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What changed in Bank First Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Bank First Corp's 2022 and 2023 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 2023 report.

+397 added−473 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-10)

Top changes in Bank First Corp's 2023 10-K

397 paragraphs added · 473 removed · 249 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

77 edited+8 added−14 removed151 unchanged
Biggest changeIn addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company. 18 Table of Contents In October of 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate by 2 basis points, applicable to all insured depository institutions, and will begin with the first quarterly assessment period in 2023 and will remain in effect until the level of the DIF reserve ratios to insured deposits meets the FDIC's long-term goals.
Biggest changeIn October of 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate by 2 basis points, applicable to all insured depository institutions, which began with the first quarterly assessment period in 2023 and will remain in effect until the level of the DIF reserve ratios to insured deposits meets the FDIC's long-term goals.
These laws and regulations include, among numerous other things, provisions that: ● limit the interest and other charges collected or contracted for by the Bank, including new rules respecting the terms of credit cards and of debit card overdrafts; ● govern the Bank’s disclosures of credit terms to consumer borrowers; ● require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the community it serves; ● prohibit the Bank from discriminating on the basis of race, creed or other prohibited factors when it makes decisions to extend credit; ● govern the manner in which the Bank may collect consumer debts; and ● prohibit unfair, deceptive or abusive acts or practices in the provision of consumer financial products and services.
These laws and regulations include, among numerous other things, provisions that: ● limit the interest and other charges collected or contracted for by the Bank, including new rules respecting the terms of credit cards and of debit card overdrafts; 20 Table of Contents ● govern the Bank’s disclosures of credit terms to consumer borrowers; ● require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the community it serves; ● prohibit the Bank from discriminating on the basis of race, creed or other prohibited factors when it makes decisions to extend credit; ● govern the manner in which the Bank may collect consumer debts; and ● prohibit unfair, deceptive or abusive acts or practices in the provision of consumer financial products and services.
Our failure to comply with these internal control rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the values of our securities. The assessments of our financial reporting controls as of December 31, 2022 are included in this report under “Item 9A. Controls and Procedures.” Corporate Governance.
Our failure to comply with these internal control rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the values of our securities. The assessments of our financial reporting controls as of December 31, 2023 are included in this report under “Item 9A. Controls and Procedures.” Corporate Governance.
The banking agencies issued proposed rules in 2011 and previously issued guidance on sound incentive compensation policies. In 2016, the Federal Reserve and the OCC also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2022, these rules have not been implemented.
The banking agencies issued proposed rules in 2011 and previously issued guidance on sound incentive compensation policies. In 2016, the Federal Reserve and the OCC also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2023, these rules have not been implemented.
Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth. The Bank was well capitalized at December 31, 2022, and brokered deposits are not restricted.
Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth. The Bank was well capitalized at December 31, 2023, and brokered deposits are not restricted.
Federal banking laws also place similar restrictions on certain extensions of credit by insured banks, such as the Bank, to their directors, executive officers and principal shareholders. Reserves. Historically, Federal Reserve rules required depository institutions, such as the Bank, to maintain reserves against their transaction accounts, primarily interest bearing and non-interest bearing checking accounts.
Federal banking laws also place similar restrictions on certain extensions of credit by insured banks, such as the Bank, to their directors, executive officers and principal shareholders. Reserves. Historically, Federal Reserve rules required depository institutions, such as the Bank, to maintain reserves against their transaction accounts, primarily interest bearing and noninterest-bearing checking accounts.
The rule also establishes general underwriting criteria for qualified mortgages, including that monthly payments be calculated based on the highest payment that will apply in the first five years of the loan and that the borrower have a total debt-to-income ratio that is less than or equal to 43%.
The rule also establishes general underwriting criteria for qualified mortgages, including that monthly payments be calculated based on the highest payment that will apply in the first five years of the loan and that the borrower has a total debt-to-income ratio that is less than or equal to 43%.
The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and FHA. ​ 21 Table of Contents LIBOR: On March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to address references to LIBOR in contracts that (i) are governed by U.S. law; (ii) will not mature before June 30, 2023; and (iii) lack fallback provisions providing for a clearly defined and practicable replacement for LIBOR.
The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and FHA. ​ LIBOR: On March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to address references to LIBOR in contracts that (i) are governed by U.S. law; (ii) will not mature before June 30, 2023; and (iii) lack fallback provisions providing for a clearly defined and practicable replacement for LIBOR.
However, on December 14, 2021, the OCC issued a final rule rescinding its 2020 CRA Rule and replacing it with a rule based largely on the prior rules adopted jointly by the federal banking agencies in 1995. The Bank had a rating of “Satisfactory” in its most recent CRA evaluation.
However, on December 14, 2021, the OCC issued a final rule rescinding its 2020 CRA Rule and replacing it with a rule based largely on the prior rules adopted jointly by the federal banking agencies in 1995. The Bank had a rating of “Outstanding” in its most recent CRA evaluation.
Dept. of Agriculture, and the Wisconsin Housing and Economic Development Authority. We also offer a number of in-house mortgage products, including adjustable rate mortgages at one, three, five, seven, ten, and fifteen years, and fixed rate mortgages at up to thirty years.
Dept. of Agriculture, the Federal Housing Administration, and the Wisconsin Housing and Economic Development Authority. We also offer a number of in-house mortgage products, including adjustable rate mortgages at one, three, five, seven, ten, and fifteen years, and fixed rate mortgages at up to thirty years.
In 2022, the Company and Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the then-applicable capital conservation buffer. Based on current estimates, we believe that the Company and Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2023.
In 2023, the Company and Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the then-applicable capital conservation buffer. Based on current estimates, we believe that the Company and Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2024.
FinCEN is required to implement regulations to specify how covered financial institutions, such as the Company, should incorporate these national priorities into their AML programs. As of December 31, 2022, no such regulations have been proposed. Economic Sanctions .
FinCEN is required to implement regulations to specify how covered financial institutions, such as the Company, should incorporate these national priorities into their AML programs. As of December 31, 2023, no such regulations have been proposed. Economic Sanctions .
Federal law also prohibits any national bank from paying dividends that would be greater than such bank’s undivided profits after deducting statutory bad debts in excess of such bank’s allowance for possible loan losses.
Federal law also prohibits any national bank from paying dividends that would be greater than such bank’s undivided profits after deducting statutory bad debts in excess of such bank’s allowance for possible credit losses.
As the Company and the Bank each had less than $10 billion in consolidated assets in 2022, they are not subject to the routine supervision of the CFPB, but this may change in the future as the Company and the Bank grow.
As the Company and the Bank each had less than $10 billion in consolidated assets in 2023, they are not subject to the routine supervision of the CFPB, but this may change in the future as the Company and the Bank grow.
Consequently, shareholders 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 companies. Investors should be aware of these requirements when acquiring shares of our stock. 14 Table of Contents Governance and Financial Reporting Obligations.
Consequently, shareholders 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 companies. Investors should be aware of these requirements when acquiring shares of our stock. Governance and Financial Reporting Obligations.
Community Reinvestment Act. The Bank is subject to the provisions of the CRA, which imposes a continuing and affirmative obligation, consistent with their safe and sound operation, to help meet the credit needs of entire communities where the Bank accepts deposits, including low- and moderate-income neighborhoods. The OCC’s assessment of the Bank’s CRA record is made available to the public.
The Bank is subject to the provisions of the CRA, which imposes a continuing and affirmative obligation, consistent with their safe and sound operation, to help meet the credit needs of entire communities where the Bank accepts deposits, including low- and moderate-income neighborhoods. The OCC’s assessment of the Bank’s CRA record is made available to the public.
If we were to enter bankruptcy or become subject to the orderly liquidation process established by the Dodd-Frank Act, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment. Acquisitions.
If we were to enter bankruptcy or become subject to the orderly liquidation process established by the Dodd-Frank Act, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment. 13 Table of Contents Acquisitions.
The Dodd-Frank Act (1) grants shareholders of U.S. publicly traded companies an advisory vote on executive compensation; (2) enhances independence requirements for Compensation Committee members; and (3) requires companies listed on national securities exchanges to adopt incentive-based compensation claw-back policies for executive officers. Incentive Compensation.
The Dodd-Frank Act (1) grants shareholders of U.S. publicly traded companies an advisory vote on executive compensation; (2) enhances independence requirements for Compensation Committee members; and (3) requires companies listed on national securities exchanges to adopt incentive-based compensation claw-back policies for executive officers. 14 Table of Contents Incentive Compensation.
The acquisition method of accounting requires assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determines the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities, deposits and borrowings with the assistance of third party valuations, appraisals, and third party advisors.
The acquisition method of accounting requires assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determines the fair value of core 6 Table of Contents deposit intangibles, securities, premises and equipment, loans, other assets and liabilities, deposits and borrowings with the assistance of third-party valuations, appraisals, and third-party advisors.
In addition, the Federal Reserve has the power to order a bank holding company or its subsidiaries to terminate any nonbanking activity 13 Table of Contents or terminate its ownership or control of any nonbank subsidiary, when it has reasonable cause to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that bank holding company.
In addition, the Federal Reserve has the power to order a bank holding company or its subsidiaries to terminate any nonbanking activity or terminate its ownership or control of any nonbank subsidiary, when it has reasonable cause to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that bank holding company.
During 2006, the federal bank regulatory agencies released guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) and advised financial institutions of the risks posed by commercial real estate (“CRE”) lending concentrations. The Guidance requires that appropriate processes be in place to identify, monitor 19 Table of Contents and control risks associated with real estate lending concentrations.
During 2006, the federal bank regulatory agencies released guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) and advised financial institutions of the risks posed by commercial real estate (“CRE”) lending concentrations. The Guidance requires that appropriate processes be in place to identify, monitor and control risks associated with real estate lending concentrations.
CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock, retained earnings, and certain qualifying minority interests, less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject 15 Table of Contents to temporary timing differences.
CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock, retained earnings, and certain qualifying minority interests, less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject to temporary timing differences.
We do not make any loans to any director, executive officer of the Bank, or the related interests of each, unless the loan is approved by the full board of directors of the Bank and is on terms not more favorable than would be available to a person not affiliated with the Bank.
We do not make any loans to any director, executive officer 8 Table of Contents of the Bank, or the related interests of each, unless the loan is approved by the full board of directors of the Bank and is on terms not more favorable than would be available to a person not affiliated with the Bank.
The Bank has twenty-eight (28) offices, including its headquarters, in Brown, Columbia, Dane, Fond du Lac, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Shawano, Sheboygan, Waupaca, Waushara, and Winnebago counties in the State of Wisconsin. We serve businesses, professionals and consumers with a wide variety of financial services, including retail and commercial banking.
The Bank has twenty-six (26) offices, including its headquarters, in Brown, Columbia, Dane, Fond du Lac, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Shawano, Sheboygan, Waupaca, Waushara, and Winnebago counties in the State of Wisconsin. We serve businesses, professionals and consumers with a wide variety of financial services, including retail and commercial banking.
The Bank’s legal and internal lending limits are a safety and soundness measure intended to prevent one person or a relatively small and economically related 9 Table of Contents group of persons from borrowing an unduly large amount of the Bank’s funds.
The Bank’s legal and internal lending limits are a safety and soundness measure intended to prevent one person or a relatively small and economically related group of persons from borrowing an unduly large amount of the Bank’s funds.
The Company has adopted and implemented an Information Security Program to comply with the regulatory cybersecurity guidance. 20 Table of Contents Consumer Regulation. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers.
The Company has adopted and implemented an Information Security Program to comply with the regulatory cybersecurity guidance. Consumer Regulation. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers.
Authority to supervise and examine the Company and the Bank for compliance with federal consumer laws remains largely with the Federal Reserve and the OCC, respectively. However, the CFPB may participate in examinations on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators.
Authority to supervise and examine the Company and the Bank for compliance with federal consumer laws 17 Table of Contents remains largely with the Federal Reserve and the OCC, respectively. However, the CFPB may participate in examinations on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators.
The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired.
The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for Safety and Soundness to implement these required standards. These guidelines set 18 Table of Contents forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired.
The competing major commercial banks have greater resources that may provide them a competitive advantage by enabling them to maintain numerous branch offices, mount extensive advertising campaigns and invest in new technologies.
The competing major commercial banks have greater resources that may provide them a competitive advantage by enabling 7 Table of Contents them to maintain numerous branch offices, mount extensive advertising campaigns and invest in new technologies.
As of December 31, 2022, consumer loans made up approximately $45.0 million or 1.6% of our loan portfolio. Mortgage Banking Activities Our mortgage banking operations include correspondent or secondary market lending, and in-house mortgage lending (included in residential mortgage and home equity loan totals above). We conduct secondary market lending through Fannie Mae, Federal Home Loan Bank of Chicago, U.S.
As of December 31, 2023, consumer loans made up approximately $51.0 million or 1.5% of our loan portfolio. Mortgage Banking Activities Our mortgage banking operations include correspondent or secondary market lending, and in-house mortgage lending (included in residential mortgage and home equity loan totals above). We conduct secondary market lending through Fannie Mae, Federal Home Loan Bank of Chicago, U.S.
These institutions may have the ability to finance wide-ranging advertising campaigns and may also be able to offer lower rates on loans and higher rates on deposits than 8 Table of Contents we can offer.
These institutions may have the ability to finance wide-ranging advertising campaigns and may also be able to offer lower rates on loans and higher rates on deposits than we can offer.
We believe our compensation package and benefits are 12 Table of Contents competitive with others in our industry. For additional information regarding our employee benefit plans, see “Note 17 – Employee Benefit Plans” to our consolidated financial statements included in this report. ​ Bank First currently has approximately 382 FTEs.
We believe our compensation package and benefits are competitive with others in our industry. For additional information regarding our employee benefit plans, see “Note 17 – Employee Benefit Plans” to our consolidated financial statements included in this report. ​ Bank First currently has approximately 379 FTEs.
Higher allowances for loan losses and capital levels may also be required.
Higher allowances for credit losses and capital levels may also be required.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average assets net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all banks is 4.0%.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average assets net of goodwill, certain other intangible assets, and certain required deduction items.
Financial institutions are further required to disclose their privacy policies to customers annually. Financial institutions, however, will be required to comply with state law if it is more protective of consumer privacy than the GLB. The GLB also directed federal regulators, including the FDIC and the OCC, to prescribe standards for the security of consumer information.
Financial institutions, however, will be required to comply with state law if it is more protective of consumer privacy than the GLB. The GLB also directed federal regulators, including the FDIC and the OCC, to prescribe standards for the security of consumer information.
Our customers are generally individuals, small to medium-sized businesses and professional firms that are located in or conduct a substantial portion of their business in our market areas. At December 31, 2022, we had total loans receivable of $2.89 billion, representing approximately 79.1% of our total earning assets.
Our customers are generally individuals, small to medium-sized businesses and professional firms that are located in or conduct a substantial portion of their business in our market areas. At December 31, 2023, we had total loans receivable of $3.34 billion, representing approximately 79.3% of our total assets.
We obtain a security interest in real estate whenever possible, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. As of December 31, 2022, loans secured by real estate made up approximately $2.14 billion, or 73.9%, of our loan portfolio.
We obtain a security interest in real estate whenever possible, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. As of December 31, 2023, loans secured by real estate made up approximately $2.59 billion, or 77.4%, of our loan portfolio.
On December 16, 2022, the FRB adopted a final rule to implement the LIBOR Act by identifying benchmark rates based on SOFR (Secured Overnight Financing Rate) that will replace LIBOR in certain financial contracts after June 30, 2023.
On December 16, 2022, the FRB adopted a final rule to implement the LIBOR Act by identifying benchmark rates based on SOFR (Secured Overnight Financing 21 Table of Contents Rate) that replaced LIBOR in certain financial contracts after June 30, 2023.
TVG is a Wisconsin corporation organized in 2009. It is a wholly-owned subsidiary of the Bank, and its purpose is to hold the Bank’s 40% ownership interest in Ansay & Associates, LLC (“Ansay”).
It is a wholly-owned subsidiary of the Bank, and its purpose is to hold the Bank’s 40% ownership interest in Ansay & Associates, LLC (“Ansay”).
As of December 31, 2022, residential mortgage loans and home equity loans made up approximately $739.5 million or 25.6% of our loan portfolio. ​ Commercial and Industrial Loans We have significant expertise in small to middle market commercial and industrial lending.
As of December 31, 2023, residential mortgage loans and home equity loans made up approximately $888.6 million or 26.6% of our loan portfolio. ​ Commercial and Industrial Loans We have significant expertise in small to middle market commercial and industrial lending.
As of December 31, 2022, we had 22 nonaccrual loans totaling approximately $3.6 million, or 0.1% of total loans. For additional discussion related to nonperforming loans, see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section as well as the notes to the consolidated financial statements. Loan Approval Certain credit risks are inherent in making loans.
As of December 31, 2023, we had 26 nonaccrual loans totaling approximately $5.7 million, or 0.2% of total loans. For additional discussion related to nonperforming loans, see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section as well as the notes to the consolidated financial statements. Loan Approval Certain credit risks are inherent in making loans.
Some of the products that we offer include checking accounts, savings accounts, money market accounts, cash management accounts, certificates of deposit, commercial and industrial loans, commercial real estate loans, construction and development loans, residential mortgages, consumer loans, credit cards, online banking, telephone banking and mobile banking.
Some of the products that we offer include checking accounts, savings accounts, money market accounts, cash management accounts, certificates of deposit, commercial and industrial loans, commercial real estate loans, construction and development loans, residential mortgages, consumer loans, credit cards, online banking, telephone banking and mobile banking. The Bank has three subsidiaries: Bank First Investments, Inc., TVG Holdings, Inc.
We also offer an eleven-month construction loan, a construction to permanent loan, and a twelve-month bridge loan. 11 Table of Contents Deposit Products We offer a full range of traditional deposit services through our branch network in our market areas that are typically available in most banks and savings institutions, including checking accounts, commercial accounts, savings accounts and other time deposits of various types, ranging from money market accounts to long-term certificates of deposit.
Deposit Products We offer a full range of traditional deposit services through our branch network in our market areas that are typically available in most banks and savings institutions, including checking accounts, commercial accounts, savings accounts and other time deposits of various types, ranging from money market accounts to long-term certificates of deposit.
In addition, the capital rules require a capital conservation buffer of CET1 of 2.5% above each of the minimum capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress.
The required minimum leverage ratio for all banks is 4.0%. 15 Table of Contents In addition, the capital rules require a capital conservation buffer of CET1 of 2.5% above each of the minimum capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress.
Generally, we do not have interest reserves built into loan commitments but require periodic cash payments for interest from the borrower’s cash flow. As of December 31, 2022, construction and development loans made up approximately $199.7 million or 6.9% of our loan portfolio.
Generally, we do not have interest reserves built into loan commitments but require periodic cash payments for interest 10 Table of Contents from the borrower’s cash flow. As of December 31, 2023, construction and development loans made up approximately $200.8 million or 6.0% of our loan portfolio.
We make available, free of charge, on or through our website, www.bankfirstwi.bank, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and amendments to such filings, as soon as reasonably practicable after each is electronically filed with, or furnished to, the SEC.
