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What changed in Citizens Community Bancorp Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Citizens Community Bancorp Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+265 added−291 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-05)

Top changes in Citizens Community Bancorp Inc.'s 2024 10-K

265 paragraphs added · 291 removed · 204 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

36 edited+19 added−10 removed73 unchanged
Biggest changeIts primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, Agricultural operators and consumers, including one-to-four family residential mortgages.
Biggest changeThe Bank is a federally chartered National Bank serving customers in Wisconsin and Minnesota through 22 full-service branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas.
As a bank holding company, the Company is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System (the “FRB”). The Bank is also subject to regulation, supervision and examination by the OCC. The Bank is a member of the Federal Reserve System and the Federal Home Loan Bank System.
As a bank holding company, the Company is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve (the “FRB”). The Bank is also subject to regulation, supervision and examination by the OCC. The Bank is a member of the Federal Reserve System and the Federal Home Loan Bank System.
The Sarbanes-Oxley Act of 2002 (SOX) was enacted to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
Sarbanes-Oxley Act The Sarbanes-Oxley Act of 2002 (SOX) was enacted to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
Prompt Corrective Action. The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, in which all institutions are placed.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, in which all institutions are placed.
The Bank is a member of the FHLB of Chicago, which is one of the 11 regional Federal Home Loan Banks. The primary purpose of the FHLBs is to provide funding to their saving association 11 members in support of the home financing credit function of the members.
The Bank is a member of the FHLB of Chicago, which is one of the 11 regional Federal Home Loan Banks. The primary purpose of the FHLBs is to provide funding to their saving association members in support of the home financing credit function of the members.
Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “United States persons” engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to United States jurisdiction (including property in the possession or control of United States persons).
Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or 10 investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “United States persons” engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to United States jurisdiction (including property in the possession or control of United States persons).
The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“Regulatory Relief Act”) eliminated questions about the applicability of certain Dodd-Frank Act reforms to community bank systems, including relieving us of any requirement to engage in mandatory stress tests, maintain a risk committee or comply with the Volcker Rule’s complicated prohibitions on proprietary trading and ownership of private funds.
The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 8 (“Regulatory Relief Act”) eliminated questions about the applicability of certain Dodd-Frank Act reforms to community bank systems, including relieving us of any requirement to engage in mandatory stress tests, maintain a risk committee or comply with the Volcker Rule’s complicated prohibitions on proprietary trading and ownership of private funds.
Some of our competitors are not subject to the same degree of regulation as that imposed on national banks or federally insured institutions, and these 7 other institutions may be able to price loans and deposits more aggressively. We also face direct competition from other banks and their holding companies that have greater assets and resources than ours.
Some of our competitors are not subject to the same degree of regulation as that imposed on national banks or federally insured institutions, and these other institutions may be able to price loans and deposits more aggressively. We also face direct competition from other banks and their holding companies that have greater assets and resources than ours.
In particular, the FRB regulates money supply, credit conditions and interest rates in order to influence general economic conditions, primarily through open market operations in United States Government Securities, varying the discount rate on member bank borrowings, setting reserve requirements against member and nonmember bank deposits, regulating interest rates payable by member banks on time and savings deposits and expanding or contracting the money supply.
In particular, the FRB regulates money supply, credit conditions and interest rates in order to influence general economic conditions, primarily through open market operations in United States Government Securities, varying the discount rate on member bank borrowings, setting reserve requirements against member and nonmember bank deposits, regulating interest rates payable by member banks on time and savings deposits and expanding or contracting the 12 money supply.
Section 404(b) requires that an independent registered public accounting firm provide an attestation report on the Company’s internal control over financial reporting and the operating effectiveness of these controls, making the public reporting process more costly. 8 Federal Banking Regulation Federal banking institutions, like the Bank, their holding companies and their affiliates are extensively regulated under federal law.
Section 404(b) requires that an independent registered public accounting firm provide an attestation report on the Company’s internal control over financial reporting and the operating effectiveness of these controls, making the public reporting process more costly. Federal Banking Regulation Federal banking institutions, like the Bank, their holding companies and their affiliates are extensively regulated under federal law.
Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement 9 remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business. See “Bank Regulation - Prompt Corrective Action” below.
Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business. See “Bank Regulation - Prompt Corrective Action” below.
See Item 7; “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, under the heading “Balance Sheet Analysis” for further analysis of our loan portfolio. Investment Activities We maintain a portfolio of investments, consisting primarily of mortgage-backed securities, asset-backed securities, U.S. Government sponsored agency securities and corporate debt securities.
See Item 7; “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, under the heading “Balance Sheet Analysis” for further analysis of our loan portfolio. 6 Investment Activities We maintain a portfolio of investments, consisting primarily of mortgage-backed securities, asset-backed securities, U.S. Government sponsored agency securities and corporate debt securities.
Each FHLB serves as a reserve or central bank for its members within its assigned region. FHLBs are funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. FHLBs make loans or advances to members in accordance with policies and procedures established by the board of directors of the FHLB.
Each FHLB serves as a reserve or central bank for its members within its assigned region. FHLBs are funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. FHLBs make loans or advances to members in accordance with policies and procedures 11 established by the board of directors of the FHLB.
Banking subsidiaries of bank holding companies are also subject to certain restrictions imposed by federal law in dealings with their holding companies and other affiliates. Federal law restricts the amount of voting stock of a bank holding company or a bank that a person or group may acquire without the prior approval of banking regulators.
Banking subsidiaries of bank holding companies are also subject to certain restrictions imposed by federal law in dealings with their holding companies and other affiliates. 9 Federal law restricts the amount of voting stock of a bank holding company or a bank that a person or group may acquire without the prior approval of banking regulators.
The deposits of the Bank are insured by the Deposit Insurance Fund (DIF) of the FDIC up to the limits set forth under applicable law and are subject to the deposit insurance premium assessments of the DIF. The current maximum per depositor FDIC insurance amount is $250,000. The FDIC applies a risk-based system for setting deposit insurance assessments.
The deposits of the Bank are insured by the DIF of the FDIC up to the limits set forth under applicable law and are subject to the deposit insurance premium assessments of the DIF. The current maximum per depositor FDIC insurance amount is $250,000. The FDIC applies a risk-based system for setting deposit insurance assessments.
An institution subject to the Patriot Act must provide AML training to employees, designate an AML compliance 10 officer and annually audit the AML program to assess its effectiveness. The FDIC continues to issue regulations and additional guidance with respect to the application and requirements of BSA and AML.
An institution subject to the Patriot Act must provide AML training to employees, designate an AML compliance officer and annually audit the AML program to assess its effectiveness. The FDIC continues to issue regulations and additional guidance with respect to the application and requirements of BSA and AML.
Under the federal Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company, such as the Company, and the OCC before acquiring control of any national bank, such as the Bank.
Under the federal Change in Bank Control Act (“CBCA”) and the regulations thereunder, a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company, such as the Company, and the OCC before acquiring control of any national bank, such as the Bank.
Yields Earned and Rates Paid This information is included in Item 7; “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, under the heading “Statement of Operations Analysis” herein. 6 Rate/Volume Analysis This information is included in Item 7; “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, under the heading “Statement of Operations Analysis” herein.
Yields Earned and Rates Paid This information is included in Item 7; “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, under the heading “Statement of Operations Analysis” herein. Rate/Volume Analysis This information is included in Item 7; “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, under the heading “Statement of Operations Analysis” herein.
The final rule established four categories of tiered presumptions of non-control that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of non-control.
Such rule established four categories of tiered presumptions of non-control that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of non-control.
In addition, the CBCA prohibits any entity from acquiring 25% (the BHC Act has a lower limit for acquirers that are existing bank holding companies) or more of a bank holding company’s or bank’s voting securities, or otherwise obtaining control or a controlling influence over a bank holding company or bank without the approval of the Federal Reserve.
In addition, the CBCA prohibits any entity from acquiring 25% (the BHCA has a lower limit for acquirers that are existing bank holding companies) or more of a bank holding company’s or bank’s voting securities, or otherwise obtaining control or a controlling influence over a bank holding company or bank without the approval of the Federal Reserve.
In addition, we are currently considered a “non-accelerated filer” and will maintain that status for so long as the Company’s annual revenues are less than $100 million, and its public float is more than $75 million but less than $700 million. Sarbanes-Oxley Act .
In addition, we are currently considered a “non-accelerated filer” and will maintain that status for so long as the Company’s annual revenues are less than $100 million, and its public float is more than $75 million but less than $700 million.
In 2022, the Company adopted a clawback policy that is consistent with Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended, and the listing standards adopted by the Nasdaq Stock Market, each of which were mandated by the Dodd-Frank Act.
In 2022, the Company adopted a clawback policy that is consistent with Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended, and the listing standards adopted by the Nasdaq Stock Market, as mandated by the Dodd-Frank Act.
As a member, the Bank is required to purchase and maintain stock in the FHLB of Chicago based on activity and membership requirements. As of December 31, 2023, the Bank had $7.3 million in FHLB stock, which was in compliance with this requirement. The Bank receives dividends on its FHLB stock. Community Reinvestment Act.
As a member, the Bank is required to purchase and maintain stock in the FHLB of Chicago based on activity and membership requirements. As of December 31, 2024, the Bank had $3.9 million in FHLB stock, which was in compliance with this requirement. The Bank receives dividends on its FHLB stock. Community Reinvestment Act.
These indicia of control include nonvoting equity ownership, director representation, management interlocks, business relationship and restrictive contractual covenants. Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily being deemed to have a controlling influence. Bank Regulation Anti-Money Laundering and OFAC Regulation .
These indicia of control include nonvoting equity ownership, director representation, management interlocks, business relationship and restrictive contractual covenants. Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily being deemed to have a controlling influence.
Consumer Compliance and Fair Lending Laws. The Bank is subject to a number of federal and state laws designed to protect borrowers and promote lending to various sectors of the economy and population.
The Bank is subject to a number of federal and state laws designed to protect borrowers and promote lending to various sectors of the economy and population.
We believe our human capital efforts, which include employee training, employee health and benefits packages, and engaging employees in volunteer activities in the communities that we serve, all contribute to our success in attracting, retaining and motivating strong employee talent. At March 5, 2024, we had 214 full-time employees and 232 total employees, company-wide.
We believe our human capital efforts, which include employee training, employee health and benefits packages, and engaging employees in volunteer activities in the communities that we serve, all contribute to our success in attracting, retaining and motivating strong employee talent. At March 13, 2025, we had 207 full-time employees and 232 total employees, company-wide.
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of applicable statutes and by the regulations and policies of various bank regulatory agencies, including our primary regulator, the Federal Reserve, and the Bank’s primary regulator, the OCC, as well as the FDIC, as the insurer of our deposits, and the Consumer Financial Protection Bureau (“CFPB”), as the regulator of consumer financial services and their providers.
As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of applicable statutes and by the regulations and policies of various bank regulatory agencies, including our primary regulator, the Federal Reserve, and the Bank’s primary regulator, the OCC, as well as the FDIC, as the insurer of our deposits.
Deposits are insured by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (“FDIC”) up to statutory limits. At December 31, 2023, our total deposits were $1.519 billion including interest bearing deposits of $1.253 billion and non-interest bearing deposits of $0.266 billion. Borrowings.
Deposits are insured by the Deposit Insurance Fund (“DIF”) of the Federal Deposit Insurance Corporation (“FDIC”) up to statutory limits. At December 31, 2024, our total deposits were $1.488 billion including interest bearing deposits of $1.235 billion and non-interest bearing deposits of $0.253 billion. Borrowings.
Our primary activities consist of holding the stock of our wholly-owned subsidiary bank, Citizens Community Federal N.A. (the “Bank”), and providing commercial, agricultural and consumer banking activities through the Bank. At December 31, 2023, we had approximately $1.851 billion in total assets, $1.519 billion in deposits, and $173.3 million in equity.
Our primary activities consist of holding the stock of our wholly-owned subsidiary bank, Citizens Community Federal N.A. (the “Bank”), and providing commercial, agricultural and consumer banking activities through the Bank. At December 31, 2024, we had approximately $1.749 billion in total assets, $1.488 billion in deposits, and $179.1 million in equity. Citizens Community Federal N.A.
The Change in Bank Control Act (“CBCA”) prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction.
The CBCA prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction.
Securities Regulation and Listing Our common stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is listed on the NASDAQ Global Market under the symbol “CZWI.” We are subject to the information, proxy solicitation, insider trading, corporate governance, and other disclosure requirements and restrictions of the Exchange Act, as well as the Securities Act of 1933 (the “Securities Act”), both administered by the SEC.
All of the foregoing may have a material adverse effect on our business, operations, and earnings. 7 Securities Regulation and Listing Our common stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is listed on the NASDAQ Global Market under the symbol “CZWI.” We are subject to the information, proxy solicitation, insider trading, corporate governance, and other disclosure requirements and restrictions of the Exchange Act, as well as the Securities Act of 1933 (the “Securities Act”), both administered by the SEC.
Our total gross outstanding loans, before net deferred loan costs and unamortized discounts on acquired loans, as of December 31, 2023, were $1.465 billion, consisting of $1.173 billion in commercial/agricultural real estate loans, $147.4 million in C&I/agricultural operating loans, $131.9 million in residential mortgage loans and $12.7 million in consumer installment loans.
Our total gross outstanding loans, before net deferred loan costs and unamortized discounts on acquired loans, as of December 31, 2024, were $1.372 billion, consisting of $1.081 billion in commercial/agricultural real estate loans, $146.7 million in C&I/agricultural operating loans, $135.3 million in residential mortgage loans and $9.0 million in consumer installment loans.
The likelihood and timing of any changes, and the impact such changes may have on the Company and the Bank, are difficult to predict. In addition, bank regulatory agencies may issue enforcement actions, policy statements, interpretive letters and similar written guidance applicable to the Company or the Bank.
In addition, bank regulatory agencies may issue enforcement actions, policy statements, interpretive letters and similar written guidance applicable to the Company or the Bank.
Section 404 of SOX requires management of the Company to undertake a periodic assessment of the adequacy and effectiveness of the Company’s internal control over financial reporting. If the Company were to be classified as an “accelerated filer” rather than a “non-accelerated filer,” then we would become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act.
If the Company were to be classified as an “accelerated filer” rather than a “non-accelerated filer,” which we believe is probable in 2025, then we would become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act.
The enforcement of fair lending laws has been an increasing area of focus for regulators, including the OCC and CFPB. Effects of Government Monetary Policy The earnings of the Company are affected by general and local economic conditions and by the policies of various governmental regulatory authorities.
Effects of Government Monetary Policy The earnings of the Company are affected by general and local economic conditions and by the policies of various governmental regulatory authorities.
The Federal Reserve Board recently issued a final rule (which became effective October 1, 2020) that clarified and codified the Federal Reserve’s standards for determining whether one company has control over another.
The Board of Governors of the Federal Reserve has clarified and codified the Federal Reserve’s standards for determining whether one company has control over another.
Removed
Unless otherwise noted herein, all monetary amounts in this report, other than share, per share and capital ratio amounts, are stated in thousands. Citizens Community Federal N.A. The Bank is a federally chartered National Bank serving customers in Wisconsin and Minnesota through 23 full-service branch locations.
Added
The Bank offers traditional community banking services to businesses, Agricultural operators and consumers, including one-to-four family residential mortgages. Internet Website We maintain a website at www.ccf.us.
Removed
Acquisitions On August 18, 2017, the Company completed its merger with Wells Financial Corporation (“WFC”), pursuant to the merger agreement, dated March 17, 2017. At that time, the separate corporate existence of WFC ceased, and the Company survived the merger.
Added
The likelihood and timing of any changes, and the impact such changes may have on the Company and the Bank, are difficult to predict, including any changes resulting from changes in the U.S. presidential administration and U.S. Congress.
Removed
In connection with the merger, the Company caused Wells Federal Bank to merge with and into the Bank, with the Bank surviving the merger. The merger expanded the Bank's market share in Mankato and southern Minnesota, along with expanded services through Wells Insurance Agency, Inc. (“WIA”).
Added
Section 404 of SOX requires management of the Company to undertake a periodic assessment of the adequacy and effectiveness of the Company’s internal control over financial reporting.
Removed
WIA provided insurance products to the Bank’s customers and was sold on June 30, 2020. On October 19, 2018, the Company completed its acquisition of United Bank for a total cash consideration of approximately $51.1 million, subject to certain post-closing purchase price adjustments and future indemnity claims.
Added
Late in the preceding administration, the standards by which bank and financial institution acquisitions would be evaluated underwent change by the OCC, FDIC and Department of Justice (“DOJ”), but not the Federal Reserve. These review and changes were incorporated into non-binding guidance.
