21 unchanged sentences
The Bank is a 49.8% member of a data processing subsidiary, UFS, LLC, which provides core data processing, endpoint management cloud services, cyber security and digital banking solutions for over 60 Midwest banks.
−Removed: The Bank, through its 100% owned subsidiary TVG Holdings, Inc., also holds a 40% (up from 30% due to a purchase of member interest on October 1, 2019) ownership interest in Ansay & Associates, LLC, an insurance agency providing clients primarily located in Wisconsin with insurance and risk management solutions.
+Added: 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.
1 unchanged sentence
The Company employs approximately 287 full-time equivalent employees and has an assets-to-FTE ratio of approximately $10.2 million.
−Removed: For more information, see the Company’s website at www.bankfirstwi.bank.
+Added: For more information, see the Company’s website at www.bankfirst.com.
Recent acquisitions
+Added: Partnership Community Bancshares, Inc .
On July 12, 2019, the Company completed a merger with Partnership, a bank holding company headquartered in Cedarburg, Wisconsin, pursuant to the Agreement and Plan of Bank Merger, dated as of January 22, 2019 and as amended on April 30, 2019, by and among the Company and Partnership, whereby Partnership merged with and into the Company, and Partnership Bank, Partnership’s wholly-owned banking subsidiary, merged with and into the Bank.
3 unchanged sentences
The stock versus cash elections by the Partnership shareholders were subject to final consideration being made up of approximately $14.3 million in cash and 534,659 shares of Company common stock, valued at approximately $35.3 million (based on a value of $66.03 per share on the closing date).
−Removed: On May 15, 2020, the Company completed a merger with Timberwood, a bank holding company headquartered in Tomah, WI, pursuant to the Agreement and Plan of Bank Merger, dated as of November 20, 2019, by and among the Company and
−Removed: Timberwood, whereby Timberwood was merged with and into the Company, and Timberwood Bank, Timberwood's wholly owned banking subsidiary, was merged with and into the Bank.
+Added: Timberwood Bancshares, Inc .
+Added: On May 15, 2020, the Company completed a merger with Timberwood, a bank holding company headquartered in Tomah, WI, pursuant to the Agreement and Plan of Bank Merger, dated as of November 20, 2019, by and among the Company and Timberwood, whereby Timberwood was merged with and into the Company, and Timberwood Bank, Timberwood's wholly owned banking subsidiary, was merged with and into the Bank.
Timberwood's principal activity was the ownership and operation of Timberwood Bank, a state-chartered banking institution that operated one (1) branch in Wisconsin at the time of closing.
2 unchanged sentences
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.
−Removed: The Company accounted for these transactions under the acquisition method of accounting, and thus, the financial position and results of operations of Partnership and Timberwood prior to the consummation date were not included in the accompanying consolidated financial statements.
−Removed: The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition.
−Removed: The Company determined 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.
+Added: Denmark Bancshares, Inc.
+Added: On January 18, 2022, the Company entered into an Agreement and Plan of Merger with Denmark Bancshares, Inc.
+Added: (“Denmark”), a Wisconsin Corporation, pursuant to which Denmark will merge with and into the Company and Denmark’s banking subsidiary, Denmark State Bank, will merge with and into the Bank.
+Added: The transaction is expected to close during the third quarter of 2022 and is subject to, among other items, approval by the shareholders of both institutions and regulatory agencies.
+Added: Merger consideration will consist of up to 20% cash and no less than 80% of the common stock of the Company, and will total approximately $119 million, subject to the fair market value of the Company’s common stock on the date of closing.
+Added: Based on results as of December 31, 2021, the combined company would have total assets of approximately $3.6 billion, loans of approximately $2.7 billion, and deposits of approximately $3.1 billion.
+Added: 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.
+Added: The acquisition method of accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition.
+Added: 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 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.
−Removed: During the first quarter of 2020, COVID-19 was declared a global pandemic by the World Health Organization and a National Public Health Emergency was declared in the United States.
−Removed: Shortly before the end of March 2020, in response to the COVID-19 pandemic, the government of Wisconsin and of most other states took preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego their time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential.
−Removed: These preventative and protective actions within Wisconsin were lifted during May 2020, but continued uncertainty remains as future actions may be warranted based on the progression of the pandemic.
−Removed: The impact of the COVID-19 pandemic on the economy continues to evolve.
−Removed: The COVID-19 pandemic and its associated impacts on trade, travel, unemployment, consumer spending, and other economic activities has resulted in less economic activity and could have an adverse effect on our business, financial condition and results of operations.
−Removed: The ultimate extent of the impact of the COVID-19 pandemic on our business, financial condition and results of operations is currently uncertain and will depend on various developments and other factors, including, among others, the duration and scope of the pandemic, as well as governmental, regulatory and private sector responses to the pandemic, and the associated impacts on the economy, financial markets and our customers.
−Removed: In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020.
−Removed: The CARES Act provided an estimated $2.2 trillion to address the economic impact of the COVID-19 pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief.
−Removed: The CARES Act also included provisions to encourage financial institutions to work prudently with borrowers.
−Removed: On December 27, 2020, the Economic Aid Act was signed into law.
−Removed: This second coronavirus relief package granted additional funds for a new round of PPP loans.
−Removed: Additionally, it expanded the eligibility for loans and allows certain businesses to request a second loan.
−Removed: Under the CARES Act, banks may elect to deem that loan modifications do not result in troubled debt restructurings ("TDRs") if they are (1) related to COVID-19;
−Removed: (2) executed on a loan that was not more than 30 days past due as of December 31, 2019;
−Removed: and (3) executed between March 1, 2020 and the earlier of (A) 60 days after the date of termination of the national emergency declaration or (B) December 31, 2020.
−Removed: Additionally, in accordance with the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), other short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs under ASC Subtopic 310-40.
−Removed: This includes short-term (e.g.
−Removed: up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant.
−Removed: Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.
−Removed: Loans modified under this guidance are not considered TDRs.
−Removed: Our business, financial condition and results of operations generally rely upon the ability of our borrowers to repay their loans, the value of collateral underlying our secured loans, and demand for loans and other products and services we offer, which are highly dependent on the business environment in our primary markets.
−Removed: We have actively reached out to our customers to provide guidance, direction and assistance in these uncertain times.
−Removed: We also participated extensively in the PPP, under which we secured funding of approximately 1,875 loans totaling approximately $279.6 million, and continue that participation during the next phase of PPP that began during the first quarter of 2021.
+Added: COVID-19 and Recent Events
+Added: economy contracted in the first half of 2020, ending the longest expansionary period in U.S.
+Added: history, due to the COVID-19 pandemic.
+Added: During March 2020, in an effort to lessen the impact of COVID-19 on consumers and businesses, the Federal Reserve reduced the federal funds rate 1.5 percentage points to 0.00 to 0.25 percent and the U.S.
+Added: government enacted the CARES Act, the largest economic stimulus package in the nation’s history.
+Added: The Company responded to the pandemic, beginning in March 2020, by supporting our clients, employees, and communities with such measures as remote work capabilities and branch service enhancements, loan payment deferrals, and accelerated investments in several technology initiatives that provided more convenience and a better digital experience as clients adapted to this highly virtual environment.
+Added: The Company participated in the PPP and funded approximately 2,998 loans totaling approximately $377.5 million under the programs available in both 2020 and 2021.
+Added: Additional government spending measures and the availability of vaccines improved consumer confidence and demand, and the economy largely reopened in 2021, leading to a reduction in the unemployment rate and accelerated GDP growth.
+Added: While 2021 has seen a recovery in the U.S.
+Added: economy compared to 2020, uncertainty and market disruptions such as additional coronavirus variants, pandemic-related supply chain issues and labor shortages persist.