We make available, free of charge, on or through our website, www.bankfirst.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and amendments to such filings, as soon as reasonably practicable after each is electronically filed with, or furnished to, the SEC. 12 Table of Contents Supervision and Regulation We are extensively regulated under federal and state law.
It is also intended to safeguard the Bank’s depositors by diversifying the risk of loan losses among a relatively large number of creditworthy borrowers engaged in various types of businesses. Based upon the capitalization of the Bank at December 31, 2022, the Bank’s legal lending limit was $55.8 million and the Bank’s internal lending limit was $44.7 million.
It is also intended to safeguard the Bank’s depositors by diversifying the risk of credit losses among a relatively large number of creditworthy borrowers engaged in various types of businesses. Based upon the capitalization of the Bank at December 31, 2023, the Bank’s base legal lending limit was $66.9 million and the Bank’s internal lending limit was $53.6 million.
The Guidance is triggered when CRE loan concentrations exceed either: ● Total reported loans for construction, land development, and other land of 100% or more of a bank ’ s total risk-based capital; or ● Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land of 300% or more of a bank ’ s total risk-based capital.
The Guidance is triggered when CRE loan concentrations exceed either: ● Total reported loans for construction, land development, and other land of 100% or more of a bank ’ s total risk-based capital; or ● Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land of 300% or more of a bank ’ s total risk-based capital. 19 Table of Contents The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a particular property type.
As of December 31, 2022, approximately 78% of our employees self-identified as female and approximately 6% self-identified as people of color. Twenty-five percent (25%) of our Board members and 50% of our Senior Management team identify as female. One of our strategic goals is to increase the diversity of our Board in the coming year.
As of December 31, 2023, approximately 73% of our employees self-identified as female and approximately 5% self-identified as people of color. Twenty-seven percent (27%) of our Board members and 46% of our Senior Management team identify as female. One of our strategic goals is to increase the diversity of our Board in the coming year.
Under the heading of Capital, our priorities include (i) growing capital through strong earnings, and (ii) assessing and monitoring short and long-term capital goals. Under the heading of Asset Quality, our top priority is maintaining a strong credit culture.
We have also added a sixth category to prioritize our strategic goals surrounding Information Technology. Under the heading of Capital, our priorities include (i) growing capital through strong earnings, and (ii) assessing and monitoring short and long-term capital goals. Under the heading of Asset Quality, our top priority is maintaining a strong credit culture.
Our board of directors has delegated the responsibility of monitoring our investment activities to our ALCO. Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our CEO. We actively monitor our investments on an ongoing basis to identify any material changes in the securities. We also review our securities for potential other-than-temporary impairment at least quarterly.
Our board of directors has delegated the responsibility of monitoring our investment activities to our ALCO. Day-to-day activities pertaining to the securities portfolio 11 Table of Contents are conducted under the supervision of our CEO and CFO. We actively monitor our investments on an ongoing basis to identify any material changes in the securities.
The Company crossed above the $3 billion threshold during the third quarter of 2022 and is now required to adhere to these capital rules. 16 Table of Contents As a result of the Economic Growth Act, the federal banking agencies were also required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s Tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion.
As a result of the Economic Growth Act, the federal banking agencies were also required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s Tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion.
Supervision and Regulation We are extensively regulated under federal and state law. The following is a brief summary that does not purport to be a complete description of all regulations that affect us or all aspects of those regulations.
The following is a brief summary that does not purport to be a complete description of all regulations that affect us or all aspects of those regulations.
Prior approval by the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank’s profits for that year combined with its retained net profits for the preceding two calendar years. 17 Table of Contents Regulation of the Bank As a national bank, our primary bank subsidiary, Bank First, N.A., is subject to comprehensive supervision and regulation by the OCC and is subject to its regulatory reporting requirements.
Prior approval by the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank’s profits for that year combined with its retained net profits for the preceding two calendar years.
As a result, as of the effective date of that change in 2018, the Company was no longer required to comply with the risk-based capital rules applicable to the Bank.
As a result, as of the effective date of that change in 2018, the Company was no longer required to comply with the risk-based capital rules applicable to the Bank. The Company crossed above the $3 billion threshold during the third quarter of 2022 and is now required to adhere to these capital rules.
As of December 31, 2022, commercial and industrial loans made up approximately $492.5 million or 17.0% of our loan portfolio. 10 Table of Contents We provide a mix of variable and fixed rate commercial and industrial loans.
As of December 31, 2023, commercial and industrial loans made up approximately $487.9 million or 14.6% of our loan portfolio. We provide a mix of variable and fixed rate commercial and industrial loans.
Our policy for reviewing commercial credit files consisted of selecting a percentage of specific files on an annual basis as defined in our loan review plan, and reviewing them for risk rating and policy compliance. Our retail review consists of selecting a percentage of specific files on an annual basis, and reviewing them for policy compliance.
Our policy for reviewing commercial credit files consisted of selecting a percentage of specific files on an annual basis as defined in our loan review plan, and reviewing them for risk rating and policy compliance. Our goal is to review every commercial relationship of $500,000 or more at least once in a five-year period.
In addition to the legal lending, management and the board of directors have established a more conservative, internal lending limit.
This legal lending limit will increase or decrease as the Bank’s level of capital increases or decreases. In addition to the legal lending, management and the board of directors have established a more conservative, internal lending limit.
The Company accounts for these transactions under the acquisition method of accounting, and thus, the financial position and results of operations of acquired institutions prior to the consummation date are not included in the accompanying consolidated financial statements.
Company stock issued totaled 1,450,272 shares valued at approximately $115.1 million, with cash of $15.4 million comprising the remainder of merger consideration. The Company accounts for these transactions under the acquisition method of accounting, and thus, the financial position and results of operations of acquired institutions prior to the consummation date are not included in the accompanying consolidated financial statements.
Because our loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of nonperforming assets.
Because our loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of nonperforming assets. 9 Table of Contents As of December 31, 2023, commercial real estate loans made up approximately $1.70 billion or 50.8% of our loan portfolio. ● Residential Mortgage Loans and Home Equity Loans.
Our underwriting criteria for, and the risks associated with, home equity loans and lines of credit are generally the same as those for first mortgage loans. Home equity loans typically have terms of 20 years or less. We generally limit the extension of credit to 90% of the available equity of each property.
Home equity loans typically have terms of 20 years or less. We generally limit the extension of credit to 90% of the available equity of each property.
Human Capital Resources ​ Our Company culture emphasizes our longstanding dedication to being respectful to others and having a workforce that is representative of the communities we serve. Diversity, equity and inclusion (“DEI”) are fundamental to our culture. We believe in attracting, retaining and promoting quality talent and recognize that diversity makes us stronger as a Company.
We also review our securities for potential credit deterioration at least quarterly. Human Capital Resources ​ Our Company culture emphasizes our longstanding dedication to being respectful to others and having a workforce that is representative of the communities we serve. Diversity, equity and inclusion (“DEI”) are fundamental to our culture.
On December 21, 2018, federal banking agencies issued a joint final rule to revise their regulatory capital rules to (i) address the upcoming implementation of the “current expected credit losses” (“CECL”) accounting standard under GAAP; (ii) provide an optional three-year phase-in period for the day-one adverse regulatory capital effects that banking organizations are expected to experience upon adopting CECL; and (iii) require the use of CECL in stress tests beginning with the 2020 capital planning and stress testing cycle for certain banking organizations. for more information regarding Accounting Standards Update No. 2016-13, which introduced CECL as the methodology to replace the current “incurred loss” methodology for financial assets measured at amortized cost, and changed the approaches for recognizing and recording credit losses on available-for-sale debt securities and purchased credit impaired financial assets, including the required implementation date for the Company, see the notes to the Company’s consolidated financial statements for the year ended December 31, 2022.
On December 21, 2018, federal banking agencies issued a joint final rule to revise their regulatory capital rules to (i) address the upcoming implementation of the “current expected credit losses” (“CECL”) accounting standard under GAAP; (ii) provide 16 Table of Contents an optional three-year phase-in period for the day-one adverse regulatory capital effects that banking organizations are expected to experience upon adopting CECL; and (iii) require the use of CECL in stress tests beginning with the 2020 capital planning and stress testing cycle for certain banking organizations.
On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” Furthermore, the federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk management.
On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” On July 26, 2023 the SEC adopted rules requiring registrants such as the Bank to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance.
The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a particular property type. See Item 1A. Risk Factors -- We are subject to lending concentration risk, which could cause our regulators to restrict our ability to grow – for a discussion of our risks regarding CRE exposure.
See Item 1A. Risk Factors -- We are subject to lending concentration risk, which could cause our regulators to restrict our ability to grow – for a discussion of our risks regarding CRE exposure. Community Reinvestment Act.
Professional development is a key priority, which is facilitated through our many corporate development initiatives including extensive training programs, corporate mentoring, leadership programs, educational reimbursement and professional speaker series.
We believe employees to be our greatest asset and that our future success depends on our ability to attract, retain and develop employees. Professional development is a key priority, which is facilitated through our many corporate development initiatives including extensive training programs, corporate mentoring, leadership programs, and educational reimbursement.
We offer fixed and adjustable rate residential real estate loans with terms of up to 30 years. We also offer a variety of lot loan options to consumers to purchase the lot on which they intend build their home. We also offer traditional home equity loans and lines of credit.
We also offer a variety of lot loan options to consumers to purchase the lot on which they intend build their home. We also offer traditional home equity loans and lines of credit. Our underwriting criteria for, and the risks associated with, home equity loans and lines of credit are generally the same as those for first mortgage loans.
As of December 31, 2022, commercial real estate loans made up approximately $1.40 billion or 48.3% of our loan portfolio. ● Residential Mortgage Loans and Home Equity Loans. We originate and hold short-term and long-term first mortgages and traditional second mortgage residential real estate loans. Generally, we limit the loan-to-value ratio on our residential real estate loans to 90%.
We originate and hold short-term and long-term first mortgages and traditional second mortgage residential real estate loans. Generally, we limit the loan-to-value ratio on our residential real estate loans to 90%. We offer fixed and adjustable rate residential real estate loans with terms of up to 30 years.
Census data, and total deposits of approximately $57.49 billion as of June 30, 2022, according to the most recent data published by the FDIC. Competition The banking business is highly competitive, and we face competition in our market areas from many other local, regional, and national financial institutions.
Competition The banking business is highly competitive, and we face competition in our market areas from many other local, regional, and national financial institutions.
This collaboration fuels a stronger foundation for innovation and connects us to our communities. 7 Table of Contents Our strategic priorities are organized around the CAMELS ratings, including Capital, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk. We have also added a sixth category to prioritize our strategic goals surrounding Information Technology.
Bank First is focused on building a culture which encourages, supports and celebrates diversity and inclusion for our employees, customers and communities. This collaboration fuels a stronger foundation for innovation and connects us to our communities. Our strategic priorities are organized around the CAMELS ratings, including Capital, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk.
UFS provides core data processing, endpoint management, cloud services, cyber security, and digital banking solutions to the Bank and many other community banks in and around Wisconsin. Bank First Investments, Inc. is a Wisconsin corporation organized in 2011, and is wholly-owned by the Bank. Bank First Investments, Inc.’s purpose is to provide investment and safekeeping services to the Bank.
(“TVG”) and BFC Title, LLC. Bank First Investments, Inc. is a Wisconsin corporation organized in 2011, and is wholly-owned by the Bank. Bank First Investments, Inc.’s purpose is to provide investment and safekeeping services to the Bank. TVG is a Wisconsin corporation organized in 2009.
Based on the deposit market share reports published by the FDIC on June 30, 2022, Bank First ranks in the top two of market share in five of the fourteen counties in which its branches are located. The fourteen counties in which the Bank has offices have an estimated aggregate population of 1,894,606, based on 2020 U.S.
The fourteen counties in which the Bank has offices have an estimated aggregate population of 1,894,606, based on 2020 U.S. Census data, and total deposits of approximately $60.4 billion as of June 30, 2023, according to the most recent data published by the FDIC.
No final rule has been issued, but the rulemaking may affect the Bank’s CRA compliance obligations in the future. Privacy and Data Security. The GLB generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure.
The GLB generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to customers annually.
It is a wholly-owned subsidiary of the Bank, and its purpose is to hold the Bank’s 5.88% ownership interest in Generations Title, LLC, a Wisconsin title company. Aside from the Bank, the Company also has another wholly-owned subsidiary, Veritas Asset Holdings, LLC, a troubled asset liquidation company.
It is a wholly-owned subsidiary of the Bank, and its purpose is to hold the Bank’s 5.88% ownership interest in Generations Title, LLC, a Wisconsin title company. As of December 31, 2023, we had total consolidated assets of $4.22 billion, total loans of $3.34 billion, total deposits of $3.43 billion and total stockholders’ equity of $619.8 million.
As of December 31, 2022, we had total consolidated assets of $3.66 billion, total loans of $2.89 billion, total deposits of $3.06 billion and total stockholders’ equity of $453.1 million. The Bank employs approximately 382 full-time equivalent employees (“FTE”), and has an assets-to-FTE ratio of approximately $10.9 million. For more information, see the Bank’s website at www.bankfirst.com.
The Bank employed approximately 379 full-time equivalent employees (“FTE”), and had an average assets-to-FTE ratio of approximately $10.7 million for the year ended December 31, 2023. For more information, see the Bank’s website at www.bankfirst.com. Recent acquisition Hometown Bancorp, Ltd. On February 10, 2023, the Company completed a merger with Hometown Bancorp, Ltd.
Lending Limits Our lending activities are subject to a variety of lending limits imposed by federal law. In general, the Bank is subject to a legal limit on loans to a single borrower equal to 15% of the Bank’s capital and unimpaired surplus. This legal lending limit will increase or decrease as the Bank’s level of capital increases or decreases.
In general, the Bank is subject to a base legal limit on loans to a single borrower equal to 15% of the Bank’s capital and unimpaired surplus, plus an additional 10 percent of the Bank’s capital and surplus, if the amount that exceeds the 15 percent general limit is fully secured by readily marketable collateral.
Our talent acquisition teams partner with hiring managers in sourcing and presenting a diverse slate of qualified candidates to strengthen our organization. Our DEI Committee is a task force of diverse staff members who are responsible for helping bring about positive change at Bank First and fostering a more diverse and inclusive work environment.
We believe in attracting, retaining and promoting quality talent and recognize that diversity makes us stronger as a Company. Our talent acquisition teams partner with hiring managers in sourcing and presenting a diverse slate of qualified candidates to strengthen our organization.
Removed
The Bank has four subsidiaries: UFS, LLC (“UFS”), Bank First Investments, Inc., TVG Holdings, Inc. (“TVG”) and BFC Title, LLC. UFS is a Wisconsin limited liability company organized in 2014, in which the Bank is a 49.8% member.
Added
Our main office is located at 402 N. 8th Street, Manitowoc, Wisconsin. Based on the deposit market share reports published by the FDIC on June 30, 2023, Bank First ranked in the top three of market share in six of the fourteen counties in which its branches are located.
Removed
Recent acquisitions Tomah Bancshares, Inc. On May 15, 2020, the Company completed a merger with Tomah Bancshares, Inc.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurthermore, the present and future dividend policy of the Bank is subject to the discretion of its board of directors. 35 Table of Contents We cannot guarantee that the Company or the Bank will be permitted by financial condition or applicable regulatory restrictions to pay dividends, that the board of directors of the Bank will elect to pay dividends to us, nor can we guarantee the timing or amount of any dividend actually paid.
Biggest changeWe cannot guarantee that the Company or the Bank will be permitted by financial condition or applicable regulatory restrictions to pay dividends, that the board of directors of the Bank will elect to pay dividends to us, nor can we guarantee the timing or amount of any dividend actually paid. ​ Our securities are not FDIC insured. ​ Securities that we issue, including our common stock, are not savings or deposit accounts or other obligations of any bank, insured by the FDIC, any other governmental agency or instrumentality, or any private insurer, and are subject to investment risk, including the possible loss of our shareholders’ investments. 36 Table of Contents ​ ​ ​ ITEM 1B.
Our provision and allowance for loan losses may not be adequate to cover actual credit losses. We make various assumptions and judgments about the collectability of our loan and lease portfolio and utilize these assumptions and judgments when determining the provision and allowance for loan losses.
Our provision and allowance for credit losses may not be adequate to cover actual credit losses. We make various assumptions and judgments about the collectability of our loan and lease portfolio and utilize these assumptions and judgments when determining the provision and allowance for credit losses.
In addition, our acquisition activities could be material to our business and involve a number of significant risks, including the following: incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in our attention being diverted from the operating of our existing business; using inaccurate estimates and judgments to evaluate credit, operations, management, and market risks with respect to the target company or the assets and liabilities that we seek to acquire; exposure to potential asset quality issues of the target company; intense competition from other banking organizations and other potential acquirers, many of which have substantially greater resources than we do; potential exposure to unknown or contingent liabilities of banks and businesses we acquire, including, without limitation, liabilities for regulatory and compliance issues; inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and other projected benefits of the acquisition; incurring time and expense required to integrate the operations and personnel of the combined businesses; inconsistencies in standards, procedures, and policies that would adversely affect our ability to maintain relationships with customers and employees; experiencing higher operating expenses relative to operating income from the new operations; creating an adverse short-term effect on our results of operations; losing key employees and customers; significant problems related to the conversion of the financial and customer data of the entity; integration of acquired customers into our financial and customer product systems; potential changes in banking or tax laws or regulations that may affect the target company; or risks of impairment to goodwill or litigation risk.
In addition, our acquisition activities could be material to our business and involve a number of significant risks, including the following: incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in our attention being diverted from the operating of our existing business; using inaccurate estimates and judgments to evaluate credit, operations, management, and market risks with respect to the target company or the assets and liabilities that we seek to acquire; exposure to potential asset quality issues of the target company; intense competition from other banking organizations and other potential acquirers, many of which have substantially greater resources than we do; potential exposure to unknown or contingent liabilities of banks and businesses we acquire, including, without limitation, liabilities for regulatory and compliance issues; inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and other projected benefits of the acquisition; incurring time and expense required to integrate the operations and personnel of the combined businesses; inconsistencies in standards, procedures, and policies that would adversely affect our ability to maintain relationships with customers and employees; 27 Table of Contents experiencing higher operating expenses relative to operating income from the new operations; creating an adverse short-term effect on our results of operations; losing key employees and customers; significant problems related to the conversion of the financial and customer data of the entity; integration of acquired customers into our financial and customer product systems; potential changes in banking or tax laws or regulations that may affect the target company; or risks of impairment to goodwill or litigation risk.
The determination of the appropriate level of the provision for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes, as we have experienced.
The determination of the appropriate level of the provision for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes, as we have experienced.
If the overall economic climate, including employment rates, real estate markets, interest rates and general economic growth, in the United States, generally, or Wisconsin, specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the levels of nonperforming loans, charge-offs and delinquencies could rise and require additional provisions for loan losses, which would cause our net income and return on equity to decrease.
If the overall economic climate, including employment rates, real estate markets, interest rates and general economic growth, in the United States, generally, or Wisconsin, specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the levels of nonperforming loans, charge-offs and delinquencies could rise and require additional provisions for credit losses, which would cause our net income and return on equity to decrease.
Our business and financial performance are vulnerable to weak economic conditions in the financial markets and economic conditions generally or specifically in the state of Wisconsin, the principal market in which we conduct business.