Removed
In connection with this acquisition, the Company merged United Bank with and into the Bank, with the Bank surviving the merger. On December 3, 2018, the Bank entered into a Purchase and Assumption Agreement with Lake Michigan Credit Union providing for the sale of the Bank’s one branch located in Rochester Hills, MI.
Added
The DOJ withdrew its 1995 Bank Merger Guidelines and issued the 2024 Banking Addendum to its 2023 Merger Guidelines.
Removed
On May 17, 2019, the Company completed the sale of the Rochester Hills, MI branch for a deposit premium of 7 percent, or approximately $2.3 million, net of selling costs. The branch sale included approximately $34 million in deposits and $300,000 in fixed assets. The Bank retained all loans associated with the branch.
Added
The DOJ clarified that it will assess competition considerations in connection with bank and bank holding company mergers using its 2023 Merger Guidelines, which is the general merger review framework the DOJ now uses to evaluate transactions in all segments of the economy, and the 2024 Banking Addendum.
Removed
On January 21, 2019, the Company and F&M Merger Sub, Inc., a newly formed Minnesota corporation and wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger with F. & M. Bancorp. of Tomah, Inc., a Wisconsin corporation (“F&M”).
Added
The 2024 Banking Addendum provides guidance on how the DOJ will assess competition in the context of bank and bank holding company mergers.
Removed
On July 1, 2019, the Company closed on the acquisition of F&M and completed the related data systems conversion on July 14, 2019. F. & M. Investment Corp. of Tomah was a wholly owned subsidiary of the Bank that was formerly utilized by F&M to manage its municipal bond portfolio and has been dissolved.
Added
An analysis under the 2023 Merger Guidelines and 2024 Banking Addendum may include consideration of theories of harm and relevant markets not considered under the 1995 Bank Merger Guidelines, which focused primarily on concentrations of deposits and branches. Whether and how the guidance might be further changed or interpreted by the new administration is uncertain.
Removed
Internet Website We maintain a website at www.ccf.us.
Added
Pause on Major Federal Reserve Rulemaking On February 28, 2025, Michael Barr stepped down as vice chair of supervision of the Federal Reserve. The Federal Reserve stated that it will not issue any major rulemaking until a new vice chair for supervision is confirmed by the U.S. Senate. Bank Regulation Anti-Money Laundering and OFAC Regulation .
Removed
All of the foregoing may have a material adverse effect on our business, operations, and earnings.
Added
In addition to the GLBA, we are, or may become in the future, subject to a variety of complex and evolving laws, regulations, rules and standards regarding privacy and cybersecurity.
Added
Privacy and cybersecurity are currently areas of considerable legislative and regulatory attention, with new or modified laws, regulations, rules and standards being frequently adopted and potentially subject to divergent interpretation or application in a manner that may create inconsistent or conflicting requirements for businesses. Prompt Corrective Action.
Added
In October 2023, the Federal Reserve, FDIC and OCC issued a final rule to amend their regulations implementing the CRA.
Added
The rule materially revises the current CRA framework, including the assessment areas with which a bank is evaluated to include activities associated with online and mobile banking, the tests used to evaluate the bank in its assessment areas, new methods of calculating credit for lending, investment and service activities and additional data collection and reporting requirements.
Added
The rule was originally intended to take effect on April 1, 2024, with most of the provisions becoming applicable on January 1, 2026, and reporting of the collected data would not be required until 2027.
Added
Several banking industry groups filed a lawsuit seeking to invalidate the final rule, in which they argued that the agencies exceeded their statutory authority in adopting it. In March 2024, a preliminary injunction was granted that provides a day-for-day extension for each day the injunction remains in place.
Added
The court’s decision granting a preliminary injunction is on appeal to the U.S. Court of Appeals for the Fifth Circuit. Uncertainty consequently remains around the actual implementation date, as well as around which elements of the final rule may be implemented. Consumer Compliance and Fair Lending Laws.
Added
The enforcement of fair lending laws has been an increasing area of focus for regulators, including the OCC.
Added
Enforcement Authority The federal banking agencies have broad authority to issue orders to depository institutions and their holding companies prohibiting activities that constitute violations of law, rule, regulation or administrative order, or that represent unsafe or unsound banking practices, as determined by the federal banking agencies.
Added
The federal banking agencies also are empowered to require affirmative actions to correct any violations or practice; issue administrative orders that can be judicially enforced; direct increases in capital; limit dividends and distributions; restrict growth; assess civil money penalties against institutions or individuals who violate any laws, regulations, orders or written agreements with the agencies; order termination of certain activities of holding companies or their non-bank subsidiaries; remove officers and directors; order divestiture of ownership or control of a non-banking subsidiary by a holding company; or terminate deposit insurance and appoint a conservator or receiver.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

51 edited+15 added−13 removed84 unchanged
Biggest changeWe face increasing pressure to provide products and services at lower prices, which can reduce our net interest margin and revenues from our fee-based products and services. In addition, the widespread adoption of new technologies, including internet and mobile banking services, could require us to make substantial expenditures to modify or adapt our existing products and services.
Biggest changeIn addition, the widespread adoption of new technologies, including internet and mobile banking services, could require us to make substantial expenditures to modify or adapt our existing products and services. Also, these and other capital investments in our business may not produce expected growth in earnings anticipated at the time of the expenditure.
Acquiring other banks or financial service companies, as well as other geographic and product expansion activities, involve various risks including: • risks of unknown or contingent liabilities; • unanticipated costs and delays; • risks that acquired new businesses do not perform consistent with our growth and profitability expectations; • risks of entering new markets or product areas where we have limited experience; • risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures; • exposure to potential asset quality issues with acquired institutions; • difficulties, expenses and delays of integrating the operations and personnel of acquired institutions, and start-up delays and costs of other expansion activities; • potential disruptions to our business; • possible loss of key employees and customers of acquired institutions; 17 • potential short-term decreases in profitability; and • diversion of our management’s time and attention from our existing operations and business.
Acquiring other banks or financial service companies, as well as other geographic and product expansion activities, involve various risks including: • risks of unknown or contingent liabilities; • unanticipated costs and delays; • risks that acquired new businesses do not perform consistent with our growth and profitability expectations; • risks of entering new markets or product areas where we have limited experience; • risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures; • exposure to potential asset quality issues with acquired institutions; • difficulties, expenses and delays of integrating the operations and personnel of acquired institutions, and start-up delays and costs of other expansion activities; • potential disruptions to our business; • possible loss of key employees and customers of acquired institutions; • potential short-term decreases in profitability; and • diversion of our management’s time and attention from our existing operations and business.
Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and modifications, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates.
Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and modifications, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region 15 where the Company operates.
Consequently, stockholders of the Company may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to acquire control of other non-bank companies. Investors should be aware of these requirements when acquiring shares of our stock. Our reporting obligations as a public company are costly.
Consequently, stockholders of the Company may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to acquire control of other non-bank companies. Investors should be aware of these requirements when acquiring shares of our stock. 19 Our reporting obligations as a public company are costly.
The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. We seek to ensure our funding needs are met by maintaining an appropriate level of liquidity through asset/liability management.
The ability of a 16 financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds. We seek to ensure our funding needs are met by maintaining an appropriate level of liquidity through asset/liability management.
The final rule established four categories of tiered presumptions of non-control that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of non-control.
The rule established four categories of tiered presumptions of non-control that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of non-control.
Thus, our common stock will be less liquid than the stock of companies with broader public ownership, and as a result, the trading prices for our shares of common stock may be more volatile, which may make it difficult for investors to resell shares at the volume, prices and times desired.
Thus, our common stock will be less liquid than the stock of 18 companies with broader public ownership, and as a result, the trading prices for our shares of common stock may be more volatile, which may make it difficult for investors to resell shares at the volume, prices and times desired.
Changes in these standards are continuously occurring, and given recent economic conditions, more drastic changes may occur. The implementation of such changes could have a material adverse effect on our financial condition and results of operations. 19 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Changes in these standards are continuously occurring, and given recent economic conditions, more drastic changes may occur. The implementation of such changes could have a material adverse effect on our financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Our failure to execute our acquisition strategy could adversely affect our business, results of operations, financial condition and future prospects. Our ability to pay dividends depends primarily on dividends from our banking subsidiary, the Bank, which is subject to regulatory and other limitations.
Our failure to execute our acquisition growth strategy could adversely affect our business, results of operations, financial condition and future prospects. Our ability to pay dividends depends primarily on dividends from our banking subsidiary, the Bank, which is subject to regulatory and other limitations.
For example, customers can now pay bills and transfer funds directly without 15 going through a bank. The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits.
For example, customers can now pay bills and transfer funds directly without going through a bank. The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits.
Privacy information security laws and regulation changes, and compliance therewith, may result in cost increases due to system changes and the development of new administrative processes.
Increasing privacy information security laws and regulation changes, and compliance therewith, may result in cost increases due to system changes and the development of new administrative processes.
Unauthorized disclosure of sensitive or confidential 13 client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business.
Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business.
Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk.
Accordingly, our results of operations, like those of other financial institutions, are, and have been, impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk.
This public uncertainty and concern could potentially affect the Bank despite its relatively high percentage of deposits (82% as of December 31, 2023) that are either insured or collateralized and its balance sheet liquidity and collateralized borrowing capacity being well in excess of the uninsured deposit balances.
This public uncertainty and concern could potentially affect the Bank despite its relatively high percentage of deposits (82% as of December 31, 2024) that are either insured or collateralized and its balance sheet liquidity 14 and collateralized borrowing capacity being well in excess of the uninsured deposit balances.
We operate in a highly regulated environment, and are subject to changes, which could increase our cost structure or have other negative impacts on our operations. The banking industry is extensively regulated at the federal and state levels.
REGULATORY AND COMPLIANCE RISKS We operate in a highly regulated environment, and are subject to changes, which could increase our cost structure or have other negative impacts on our operations. The banking industry is extensively regulated at the federal and state levels.
Our net interest income will be adversely affected if market interest rates change such that the interest we pay on deposits and borrowings increase faster than the interest earned on loans and investments. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time.
Our net interest income has been, and will continue to be, adversely affected if market interest rates change such that the interest we pay on deposits and borrowings increase faster than the interest earned on loans and investments. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time.
A significant decline in general economic conditions caused by inflation, recession, tariffs, unemployment, changes in securities markets, changes in housing market prices, geopolitical uncertainties, natural disasters, pandemics and election outcomes or other factors could impact economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.
A significant decline in general economic conditions caused by inflation, recession, tariffs, unemployment, changes in securities markets, rate cuts by the Federal Reserve, changes in housing market prices, geopolitical uncertainties, natural disasters, pandemics and election outcomes or other factors could impact economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.
Accordingly, we cannot be assured of our ability to raise capital when needed or on favorable terms. If we cannot raise additional capital when needed or if we are subject to material unfavorable terms for such capital, we may be subject to increased regulatory supervision and the imposition of restrictions on our growth and business.
If we cannot raise additional capital when needed or if we are subject to material unfavorable terms for such capital, we may be subject to increased regulatory supervision and the imposition of restrictions on our growth and business.
Adverse economic conditions may result from a variety of factors including domestic and global economic and political developments, including civil unrest, terrorism, foreign investment restrictions, or military action, such as the armed conflict between Ukraine and Russia and corresponding sanctions imposed by the United States and other countries or the conflict in Israel and the surrounding areas, and new or evolving legal and regulatory requirements on business investment, hiring, migration, labor supply and global supply chains.
Adverse economic conditions may result from a variety of factors including domestic and global economic and political developments, including civil unrest, terrorism, foreign investment restrictions, various political or military action, such as the armed conflict between Ukraine and Russia and corresponding sanctions imposed by the United States and other countries or the conflict in Israel and the surrounding areas, geopolitical events (including China-Taiwan and U.S.-China relations), and new or evolving legal and regulatory requirements on business investment, hiring, migration, labor supply and global supply chains.
Inflation may have an adverse impact on our business and on our customers. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. The annual inflation rate as of December 2023 was 3.4% measured by consumer price index.
Inflation may have an adverse impact on our business and on our customers. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. The annual inflation rate as of December 2024 was 2.9% measured by consumer price index.
In the case of debt securities, if these securities are never sold, the decrease will be recovered over the life of the securities. We conduct a periodic review and evaluation of our securities portfolio to determine if the decline in the fair value of any security below its cost basis is other-than-temporary.
In the case of debt securities, if these securities are never sold, the decrease will be recovered over the life of the securities. We conduct a periodic review and evaluation of our securities portfolio to determine if the decline in the fair value of any security below its cost basis is due to credit impairment.
The system of supervision and regulation applicable to us establishes a comprehensive framework for our operations and is intended primarily for the protection of the Deposit Insurance Fund, our depositors and the public, rather than our stockholders.
The system of supervision and regulation applicable to us establishes a comprehensive framework for our operations and is intended primarily for the protection of the DIF, our depositors and the public, rather than our stockholders.
If the Company were to be classified as an “accelerated filer” rather than a “non-accelerated filer,” then we would become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act.
If the Company were to be classified as an “accelerated filer” rather than a “non-accelerated filer,” which we believe is probable in 2025, then we would become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act.
Our compliance with these regulations, including compliance with regulatory commitments, is costly. 18 Regulation includes, among other things, capital and reserve requirements, the level of deposit insurance premiums assessed, permissible investments and lines of business, mergers and acquisitions, restrictions on transactions with insiders and affiliates, anti-money laundering regulations, dividend limitations, community reinvestment requirements, limitations on products and services offered, loan limits, geographical limits, and consumer credit regulations.
Regulation includes, among other things, capital and reserve requirements, the level of deposit insurance premiums assessed, permissible investments and lines of business, mergers and acquisitions, restrictions on transactions with insiders and affiliates, anti-money laundering regulations, dividend limitations, community reinvestment requirements, limitations on products and services offered, loan limits, geographical limits, and consumer credit regulations.
Our growth strategy includes selectively acquiring businesses through acquisitions of other banks, and our ability to consummate these acquisitions on economically advantageous terms acceptable to us in the future is unknown.
Our growth strategy includes selectively acquiring businesses through acquisitions of other banks, and our ability to consummate these acquisitions on economically advantageous terms acceptable to us in the future is unknown. Our growth strategy includes acquisitions of other banks that serve customers or markets we find desirable.
At December 31, 2023, $155.7 million of our securities, were classified as available for sale (AFS) and $91.2 million were classified as held to maturity (HTM). The estimated fair value of our AFS securities portfolio may increase or decrease depending on market conditions. Our AFS securities portfolio is comprised of fixed-rate, and to a lesser extent, floating rate securities.
At December 31, 2024, $142.9 million of our securities, were classified as available-for-sale (AFS) and $85.5 million were classified as held to maturity (“HTM”). The estimated fair value of our AFS securities portfolio may increase or decrease depending on market conditions. Our AFS securities portfolio is comprised of fixed-rate, and to a lesser extent, floating rate securities.
Insured depository institutions and their holding companies are subject to comprehensive regulation and supervision by financial regulatory authorities covering all aspects of their organization, management and operations. We are also subject to regulation by the SEC.
Insured depository institutions and their holding companies are subject to comprehensive regulation and supervision by financial regulatory authorities covering all aspects of their organization, management and operations. We are also subject to regulation by the SEC. Our compliance with these regulations, including compliance with regulatory commitments, is costly.
If any of the events or circumstances described in the 12 following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline.
If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline. RISKS RELATED TO ECONOMIC CONDITIONS Our business may be adversely affected by conditions in the financial markets and economic conditions generally.
In addition, our business is susceptible to broader economic trends within the United States economy. Economic conditions have a significant impact on the demand for our products and services, as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources.
Economic conditions have a significant impact on the demand for our products and services, as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources.
The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities.
Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities.
This competition could increase prices for potential acquisitions that we believe are attractive. Any such acquisitions could be funded through cash from operations, the issuance of equity and/or the incurrence of additional indebtedness, which amount may be material, or a combination thereof. Any acquisition could be dilutive to our earnings and stockholders’ equity per share of our common stock.
Any such acquisitions could be funded through cash from operations, the issuance of equity and/or the incurrence of additional indebtedness, which amount may be material, or a combination thereof. Any acquisition could be dilutive to our earnings and 17 stockholders’ equity per share of our common stock. Also, acquisitions are subject to various regulatory approvals.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. Geopolitical tensions, including current or anticipated impact of military conflicts , could adversely affect general economic industry conditions.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us or the willingness of businesses to take loans with us.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Furthermore, the storage and transmission of such data is regulated at the federal and state level.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
RISKS RELATED TO ECONOMIC CONDITIONS Our business may be adversely affected by conditions in the financial markets and economic conditions generally. We operate primarily in the Wisconsin and Minnesota markets. As a result, our financial condition, results of operations and cash flows are significantly impacted by changes in the economic conditions in those areas.
