compensation in the event of a material restatement of financial statements. | | | Hold an annual say-on-pay vote to solicit regular feedback from shareholders. | | | Require stock ownership for executives based on a salary multiple of stock and retention of a portion of shares after vesting. | |

  12. Operational Risk Committee

    Alignment of Pay with Performance Our executive compensation program supports long-term value creation. Approximately 49% of our CEO’s total direct compensation and 40% of the compensation for the other NEOs is variable and at risk, tied to the achievement of rigorous performance metrics that are aligned to our strategic priorities and important to our shareholders. A significant percentage of executive compensation opportunities is delivered in the form of performance equity incentives. The executive officers’ grants are delivered in a mix of approximately 60% in Performance Restricted Stock Units ("PRSUs") and 40% in Restricted Stock Units ("RSUs"). The Company believes PRSUs incentivize executive officers to drive long-term Company performance, thereby aligning the executive officers’ interests with the long-term interests of shareholders. Within the 2023 compensation program, the PRSUs are measured 50% on Total Shareholder Return ("TSR") and 50% on Return on Average Common Equity ("ROACE") and will cliff-vest after a three-year measurement period based on the Company’s performance relative to a custom peer group. The Bonus Plan for fiscal 2023 paid out at 113% of target. The payout reflects our strong performance across the key performance metrics (top line revenue, ROAA, efficiency ratio) which drive shareholder value and the Company’s business strategy. The Director and Named Executive Officer Stock Ownership Guidelines ("Guidelines") fosters alignment with shareholder interests. Beginning in January 2023, we introduced a new provision in the Guidelines that requires NEOs to hold 50% or more of any vested shares (which may be reduced due to net-settlement for tax withholding) issued under the Company's equity plan for 12 months after issuance or until the end of employment, whichever is earlier. The new requirement is in addition to the requirement for the NEOs to retain 100% of their vested shares (which may be reduced due to net-settlement for tax withholding) until they meet the applicable share guidelines. We adjusted our dividend equivalents policy to align with compensation governance best practice. Dividend equivalents with respect to RSU grants made after January 2023 will only be paid if the underlying RSUs vest and will be paid at the time of vesting.

  13. Role of Independent Compensation Consultant

    Role of Independent Compensation Consultant For 2023, the Compensation Committee engaged McLagan, which is part of the Human Capital Solutions practice at Aon plc, ("McLagan"), as its outside independent compensation consultant. The Compensation Committee’s consultant regularly attends Compensation Committee meetings and attends executive sessions as requested by the Compensation Committee Chair. In 2023, McLagan conducted several projects for the Compensation Committee and Company including: •performed an audit of the Company's incentive compensation risk review and incentive plan governance, •reviewed the Company's Annual Bonus Plan plan design and payout trends, •certified the results of the PRSUs corresponding to the performance period ending December 31, 2022, for the Compensation Committee's approval, •modeled equity plan share size options and reviewed equity plan designs, •recommended a peer group to determine relative performance for the 2023 annual PRSU grant for the Compensation Committee's consideration and approval, and •reviewed the Compensation Discussion and Analysis included in the proxy statement.

  14. Peer Group Companies and Analysis

    Peer Group Companies and Analysis The Compensation Committee reviews compensation levels and design at peer companies as part of its decision-making process in order to understand how the Company's practices align with those of similarly-situated organizations. The Compensation Committee generally strives to establish compensation for its executive officers that is competitive with that of our peer companies, while also taking into consideration other factors such as additional competitive market data, the scope of particular job responsibilities, individual performance of the executive officer, internal pay equity and other factors. The Compensation Committee’s determinations for executive officers are based on its review of such factors. Determinations are also informed by the experiences of the members of the Compensation Committee as well as input from, and peer group data provided by McLagan. For purposes of peer analysis in assessing performance, the Company utilizes a peer group that includes commercial banks of similar revenue size. Given the ever-changing landscape within the banking industry, the Compensation Committee regularly reviews and recalibrates the group of banks used for this analysis as recommended by McLagan. In 2022, the Compensation Committee engaged McLagan to assist with developing a peer group of publicly traded banks to be used for executive and director compensation market comparisons. The peer group reflected a reference group of publicly traded bank holding companies with revenue between $65 and $240 million which was approximately one-half to two times the Company’s size, a commercial lending concentration of at least 75%, headquarters in the continental United States (excluding some specific states and large metropolitan areas due to different market and compensation conditions), and similar product offerings. While revenue is of primary interest, a cap on total assets has been added to exclude firms significantly larger than the Company. This updated reference group had median revenue of $113 million at the time of the analysis. The new peer group includes 16 peers from the prior peer group, while six firms were removed due to not meeting the criteria and six new peers were added. The peer group used for purposes of 2023 compensation decisions is reflected below. The companies included in this peer group are as follows:

  15. Peer Group Companies and Analysis

    | American National Bankshares Inc. (AMNB) | Equity Bancshares, Inc. (EQBK) | MidWestOne Financial Group, Inc. (MOFG) | | Bankwell Financial Group, Inc. (BWFG) | Farmers & Merchants Bancorp, Inc. (FMAO) | MVB Financial Corp. (MVBF) | | Bridgewater Bancshares, Inc. (BWB) | First Bank (FRBA) | Orange County Bancorp, Inc. (OBT) | | Business First Bancshares, Inc. (BFST) | First Mid Bancshares, Inc. (FMBH) | SmartFinancial, Inc. (SMBK) | | CapStar Financial Holdings, Inc. (CSTR) | Investar Holding Corporation (ISTR) | Timberland Bancorp, Inc. (TSBK) | | Citizens Community Bancorp, Inc. (CZWI) | Macatawa Bank Corporation (MCBC) | West Bancorporation, Inc. (WTBA) | | Citizens Financial Services, Inc. (CZFS) | Mercantile Bank Corporation (MBWM) | | | Coastal Financial Corporation (CCB) | Mid Penn Bancorp, Inc. (MPB) | |

  16. Peer Group Companies and Analysis

    Compensation Program Components The Compensation Committee strives to provide an appropriate mix of compensation components, including finding a balance between current and long-term compensation and between cash and equity incentive compensation. Cash payments primarily are aligned with and reward more recent performance, while equity awards encourage the Company’s executives to continue to deliver results over a longer period of time and also serve as a retention tool. Compensation for the NEOs was allocated between base salary, annual incentive compensation and longer-term awards as described below.

  17. Annual Bonus Plan

    Annual Bonus Plan The Compensation Committee typically determines eligibility for annual bonus payments using the parameters defined in the Company’s Bonus Plan, which is a performance-based bonus plan for eligible officers and employees of the Company, including the NEOs. The plan is formulaic and has clear disclosure of the business drivers. As established, the Compensation Committee retains the right to apply discretion to modify the Bonus Plan or withhold payment at any time. In 2023, the NEOs participating in the Bonus Plan earned cash bonuses based on the performance of the Company’s pre-established performance measures that included a combination of equally weighted revenue growth goals, operating profitability goals and goals related to strategic objectives, as established and measured by the Compensation Committee and the Board. Each year, the Compensation Committee approves threshold, target and superior levels for each of the measures used in the Bonus Plan, given the expectations and strategies for each particular year. Bonus payments under the Bonus Plan are determined by the formulas described below. In addition, the Bonus Plan has a safeguard of requiring that the Company must meet one-half of the return on asset threshold before any bonus payment can be made based on performance on any criteria. The following chart outlines the Company's performance measures that were used in the NEOs’ bonus calculations. The bonus calculations for all NEOs were based 100% on the performance of the Company. Each performance measure is determined by straight-line interpolation for actual performance falling between threshold and target or target and superior levels. If achievement with respect to a particular performance measure does not reach threshold level, then no portion of the bonus will be awarded with respect to such performance measure.

  18. Annual Bonus Plan

    | Measure | Weighting | Threshold | Target | Superior | Actual | Payout % of Target | | Top Line Revenue(1) | 33.33% | $133,700,000 | $139,700,000 | $145,700,000 | $143,895,551 | 170.00% | | Efficiency Ratio(2) | 33.33% | 63.35% | 61.35% | 59.35% | 60.99% | 118.00% | | Return on Average Assets(3) | 33.33% | 1.10% | 1.20% | 1.30% | 1.13% | 50.00% | | Total Achievement Level | | | | | | 113.00% |