+Added: The economic expansion has been met with inflationary pressures that are expected to result in the Federal Open Market Committee policy-tightening in 2022, likely including multiple interest rate hikes.
+Added: With a strong asset-sensitive balance sheet and our strong position in our markets, we expect increases in loan demand and interest rates should improve returns going forward.
CRITICAL ACCOUNTING POLICIES
70 unchanged sentences
We are currently evaluating the impact of ASU 2016-13 on the consolidated financial statements, although the general expectation in the banking industry is that the implementation of this standard will result in higher required balances in the ALLL.
−Removed: In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350):
−Removed: Simplifying the Test for Goodwill Impairment.
−Removed: The amendments in this ASU were issued to address concerns over the cost and complexity of the two-step goodwill impairment test and resulted in the removal of the second step of the test.
−Removed: The amendments require an entity to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.
−Removed: The new guidance does not amend the optional qualitative assessment of goodwill impairment.
−Removed: This ASU is intended to reduce the cost and complexity of the two-step goodwill impairment test and was effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019.
−Removed: Upon adoption, the amendments were to be applied on a prospective basis and the entity was required to disclose the nature of and reason for the change in accounting principle upon transition.
−Removed: The adoption of this guidance did not have a significant impact on our consolidated financial statements.
+Added: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):
+Added: Facilitation of the Effects of Reference Rate Reform on Financial Reporting .
+Added: This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.
+Added: It provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.
+Added: The updated guidance is effective for all entities from March 12, 2020 through December 31, 2022.
+Added: The Corporation has been diligent in responding to reference rate reform and does not anticipate a significant impact to its financial statements as a result.
In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs.
5 unchanged sentences
Net income increased $7.4 million, or 19.4%, to $45.4 million for the year ended December 31, 2021, from $38.0 million for the year ended December 31, 2020.
−Removed: The primary reasons for the increase in profitability were increased net interest and service charge income from the added scale as a result of the acquisitions of Partnership and Timberwood, significant growth in our loan portfolio through participation in PPP, and robust retail mortgage lending which led to a large increase in gains on sales of mortgage loans to the secondary market.
−Removed: This was offset by larger provisions for loan losses during 2020, as well as increased expenses related to personnel, facilities and data processing as part of the same added scale from the aforementioned acquisitions.
−Removed: 2020 profitability was further negatively impacted by higher losses on sales of foreclosed properties and a penalty related to the early extinguishment of long-term debt.
+Added: The primary reasons for the increase in profitability were increased net interest, a reduced provision for loan losses during 2021, robust retail mortgage lending which led to a large increase in gains on sales of mortgage loans to the secondary market, reduced losses on sales and valuations of OREO and a significant penalty for the early extinguishment of debt during 2020 that did not recur during 2021.
+Added: This was offset by a small loss on sales of securities during 2021 that compared unfavorably to a gain of $3.2 million on these sales during 2020 as well as a $1.7 million gain on the sale of a branch location during 2020 with no similar gain during 2021.
Net Interest Income.
6 unchanged sentences
Net interest income after provision for loan losses increased by $7.3 million to $87.0 million for the year ended December 31, 2021, from $79.7 million for the year ended December 31, 2020.
−Removed: Interest income on loans increased by $12.3 million, or 14.9%, from 2019 to 2020.
+Added: Interest income on loans decreased by $1.9 million, or 1.9%, from 2020 to 2021.
Total average interest-earning assets increased to $2.63 billion for the year ended December 31, 2021 from $2.31 billion for the year ended December 31, 2020.
1 unchanged sentence
Interest Income.
−Removed: Total interest income increased $11.5 million, or 12.9%, to $100.7 million for the year ended December 31, 2020, up from $89.2 million for the year ended December 31, 2019.
−Removed: As noted, the increase was primarily due to loan growth from the acquisitions of Partnership and Timberwood, as well as participation in PPP.
−Removed: The average balance of loans increased by $466.9 million during 2020.
+Added: Total interest income decreased $2.3 million, or 2.30%, to $98.4 million for the year ended December 31, 2021, down from $100.7 million for the year ended December 31, 2020.
+Added: This decrease was primarily due to yield on loans decreasing by 50 basis points from 4.75% during 2020 to 4.25% during 2021, which more than offset the $185.1 million increase in average balances of loans during 2021.
Interest Expense.
1 unchanged sentence
The decrease was driven by declines in the average cost of interest-bearing liabilities, falling 39 basis points from 0.87% to 0.48%.
−Removed: This decline was primarily the result of a significantly lower interest rate environment that developed through the first half of 2020.
+Added: This decline was primarily the result of a significantly lower interest rate environment that developed through the first half of 2020 and continued throughout 2021.
Interest expense on interest-bearing deposits decreased by $4.9 million to $7.5 million for the year ended December 31, 2021, from $12.5 million for the year ended December 31, 2020.
10 unchanged sentences
We recorded a provision for loan losses of $3.1 million for the year ended December 31, 2021, compared to $7.1 million for the year ended December 31, 2020.
−Removed: Significant charge-offs occurring during the third quarter of 2019 necessitated increased provisions for loan losses during 2019.
−Removed: These charge-offs were the result of exiting certain relationships during that quarter which were originally acquired as part of the Waupaca transaction.
−Removed: Despite having significantly reduced charge-offs during 2020, economic uncertainties as a result of the COVID-19 pandemic required a build-up of our ALLL, resulting in higher provision expense.
+Added: Provision expense was elevated during 2020 in response to uncertainty created by COVID-19 and society’s response to it.
+Added: Actual asset quality metrics during the course of 2021 remained strong, however, and allowed for a reduction in provision expense during that year.
The ALLL was $20.3 million, or 0.91% of total loans, at December 31, 2021 compared to $17.7 million, or 0.81% of total loans at December 31, 2020.
+Added: The increase in ALLL coverage to total loans from December 31, 2020, to December 31, 2021, was primarily due to a smaller percentage of the Company’s loan portfolio accounted for under purchase accounting year-over-year.
+Added: Under the Company’s current allowance methodology, loans which are accounted for under purchase accounting do not require an ALLL reserve allocation.
Noninterest Income.
1 unchanged sentence
A significant portion of our noninterest income is associated with service charges and income from the Bank’s unconsolidated subsidiaries, Ansay and UFS.
−Removed: Other sources of noninterest income include loan servicing fees, gains on sales of mortgage loans, and other income from strategic alliances.
−Removed: Noninterest income increased $10.9 million to $23.5 million in 2020 compared to $12.6 million in 2019.
−Removed: Service charges increased by $1.5 million, or 42.7%, from 2019 to 2020, the result of new markets and added scale from three acquisitions in slightly more than three years.
−Removed: Income from Ansay increased by $0.9 million as a result of modestly higher profitability at that organization as well as the increase in our ownership during October 2019.
−Removed: Loan servicing income and net gain on sales of mortgage loans increased by $0.9 and $3.9 million from 2019 to 2020, the result of a robust residential mortgage lending environment during 2020 spurred by historically low mortgage interest rates.
+Added: Other sources of noninterest income include loan servicing fees and gains on sales of mortgage loans.
+Added: Noninterest income was $23.5 million for 2021, matching non-interest income during 2020.
+Added: Service charges increased by $1.1 million, or 22.5%, from 2020 to 2021, as a result of new markets and added scale from three acquisitions during the previous four years.
+Added: Loan servicing income and net gain on sales of mortgage loans increased by $2.4 million and $2.1 million from 2020 to 2021, respectively, as a result of a robust residential mortgage lending environment during 2021 spurred by historically low mortgage interest rates.
Due to uncertainty about liquidity needs in financial markets during the early days of the COVID-19 pandemic, the Company sold approximately $34.0 million in U.S.