We operate primarily in the Wisconsin and Minnesota markets. As a result, our financial condition, results of operations and cash flows are significantly impacted by changes in the economic conditions in those areas. In addition, our business is susceptible to broader economic trends within the United States economy.
Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger.
Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger. Climate change manifesting as physical or transition risks could adversely affect our operations, businesses, and customers.
We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience. If we deem such decline to be other-than-temporary related to credit losses, an allowance for credit losses(“ACL”) will be established. At December 31, 2023, no ACL was established for available for sale securities or held to maturity securities.
We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience. If we deem such decline to be due to credit impairment, an allowance for credit losses(“ACL”) will be established.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology driven by new or modified products and services.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology driven by new or modified products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the outsourcing of some of our business operations and the continued uncertain global economic environment.
Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the outsourcing of some of our business operations, the continued uncertain global economic environment, the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, nation-state supported actors, activists and other external parties.
Therefore, ratings downgrades on our securities may also have a material adverse effect on our risk-based regulatory capital levels. Our allowance for credit losses - loans may be insufficient.
The capital that we are required to maintain for regulatory purposes is impacted by, among other factors, the securities ratings on our portfolio. Therefore, ratings downgrades on our securities may also have a material adverse effect on our risk-based regulatory capital levels. Our allowance for credit losses - loans may be insufficient.
The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. 16 Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.
Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements.
On October 1, 2020, a Federal Reserve Board final rule became effective that clarified and codified the Federal Reserve’s standards for determining whether one company has control over another.
The Board of Governors of the Federal Reserve clarified and codified the Federal Reserve’s standards for determining whether one company has control over another.
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations. Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
We may not be able to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.
Also, these and other capital investments in our business may not produce expected growth in earnings anticipated at the time of the expenditure. We may not be successful in introducing new products and services, achieving market acceptance of our products and services, or developing and maintaining loyal customers, which in turn, could adversely affect our results of operations and profitability.
We may not be successful in introducing new products and services, achieving market acceptance of our products and services, or developing and maintaining loyal customers, which in turn, could adversely affect our results of operations and profitability. We could experience an unexpected inability to obtain needed liquidity.
To the extent our future operating results erode capital or we elect to expand through loan growth or acquisition, we may be required to raise additional capital. Our ability to raise capital will depend on conditions in the capital markets, which are outside of our control, and on our financial performance.
To the extent our future operating results erode capital or we elect to expand through loan growth, we may be required to raise additional capital. Furthermore, our strategy includes growth through acquisition.
We believe there are 9,047,304 shares of our common stock held by nonaffiliates as of March 5, 2024.
There are approximately 9.6 million shares of our common stock held by nonaffiliates as of March 13, 2025.
We intend to continue to evaluate potential acquisitions and expansion opportunities in the normal course of our business. Although the integration of F&M, United Bank, WFC and CBN have been successfully completed, we cannot assure you that we will be able to adequately or profitably manage the ongoing integration of any future acquisitions.
Acquisition and expansion activities may disrupt our business, dilute existing stockholders and adversely affect our operating results. We seek to expand through acquisition and are evaluating potential acquisitions and expansion opportunities in the normal course of our business. We cannot assure you that we will be able to adequately or profitably manage the ongoing integration of any future acquisitions.
For a further discussion of risks that can impact us as a result of financial market disruption or an economic downturn, see “ Our business may be adversely affected by conditions in the financial markets and economic conditions generally .” RISKS RELATED TO OUR BUSINESS AND OPERATIONS We rely on network and information systems and other technologies, and, as a result, we are subject to various Cybersecurity risks.
These risks could materially and adversely impact our results of operations, financial position and/or liquidity. RISKS RELATED TO OUR BUSINESS AND OPERATIONS We rely on network and information systems and other technologies, and, as a result, we are subject to various Cybersecurity risks.
Although we exercise prudent due diligence when making loans, we could be subject to environmental liabilities with respect to these properties.
Although we exercise prudent due diligence when making loans, we could be subject to environmental liabilities with respect to these properties. Changes in the fair value or ratings downgrades of our securities may reduce our stockholders’ equity, net earnings, or regulatory capital ratios.
Also, acquisitions are subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests. Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals.
Regulatory approval is required for acquisitions we seek to consummate. Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals. If we are unable to find suitable acquisition candidates, this component of our growth strategy may be lost.
Our growth strategy includes acquisitions of other banks that serve customers or markets we find desirable, including our acquisitions of Community Bank of Northern Wisconsin (“CBN”), WFC, United Bank and F&M. The market for acquisitions remains highly competitive, and we may be unable to find satisfactory acquisition candidates in the future that fit our acquisition and growth strategy.
The market for acquisitions remains highly competitive, and we may be unable to find satisfactory acquisition candidates in the future that fit our acquisition and growth strategy. This competition could increase prices for potential acquisitions that we believe are attractive.
Maintaining or increasing our market share may depend on lowering prices and market acceptance of new products and services. Our success depends, in part, on our ability to adapt our products and services to evolving industry standards and customer demands.
Our success depends, in part, on our ability to adapt our products and services to evolving industry standards and customer demands. We face increasing pressure to provide products and services at lower prices, which can reduce our net interest margin and revenues from our fee-based products and services.
Removed
These risks could materially and adversely impact our results of operations, financial position and/or liquidity.
Added
Geopolitical tensions, including current or anticipated impact of military conflicts , could adversely affect general economic industry conditions. Geopolitical tensions may affect our earnings.
Removed
See also “ The COVID-19 pandemic may continue to impact economic conditions and affect our financial condition, our results of operations and other aspects of our business. ” 14 Changes in the fair value or ratings downgrades of our securities may reduce our stockholders’ equity, net earnings, or regulatory capital ratios.
Added
Furthermore, severe weather events such as catastrophic fire, tornado, or 13 other events could impact the markets that we serve and adversely impact our customers, such as hindering our borrowers’ ability to timely repay their loans and diminish the value of the collateral held by us.
Removed
At December 31, 2023, U.S. government issued or U.S. agency issued securities were carried at $181.3 million or 73.4% of the combined AFS and HTM portfolio. The capital that we are required to maintain for regulatory purposes is impacted by, among other factors, the securities ratings on our portfolio.
Added
Additionally, the techniques used by cyber criminals change frequently, may not be recognized until launched (or may evade detection for considerable time), can be initiated from a variety of sources, and may increase in frequency and effectiveness by the use of artificial intelligence.
Removed
We may not have sufficient pre-tax net income in future periods to fully realize the benefits of our net deferred tax assets. Assessing the need for, or the sufficiency of, a valuation allowance requires management to evaluate all available evidence.
Added
Our ability to maintain, timely update and replace systems can become more challenging as the speed, frequency, volume, interconnectivity and complexity of the information on these systems increases. Furthermore, the storage and transmission of such data is regulated at the federal and state level.
Removed
Based on future pre-tax net income projections and the planned execution of existing tax planning strategies, we believe that it is more likely than not that we will fully realize the benefits of our net deferred tax assets. However, our current assessment is based on assumptions and judgments that may or may not reflect actual future results.
Added
Additionally risks could arise in connection with any failure, or perceived failure, to timely or sufficiently update or expand our privacy notices and policies to be fully compliant with quickly evolving state privacy requirements, and any failure to sufficiently respond to, or respond in a sufficiently timely manner to, consumer rights and other requests exercised under such state privacy laws, in each case to the extent they are applicable to us.
Removed
If a valuation allowance becomes necessary, it could have a material adverse effect on our consolidated results of operations and financial condition. We could experience an unexpected inability to obtain needed liquidity. Liquidity measures the ability to meet current and future cash flow needs as they become due.
Added
Additionally, customers may decide to remove money from accounts with us in favor of other banks or other types of cash management products, such as emerging financial technologies, including digital wallets, non-fungible tokens and digital currencies and cryptocurrencies.
Removed
Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers.
Added
Additionally, we are subject to reputational risk associated with environmental, social and governance, issues – including different perspectives on the meaning of these issues. Such differing perspectives may expose us to increased scrutiny and criticism. Maintaining or increasing our market share may depend on lowering prices and market acceptance of new products and services.
Removed
To the extent that we are unable to find suitable acquisition candidates, an important component of our growth strategy may be lost. Acquisition and expansion activities may disrupt our business, dilute existing stockholders and adversely affect our operating results. We acquired F&M in July 2019, United Bank in October 2018, WFC in August 2017 and CBN in May 2016.
Added
Such expansion may also require us to raise additional capital which will depend on conditions in the capital markets, which are outside of our control, and on our financial performance. Accordingly, we cannot be assured of our ability to raise capital when needed or on favorable terms.
Removed
REGULATORY AND COMPLIANCE RISKS A new accounting standard may require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.
Added
Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
Removed
The Financial Accounting Standards Board (“FASB”) adopted a new accounting standard referred to as Current Expected Credit Loss, or CECL, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses. CECL became effective in January 2023 for smaller reporting companies such as the Company.
Added
There is an increasing concern over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include discrete events, such as flooding and wildfires, and longer-term shifts in climate patterns, such as extreme heat, and more frequent and prolonged drought.
Removed
This changed the current method of providing allowances for loan losses that are probable, which may require us to increase our allowance for loan 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 losses.
Added
Under medium or longer-term scenarios, such events, if uninterrupted or unaddressed, could disrupt our operations or those of our customers or third parties on which we rely, including through direct damage to assets and indirect impacts from supply chain disruption and market volatility. Additionally, transitioning to a low-carbon economy may entail extensive policy, legal, technology and market initiatives.
Removed
Banking regulators expect the new accounting standard will increase the allowance for loan losses. Any change in the allowance for loan losses will be an adjustment to retained earnings and would change the Bank’s capital levels.
Added
Transition risks, including changes in consumer preferences and additional regulatory requirements or supervisory expectations or taxes, could increase our expenses and undermine our strategies.
Removed
Any increase in our allowance for loan losses or expenses incurred to determine the appropriate level of the allowance for loan losses may have a material adverse effect on our financial condition and results of operations.
Added
In addition, our reputation and client relationships may be damaged as a result of our practices related to climate change, including our involvement, or our customers’ involvement, in certain industries or projects, in the absence of mitigation and/or transition measures, associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
Added
The election of a new President together with changes in the membership of Congress, including change in control of the Senate, will likely lead to changes in the laws or policies applicable to us and the agencies that regulate us.
Added
Further, some of the laws and regulations finalized in the prior administration that are applicable to financial institutions are subject to ongoing litigation creating further uncertainty. Additionally, different approaches to regulation by different jurisdictions, including potentially conflicting state-level regulation, could increase compliance costs or risks of non-compliance.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Chief Information Security Officer (“CISO”) and the Chief Technology Officer (“CTO”) are key management roles responsible for assessing and managing material risks from cybersecurity threats. The CISO reports to the Risk Committee and is responsible for implementing and maintaining our enterprise cybersecurity organization. The CISO will maintain an Incident Response Plan.
Biggest changeThe CISO reports to the Risk Committee and is responsible for implementing and maintaining our enterprise cybersecurity organization. The CISO will maintain an Incident Response Plan. The CISO ensures that the Incident Response Plan is tested annually and will present testing results to the Risk Committee.
These reports cover, but are not limited to, the Company’s cybersecurity posture, overall status of the Company’s compliance with the Cybersecurity Program, threat environment, material cybersecurity risks and events, Cybersecurity Program improvements and effectiveness, and other material matters related to the Cybersecurity Program. 20
These reports cover, but are not limited to, the Company’s cybersecurity posture, overall status of the Company’s compliance with the Cybersecurity Program, threat environment, material cybersecurity risks and events, Cybersecurity Program improvements and effectiveness, and other material matters related to the Cybersecurity Program. 21
The CTO provides our Cybersecurity Program with the technical and functional resources to achieve its strategic goals and objectives, and partners and collaborates with the CISO. The Risk Committee is responsible for overseeing the Company’s management of cybersecurity risk, including oversight into appropriate risk mitigation, strategies, processes, systems, and controls.
The CISO will ensure security incidents are logged and maintained. The CTO provides our Cybersecurity Program with the technical and functional resources to achieve its strategic goals and objectives, and partners and collaborates with the CISO. The Risk Committee is responsible for overseeing the Company’s management of cybersecurity risk, including oversight into appropriate risk mitigation, strategies, processes, systems, and controls.
The CISO is responsible for ensuring the Board of Directors and staff are trained annually on cybersecurity and information security awareness. Additionally, the CISO ensures staff is adequately trained on Incident Response Plan procedures. The CISO will ensure security incidents are logged and maintained.
The CISO and/or its delegate will share applicable threat information to ensure Board members and staff are informed on the evolving threat environment. The CISO is responsible for ensuring the Board of Directors and staff are trained annually on cybersecurity and information security awareness. Additionally, the CISO ensures staff is adequately trained on Incident Response Plan procedures.
Overseen by the Board of Directors and its Risk Committee, we regularly review, and as appropriate, adapt our Cybersecurity Program to an evolving landscape of emerging threats, evaluate effectiveness of key security controls, and assess cybersecurity best practices.
Overseen by the Board of Directors and its Risk Committee, we regularly review, and as appropriate, adapt our Cybersecurity Program to an evolving landscape of emerging threats, evaluate effectiveness of key security controls, and assess cybersecurity best practices. 20 The Chief Information Security Officer (“CISO”) and the Chief Technology Officer (“CTO”) are key management roles responsible for assessing and managing material risks from cybersecurity threats.
Removed
The CISO ensures that the Incident Response Plan is tested annually and will present testing results to the Risk Committee. The CISO and/or its delegate will share applicable threat information to ensure Board members and staff are informed on the evolving threat environment.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2023, the Bank had a total of 23 full-service branch offices located in the Wisconsin cities of Altoona, Barron, Eau Claire, Ellsworth, Ettrick, La Crosse, Ladysmith, Lake Hallie, Mondovi, Osseo, Rice Lake, Spooner, Strum and Tomah (2); and the Minnesota cities of Albert Lea, Blue Earth, Fairmont, Faribault, Mankato, Oakdale, St. Peter and Wells.
Biggest changeAt December 31, 2024, the Bank had a total of 22 full-service branch offices located in the Wisconsin cities of Altoona, Barron, Eau Claire, Ellsworth, Ettrick, La Crosse, Ladysmith, Lake Hallie, Mondovi, Osseo, Rice Lake, Spooner, Strum and Tomah (2); and the Minnesota cities of Albert Lea, Blue Earth, Fairmont, Faribault, Mankato, Oakdale, and Wells.
Of these, the Bank owns 19 and leases the remaining 4 branch offices. Management believes that our current facilities are adequate to meet our present and immediately foreseeable needs. For more information on our properties and equipment, see Note 5, Office Properties and Equipment of Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
Of these, the Bank owns 19 and leases the remaining 3 branch offices. Management believes that our current facilities are adequate to meet our present and immediately foreseeable needs. For more information on our properties and equipment, see Note 5, Office Properties and Equipment of Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS In the normal course of business, the Company and/or the Bank occasionally become involved in various legal proceedings. While the outcome of any such proceeding cannot be predicted with certainty, in our opinion, any liability from such proceedings would not have a material adverse effect on the business or financial condition of the Company. ITEM 4.
Biggest changeWhile the outcome of any such proceeding cannot be predicted with certainty, in our opinion, we believe that any liability from such proceedings would not have a material adverse effect on the business or financial condition of the Company. ITEM 4. MINE SAFETY DISCLOSURES None PART II
Added
ITEM 3. LEGAL PROCEEDINGS In the normal course of business, the Company and/or the Bank occasionally become involved in various legal proceedings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans For information relating to securities authorized for issuance under equity compensation plans, see Part III, Item 12. 21 Purchases of Equity Securities by the Issuer On July 23, 2021, the Board of Directors adopted a new share repurchase program.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans For information relating to securities authorized for issuance under equity compensation plans, see Part III, Item 12. 22 Purchases of Equity Securities by the Issuer On July 25, 2024, the Board of Directors authorized a stock repurchase program of 5% of the outstanding shares on that date or 512,709 shares.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Historically, trading in shares of our common stock has been limited. Citizens Community Bancorp, Inc. common stock is traded on the NASDAQ Global Market under the symbol “CZWI”. We had approximately 564 stockholders of record at March 5, 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Historically, trading in shares of our common stock has been limited. Citizens Community Bancorp, Inc. common stock is traded on the NASDAQ Global Market under the symbol “CZWI”. We had approximately 532 stockholders of record at March 13, 2025.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 - October 31, 2023 — $ — — 229,659 November 1, 2023 - November 30, 2023 27,500 $ 11.00 27,500 202,159 December 1, 2023 - December 31, 2023 — $ — — 202,159 Total 27,500 $ 11.00 27,500
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2024 - October 31, 2024 — $ — — 332,663 November 1, 2024 - November 30, 2024 93,894 $ 14.55 93,894 238,769 December 1, 2024 - December 31, 2024 — $ — — 238,769 Total 93,894 $ 14.55 93,894 ITEM 6.