  19. Annual Bonus Plan

    (1) Top Line Revenue is defined as net interest income ($112.59 million) plus non-interest income ($31.31 million). (2) Efficiency ratio is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on foreclosed properties, amortization of other intangible assets and other discrete items, if any, divided by operating revenue, which is equal to net interest income plus non-interest income less realized gains or losses on securities, if any. (3) Return on Average Assets (ROAA) is defined as net income available to common shareholders divided by average assets. Full year 2022 ROAA of 1.46% included non-recurring net recoveries on previously charged-off loans and leases of of $3.8 million. The 2023 Target ROAA of 1.20% compares favorably to the Company's 5-year (2019-2023) strategic plan goal of 1.15%. The specific performance metrics established with respect to the Company’s 2023 performance include the following non-GAAP financial measures, which the Company believes are relevant measures to align employees’ performance with profitability, growth and achievement of the Company’s strategic objectives: •Top line revenue is a key measure of growth and income diversification. •The efficiency ratio measures operating expenses in relation to top line revenue and is an industry standard measure of operating efficiency. The bonus formula provides for bonus payments of 0% to 95% of eligible salary based on differing percentages of eligible salary and differing payout ranges for each NEO. The target annual incentive opportunities for each position did not change in 2023. After the end of fiscal 2023, the Compensation Committee determined the extent to which the performance goals were achieved and subsequently approved the award to each NEO for payment in 2024.

  20. Annual Bonus Plan

    | Name | Targeted Payout As % Of Base Salary | Maximum Payout As % Of Base Salary | Actual Payout As % Of Base Salary | Bonus Payout | | | | | | (S) | | Corey A. Chambas | 45.00% | 95.00% | 50.98% | $310,969 | | Edward G. Sloane, Jr. | 35.00% | 75.00% | — | — | | Brian D. Spielmann | 35.00% | 75.00% | 40.53% | $108,919 | | David R. Seiler | 40.00% | 80.00% | 44.29% | $166,073 | | Mark J. Meloy | 30.00% | 60.00% | 33.84% | $93,386 | | Bradley A. Quade | 30.00% | 60.00% | 33.84% | $93,386 |

  21. Long-Term Incentive Plan

    Long-Term Incentive Plan The Long-Term Incentive Plan ("LTI Plan") was established to advance the interests of the Company’s shareholders by enhancing the Company’s ability to attract, retain and motivate employees who make or are expected to make important contributions to the Company by providing equity ownership opportunities and equity-based incentives, thereby aligning the interests of such persons with those of the shareholders. The LTI Plan is administered by the Compensation Committee of the Board and provides for the grant of equity ownership opportunities through incentive stock options and non-qualified stock options, restricted stock, restricted stock units, performance restricted stock units and any other type of award permitted by the LTI Plan. In 2023, the Company issued a mix of PRSUs or RSUs to its executive officers. The PRSUs cliff-vest after the end of a three-year measurement period based on the Company’s TSR and ROACE performance relative to a custom peer group. The PRSUs enhance the alignment between Company performance and executive officer pay and strengthen long-term shareholder alignment by linking the ultimate payout to pre-established relative goals based on a formula. The RSUs vest ratably over a three-year period and serve as a strong retention tool for the Company’s executive officers. The executive officers' grants are weighted approximately 60% in PRSUs and 40% in RSUs. The Company’s executive officers are eligible to receive dividend equivalents with respect to PRSU and RSU grants made after January 2023 which will only be paid if the underlying PRSUs and RSUs vest and will be paid at the time of vesting.

  22. Long-Term Incentive Plan

    | 2023 PRSU Program Features | | Vehicle Value of units is measured on a relative basis over the performance period; PSRUs are settled in shares at vesting. | | Performance Period Awards made in 2023 have a three-year performance measurement period of 2023-2025 and will cliff vest at the end of the measurement period. | | Performance Measures Relative Total Shareholder Return (50% weighting) and Relative Return on Average Common Equity (50%). | | Payout Payout under the program is calculated at the end of the three-year performance period and is based on the relative performance for each measure against the custom peer group. Payout at the 25th percentile of the peer group will result in an award of 50% of the target value, payout at the 50th percentile of the peer group will result in an award of 100% of the target value, and payout at the 75th percentile or above of the peer group will result in an award of 200% of the target value. Achievement of each performance measure is determined by straight-line interpolation for actual performance falling between threshold and target or target and maximum levels. If achievement with respect to a particular performance measure does not reach threshold level, then no portion of the award will vest with respect to such performance goal. | | Peer Group Performance A peer group is established for each grant to measure relative performance. The peer groups consist of publicly traded banks, headquartered in the U.S., with assets between $1.5 billion and $5.5 billion. For the 2023 grant, the peer group is comprised of approximately 124 banks and the peer group will remain static for each grant throughout the measurement period. |

