What First Business Financial Services, Inc. told the SEC could break it.

First Business's strategy depends on liquidity and its ability to fund loan originations and working capital through deposits, borrowings and loan sales; an inability to raise funds through deposits (including brokered deposits, which are regulatorily constrained), borrowings or loan sales would substantially harm its liquidity, and it carries Series A Preferred Stock (redeemable on/after March 15, 2027 subject to regulatory approval) plus a $75.0M shelf as funding levers.

“An inability to raise funds through deposits, borrowings, the sale of loans, and other sources could have a substantial negative effect on our liquidity.”

First Business concentrates in commercial, commercial-real-estate, construction and asset-based lending where repayment depends on project completion and borrower performance (construction-cost estimates may prove inaccurate, exposing it to losses), and its SBA lending program depends on the continued availability of SBA loan programs, retention of its SBA Preferred Lender status and compliance with SBA requirements; a credit-cycle downturn or loss of SBA standing would hurt results.

“The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as a Preferred Lender under the SBA loan programs, our ability to effectively compete and originate new SBA loans, and our ability to comply with applicable SBA lending requirements.”

First Business is a Wisconsin business bank operating through First Business Bank (headquartered in Madison) with concentration in its Wisconsin and greater Kansas City metro markets, and many of its loans have real estate as a primary or secondary component of collateral; deterioration of a few real-estate-secured loans or a downturn in those regional economies/property values could materially raise non-performing loans, charge-offs and credit-loss provisions.

“The deterioration of one, or a few, of these loans could cause a material increase in our level of non-performing loans, which would result in a loss of revenue from these loans and could result in an increase in the provision for credit losses and an increase in charge-offs, all of which could have a material adverse impact on our net income. These loans have real estate as a primary or secondary component of collateral.”

As a Wisconsin-chartered bank holding company, First Business is subject to extensive federal/state bank regulation — Dodd-Frank interstate-branching and merger rules, FDIC brokered-deposit restrictions, and AML/CFT obligations under the Bank Secrecy Act, Money Laundering Control Act and USA PATRIOT Act plus OFAC sanctions laws requiring customer identification, due diligence and suspicious-activity reporting — and non-compliance could bring penalties, enforcement actions and constraints on expansion.

“The Bank is subject to several federal laws that are designed to combat money laundering and countering the financing of terrorism, and restrict transactions with persons, companies, or foreign governments sanctioned by United States authorities.”