Removed
Under this new share repurchase program, the Company may repurchase up to approximately 5% of the outstanding shares of its common stock as of July 23, 2021, or 532,962 shares, from time to time. During the quarter ended December 31, 2023, approximately 27 thousand shares were repurchased under this authorization.
Added
As of the beginning of the quarter ended December 31, 2024, 332 thousand shares were available for purchase under the 2024 share repurchase program. During the quarter ended December 31, 2024, 94 thousand shares were repurchased under the program. As of December 31, 2024, an additional 238 thousand shares remain available for repurchase under the 2024 share repurchase program.
Removed
The table below shows information about our repurchases of our common stock during the three months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe amortized cost and market values of our investment securities by asset categories as of the dates indicated below were as follows: Available for sale securities Amortized Cost Fair Value December 31, 2023 U.S. government agency obligations $ 16,655 $ 16,576 Mortgage-backed securities 91,091 73,480 Corporate debt securities 47,158 41,174 Asset-backed securities 24,840 24,513 Total available for sale securities $ 179,744 $ 155,743 December 31, 2022 U.S. government agency obligations $ 18,373 $ 18,313 Mortgage-backed securities 97,458 78,610 Corporate debt securities 44,636 40,251 Asset-backed securities 29,877 28,817 Total available for sale securities $ 190,344 $ 165,991 Held to maturity securities Amortized Cost Fair Value December 31, 2023 Obligations of states and political subdivisions $ 600 $ 565 Mortgage-backed securities 90,629 72,697 Total held to maturity securities $ 91,229 $ 73,262 December 31, 2022 Obligations of states and political subdivisions $ 600 $ 546 Mortgage-backed securities 95,779 76,233 Total held to maturity securities $ 96,379 $ 76,779 The amortized cost and fair values of our investment securities by maturity, as of December 31, 2023 were as follows: 32 Available for sale securities Amortized Cost Estimated Fair Value Due in one year or less $ — $ — Due after one year through five years 13,986 13,703 Due after five years through ten years 45,549 39,701 Due after ten years 29,118 28,859 Total securities with contractual maturities 88,653 82,263 Mortgage-backed securities 91,091 73,480 Total available for sale securities $ 179,744 $ 155,743 Held to maturity securities Amortized Cost Estimated Fair Value Due in one year or less $ 100 $ 100 Due after one year through five years 500 465 Due after five years through ten years — — Total securities with contractual maturities 600 565 Mortgage-backed securities 90,629 72,697 Total held to maturity securities $ 91,229 $ 73,262 The amortized cost and fair values of our investment securities by maturity, as of December 31, 2022 were as follows: Available for sale securities Amortized Cost Estimated Fair Value Due in one year or less $ — $ — Due after one year through five years 8,525 8,184 Due after five years through ten years 45,622 41,427 Due after ten years 38,739 37,770 Total securities with contractual maturities 92,886 87,381 Mortgage-backed securities 97,458 78,610 Total available for sale securities $ 190,344 $ 165,991 Held to maturity securities Amortized Cost Estimated Fair Value Due after one year through five years $ 450 $ 415 Due after five years through ten years 150 131 Total securities with contractual maturities 600 546 Mortgage-backed securities 95,779 76,233 Total held to maturity securities $ 96,379 $ 76,779 33 The following tables show the fair value and gross unrealized losses of securities with unrealized losses, as of the dates indicated below, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position: Less than 12 Months 12 Months or More Total Available for sale securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2023 U.S. government agency obligations $ 3,776 $ 5 $ 3,627 $ 151 $ 7,403 $ 156 Mortgage-backed securities — — 73,476 17,611 73,476 17,611 Corporate debt securities 3,350 76 35,916 5,914 39,266 5,990 Asset-backed securities 3,348 22 20,008 317 23,356 339 Total available for sale securities $ 10,474 $ 103 $ 133,027 $ 23,993 $ 143,501 $ 24,096 December 31, 2022 U.S. government agency obligations $ 3,169 $ 138 $ 1,138 $ 95 $ 4,307 $ 233 Mortgage-backed securities 9,654 896 68,907 17,952 78,561 18,848 Corporate debt securities 21,547 1,688 18,704 2,697 40,251 4,385 Asset-backed securities 7,955 221 20,862 839 28,817 1,060 Total available for sale securities $ 42,325 $ 2,943 $ 109,611 $ 21,583 $ 151,936 $ 24,526 Less than 12 Months 12 Months or More Total Held to maturity securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2023 Obligations of states and political subdivisions $ — $ — $ 565 $ 35 $ 565 $ 35 Mortgage-backed securities — — 72,507 17,938 72,507 17,938 Total held to maturity securities $ — $ — $ 73,072 $ 17,973 $ 73,072 $ 17,973 December 31, 2022 Obligations of states and political subdivisions $ — $ — $ 546 $ 54 $ 546 $ 54 Mortgage-backed securities 16,627 2,416 59,367 17,137 75,994 19,553 Total held to maturity securities $ 16,627 $ 2,416 $ 59,913 $ 17,191 $ 76,540 $ 19,607 Unrealized losses reflected in the preceding tables have not been included in results of operations because the unrealized loss was not deemed other-than-temporary.
Biggest changeThe amortized cost and market values of our investment securities by asset categories as of the dates indicated below were as follows: Available-for-sale securities Amortized Cost Fair Value December 31, 2024 U.S. government agency obligations $ 13,853 $ 13,753 Mortgage-backed securities 87,762 68,386 Corporate debt securities 44,931 41,716 Asset-backed securities 19,058 18,996 Total available-for-sale securities $ 165,604 $ 142,851 December 31, 2023 U.S. government agency obligations $ 16,655 $ 16,576 Mortgage-backed securities 91,091 73,480 Corporate debt securities 47,158 41,174 Asset-backed securities 24,840 24,513 Total available-for-sale securities $ 179,744 $ 155,743 Held to maturity securities Amortized Cost Fair Value December 31, 2024 Obligations of states and political subdivisions $ 500 $ 478 Mortgage-backed securities 85,004 65,144 Total held-to-maturity securities $ 85,504 $ 65,622 December 31, 2023 Obligations of states and political subdivisions $ 600 $ 565 Mortgage-backed securities 90,629 72,697 Total held to maturity securities $ 91,229 $ 73,262 31 The amortized cost and fair values of our investment securities by maturity, as of December 31, 2024 were as follows: Available-for-sale securities Amortized Cost Estimated Fair Value Due in one year or less $ 4,526 $ 4,487 Due after one year through five years 8,652 8,715 Due after five years through ten years 41,380 38,033 Due after ten years 23,284 23,230 Total securities with contractual maturities 77,842 74,465 Mortgage-backed securities 87,762 68,386 Total available-for-sale securities $ 165,604 $ 142,851 Held to maturity securities Amortized Cost Estimated Fair Value Due in one year or less $ 100 $ 100 Due after one year through five years 400 378 Due after five years through ten years — — Total securities with contractual maturities 500 478 Mortgage-backed securities 85,004 65,144 Total held-to-maturity securities $ 85,504 $ 65,622 The amortized cost and fair values of our investment securities by maturity, as of December 31, 2023 were as follows: Available-for-sale securities Amortized Cost Estimated Fair Value Due in one year or less $ — $ — Due after one year through five years 13,986 13,703 Due after five years through ten years 45,549 39,701 Due after ten years 29,118 28,859 Total securities with contractual maturities 88,653 82,263 Mortgage-backed securities 91,091 73,480 Total available-for-sale securities $ 179,744 $ 155,743 Held to maturity securities Amortized Cost Estimated Fair Value Due in one year or less $ 100 $ 100 Due after one year through five years 500 465 Due after five years through ten years — — Total securities with contractual maturities 600 565 Mortgage-backed securities 90,629 72,697 Total held-to-maturity securities $ 91,229 $ 73,262 32 The following tables show the fair value and gross unrealized losses of securities with unrealized losses, as of the dates indicated below, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position: Less than 12 Months 12 Months or More Total Available-for-sale securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2024 U.S. government agency obligations $ 5,472 $ 25 $ 3,334 $ 103 $ 8,806 $ 128 Mortgage-backed securities 2,732 112 65,654 19,264 68,386 19,376 Corporate debt securities — — 36,806 3,326 36,806 3,326 Asset-backed securities 939 1 12,210 104 13,149 105 Total available-for-sale securities $ 9,143 $ 138 $ 118,004 $ 22,797 $ 127,147 $ 22,935 December 31, 2023 U.S. government agency obligations $ 3,776 $ 5 $ 3,627 $ 151 $ 7,403 $ 156 Mortgage-backed securities — — 73,476 17,611 73,476 17,611 Corporate debt securities 3,350 76 35,916 5,914 39,266 5,990 Asset-backed securities 3,348 22 20,008 317 23,356 339 Total available-for-sale securities $ 10,474 $ 103 $ 133,027 $ 23,993 $ 143,501 $ 24,096 Unrealized losses reflected in the preceding tables have not been included in results of operations because the unrealized loss was not due to credit impairment.
However, this benefit was offset by a one-time tax expense of $1.8 million reflecting the impact of the lower 30 2023 Wisconsin state tax rate on the future realization of existing net deferred tax assets, with the charge creating a Wisconsin state tax valuation allowance.
However, this benefit was offset by a one-time tax expense of $1.8 million reflecting the impact of the lower 2023 Wisconsin state tax rate on the future realization of existing net deferred tax assets, with the charge creating a Wisconsin state tax valuation allowance.
Management believes that our liquidity is adequate, and to management’s knowledge, there are no known events or uncertainties that will result or are likely to reasonably result in a material increase or decrease in our liquidity. 48 Off-Balance Sheet Arrangements .
Management believes that our liquidity is adequate, and to management’s knowledge, there are no known events or uncertainties that will result or are likely to reasonably result in a material increase or decrease in our liquidity. Off-Balance Sheet Arrangements .
The MD&A should be read in conjunction with our consolidated financial statements, related notes, the selected financial data and the statistical information presented elsewhere in this Annual Report on Form 10-K for a more complete understanding of the following discussion and analysis. Unless otherwise noted, years refer to the Company’s fiscal years ended December 31, 2023 and December 31, 2022.
The MD&A should be read in conjunction with our consolidated financial statements, related notes, the selected financial data and the statistical information presented elsewhere in this Annual Report on Form 10-K for a more complete understanding of the following discussion and analysis. Unless otherwise noted, years refer to the Company’s fiscal years ended December 31, 2024 and December 31, 2023.
(c) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in March 2022, which bears a fixed interest rate of 4.75% for five years. In April 2027, the fixed interest rate will be reset quarterly to equal the three-month term Secured Overnight Financing Rate plus 329 basis points.
(b) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in March 2022, which bears a fixed interest rate of 4.75% for five years. In April 2027, the fixed interest rate will be reset quarterly to equal the three-month term Secured Overnight Financing Rate plus 329 basis points.
If there are significant charge-offs against the ACL, or we otherwise determine that the ACL is inadequate, we will need to record an additional provision in the future. Non-Interest Income . The following table reflects the various components of non-interest income for 2023 and 2022, respectively.
If there are significant charge-offs against the ACL, or we otherwise determine that the ACL is inadequate, we will need to record an additional provision in the future. Non-Interest Income . The following table reflects the various components of non-interest income for 2024 and 2023, respectively.
Also presented is the weighted average yield on interest earning assets on a tax-equivalent basis, rates paid on interest bearing liabilities and the resultant spread at December 31, 2023 and December 31, 2022. Non-accruing loans average balances are included in the table with the loans carrying a zero yield.
Also presented is the weighted average yield on interest earning assets on a tax-equivalent basis, rates paid on interest bearing liabilities and the resultant spread at December 31, 2024 and December 31, 2023. Non-accruing loans average balances are included in the table with the loans carrying a zero yield.
Liquidity and Asset / Liability Management. Liquidity management refers to our ability to ensure cash is available in a timely manner to meet loan demand, depositors’ needs, and meet other financial obligations as they become due without undue cost, risk, or disruption to normal operating activities.
Liquidity management refers to our ability to ensure cash is available in a timely manner to meet loan demand, depositors’ needs, and meet other financial obligations as they become due without undue cost, risk, or disruption to normal operating activities.
Income tax expense recorded in the accompanying Consolidated Statements of Operations involves interpretation and application of certain accounting pronouncements and federal and state tax codes and is, therefore, considered a critical accounting policy. We undergo examination by various taxing authorities.
Income tax expense recorded in the accompanying Consolidated Statements of Operations involves interpretation and application of certain accounting pronouncements and federal and state tax codes and is, therefore, considered a critical accounting policy. We undergo examinations by various taxing authorities.
See Note 9, “Federal Home Loan Bank and Other Borrowings” of “Notes to Consolidated Financial Statements” which are included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K, for further detail.
See Note 9, “Federal Home Loan Bank and Other Borrowings” of “Notes to Consolidated Financial Statements” which are included in Item 8, “Financial Statements and Supplementary Data” of this Form 10-K, for further detail.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion sets forth management’s discussion and analysis of our results of operations for the year ended December 31, 2023 and December 31, 2022, and our financial position as of December 31, 2023 and December 31, 2022, respectively.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion sets forth management’s discussion and analysis of our results of operations for the year ended December 31, 2024 and December 31, 2023, and our financial position as of December 31, 2024 and December 31, 2023, respectively.
Significant loan concentrations are considered to exist for a financial entity when the amounts of loans to multiple borrowers engaged in similar activities cause them to be similarly impacted by economic or other conditions. As illustrated above, at December 31, 2023, the largest loan concentration we identified was commercial real estate loans which comprised 51% of our total loan portfolio.
Significant loan concentrations are considered to exist for a financial entity when the amounts of loans to multiple borrowers engaged in similar activities cause them to be similarly impacted by economic or other conditions. As illustrated above, at December 31, 2024, the largest loan concentration we identified was commercial real estate loans which comprised 52% of our total loan portfolio.
See the remainder of this section for a more thorough discussion. Unless otherwise stated, all monetary amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, other than share, per share and capital ratio amounts, are stated in thousands.
See the remainder of this section for a more thorough discussion. Unless otherwise stated, all monetary amounts in the tables set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, other than share, per share and capital ratio amounts, are stated in thousands.
December 31, 2023 and Twelve Months Ended December 31, 2022 and Twelve Months Ended ACL - Unfunded Commitments - beginning of period $ — $ — Cumulative effect of ASU 2016-13 adoption 1,537 — Reversals to ACL - Unfunded Commitments via provision for credit losses charged to operations (287) — ACL - Unfunded Commitments - end of period $ 1,250 $ — Nonperforming Loans, Potential Problem Loans and Foreclosed Properties.
December 31, 2024 and Twelve Months Ended December 31, 2023 and Twelve Months Ended ACL - Unfunded Commitments - beginning of period $ 1,250 $ — Cumulative effect of ASU 2016-13 adoption — 1,537 Reversals to ACL - Unfunded Commitments via provision for credit losses charged to operations (916) (287) ACL - Unfunded Commitments - end of period $ 334 $ 1,250 Nonperforming Loans, Potential Problem Loans and Foreclosed Properties.
Loan amounts, their contractual maturities and weighted average interest rates at December 31, 2022 are shown below.
Loan amounts, their contractual maturities and weighted average interest rates at December 31, 2023 are shown below.
Our borrowing arrangement with the FHLB calls for pledging certain qualified real estate, commercial and industrial loans, and borrowing up to 75% of the value of those loans, not to exceed 35% of the Bank’s total assets. Currently, we have approximately $370.6 million available to borrow under this arrangement, supported by loan collateral as of December 31, 2023.
Our borrowing arrangement with the FHLB calls for pledging certain qualified real estate, commercial and industrial loans, and borrowing up to 75% of the value of those loans, not to exceed 35% of the Bank’s total assets. Currently, we have approximately $424.7 million available to borrow under this arrangement, supported by loan collateral as of December 31, 2024.
As of December 31, 2023, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of December 31, 2023, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.5 million and mortgage-backed securities with a carrying value of $1.9 million as collateral against specific municipal deposits.
As of December 31, 2024, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of December 31, 2024, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.3 million and mortgage-backed securities with a carrying value of $1.8 million as collateral against specific municipal deposits.