Our business and financial performance are vulnerable to weak economic conditions in the financial markets generally and specifically in the state of Wisconsin, the principal market in which we conduct business.
If, as a result of an examination, an agency were to determine that the financial, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or violates any law or regulation, such agency may take certain remedial or enforcement actions it deems appropriate to correct any deficiency.
If, as a result of an examination, an agency was to determine that the financial, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or violates any law or regulation, such agency may take certain remedial or enforcement actions it deems appropriate to correct any deficiency.
A deterioration in economic conditions in our primary market areas caused by inflation, recession, pandemics, outbreaks of hostilities or other international or domestic occurrences, unemployment, plant or business closings or downsizing, changes in securities markets or other factors could result in the following consequences, any of which could materially and adversely affect our business: increased loan delinquencies; problem assets and foreclosures; significant write-downs of asset values; lower demand for our products and services; reduced low cost or noninterest-bearing deposits; intangible asset impairment; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing our customers’ ability to repay outstanding loans, and reducing the value of assets and collateral associated with our existing loans.
A deterioration in economic conditions in the global and financial markets as well as our primary market areas caused by inflation, recession, pandemics, outbreaks of hostilities or other international or domestic occurrences, unemployment, plant or business closings or downsizing, changes in securities markets or other factors could result in the following consequences, any of which could materially and adversely affect our business: increased loan delinquencies; problem assets and foreclosures; significant write-downs of asset values; lower demand for our products and services; reduced low cost or noninterest-bearing deposits; intangible asset impairment; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing our customers’ ability to repay outstanding loans, and reducing the value of assets and collateral associated with our existing loans.
Although we are actively working to manage our CRE concentration and believe that our underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are currently sufficient to address the CRE Concentration Guidance, the OCC or other federal regulators could become concerned about our CRE loan concentrations, and they could limit our ability to grow by, among other things, restricting their approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities.
Although we are actively working to manage our CRE concentration and believe that our underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are currently sufficient to address the CRE Concentration Guidance, the OCC or other federal regulators could become 33 Table of Contents concerned about our CRE loan concentrations, and they could limit our ability to grow by, among other things, restricting their approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities.
If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans, which would negatively impact our business, financial condition and results of operations.
If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition 35 Table of Contents plans, which would negatively impact our business, financial condition and results of operations.
Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the amount reserved in the allowance for loan losses.
Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the amount reserved in the allowance for credit losses.
In addition, bank regulatory agencies periodically review our provision and the total allowance for loan losses and may require an increase in the allowance for loan losses or future provisions for loan losses, based on judgments different than those of management.
In addition, bank regulatory agencies periodically review our provision and the total allowance for credit losses and may require an increase in the allowance for credit losses or future provisions for credit losses, based on judgments different than those of management.
In addition, we rely heavily upon information supplied by third parties, including the information contained in credit applications, property appraisals, title information, equipment pricing and valuation and employment and income 30 Table of Contents documentation, in deciding which loans we will originate, as well as the terms of those loans.
In addition, we rely heavily upon information supplied by third parties, including the information contained in credit applications, property appraisals, title information, equipment pricing and valuation and employment and income documentation, in deciding which loans we will originate, as well as the terms of those loans.
Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties 31 Table of Contents and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations.
Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs. 34 Table of Contents Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings.
In addition, ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs. Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings.
Changes in accounting standards could materially impact our financial statements. From time to time, FASB or the SEC may change the financial accounting and reporting standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing accounting and reporting standards.
From time to time, FASB or the SEC may change the financial accounting and reporting standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing accounting and reporting standards.
While we are not aware of any successful hacking or cyberattacks into our computer or other information technology systems, or those of our data processing subsidiary, there can be no assurance that we will not be the victim of successful hacking or cyberattacks in the future that could cause us to suffer material losses.
While we are not aware of any successful hacking or cyberattacks into our computer or other information technology systems, there can be no assurance that we will not be the victim of successful hacking or cyberattacks in the future that could cause us to suffer material losses.
If the Bank fails to meet these minimum capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected. We may also be required to satisfy additional capital 33 Table of Contents adequacy standards as determined by the Federal Reserve.
If the Bank fails to meet these minimum capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected. We may also be required to satisfy additional capital adequacy standards as determined by the Federal Reserve.
As of December 31, 2022, approximately 95.17% of our loans and approximately 97.34% of our deposits were made to borrowers or received from depositors who live and/or primarily conduct business in Wisconsin. Therefore, our success will depend in large part upon the general economic conditions in this area, which we cannot predict with certainty.
As of December 31, 2023, approximately 95.74% of our loans and approximately 97.81% of our deposits were made to borrowers or received from depositors who live and/or primarily conduct business in Wisconsin. Therefore, our success will depend in large part upon the general economic conditions in this area, which we cannot predict with certainty.
As of December 31, 2022, approximately 73.9% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. This includes collateral consisting of income producing and residential construction properties, which properties tend to be more sensitive to general economic conditions and downturns in real estate markets.
As of December 31, 2023, approximately 77.4% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. This includes collateral consisting of income producing and residential construction properties, which properties tend to be more sensitive to general economic conditions and downturns in real estate markets.
The occurrence of any cyberattack or information security breach could result in potential liability to clients, reputational damage and the disruption of our operations, and regulatory concerns, all of which could adversely affect our business, financial condition or results of operations.
The occurrence of any cyberattack or information security breach could result in potential liability to clients, reputational damage, 29 Table of Contents disclosure obligations, the disruption of our operations, and regulatory concerns, all of which could adversely affect our business, financial condition or results of operations.
Commercial real estate (“CRE”) is cyclical and poses risks of loss to us due to our concentration levels and risk of the asset, especially during a difficult economy, including the current stressed economy. As of December 31, 2022, 73.9% of our loan portfolio was comprised of loans secured by commercial real estate.
Commercial real estate (“CRE”) is cyclical and poses risks of loss to us due to our concentration levels and risk of the asset, especially during a difficult economy, including the current stressed economy. As of December 31, 2023, 50.8% of our loan portfolio was comprised of loans secured by commercial real estate.
Any increases in the provision or allowance for loan losses will result in a decrease in 24 Table of Contents our net income and, potentially, capital, and may have a material adverse effect on our financial condition or results of operations.
Any increases in the provision or allowance for credit losses will result in a decrease in our net income and, potentially, capital, and may have a material adverse effect on our financial condition or results of operations.
In many instances these national and regional banks have greater resources than we do, and the smaller community banks may have stronger ties in local markets than we do, which may put us at a competitive disadvantage.
These competitors include banks with nationwide operations, regional banks and community banks. In many instances these national and regional banks have greater resources than we do, and the smaller community banks may have stronger ties in local markets than we do, which may put us at a competitive disadvantage.
While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. See “Business - Supervision and Regulation”.
While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.
Federal regulatory agencies, including the Federal Reserve and the OCC, periodically conduct examinations of our business, including for compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations may adversely affect our business.
See “Business - Supervision and Regulation”. ​ 32 Table of Contents Federal regulatory agencies, including the Federal Reserve and the OCC, periodically conduct examinations of our business, including for compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations may adversely affect our business.
Failure to successfully integrate businesses that we acquire could have an adverse effect on our profitability, return on equity, return on assets, or our ability to implement our strategy, any of which in turn could have a material adverse effect on our business, financial condition, and results of operations.
Failure to successfully integrate businesses that we acquire could have an adverse effect on our profitability, return on equity, return on assets, or our ability to implement our strategy, any of which in turn could have a material adverse effect on our business, financial condition, and results of operations. The fair value of our investment securities may decline.
The financial markets and the global 32 Table of Contents economy may also be adversely affected by the current or anticipated impact of military conflict, including the current conflict between Russia and Ukraine, which is increasing volatility in commodity and energy prices, creating supply chain issues and causing instability in financial markets.
Moreover, the financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the current conflicts between Russia and Ukraine and between Israel and Hamas, which are 22 Table of Contents increasing volatility in commodity and energy prices, creating supply chain issues and causing instability in financial markets.
As of December 31, 2022, the fair value of our available for sale securities portfolio was approximately $304.6 million. Factors beyond our control can significantly influence the fair value of our securities and can cause adverse changes to the fair value of these securities.
As of December 31, 2023, the fair value of our available for sale securities portfolio was approximately $142.2 million. Factors beyond our control can significantly influence the fair value of our securities and can cause adverse changes to the fair value of these securities.
Increased competition in our markets may result in reduced loans and deposits, as well as reduced net interest margin and profitability.
Increased competition in our markets may result in reduced loans 25 Table of Contents and deposits, as well as reduced net interest margin and profitability.
Risks related to our business Difficult or volatile conditions in the national financial markets, and the U.S. economy generally, may adversely affect our lending activity or other businesses, as well as our financial condition.
Risks related to our business Difficult or volatile conditions in the national financial markets, and the U.S. economy generally, may adversely affect our lending activity or other businesses, as well as our financial condition. We are operating in an uncertain economic environment.
Inflationary pressures are currently expected to remain elevated 2023 Increasing interest rates can have a negative impact on our business by reducing the amount of money our customers borrow or by adversely affecting their ability to repay outstanding loan balances that may increase due to adjustments in their variable rates.
Rising interest rates can have a negative impact on our business by reducing the amount of money our clients borrow or by adversely affecting their ability to repay outstanding loan balances that may increase due to adjustments in their variable rates.
This is done, in part, by recruiting, hiring and retaining bankers and other associates who share our core values of being an integral part of the communities we serve, delivering superior service to our clients and caring about our clients and associates.
This is done, in part, by recruiting, hiring, and retaining and providing growth opportunities for employees who share our core values of being an integral part of the communities we serve, delivering superior service to our clients, caring about our clients and employees, and investing in our information technology and other systems.
Any damage or failure that causes breakdowns or disruptions in our client relationship management, general ledger, deposit, loan and other systems could damage our reputation, result in a loss of client business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on us. 29 Table of Contents Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure.
Any damage or failure that causes breakdowns or disruptions in our client relationship management, general ledger, deposit, loan and other systems could damage our reputation, result in a loss of client business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on us.
Any regional or local economic downturn that affects Wisconsin or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and adversely than our competitors whose operations are less geographically concentrated. Changes in interest rates could have an adverse impact on our results of operations and financial condition.
Any regional or local economic downturn that affects Wisconsin or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and adversely than our competitors whose operations are less geographically concentrated.
Sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability .
Sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. Changes in interest rates may have an adverse effect on our net interest income.
We are subject to lending concentration risk, which could cause our regulators to restrict our ability to grow . A substantial portion of our loan portfolio is secured by real estate. In weak economies, or in areas where real estate market conditions are distressed, we may experience a higher than normal level of nonperforming real estate loans.
A substantial portion of our loan portfolio is secured by real estate. In weak economies, or in areas where real estate market conditions are distressed, we may experience a higher than normal level of nonperforming real estate loans.
In addition, we may fail to realize some or all of the anticipated benefits of completed acquisitions. We anticipate that the integration of businesses that we may acquire in the future will be a time-consuming and expensive process, even if the integration process is effectively planned and implemented.
We anticipate that the integration of businesses that we may acquire in the future will be a time-consuming and expensive process, even if the integration process is effectively planned and implemented.
Inflationary pressures are currently expected to remain elevated throughout 2022 and are likely to continue into 2023. Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expense related to talent acquisition and retention, and negatively impacting the demand for our products and services.
Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expense related to talent acquisition and retention, and negatively impacting the demand for our products and services.
In addition, the Federal Reserve has the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business.
Both the Company and the Bank are subject to various regulatory restrictions relating to the payment of dividends. In addition, the Federal Reserve has the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business.
We follow a relationship-based operating model and our ability to maintain our reputation is critical to the success of our business. We are a community bank, and our reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation.
Our reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation.
Accordingly, we may not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our clients, which could impair our growth and profitability. In addition, some of our competitors are subject to less regulation and/or more favorable tax treatment, which may put us at a competitive disadvantage.
Accordingly, we may not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our clients, which could impair our growth and profitability.
In addition, in a rising interest rate environment we may have to offer more attractive interest rates to depositors to compete for deposits, or pursue other sources of liquidity, such as wholesale funds.
In addition, as interest rates rise, we may have to offer more attractive interest rates to depositors to compete for deposits, or pursue other sources of liquidity, such as wholesale funds. ​ On the other hand, decreasing interest rates reduce our yield on our variable rate loans and on our new loans, which reduces our net interest income.
If real estate values decline, it is also more likely that we would be required to increase our ALLL, which could adversely affect our financial condition, results of operations and cash flows. We may be materially and adversely affected by the creditworthiness and liquidity of other financial institutions.
If real estate values decline, it is also more likely that we would be required to increase our ACL-Loans, which could adversely affect our financial condition, results of operations and cash flows. Our future success is largely dependent upon our ability to successfully execute our business strategy.
Many of our competitors offer the same, or a wider variety of, banking services within our market areas, and we compete with them for the same customers. These competitors include banks with nationwide operations, regional banks and community banks.
We face strong competition from financial services companies and other companies that offer banking services. We conduct our banking operations primarily in Wisconsin. Many of our competitors offer the same, or a wider variety of, banking services within our market areas, and we compete with them for the same customers.
Further, such additional capital could result in dilution to our existing shareholders. If we or the Bank fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations, as well as our ability to maintain compliance with regulatory capital requirements, would be materially and adversely affected.
If we or the Bank fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations, as well as our ability to maintain compliance with regulatory capital requirements, would be materially and adversely affected. ​ 31 Table of Contents The costs and effects of litigation, investigations or similar matters involving us or other financial institutions or counterparties, or related adverse facts and developments, could materially affect our business, operating results and financial condition.
If we are unable to attract and retain banking clients, we may be unable to continue to grow our loan and deposit portfolios, and our business, financial condition and results of operations may be adversely affected. If we do not effectively manage our asset quality and credit risk, we could experience loan losses.
If we are unable to attract and retain banking clients, we may be unable to continue to grow our loan and deposit portfolios, and our business, financial condition and results of operations may be adversely affected. Furthermore, the financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.
Acquisitions may disrupt our business and dilute stockholder value, and integrating acquired companies may be more difficult, costly, or time-consuming than we expect. Our pursuit of acquisitions may disrupt our business, and any equity that we issue as merger consideration may have the effect of diluting the value of your investment.
Furthermore, our pursuit of acquisitions may disrupt our business, and any equity that we issue as merger consideration may have the effect of diluting the value of your investment. In addition, we may fail to realize some or all of the anticipated benefits of completed acquisitions.
See “Business-Supervision and Regulation.” ​ Risks related to our common stock Applicable laws and regulations restrict both the ability of the Bank to pay dividends to the Company and the ability of the Company to pay dividends to our shareholders. Both the Company and the Bank are subject to various regulatory restrictions relating to the payment of dividends.
This could impact our ability to achieve our strategic objectives and may result in changes to our balance sheet position which could, in turn, negatively impact our profitability. ​ Risks related to our common stock Applicable laws and regulations restrict both the ability of the Bank to pay dividends to the Company and the ability of the Company to pay dividends to our shareholders.
The financial services industry is undergoing rapid technological changes and we may not have the resources to implement new technology to stay current with these changes. The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. These trends were accelerated by the COVID-19 pandemic, increasing demand for mobile banking solutions.
A prolonged decline in the fair value of our securities could result in an established allowance for credit losses, which would affect our results of operations. ​ The financial services industry is undergoing rapid technological changes and we may not have the resources to implement new technology to stay current with these changes. ​ The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services (including those related to or involving artificial intelligence, machine learning, blockchain and other distributed ledger technologies) and a growing demand for mobile and other phone and computer banking applications.
In addition, our access to deposits may be affected by the liquidity and/or cash flow needs of depositors, which may be exacerbated in an inflationary, recessionary, or elevated rate environment.
This could result in a failure to maintain adequate liquidity and higher funding costs, reducing our net interest margin and net interest income. In addition, our access to deposits may be affected by the liquidity needs of our depositors.
Our earnings and financial condition are dependent to a large degree upon net interest income, which is the difference, or spread, between interest earned on loans, securities and other interest-earning assets and interest paid on deposits, borrowings and other interest-bearing liabilities.
Net interest income, which is the difference between the interest income that we earn on interest-earning assets and the interest expense that we pay on interest-bearing liabilities, is a major component of our income and our primary source of revenue from our operations. Narrowing of interest rate spreads could adversely affect our earnings and financial condition.
These inflationary pressures could result in missed earnings and budgetary projections causing our stock price to suffer. 23 Table of Contents We face strong competition from financial services companies and other companies that offer banking services. We conduct our banking operations primarily in Wisconsin.
These inflationary pressures could result in missed earnings and budgetary projections causing our stock price to suffer. Changes in the cost and availability of funding due to changes in the deposit market and credit market may adversely affect our capital resources, liquidity, and financial results .
Removed
Interest rates increased significantly in 2022 as the Federal Reserve attempted to slow economic growth and counteract rising inflation. Further changes in interest rates and monetary policy reportedly are dependent upon the Federal Reserve’s assessment of economic data as it becomes available, though the rising interest rate environment is expected to continue in 2023.
Added
In addition, regulatory scrutiny of the industry has increased and could continue to increase, leading to increased regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or fines. Additionally, we conduct our banking operations primarily in Wisconsin.
Removed
Higher income volatility from changes in interest rates and spreads to benchmark indices could result in a decrease in net interest income and a decrease in current fair market values of our assets.
Added
We cannot control or predict with certainty changes in interest rates.
Removed
Fluctuations in interest rates impacts both the level of income and expense recorded on most of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a 22 Table of Contents material adverse effect on our net income, operating results, or financial condition.
Added
Regional and local economic conditions, competitive pressures, and the policies of regulatory authorities, including monetary policies of the Federal Reserve Board (“FRB”), affect interest income and interest expense. ​ Beginning in early 2022, in response to growing signs of inflation, the FRB increased interest rates rapidly and made a number of adjustments to monetary policy and liquidity, including quantitative tightening and other balance sheet actions.
Removed
Changes in market values of investment securities classified as available for sale are also impacted by higher rates and can negatively impact our other comprehensive income and equity levels through accumulated other comprehensive income, which includes net unrealized gains and losses on those securities.
Added
Further, the FRB has increased the benchmark rapidly and has announced an intention to take further actions to mitigate rising inflationary pressures.
Removed
Further, such losses could be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position. A prolonged period of volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Additionally, we conduct our banking operations primarily in Wisconsin.
Added
In addition, lower interest rates may reduce our realized yields on investment securities which would reduce our net interest income and cause downward pressure on net interest margin in future periods. A significant reduction in our net interest income could have a material adverse impact on our capital, financial condition and results of operations.
Removed
When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities may fluctuate.
Added
Although the FRB increased the target federal funds rate in 2023 to combat inflationary trends, the FRB held the federal funds rate steady in December 2023 for the third consecutive quarter and indicated that the rate is likely to be decreased in 2024 and beyond.
Removed
This may cause decreases in our spread and may adversely affect our earnings and financial condition. ​ Interest rates are highly sensitive to many factors including, without limitation: the rate of inflation; economic conditions; federal monetary policies; and stability of domestic and foreign markets. ​ Although we have implemented procedures we believe will reduce the potential effects of changes in interest rates on our net interest income, these procedures may not always be successful as some of these effects are outside of our control.