−Removed: Treasury Securities during the second quarter of 2020, resulting in a gain on sale of securities of $3.2 million, an increase of $2.6 million over 2019.
−Removed: Finally, the Company recorded a $1.7 million gain on the sale of a branch location during December 2020, causing other noninterest income to increase year-over-year.
+Added: Treasury Securities during the second quarter of 2020, resulting in a gain on sale of securities of $3.2 million.
+Added: This compared favorably to small losses on sales of securities during 2021.
+Added: Finally, the Company recorded a $1.7 million gain on the sale of a branch location during December 2020.
+Added: There was no similar sale during 2021, causing other noninterest income to decrease year-over-year.
The major components of our noninterest income are listed in the table below:
−Removed: For the Years
−Removed: Ended December 31,
+Added: For the Years Ended
(In thousands)
6 unchanged sentences
Net gain on sales of securities
−Removed: Noninterest income from strategic alliances
Total noninterest income
Noninterest Expense.
−Removed: Noninterest expense increased $10.6 million to $53.4 million for the year ended December 31, 2020, up from $42.8 million for the year ended December 31, 2019.
−Removed: Year-over-year, personnel expense increased $4.4 million, or 19.1%, occupancy expense increased $0.9 million, or 22.3%, data processing increased $1.0 million, or 22.3%, outside service fees increased $1.1 million, or 35.2%, and amortization of intangibles increased $0.6 million, or 53.0% the result of added scale and expenses from acquisitions of Partnership and Timberwood during 2019 and 2020.
−Removed: Postage, stationary, and supplies increased by $0.3 million, or 47.6%, from 2019 to 2020 as a result of costs associated with the Company’s response to the COVID-19 pandemic.
+Added: Noninterest expense decreased $2.8 million to $50.5 million for the year ended December 31, 2021, down from $53.4 million for the year ended December 31, 2020.
+Added: Personnel expense increased $1.2 million, or 4.6%, primarily as a result of customary annual salary increases.
+Added: Occupancy expense decreased $0.5 million, or 11.0%, data processing decreased $0.2 million, or 3.1%, and outside service fees decreased $1.0 million, or 25.2%, primarily as a result of the Company completing an acquisition of another institution during 2020 with no corresponding acquisition during 2021.
+Added: These areas of noninterest expense are typically elevated during years where acquisitions occur.
The Company had sales of two large foreclosed properties scheduled to close late in the first quarter of 2020 which would have resulted in modest losses.
−Removed: Due to the economic turmoil that resulted during the last several weeks of that quarter, terms of these sales were negatively impacted.
−Removed: Rather than hold these properties heading into this time of uncertainty, the Company chose to accept the reduced terms, causing significant losses on these sales that were the primary components of $1.4 million in total losses on sales and valuations of other real estate owned, compared to gains of $0.1 million during 2019.
+Added: Due to the economic turmoil that resulted during the last several weeks of the first quarter of 2020, terms of these sales were negatively impacted.
+Added: Rather than hold these properties heading into this time of uncertainty, the Company chose to accept the reduced terms, causing significant losses on these sales that were the primary components of $1.4 million in total losses on sales and valuations of other real estate owned during 2020.
+Added: During 2021 the Company experienced a small overall gain on these types of transactions, creating a very favorable year-over-year comparison.
Finally, during the second quarter of 2020 the Company paid off $30.0 million in borrowings from the Federal Home Loan Bank of Chicago which had contractual maturities ranging from August 2022 through August 2024, resulting in prepayment penalties of $1.3 million, but saving the Company $1.7 million in interest over the next four years.
+Added: There was no similar action during 2021.
The major components of our noninterest expense are listed in the table below.
−Removed: For the Years
−Removed: Ended December 31,
+Added: For the Years Ended
(In thousands)
11 unchanged sentences
We recorded a provision for income taxes of $14.5 million for the year ended December 31, 2021, compared to $11.8 million for the year ended December 31, 2020, reflecting effective tax rates of 24.2% and 23.7%, respectively.
−Removed: The effective tax rate for 2020 increased due to the fact that tax- exempt interest remained consistent year-over-year while other taxable components of income increased significantly.
Results of Operations for the Years Ended December 31, 2020 and 2019
Net income increased $11.3 million, or 42.5%, to $38.0 million for the year ended December 31, 2020, from $26.7 million for the year ended December 31, 2019.
−Removed: The primary reason for the increase in profitability was increased net interest income from the added scale as a result of the acquisition of Partnership, which impacted the second half of 2019.
−Removed: This was offset by larger provisions for loan losses during 2019, which were required due to significant charge-offs related to exiting certain relationships which were obtained through the Waupaca acquisition.
+Added: The primary reasons for the increase in profitability were increased net interest and service charge income from the added scale as a result of the acquisitions of Partnership and Timberwood, significant growth in our loan portfolio through participation in PPP, and robust retail mortgage lending which led to a large increase in gains on sales of mortgage loans to the secondary market.
+Added: This was offset by larger provisions for loan losses during 2020, as well as increased expenses related to personnel, facilities and data processing as part of the same added scale from the aforementioned acquisitions.
+Added: 2020 profitability was further negatively impacted by higher losses on sales of foreclosed properties and a penalty related to the early extinguishment of long-term debt.
Net Interest Income.
2 unchanged sentences
Total average interest-earning assets increased to $2.31 billion for the year ended December 31, 2020 from $1.81 billion for the year ended December 31, 2019.
−Removed: The Bank’s net interest margin increased 6 basis points to 3.95% for the year ended December 31, 2019, up from 3.89% for the year ended December 31, 2018.
+Added: The Bank’s net interest margin decreased 11 basis points to 3.84% for the year ended December 31, 2020, down from 3.95% for the year ended December 31, 2019.
Interest Income.
Total interest income increased $11.5 million, or 12.9%, to $100.7 million for the year ended December 31, 2020, up from $89.2 million for the year ended December 31, 2019.
−Removed: As noted, the increase was primarily due to loan growth from the acquisition of Partnership.
+Added: As noted, the increase was primarily due to loan growth from the acquisitions of Partnership and Timberwood, as well as participation in PPP.
The average balance of loans increased by $466.9 million during 2020.
−Removed: Interest income was also aided by a generally rising interest rate environment which occurred throughout 2018 and the first half of 2019.
Interest Expense.
−Removed: Interest expense increased $4.7 million, or 31.3%, to $19.5 million for the year ended December 31, 2019, up from $14.8 million for the year ended December 31, 2018.
−Removed: The increase was driven by a $53.7 million increase in the average balance of interest-bearing liabilities as well as an increase in the average cost of interest-bearing liabilities, rising 32 basis points from 1.25% to 1.57%.
−Removed: As noted above, a generally rising interest rate environment occurred throughout 2018 and the first half of 2019.
−Removed: Interest expense from other borrowed funds decreased $0.9 million from 2018 to 2019, primarily due to a decrease of 57.8 million in the average balance of other borrowings year-over-year.
−Removed: Interest expense on interest-bearing deposits increased by $5.5 million to $17.9 million for the year ended December 31, 2019, from $12.4 million for the year ended December 31, 2018.
−Removed: This increase was primarily due to a higher interest rate environment along with elevated levels of interest-bearing deposits from the acquisition of Partnership, which impacted the second half of 2019.
+Added: Interest expense decreased $5.6 million, or 28.9%, to $13.9 million for the year ended December 31, 2020, down from $19.5 million for the year ended December 31, 2019.
+Added: The decrease was driven by declines in the average cost of interest-bearing liabilities, falling 70 basis points from 1.57% to 0.87%.
+Added: This decline was primarily the result of a significantly lower interest rate environment that developed through the first half of 2020.
+Added: Interest expense on interest-bearing deposits decreased by $5.4 million to $12.5 million for the year ended December 31, 2020, from $17.9 million for the year ended December 31, 2019.