The fair market value of the Company’s MSR asset was $5.6 million at December 31, 2023, and $5.7 million at December 31, 2022. At December 31, 2023, and December 31, 2022, the Company did not have an MSR impairment, or related valuation allowance.
The fair market value of the Company’s MSR asset was $5.2 million at December 31, 2024, and $5.6 million at December 31, 2023. At December 31, 2024, and December 31, 2023, the Company did not have an MSR impairment, or related valuation allowance.
Net interest margin exceeds interest rate spread because non-interest-bearing sources of funds (“net free funds”), principally demand deposits and stockholders’ equity, also support interest earning assets. The narrative below discusses net interest income, interest rate spread, and net interest margin. Net interest income was $48.3 million for 2023 compared to $56.4 million for 2022.
Net interest margin exceeds interest rate spread because non-interest-bearing sources of funds (“net free funds”), principally demand deposits and stockholders’ equity, also support interest earning assets. The narrative below discusses net interest income, interest rate spread, and net interest margin. Net interest income was $46.5 million for 2024 compared to $48.3 million for 2023.
The amortized cost of MSR assets decreased as amortization exceeded additions due to loan sales, resulting in the unpaid balances of one-to-four family residential real estate loans serviced for others to decrease as of December 31, 2023, to $495.5 million from $523.7 million at December 31, 2022.
The amortized cost of MSR assets decreased as amortization exceeded additions due to loan sales, resulting in the unpaid balances of one-to-four family residential real estate loans serviced for others to decrease as of December 31, 2024, to $479.6 million from $495.5 million at December 31, 2023.
There were no borrowings outstanding on these lines of credit as of December 31, 2023, or December 31, 2022. At December 31, 2023, and 2022, the Bank had the ability to borrow $22.4 million and $4.1 million from the Federal Reserve Bank of Minneapolis.
There were no borrowings outstanding on these lines of credit as of December 31, 2023, or December 31, 2022. At December 31, 2024, and 2023, the Bank had the ability to borrow $24.9 million and $22.4 million, respectively from the Federal Reserve Bank of Minneapolis.
The ability to borrow is based on mortgage-backed securities pledged with a carrying value of $29.2 million and $5.4 million as of December 31, 2023, and 2022, respectively. There were no Federal Reserve borrowings outstanding as of December 31, 2023, and 2022. Stockholders’ Equity.
The ability to borrow is based on mortgage-backed securities pledged with a carrying value of $33.9 million and $29.2 million as of December 31, 2024, and 2023, respectively. There were no Federal Reserve borrowings outstanding as of December 31, 2024, and 2023. Stockholders’ Equity.
At December 31, 2022, the Bank pledged certain of its mortgage-backed securities with a carrying value of $5.4 million as collateral to secure a line of credit with the Federal Reserve Bank. As of December 31, 2022, there were no borrowings outstanding on this Federal Reserve Bank line of credit.
At December 31, 2023, the Bank pledged certain of its mortgage-backed securities with a carrying value of $29.2 million as collateral to secure a line of credit with the Federal Reserve Bank. As of December 31, 2023, there were no borrowings outstanding on this Federal Reserve Bank line of credit.
Total stockholders’ equity was $173.3 million at December 31, 2023, compared to $167.1 million at December 31, 2022. The increase in stockholders’ equity included the Company’s net income of $13.0 million, restricted stock amortization of $0.7 million and a decrease in the unrealized loss on available for sale securities of $0.3 million, net of tax, due to lower interest rates.
Total stockholders’ equity was $179.1 million at December 31, 2024, compared to $173.3 million at December 31, 2023. The increase in stockholders’ equity included the Company’s net income of $13.8 million, a decrease in the unrealized loss on available-for-sale securities of $0.9 million, net of tax, due to lower interest rates and restricted stock amortization of $0.6 million.
At December 31, 2023, our on-balance sheet liquidity ratio decreased to 11.4% percent from 13.0% at December 31, 2022, remaining above our internal requirement of 10%. This was largely due to reductions in the AFS and HTM investment portfolios. There are no material customers or industry deposit concentrations.
At December 31, 2024, our on-balance sheet liquidity ratio increased to 11.75% percent from 11.4% at December 31, 2023, 48 remaining above our internal requirement of 10%. This was largely due to reductions in the AFS and HTM investment portfolios. There are no material customers or industry deposit concentrations.
These instruments include unused commitments for lines of credit, overdraft protection lines of credit and home equity lines of credit, as well as commitments to extend credit. As of December 31, 2023, the Company had approximately $210.4 million in unused loan commitments, compared to approximately $243.0 million in unused commitments as of December 31, 2022.
These instruments include unused commitments for lines of credit, overdraft protection lines of credit and home equity lines of credit, as well as commitments to extend credit. As of December 31, 2024, the Company has approximately $137.0 in unused loan commitments, compared to approximately $210.4 million in unused loan commitments as of December 31, 2023.
This irrevocable standby letter of credit (“LOC”) is supported by loan collateral as an alternative to directly pledging investment securities on behalf of a municipal customer as collateral for their interest-bearing deposit balances. The Bank’s current unused borrowing capacity, supported by loan collateral as of December 31, 2023, is approximately $370.6 million.
This irrevocable standby letter of credit (“LOC”) is supported by loan collateral as an alternative to directly pledging investment securities on behalf of a municipal customer as collateral for their interest-bearing deposit balances. The Bank’s current unused borrowing capacity, supported by loan collateral, was approximately $424.7 million at December 31, 2024.
In addition, the impact of the New Market Tax Credit investment depletion, now being included in income tax expense, increased the income tax rate, while lower pre-tax income reduced current period income tax expense.
In addition, the impact of the New Market Tax Credit investment depletion, now being included in income tax expense, increased the income tax rate, while lower pre-tax income reduced current period income tax expense. In addition, lower pre-tax income reduced tax expense by approximately $0.4 million.
In addition, there are $3.4 million of commitments for contributions of capital to an SBIC and an investment company at December 31, 2023. These commitments totaled $4.7 million at December 31, 2022.
In addition, there are $2.9 million of commitments for contributions of capital to an SBIC and an investment company at December 31, 2024. These commitments totaled $3.4 million of commitments at December 31, 2023.
Total benefit, i.e., negative provision, for credit losses for the twelve months ended December 31, 2023, was $0.475 million, compared to provision of $1.475 million for the twelve months ended December 31, 2022.
Total benefit, i.e., negative provision, for credit losses for the twelve months ended December 31, 2024, was $3.175 million, compared to negative provision of $0.475 million for the twelve months ended December 31, 2023.
The 2023 effective tax rate was 31.0% compared to 24.7% in 2022. The Wisconsin state budget, signed by Governor Evers on July 5, 2023, provides financial institutions a tax exemption on income earned on Wisconsin commercial and agricultural loans up to $5 million retroactive to January 1, 2023.
The 2024 effective tax rate was 21.2% compared to 31.0% 2023. The Wisconsin state budget, signed by Governor Evers on July 5, 2023, provides financial institutions with a tax exemption on income earned on Wisconsin commercial and agricultural loans up to $5 million retroactive to January 1, 2023.
At December 31, 2023, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $370,569 compared to $256,773 as of December 31, 2022. (2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $217,530 and $157,530, during the twelve months ended December 31, 2023 and December 31, 2022, respectively.
At December 31, 2024, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $424,658 compared to $370,569 as of December 31, 2023. (2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $81,000 and $217,530, during the twelve months ended December 31, 2024 and December 31, 2023, respectively.
A summary of Federal Home Loan Bank (FHLB) advances and other borrowings at December 31, 2023 and December 31, 2022 is as follows: December 31, 2023 December 31, 2022 Stated Maturity Amount Range of Stated Rates Stated Maturity Amount Range of Stated Rates Federal Home Loan Bank advances (1), (2), (3), (4) 2023 $ — — % — % 2023 $ 117,000 1.43 % 4.31 % 2024 64,530 0.00 % 5.45 % 2024 20,530 0.00 % 1.45 % 2025 5,000 1.45 % 1.45 % 2025 5,000 1.45 % 1.45 % 2028 10,000 3.82 % 3.82 % 2028 — — % — % Federal Home Loan Bank advances $ 79,530 $ 142,530 Other borrowings: Senior notes (5) 2034 $ 18,083 6.75 % 7.75 % 2034 $ 23,250 3.00 % 6.75 % Subordinated notes (6) 2030 $ 15,000 6.00 % 6.00 % 2030 $ 15,000 6.00 % 6.00 % 2032 35,000 4.75 % 4.75 % 2032 35,000 4.75 % 4.75 % $ 50,000 $ 50,000 Unamortized debt issuance costs (618) (841) Total other borrowings $ 67,465 $ 72,409 Totals $ 146,995 $ 214,939 (1) The FHLB advances bear fixed rates, require interest-only monthly payments, and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans and certain other loans which had pledged balances of $1,106,267 and $984,878 at December 31, 2023 and 2022, respectively.
A summary of Federal Home Loan Bank (FHLB) advances and other borrowings at December 31, 2024 and December 31, 2023 is as follows: December 31, 2024 December 31, 2023 Stated Maturity Amount Range of Stated Rates Stated Maturity Amount Range of Stated Rates Federal Home Loan Bank advances (1), (2), (3), (4) 2024 $ — — % — % 2024 $ 64,530 — % 5.45 % 2025 5,000 1.45 % 1.45 % 2025 5,000 1.45 % 1.45 % 2028 10,000 3.82 % 3.82 % Federal Home Loan Bank advances $ 5,000 $ 79,530 Other borrowings: Senior notes (5) 2039 $ 12,000 6.75 % 7.75 % 2034 $ 18,083 6.75 % 7.75 % Subordinated notes (6) 2030 $ 15,000 6.00 % 6.00 % 2030 $ 15,000 6.00 % 6.00 % 2032 35,000 4.75 % 4.75 % 2032 35,000 4.75 % 4.75 % $ 50,000 $ 50,000 Unamortized debt issuance costs (394) (618) Total other borrowings $ 61,606 $ 67,465 Totals $ 66,606 $ 146,995 (1) The FHLB advances bear fixed rates, require interest-only monthly payments, and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans and certain other loans which had pledged balances of $1,075,001 and $1,106,267 at December 31, 2024 and 2023, respectively.
As noted above, a Wisconsin income tax valuation allowance was created due to the Wisconsin budget law change, resulting in reduction of the realization of Wisconsin deferred tax assets. 31 BALANCE SHEET ANALYSIS Total assets increased by $35.0 million to $1.85 billion at December 31, 2023, from $1.82 billion at December 31, 2022. Cash and Cash Equivalents.
As noted above, a Wisconsin income tax valuation allowance was created due to the Wisconsin budget law change, resulting in reduction of the realization of Wisconsin deferred tax assets. 30 BALANCE SHEET ANALYSIS Total assets decreased by $102.9 million to $1.75 billion at December 31, 2024, from $1.85 billion at December 31, 2023. Cash and Cash Equivalents.
As of December 31, 2022, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $2.6 million and mortgage-backed securities with a carrying value of $2.2 million as collateral against specific municipal deposits.
As of December 31, 2023, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.5 million and mortgage-backed securities with a carrying value of $1.9 million as collateral against specific municipal deposits. As of December 31, 2023, the Bank also has mortgage-backed securities with a carrying value of $0.2 million and U.S.
We reported net income of $13.06 million for the twelve months ended December 31, 2023, compared to net income of $17.76 million for the twelve months ended December 31, 2022. Diluted earnings per share were $1.25 for the twelve months ended December 31, 2023, compared to $1.69 for the twelve months ended December 31, 2022.
We reported net income of $13.75 million for the twelve months ended December 31, 2024, compared to net income of $13.06 million for the twelve months ended December 31, 2023. Diluted earnings per share were $1.34 for the twelve months ended December 31, 2024, compared to $1.25 for the twelve months ended December 31, 2023.
Collateral dependency is determined using the practical expedient when: (1) the borrower is experiencing financial difficulty; and (2) repayment is expected to be provided substantially through the sale or operation of the collateral. In addition, various regulatory agencies periodically review the ACL.
Collateral dependency is determined using the practical expedient when: (1) the borrower is experiencing financial difficulty; and (2) repayment is expected to be provided substantially through the sale or operation of the collateral.
The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at December 31, 2023, and December 31, 2022, was 1.13% and 1.08%, respectively. Intangible Assets. We have intangible assets of $1.7 million at December 31, 2023, compared to $2.4 million at December 31, 2022.
The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at December 31, 2024, and December 31, 2023, were 1.09% and 1.13%, respectively. Intangible Assets. We have intangible assets of $1.0 million at December 31, 2024, compared to $1.7 million at December 31, 2023.
We follow all applicable regulatory guidance, including the “Interagency Policy Statement on Allowances for Credit losses,” issued by the Office of the Comptroller of the Currency, Department of the Treasury, Federal Deposit Insurance Corporation, and National Credit Union Administration. We believe that the Bank’s Allowance for Credit Losses Policy conforms to all applicable regulatory requirements.
We follow all applicable regulatory guidance, including the “Interagency Policy Statement on Allowances for Credit losses,” issued by the Office of the Comptroller of the Currency, Department of the Treasury, Board of Governors of the Federal Reserve, Federal Deposit Insurance Corporation, and National Credit Union Administration.
Uninsured deposits alone at December 31, 2023, were $427.5 million, or 28% of total deposits, and $441.2 million, or 31% of total deposits at December 31, 2022, with the difference being an increase in fully secured government deposits. 45 Federal Home Loan Bank (FHLB) advances and other borrowings.
Uninsured deposits at December 31, 2024, were $428.0 million, or 29% of total deposits, and $427.5 million, or 28% of total deposits at December 31, 2023, with the difference being an increase in fully secured government deposits. 46 Federal Home Loan Bank (FHLB) advances and other borrowings.
PERFORMANCE SUMMARY The following is a summary of some of the significant factors that affected our operating results for the twelve months ended December 31, 2023, and 2022.
PERFORMANCE SUMMARY The following is a summary of some of the significant factors that affected our operating results for the twelve months ended December 31, 2024, compared to the same 2023 period.
Uninsured deposits alone at December 31, 2023, were $427.5 million, or 28% of total deposits, and $441.2 million, or 31% of total deposits at December 31, 2022, with the difference being an increase in fully secured government deposits.
Uninsured deposits at December 31, 2024, were $428.0 million, or 29% of total deposits, and $427.5 million, or 28% of total deposits at December 31, 2023, with the difference being an increase in fully secured government deposits.
On-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability was $673.6 million, or 244% of uninsured and uncollateralized deposits at December 31, 2023. At December 31, 2022, on-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability was $614.9 million, or 221% of uninsured and uncollateralized deposits.
On-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability was $724.8 million, or 273% of uninsured and uncollateralized deposits at December 31, 2024. At December 31, 2023, on-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability was $673.6 million, or 244% of uninsured and uncollateralized deposits.
At December 31, 2022, no FHLB term notes could be called by the FHLB. (5) Senior notes, entered into by the Company in June 2019 consist of the following: (a) A term note, which was subsequently refinanced in March 2022 and modified in February of 2023, requiring quarterly interest-only payments through March 2027, and quarterly principal and interest payments thereafter.
(5) Senior notes, entered into by the Company in June 2019 consist of the following: (a) A term note, which was subsequently refinanced in March 2022, modified in February of 2023, and refinanced in May 2024, requiring quarterly interest-only payments through January 2029, and quarterly principal and interest payments thereafter.
Uninsured and uncollateralized deposits were $275.8 million, or 18% of total deposits, at December 31, 2023, and $298.8 million, or 21% of total deposits, at December 31, 2022.
Uninsured and uncollateralized deposits were $265.4 million, or 18% of total deposits, at December 31, 2024, and $275.8 million, or 18% of total deposits at December 31, 2023.
While the Bank does not have formal brokered certificate lines of credit with counter parties at December 31, 2023, we believe that the Bank could access this market, which provides an additional potential source of liquidity, as evidenced by access to this market during the past four quarters.
While the Bank does not have approved brokered certificate lines of credit with counter parties at December 31, 2024, we believe that the Bank could access this market, which provides an additional potential source of liquidity.
As of December 31, 2023, the Bank also has mortgage-backed securities with a carrying value of $0.2 million and U.S. Government Agencies with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.
As of December 31, 2024, the Bank also has mortgage-backed securities with a carrying value of $0.1 million pledged as collateral to the Federal Home Loan Bank of Des Moines.
The Bank maintains two unsecured federal funds purchased lines of credit with its banking partners which total $70.0 million. These lines bear interest at the lender banks announced daily federal funds rate, mature daily and are revocable at the discretion of the lending institution.