  23. Long-Term Incentive Plan

    Shares certified as earned by the Compensation Committee at the end of the performance period will be distributed in the calendar year following the end of the performance period. NEOs are required to hold at least 50% of any vested shares (which may be reduced due to net-settlement for tax withholding) issued under the Company's equity plan for 12 months after issuance or until the end of employment, whichever is earlier. Additionally, NEOs are required to retain 100% of their vested shares (which may be reduced due to net-settlement for tax withholding) until they meet the applicable ownership guidelines. The targeted amount of the long-term incentive awarded for each of the NEOs is determined utilizing market data for similar positions within the industry as well as relative roles and responsibilities within the Company. The targeted value of the grant is determined as a percentage of their base salary and ranges from 30% to 50%. The following chart summarizes the equity awards made to each of the NEOs in 2023.

  24. Long-Term Incentive Plan

    | Name | Long-Term Incentives (% Of Base Salary) | Total Long-Term Incentives ($) | PRSU # Granted At Target | PRSU Grant Date Fair Value | RSU # Granted | RSU Grant Date Fair Value | | Corey A. Chambas | 50.00% | $336,580 | 5,185 | $210,567 | 3,460 | $126,013 | | Edward G. Sloane, Jr. | 35.00% | $0 | 0 | $0 | 0 | $0 | | Brian D. Spielmann | 35.00% | $97,009 | 1,595 | $64,777 | 885 | $32,232 | | David R. Seiler | 35.00% | $145,497 | 2,390 | $97,058 | 1,330 | $48,439 | | Mark J. Meloy | 30.00% | $91,327 | 1,370 | $55,636 | 980 | $35,692 | | Bradley A. Quade | 30.00% | $91,327 | 1,370 | $55,636 | 980 | $35,692 |

  25. Long-Term Incentive Plan

    These equity awards are also listed in the Grant of Plan Based Awards on page 35 and the Outstanding Equity Awards at Fiscal Year End table on page 36. 2020-2022 LTI Plan Performance Results For the PRSU grant made in 2020 with a three-year performance period ending December 31, 2022, the Compensation Committee determined that the performance goals were achieved at the following levels against relative performance of a custom peer group consisting of over 100 U.S.-based publicly listed banks with $1 billion to $4 billion in total assets. Shares were certified and approved on April 17, 2023. Final LTI Plan performance approved by the Compensation Committee is displayed below.

  26. Long-Term Incentive Plan

    | Percentile | | | | | | | LTI Measure | Weight | Threshold | Target | Superior | Performance Results | | Relative TSR | 50% | 25th | 50th | 75th | 94th | | Relative ROAE | 50% | 25th | 50th | 75th | 82nd | | Performance Payout | | | | | 200% of Target |

  27. Long-Term Incentive Plan

    Shares Earned Under the PRSU Award for the 2020-2022 Performance Period Due to the Company's superior performance on both TSR and ROAE relative to the custom peer group, the NEOs earned 200% of the targeted amount and the number of shares earned under the PRSU awards below were delivered to the NEOs on April 17, 2023.

  28. Long-Term Incentive Plan

    | Named Executive Officer | Position | Shares Earned For The 2020-2022 Performance Period | | Corey A. Chambas | Chief Executive Officer | 11,400 | | Edward G. Sloane, Jr. | Chief Financial Officer | 4,910 | | Brian D. Spielmann | Chief Financial Officer | 0 | | David R. Seiler | President & Chief Operating Officer | 5,280 | | Mark J. Meloy | Executive Vice President | 3,180 | | Bradley A. Quade | Chief Credit Officer | 3,260 |

  29. Long-Term Incentive Plan

    The PRSUs the Company granted to its executive officers in 2021 for the performance measurement period of 2021-2023 will be paid out in April 2024. As of the date of this proxy statement, the number of shares earned under that award is unknown due to the unavailability of final Relative ROAE information. The Company intends to file a Current Report on Form 8-K disclosing the number of shares earned by the NEOs under the 2021 PRSU award once the information becomes available. All Other Compensation and Perquisites. While the Compensation Committee reviews and monitors the level of other compensation offered to the NEOs, it typically does not adjust the level of benefits offered on an annual basis. The Compensation Committee does consider the benefits and perquisites offered to the NEOs in its evaluation of the total compensation received by each. It is the Compensation Committee's belief that perquisites for NEOs should be very limited in scope and value and reflective of similar perquisites from competitive employers both in the industry and the region. Due to this philosophy, the Company has generally provided nominal benefits to NEOs that are not available to other employees and plans to continue this approach in the future. The benefits offered in 2023 to the NEOs will continue for 2024. The perquisites received by the NEOs in 2023 are reported in the Summary Compensation Table on page 34. Named Executive Officer Stock Ownership Guidelines The Board has established the Guidelines as another means by which to align their decisions with creating shareholder value. The Guidelines are based on a multiple of base salary for the CEO and NEOs as follows:

  30. Long-Term Incentive Plan

    | Position | Baseline | Minimum Ownership As A Multiple Of The Baseline | | CEO | Base Salary | 3x | | NEOs | Base Salary | 1x |

  31. Long-Term Incentive Plan

    NEOs are allowed five years from the later of the adoption of the Guidelines or their appointment to accumulate the minimum number of shares to satisfy these Guidelines. Once an NEO meets the applicable ownership guidelines, they must hold 50% or more of any vested shares (which may be reduced due to net-settlement for tax withholding) issued under the Company's equity plan for 12 months after issuance or until the end of employment, whichever is earlier. All NEOs who are subject to these Guidelines are currently in compliance. Clawback Policies The Company’s 2019 Clawback Policy applies to all current and former executive officers. In the event of a material restatement of the Company’s financial results, other than a restatement due to changes in accounting principles or applicable law or interpretations thereof, the Board will review the facts and circumstances that led to the requirement for the restatement and will take such actions, including clawback, as it deems necessary or appropriate. The Board will consider whether any executive officer received incentive compensation based on the original financial statements because it appeared they achieved financial performance targets which in fact were not achieved based on the restatement. The Board will also consider the accountability of any executive officer whose acts or omissions were responsible in whole or in part for the events that led to the restatement and whether such acts or omissions constituted improper conduct. The 2019 Clawback Policy also includes clawback provisions for incentive compensation in the event of improper conduct by the executive officer. In 2023, the Company adopted the Executive Officer Compensation Recovery Policy (the "Recovery Policy"), which adheres to the listing standards of Nasdaq and the rules of the SEC. Under the Recovery Policy, in the event the Company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the federal securities laws, the Company will recover the amount of any applicable incentive-based compensation received by an executive covered by the Recovery Policy during the applicable recovery period (generally the prior three completed fiscal years) that exceeds the amount that otherwise would have been received had it been determined based on the restated financial statements. In adopting the Recovery Policy, the Company did not supersede the 2019 Clawback Policy, but instead preserved any rights it still has related to use the 2019 Clawback Policy that are in addition to those it has under the newer Recovery Policy. No-Hedging and No-Pledging Provisions The Company's Insider Trading Policy includes provisions that prohibit all Section 16 Reporting Persons from hedging Company stock, from holding Company stock in a margin account and from pledging Company stock as collateral for a loan. All Section 16 Reporting Persons are currently in compliance with these provisions. Assessment of Compensation Risk As a publicly traded financial institution, the Company must comply with several often overlapping layers of regulations when considering and implementing compensation-related decisions. These regulations do not set specific parameters within which compensation decisions must be made, but do require the Company and the Compensation Committee to be mindful of the risks that often go hand-in-hand with compensation programs designed to incentivize the achievement of better than average performance. The Compensation Committee believes that a sensible approach to balancing risk-taking and rewarding reasonable, but not necessarily easily attainable, goals has always been a component of its overall assessment of the compensation plans, programs and arrangements it has established for the NEOs. In addition to our cultural competencies, the Company engages in the following practices to ensure its executive compensation program is aligned with shareholders’ interests and protects the Company against excessive risk taking: •Variable compensation based on a variety of performance goals, •Board discretion to lower incentive award amounts, •Balanced mix of short-term and long-term incentives with emphasis on performance, •Stock ownership guidelines, •No-hedging and no-pledging provisions, and •Clawback provisions. In 2023, the Compensation Committee engaged McLagan to perform an audit of the Company's incentive compensation risk review and incentive plan governance to determine whether any aspect of the plans or programs encourages excessive or unnecessary risk that would adversely affect the long-term value or performance of the Company. Based on the risk review performed by McLagan, the risk assessment process and the practices listed above, the Compensation Committee concluded that the compensation plans and programs, considered individually and as a whole, do not encourage excessive risk-taking by NEOs or other employees. COMPENSATION COMMITTEE REPORT The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on review and discussion with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Submitted by the members of the Compensation Committee: Mark D. Bugher, Compensation Committee Chair Laurie S. Benson Carla C. Chavarria Carol P. Sanders

