MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
−Removed: The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2020, included in our Annual Report and with our unaudited condensed accompanying notes set forth in this Quarterly Report on Form 10-Q for the quarterly period September 30, 2021.
+Added: The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2021, included in our Annual Report and with our unaudited condensed accompanying notes set forth in this Quarterly Report on Form 10-Q for the quarterly period March 31, 2022.
FORWARD-LOOKING STATEMENTS
27 unchanged sentences
These unconsolidated subsidiary interests contribute noninterest income to the Bank through their underlying annual earnings.
−Removed: On October 27, 2017, the Company consummated its merger with Waupaca pursuant to the Agreement and Plan of Bank Merger, dated as of May 11, 2017 and as amended on July 20, 2017, by and among the Company, BFNC Merger Sub, LLC, a wholly-owned subsidiary of the Company, and Waupaca, whereby Waupaca was merged with and into the Company, and First National Bank, Waupaca’s wholly owned banking subsidiary, was merged with and into the Bank.
−Removed: The system integration was completed, and six branches of First National Bank opened on October 30, 2017 as branches of the Bank, expanding the Bank’s presence into Waupaca county.
On July 12, 2019, the Company consummated its merger with Partnership 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 was merged with and into the Company, and Partnership Bank, Partnership’s wholly owned banking subsidiary, was merged with and into the Bank.
2 unchanged sentences
The system integration was completed, and the sole branch of Timberwood Bank opened on May 18, 2020 as a branch of the bank, expanding the Bank’s presence in Monroe County.
−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.
−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: 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 Payroll Protection Program (“PPP”), under which we secured funding of approximately 1,875 loans totaling approximately $279.6 million during 2020 as well as approximately 1,132 loans totaling approximately $98.2 million under the new round of funding during the first six months of 2021.
+Added: On January 18, 2022, the Company entered into an Agreement and Plan of Merger with 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 March 31, 2022, the combined company would have total assets of approximately $3.61 billion, loans of approximately $2.79 billion, and deposits of approximately $3.17 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.
+Added: 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.
+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 saw 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, which began in March 2022 and will likely include more interest rate hikes in the future.
+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.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
1 unchanged sentence
At or for the Three Months Ended
−Removed: At or for the Nine Months Ended
(In thousands, except per share data)
20 unchanged sentences
Net gain on sales of mortgage loans
−Removed: Net (loss) gain on sales of securities
+Added: Net gain (loss) on sales and valuations of other real estate owned
Other noninterest income
4 unchanged sentences
Postage, stationery and supplies
−Removed: Net (gain) loss on sales and valuations of other real estate owned
+Added: Net loss on sales of securities
Charitable contributions
1 unchanged sentence
Amortization of intangibles
−Removed: Penalty for early extinguishment of debt
Other noninterest expense
40 unchanged sentences
At or for the Three Months Ended
−Removed: At or for the Nine Months Ended
(In thousands, except per share data)
11 unchanged sentences
RESULTS OF OPERATIONS
−Removed: Results of Operations for the Three Months Ended September 30, 2021 and September 30, 2020
−Removed: Net income increased $0.3 million to $11.2 million for three months ended September 30, 2021, compared to $11.0 million for the same period in 2020.
−Removed: This increase was primarily due to a reduction in required provision for loan losses during the third quarter of 2021, compared to the third quarter of 2020.
−Removed: This reduction was the result of strong credit quality metrics as well as greater clarity on the impacts of COVID in the current year third quarter.
+Added: Results of Operations for the Three Months Ended March 31, 2022 and March 31, 2021
+Added: Net income decreased $1.3 million to $10.2 million for three months ended March 31, 2022, compared to $11.5 million for the same period in 2021.
+Added: This decrease was primarily due to a slowdown in residential mortgage production during the first quarter of 2022 compared to the year earlier first quarter, and a reduction in interest income produced by PPP loans originated during 2020 and 2021, which totaled $0.7 million for the first quarter of 2022 compared to $2.4 million for the first quarter of 2021.
Net Interest Income .