The Company refinanced its senior debt in May 2024 and reduced the balances by $6.1 million. The Bank maintains two unsecured federal funds purchased lines of credit with its banking partners which total $70.0 million. These lines bear interest at the lender banks’ announced daily federal funds rate, mature daily and are revocable at the discretion of the lending institution.
As of December 31, 2022, the Bank also has mortgage-backed securities with a carrying value of $0.1 million pledged as collateral to the Federal Home Loan Bank of Des Moines. Loans. Total loans outstanding, net of deferred loan fees and costs, increased to $1.46 billion at December 31, 2023, from $1.42 billion at December 31, 2022.
Government Agencies with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines. Loans. Total loans outstanding, net of deferred loan fees and costs, decreased to $1.37 billion at December 31, 2024, from $1.46 billion at December 31, 2023.
In 2023, net interest income decreased, primarily due to the impact of higher short-term interest rates on the Bank’s liability-sensitive balance sheet, i.e., higher deposit costs, and customer account shifts to higher-cost certificates, along with increased borrowing costs, partially offset by higher yields on assets.
In 2024, net interest income decreased $1.9 million, primarily due to the ongoing impact of higher short-term interest rates on the Bank’s liability-sensitive balance sheet, i.e., higher deposit costs, with growth in higher-cost money market accounts and certificates, along with increased borrowing costs, partially offset by higher asset yields.
At December 31, 2023, our deposit portfolio composition was 54% consumer, 28% commercial, 12% public and 6% brokered deposits. At December 31, 2022, our deposit portfolio composition was 57% consumer, 28% commercial, 12% public and 3% brokered deposits.
At December 31, 2024, the deposit portfolio composition was 57% consumer, 28% commercial, 13% public, and 2% wholesale deposits. At December 31, 2023, our deposit portfolio composition was 54% consumer, 28% commercial, 12% public and 6% wholesale deposits.
At December 31, 2022, our deposit portfolio composition was 57% consumer, 28% commercial, 12% public and 3% brokered deposits. Uninsured and uncollateralized deposits were $275.8 million, or 18% of total deposits at December 31, 2023, and $298.8 million, or 21% of total deposits at December 31, 2022.
At December 31, 2023, our deposit portfolio composition was 54% consumer, 28% commercial, 12% public and 6% wholesale deposits. Uninsured and uncollateralized deposits were $265.4 million, or 18% of total deposits, at December 31, 2024, and $275.8 million, or 18% of total deposits at December 31, 2023.
Federal Home Loan Bank (FHLB) advances and other borrowings We utilize advances and other borrowings, as necessary, to supplement core deposits to meet our funding and liquidity needs and we evaluate all options for funding securities. FHLB advances decreased $63.0 million to $79.5 million as of December 31, 2023, compared to $142.5 million as of December 31, 2022.
Federal Home Loan Bank (FHLB) advances and other borrowings We utilize advances and other borrowings, as necessary, to supplement core deposits to meet our funding and liquidity needs, and we evaluate all options for funding securities.
Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2023 Total capital (to risk weighted assets) $ 228,092 14.6 % $ 124,883 > = 8.0 % $ 156,104 > = 10.0 % Tier 1 capital (to risk weighted assets) 208,726 13.4 % 93,662 > = 6.0 % 124,883 > = 8.0 % Common equity tier 1 capital (to risk weighted assets) 208,726 13.4 % 70,247 > = 4.5 % 101,468 > = 6.5 % Tier 1 leverage ratio (to adjusted total assets) 208,726 11.5 % 72,479 > = 4.0 % 90,599 > = 5.0 % As of December 31, 2022 Total capital (to risk weighted assets) $ 221,361 14.2 % $ 124,971 > = 8.0 % $ 156,213 > = 10.0 % Tier 1 capital (to risk weighted assets) 203,422 13.0 % 93,728 > = 6.0 % 124,971 > = 8.0 % Common equity tier 1 capital (to risk weighted assets) 203,422 13.0 % 70,296 > = 4.5 % 101,539 > = 6.5 % Tier 1 leverage ratio (to adjusted total assets) 203,422 11.5 % 70,610 > = 4.0 % 88,262 > = 5.0 % At December 31, 2023, the Bank was categorized as “Well Capitalized” under Prompt Corrective Action Provisions, as determined by the OCC, our primary regulator.
Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2024 Total capital (to risk weighted assets) $ 225,432 15.6 % $ 115,755 > = 8.0 % $ 144,693 > = 10.0 % Tier 1 capital (to risk weighted assets) 207,749 14.4 % 86,816 > = 6.0 % 115,755 > = 8.0 % Common equity tier 1 capital (to risk weighted assets) 207,749 14.4 % 65,112 > = 4.5 % 94,051 > = 6.5 % Tier 1 leverage ratio (to adjusted total assets) 207,749 11.9 % 69,787 > = 4.0 % 87,234 > = 5.0 % As of December 31, 2023 Total capital (to risk weighted assets) $ 228,092 14.6 % $ 124,883 > = 8.0 % $ 156,104 > = 10.0 % Tier 1 capital (to risk weighted assets) 208,726 13.4 % 93,662 > = 6.0 % 124,883 > = 8.0 % Common equity tier 1 capital (to risk weighted assets) 208,726 13.4 % 70,247 > = 4.5 % 101,468 > = 6.5 % Tier 1 leverage ratio (to adjusted total assets) 208,726 11.5 % 72,479 > = 4.0 % 90,599 > = 5.0 % At December 31, 2024, the Bank was categorized as “Well Capitalized” under Prompt Corrective Action Provisions, as determined by the OCC, our primary regulator.
The ACL - Unfunded Commitments, established under ASU 2016-13, was $1.3 million at December 31, 2023. 39 Allowance for Credit Losses - Loans Roll Forward (in thousands, except ratios) Twelve Months Ended December 31, 2023 December 31, 2022 Allowance for Credit Losses (“ACL”) ACL - Loans, at beginning of period $ 17,939 $ 16,913 Cumulative effect of ASU 2016-13 adoption 4,706 — Loans charged off: Commercial/Agricultural real estate (46) (205) C&I/Agricultural operating — (346) Residential mortgage (78) (68) Consumer installment (36) (48) Total loans charged off (160) (667) Recoveries of loans previously charged off: Commercial/Agricultural real estate 489 102 C&I/Agricultural operating 47 36 Residential mortgage 42 29 Consumer installment 33 51 Total recoveries of loans previously charged off: 611 218 Net loan recoveries/(charge-offs) (“NCOs”) 451 (449) (Reversals)/additions to ACL - Loans via provision for credit losses charged to operations (188) 1,475 ACL - Loans, at end of period $ 22,908 $ 17,939 Average outstanding loan balance $ 1,430,035 $ 1,351,052 Ratios: NCOs (annualized) to average loans (0.03) % 0.03 % Allowance for Credit Losses - Loans Activity by Segment (in thousands, except ratios) Commercial/Agricultural Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Unallocated Total Twelve months ended December 31, 2023 Allowance for Credit Losses - Loans: ACL - Loans, at beginning of period $ 14,085 $ 2,318 $ 599 $ 129 $ 808 $ 17,939 Cumulative effect of ASU 2016-13 adoption 4,510 (331) 1,119 216 (808) 4,706 Charge-offs (46) — (78) (36) — (160) Recoveries 489 47 42 33 — 611 (Reversals)/additions to ACL - Loans via provision for credit losses charged to operations (254) (929) 1,062 (67) — (188) ACL - Loans, at end of period $ 18,784 $ 1,105 $ 2,744 $ 275 $ — $ 22,908 Allowance for Credit Losses - Loans to Percentage (in thousands, except ratios) December 31, 2023 December 31, 2022 Loans, end of period $ 1,460,792 $ 1,411,784 ACL - Loans $ 22,908 $ 17,939 ACL - Loans to loans, end of period 1.57 % 1.27 % 40 Allowance for Credit Losses - Unfunded Commitments: (in thousands) In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $1.250 million at December 31, 2023 and $0 at December 31, 2022, classified in other liabilities on the consolidated balance sheets.
The allowance for loan losses, prior to the ASU 2016-13 transition, was $17.9 million at December 31, 2022, representing 1.27% of loans receivable. 39 40 Allowance for Credit Losses - Loans Roll Forward (in thousands, except ratios) Twelve Months Ended December 31, 2024 December 31, 2023 Allowance for Credit Losses (“ACL”) ACL - Loans, at beginning of period $ 22,908 $ 17,939 Cumulative effect of ASU 2016-13 adoption — 4,706 Loans charged off: Commercial/Agricultural real estate (39) (46) C&I/Agricultural operating (143) — Residential mortgage (4) (78) Consumer installment (35) (36) Total loans charged off (221) (160) Recoveries of loans previously charged off: Commercial/Agricultural real estate 56 489 C&I/Agricultural operating 36 47 Residential mortgage 7 42 Consumer installment 22 33 Total recoveries of loans previously charged off: 121 611 Net loan recoveries/(charge-offs) (“NCOs”) (100) 451 (Reversals)/additions to ACL - Loans via provision for credit losses charged to operations (2,259) (188) ACL - Loans, at end of period $ 20,549 $ 22,908 Average outstanding loan balance $ 1,430,631 $ 1,430,035 Ratios: NCOs (annualized) to average loans 0.01 % (0.03) % Allowance for Credit Losses - Loans Activity by Segment (in thousands, except ratios) Commercial/Agricultural Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Total Twelve months ended December 31, 2024 Allowance for Credit Losses - Loans: ACL - Loans, at beginning of period $ 18,784 $ 1,105 $ 2,744 $ 275 $ 22,908 Charge-offs (39) (143) (4) (35) (221) Recoveries 56 36 7 22 121 (Reversals)/additions to ACL - Loans via provision for credit losses charged to operations (2,285) 332 (258) (48) (2,259) ACL - Loans, at end of period $ 16,516 $ 1,330 $ 2,489 $ 214 $ 20,549 Allowance for Credit Losses - Loans to Percentage (in thousands, except ratios) December 31, 2024 December 31, 2023 Loans, end of period $ 1,368,981 $ 1,460,792 ACL - Loans $ 20,549 $ 22,908 ACL - Loans to loans, end of period 1.50 % 1.57 % 41 Allowance for Credit Losses - Unfunded Commitments: (in thousands) In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.334 million at December 31, 2024 and $1.250 million at December 31, 2023, classified in other liabilities on the consolidated balance sheets.
Management has determined that more likely than not, the Company neither intends to sell, nor will it be required to sell each debt security before its anticipated recovery, and therefore recovery of cost will occur. 34 The composition of our investment securities portfolio by credit rating as of the periods indicated below was as follows: December 31, December 31, 2023 2022 Available for sale securities Amortized Cost Fair Value Amortized Cost Fair Value U.S. government agency $ 98,977 $ 81,351 $ 112,477 $ 93,669 AAA 9,695 9,508 8,640 8,334 AA 23,913 23,709 24,591 23,737 A 8,200 7,292 5,700 5,133 BBB 38,959 33,883 38,936 35,118 Non-rated — — — — Total available for sale securities $ 179,744 $ 155,743 $ 190,344 $ 165,991 December 31, December 31, 2023 2022 Held to maturity securities Amortized Cost Fair Value Amortized Cost Fair Value U.S. government agency $ 90,629 $ 72,697 $ 95,779 $ 76,233 AAA — — — — AA — — — — A 600 565 600 546 Total $ 91,229 $ 73,262 $ 96,379 $ 76,779 At December 31, 2023, the Bank pledged certain of its mortgage-backed securities with a carrying value of $29.2 million as collateral to secure a line of credit with the Federal Reserve Bank.
Management has determined that the Company neither intends to sell, nor will it be required to sell each debt security before its anticipated recovery, and therefore recovery of cost will occur. 33 The composition of our investment securities portfolio by credit rating as of the periods indicated below was as follows: December 31, December 31, 2024 2023 Available-for-sale securities Amortized Cost Fair Value Amortized Cost Fair Value U.S. government agency $ 94,327 $ 74,910 $ 98,977 $ 81,351 AAA 7,210 7,148 9,695 9,508 AA 19,136 19,077 23,913 23,709 A 5,950 5,620 8,200 7,292 BBB 38,981 36,096 38,959 33,883 Non-rated — — — — Total available for sale securities $ 165,604 $ 142,851 $ 179,744 $ 155,743 December 31, December 31, 2024 2023 Held to maturity securities Amortized Cost Fair Value Amortized Cost Fair Value U.S. government agency $ 85,004 $ 65,144 $ 90,629 $ 72,697 AAA — — — — AA — — — — A 500 478 600 565 Total $ 85,504 $ 65,622 $ 91,229 $ 73,262 At December 31, 2024, the Bank pledged certain of its mortgage-backed securities with a carrying value of $34.0 million as collateral to secure a line of credit with the Federal Reserve Bank.
These increases were offset by: (1) the $4.4 million cumulative effect adjustment from the adoption of ASU 2016-13; (2) the payment of the annual cash dividend paid in February to common stockholders of $0.29 per share, or $3.0 million; and (3) the repurchase of approximately 42 thousand shares of its common stock, which reduced equity by $0.4 million.
These increases were partially offset by: 1) the repurchase of approximately 476 thousand shares of its common stock, which reduced equity by $6.1 million and 2) the payment of the annual cash dividend, paid in February to common stockholders of $0.32 per share which was a 10% increase from the prior year dividend amount of $0.29 per share, or $3.3 million.
Cash and cash equivalents increased from $35.4 million at December 31, 2022, to $37.1 million at December 31, 2023, largely due to an increase in interest-bearing balances. Investment Securities. We manage our securities portfolio to provide liquidity, in an effort to improve interest rate risk, and enhance income.
Cash and cash equivalents increased from $37.1 million at December 31, 2023, to $50.2 million at December 31, 2024, largely due to an increase in interest-bearing balances. Investment Securities. We manage our securities portfolio to provide liquidity, manage interest rate risk, and enhance income. Our investment portfolio is comprised of securities available-for-sale (“AFS”) and securities held to maturity (“HTM”).
Mortgage servicing rights expense, net increased for the twelve months ended December 31, 2023, compared to the comparable prior year period due to the impact of a $566 thousand impairment reversal recorded in the comparable prior year period, partially offset by lower amortization due to lower forecasted prepayments and the impact of a lower balance of loans serviced for others.
Mortgage servicing rights expense, net decreased for the twelve months ended December 31, 2024, compared to the same period in 2023 due to lower amortization resulting from lower forecasted prepayments and the impact of a lower balance of loans serviced for others.
The current year’s negative provision is primarily the result of net recoveries of $0.425 million in the last six months of 2023 and improving forecasted future economic conditions. Continued improving economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in good overall economic trends for businesses.
The $0.475 million of negative provision for credit losses in 2023 was largely due to net recoveries of $0.451 million 28 Continued improving economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in good overall economic trends for businesses.
In addition, a decline in the quality of our loan portfolio as a result of general economic conditions, factors affecting particular borrowers or our market areas, or otherwise, could all affect the adequacy of our ACL.
We continually monitor non-performing loan relationships and will adjust our provision, as necessary, if changing facts and circumstances require a change in the ACL. In addition, a decline in the quality of our loan portfolio as a result of general economic conditions, factors affecting particular borrowers or our market areas, or otherwise, could all affect the adequacy of our ACL.
For these loans, the estimated loss is based on likelihood of default, payment history, and net realizable value of underlying collateral. Specific allocations for collateral dependent loans are based on the fair value of the underlying collateral relative to the amortized cost of the loans.
Specific allocations for collateral dependent loans are based on the fair value of the underlying collateral relative to the amortized cost of the loans.
Since transition, the ACL- Loans modestly increased $0.3 million to $23.0 million at December 31, 2023, representing 1.57% of loans receivable. The allowance for loan losses, prior to the ASU 2016-13 transition, was $17.9 million at December 31, 2022, representing 1.27% of loans receivable.
Since transition, the ACL- Loans modestly increased $0.3 million to $23.0 million at December 31, 2023, representing 1.57% of loans receivable.
(3) The weighted-average interest rates on FHLB borrowings, with maturities less than twelve months, outstanding as of December 31, 2023 and December 31, 2022 were 4.16% and 4.09%, respectively. (4) At December 31, 2023, one FHLB term note totaling $10,000 could be called once by the FHLB on June 15, 2024, and if not called, would mature in 2028.
(3) The weighted-average interest rates on FHLB borrowings, with maturities less than twelve months, outstanding as of December 31, 2024 and December 31, 2023 were 1.45% and 4.16%, respectively. (4) In June 2024, the FHLB called the $10,000, 3.82% advance maturing in 2028.