+Added: This decrease was primarily due to the aforementioned lower interest rate environment, allowing the Company to significantly reduce crediting interest rates on non-time, interest-bearing deposit accounts.
The average cost of interest-bearing deposits was 0.83% for the year ended December 31, 2020, compared to 1.50% for the year ended December 31, 2019.
3 unchanged sentences
These charge-offs were the result of exiting certain relationships during that quarter which were originally acquired as part of the Waupaca transaction.
−Removed: These relationships were never anticipated to be long-term relationships for the Company, and this action had been foreshadowed since the transaction occurred during 2017.The ALLL was $11.4 million, or 0.66% of total loans, at December 31, 2019 compared to $12.2 million, or 0.86% of total loans at December 31, 2018.
+Added: Despite having significantly reduced charge-offs during 2020, economic uncertainties as a result of the COVID-19 pandemic required a build-up of our ALLL, resulting in higher provision expense.
+Added: The ALLL was $17.7 million, or 0.81% of total loans, at December 31, 2020 compared to $11.4 million, or 0.66% of total loans at December 31, 2019.
Noninterest Income.
Noninterest income increased $10.9 million to $23.5 million in 2020 compared to $12.6 million in 2019.
−Removed: Income from Ansay decreased by $0.3 million as a result of lower contingency income recorded during 2019 compared to 2018.
−Removed: As an insurance broker, Ansay’s profitability is subject to ongoing volatility due to variable claim history from year-to-year, which impacts the level of contingency income they receive.
−Removed: Income from UFS increased by $0.4 million from 2018 to 2019, the result of an increase in their customer base.
−Removed: Loan servicing income decreased by $0.9 million from 2018 to 2019.
−Removed: This decrease was the result of a negative valuation adjustment to the Bank’s mortgage servicing rights asset of $0.7 million during 2019 versus a positive valuation adjustment of $0.4 million during 2018.
−Removed: Offsetting this, however, was an increase of $0.8 million in gains on sales of mortgage loans on the secondary market year-over-year.
−Removed: Finally, a restructuring of the Bank’s investment portfolio during 2019 led to a gain on sale of investments of $0.9 million, an increase over a negligible loss during 2018.
+Added: Service charges increased by $1.5 million, or 42.7%, from 2019 to 2020, the result of new markets and added scale from three acquisitions in slightly more than three years.
+Added: Income from Ansay increased by $0.9 million as a result of modestly higher profitability at that organization as well as the increase in our ownership during October 2019.
+Added: Loan servicing income and net gain on sales of mortgage loans increased by $0.9 and $3.9 million from 2019 to 2020, the result of a robust residential mortgage lending environment during 2020 spurred by historically low mortgage interest rates.
+Added: Due to uncertainty about liquidity needs in financial markets during the early days of the COVID-19 pandemic, the Company sold approximately $34.0 million in U.S.
+Added: Treasury Securities during the second quarter of 2020, resulting in a gain on sale of securities of $3.2 million, an increase of $2.6 million over 2019.
+Added: Finally, the Company recorded a $1.7 million gain on the sale of a branch location during December 2020, causing other noninterest income to increase year-over-year.
The major components of our noninterest income are listed in the table below:
8 unchanged sentences
Net gain on sales of mortgage loans
−Removed: Net gain (loss) on sales of securities
+Added: Net gain on sales of securities
Noninterest income from strategic alliances
2 unchanged sentences
Noninterest expense increased $10.6 million to $53.4 million for the year ended December 31, 2020, up from $42.8 million for the year ended December 31, 2019.
−Removed: Personnel expense increased $1.4 million, or 6.5%, year-over-year, the result of staffing four additional locations for the second half of 2019 after the Partnership acquisition.
−Removed: Equipment and data processing expense as well as amortization of intangibles also all increased significantly from 2018 to 2019 as a result of the Partnership acquisition.
−Removed: Outside service fees were also negatively impacted by the Partnership acquisition during 2019, but this impact was more than offset by the lack of expenses that were incurred during 2018 during the process of becoming an SEC registrant.
−Removed: Charitable contributions returned to normal levels during 2019 after seeing several large one-time contributions during 2018.
+Added: Year-over-year, personnel expense increased $4.4 million, or 19.1%, occupancy expense increased $0.9 million, or 22.3%, data processing increased $1.0 million, or 22.3%, outside service fees increased $1.1 million, or 35.2%, and amortization of intangibles increased $0.6 million, or 53.0% the result of added scale and expenses from acquisitions of Partnership and Timberwood during 2019 and 2020.
+Added: Postage, stationary, and supplies increased by $0.3 million, or 47.6%, from 2019 to 2020 as a result of costs associated with the Company’s response to the COVID-19 pandemic.
+Added: The Company had sales of two large foreclosed properties scheduled to close late in the first quarter of 2020 which would have resulted in modest losses.
+Added: Due to the economic turmoil that resulted during the last several weeks of that quarter, terms of these sales were negatively impacted.
+Added: Rather than hold these properties heading into this time of uncertainty, the Company chose to accept the reduced terms, causing significant losses on these sales that were the primary components of $1.4 million in total losses on sales and valuations of other real estate owned, compared to gains of $0.1 million during 2019.
+Added: Finally, during the second quarter of 2020 the Company paid off $30.0 million in borrowings from the Federal Home Loan Bank of Chicago which had contractual maturities ranging from August 2022 through August 2024, resulting in prepayment penalties of $1.3 million, but saving the Company $1.7 million in interest over the next four years.
The major components of our noninterest expense are listed in the table below.
6 unchanged sentences
Postage, stationary, and supplies
−Removed: Net (gain) loss on sales and valuation of ORE
+Added: Net loss (gain) on sales and valuation of ORE
Charitable Contributions
1 unchanged sentence
Amortization of intangibles
+Added: Penalty for early extinguishment of debt
Total noninterest expenses
1 unchanged sentence
We recorded a provision for income taxes of $11.8 million for the year ended December 31, 2020, compared to $7.6 million for the year ended December 31, 2019, reflecting effective tax rates of 23.7% and 22.1%, respectively.
−Removed: The effective tax rate for 2019 increased due to certain nondeductible expenses incurred as part of the Partnership acquisition.
+Added: The effective tax rate for 2020 increased due to the fact that tax- exempt interest remained consistent year-over-year while other taxable components of income increased significantly.
NET INTEREST MARGIN
31 unchanged sentences
Shareholders’ equity
−Removed: Total liabilities & sharesholders’ equity
+Added: Total liabilities & shareholders’ equity
Net interest income on a fully taxable equivalent basis
22 unchanged sentences
(dollars in thousands)
−Removed: Interest income Loans Taxable
−Removed: Taxable (available for sale)
−Removed: Tax-exempt (available for sale)
−Removed: Taxable (held to maturity)
−Removed: Tax-exempt (held to maturity)
+Added: Interest income
+Added: Taxable (AFS)
+Added: Tax-exempt (AFS)
+Added: Taxable (HTM)
+Added: Tax-exempt (HTM)
Cash and due from banks
Total interest income
−Removed: Interest expense Deposits
+Added: Interest expense
Checking accounts
13 unchanged sentences
Investment Securities.
−Removed: The carrying value of total investment securities decreased by $53.5 million to $171.7 million at December 31, 2020 from $225.2 million at December 31, 2019.
+Added: The carrying value of total investment securities increased by $46.9 million to $218.6 million at December 31, 2021 from $171.7 million at December 31, 2020.
Net loans increased by $41.4 million, or 1.9%, to $2.22 billion at December 31, 2021 from $2.17 billion at December 31, 2020.
2 unchanged sentences
Deposits increased $207.5 million, or 8.9%, to $2.53 billion at December 31, 2021 from $2.32 billion at December 31, 2020.