Added
We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply, and other changes in financial markets. We have ongoing policies and procedures designed to manage the risks associated with changes in market interest rates and actively manage these risks through hedging and other risk mitigation strategies.
Removed
Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest income and our net interest margin, asset quality, loan and lease origination volume, liquidity or overall profitability. Inflation could negatively impact our business, our profitability and our stock price . Inflation has continued rising in 2022 at levels not seen for over 40 years.
Added
However, if our assumptions are wrong or overall economic conditions are significantly different than anticipated, our risk mitigation techniques may be ineffective or costly. Changes in interest rates may change the value of our mortgage servicing rights portfolio, which may increase the volatility of our earnings.
Removed
The current expected credit loss standard established by the Financial Accounting Standards Board will require significant data requirements and changes to methodologies.
Added
A mortgage servicing right is the right to service a mortgage loan - collect principal, interest and escrow amounts - for a fee. We measure and carry our residential mortgage servicing rights using the fair value measurement method.
Removed
In the aftermath of the 2007-2008 financial crisis, the Financial Accounting Standards Board, or FASB, decided to review how banks estimate losses in the ALL calculations, and it issued the final Current Expected Credit Loss, or CECL, standard on June 16, 2016.
Added
Fair value is determined as the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers.
Removed
Currently, the impairment model used by many financial institutions is based on incurred losses, and loans are recognized as impaired when there is no longer an assumption that future cash flows will be collected in full under the originally contracted terms.
Added
The primary risk associated with mortgage servicing rights is that in a declining interest rate environment, they will likely lose a substantial portion of their value as a result of higher than anticipated prepayments. Moreover, if prepayments are greater than expected, the cash we receive over the life of the mortgage loans would be reduced.
Removed
This model will be replaced by the CECL model that will become effective for the Company for the fiscal year beginning after December 15, 2022 in which financial institutions will be required to use historical information, current conditions, and reasonable forecasts to estimate the expected loss over the life of the loan.
Added
Conversely, these assets generally increase in value in a rising interest rate environment to the extent that prepayments are slower than previously estimated. An increase in the size of our mortgage servicing rights portfolio may increase our interest rate risk.
Removed
The Company will record a one-time adjustment to its credit loss allowance, as of the beginning of the first quarter of 2023, equal to the difference between the amounts of its credit loss allowance under the incurred loss methodology and CECL.
Added
Depending on the interest rate environment, it is possible that the fair value of our mortgage servicing rights may be reduced in the future.
Removed
Moreover, the new accounting standard is likely, as a result of its requirement to estimate and recognize expected credit losses on new assets, to introduce greater volatility in our provision for credit loans and allowance for loan losses.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeMain Street ​ Cambridge, Wisconsin, 53523 ​ Own Cedarburg ​ W61 N529 Washington Avenue ​ Cedarburg, Wisconsin, 53012 ​ Own Clintonville ​ 135 S. Main Street ​ Clintonville, Wisconsin, 54929 ​ Own Denmark ​ 103 E. Main Street ​ Denmark, Wisconsin, 54208 ​ Own Fond du Lac ​ 245 N.
Biggest changeWisconsin Avenue ​ Appleton, Wisconsin, 54913 ​ Lease Bellevue ​ 2747 Manitowoc Road ​ Green Bay, Wisconsin, 54311 ​ Own Cambridge ​ 221 W. Main Street ​ Cambridge, Wisconsin, 53523 ​ Own Cedarburg ​ W61 N529 Washington Avenue ​ Cedarburg, Wisconsin, 53012 ​ Own Clintonville ​ 135 S. Main Street ​ Clintonville, Wisconsin, 54929 ​ Own Denmark ​ 103 E.
Main Street ​ Pardeeville, Wisconsin, 53954 ​ Own Plymouth ​ 2700 Eastern Avenue ​ Plymouth, Wisconsin, 53073 ​ Own Poynette ​ 105 S. Main Street ​ Poynette, Wisconsin, 53955 ​ Own Reedsville ​ 427 Manitowoc Street ​ Reedsville, Wisconsin, 54230 ​ Own Shawano ​ 835 E.
Main Street ​ Pardeeville, Wisconsin, 53954 ​ Own Plymouth ​ 2700 Eastern Avenue ​ Plymouth, Wisconsin, 53073 ​ Own Poynette ​ 105 S. Main Street ​ Poynette, Wisconsin, 53955 ​ Own Reedsville ​ 100 Mill Street ​ Reedsville, Wisconsin, 54230 ​ Own Shawano ​ 835 E.
ITEM 2. PROPERTIES Our main office is located at 402 North 8 th Street, Manitowoc, Wisconsin 54220. In addition, the Bank operates twenty-seven (27) additional branches located in fourteen (14) counties in Wisconsin, which includes the branches that were acquired in connection with the Company’s acquisitions of Timberwood, Denmark and Hometown. The addresses of these offices are provided below.
ITEM 2. PROPERTIES Our main office is located at 402 North 8 th Street, Manitowoc, Wisconsin 54220. In addition, the Bank operates twenty-six (26) additional branches located in fourteen (14) counties in Wisconsin, which includes the branches that were acquired in connection with the Company’s recent acquisitions. The addresses of these offices are provided below.
Main Street ​ Watertown, Wisconsin, 54245 ​ Own Waupaca ​ 111 Jefferson Street ​ Waupaca, Wisconsin, 54981 ​ Own Wautoma ​ 105 Plaza Road ​ Wautoma, Wisconsin, 54982 ​ Own Whitelaw ​ 202 N. Hickory Street ​ Whitelaw, Wisconsin, 54247 ​ Own ​
Main Street ​ Watertown, Wisconsin, 53094 ​ Own Waupaca ​ 111 Jefferson Street ​ Waupaca, Wisconsin, 54981 ​ Own Wautoma ​ 105 Plaza Road ​ Wautoma, Wisconsin, 54982 ​ Own ​ ​ ​ ​ ​ ​ ​ ​
Peters Avenue ​ Fond du Lac, Wisconsin, 54935 ​ Own Fond du Lac ​ 80 Sheboygan Street ​ Fond du Lac, Wisconsin, 54935 ​ Own Iola ​ 295 E.
Main Street ​ Denmark, Wisconsin, 54208 ​ Own Fond du Lac ​ 245 N. Peters Avenue ​ Fond du Lac, Wisconsin, 54935 ​ Own Howard ​ 1951 Shawano Avenue ​ Howard, Wisconsin, 54303 ​ Own Iola ​ 295 E.
Removed
Wisconsin Avenue ​ Appleton, Wisconsin, 54913 ​ Lease Ashwaubenon ​ 2865 S. Ridge Road ​ Green Bay, Wisconsin, 54304 ​ Own Bellevue ​ 2747 Manitowoc Road ​ Green Bay, Wisconsin, 54311 ​ Own Cambridge ​ 221 W.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the ultimate outcome of these suits cannot be ascertained at this time, it is the opinion of management that none of these matters, even if it resolved adversely to the Company, will have a material adverse effect on the Company’s consolidated financial position. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ ​ 38 Table of Contents PART II
Biggest changeAlthough the ultimate outcome of these suits cannot be ascertained at this time, it is the opinion of management that none of these matters, even if it resolved adversely to the Company, will have a material adverse effect on the Company’s consolidated financial position. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ ​ 40 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe table below sets forth information regarding repurchases of our common stock during the fourth quarter of 2022 under that program as well as pursuant to the 2020 Equity Plan and other repurchases. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number Maximum Number ​ ​ ​ ​ ​ ​ ​ of Shares Repurchased as ​ of Shares ​ ​ ​ ​ ​ ​ ​ Part of ​ that May Yet Be ​ ​ Total Number of Shares ​ Average Price Paid per ​ Publicly Announced ​ Purchased Under the ​ ​ Repurchased ​ Share (1) ​ Plans or Programs ​ Plans or Programs (2) October 2022 0 ​ $ 0 0 193,946 November 2022 0 ​ 0 0 193,946 December 2022 0 ​ 0 0 193,946 Total 0 ​ $ 0 0 193,946 (1) The average price paid per share is calculated on a trade date basis for all open market transactions and excludes commissions and other transactions expenses.
Biggest changeThe table below sets forth information regarding repurchases of our common stock during the fourth quarter of 2023 under that program and other repurchases. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number Maximum Number ​ ​ ​ ​ ​ ​ ​ of Shares Repurchased as ​ of Shares ​ ​ ​ ​ ​ ​ ​ Part of ​ that May Yet Be ​ ​ Total Number of Shares ​ Average Price Paid per ​ Publicly Announced ​ Purchased Under the (in thousands, except per share data) ​ Repurchased ​ Share (1) ​ Plans or Programs ​ Plans or Programs (2) October 2023 14,611 ​ $ 76.59 12,611 270,346 November 2023 — ​ — — 270,346 December 2023 — ​ — — 270,346 Total 14,611 ​ $ 76.59 12,611 270,346 (1) The average price paid per share is calculated on a trade date basis for all open market transactions and excludes commissions and other transactions expenses.
Share Repurchase Program On April 19, 2022, the Company reactivated its share repurchase program, pursuant to which the Company may repurchase up to $30 million of its common stock, par value $0.01 per share, for a period of one (1) year ending on April 18, 2023.
Share Repurchase Program On April 18, 2023, the Company reactivated its share repurchase program, pursuant to which the Company may repurchase up to $26 million of its common stock, par value $0.01 per share, for a period of one (1) year ending on April 17, 2024.
The program was announced in a Current Report on Form 8-K on April 25, 2022.
The program was announced in a Current Report on Form 8-K on April 19, 2023.
The following performance graph and related information are neither “soliciting material” nor “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such filing. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 BFC ​ $ 100.00 ​ $ 105.60 ​ $ 160.82 ​ $ 150.81 ​ $ 170.80 ​ $ 222.14 Russell 2000 ​ 100.00 ​ 87.82 ​ 108.66 ​ 128.61 ​ 146.23 ​ 114.70 Nasdaq Bank ​ 100.00 ​ 80.40 ​ 106.23 ​ 91.75 ​ 123.91 ​ 94.51 ​ ​ ITEM 6.
The following performance graph and related information are neither “soliciting material” nor “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such filing. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 BFC ​ $ 100.00 ​ $ 152.29 ​ $ 142.81 ​ $ 161.74 ​ $ 210.36 ​ $ 199.27 Russell 2000 ​ 100.00 ​ 123.72 ​ 146.44 ​ 166.50 ​ 130.60 ​ 150.31 Nasdaq Bank ​ 100.00 ​ 132.14 ​ 114.13 ​ 154.12 ​ 117.55 ​ 111.93 ​ ​ ITEM 6.
(2) Based on the closing price per share as of December 31, 2022 ($92.82). 39 Table of Contents Performance Graph The following graph compares the yearly percentage change in cumulative shareholder return on Bank First stock with the cumulative total return of the Russell 2000 Index and the Nasdaq Bank Index for the last five fiscal years (assuming a $100 investment on December 31, 2017 and reinvestment of all dividends).
The impact of the IRA on our consolidated financial statements will be dependent on the extent of stock repurchases made in current and future periods. 41 Table of Contents Performance Graph The following graph compares the yearly percentage change in cumulative shareholder return on Bank First stock with the cumulative total return of the Russell 2000 Index and the Nasdaq Bank Index for the last five fiscal years (assuming a $100 investment on December 31, 2018 and reinvestment of all dividends).
As of December 31, 2022, Bank First had approximately 1,596 shareholders of record, 10,064,858 shares issued and 9,021,696 shares outstanding.
As of February 29, 2024, Bank First had approximately 1,658 shareholders of record, 11,515,130 shares issued and 10,141,926 shares outstanding.
Added
(2) Based on the closing price per share as of December 31, 2023 ($86.66). The Inflation Reduction Act of 2022 (“IRA”) created a new nondeductible 1% excise tax on repurchases of corporate stock by certain publicly traded corporations or their specified affiliates after December 31, 2022.
Added
The tax is imposed on the fair value of the stock of a covered corporation that is repurchased in a given year, less the fair market value of any stock issued in that year. The Company falls under the definition of a “covered corporation”.
Added
The excise tax applies to all of the stock of a covered corporation regardless of whether the corporation has profits or losses.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. Reserved 40 ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41 ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 66 ​ Item 8. Financial Statements and Supplementary Data 68 ​
Biggest changeItem 6. Reserved 42 ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 43 ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 65 ​ Item 8. Financial Statements and Supplementary Data 67 ​

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following tables set forth the distribution of our average assets, liabilities and shareholders’ equity, and average rates earned or paid on a fully taxable equivalent basis for each of the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ Interest ​ Rate ​ ​ ​ ​ Interest ​ Rate ​ ​ ​ ​ Interest ​ Rate ​ ​ Average ​ Income/ ​ Earned/ ​ Average ​ Income/ ​ Earned/ ​ Average ​ Income/ ​ Earned/ ​ Balance Expenses (1) Paid (1) Balance Expenses (1) Paid (1) Balance Expenses (1) Paid (1) ​ ​ ​ (dollars in thousands) ​ ASSETS ​ ​ ​ ​ ​ ​ ​ Interest-earning assets ​ ​ ​ ​ ​ ​ ​ Loans (2) ​ ​ ​ ​ ​ ​ ​ Taxable ​ $ 2,434,554 ​ $ 103,612 4.26 % $ 2,128,327 ​ $ 90,172 4.24 % $ 1,918,490 ​ $ 90,698 4.73 % Tax-exempt ​ 96,183 ​ 4,227 4.39 % 88,978 ​ 4,113 4.62 % 113,667 ​ 5,791 5.09 % Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable (available for sale) ​ 227,101 ​ 5,230 2.30 % 103,277 ​ 2,788 2.70 % 114,392 ​ 3,142 2.75 % Tax-exempt (available for sale) ​ 81,181 ​ 2,140 2.64 % 70,864 ​ 2,207 3.11 % 67,903 ​ 2,170 3.20 % Taxable (held to maturity) ​ 24,416 ​ 670 2.74 % — ​ — — % 9,068 ​ 216 2.38 % Tax-exempt (held to maturity) ​ 5,396 ​ 139 2.58 % 6,098 ​ 155 2.54 % 8,422 ​ 220 2.61 % Cash and due from banks ​ 220,929 ​ 1,883 0.85 % 237,021 ​ 310 0.13 % 76,153 ​ 181 0.24 % Total interest-earning assets ​ 3,089,760 ​ 117,901 3.82 % 2,634,565 ​ 99,745 3.79 % 2,308,095 ​ 102,418 4.44 % Non interest-earning assets ​ 280,249 ​ ​ 222,548 ​ ​ 211,387 ​ ​ Allowance for loan losses ​ (22,152) ​ ​ (19,320) ​ ​ (14,800) ​ ​ Total assets ​ $ 3,347,857 ​ ​ $ 2,837,793 ​ ​ $ 2,504,682 ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Checking accounts ​ $ 253,443 ​ $ 1,075 0.42 % $ 209,970 ​ $ 252 0.12 % $ 194,718 ​ $ 669 0.34 % Savings accounts ​ 691,599 ​ 3,099 0.45 % 497,958 ​ 1,773 0.36 % 356,091 ​ 1,792 0.50 % Money market accounts ​ 666,717 ​ 3,025 0.45 % 664,591 ​ 2,115 0.32 % 563,847 ​ 3,076 0.55 % Certificates of deposit ​ 286,054 ​ 2,818 0.99 % 278,602 ​ 2,967 1.06 % 367,054 ​ 6,405 1.74 % Brokered Deposits ​ 8,587 ​ 251 2.92 % 14,718 ​ 420 2.85 % 18,428 ​ 531 2.88 % Total interest bearing deposits ​ 1,906,400 ​ 10,268 0.54 % 1,665,839 ​ 7,527 0.45 % 1,500,138 ​ 12,473 0.83 % Other borrowed funds ​ 185,329 ​ 2,181 1.18 % 63,474 ​ 777 1.22 % 88,512 ​ 1,392 1.57 % Total interest-bearing liabilities ​ 2,091,729 ​ 12,449 0.60 % 1,729,313 ​ 8,304 0.48 % 1,588,650 ​ 13,865 0.88 % Non-interest bearing liabilities ​ ​ ​ ​ ​ ​ ​ ​ Demand Deposits ​ 878,727 ​ ​ 785,364 ​ ​ 634,969 ​ ​ Other liabilities ​ 4,971 ​ ​ 12,746 ​ ​ 15,559 ​ ​ Total Liabilities ​ 2,975,427 ​ ​ 2,527,423 ​ ​ 2,239,178 ​ ​ Shareholders’ equity ​ 372,430 ​ ​ 310,370 ​ ​ 265,504 ​ ​ Total liabilities & shareholders' equity ​ $ 3,347,857 ​ ​ $ 2,837,793 ​ ​ $ 2,504,682 ​ ​ Net interest income on a fully taxable equivalent basis ​ ​ ​ 105,452 ​ ​ ​ 91,441 ​ ​ ​ 88,553 ​ Less taxable equivalent adjustment ​ ​ ​ ​ (1,366) ​ ​ ​ ​ ​ ​ (1,359) ​ ​ ​ ​ ​ ​ (1,718) ​ ​ ​ Net interest income ​ ​ $ 104,086 ​ ​ $ 90,082 ​ ​ $ 86,835 ​ Net interest spread (3) ​ ​ ​ ​ 3.22 % ​ ​ ​ 3.31 % ​ ​ ​ 3.56 % Net interest margin (4) ​ ​ 3.41 % ​ 3.47 % ​ 3.84 % (1) Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21%.