  32. Compensation Committee Interlocks and Insider Participation

    | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (S)(3) | All Other Compensation ($)(4) | Total ($) | | Corey A. Chambas | 2023 | $610,000 | $0 | $336,580 | $310,969 | $691,210 | $29,990 | $1,978,750 | | Chief Executive Officer | 2022 | $560,000 | $0 | $336,093 | $505,658 | $399,848 | $34,030 | $1,835,629 | | | 2021 | $510,000 | $0 | $311,904 | $378,387 | $400,697 | $28,675 | $1,629,663 | | Edward G. Sloane, Jr. | 2023 | $76,154 | $0 | $0 | $0 | — | $65,137 | $141,291 | | Retired Chief Financial Officer | 2022 | $300,000 | $0 | $127,391 | $213,710 | — | $26,871 | $667,972 | | | 2021 | $286,814 | $0 | $123,981 | $167,370 | — | $23,693 | $601,858 | | Brian D. Spielmann | 2023 | $268,750 | $0 | $97,009 | $108,919 | — | $24,222 | $498,900 | | Chief Financial Officer | — | — | — | — | — | — | — | — | | | — | — | — | — | — | — | — | — | | David R. Seiler | 2023 | $375,000 | $0 | $145,497 | $166,073 | — | $42,766 | $729,335 | | President & Chief Operating Officer | 2022 | $334,459 | $0 | $140,341 | $254,980 | — | $44,015 | $773,798 | | | 2021 | $313,448 | $0 | $135,444 | $182,912 | — | $38,244 | $670,048 | | Mark J. Meloy | 2023 | $276,000 | $0 | $91,327 | $93,386 | — | $41,443 | $502,156 | | Executive Vice President | 2022 | $255,000 | $0 | $91,432 | $145,803 | — | $43,519 | $535,755 | | | 2021 | $239,155 | $0 | $87,347 | $113,637 | — | $46,329 | $486,468 | | Bradley A. Quade | 2023 | $276,000 | $0 | $91,327 | $93,386 | — | $45,797 | $506,510 | | Chief Credit Officer | 2022 | $259,560 | $0 | $93,196 | $148,410 | — | $41,351 | $542,917 | | | 2021 | $247,200 | $0 | $90,329 | $117,460 | — | $35,941 | $490,930 |

  33. Potential Payments and Benefits

    Potential Payments and Benefits The following tables set forth information concerning potential payments and benefits under the Company’s compensation programs and benefit plans to which the NEOs, whose benefits are described above, could be entitled upon the NEO’s termination of employment or a change in control of the Company. The tables assume a change in control and termination date (to the extent applicable) of December 31, 2023, and a price per share of $40.10, the closing price of the Company’s Common Stock on December 31, 2023. The NEOs’ employment agreement, change in control agreements and the 2019 Plan may limit the amount payable in the event of a change in control of the Company to the extent any payments would constitute an "excess parachute payment" under Internal Revenue Code Section 280G, but the following tables do not show any reduction in benefits due to such a limitation. The amounts shown in the following tables also assume that in a change of control, the acquiring or surviving company would have assumed all outstanding and unvested equity awards.

  34. Tax Deductibility of Compensation

    | Year | Summary Compensation Table Total for Corey A. Chambas(1) ($) | Compensation Actually Paid to Corey A. Chambas(¹)(²)(³) ($) | Average Summary Compensation Table Total for Non-PEO NEOs(1) ($) | Average Compensation Actually Paid to Non-PEO NEOs(1)(2)(3) ($) | Value of Initial Fixed $100 Investment based on:(4) | | Net Income ($ Thousands) | Return on Average Assets(5) | | | | | | | TSR ($) | Peer Group TSR ($) | | | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | 1,978,750 | 2,422,445 | 475,638 | 659,922 | 170.93 | 96.65 | 37,027 | 1.13% | | 2022 | 1,835,629 | 2,407,904 | 630,011 | 864,228 | 151.42 | 97.78 | 40,858 | 1.46% | | 2021 | 1,629,663 | 2,424,342 | 562,326 | 883,253 | 118.15 | 124.39 | 35,755 | 1.37% | | 2020 | 1,375,012 | 919,724 | 509,438 | 378,943 | 72.58 | 89.92 | 16,978 | 0.70% |