These decreases were partially offset by increases in loan and investment yields. 26 Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following table shows interest income from average interest earning assets, expressed in dollars and yields, and interest expense on average interest bearing liabilities, expressed in dollars and rates.
The following table shows interest income from average interest earning assets, expressed in dollars and yields, and interest expense on average interest bearing liabilities, expressed in dollars and rates.
The growth in these portfolios exceeded the reduction in the remaining loan portfolios of $27.1 million. 35 The following table reflects the composition, or mix, of our loan portfolio at December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 Amount Percent Amount Percent Real Estate Loans: Commercial/Agricultural real estate: Commercial real estate $ 750,531 51.4 % $ 725,971 51.5 % Agricultural real estate 83,350 5.7 % 87,908 6.2 % Multi-family real estate 228,095 15.6 % 208,908 14.8 % Construction and land development 110,941 7.6 % 102,492 7.3 % Residential mortgage: Residential mortgage 129,021 8.8 % 105,389 7.5 % Purchased HELOC loans 2,880 0.2 % 3,262 0.2 % Total real estate loans 1,304,818 89.3 % 1,233,930 87.5 % C&I/Agricultural operating and Consumer installment loans: C&I/Agricultural operating: Commercial and industrial ("C&I") 121,666 8.3 % 136,013 9.6 % Agricultural operating 25,691 1.8 % 28,806 2.0 % Consumer installment: Originated indirect paper 6,535 0.5 % 10,236 0.7 % Other consumer 6,187 0.4 % 7,150 0.5 % Total C&I/Agricultural operating and Consumer installment loans 160,079 11.0 % 182,205 12.8 % Gross loans 1,464,897 100.3 % 1,416,135 100.3 % Unearned net deferred fees and costs and loans in process (2,900) (0.2) % (2,585) (0.2) % Unamortized discount on acquired loans (1,205) (0.1) % (1,766) (0.1) % Total loans (net of unearned income and deferred expense) 1,460,792 100.0 % 1,411,784 100.0 % Allowance for credit losses (22,908) (17,939) Total loans receivable, net $ 1,437,884 $ 1,393,845 Our loan portfolio is diversified by types of borrowers and industry groups within the market areas that we serve.
The Company’s planned balance sheet optimization resulted in the runoff of largely non-strategic loans. 34 The following table reflects the composition, or mix, of our loan portfolio at December 31, 2024 and December 31, 2023: December 31, 2024 December 31, 2023 Amount Percent Amount Percent Real Estate Loans: Commercial/Agricultural real estate: Commercial real estate $ 709,018 51.8 % $ 750,531 51.4 % Agricultural real estate 73,130 5.3 % 83,350 5.7 % Multi-family real estate 220,805 16.1 % 228,095 15.6 % Construction and land development 78,489 5.7 % 110,941 7.6 % Residential mortgage: Residential mortgage 132,341 9.7 % 129,021 8.8 % Purchased HELOC loans 2,956 0.2 % 2,880 0.2 % Total real estate loans 1,216,739 88.8 % 1,304,818 89.3 % C&I/Agricultural operating and Consumer installment loans: C&I/Agricultural operating: Commercial and industrial ("C&I") 115,657 8.4 % 121,666 8.3 % Agricultural operating 31,000 2.3 % 25,691 1.8 % Consumer installment: Originated indirect paper 3,970 0.4 % 6,535 0.5 % Other consumer 5,012 0.4 % 6,187 0.4 % Total C&I/Agricultural operating and Consumer installment loans 155,639 11.5 % 160,079 11.0 % Gross loans 1,372,378 100.3 % 1,464,897 100.3 % Unearned net deferred fees and costs and loans in process (2,547) (0.2) % (2,900) (0.2) % Unamortized discount on acquired loans (850) (0.1) % (1,205) (0.1) % Total loans (net of unearned income and deferred expense) 1,368,981 100.0 % 1,460,792 100.0 % Allowance for credit losses (20,549) (22,908) Total loans receivable, net $ 1,348,432 $ 1,437,884 Our loan portfolio is diversified by types of borrowers and industry groups within the market areas that we serve.
Actual For Capital Adequacy Purposes Amount Ratio Amount Ratio As of December 31, 2023 Total capital (to risk weighted assets) $ 230,160 14.7 % $ 124,883 > = 8.0 % Tier 1 capital (to risk weighted assets) 160,794 10.3 % 93,662 > = 6.0 % Common equity tier 1 capital (to risk weighted assets) 160,794 10.3 % 70,247 > = 4.5 % Tier 1 leverage ratio (to adjusted total assets) 160,794 8.9 % 72,479 > = 4.0 % As of December 31, 2022 Total capital (to risk weighted assets) $ 218,737 14.0 % $ 124,971 > = 8.0 % Tier 1 capital (to risk weighted assets) 150,798 9.7 % 93,728 > = 6.0 % Common equity tier 1 capital (to risk weighted assets) 150,798 9.7 % 70,296 > = 4.5 % Tier 1 leverage ratio (to adjusted total assets) 150,798 8.5 % 70,610 > = 4.0 % 50 Selected Quarterly Financial Data The following is selected financial data summarizing the results of operations for each quarter as of the periods indicated below: Year ended December 31, 2023: March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Interest dividend income $ 19,673 $ 20,777 $ 21,772 $ 22,026 Interest expense 6,878 9,091 9,651 10,279 Net interest income before provision for credit losses 12,795 11,686 12,121 11,747 Provision for credit losses 50 450 (325) (650) Net interest income after provision for credit losses 12,745 11,236 12,446 12,397 Non-interest income 2,292 2,913 2,565 2,480 Non-interest expense 10,121 9,846 9,969 10,206 Income before provision for income taxes 4,916 4,303 5,042 4,671 Provision for income taxes 1,254 1,097 2,544 978 Net income attributable to common stockholders $ 3,662 $ 3,206 $ 2,498 $ 3,693 Basic earnings per share $ 0.35 $ 0.31 $ 0.24 $ 0.35 Diluted earnings per share $ 0.35 $ 0.31 $ 0.24 $ 0.35 Cash dividends paid $ 0.29 $ — $ — $ — Year ended December 31, 2022: March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Interest dividend income $ 15,376 $ 16,703 $ 17,959 $ 19,359 Interest expense 2,209 2,436 3,502 4,881 Net interest income before provision for loan losses 13,167 14,267 14,457 14,478 Provision for loan losses — 400 375 700 Net interest income after provision for loan losses 13,167 13,867 14,082 13,778 Non-interest income 2,713 2,372 2,472 2,873 Non-interest expense 9,668 10,462 11,277 10,336 Income before provision for income taxes 6,212 5,777 5,277 6,315 Provision for income taxes 1,506 1,411 1,284 1,619 Net income $ 4,706 $ 4,366 $ 3,993 $ 4,696 Basic earnings per share $ 0.45 $ 0.41 $ 0.38 $ 0.45 Diluted earnings per share $ 0.45 $ 0.41 $ 0.38 $ 0.45 Cash dividends paid $ 0.26 $ — $ — $ —
Actual For Capital Adequacy Purposes Amount Ratio Amount Ratio As of December 31, 2024 Total capital (to risk weighted assets) $ 232,926 16.1 % $ 115,914 > = 8.0 % Tier 1 capital (to risk weighted assets) 165,243 11.4 % 86,936 > = 6.0 % Common equity tier 1 capital (to risk weighted assets) 165,243 11.4 % 65,202 > = 4.5 % Tier 1 leverage ratio (to adjusted total assets) 165,243 9.5 % 69,867 > = 4.0 % As of December 31, 2023 Total capital (to risk weighted assets) $ 230,160 14.7 % $ 124,883 > = 8.0 % Tier 1 capital (to risk weighted assets) 160,794 10.3 % 93,662 > = 6.0 % Common equity tier 1 capital (to risk weighted assets) 160,794 10.3 % 70,247 > = 4.5 % Tier 1 leverage ratio (to adjusted total assets) 160,794 8.9 % 72,479 > = 4.0 % 50 Selected Quarterly Financial Data The following is selected financial data summarizing the results of operations for each quarter as of the periods indicated below: Year ended December 31, 2024: March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 Interest dividend income $ 22,679 $ 22,463 $ 22,512 $ 21,961 Interest expense 10,774 10,887 11,227 10,253 Net interest income before provision for credit losses 11,905 11,576 11,285 11,708 Provision for credit losses (800) (1,525) (400) (450) Net interest income after provision for credit losses 12,705 13,101 11,685 12,158 Non-interest income 3,264 1,913 2,921 2,009 Non-interest expense 10,777 10,299 10,421 10,809 Income before provision for income taxes 5,192 4,715 4,185 3,358 Provision for income taxes 1,104 1,040 899 656 Net income attributable to common stockholders $ 4,088 $ 3,675 $ 3,286 $ 2,702 Basic earnings per share $ 0.39 $ 0.35 $ 0.32 $ 0.27 Diluted earnings per share $ 0.39 $ 0.35 $ 0.32 $ 0.27 Cash dividends paid $ 0.32 $ — $ — $ — Year ended December 31, 2023: March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Interest dividend income $ 19,673 $ 20,777 $ 21,772 $ 22,026 Interest expense 6,878 9,091 9,651 10,279 Net interest income before provision for loan losses 12,795 11,686 12,121 11,747 Provision for loan losses 50 450 (325) (650) Net interest income after provision for loan losses 12,745 11,236 12,446 12,397 Non-interest income 2,292 2,913 2,565 2,480 Non-interest expense 10,121 9,846 9,969 10,206 Income before provision for income taxes 4,916 4,303 5,042 4,671 Provision for income taxes 1,254 1,097 2,544 978 Net income $ 3,662 $ 3,206 $ 2,498 $ 3,693 Basic earnings per share $ 0.35 $ 0.31 $ 0.24 $ 0.35 Diluted earnings per share $ 0.35 $ 0.31 $ 0.24 $ 0.35 Cash dividends paid $ 0.29 $ — $ — $ —
The change in net gains on investment securities between the twelve months ended December 31, 2023, and the twelve months ended December 31, 2022, is primarily due to the change in valuations of equity securities and a small gain on the sale of available for sale securities in the second quarter of 2023.
The decrease in net gains on equity securities for the twelve months ended December 31, 2024, compared to the same period in 2023 is primarily due to the change in valuations of equity securities.
Return on average assets for the twelve months ended December 31, 2023, was 0.71%, compared to 1.00% for the twelve months ended December 31, 2022.
Return on average assets for the twelve months ended December 31, 2024, was 0.76%, compared to 0.71% for the twelve months ended December 31, 2023. The return on average equity was 7.84% for the twelve months ended December 31, 2024, and 7.87% for the comparable period in 2023.
Included in foreclosed and repossessed assets, net are two closed branch locations that are being held for sale. These properties are being held at $0.9 million and $0.7 million, respectively, which represent their estimated fair market values less the anticipated costs to sell.
Included in foreclosed and repossessed assets at December 31, 2024, is a branch location that is being held for sale. This property is being held for $0.7 million at December 31, 2024, which represents the estimated fair market value less the anticipated costs to sell.
In 2023, a loss of $0.4 million was recognized on the reclassification of the $0.7 million from property and equipment to foreclosed assets, which was recorded in other expense. Deposits. Deposits have grown each quarter since December 31, 2022, with growth in brokered deposits accounting for the growth in the first and second quarters of 2023.
In 2024, a loss of $0.3 million was recognized and a former branch location was sold. In 2023, a loss of $0.4 million was recognized on the reclassification of the $0.7 million from property and equipment to foreclosed assets, which was recorded in other expense. Deposits.
Approximately 89% of our total gross loans are secured by real estate. 36 The following table sets forth, as of December 31, 2023 and December 31, 2022 respectively the fixed and adjustable-rate loans in our loan portfolio: December 31, 2023 December 31, 2022 Amount Percent Amount Percent Fixed rate loans: Real estate loans: Commercial/Agricultural real estate $ 457,931 31.3 % $ 433,988 30.8 % Residential mortgage 44,740 3.1 % 51,558 3.6 % Total fixed rate real estate loans 502,671 34.4 % 485,546 34.4 % Non-real estate loans: C&I/Agricultural Operating 116,193 7.9 % 128,068 9.0 % Consumer installment 12,722 0.9 % 17,369 1.2 % Total fixed rate non-real estate loans 128,915 8.8 % 145,437 10.2 % Total fixed rate loans 631,586 43.2 % 630,983 44.6 % Adjustable-rate loans: Real estate loans: Commercial/Agricultural real estate 714,986 49.0 % 691,290 49.0 % Residential mortgage 87,160 6.0 % 57,094 4.1 % Total adjustable-rate real estate loans 802,146 55.0 % 748,384 53.1 % Non-real estate loans: C&I/Agricultural operating 31,164 2.1 % 36,752 2.6 % Consumer installment 1 — % 16 — % Total adjustable-rate non-real estate loans 31,165 2.1 % 36,768 2.6 % Total adjustable-rate loans 833,311 57.1 % 785,152 55.7 % Gross loans 1,464,897 1,416,135 Unearned net deferred fees and costs and loans in process (2,900) (0.2) % (2,585) (0.2) % Unamortized discount on acquired loans (1,205) (0.1) % (1,766) (0.1) % Total loans (net of unearned income) 1,460,792 100.0 % 1,411,784 100.0 % Allowance for credit losses (22,908) (17,939) Total loans receivable, net $ 1,437,884 $ 1,393,845 37 Loan amounts, their contractual maturities and weighted average interest rates at December 31, 2023 are shown below.
Approximately 89% of our total gross loans are secured by real estate. 35 The following table sets forth, as of December 31, 2024 and December 31, 2023 respectively the fixed and adjustable-rate loans in our loan portfolio: December 31, 2024 December 31, 2023 Amount Percent Amount Percent Fixed rate loans: Real estate loans: Commercial/Agricultural real estate $ 426,840 31.2 % $ 457,931 31.3 % Residential mortgage 37,691 2.8 % 44,740 3.1 % Total fixed rate real estate loans 464,531 34.0 % 502,671 34.4 % Non-real estate loans: C&I/Agricultural Operating 107,899 7.9 % 116,193 7.9 % Consumer installment 8,982 0.7 % 12,722 0.9 % Total fixed rate non-real estate loans 116,881 8.6 % 128,915 8.8 % Total fixed rate loans 581,412 42.6 % 631,586 43.2 % Adjustable-rate loans: Real estate loans: Commercial/Agricultural real estate 654,602 47.8 % 714,986 49.0 % Residential mortgage 97,606 7.1 % 87,160 6.0 % Total adjustable-rate real estate loans 752,208 54.9 % 802,146 55.0 % Non-real estate loans: C&I/Agricultural operating 38,758 2.8 % 31,164 2.1 % Consumer installment — — % 1 — % Total adjustable-rate non-real estate loans 38,758 2.8 % 31,165 2.1 % Total adjustable-rate loans 790,966 57.7 % 833,311 57.1 % Gross loans 1,372,378 1,464,897 Unearned net deferred fees and costs and loans in process (2,547) (0.2) % (2,900) (0.2) % Unamortized discount on acquired loans (850) (0.1) % (1,205) (0.1) % Total loans (net of unearned income) 1,368,981 100.0 % 1,460,792 100.0 % Allowance for credit losses (20,549) (22,908) Total loans receivable, net $ 1,348,432 $ 1,437,884 Commercial real estate (“CRE”) lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property or the business conducted on the property securing the loan.
Other non-interest income increased for the twelve months ended December 31, 2023, compared to the same period in 2022 due in part to higher BOLI income and certain positive one-time events. 29 Non-Interest Expense. The following table reflects the various components of non-interest expense for 2023 and 2022.
The increase in Bank Owned Life Insurance death benefit or the twelve months ended December 31, 2024, compared to the same period in 2023 BOLI is due to the passing of an employee in 2024. 29 Non-Interest Expense. The following table reflects the various components of non-interest expense for 2024 and 2023.
Non-interest expense decreased modestly in 2023, largely due to lower compensation expense due to lower production incentives and lower net income and higher branch closing costs incurred in 2022. When comparing year-over-year results, changes in net interest income, provision for credit losses, non-interest income and non-interest expense are primarily due to the items discussed above.
Non-interest expense increased approximately 5% or $2.2 million primarily due to a $1.6 million increase in compensation due to higher incentive compensation and merit increases. When comparing year-over-year results, changes in net interest income, provision for credit losses, non-interest income and non-interest expense are primarily due to the items discussed above.