Biggest changeThe average rate paid on interest-bearing liabilities is equal to annualized interest expense as a percentage of average interest-bearing liabilities. 48 Table of Contents The following tables set forth the distribution of our average assets, liabilities and shareholders’ equity, and average rates earned or paid on a fully taxable equivalent basis for each of the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ Interest ​ Rate ​ ​ ​ ​ Interest ​ Rate ​ ​ ​ ​ Interest ​ Rate ​ ​ Average ​ Income/ ​ Earned/ ​ Average ​ Income/ ​ Earned/ ​ Average ​ Income/ ​ Earned/ ​ Balance Expenses (1) Paid (1) Balance Expenses (1) Paid (1) Balance Expenses (1) Paid (1) ​ ​ ​ (dollars in thousands) ​ ASSETS ​ ​ ​ ​ ​ ​ ​ Interest-earning assets ​ ​ ​ ​ ​ ​ ​ Loans (2) ​ ​ ​ ​ ​ ​ ​ Taxable ​ $ 3,172,468 ​ $ 165,113 5.20 % $ 2,434,554 ​ $ 103,612 4.26 % $ 2,128,327 ​ $ 90,172 4.24 % Tax-exempt ​ 103,957 ​ 4,686 4.51 % 96,183 ​ 4,227 4.39 % 88,978 ​ 4,113 4.62 % Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable (available for sale) ​ 185,867 ​ 5,851 3.15 % 227,101 ​ 5,230 2.30 % 103,277 ​ 2,788 2.70 % Tax-exempt (available for sale) ​ 36,690 ​ 1,195 3.26 % 81,181 ​ 2,140 2.64 % 70,864 ​ 2,207 3.11 % Taxable (held to maturity) ​ 71,908 ​ 2,678 3.72 % 24,416 ​ 670 2.74 % — ​ — — % Tax-exempt (held to maturity) ​ 4,426 ​ 115 2.60 % 5,396 ​ 139 2.58 % 6,098 ​ 155 2.54 % Cash and due from banks ​ 79,822 ​ 4,104 5.14 % 220,929 ​ 1,883 0.85 % 237,021 ​ 310 0.13 % Total interest-earning assets ​ 3,655,138 ​ 183,742 5.03 % 3,089,760 ​ 117,901 3.82 % 2,634,565 ​ 99,745 3.79 % Non interest-earning assets ​ 447,934 ​ ​ 280,249 ​ ​ 222,548 ​ ​ Allowance for loan losses ​ (41,714) ​ ​ (22,152) ​ ​ (19,320) ​ ​ Total assets ​ $ 4,061,358 ​ ​ $ 3,347,857 ​ ​ $ 2,837,793 ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Checking accounts ​ $ 293,568 ​ $ 5,362 1.83 % $ 253,443 ​ $ 1,075 0.42 % $ 209,970 ​ $ 252 0.12 % Savings accounts ​ 833,360 ​ 9,796 1.18 % 691,599 ​ 3,099 0.45 % 497,958 ​ 1,773 0.36 % Money market accounts ​ 665,988 ​ 12,722 1.91 % 666,717 ​ 3,025 0.45 % 664,591 ​ 2,115 0.32 % Certificates of deposit ​ 509,273 ​ 14,396 2.83 % 286,054 ​ 2,818 0.99 % 278,602 ​ 2,967 1.06 % Brokered Deposits ​ 3,184 ​ 90 2.83 % 8,587 ​ 251 2.92 % 14,718 ​ 420 2.85 % Total interest bearing deposits ​ 2,305,373 ​ 42,366 1.84 % 1,906,400 ​ 10,268 0.54 % 1,665,839 ​ 7,527 0.45 % Other borrowed funds ​ 97,384 ​ 6,637 6.82 % 185,329 ​ 2,181 1.18 % 63,474 ​ 777 1.22 % Total interest-bearing liabilities ​ 2,402,757 ​ 49,003 2.04 % 2,091,729 ​ 12,449 0.60 % 1,729,313 ​ 8,304 0.48 % Non-interest bearing liabilities ​ ​ ​ ​ ​ ​ ​ ​ Demand Deposits ​ 1,078,468 ​ ​ 878,727 ​ ​ 785,364 ​ ​ Other liabilities ​ 10,533 ​ ​ 4,971 ​ ​ 12,746 ​ ​ Total Liabilities ​ 3,491,758 ​ ​ 2,975,427 ​ ​ 2,527,423 ​ ​ Shareholders’ equity ​ 569,600 ​ ​ 372,430 ​ ​ 310,370 ​ ​ Total liabilities & shareholders' equity ​ $ 4,061,358 ​ ​ $ 3,347,857 ​ ​ $ 2,837,793 ​ ​ Net interest income on a fully taxable equivalent basis ​ ​ ​ 134,739 ​ ​ ​ 105,452 ​ ​ ​ 91,441 ​ Less taxable equivalent adjustment ​ ​ ​ ​ (1,259) ​ ​ ​ ​ ​ ​ (1,366) ​ ​ ​ ​ ​ ​ (1,359) ​ ​ ​ Net interest income ​ ​ $ 133,480 ​ ​ $ 104,086 ​ ​ $ 90,082 ​ Net interest spread (3) ​ ​ ​ ​ 2.99 % ​ ​ ​ 3.22 % ​ ​ ​ 3.31 % Net interest margin (4) ​ ​ 3.69 % ​ 3.41 % ​ 3.47 % (1) Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21%.
Net Interest Income. The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of the Company’s total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets).
The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of the Company’s total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets).
We seek to maximize net interest income without exposing the Company to an excessive level of interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the 45 Table of Contents pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities.
We seek to maximize net interest income without exposing the Company to an 45 Table of Contents excessive level of interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities.
The estimated fair values are subject to refinement for up to one year after the consummation as additional information becomes available relative to the closing date fair values. CRITICAL ACCOUNTING POLICIES The accounting and reporting policies of the Company conform to GAAP in the United States and general practices within the financial institution industry.
The estimated fair values are subject to refinement for up to one year after the consummation as additional information becomes available relative to the closing date fair values. CRITICAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES The accounting and reporting policies of the Company conform to GAAP in the United States and general practices within the financial institution industry.
The provision for loan losses and level of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market area.
The provision for credit losses and level of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market area.
Liquidity is defined as the Company’s ability to generate adequate cash to meet its needs for day-to-day operations and material long and short-term commitments. Liquidity is the risk of potential loss if we were unable to meet our funding requirements at a reasonable cost.
LIQUIDITY AND CAPITAL RESOURCES Liquidity. Liquidity is defined as the Company’s ability to generate adequate cash to meet its needs for day-to-day operations and material long and short-term commitments. Liquidity is the risk of potential loss if we were unable to meet our funding requirements at a reasonable cost.
Including its headquarters in Manitowoc, Wisconsin, the Bank has 28 banking locations in Brown, Columbia, Dane, Fond du Lac, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Shawano, Sheboygan, Waupaca, Waushara, and Winnebago counties in Wisconsin. The Bank offers loan, deposit and treasury management products at each of its banking locations.
Including its headquarters in Manitowoc, Wisconsin, the Bank has 26 banking locations in Brown, Columbia, Dane, Fond du Lac, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Shawano, Sheboygan, Waupaca, Waushara, and Winnebago counties in Wisconsin. The Bank offers loan, deposit and treasury management products at each of its banking locations.
Securities classified as available for sale, which 61 Table of Contents management has the intent and ability to hold for an indefinite period of time, but not necessarily to maturity, are carried at fair value, with unrealized gains and losses, net of related deferred income taxes, included in stockholders’ equity as a separate component of other comprehensive income.
Securities classified as available for sale, which management has the intent and ability to hold for an indefinite period of time, but not necessarily to maturity, are carried at fair value, with unrealized gains and losses, net of related deferred income taxes, included in stockholders’ equity as a separate component of other comprehensive income.
Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After One, But ​ After Five, But ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Within One Year ​ Within Five Years ​ Within Ten Years ​ After Ten Years ​ Total ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average At December 31, 2022 Cost Yield (1) Cost Yield (1) Cost Yield (1) Cost Yield (1) Cost Yield (1) ​ ​ (dollars in thousands) ​ Available for sale securities ​ ​ ​ ​ ​ ​ U.S.
Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After One, But ​ After Five, But ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Within One Year ​ Within Five Years ​ Within Ten Years ​ After Ten Years ​ Total ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average At December 31, 2023 Cost Yield (1) Cost Yield (1) Cost Yield (1) Cost Yield (1) Cost Yield (1) ​ ​ (dollars in thousands) ​ Available for sale securities ​ ​ ​ ​ ​ ​ Obligations of U.S.
The following tables summarize the dollar amount of loans maturing in our portfolio based on their loan type, fixed or variable rate of interest, and contractual terms to maturity at December 31, 2022.
The following tables summarize the dollar amount of loans maturing in our portfolio based on their loan type, fixed or variable rate of interest, and contractual terms to maturity at December 31, 2023.
Furthermore, we are committed to collecting on all of our loans and, as a result, at times have lower net charge-offs compared to many of our peer banks. We believe that our commitment to collecting on all of our loans results in higher loan recoveries. Our nonperforming assets consist of nonperforming loans and foreclosed real estate.
Furthermore, we are committed to collecting on all of our loans and, as a result, at times have lower net charge-offs compared to many of our peer banks. We believe that our commitment to collecting on all of our loans results in higher loan recoveries. 54 Table of Contents Our nonperforming assets consist of nonperforming loans and foreclosed real estate.
Cyclical lagging factors may result in charge-offs being higher than historical levels. The dollar amount of the ALLL increased primarily as a result of loan growth and changes in the portfolio composition. Although the allowance is allocated between categories, the entire allowance is available to absorb losses attributable to all loan categories.
Cyclical lagging factors may result in charge-offs being higher than historical levels. The dollar amount of the ACL - Loans increased primarily as a result of loan growth and changes in the portfolio composition. Although the allowance is allocated between categories, the entire allowance is available to absorb losses attributable to all loan categories.
Pursuant to the terms of the merger agreement, Hometown shareholders could elect to receive either 0.3962 of a share of the Company’s common stock or $29.16 in cash for each outstanding share of Hometown common stock, subject to a maximum of 30% cash consideration in total, and cash in lieu of any remaining fractional share.
Pursuant to the terms of the merger agreement, Hometown shareholders could elect to receive either 0.3962 of a share of the Company’s common stock or $29.16 in cash for each outstanding share of Hometown common stock, subject to a maximum of 30% cash consideration in total, with cash paid in lieu of any remaining fractional share.
For additional information regarding interest rates and changes in net interest income see “Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Sensitivity.” Inflation may have impacts on the Bank’s customers, on businesses and consumers and their ability or willingness to invest, save or spend, and perhaps on their ability to repay loans.
For additional information regarding interest rates and changes in net interest income see “Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Sensitivity.” Inflation may have impacts on the Bank’s customers, on businesses and consumers and their ability or willingness to invest, save or 64 Table of Contents spend, and perhaps on their ability to repay loans.
The provision for loan losses is determined by conducting a quarterly evaluation of the adequacy of our ALLL and charging the shortfall or excess, if any, to the current quarter’s expense. This has the effect of creating variability in the amount and frequency of charges to earnings.
The provision for credit losses is determined by conducting a quarterly evaluation of the adequacy of our allowance for credit losses and charging the shortfall or excess, if any, to the current quarter’s expense. This has the effect of creating variability in the amount and frequency of charges to earnings.
While a financial institution’s operating expenses, particularly salary and employee benefits, are affected by general inflation, the asset and 65 Table of Contents liability structure of a financial institution consists largely of monetary items.
While a financial institution’s operating expenses, particularly salary and employee benefits, are affected by general inflation, the asset and liability structure of a financial institution consists largely of monetary items.
("Hometown"), a bank holding company headquartered in Fond Du Lac, Wisconsin, pursuant to the Agreement and Plan of Bank Merger, dated as of July 25, 2022, by and between the Company and Hometown, whereby Hometown merged with and into the Company, and Hometown Bank, Hometown's wholly-owned banking subsidiary, merged with and into the Bank.
("Hometown"), a bank holding company headquartered in Fond du Lac, Wisconsin, pursuant to the merger agreement, dated as of July 25, 2022, by and between the Company and Hometown, whereby Hometown merged with and into the Company, and Hometown Bank, 43 Table of Contents Hometown's wholly-owned banking subsidiary, merged with and into the Bank.
To account for credit risk inherent in all loans, the Bank maintains an ALLL to absorb possible losses on existing loans that may become uncollectible. The Bank establishes and maintains this allowance by charging a provision for loan losses against operating earnings.
To account for credit risk inherent in all loans, the Bank maintains an allowance for credit losses (“ACL – Loans”) to absorb possible losses on existing loans that may become uncollectible. The Bank establishes and maintains this allowance by charging a provision for credit losses against operating earnings.
Our loan portfolio is our most significant earning asset, comprising 79.1%, 76.1% and 80.6% of our total assets as of December 31, 2022, 2021 and 2020, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives.
Our loan portfolio is our most significant earning asset, comprising 79.3%, 79.1% and 76.1% of our total assets as of December 31, 2023, 2022 and 2021, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives.
We believe that our present position is adequate 63 Table of Contents to meet our current and future liquidity needs, and management knows of no trend or event that will have a material impact on the Company’s ability to maintain liquidity at satisfactory levels. Capital Adequacy.
We believe that our present position is adequate to meet our current and future liquidity needs, and management knows of no trend or event that will have a material impact on the Company’s ability to maintain liquidity at satisfactory levels.
On August 12, 2022, the Company completed a merger with Denmark, a bank holding company headquartered in Denmark, Wisconsin, pursuant to the merger agreement, dated as of January 18, 2022 by and between the Company and Denmark, whereby Denmark merged with and into the Company, and Denmark State Bank, Denmark’s wholly-owned banking subsidiary, merged with and into the Bank.
(“Denmark”), a bank holding company headquartered in Denmark, Wisconsin, pursuant to the merger agreement, dated as of January 18, 2022 by and between the Company and Denmark, whereby Denmark merged with and into the Company, and Denmark State Bank, Denmark’s wholly-owned banking subsidiary, merged with and into the Bank.
Securities classified as held to maturity consist of U.S. Treasury securities and obligations of states and political subdivisions. These securities, which management has the intent and ability to hold to maturity, are reported at amortized cost. Securities held to maturity as of December 31, 2022 and 2021, are carried at their amortized cost of $45.1 million and $5.9 million, respectively.
Securities classified as held to maturity consist of U.S. Treasury securities and obligations of states and political subdivisions. These securities, which management has the intent and ability to hold to maturity, are reported at amortized cost. Securities held to maturity as of December 31, 2023 and 2022, are carried at their amortized cost of $103.3 million and $45.1 million, respectively.
As of December 31, 2022, deposit liabilities accounted for approximately 83.6% of our total liabilities and equity. We accept deposits primarily from customers in the communities in which our branches and offices are located, as well as from small businesses and other customers throughout our lending area.
As of December 31, 2023, deposit liabilities accounted for approximately 81.3% of our total liabilities and equity. We accept deposits primarily from customers in the communities in which our branches and offices are located, as well as from small businesses and other customers throughout our lending area.
We establish an ALLL through charges to earnings, which are shown in the statements of operations as the provision for loan losses. Specifically identifiable and quantifiable known losses are promptly charged off against the allowance.
We establish an allowance for credit losses through charges to earnings, which are shown in the statements of income as the provision for credit losses. Specifically identifiable and quantifiable known losses are promptly charged off against the allowance.
The following table summarizes securities sold under repurchase agreements, and the weighted average interest rates paid: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ (dollars in thousands) 2022 2021 2020 Average daily amount of securities sold under repurchase agreements during the period ​ $ 25,749 ​ $ 34,637 ​ $ 34,984 ​ Weighted average interest rate on average daily securities sold under repurchase agreements ​ 2.11 % 0.03 % 0.32 % Maximum outstanding securities sold under repurchase agreements at any month-end ​ $ 97,196 ​ $ 57,915 ​ $ 79,718 ​ Securities sold under repurchase agreements at period end ​ $ 97,196 ​ $ 41,122 ​ $ 36,377 ​ Weighted average interest rate on securities sold under repurchase agreements at period end ​ 4.31 % 0.02 % 0.04 % ​ 60 Table of Contents Lines of credit and other borrowings The Company’s other borrowings have historically consisted primarily of short-term FHLB of Chicago advances collateralized by a blanket pledge agreement on the Company’s FHLB capital stock and retail and commercial loans held in the Company’s portfolio.
The following table summarizes securities sold under repurchase agreements, and the weighted average interest rates paid: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ (dollars in thousands) 2023 2022 2021 Average daily amount of securities sold under repurchase agreements during the period ​ ​ $ 36,833 ​ $ 25,749 ​ $ 34,637 ​ Weighted average interest rate on average daily securities sold under repurchase agreements ​ ​ 4.92 % 2.11 % 0.03 % Maximum outstanding securities sold under repurchase agreements at any month-end ​ ​ $ 75,747 ​ $ 97,196 ​ $ 57,915 ​ Securities sold under repurchase agreements at period end ​ ​ $ 75,747 ​ $ 97,196 ​ $ 41,122 ​ Weighted average interest rate on securities sold under repurchase agreements at period end ​ ​ 5.31 % 4.31 % 0.02 % ​ 59 Table of Contents Lines of credit and other borrowings The Company’s other borrowings have historically consisted primarily of short-term FHLB of Chicago advances collateralized by a blanket pledge agreement on the Company’s FHLB capital stock and retail and commercial loans held in the Company’s portfolio.
At December 31, 2022, we had a total of $424.0 million in certificates of deposit, including $6.7 million of brokered deposits, of which $6.0 million had remaining maturities of one year or less.
At December 31, 2023, we had a total of $582.0 million in certificates of deposit, including $0.7 million of brokered deposits, of which $0.7 million had remaining maturities of one year or less.
We were servicing mortgage loans sold to others without recourse of approximately $866.9 million, $705.5 million and $612.7 million at December 31, 2022, 2021 and 2020, respectively. Loans sold with the retention of servicing assets result in the capitalization of servicing rights. Loan servicing rights are subsequently amortized as an offset to other income over the estimated period of servicing.
We were servicing mortgage loans sold to others without recourse of approximately $1.18 billion and $866.9 million at December 31, 2023 and 2022, respectively. Loans sold with the retention of servicing assets result in the capitalization of servicing rights. Loan servicing rights are subsequently amortized as an offset to other income over the estimated period of servicing.
During the year ended December 31, 2022, $46.5 million of additions and $49.8 million of repayments were made to these loans, compared to $24.7 million of additions and $18.4 million of repayments during the year ended December 31, 2021.
During the year ended December 31, 2023, $24.5 million of additions and $30.8 million of repayments were made to these loans, compared to $46.5 million of additions and $49.8 million of repayments during the year ended December 31, 2022.
Significant accounting and reporting policies are summarized below. 42 Table of Contents Business Combinations We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations (ASC 805). We recognize the full fair value of the assets acquired and liabilities assumed and immediately expense transaction costs.
We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations (ASC 805). We recognize the full fair value of the assets acquired and liabilities assumed and immediately expense transaction costs.
The net balance of capitalized servicing rights amounted to $9.6 million, $5.0 million and $3.7 million at December 31, 2022, 2021 and 2020, respectively. Consumer Loans. Our consumer loan portfolio totaled $45.0 million, $32.1 million and $30.5 million at December 31, 2022, 2021 and 2020, respectively, and represented 2%, 1%, and 1% of our total loans, respectively.
The net balance of capitalized servicing rights amounted to $13.7 million and $9.6 million at December 31, 2023 and 2022, respectively. Consumer Loans. Our consumer loan portfolio totaled $51.0 million and $45.0 million at December 31, 2023 and 2022, respectively, and represented 1% and 2% of our total loans, respectively.
The determination of the amount is complex and involves a high degree of judgment and subjectivity. We recorded a provision for loan losses of $2.2 million for the year ended December 31, 2022, compared to $3.1 million for the year ended December 31, 2021.
The determination of the amount is complex and involves a high degree of judgment and subjectivity. We recorded a provision for credit losses of $4.7 million for the year ended December 31, 2023, compared to $2.2 million for the year ended December 31, 2022.
At December 31, 2022 and December 31, 2021, total loans outstanding to such directors and officers and their affiliates were $70.2 million and $73.5 million, respectively.
At December 31, 2023 and December 31, 2022, total loans outstanding to such directors and officers and their affiliates were $63.9 million and $70.2 million, respectively.
We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations. Total loans increased $658.5 million, or 29.4%, to $2.89 billion as of December 31, 2022 as compared to $2.24 billion as of December 31, 2021.
We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations. Total loans increased $449.0 million, or 15.5%, to $3.34 billion as of December 31, 2023 as compared to $2.89 billion as of December 31, 2022.