−Removed: At December 31, 2020, borrowings consisted of advances from the FHLB of Chicago and subordinated debt to other banks.
−Removed: At December 31, 2019, borrowings also included notes payable to other banks.
−Removed: FHLB borrowings totaled $23.5 million at December 31, 2020.
−Removed: FHLB borrowings and notes payable to other banks totaled $39.8 million and $10.0 million, respectively, at December 31, 2019.
−Removed: Subordinated debt decreased $1.1 million to $17.5 million at December 31, 2020 from $18.6 million at December 31, 2019.
+Added: At December 31, 2021 and 2020, borrowings consisted of advances from the FHLB of Chicago and subordinated debt to other banks.
+Added: FHLB borrowings totaled $8.0 million and $23.5 million at December 31, 2021 and 2020, respectively.
+Added: Subordinated debt totaled at $17.5 million at December 31, 2021 and 2020.
Stockholders’ Equity.
10 unchanged sentences
Total loans increased $44.1 million, or 2.0%, to $2.24 billion as of December 31, 2021 as compared to $2.19 billion as of December 31, 2020.
−Removed: Our loan growth during the year ended December 31, 2020 has been comprised of an increase of $142.6 million or 47.2% in commercial and industrial loans, an increase of $179.1 million or 22.0% in commercial real estate loans, an increase of $7.9 million or 6.0% in construction and development loans, an increase of $97.2 million or 21.7% in residential 1-4 family loans and an increase of $28.3 million or 70.7% in consumer and other loans.
−Removed: The increase in loans during the year ended December 31, 2020 is attributable to loans purchased as part of the Timberwood transaction along with significant commercial and industrial loan growth as a result of participating in PPP.
+Added: Our loan growth during the year ended December 31, 2021 has been comprised of an decrease of $78.8 million or 17.7% in commercial and industrial loans, an increase of $119.2 million or 12.0% in commercial real estate loans, a decrease of $7.6 million or 5.4% in construction and development loans, an increase of $26.0 million or 4.8% in residential 1-4 family loans and a decrease of $14.7 million or 21.6% in consumer and other loans.
Total loans increased $455.1 million, or 26.2%, to $2.19 billion as of December 31, 2020 as compared to $1.74 billion as of December 31, 2019.
Our loan growth during the year ended December 31, 2020 has been comprised of an increase of $142.6 million or 47.2% in commercial and industrial loans, an increase of $179.1 million or 22.0% in commercial real estate loans, an increase of $7.9 million or 6.0% in construction and development loans, an increase of $97.2 million or 21.7% in residential 1-4 family loans and an increase of $28.3 million or 70.7% in consumer and other loans.
−Removed: The increase in loans during the year ended December 31, 2019 is attributable to loans purchased as part of the Partnership transaction along with modest organic loan growth.
−Removed: This was offset by a reduction in loans which were acquired as part of the Waupaca transaction, which were primarily poor quality, out-of-market loan relationships which were never intended to be a long-term part of the Bank’s portfolio.
+Added: The significant increase in loans during the year ended December 31, 2020 is attributable to loans purchased as part of the Timberwood transaction along with significant commercial and industrial loan growth as a result of participating in the PPP loan program.
The following table presents the balance and associated percentage of each major category in our loan portfolio at December 31, 2021, 2020, and 2019:
Commercial & industrial
−Removed: Commercial & industrial
−Removed: Deferred costs net of unearned fees
−Removed: Total commercial & industrial
Commercial real estate
1 unchanged sentence
Non-owner occupied
−Removed: Deferred costs net of unearned fees
−Removed: Total commercial real estate
Construction & Development
−Removed: Construction & Development
−Removed: Deferred costs net of unearned fees
−Removed: Total construction & development
Residential 1-4 family
−Removed: Residential 1-4 family
−Removed: Deferred costs net of unearned fees
−Removed: Total residential 1-4 family
−Removed: Deferred costs net of unearned fees
−Removed: Total consumer
−Removed: Deferred costs net of unearned fees
−Removed: Total other loans
−Removed: Our directors and officers and their associates are customers of, and have other transactions with, the Bank in the normal course of business.
+Added: Our directors and officers and their affiliates are customers of, and have other transactions with, the Bank in the normal course of business.
All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collection or present other unfavorable features.
−Removed: At December 31, 2020 and December 31, 2019, total loans outstanding to such directors and officers and their associates were $67.1 million and $68.6 million, respectively.
+Added: At December 31, 2021 and December 31, 2020, total loans outstanding to such directors and officers and their affiliates were $73.5 million and $67.1 million, respectively.
During the year ended December 31, 2021, $24.7 million of additions and $18.4 million of repayments were made to these loans, compared to $54.7 million of additions and $56.2 million of repayments during the year ended December 31, 2020.
4 unchanged sentences
Our C&I portfolio totaled $366.2 million, $445.0 million and $302.4 million at December 31, 2021, 2020 and 2019, respectively, and represented 16%, 20% and 17% of our total loans, respectively.
+Added: C&I loans decreased 17.7% during 2021, primarily the result of significant levels of PPP loans being forgiven during the year.
C&I loans increased 47.2% during 2020, primarily as a result of loans made through PPP and secondarily as a result of the Timberwood acquisition.
C&I loans increased 1.7% in 2019.
−Removed: C&I loans increased 12.8% during 2018 due to the increased business needs of customers in our markets in response to strong economic conditions in those markets.
Our C&I loan customers represent various small and middle-market established businesses involved in professional services, accommodation and food services, health care, financial services, wholesale trade, manufacturing, distribution, retailing and non-profits.
4 unchanged sentences
Commercial Real Estate (CRE).
−Removed: ur CRE loan portfolio totaled $992.2 million, $813.1 million and $668.3 million at December 31, 2020, 2019 and 2018, respectively, and represented 45%, 47% and 47% of our total loans, respectively.
+Added: Our CRE loan portfolio totaled $1.11 billion, $992.2 million and $813.1 million at December 31, 2021, 2020 and 2019, respectively, and represented 50%, 45% and 47% of our total loans, respectively.
+Added: Our CRE loans increased 12.0% during 2021, primarily as a result of a backlog from 2020 when developers were cautious to start projects during the early stages of COVID-19.
Our CRE loans increased 22.0% during 2020, primarily as a result of the Timberwood acquisition.
Our CRE loans increased 21.7% during 2019 due primarily to the Partnership acquisition.
−Removed: Our CRE loans increased 3.8% during 2018 due to modest organic loan growth spurred by the business needs of customers in our markets, offset by a planned reduction in out-of-market CRE loans acquired in the Waupaca acquisition that was planned at the time of acquisition
Our CRE loans are secured by a variety of property types including multifamily dwellings, retail facilities, office buildings, commercial mixed use, lodging and industrial and warehouse properties.
1 unchanged sentence
Our commercial real estate loans are generally for terms up to twenty years, with loan-to-values that generally do not exceed 85%.
−Removed: Amortization schedules are long term and thus a balloon payment is generally due at maturity.
+Added: Amortization schedules are long term and thus a balloon payment is generally
+Added: due at maturity.
Under most circumstances, the Bank will offer to rewrite or otherwise extend the loan at prevailing interest rates.
1 unchanged sentence
Our C&D loan portfolio totaled $132.5 million, $140.1 million and $132.2 million at December 31, 2021, 2020 and 2019, respectively, and represented 6%, 7% and 8% of our total loans, respectively.
+Added: C&D loans decreased 5.4% during 2021.
C&D loans increased 6.0% during 2020.
C&D loans increased 117.4% during 2019 due to a combination of loans acquired in the Partnership acquisition and strong development in both owner-occupied and multifamily developments in our markets due to a continued strong economy.