Twelve months ended December 31, 2023 Twelve months ended December 31, 2022 Average Balance Interest Income/ Expense Average Yield/ Rate Average Balance Interest Income/ Expense Average Yield/ Rate Average interest earning assets: Cash and cash equivalents $ 18,469 $ 1,010 5.47 % $ 19,796 $ 203 1.03 % Loans receivable 1,430,035 73,577 5.15 % 1,351,052 61,639 4.56 % Interest bearing deposits 63 1 1.59 % 1,106 24 2.17 % Investment securities (1) 257,020 8,606 3.35 % 278,056 6,767 2.43 % Other investments 16,274 1,054 6.48 % 15,230 764 5.02 % Total interest earning assets (1) $ 1,721,861 $ 84,248 4.89 % $ 1,665,240 $ 69,397 4.17 % Average interest bearing liabilities: Savings accounts $ 200,087 $ 1,427 0.71 % $ 234,755 $ 753 0.32 % Demand deposits 359,866 6,727 1.87 % 403,289 1,881 0.47 % Money market accounts 306,020 6,976 2.28 % 317,879 1,721 0.54 % CD’s 317,376 10,619 3.35 % 178,726 2,074 1.16 % Total deposits $ 1,183,349 $ 25,749 2.18 % $ 1,134,649 $ 6,429 0.57 % FHLB advances and other borrowings 208,373 10,150 4.87 % 189,274 6,599 3.49 % Total interest bearing liabilities $ 1,391,722 $ 35,899 2.58 % $ 1,323,923 $ 13,028 0.98 % Net interest income $ 48,349 $ 56,369 Interest rate spread 2.31 % 3.19 % Net interest margin (1) 2.81 % 3.39 % Average interest earning assets to average interest bearing liabilities 1.24 % 1.26 % (1) Fully taxable equivalent (FTE).
Twelve months ended December 31, 2024 Twelve months ended December 31, 2023 Average Balance Interest Income/ Expense Average Yield/ Rate Average Balance Interest Income/ Expense Average Yield/ Rate Average interest earning assets: Cash and cash equivalents $ 20,864 $ 1,150 5.51 % $ 18,469 $ 1,010 5.47 % Loans receivable 1,430,631 79,738 5.57 % 1,430,035 73,577 5.15 % Interest bearing deposits — — — % 63 1 1.59 % Investment securities 238,851 7,977 3.34 % 257,020 8,606 3.35 % Other investments 12,816 750 5.85 % 16,274 1,054 6.48 % Total interest earning assets $ 1,703,162 $ 89,615 5.26 % $ 1,721,861 $ 84,248 4.89 % Average interest bearing liabilities: Savings accounts $ 171,069 $ 1,684 0.98 % $ 200,087 $ 1,427 0.71 % Demand deposits 353,107 8,083 2.29 % 359,866 6,727 1.87 % Money market accounts 371,909 11,725 3.15 % 306,020 6,976 2.28 % CD’s 366,634 16,493 4.50 % 317,376 10,619 3.35 % Total deposits $ 1,262,719 $ 37,985 3.01 % $ 1,183,349 $ 25,749 2.18 % FHLB advances and other borrowings 99,731 5,156 5.17 % 208,373 10,150 4.87 % Total interest bearing liabilities $ 1,362,450 $ 43,141 3.17 % $ 1,391,722 $ 35,899 2.58 % Net interest income $ 46,474 $ 48,349 Interest rate spread 2.09 % 2.31 % Net interest margin 2.73 % 2.81 % Average interest earning assets to average interest bearing liabilities 1.25 1.24 27 Rate/Volume Analysis.
The Bank added a $5 million advance maturing in the second quarter of 2023. The Bank had $107 million of FHLB advances maturing in January 2023. The Bank has an irrevocable Standby Letter of Credit Master Reimbursement Agreement with the Federal Home Loan Bank.
A $10 million FHLB advance, which the FHLB could call one-time, was called in June 2024. The Bank has an irrevocable Standby Letter of Credit Master Reimbursement Agreement with the Federal Home Loan Bank.
However, based on periodic examinations by regulators, the amount of the allowance for credit losses recorded during a particular period may be adjusted. Our determination of the allowance for credit losses - loans is based on (1) an individual allowance for specifically identified and evaluated loans that management has determined have unique risk characteristics.
Our determination of the allowance for credit losses - loans is based on (1) an individual allowance for specifically identified and evaluated loans that management has determined have unique risk characteristics. For these loans, the estimated loss is based on likelihood of default, payment history, and net realizable value of underlying collateral.
Interest is variable, based on US Prime rate minus 75 basis points with a floor rate of 3.00%. (b) A $5,000 line of credit, maturing in August 2024, that remains undrawn upon. 46 (6) Subordinated notes resulted from the following: (a) The Company’s private sale in August 2017, which bore a fixed interest rate of 6.75% for five years.
(b) A $5,000 line of credit, maturing August 1, 2025, that remains undrawn upon. 47 (6) Subordinated notes resulted from the following: (a) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in August 2020, which bears a fixed interest rate of 6.00% for five years.
TDR loans may have involved loans that had a charge-off taken against the loan to reduce the carrying amount of the loan to fair market value as determined pursuant to ASC 310-10. 41 The following table identifies the various components of non-performing assets and other balance sheet information as of the dates indicated below and changes in the ACL for the periods then ended: December 31, 2023 and twelve months ended December 31, 2022 and twelve months ended Nonperforming assets: Nonaccrual loans Commercial real estate $ 10,359 $ 5,736 Agricultural real estate 391 2,742 Construction and land development 54 — Commercial and industrial (“C&I”) — 552 Agricultural operating 1,180 890 Residential mortgage 1,167 1,253 Consumer installment 33 31 Total nonaccrual loans 13,184 11,204 Accruing loans past due 90 days or more 389 246 Total nonperforming loans (“NPLs”) 13,573 11,450 Other real estate owned 1,795 1,265 Other collateral owned — 6 Total nonperforming assets (“NPAs”) $ 15,368 $ 12,721 Average outstanding loan balance $ 1,430,035 $ 1,351,052 Loans, end of period $ 1,460,792 $ 1,411,784 Total assets, end of period $ 1,851,391 $ 1,816,386 ACL - Loans, at beginning of period $ 17,939 $ 16,913 Cumulative effect of ASU 2016-13 adoption 4,706 — Loans charged off: Commercial/Agricultural real estate (46) (205) C&I/Agricultural operating — (346) Residential mortgage (78) (68) Consumer installment (36) (48) Total loans charged off (160) (667) Recoveries of loans previously charged off: Commercial/Agricultural real estate 489 102 C&I/Agricultural operating 47 36 Residential mortgage 42 29 Consumer installment 33 51 Total recoveries of loans previously charged off: 611 218 Net loan recoveries/(charge-offs) (“NCOs”) 451 (449) (Reversals)/additions to ACL - Loans via provision for credit losses charged to operations (188) 1,475 ACL - Loans, at end of period $ 22,908 $ 17,939 Ratios: ACL to NCOs (annualized) (5,079.38) % 3,995.32 % NCOs (annualized) to average loans 0.03 % (0.03) % ACL to total loans 1.57 % 1.27 % NPLs to total loans 0.93 % 0.81 % NPAs to total assets 0.83 % 0.70 % 42 Nonaccrual Loans Roll Forward Quarter Ended December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Balance, beginning of period $ 13,456 $ 15,663 $ 10,410 $ 11,204 $ 10,772 Additions 538 33 7,826 154 1,039 Charge offs — (53) (23) (49) (37) Transfers to OREO (23) — (110) (25) — Return to accrual status — (190) — (252) — Payments received (781) (1,994) (2,429) (527) (561) Other, net (6) (3) (11) (95) (9) Balance, end of period $ 13,184 $ 13,456 $ 15,663 $ 10,410 $ 11,204 Nonaccrual loans increased by $2.0 million at December 31, 2023, from $11.2 million at December 31, 2022, largely due to adding a $5.4 million hotel loan from special mention to substandard and nonaccrual in the second quarter of 2023, partially offset by payments received, which include loan payoffs.
The accrual of interest income is discontinued according to the following schedules: • Commercial/agricultural real estate loans, past due 90 days or more; • Commercial and industrial/agricultural operating loans past due 90 days or more; • Closed ended consumer installment loans past due 120 days or more; and • Residential mortgage and open ended consumer installment loans past due 180 days or more. 42 The following table identifies the various components of non-performing assets and other balance sheet information as of the dates indicated below and changes in the ACL for the periods then ended: December 31, 2024 and twelve months ended December 31, 2023 and twelve months ended Nonperforming assets: Nonaccrual loans Commercial real estate $ 4,594 $ 10,359 Agricultural real estate 6,222 391 Construction and land development 103 54 Commercial and industrial (“C&I”) 597 — Agricultural operating 793 1,180 Residential mortgage 858 1,167 Consumer installment 1 33 Total nonaccrual loans 13,168 13,184 Accruing loans past due 90 days or more 186 389 Total nonperforming loans (“NPLs”) 13,354 13,573 Other real estate owned 891 1,795 Other collateral owned 24 — Total nonperforming assets (“NPAs”) $ 14,269 $ 15,368 Average outstanding loan balance $ 1,430,631 $ 1,430,035 Loans, end of period $ 1,368,981 $ 1,460,792 Total assets, end of period $ 1,748,519 $ 1,851,391 ACL - Loans, at beginning of period $ 22,908 $ 17,939 Cumulative effect of ASU 2016-13 adoption — 4,706 Loans charged off: Commercial/Agricultural real estate (39) (46) C&I/Agricultural operating (143) — Residential mortgage (4) (78) Consumer installment (35) (36) Total loans charged off (221) (160) Recoveries of loans previously charged off: Commercial/Agricultural real estate 56 489 C&I/Agricultural operating 36 47 Residential mortgage 7 42 Consumer installment 22 33 Total recoveries of loans previously charged off: 121 611 Net loan recoveries/(charge-offs) (“NCOs”) (100) 451 (Reversals)/additions to ACL - Loans via provision for credit losses charged to operations (2,259) (188) ACL - Loans, at end of period $ 20,549 $ 22,908 Ratios: ACL to NCOs (annualized) N/M N/M NCOs (annualized) to average loans (0.01) % 0.03 % ACL to total loans 1.50 % 1.57 % NPLs to total loans 0.98 % 0.93 % NPAs to total assets 0.82 % 0.83 % N/M means not meaningful 43 Nonaccrual Loans Roll Forward Quarter Ended December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Balance, beginning of period $ 15,042 $ 8,352 $ 8,413 $ 13,184 $ 13,456 Additions 1,054 7,486 352 961 538 Charge offs (138) — — — — Transfers to OREO (201) (124) — — (23) Return to accrual status — — — — — Payments received (2,515) (641) (411) (5,767) (781) Other, net (74) (31) (2) 35 (6) Balance, end of period $ 13,168 $ 15,042 $ 8,352 $ 8,413 $ 13,184 Nonaccrual loans remained flat at approximately $13.2 million at both December 31, 2024, and December 31, 2023, with one large loan payoff in the second quarter and other payments received offsetting the addition of a $7.3 million relationship secured by collateral in the forestry services industry.
The decrease in other expenses during the twelve months ended December 31, 2023, from the comparable prior year period, is largely related to branch closure costs incurred in 2022 of $1.0 million compared to $0.4 million in 2023. Income Taxes. Income tax provision was $5.9 million in 2023 compared to $5.8 million for 2022.
The decrease in other expenses for the twelve months ended December 31, 2024, compared to the same period in 2023 is primarily due to lower loan origination costs due to lower loan volumes in 2024. Income Taxes. Income tax provision was $3.7 million in 2024 compared to $5.9 million for 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−1 removed10 unchanged
Biggest changeThese policies are implemented by our Asset and Liability Management Committee (ALCO). The ALCO is comprised of members of the Bank’s senior management and Board of Directors. The ALCO establishes guidelines for and monitors the volume and mix of our assets and funding sources, taking into account relative costs and spreads, interest rate sensitivity and liquidity needs.
Biggest changeThese policies are implemented by our Asset and Liability Management Committee (ALCO). The ALCO is comprised of members of the Bank’s senior management and a member of the Board of Directors.
In managing our assets and liabilities to achieve desired levels of interest rate risk, we have focused our strategies on: • originating shorter-term secured commercial, agricultural and consumer loan maturities; • originating variable rate commercial and agricultural loans; • the sale of a vast majority of longer-term fixed-rate residential loans in the secondary market with retained servicing; • managing our funding needs growing core deposits; • utilize brokered certificate of deposits and borrowings as appropriate, which may have fixed rates with varying maturities; • purchasing investment securities to modify our interest rate risk profile.
In managing our assets and liabilities to achieve desired levels of interest rate risk, we have focused our strategies on: • originating shorter-term secured commercial, agricultural and consumer loan maturities; • originating variable rate commercial and agricultural loans; • the sale of a vast majority of longer-term fixed-rate residential loans in the secondary market with servicing retained; • managing our funding needs by growing core deposits; • utilize brokered certificate of deposits and borrowings as appropriate, which may have fixed rates with varying maturities; • purchasing investment securities to modify our interest rate risk profile.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCO may determine to increase the Bank’s interest rate risk position somewhat in order to maintain or improve its net interest margin. 52 The following table sets forth, at December 31, 2023 and December 31, 2022 an analysis of our interest rate risk as measured by the estimated changes in Economic Value of Equity (“EVE”) resulting from an immediate and permanent shift in the yield curve (up 300 basis points and down 200 basis points).
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCO may determine to increase the Bank’s interest rate risk position somewhat in order to maintain or improve its net interest margin. 52 The following table sets forth, at December 31, 2024 and December 31, 2023 an analysis of our interest rate risk as measured by the estimated changes in Economic Value of Equity (“EVE”) resulting from an immediate and permanent shift in the yield curve (up 300 basis points and down 200 basis points).
Percent Change in Economic Value of Equity (EVE) Change in Interest Rates in Basis Points (“bp”) Rate Shock in Rates (1) At December 31, 2023 At December 31, 2022 +300 bp 0% 0% +200 bp 0% 0% +100 bp 0% 0% -100 bp 0% (1)% -200 bp (2)% (4)% (1) Assumes an immediate and parallel shift in the yield curve at all maturities.
Percent Change in Economic Value of Equity (EVE) Change in Interest Rates in Basis Points (“bp”) Rate Shock in Rates (1) At December 31, 2024 At December 31, 2023 +300 bp 2% 0% +200 bp 2% 0% +100 bp 1% 0% -100 bp (1)% 0% -200 bp (4)% (2)% (1) Assumes an immediate and parallel shift in the yield curve at all maturities.
Percent Change in Net Interest Income Over One Year Horizon Change in Interest Rates in Basis Points (“bp”) Rate Shock in Rates (1) At December 31, 2023 At December 31, 2022 +300 bp (13)% (3)% +200 bp (8)% (2)% +100 bp (4)% (1)% -100 bp 4% 1% -200 bp 7% 2% (1) Assumes an immediate and parallel shift in the yield curve at all maturities.
Percent Change in Net Interest Income Over One Year Horizon Change in Interest Rates in Basis Points (“bp”) Rate Shock in Rates (1) At December 31, 2024 At December 31, 2023 +300 bp (8)% (13)% +200 bp (5)% (8)% +100 bp (3)% (4)% -100 bp 2% 4% -200 bp 3% 7% - (1) Assumes an immediate and parallel shift in the yield curve at all maturities.
The table below presents our projected change in net interest income for the various rate shock levels at December 31, 2023, and December 31, 2022.
The table below presents our projected change in net interest income for the various rate shock levels at December 31, 2024, and December 31, 2023.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our Risk When Interest Rates Change . The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time and are not predictable or controllable.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our Risk When Interest Rates Change . The rates of interest we earn on assets and pay on liabilities generally are established contractually, with various repricing indices. Market interest rates change over time and are not predictable or controllable.
The Committee’s objectives are to manage assets and funding sources to produce results that are consistent with liquidity, cash flow, capital adequacy, growth, risk, and profitability goals for the Bank.
The ALCO establishes guidelines for and monitors the volume and mix of our assets and funding sources, taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The Committee’s objectives are to manage assets and funding sources to produce results that are consistent with liquidity, cash flow, capital adequacy, growth, risk, and profitability goals for the Bank.
Removed
Note: The table above may not be indicative of future results. The projected changes in net interest income in the rate shock scenarios is largely due to the impact of growth in short-term certificates of deposits, which reprice faster and at a higher rate than other deposit products.
Added
Note: The table above may not be indicative of future results.
Added
The percent change in net interest income over one year horizon at December 31, 2024 compared to December 31, 2023 is largely due to the impact of a 100 basis point reduction in short-term interest rates in the third and fourth quarter with an increase of approximately 70 basis points in the ten year Treasury rate at December 31, 2024 compared to December 31, 2023, which results in a shifting in results in the +300bp (similar to +2 and 200bp (similar to +300bp) and -200bp scenarios (similar to -200bp)).

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