Construction and Development (C&D). Our C&D loan portfolio totaled $199.7 million, $132.5 million and $140.1 million at December 31, 2022, 2021 and 2020, respectively, and represented 7%, 6% and 6% of our total loans, respectively. C&D loans increased 50.8% during 2022, primarily as a result of loans acquired from Denmark during 2022.
Our CRE loans increased 25.8% during 2022, primarily as a result of loans acquired from Denmark during 2022. Construction and Development (C&D). Our C&D loan portfolio totaled $200.8 million and $199.7 million at December 31, 2023 and 2022, respectively, and represented 6% and 7% of our total loans, respectively.
The fair value of securities available for sale totaled $304.6 million and included gross unrealized gains of $0.5 million and gross unrealized losses of $21.8 million at December 31, 2022. At December, 31 2021, the fair value of securities available for sale totaled $212.7 million and included gross unrealized gains of $5.6 million and gross unrealized losses of $0.7 million.
The fair value of securities available for sale totaled $142.2 million and included gross unrealized gains of $86,000 and gross unrealized losses of $12.2 million at December 31, 2023. At December 31, 2022, the fair value of securities available for sale totaled $304.6 million and included gross unrealized gains of $0.5 million and gross unrealized losses of $21.8 million.
The following table summarizes the changes in our ALLL for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ Year ended ​ ​ ​ December 31, ​ December 31, ​ December 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ (dollars in thousands) Balance of ALL at the beginning of period $ 20,315 $ 17,658 $ 11,396 Net loans charged-off (recovered): ​ ​ ​ ​ ​ ​ Commercial & industrial ​ (499) ​ 180 ​ 1,083 Commercial real estate - owner occupied ​ 816 ​ 275 ​ (346) Commercial real estate - non-owner occupied ​ (360) ​ (5) ​ (40) Construction & Development ​ (152) ​ (143) ​ 33 Residential 1-4 family ​ 26 ​ 110 ​ 21 Consumer ​ 21 ​ 6 ​ 90 Other Loans ​ (17) ​ 20 ​ 22 Total net loans charged-off ​ (165) ​ 443 ​ 863 Provision charged to operating expense ​ 2,200 ​ 3,100 ​ 7,125 Balance of ALL at end of period ​ $ 22,680 ​ $ 20,315 ​ $ 17,658 ​ Ratio of net charge-offs (recoveries) to average loans by loan composition ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ (0.12) % 0.05 % 0.23 % Commercial real estate - owner occupied ​ 0.13 % 0.05 % (0.07) % Commercial real estate - non-owner occupied ​ (0.06) % 0.00 % (0.01) % Construction & Development ​ (0.09) % (0.11) % 0.02 % Residential 1-4 family ​ 0.00 % 0.02 % 0.00 % Consumer ​ 0.05 % 0.02 % 0.31 % Other Loans ​ (0.04) % 0.07 % 0.16 % Total net charge-offs to average loans ​ (0.01) % 0.02 % 0.04 % ​ The level of charge-offs depends on many factors, including the national and regional economy.
Net charge-offs remain negligible. 56 Table of Contents ​ The following table summarizes the changes in our ACL - Loans for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ Year ended ​ ​ ​ December 31, ​ December 31, ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ (dollars in thousands) Balance of ACL - Loans at the beginning of period $ 22,680 $ 20,315 $ 17,658 Adoption of CECL ​ ​ 10,972 ​ ​ — ​ ​ — ​ ACL - Loans on PCD loans acquired ​ ​ 5,534 ​ ​ — ​ ​ — ​ Net loans charged-off (recovered): ​ ​ ​ ​ ​ ​ Commercial & industrial ​ (22) ​ (499) ​ 180 Commercial real estate - owner occupied ​ (70) ​ 816 ​ 275 Commercial real estate - non-owner occupied ​ — ​ (360) ​ (5) Commercial real estate - multi-family ​ ​ — ​ ​ — ​ ​ — ​ Construction & Development ​ — ​ (152) ​ (143) Residential 1-4 family ​ (106) ​ 26 ​ 110 Consumer ​ — ​ 21 ​ 6 Other Loans ​ 67 ​ (17) ​ 20 Total net loans recovered ​ (131) ​ (165) ​ 443 Provision charged to operating expense ​ 4,292 ​ 2,200 ​ 3,100 Balance of ACL - Loans at end of period ​ $ 43,609 ​ $ 22,680 ​ $ 20,315 ​ Ratio of net charge-offs (recoveries) to average loans by loan composition ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ (0.00) % (0.12) % 0.05 % Commercial real estate - owner occupied ​ (0.01) % 0.13 % 0.05 % Commercial real estate - non-owner occupied ​ — % (0.06) % — % Commercial real estate - multi-family ​ ​ — % ​ — % ​ — % Construction & Development ​ — % (0.09) % (0.11) % Residential 1-4 family ​ (0.01) % — % 0.02 % Consumer ​ — % 0.05 % 0.02 % Other Loans ​ 0.36 % (0.04) % 0.07 % Total net charge-offs (recoveries) to average loans ​ (0.00) % (0.01) % 0.02 % ​ The level of charge-offs depends on many factors, including the national and regional economy.
As of December 31, 2022, the Company had total consolidated assets of $3.66 billion, total loans of $2.89 billion, total deposits of $3.06 billion and total stockholders’ equity of $453.1 million. The Company employs approximately 382 full-time equivalent employees and has an assets-to-FTE ratio of approximately $11.2 million. For more information, see the Company’s website at www.bankfirst.com.
As of December 31, 2023, the Company had total consolidated assets of $4.22 billion, total loans of $3.34 billion, total deposits of $3.43 billion and total stockholders’ equity of $619.8 million. The Company employs approximately 379 full-time equivalent employees and has an assets-to-FTE ratio of approximately $11.1 million. For more information, see the Company’s website at www.bankfirst.com.
Net loans increased by $656.1 million, or 29.6%, to $2.87 billion at December 31, 2022 from $2.22 billion at December 31, 2021. 51 Table of Contents Bank-Owned Life Insurance. At December 31, 2022, our investment in bank-owned life insurance was $46.1 million, an increase of $14.2 million from $31.9 million at December 31, 2021. Deposits.
Net loans increased by $428.1 million, or 14.9%, to $3.30 billion at December 31, 2023 from $2.87 billion at December 31, 2022. 50 Table of Contents Bank-Owned Life Insurance. At December 31, 2023, our investment in bank-owned life insurance was $61.3 million, an increase of $15.2 million from $46.1 million at December 31, 2022. Deposits.
We rely on our competitive pricing and products, quality customer service, and convenient locations and hours to attract and retain deposits. Deposit rates and terms are based primarily on current business strategies, market interest rates, liquidity requirements and our deposit growth goals.
We rely on our competitive pricing and products, quality customer service, and convenient locations and hours to attract and retain deposits. Deposit rates and terms are based primarily on current business strategies, market interest rates, liquidity requirements and our deposit growth goals. Total deposits were $3.43 billion and $3.06 billion as of December 31, 2023 and 2022, respectively.
Interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate paid on total interest-bearing liabilities. Net interest margin is the amount of net interest income, on a fully taxable-equivalent basis, expressed as a percentage of average interest-earning assets.
Net interest margin is the amount of net interest income, on a fully taxable-equivalent basis, expressed as a percentage of average interest-earning assets. The average rate earned on earning assets is the amount of annualized taxable equivalent interest income expressed as a percentage of average earning assets.
We do not offer reverse mortgages nor do we offer loans that provide for negative amortization of principal, such as “ Option ARM ” loans, where the borrower can pay less than the interest owed on his loan, resulting in an increased principal balance during the life of the loan.
Residential 1-4 family loans increased 29.3% during 2022, primarily as a result of loans acquired from Denmark during 2022. 52 Table of Contents We do not offer reverse mortgages nor do we offer loans that provide for negative amortization of principal, such as “ Option ARM ” loans, where the borrower can pay less than the interest owed on his loan, resulting in an increased principal balance during the life of the loan.
Based on historical experience and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity. 59 Table of Contents The following tables set forth the average balances of our deposits for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended Year ended Year ended ​ ​ ​ December 31, 2022 December 31, 2021 December 31, 2020 ​ ​ Amount Percent Amount Percent Amount Percent ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing demand deposits $ 878,727 31.6 % $ 785,364 32.0 % $ 634,939 29.7 % ​ Interest-bearing checking deposits ​ 253,443 9.1 % 209,970 8.6 % 194,718 9.1 % ​ Savings deposits ​ 691,599 24.8 % 497,958 20.3 % 356,091 16.7 % ​ Money market accounts ​ 666,717 23.9 % 664,591 27.1 % 563,847 26.4 % ​ Certificates of deposit ​ 286,054 10.3 % 278,602 11.4 % 367,054 17.2 % ​ Brokered deposits ​ 8,587 0.3 % 14,718 0.6 % 18,428 0.9 % ​ Total ​ $ 2,785,127 100 % $ 2,451,203 ​ 100 % $ 2,135,077 100 % ​ ​ The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Time Deposits over FDIC ​ Portion of Time Deposits in ​ ​ Insurance Limits Excess of FDIC Insurance Limits ​ (dollars in thousands) 3 months or less remaining ​ $ 10,986 ​ $ 3,986 Over 3 to 6 months remaining ​ 20,876 ​ 13,876 Over 6 to 12 months remaining ​ 33,266 ​ 14,016 Over 12 months or more remaining ​ 34,064 ​ 15,314 Total ​ $ 99,192 ​ $ 47,192 ​ Borrowings Deposits and investment securities for sale are the primary source of funds for our lending activities and general business purposes.
Based on historical experience and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity. 58 Table of Contents The following tables set forth the average balances of our deposits for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended Year ended Year ended ​ ​ ​ December 31, 2023 December 31, 2022 December 31, 2021 ​ ​ Amount Percent Amount Percent Amount Percent ​ ​ (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing demand deposits $ 1,078,468 31.9 % $ 878,727 31.6 % $ 785,364 32.0 % ​ Interest-bearing checking deposits ​ 293,568 8.7 % 253,443 9.1 % 209,970 8.6 % ​ Savings deposits ​ 833,360 24.6 % 691,599 24.8 % 497,958 20.3 % ​ Money market accounts ​ 665,988 19.7 % 666,717 23.9 % 664,591 27.1 % ​ Certificates of deposit ​ 509,273 15.1 % 286,054 10.3 % 278,602 11.4 % ​ Brokered deposits ​ 3,184 0.1 % 8,587 0.3 % 14,718 0.6 % ​ Total ​ $ 3,383,841 100 % $ 2,785,127 ​ 100 % $ 2,451,203 100 % ​ ​ The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Time Deposits over FDIC ​ Portion of Time Deposits in ​ ​ Insurance Limits Excess of FDIC Insurance Limits ​ (dollars in thousands) 3 months or less remaining ​ $ 62,889 ​ $ 34,139 Over 3 to 6 months remaining ​ 26,972 ​ 10,472 Over 6 to 12 months remaining ​ 41,665 ​ 21,665 Over 12 months or more remaining ​ 11,169 ​ 3,919 Total ​ $ 142,695 ​ $ 70,195 ​ Borrowings Deposits and investment securities for sale are the primary source of funds for our lending activities and general business purposes.
Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments, standby and direct pay letters of credit and unadvanced portions of construction and development loans is represented by the contractual amount of those instruments.
The contract or notional amounts of those instruments reflect the extent of involvement the Company has in these particular classes of financial instruments. 63 Table of Contents Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments, standby and direct pay letters of credit and unadvanced portions of construction and development loans is represented by the contractual amount of those instruments.
Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations.
We are subject to various regulatory capital requirements administered by state and federal banking agencies, including the Federal Reserve and the OCC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations.
Management believes that the ALLL is adequate. 58 Table of Contents The following table summarizes an allocation of the ALLL and the related percentage of loans outstanding in each category for the periods below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ December 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ (in thousands, except %) Amount Loans Amount Loans Amount Loans ​ Loan Type: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ $ 4,071 17 % $ 3,699 16 % $ 2,049 20 % ​ Commercial real estate - owner occupied ​ 5,204 25 % 5,633 26 % 6,108 25 % ​ Commercial real estate - non-owner occupied ​ 5,405 23 % 5,151 24 % 3,904 20 % ​ Construction & development ​ 1,592 7 % 984 6 % 1,027 7 % ​ Residential 1-4 family ​ 5,944 25 % 4,445 26 % 3,960 25 % ​ Consumer ​ 314 2 % 224 1 % 201 1 % ​ Other loans ​ 150 1 % 179 1 % 409 2 % ​ Total allowance ​ $ 22,680 ​ 100 % $ 20,315 ​ 100 % $ 17,658 ​ 100 % ​ ​ SOURCES OF FUNDS General.
Management believes that the ACL - Loans is adequate. 57 Table of Contents The following table summarizes an allocation of the ACL - Loans and the related percentage of loans outstanding in each category for the periods below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31 ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ (in thousands, except %) Amount Loans Amount Loans Amount Loans Loan Type: ​ ​ ​ Commercial & industrial ​ $ 5,965 15 % $ 4,071 17 % $ 3,699 16 % Commercial real estate - owner occupied ​ 12,285 27 % 5,204 25 % 5,633 26 % Commercial real estate - non-owner occupied ​ 5,700 14 % 2,644 23 % 3,123 14 % Commercial real estate - multi-family ​ ​ 4,754 ​ 10 % ​ 2,761 ​ ​ % ​ 2,028 ​ 10 % Construction & development ​ 3,597 6 % 1,592 7 % 984 6 % Residential 1-4 family ​ 10,620 27 % 5,944 25 % 4,445 26 % Consumer ​ 615 1 % 314 2 % 224 1 % Other loans ​ 73 — % 150 1 % 179 1 % Total allowance ​ $ 43,609 100 % $ 22,680 100 % $ 20,315 100 % ​ SOURCES OF FUNDS General.
There were no outstanding balances on this note at December 31, 2022 or 2021. Any future borrowings will require monthly payments of interest at a variable rate, and will be due in full on May 15, 2024. During September 2017, the Company entered into subordinated note agreements with three separate commercial banks.
The Company maintains a $7.5 million line of credit with a commercial bank, which was entered into on May 15, 2022. There were no outstanding balances on this note at December 31, 2023 or 2022. Any future borrowings will require monthly payments of interest at a variable rate, and will be due in full on May 15, 2024.
These notes were all issued with 10-year maturities, carry interest at a variable rate payable quarterly, are callable on or after the sixth anniversary of their issuance dates, and qualify for Tier 2 capital for regulatory purposes. On July 22, 2020, the Company entered into subordinated note agreements with two separate commercial banks.
During September 2017, the Company entered into subordinated note agreements with three separate commercial banks under which it borrowed $11.5 million. These notes were all issued with 10-year maturities, carried interest at a variable rate payable quarterly, were callable on or after the sixth anniversary of the issuance dates, and qualified for Tier 2 capital for regulatory purposes.
We recorded a provision for income taxes of $14.4 million for the year ended December 31, 2022, compared to $14.5 million for the year ended December 31, 2021, reflecting effective tax rates of 24.2% for both 2022 and 2021, respectively. 47 Table of Contents Results of Operations for the Years Ended December 31, 2021 and 2020 General.
We recorded a provision for income taxes of $24.3 million for the year ended December 31, 2023, compared to $14.4 million for the year ended December 31, 2022, reflecting effective tax rates of 24.6% and 24.2%, respectively.
(2) Nonaccrual loans are included in average amounts outstanding. (3) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. 50 Table of Contents (4) Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets.
(2) Nonaccrual loans are included in average amounts outstanding. (3) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
Total average interest-earning assets increased to $3.09 billion for the year ended December 31, 2022 from $2.63 billion for the year ended December 31, 2021. The Bank’s net interest margin decreased six basis points to 3.41% for the year ended December 31, 2022, down from 3.47% for the year ended December 31, 2021. Interest Income.
Total average interest-earning assets increased to $3.66 billion for the year ended December 31, 2023 from $3.09 billion for the year ended December 31, 2022. The Bank’s net interest margin increased twenty-eight basis points to 3.69% for the year ended December 31, 2023, up from 3.41% for the year ended December 31, 2022. Interest Income.
Total assets increased $722.9 million, or 24.6%, to $3.66 billion at December 31, 2022 from $2.94 billion at December 31, 2021. The primary driver of this increase, as with most of the categories below, was our acquisition of Denmark, consisting of $685.8 million in assets, during 2022. Cash and Cash Equivalents.
Total assets increased $561.4 million, or 15.3%, to $4.22 billion at December 31, 2023 from $3.66 billion at December 31, 2022. The primary driver of this increase, as with most of the categories below, was our acquisition of Hometown, consisting of $615.1 million in assets, during 2023. Cash and Cash Equivalents.
Our residential 1-4 family loan portfolio totaled $739.5 million, $571.8 million and $545.8 million at December 31, 2022, 2021 and 2020, respectively, and represented 25%, 26% and 25% of our total loans, respectively. Residential 1-4 family loans increased 29.3% during 2022, primarily as a result of loans acquired from Denmark during 2022. Residential 1-4 family loans increased 4.8% during 2021.
Our residential 1-4 family loan portfolio totaled $888.6 million and $739.5 million at December 31, 2023 and 2022, respectively, and represented 27% and 25% of our total loans, respectively. Residential 1-4 family loans increased 20.2% during 2023, primarily as a result of loans acquired from Hometown during 2023.
Rate/Volume Analysis The following tables describe the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated.
(4) Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets. 49 Table of Contents Rate/Volume Analysis The following tables describe the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated.
The major components of our noninterest income are listed in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ December 31, ​ 2022 2021 (in thousands) ​ ​ ​ Noninterest Income ​ ​ ​ Service charges ​ ​ $ 5,810 ​ $ 6,128 Income from Ansay ​ ​ ​ 2,558 ​ ​ 2,587 Income from UFS ​ ​ 3,055 ​ 2,556 Loan servicing income ​ ​ 1,922 ​ 1,622 Valuation adjustment on MSR ​ ​ ​ 2,865 ​ ​ 1,290 Net gain on sales of mortgage loans ​ ​ 1,560 ​ 7,371 Net gain on sales and valuation of ORE ​ ​ 146 ​ 20 Other ​ ​ 1,931 ​ 1,967 Total noninterest income ​ ​ $ 19,847 ​ $ 23,541 ​ Noninterest Expense.
The major components of our noninterest income are listed in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ December 31, ​ 2023 2022 (in thousands) ​ ​ ​ Noninterest Income ​ ​ ​ ​ Service charges ​ ​ $ 7,033 ​ $ 5,810 ​ Income from Ansay ​ ​ ​ 2,922 ​ ​ 2,558 ​ Income from UFS ​ ​ 2,265 ​ 3,055 ​ Loan servicing income ​ ​ 2,860 ​ 1,922 ​ Valuation adjustment on MSR ​ ​ ​ 395 ​ ​ 2,865 ​ Net gain on sales of mortgage loans ​ ​ 897 ​ 1,560 ​ Gain on sale of UFS ​ ​ ​ 38,904 ​ ​ — ​ Other ​ ​ 2,839 ​ 1,931 ​ Total noninterest income ​ ​ $ 58,115 ​ $ 19,701 ​ ​ 47 Table of Contents Noninterest Expense.
Net interest income after provision for loan losses increased by $14.9 million to $101.9 million for the year ended December 31, 2022, from $87.0 million for the year ended December 31, 2021. Interest income on loans increased by $13.5 million, or 14.5%, from 2021 to 2022.