−Removed: C&D loans decreased 19.8% during 2018 as a result of targeted efforts to reduce this type of lending as it had approached an internally set maximum allowable percentage to regulatory capital during 2017.
Our C&D loans are generally for the purpose of creating value out of real estate through construction and development work, and also include loans used to purchase recreational use land.
5 unchanged sentences
Our residential 1-4 family loan portfolio totaled $571.8 million, $545.8 million and $448.6 million at December 31, 2021, 2020 and 2019, respectively, and represented 26%, 25% and 26% of our total loans, respectively.
+Added: Residential 1-4 family loans increased 4.8% during 2021.
Residential 1-4 family loans increased 21.7% during 2020 primarily as a result of the Timberwood transaction.
Residential 1-4 family loans increased 21.7% during 2019 primarily as a result of the Partnership transaction.
−Removed: Residential 1-4 family loans decreased 2.3% during 2018 as a result of an overall slowdown in the residential mortgage lending environment.
We offer fixed and adjustable rate residential mortgage loans with maturities up to 30 years.
−Removed: One-to-four family residential mortgage loans are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed and adjustable rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency.
+Added: One-to-four family residential mortgage loans are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as “ conforming loans.
+Added: ” We generally originate both fixed and adjustable rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency.
In addition, we also offer loans above conforming lending limits typically referred to as “ jumbo ” loans.
11 unchanged sentences
Consumer Loans.
−Removed: Our consumer loan portfolio totaled $ million, $27.0 million and $33.6 million at December 31, 2020, 2019 and 2018, respectively, and represented and represented 1%, 2%, and 2% of our total loans, respectively.
+Added: Our consumer loan portfolio totaled $32.1 million, $30.5 million and $29.6 million at December 31, 2021, 2020 and 2019, respectively, and represented 1%, 1%, and 2% of our total loans, respectively.
Consumer loans include secured and unsecured loans, lines of credit and personal installment loans.
−Removed: Our consumer loans increased by 3.0% during 2020.
−Removed: Our consumer loans increased by 9.8% during 2019.
−Removed: Our consumer loans decreased by 19.7% during 2018 due to one loan totaling $7.6 million, secured by a trust, which was paid in full when the trust grantor passed away.
+Added: Our consumer loans increased by 5.4%, 3.0% and 9.8% during 2021, 2020 and 2019, respectively.
Consumer loans generally have greater risk compared to longer-term loans secured by improved, owner-occupied real estate, particularly consumer loans that are secured by rapidly depreciable assets.
4 unchanged sentences
Loan Portfolio Maturities.
−Removed: The following tables summarize the dollar amount of loans maturing in our portfolio based on their loan type and contractual terms to maturity at December 31, 2020 and 2019, respectively.
+Added: 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, 2021.
The tables do not include any estimate of prepayments, which can significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below.
Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
−Removed: As of December 31, 2020
+Added: Five to Fifteen
(dollars in thousands)
1 unchanged sentence
Commercial real estate
+Added: Owner Occupied
+Added: Non-owner Occupied
Construction & Development
1 unchanged sentence
Consumer and other
−Removed: As of December 31, 2019
−Removed: (dollars in thousands)
+Added: Fixed Rate Loans:
Commercial & industrial
Commercial real estate
+Added: Owner Occupied
+Added: Non-owner Occupied
Construction & Development
1 unchanged sentence
Consumer and other
−Removed: The following tables summarize the dollar amount of loans maturing in our portfolio based on whether the loan has a fixed or variable rate of interest and their contractual terms to maturity at December 31, 2020 and 2019, respectively.
−Removed: The tables do not include any estimate of prepayments, which can significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below.
−Removed: Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
−Removed: As of December 31, 2020
−Removed: (dollars in thousands)
−Removed: Predetermined interest rates
−Removed: Floating or adjustable interest rates
−Removed: As of December 31, 2019
−Removed: (dollars in thousands)
−Removed: Predetermined interest rates
−Removed: Floating or adjustable interest rates
−Removed: NONPERFORMING LOANS AND TROUBLED DEBT RESTRUCTURINGS
+Added: Floating Rate Loans:
+Added: Commercial & industrial
+Added: Commercial real estate
+Added: Owner Occupied
+Added: Non-owner Occupied
+Added: Construction & Development
+Added: Residential 1-4 family
+Added: Consumer and other
+Added: NONPERFORMING ASSETS
In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality.
10 unchanged sentences
(dollars in thousands)
+Added: Nonperforming loans
+Added: Nonaccrual loans
+Added: Commercial & industrial
+Added: Commercial real estate
+Added: Owner Occupied
+Added: Non-owner Occupied
+Added: Construction & Development
+Added: Residential 1-4 family
+Added: Consumer and other
+Added: Total nonaccrual loans
Loans past due > 90 days, but still accruing
+Added: Commercial & industrial
+Added: Commercial real estate
+Added: Owner Occupied
+Added: Non-owner Occupied
+Added: Construction & Development
+Added: Residential 1-4 family
+Added: Consumer and other
+Added: Total loans past due > 90 days, but still accruing
Total nonperforming loans
+Added: Commercial real estate owned
+Added: Residential real estate owned
+Added: Bank property real estate owned
+Added: Total nonperforming assets ("NPAs")
Accruing troubled debt resructured loans
−Removed: Nonperforming loans as a percent of gross loans
−Removed: Nonperforming loans as a percent of total assets
+Added: Nonaccrual loans to total loans
+Added: NPAs to total loans plus OREO
+Added: NPAs to total assets
+Added: ALLL to Nonaccrual loans
+Added: ALLL to total loans
At December 31, 2021, 2020 and 2019, impaired loans had specific reserves of $964,000, $900,000 and $840,000, respectively.
1 unchanged sentence
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 loan losses at December 31, 2021.
−Removed: Our nonperforming assets increased during the years ended December 31, 2018 and 2017, primarily due to the Waupaca acquisition, which included $19.4 million of loans which were considered nonperforming.
−Removed: This increase in nonperforming assets was anticipated in conjunction with the Waupaca acquisition, and management has actively manage these relationships out of the Bank through pay downs, refinances with or sales of loans to other institutions, or foreclosure actions.
+Added: Our nonperforming assets were elevated during the years ended December 31, 2018 and 2017, primarily due to the acquisition of a troubled institution during 2017, which included $19.4 million of loans which were considered nonperforming.
+Added: This increase in nonperforming assets was anticipated in conjunction with the acquisition, and management actively managed these relationships out of the Bank through pay downs, refinances with or sales of loans to other institutions, or foreclosure actions.
As a result of these actions nonperforming assets declined sharply during 2019.
Nonperforming assets trended back up slightly during 2020 primarily due to one commercial real estate loan totaling approximately $7.3 million which was moved to nonaccrual status when a major tenant declared bankruptcy and vacated the facility.
−Removed: Payments have continued to be made timely on this loan, and significant interest has been noted from potential tenants to fill this vacancy.
+Added: Payments continued to be made timely on this loan, and it returned to performing status during 2021, causing a decline in nonperforming assets.
Nonaccrual Loans
23 unchanged sentences
As of December 31, 2020, these totals had decreased to fewer than 20 loans with total balances less than $20.0 million.
+Added: As of December 31, 2021, only one loan remained with payment deferrals under the CARES Act, totaling $1.1 million.
As of December 31, 2021 and 2020, the Company had specific reserves of $7,000 and $0 for TDRs, respectively, and none of them have subsequently defaulted.
−Removed: Classified loans
−Removed: Accounting standards require the Company to identify loans, where full repayment of principal and interest is doubtful, as impaired loans.
−Removed: These standards require that impaired loans be valued at the present value of expected future cash flows, discounted at the loan’s effective interest rate, or using one of the following methods:
−Removed: the observable market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent.
−Removed: We have implemented these standards in our quarterly review of the adequacy of the ALLL, and identify and value impaired loans in accordance with guidance on these standards.
−Removed: As part of the review process, we also identify loans classified as watch, which have a potential weakness that deserves management’s close attention.
−Removed: Loans totaling $50.1 million and $60.3 million were classified substandard under the Bank’s policy as of December 31, 2020 and 2019, respectively.
−Removed: The following table sets forth information related to the credit quality of our loan portfolio at December 31, 2020 and 2019.
−Removed: Loan type (in thousands)
−Removed: As of December 31, 2020
−Removed: Commercial & industrial
−Removed: Commercial real estate
−Removed: Construction & Development
−Removed: Residential 1-4 family
−Removed: Loan type (in thousands)
−Removed: As of December 31, 2019
−Removed: Commercial & industrial
−Removed: Commercial real estate
−Removed: Construction & Development
−Removed: Residential 1-4 family
ALLOWANCE FOR LOAN AND LEASE LOSSES
20 unchanged sentences
(dollars in thousands)
−Removed: Period-end loans outstanding (net of unearned discount and deferred loan fees)
−Removed: Average loans outstanding (net of unearned discount and deferred loan fees)
−Removed: Balance of allowance for loan losses at the beginning of period
−Removed: Loans charged-off:
+Added: Balance of ALLL at the beginning of period
+Added: Net loans charged-off (recovered):
Commercial & industrial
3 unchanged sentences
Residential 1-4 family
−Removed: Total loans charged-off
−Removed: Recoveries of loans previously charged off:
+Added: Total net loans charged-off
+Added: Provision charged to operating expense
+Added: Balance of ALLL at end of period
+Added: Ratio of net charge-offs (recoveries) to average loans by loan composition
Commercial & industrial
3 unchanged sentences
Residential 1-4 family
−Removed: Total recoveries of loans previously charged off:
−Removed: Net Loan charge-offs (recoveries)
−Removed: Provision charged to operating expense
−Removed: Balance at end of period
−Removed: Ratio of net charge offs (recoveries) during the year to average loans outstanding
−Removed: Ratio of allowance for loan losses to loans outstanding
+Added: Total net charge-offs to average loans
The level of charge-offs depends on many factors, including the national and regional economy.
34 unchanged sentences
Brokered deposits
−Removed: Certificates of deposit of $100,000 or greater by maturity are as follows:
+Added: The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of December 31, 2021:
+Added: Time Deposits over FDIC
+Added: Portion of Time Deposits in
+Added: Insurance Limits
+Added: Excess of FDIC Insurance Limits
(dollars in thousands)
−Removed: Less than 3 months remaining
+Added: 3 months or less remaining
Over 3 to 6 months remaining
1 unchanged sentence
Over 12 months or more remaining
−Removed: Retail certificates of deposit of $100,000 or greater totaled $154.1 million, $176.6 million and $198.4 million at December 31, 2020, 2019 and 2018, respectively.
−Removed: Interest expense on retail certificates of deposit of $100,000 or greater was $3.1 million, $3.5 million and $2.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.
−Removed: The following table sets forth certificates of deposit (including brokered deposits) classified by interest rate as of the dates indicated:
−Removed: (dollars in thousands)
−Removed: Interest Rate:
−Removed: Less than 1.00%
−Removed: 1.00% to 1.99%
−Removed: 2.00% to 2.99%
−Removed: 3.00% to 3.99%
Deposits and investment securities for sale are the primary source of funds for our lending activities and general business purposes.
9 unchanged sentences
Weighted average interest rate on average daily securities sold under repurchase agreements
−Removed: Maximum outstanding securities sold under repurcase agreements at any month-end
+Added: Maximum outstanding securities sold under repurchase agreements at any month-end
Securities sold under repurchase agreements at period end
2 unchanged sentences
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.
−Removed: There were $23.3 million and $39.6 million of advances outstanding from the FHLB at December 31, 2020 and 2019, respectively.
−Removed: There were no advances outstanding from the FHLB as of December 31, 2018.
−Removed: From time to time the Company utilized short-term FHLB advances to fund liquidity during 2018.
+Added: There were $8.0 million, $23.3 million and $39.6 million of advances outstanding from the FHLB at December 31, 2021, 2020, and 2019.
The total loans pledged as collateral were $915.5 million, $825.3 million and $815.2 million at December 31, 2021, 2020 and 2019, respectively.
−Removed: Outstanding letters of credit from the FHLB totaled $0.8 million, $14.4 million and $55.0 million at December 31, 2020, 2019 and 2018, respectively.
+Added: Outstanding letters of credit from the FHLB totaled $0.8 million and $14.4 million at December 31, 2020 and 2019, respectively.
+Added: There were no outstanding letters of credit from the FHLB at December 31, 2021.
The following table summarizes short-term borrowings (borrowings with maturities of one year or less), which consist of borrowings from the FHLB, and the weighted average interest rates paid:
5 unchanged sentences
Short-term borrowing outstanding at period end
−Removed: Weighted average intrest rate on short-term borrowing at period end
−Removed: We maintained a $5.0 million line of credit with a commercial bank.
−Removed: At December 31, 2019 we had outstanding balances on this note of $5.0 million.
−Removed: Borrowings under this note carried interest at a variable rate with a floor of 3.50%, and were due in full on May 25, 2021.
−Removed: This agreement was terminated on July 22, 2020.
−Removed: We also maintained a $5.0 million line of credit with another commercial bank.
−Removed: There were outstanding balances on this note of $5.0 million as of December 31, 2019.
−Removed: There were no advances on this note at December 31, 2018 or 2017.
−Removed: This note was not renewed when it matured on May 19, 2020.
−Removed: The Corporation maintains a $7.5 million line of credit with another commercial bank, which was entered into on May 15, 2020.
−Removed: There were no outstanding balances on this note at December 31, 2020.
+Added: Weighted average interest rate on short-term borrowing at period end
+Added: The Corporation maintains a $7.5 million line of credit with a commercial bank, which was entered into on May 15, 2020, and renewed on May 15, 2021.
+Added: There were no outstanding balances on this note at December 31, 2021 or 2020.
Any future borrowings will require monthly payments of interest at a variable rate, and will be due in full on May 15, 2022.
3 unchanged sentences
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.
−Removed: As part of the Partnership acquisition, the Company assumed a subordinated note agreement with an outstanding balance of $7.0 million, and a fair market value adjustment of $0.2 million.
−Removed: The note was set to mature on October 1, 2025, required quarterly interest-only payments at a rate of 7.1% prior to maturity, and could be prepaid without penalty on or after October 1, 2020.
−Removed: This note qualified for Tier 2 capital for regulatory purposes.
−Removed: This note was prepaid in full on October 1, 2020.
On July 22, 2020, the Company entered into subordinated note agreements with two separate commercial banks.
2 unchanged sentences
These notes are callable on or after January 1, 2026 and qualify for Tier 2 capital for regulatory purposes.
−Removed: The Company had outstanding balances of $6.0 million under these agreements at December 31, 2020.
+Added: The Company had outstanding balances of $6.0 million under these agreements at December 31, 2021 and 2020.
INVESTMENT SECURITIES
12 unchanged sentences
These securities, which management has the intent and ability to hold to maturity, are reported at amortized cost.
−Removed: Securities held to maturity as of December 31, 2020 are carried at their amortized cost of $6.7 million.
−Removed: At December 31, 2019, securities held to maturity totaled $43.7 million and consisted of U.S.
−Removed: Treasury securities and obligations of states and political subdivisions.
+Added: Securities held to maturity as of December 31, 2021 and 2020, are carried at their amortized cost of $5.9 million and $6.7 million, respectively.