Net interest income after provision for credit losses increased by $26.9 million to $128.8 million for the year ended December 31, 2023, from $101.9 million for the year ended December 31, 2022. Interest income on loans increased by $61.9 million, or 57.8%, from 2022 to 2023.
Deferred taxes are reviewed quarterly and would be reduced by a valuation allowance if, based upon the information available, it is more likely than not that some or all of the DTAs will not be realized. 44 Table of Contents Recent Accounting Developments In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments .
Deferred taxes are reviewed quarterly and are reduced by a valuation allowance if, based upon the information available, it is more likely than not that some or all of the DTAs will not be realized. Recent Accounting Pronouncements.
Our CRE loan portfolio totaled $1.40 billion, $1.11 billion and $992.2 million at December 31, 2022, 2021 and 2020, respectively, and represented 48%, 50% and 45% of our total loans, respectively. Our CRE loans increased 25.8% during 2022, primarily as a result of loans acquired from Denmark during 2022.
Our CRE loan portfolio totaled $1.70 billion and $1.40 billion at December 31, 2023 and 2022, respectively, and represented 51% and 48% of our total loans, respectively. Our CRE loans increased 21.5% during 2023, primarily as a result of loans acquired from Hometown during 2023.
Other sources of noninterest income include loan servicing fees and gains on sales of mortgage loans. 46 Table of Contents Noninterest income decreased by $3.7 million, or 15.7% to $19.8 million for 2022, down from $23.5 million during 2021.
Other typical sources of noninterest income include loan servicing fees and gains on sales of mortgage loans. 46 Table of Contents Noninterest income increased by $38.4 million, or 195.0% to $58.1 million for 2023, up from $19.7 million during 2022.
The composition of our nonperforming assets is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, As of December 31, As of December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ (dollars in thousands) ​ Nonperforming loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ $ 418 ​ $ 247 ​ $ 433 ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owner Occupied ​ ​ 2,688 ​ ​ 5,884 ​ ​ 1,078 ​ Non-owner Occupied ​ ​ — ​ ​ 650 ​ ​ 8,087 ​ Construction & Development ​ ​ 17 ​ ​ 19 ​ ​ 281 ​ Residential 1-4 family ​ ​ 505 ​ ​ 439 ​ ​ 912 ​ Consumer and other ​ ​ — ​ ​ 2 ​ ​ 5 ​ Total nonaccrual loans ​ ​ 3,628 ​ ​ 7,241 ​ ​ 10,796 ​ Loans past due > 90 days, but still accruing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ ​ — ​ ​ 738 ​ ​ — ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owner Occupied ​ ​ — ​ ​ — ​ ​ 1,582 ​ Non-owner Occupied ​ ​ — ​ ​ — ​ ​ — ​ Construction & Development ​ ​ — ​ ​ — ​ ​ — ​ Residential 1-4 family ​ ​ 268 ​ ​ 245 ​ ​ 142 ​ Consumer and other ​ ​ 5 ​ ​ 16 ​ ​ 14 ​ Total loans past due > 90 days, but still accruing ​ ​ 273 ​ ​ 999 ​ ​ 1,738 ​ Total nonperforming loans ​ $ 3,901 ​ $ 8,240 ​ $ 12,534 ​ OREO ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate owned ​ $ — ​ $ — ​ $ 1,742 ​ Residential real estate owned ​ ​ — ​ ​ 10 ​ ​ 143 ​ Bank property real estate owned ​ ​ 2,520 ​ ​ 140 ​ ​ — ​ Total OREO ​ $ 2,520 ​ $ 150 ​ $ 1,885 ​ Total nonperforming assets ("NPAs") ​ $ 6,421 ​ $ 8,390 ​ $ 14,419 ​ Accruing troubled debt restructured loans ​ $ 450 ​ $ 484 ​ $ 1,132 ​ Ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans to total loans ​ ​ 0.13 % ​ 0.32 % ​ 0.49 % NPAs to total loans plus OREO ​ ​ 0.22 % ​ 0.38 % ​ 0.66 % NPAs to total assets ​ ​ 0.18 % ​ 0.29 % ​ 0.53 % ALL to nonaccrual loans ​ ​ 625 % ​ 281 % ​ 164 % ALL to total loans ​ ​ 0.78 % ​ 0.91 % ​ 0.81 % ​ 56 Table of Contents At December 31, 2022, 2021 and 2020, impaired loans had specific reserves of $8,000, $964,000 and $900,000, respectively.
The composition of our nonperforming assets is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, As of December 31, As of December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ (dollars in thousands) ​ Nonperforming loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ $ 1,344 ​ $ 418 ​ $ 247 ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owner Occupied ​ ​ 3,877 ​ ​ 2,688 ​ ​ 5,884 ​ Non-owner Occupied ​ ​ — ​ ​ — ​ ​ 650 ​ Multi-family ​ ​ — ​ ​ — ​ ​ — ​ Construction & Development ​ ​ — ​ ​ 17 ​ ​ 19 ​ Residential 1-4 family ​ ​ 429 ​ ​ 505 ​ ​ 439 ​ Consumer and other ​ ​ 12 ​ ​ — ​ ​ 2 ​ Total nonaccrual loans ​ ​ 5,662 ​ ​ 3,628 ​ ​ 7,241 ​ Loans past due > 90 days, but still accruing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ ​ 106 ​ ​ — ​ ​ 738 ​ Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owner Occupied ​ ​ 252 ​ ​ — ​ ​ — ​ Non-owner Occupied ​ ​ — ​ ​ — ​ ​ — ​ Multi-family ​ ​ — ​ ​ — ​ ​ — ​ Construction & Development ​ ​ — ​ ​ — ​ ​ — ​ Residential 1-4 family ​ ​ 507 ​ ​ 268 ​ ​ 245 ​ Consumer and other ​ ​ 28 ​ ​ 5 ​ ​ 16 ​ Total loans past due > 90 days, but still accruing ​ ​ 893 ​ ​ 273 ​ ​ 999 ​ Total nonperforming loans ​ $ 6,555 ​ $ 3,901 ​ $ 8,240 ​ OREO ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate owned ​ $ — ​ $ — ​ $ — ​ Residential real estate owned ​ ​ — ​ ​ — ​ ​ 10 ​ Acquired bank property real estate owned ​ ​ 2,573 ​ ​ 2,520 ​ ​ 140 ​ Total OREO ​ $ 2,573 ​ $ 2,520 ​ $ 150 ​ Total nonperforming assets ("NPAs") ​ $ 9,128 ​ $ 6,421 ​ $ 8,390 ​ Accruing modified loans to borrowers experiencing financial difficulty (1) ​ $ 21 ​ $ 450 ​ $ 484 ​ Ratios ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual loans to total loans ​ ​ 0.17 % ​ 0.13 % ​ 0.32 % NPAs to total loans plus OREO ​ ​ 0.27 % ​ 0.22 % ​ 0.38 % NPAs to total assets ​ ​ 0.21 % ​ 0.18 % ​ 0.29 % ACL - Loans to nonaccrual loans ​ ​ 770 % ​ 625 % ​ 281 % ACL - Loans to total loans ​ ​ 1.30 % ​ 0.78 % ​ 0.91 % ​ (1) Amounts prior to January 1, 2023 represent accruing troubled debt restructured loans.
Cash and cash equivalents decreased by $177.5 million, or 59.8%, to $119.4 million at December 31, 2022 from $296.9 million at December 31, 2021. Investment Securities. The carrying value of total investment securities increased by $131.1 million to $349.7 million at December 31, 2022 from $218.6 million at December 31, 2021. Loans.
Cash and cash equivalents increased by $128.1 million, or 107.3%, to $247.5 million at December 31, 2023 from $119.4 million at December 31, 2022. Investment Securities. The carrying value of total investment securities decreased by $104.2 million to $245.5 million at December 31, 2023 from $349.7 million at December 31, 2022.
Information is provided in each category with respect to: (i) changes attributable to changes in volumes (changes in average balance multiplied by prior year average rate) and (ii) changes attributable to changes in rate (change in average interest rate multiplied by prior year average balance), while (iii) changes attributable to the combined impact of volumes and rates have been allocated proportionately to separate volume and rate categories. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended December 31, 2022 Twelve Months Ended December 31, 2021 ​ ​ Compared with ​ Compared with ​ ​ Twelve Months Ended December 31, 2021 ​ Twelve Months Ended December 31, 2020 ​ ​ Increase/(Decrease) ​ Increase/(Decrease) ​ ​ Due to Change in ​ Due to Change in ​ ​ Volume ​ Rate ​ Total ​ Volume ​ Rate ​ Total ​ ​ (dollars in thousands) Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable $ 13,031 $ 409 $ 13,440 $ 9,392 $ (9,918) $ (526) Tax-exempt ​ ​ 323 ​ ​ (209) ​ ​ 114 ​ ​ (1,176) ​ ​ (502) ​ ​ (1,678) Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable (AFS) ​ ​ 2,905 ​ ​ (463) ​ ​ 2,442 ​ ​ (301) ​ ​ (53) ​ ​ (354) Tax-exempt (AFS) ​ ​ 297 ​ ​ (364) ​ ​ (67) ​ ​ 93 ​ ​ (56) ​ ​ 37 Taxable (HTM) ​ ​ 670 ​ ​ — ​ ​ 670 ​ ​ (108) ​ ​ (108) ​ ​ (216) Tax-exempt (HTM) ​ ​ (18) ​ ​ 2 ​ ​ (16) ​ ​ (59) ​ ​ (6) ​ ​ (65) Cash and due from banks ​ ​ (22) ​ ​ 1,595 ​ ​ 1,573 ​ ​ 241 ​ ​ (112) ​ ​ 129 Total interest income ​ ​ 17,186 ​ ​ 970 ​ ​ 18,156 ​ $ 8,082 ​ $ (10,755) ​ $ (2,673) Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Checking accounts ​ $ 62 ​ $ 761 ​ $ 823 ​ $ 49 ​ $ (466) ​ $ (417) Savings accounts ​ 797 ​ 529 ​ 1,326 ​ 594 ​ (613) ​ (19) Money market accounts ​ 7 ​ 903 ​ 910 ​ 481 ​ (1,442) ​ (961) Certificates of deposit ​ 78 ​ (227) ​ (149) ​ (1,314) ​ (2,124) ​ (3,438) Brokered Deposits ​ (179) ​ 10 ​ (169) ​ (106) ​ (5) ​ (111) Total interest bearing deposits ​ 765 ​ 1,976 ​ 2,741 ​ (296) ​ (4,650) ​ (4,946) Other borrowed funds ​ 1,435 ​ (31) ​ 1,404 ​ (345) ​ (270) ​ (615) Total interest expense ​ 2,200 ​ 1,945 ​ 4,145 ​ (641) ​ (4,920) ​ (5,561) Change in net interest income ​ $ 14,986 ​ $ (975) ​ $ 14,011 ​ $ 8,724 ​ $ (5,836) ​ $ 2,888 ​ CHANGES IN FINANCIAL CONDITION Total Assets.
Information is provided in each category with respect to: (i) changes attributable to changes in volumes (changes in average balance multiplied by prior year average rate) and (ii) changes attributable to changes in rate (change in average interest rate multiplied by prior year average balance), while (iii) changes attributable to the combined impact of volumes and rates have been allocated proportionately to separate volume and rate categories. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended December 31, 2023 Twelve Months Ended December 31, 2022 ​ ​ Compared with ​ Compared with ​ ​ Twelve Months Ended December 31, 2022 ​ Twelve Months Ended December 31, 2021 ​ ​ Increase/(Decrease) ​ Increase/(Decrease) ​ ​ Due to Change in ​ Due to Change in ​ ​ Volume ​ Rate ​ Total ​ Volume ​ Rate ​ Total ​ ​ (dollars in thousands) ​ (dollars in thousands) Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable $ 35,439 $ 26,062 $ 61,501 $ 13,031 $ 409 $ 13,440 Tax-exempt ​ ​ 348 ​ ​ 111 ​ ​ 459 ​ ​ 323 ​ ​ (209) ​ ​ 114 Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable (AFS) ​ ​ (1,065) ​ ​ 1,686 ​ ​ 621 ​ ​ 2,905 ​ ​ (463) ​ ​ 2,442 Tax-exempt (AFS) ​ ​ (1,366) ​ ​ 421 ​ ​ (945) ​ ​ 297 ​ ​ (364) ​ ​ (67) Taxable (HTM) ​ ​ 1,696 ​ ​ 312 ​ ​ 2,008 ​ ​ 670 ​ ​ — ​ ​ 670 Tax-exempt (HTM) ​ ​ (25) ​ ​ 1 ​ ​ (24) ​ ​ (18) ​ ​ 2 ​ ​ (16) Cash and due from banks ​ ​ (1,884) ​ ​ 4,105 ​ ​ 2,221 ​ ​ (22) ​ ​ 1,595 ​ ​ 1,573 Total interest income ​ ​ 33,143 ​ ​ 32,698 ​ ​ 65,841 ​ $ 17,186 ​ $ 970 ​ $ 18,156 Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Checking accounts ​ $ 196 ​ $ 4,091 ​ $ 4,287 ​ $ 62 ​ $ 761 ​ $ 823 Savings accounts ​ 751 ​ 5,946 ​ 6,697 ​ 797 ​ 529 ​ 1,326 Money market accounts ​ (3) ​ 9,700 ​ 9,697 ​ 7 ​ 903 ​ 910 Certificates of deposit ​ 3,410 ​ 8,168 ​ 11,578 ​ 78 ​ (227) ​ (149) Brokered Deposits ​ (153) ​ (8) ​ (161) ​ (179) ​ 10 ​ (169) Total interest bearing deposits ​ 4,201 ​ 27,897 ​ 32,098 ​ 765 ​ 1,976 ​ 2,741 Other borrowed funds ​ (1,482) ​ 5,938 ​ 4,456 ​ 1,435 ​ (31) ​ 1,404 Total interest expense ​ 2,719 ​ 33,835 ​ 36,554 ​ 2,200 ​ 1,945 ​ 4,145 Change in net interest income ​ $ 30,424 ​ $ (1,137) ​ $ 29,287 ​ $ 14,986 ​ $ (975) ​ $ 14,011 ​ CHANGES IN FINANCIAL CONDITION Total Assets.
The Company accounts for these transactions under the acquisition method of accounting, and thus, the financial position and results of operations of acquired institutions prior to the consummation date are not included in the accompanying consolidated financial statements.
Company stock issued totaled 1,579,530 shares valued at approximately $124.8 million, with cash of $4.0 million comprising the remainder of merger consideration. The Company accounts for these transactions under the acquisition method of accounting, and thus, the financial position and results of operations of acquired institutions prior to the consummation date are not included in the accompanying consolidated financial statements.
Company stock issued totaled 575,641 shares valued at approximately $29.4 million, with cash of $0.4 million comprising the remainder of merger consideration. Denmark Bancshares, Inc.
Company stock issued totaled 1,450,272 shares valued at approximately $115.1 million, with cash of $15.4 million comprising the remainder of merger consideration. Denmark Bancshares, Inc. On August 12, 2022, the Company completed a merger with Denmark Bancshares, Inc.
These notes are callable on or after January 1, 2026 and qualify for Tier 2 capital for regulatory purposes. The Company had outstanding balances of $6.0 million under these agreements at December 31, 2022 and 2021. During August 2022, the Company entered into subordinated note agreements with an individual.
The Company had outstanding balances of $6.0 million under these agreements at December 31, 2023 and 2022. During August 2022, the Company entered into subordinated note agreements with an individual. The Company had outstanding balances of $6.0 million under these agreements as of December 31, 2023 and 2022.
For more information, see “Business—Supervision and Regulation—Capital Requirements.” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital Required ​ ​ Minimum To Be Well- ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital ​ for Capital Adequacy Plus ​ ​ Capitalized Under prompt ​ ​ ​ ​ ​ ​ ​ ​ Required for Capital ​ Capital Conservation Buffer ​ ​ corrective Action ​ ​ Actual ​ ​ Adequacy ​ Basel III Phase-In Schedule ​ ​ Provisions ​ ​ Amount ​ Ratio ​ ​ Amount ​ Ratio ​ Amount ​ Ratio ​ ​ Amount ​ Ratio ​ ​ (dollars in thousands) At December 31, 2022 ​ ​ ​ ​ Bank First Corporation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets) ​ $ 387,814 12.2 % ​ 253,689 8.0 % 332,967 10.5 % ​ N/A N/A ​ Tier I capital (to risk-weighted assets) ​ ​ 341,634 10.8 % ​ 190,627 6.0 % 269,545 8.5 % ​ N/A N/A ​ Common equity tier I capital (to risk-weighted assets) ​ ​ 341,634 10.8 % ​ 142,700 4.5 % 221,978 7.0 % ​ N/A N/A ​ Tier I capital (to average assets) ​ ​ 341,634 9.7 % ​ 140,992 4.0 % 140,992 4.0 % ​ N/A N/A ​ Bank First, N.A: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets) ​ $ 372,312 11.8 % ​ 253,504 8.0 % 332,724 10.5 % ​ 316,880 10.0 % Tier I capital (to risk-weighted assets) ​ ​ 349,632 11.0 % ​ 190,128 6.0 % 269,348 8.5 % ​ 253,504 8.0 % Common equity tier I capital (to risk-weighted assets) ​ ​ 349,632 11.0 % ​ 142,596 4.5 % 221,816 ​ 7.0 % ​ 205,972 ​ 6.5 % Tier I capital (to average assets) ​ ​ 349,632 9.9 % ​ 140,887 4.0 % 140,887 4.0 % ​ 176,108 5.0 % At December 31, 2021 ​ ​ ​ ​ ​ Bank First Corporation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets) ​ $ 297,467 12.4 % ​ N/A N/A N/A N/A ​ N/A N/A ​ Tier I capital (to risk-weighted assets) ​ ​ 259,652 10.9 % ​ N/A N/A N/A N/A ​ N/A N/A ​ Common equity tier I capital (to risk-weighted assets) ​ ​ 259,652 10.9 % ​ N/A N/A N/A N/A ​ N/A N/A ​ Tier I capital (to average assets) ​ ​ 259,652 9.3 % ​ N/A N/A N/A N/A ​ N/A N/A ​ Bank First, N.A: ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets) ​ $ 291,994 12.2 % ​ 191,339 8.0 % 251,133 10.50 % ​ 239,174 10.0 % Tier I capital (to risk-weighted assets) ​ ​ 271,679 11.4 % ​ 143,505 6.0 % 203,298 8.50 % ​ 191,339 8.0 % Common equity tier I capital (to risk-weighted assets) ​ ​ 271,679 11.4 % ​ 107,628 4.5 % 167,422 ​ 7.00 % ​ 155,463 ​ 6.5 % Tier I capital (to average assets) ​ ​ 271,679 9.7 % ​ 111,825 4.0 % 111,825 4.00 % ​ 139,781 5.0 % ​ As previously mentioned, the Company carried $23.5 million of subordinated debt as of December 31, 2022 and $17.5 million of subordinated debt as of December 31, 2021, which is included in total capital for the Company in the tables above. 64 Table of Contents FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK We are party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers.
For more information, see “Business—Supervision and Regulation—Capital Requirements.” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital Required ​ ​ Minimum To Be Well- ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital ​ ​ for Capital Adequacy Plus ​ ​ Capitalized Under prompt ​ ​ ​ ​ ​ ​ ​ ​ Required for Capital ​ ​ Capital Conservation Buffer ​ ​ corrective Action ​ ​ Actual ​ ​ Adequacy ​ ​ Basel III Phase-In Schedule ​ ​ Provisions ​ ​ Amount ​ Ratio ​ ​ Amount ​ Ratio ​ ​ Amount ​ Ratio ​ ​ Amount ​ Ratio ​ ​ (dollars in thousands) At December 31, 2023 ​ ​ ​ ​ ​ Bank First Corporation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets) ​ $ 484,398 14.0 % $ 276,904 8.0 % $ 363,437 10.5 % ​ N/A N/A ​ Tier I capital (to risk-weighted assets) ​ ​ 437,979 12.7 % ​ 207,678 6.0 % ​ 294,211 8.5 % ​ N/A N/A ​ Common equity tier I capital (to risk-weighted assets) ​ ​ 433,979 12.5 % ​ 155,759 4.5 % ​ 242,291 7.0 % ​ N/A N/A ​ Tier I capital (to average assets) ​ ​ 437,979 11.1 % ​ 158,581 4.0 % ​ 158,581 4.0 % ​ N/A N/A ​ Bank First, N.A: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets) ​ $ 446,634 12.9 % $ 276,726 8.0 % $ 363,202 10.5 % $ 345,907 10.0 % Tier I capital (to risk-weighted assets) ​ ​ 412,215 11.9 % ​ 207,544 6.0 % ​ 294,021 8.5 % ​ 276,726 8.0 % Common equity tier I capital (to risk-weighted assets) ​ ​ 412,215 11.9 % ​ 155,658 4.5 % ​ 242,135 ​ 7.0 % ​ 224,840 ​ 6.5 % Tier I capital (to average assets) ​ ​ 412,215 10.4 % ​ 158,585 4.0 % ​ 158,585 4.0 % ​ 198,231 5.0 % At December 31, 2022 ​ ​ ​ ​ ​ ​ Bank First Corporation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets) ​ $ 387,814 12.2 % $ 253,689 8.0 % $ 332,967 10.5 % ​ N/A N/A ​ Tier I capital (to risk-weighted assets) ​ ​ 341,634 10.8 % ​ 190,627 6.0 % ​ 269,545 8.5 % ​ N/A N/A ​ Common equity tier I capital (to risk-weighted assets) ​ ​ 341,634 10.8 % ​ 142,700 4.5 % ​ 221,978 7.0 % ​ N/A N/A ​ Tier I capital (to average assets) ​ ​ 341,634 9.7 % ​ 140,992 4.0 % ​ 140,992 4.0 % ​ N/A N/A ​ Bank First, N.A: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital (to risk-weighted assets) ​ $ 372,312 11.8 % $ 253,504 8.0 % $ 332,724 10.5 % $ 316,880 10.0 % Tier I capital (to risk-weighted assets) ​ ​ 349,632 11.0 % ​ 190,128 6.0 % ​ 269,348 8.5 % ​ 253,504 8.0 % Common equity tier I capital (to risk-weighted assets) ​ ​ 349,632 11.0 % ​ 142,596 4.5 % ​ 221,816 ​ 7.0 % ​ 205,972 ​ 6.5 % Tier I capital (to average assets) ​ ​ 349,632 9.9 % ​ 140,887 4.0 % ​ 140,887 4.0 % ​ 176,108 5.0 % ​ As previously mentioned, the Company carried $12.0 million of subordinated debt and $4.0 million of junior subordinated debt as of December 31, 2023 and $23.5 million of subordinated debt as of December 31, 2022, which is included in total capital for the Company in the tables above.
The Company did not sell any securities in 2022. The Company recognized a net loss on sale of investment securities of $3,000 during the year ended December 31, 2021. The Company recognized a net gain on sale of investment securities of $3.2 million during the year ended December 31, 2020.
The Company recognized a net loss on sale of investment securities of $7.9 million during the year ended December 31, 2023. The Company did not sell any securities in 2022. The following tables set forth the composition and maturities of investment securities as of December 31, 2023 and December 31, 2022.
The Bank, through its 100% owned subsidiary TVG Holdings, Inc., also holds a 40% ownership interest in Ansay & Associates, LLC, an insurance agency providing clients primarily located in Wisconsin with insurance and risk management solutions. These unconsolidated subsidiary interests contribute noninterest income to the Bank through their underlying annual earnings.
The Bank, through its 100% owned subsidiary TVG Holdings, Inc., holds a 40% ownership interest in Ansay & Associates, LLC, an insurance agency providing clients primarily located in Wisconsin with insurance and risk management solutions. The Bank owned 49.8% of UFS, LLC, which provides data processing solutions to over 60 banks in the Midwest, through October 1, 2023.
Nonaccrual Loans Loans are typically placed on nonaccrual status when any payment of principal and/or interest is 90 days or more past due, unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection.
Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for credit losses at December 31, 2023. 55 Table of Contents Nonaccrual Loans Loans are typically placed on nonaccrual status when any payment of principal and/or interest is 90 days or more past due, unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection.
These financial instruments primarily include commitments to originate and sell loans, standby and direct pay letters of credit, unused lines of credit and unadvanced portions of construction and development loans. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK We are party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments primarily include commitments to originate and sell loans, standby and direct pay letters of credit, unused lines of credit and unadvanced portions of construction and development loans.
Net income decreased $0.2 million, or 0.1%, to $45.2 million for the year ended December 31, 2022, from $45.4 million for the year ended December 31, 2021.
Net income increased $29.3 million, or 64.8%, to $74.5 million for the year ended December 31, 2023, from $45.2 million for the year ended December 31, 2022.
The following table presents the balance and associated percentage of each major category in our loan portfolio at December 31, 2022, 2021, and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ % of ​ ​ ​ % of ​ ​ ​ % of ​ (In thousands) ​ 2022 ​ Total ​ 2021 ​ Total ​ 2020 ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ $ 492,450 ​ 17 % $ 366,166 ​ 16 % $ 444,992 ​ 20 % Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owner Occupied ​ ​ 716,963 ​ 25 % ​ 574,565 ​ 26 % ​ 549,253 ​ 25 % Non-owner occupied ​ ​ 681,620 ​ 23 % ​ 536,892 ​ 24 % ​ 442,996 ​ 20 % Construction & Development ​ ​ 199,708 ​ 7 % ​ 132,454 ​ 6 % ​ 140,074 ​ 6 % Residential 1-4 family ​ ​ 739,514 ​ 25 % ​ 571,845 ​ 26 % ​ 545,806 ​ 25 % Consumer ​ ​ 44,963 ​ 2 % ​ 32,131 ​ 1 % ​ 30,488 ​ 1 % Other Loans ​ ​ 18,760 ​ 1 % ​ 21,461 ​ 1 % ​ 37,851 ​ 2 % Total Loans ​ $ 2,893,978 ​ 100 % $ 2,235,514 ​ 100 % $ 2,191,460 ​ 100 % ​ Our directors and officers and their affiliates are customers of, and have other transactions with, the Bank in the normal course of business.
Our loan growth during the year ended December 31, 2023 has been comprised of a decrease of $4.5 million, or 0.9%, in commercial and industrial loans, an increase of $301.1 million, or 21.5%, in commercial real estate loans, an increase of $1.1 million, or 0.6%, in construction and development loans, an increase of $149.1 million, or 20.2%, in residential 1-4 family loans and an increase of $2.2 million, or 3.5%, in consumer and other loans. 51 Table of Contents The following table presents the balance and associated percentage of each major category in our loan portfolio at December 31, 2023, 2022, and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ % of ​ ​ ​ % of ​ ​ ​ % of ​ (In thousands) ​ 2023 ​ Total ​ 2022 ​ Total ​ 2021 ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial & industrial ​ $ 487,893 ​ 15 % $ 492,450 ​ 17 % $ 366,166 ​ 16 % Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owner Occupied ​ ​ 894,596 ​ 27 % ​ 716,963 ​ 25 % ​ 574,565 ​ 26 % Non-owner occupied ​ ​ 472,321 ​ 14 % ​ 391,040 ​ 13 % ​ 298,539 ​ 13 % Multi-family ​ ​ 332,757 ​ 10 % ​ 290,580 ​ 10 % ​ 238,353 ​ 11 % Construction & Development ​ ​ 200,835 ​ 6 % ​ 199,708 ​ 7 % ​ 132,454 ​ 6 % Residential 1-4 family ​ ​ 888,639 ​ 27 % ​ 739,514 ​ 25 % ​ 571,845 ​ 26 % Consumer ​ ​ 50,950 ​ 1 % ​ 44,963 ​ 2 % ​ 32,131 ​ 1 % Other Loans ​ ​ 14,983 ​ — % ​ 18,760 ​ 1 % ​ 21,461 ​ 1 % Total Loans ​ $ 3,342,974 ​ 100 % $ 2,893,978 ​ 100 % $ 2,235,514 ​ 100 % ​ Our directors and officers and their affiliates are customers of, and have other transactions with, the Bank in the normal course of business.
Alternatively, if the amount by which the fair value of assets purchased exceeds the fair value of liabilities assumed and consideration paid, a gain (bargain purchase gain) is recorded. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available.
Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available.
The Bank makes commercial and industrial loans, commercial real estate loans, construction and development loans, residential real estate loans, and a variety of consumer loans and other loans. Much of the loans made by the Bank are secured by real estate collateral.
Much of the loans made by the Bank are secured by real estate collateral.
Our off-balance sheet arrangements as of December 31, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts of Commitments Expiring - By Period as of December 31, 2022 ​ ​ ​ ​ ​ Less Than ​ One to ​ Three to ​ After Five Other Commitments Total One Year Three Years Five Years Years ​ ​ (dollars in thousands) Unused lines of credit ​ $ 660,564 ​ $ 299,202 ​ $ 91,567 ​ $ 52,037 ​ $ 217,758 Standby and direct pay letters of credit ​ 10,343 ​ 8,023 ​ 1,415 ​ 722 ​ 183 Credit card arrangements ​ 17,364 ​ — ​ — ​ — ​ 17,364 Total commitments ​ $ 688,271 ​ $ 307,225 ​ $ 92,982 ​ $ 52,759 ​ $ 235,305 ​ We closely monitor the amount of our remaining future commitments to borrowers in light of prevailing economic conditions and adjust these commitments as necessary.
Our off-balance sheet arrangements as of December 31, 2023 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amounts of Commitments Expiring - By Period as of December 31, 2023 ​ ​ ​ ​ ​ Less Than ​ One to ​ Three to ​ After Five Other Commitments Total One Year Three Years Five Years Years ​ ​ (dollars in thousands) Unused lines of credit ​ $ 799,398 ​ $ 369,800 ​ $ 129,181 ​ $ 66,070 ​ $ 234,347 Standby and direct pay letters of credit ​ 9,785 ​ 7,615 ​ 1,407 ​ 580 ​ 183 Credit card arrangements ​ 21,213 ​ — ​ — ​ — ​ 21,213 Total commitments ​ $ 830,396 ​ $ 377,415 ​ $ 130,588 ​ $ 66,650 ​ $ 255,743 ​ We closely monitor the amount of our remaining future commitments to borrowers in light of prevailing economic conditions and adjust these commitments as necessary.
The major components of our noninterest expense are listed in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ December 31, ​ ​ ​ 2022 ​ 2021 (In thousands) ​ ​ ​ ​ ​ ​ Noninterest Expense ​ ​ ​ Salaries, commissions, and employee benefits ​ ​ $ 33,155 ​ $ 28,515 Occupancy ​ ​ 5,467 ​ 4,198 Data Processing ​ ​ 6,324 ​ 5,344 Postage, stationary, and supplies ​ ​ 771 ​ 713 Net loss on sales of securities ​ ​ — ​ 3 Advertising ​ ​ 271 ​ 227 Charitable contributions ​ ​ 718 ​ 534 Outside service fees ​ ​ 6,727 ​ 3,076 Amortization of intangibles ​ ​ 2,318 ​ 1,405 Other ​ ​ 6,348 ​ 6,541 Total noninterest expenses ​ ​ $ 62,099 ​ $ 50,556 ​ Income Tax Expense.
These acquisitions also resulted in several former bank branches of those institutions becoming other real estate owned, leading to the significant losses on sales and valuations of these buildings during 2023.The major components of our noninterest expense are listed in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ December 31, ​ ​ ​ 2023 ​ 2022 (In thousands) ​ ​ ​ ​ ​ ​ Noninterest Expense ​ ​ ​ Salaries, commissions, and employee benefits ​ ​ $ 40,355 ​ $ 33,155 Occupancy ​ ​ ​ 5,670 ​ ​ 5,467 Data processing ​ ​ 8,011 ​ 6,324 Postage, stationary, and supplies ​ ​ 1,084 ​ 771 Advertising ​ ​ 326 ​ 271 Charitable contributions ​ ​ 944 ​ ​ 718 Outside service fees ​ ​ 6,350 ​ 6,727 Net loss (gain) on sales and valuations of other real estate owned ​ ​ 2,133 ​ (146) Net loss on sales of securities ​ ​ 7,901 ​ — Amortization of intangibles ​ ​ 6,324 ​ 2,318 Other ​ ​ 9,021 ​ 6,348 Total noninterest expenses ​ ​ $ 88,119 ​ $ 61,953 ​ ​ ​ ​ ​ ​ ​ ​ ​ Income Tax Expense.
Deposits increased $531.8 million, or 21.0%, to $3.06 billion at December 31, 2022 from $2.53 billion at December 31, 2021. Borrowings. At December 31, 2022 and 2021, borrowings consisted of advances from the FHLB of Chicago and subordinated debt to other banks. FHLB borrowings totaled $1.9 million and $8.0 million at December 31, 2022 and 2021, respectively.
Deposits increased $372.7 million, or 12.2%, to $3.43 billion at December 31, 2023 from $3.06 billion at December 31, 2022. Borrowings. At December 31, 2023 and 2022, borrowings consisted of advances from the FHLB of Chicago, subordinated debt to other banks and a junior subordinated debenture related to the Hometown Bancorp, Ltd. Capital Trust I.
Our C&I portfolio totaled $492.5 million, $366.2 million and $445.0 million at December 31, 2022, 2021 and 2020, respectively, and represented 17%, 16% and 20% of our total loans, respectively. C&I loans increased 34.5% during 2022, primarily as a result of loans acquired from Denmark during 2022, slightly offset by significant levels of PPP loans being forgiven during the year.
C&I loans increased 34.5% during 2022 primarily as a result of loans acquired from Denmark during 2022, slightly offset by significant levels of PPP loans being forgiven during the year. Commercial Real Estate (CRE).
The Company had outstanding balances of $6.0 million under these agreements as of December 31, 2022. These notes were issued with 10-year maturities, carry interest at a fixed rate of 5.25% through August 6, 2027, and at a variable rate thereafter, payable quarterly.
These notes were issued with 10-year maturities, carry interest at a fixed rate of 5.25% through August 6, 2027, and at a variable rate thereafter, payable quarterly. These notes are callable on or after August 6, 2027 and qualify for Tier 2 capital for regulatory purposes.
At December 31, 2022 and December 31, 2021, all of the loans to directors and officers were performing according to their original terms. Loan categories The principal categories of our loan portfolio are discussed below: Commercial and Industrial (C&I).
At December 31, 2023 and December 31, 2022, all of the loans to directors and officers were performing according to their original terms. Loan segments Changes in the principal segments of our loan portfolio are discussed below. Descriptions of and risks related to these segments can be found in the consolidated financial statements and footnotes presented elsewhere in this report.
Our other loans totaled $18.8 million, $21.5 million and $37.9 million at December 31, 2022, 2021 and 2020, respectively, and are immaterial to the overall loan portfolio. The other loans category consists primarily of overdrawn depository accounts, loans utilized to purchase or carry securities and loans to nonprofit organizations. Loan Portfolio Maturities.
The other loans category consists primarily of overdrawn depository accounts, loans utilized to purchase or carry securities and loans to nonprofit organizations. 53 Table of Contents Loan Portfolio Maturities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTherefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Company’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Company’s overall asset/liability management process is to facilitate meaningful strategy development and implementation.
Biggest changeAccordingly, the Company’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Company’s overall asset/liability management process is to facilitate meaningful strategy development and implementation. 65 Table of Contents Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios; the collective impact of which will enable the Company to clearly understand the nature and extent of its sensitivity to interest rate changes.
Although our economic value of equity analysis provides an indication of our interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on the economic value of our equity and will differ from actual results. ​ 67 Table of Contents
Although our economic value of equity analysis provides an indication of our interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on the economic value of our equity and will differ from actual results. ​ 66 Table of Contents
At the same date, our analysis estimated that, in the event of an instantaneous 100 basis point decrease in interest rates, the Company would experience 3.46% decrease in the economic value of equity.
At the same date, our analysis estimated that, in the event of an instantaneous 100 basis point decrease in interest rates, the Company would experience 2.10% decrease in the economic value of equity.
The following tables demonstrate the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock,” in the yield curve and subjective adjustments in deposit pricing might have on the Company’s projected net interest income over the next 12 months.
The following table demonstrates, as of December 31, 2023, the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock,” in the yield curve and subjective adjustments in deposit pricing might have on the Company’s projected net interest income over the next 12 months.
The Company’s economic value of equity analysis as of December 31, 2022 estimated that, in the event of an instantaneous 200 basis point increase in interest rates, the Company would experience a 2.16% increase in the economic value of equity.
The Company’s economic value of equity analysis as of December 31, 2023 estimated that, in the event of an instantaneous 200 basis point increase in interest rates, the Company would experience a 4.05% increase in the economic value of equity.
This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months. The changes to net interest income shown below are in compliance with the Company’s policy guidelines.
This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months.
The results of these reports are compared to limits established by the Company’s ALCO policies and appropriate adjustments are made if the results are outside the established limits. 66 Table of Contents There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic/political/regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, etc.; and, can last for varying degrees of time.
There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic/political/regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, etc.; and, can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty.
As of December 31, 2022: ​ ​ ​ ​ Change in Interest Rates Percentage Change in (in Basis Points) Net Interest Income +400 3.6% +300 2.7% +200 2.1% +100 1.5% -100 (4.4)% ​ As of December 31, 2021: ​ ​ ​ ​ Change in Interest Rates Percentage Change in (in Basis Points) ​ Net Interest Income +400 9.3% +300 7.6% +200 6.2% +100 3.6% -100 (4.3)% ​ Economic Value of Equity Analysis.
The changes to net interest income shown below are in compliance with the Company’s policy guidelines. ​ ​ ​ ​ Change in Interest Rates Percentage Change in (in Basis Points) Net Interest Income +400 0.1% +300 0.1% +200 0.1% +100 0.2% -100 (0.1)% ​ ​ Economic Value of Equity Analysis.
Removed
Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios; the collective impact of which will enable the Company to clearly understand the nature and extent of its sensitivity to interest rate changes.
Added
The results of these reports are compared to limits established by the Company’s ALCO policies and appropriate adjustments are made if the results are outside the established limits.

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