+Added: 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 gain of $0.2 million on the sale of an investment previously classified as an “other investment” and also a net gain on sale of investment securities of $0.6 million during the year ended December 31, 2019.
−Removed: The Company recognized a net loss on sale of investment securities of $31,000 for the year ended December 31, 2018.
−Removed: The following table sets forth the fair value of available for sale investment securities, the amortized costs of held to maturity and the percentage distribution at the dates indicated:
−Removed: (dollars in thousands)
−Removed: Available for sale securities
−Removed: Obligations of U.S.
−Removed: Government sponsored agencies
−Removed: Obligations of states and political subdivisions
−Removed: Mortgage-backed securities
−Removed: Corporate notes
−Removed: Certificates of deposit
−Removed: Total securities available for sale
−Removed: Held to maturity securities
−Removed: Treasury securities
−Removed: Obligations of states and political subdivisions
−Removed: Total securities held to maturity
The following tables set forth the composition and maturities of investment securities as of December 31, 2021 and December 31, 2020.
6 unchanged sentences
After Ten Years
−Removed: (dollars in thousands)
At December 31, 2021
+Added: (dollars in thousands)
Available for sale securities
+Added: Treasury securities
Obligations of U.S.
13 unchanged sentences
After Ten Years
−Removed: (dollars in thousands)
At December 31, 2020
+Added: (dollars in thousands)
Available for sale securities
4 unchanged sentences
Corporate notes
+Added: Certificates of deposit
Total available for sale securities
Held to maturity securities
−Removed: Treasury securities
Obligations of states and political subdivisions
−Removed: Total held to maturity securities
(1) Weighted Average Yield is shown on a fully taxable equivalent basis using a federal tax rate of 21%.
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and (4) that the Company does not have the intent to sell the security and it is more likely than not that it will not have to sell the security before recovery of its cost basis.
−Removed: As of December 31, 2020, six debt securities had gross unrealized losses, with an aggregate depreciation of 0.08% from our amortized cost basis.
+Added: As of December 31, 2021, 26 debt securities had gross unrealized losses, with an aggregate depreciation of 0.98% from our amortized cost basis.
The largest unrealized loss percentage of any single security was 5.31% (or $256,000) of its amortized cost.
This was also the largest unrealized dollar loss of any single security.
−Removed: As of December 31, 2019, 20 debt securities had gross unrealized losses, with an aggregate depreciation of 0.11% from our amortized cost basis.
+Added: As of December 31, 2020, six debt securities had gross unrealized losses, with an aggregate depreciation of 0.08% from our amortized cost basis.
The largest unrealized loss percentage of any single security was 1.86% (or $74,000) of its amortized cost.
−Removed: The largest unrealized dollar loss of any single security was $67,000 (or 1.46%) of its amortized cost.
−Removed: RETURN ON AVERAGE EQUITY AND ASSETS
−Removed: Over the past five years, we have consistently improved our profitability as a result of the success of our growth strategies to grow quality loans and low-cost deposits as well as the improving economic conditions in our markets during the periods indicated in the table below.
−Removed: The following table sets forth our ROAA, ROAE, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated:
−Removed: Year ended December 31,
−Removed: Return on average:
−Removed: Stockholders’ equity
−Removed: Dividend payout ratio
−Removed: Average shareholders’ equity to average assets
+Added: This was also the largest unrealized dollar loss of any single security.
LIQUIDITY AND CAPITAL RESOURCES
−Removed: Impact of Inflation and Changing Prices.
−Removed: Our consolidated financial statements and related notes have been prepared in accordance with GAAP.
−Removed: GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation.
−Removed: The impact of inflation is reflected in the increased cost of our operations.
−Removed: Unlike industrial companies, our assets and liabilities are primarily monetary in nature.
−Removed: As a result, changes in market interest rates have a greater impact on our performance than they would on industrial companies.
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.
23 unchanged sentences
For more information, see “Business—Supervision and Regulation—Capital Requirements.”
−Removed: Minimum Capital
−Removed: Capital Adequacy
−Removed: Minimum To Be
−Removed: Well-Capitalized
+Added: Minimum Capital Required
+Added: Minimum To Be Well-
Minimum Capital
−Removed: Conservation Buffer
−Removed: Corective Action
−Removed: Capital Adequacy
−Removed: Phase-In Schdule
+Added: for Capital Adequacy Plus
+Added: Capitalized Under Prompt
+Added: Required for Capital
+Added: Capital Conservation Buffer
+Added: Corrective Action
+Added: Basel III Phase-In Schedule
(dollars in thousands)
21 unchanged sentences
Tier I capital (to average assets)
−Removed: As previously mentioned, the Company carried $17.5 and $18.6 million of subordinated debt as of December 31, 2020 and 2019, respectively, which is included in total capital for the Company in the tables above.
−Removed: CONTRACTUAL OBLIGATIONS, COMMITMENTS, AND CONTINGENCIES
−Removed: The Company has entered into contractual obligations and commitments.
−Removed: The following tables summarize the Company’s contractual cash obligations and other commitments by maturity at December 31, 2020:
−Removed: Payments Due—By Period as of December 31, 2020
−Removed: CONTRACUAL OBLIGATIONS
−Removed: (dollars in thousands)
−Removed: Certificates of deposit
−Removed: Subordinate debt
−Removed: Operating lease obligations
−Removed: Total contractual cash obligations
−Removed: We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels.
−Removed: We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities.
−Removed: We have in place various borrowing mechanisms for both short-term and long-term liquidity needs.
+Added: As previously mentioned, the Company carried $17.5 million of subordinated debt as of December 31, 2021 and 2020, respectively, which is included in total capital for the Company in the tables above.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
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Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management’s credit assessment of the customer.
−Removed: Loan commitments and standby and direct pay letters of credit do not necessarily represent our future cash requirements because while the borrower has the ability to draw upon these commitments at anytime, these commitments occasionally expire without being drawn upon.
+Added: Loan commitments and standby and direct pay letters of credit do not necessarily represent our future cash requirements because while the borrower has the ability to draw upon these commitments at any time, these commitments occasionally expire without being drawn upon.
Our off-balance sheet arrangements as of December 31, 2021 were as follows:
15 unchanged sentences
As such, there would likely be impacts on the general appetite of banking products and the credit health of the Bank’s customer base.
−Removed: Selected Quarterly Financial Data
−Removed: The following is selected financial data summarizing the results of operations for each quarter in the years ended December 31, 2020 and 2019.
−Removed: 2020 Quarter Ended
−Removed: (dollars in thousands, except per share data)
−Removed: September 30,
−Removed: Interest income
−Removed: Interest expense
−Removed: Net interest income
−Removed: Provision for loan losses
−Removed: Noninterest income
−Removed: Noninterest expense
−Removed: Provision for income taxes
−Removed: Net income attributable to Bank First Corporation
−Removed: Net income available to common shareholders
−Removed: Basic earnings per common share*
−Removed: Diluted earnings per common share*
−Removed: 2019 Quarter Ended
−Removed: (dollars in thousands, except per share data)
−Removed: September 30,
−Removed: Interest income
−Removed: Interest expense
−Removed: Net interest income
−Removed: Provision for loan losses
−Removed: Noninterest income
−Removed: Noninterest expense
−Removed: Provision for income taxes
−Removed: Net income attributable to Bank First Corporation
−Removed: Net income available to common shareholders
−Removed: Basic earnings per common share*
−Removed: Diluted earnings per common share*
−Removed: *Cumulative quarterly per share performance may not equal annual per share totals due to the effects of the amount and timing of capital increases.
−Removed: When computing earnings per share for an interim period, the denominator is based on the weighted average shares outstanding during the interim period, and not on an annualized weighted average basis.
−Removed: Accordingly, the sum of the quarters’ earnings per share data will not necessarily equal the year to date earnings per share data.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.