2 unchanged sentences
Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets).
−Removed: 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.
+Added: We seek to maximize net interest income without exposing the Company to an excessive level of interest rate risk
+Added: 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.
Our net interest margin can also be adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments.
−Removed: Net interest and dividend income totaled $22.9 million for the three months ended September 30, 2021, matching the third quarter of 2020.
−Removed: Tax equivalent net interest margin decreased 0.37% to 3.47% for the three-months ended September 30, 2021, down from 3.84% for the same period in 2020.
−Removed: Net interest margin decreased by 0.22% due to a decrease in purchase accounting accretion quarter-over-quarter which added to a decrease of 0.15% in core net interest margin.
−Removed: Interest-earnings assets increased by $236.4 million quarter-over-quarter, causing the increase in net interest income despite the reduction in net interest margin.
+Added: Net interest and dividend income increased by $0.2 million to $22.3 million for the three months ended March 31, 2022 compared to $22.1 million for three months ended March 31, 2021.
+Added: The increase in net interest income was primarily due to growth in interest earnings assets over the last twelve months as well as a reduction in the cost of interest earning liabilities during that same time period.
+Added: Total average interest-earning assets was $3.0 billion for the three months ended March 31, 2022, up from $2.55 billion for the same period in 2021.
+Added: Tax equivalent net interest margin decreased 0.51% to 3.06% for the three-months ended March 31, 2022, down from 3.57% for the same period in 2021.
+Added: Net interest margin decreased by 0.05% due to a decrease in purchase accounting accretion quarter-over-quarter and a short-term net interest income enhancement strategy further decreased net interest margin by 0.29%, both of which added to a decrease of 0.17% in core net interest margin.
+Added: This short-term net interest income enhancement strategy increased average interest-earning assets and average interest-bearing liabilities by approximately $290.0 million.
Net interest margin and net interest income are influenced by internal and external factors.
1 unchanged sentence
Interest Income.
−Removed: Total interest income decreased $1.0 million, or 4.0%, to $24.9 million for the three months ended September 30, 2021 compared to $25.9 million for the same period in 2020.
−Removed: The decrease in total interest income was primarily due a reduction of 0.57% in yield on interest earnings assets, offset to a degree by the aforementioned increase in interest-earning assets.
+Added: Total interest income decreased $0.2 million, or 0.9%, to $24.2 million for the three months ended March 31, 2022 compared to $24.4 million for the same period in 2021.
+Added: The decrease in total interest income was primarily due the aforementioned reduction in interest income produced by PPP loans.
+Added: The average balance of interest-earning assets increased by $453.4 million during the three months ended March 31, 2022 compared to the same period in 2021, offsetting a reduction in yield on interest-earning assets of 0.63% between these two periods.
Interest Expense.
−Removed: Interest expense decreased $1.0 million, or 34.6%, to $2.0 million for the three months ended September 30, 2021 compared to $3.0 million for the same period in 2020.
−Removed: The decrease in interest expense was primarily due to the lower overall interest rate environment, leading to a 0.28% decline in cost of funds quarter-over-quarter.
−Removed: This decline in cost of funds more than overcame a 6.3% increase in interest-bearing liabilities in these respective quarters.
−Removed: Interest expense on interest-bearing deposits decreased by $0.9 million to $1.8 million for the three months ended September 30, 2021 from $2.7 million for the same period in 2020.
−Removed: The average cost of interest-bearing deposits was 0.42% for the three months ended September 30, 2021, compared to 0.69% for the same period in 2020.
+Added: Interest expense decreased $0.4 million, or 17.5%, to $1.9 million for the three months ended March 31, 2022 compared to $2.3 million for the same period in 2021.
+Added: The decrease in interest expense was primarily due to the lower overall interest rate environment due to the COVID-19 pandemic, which was counteracted to a certain extent by an increase of $385.5 million in interest bearing liabilities quarter-over-quarter.
+Added: Interest expense on interest-bearing deposits decreased by $0.5 million to $1.6 million for the three months ended March 31, 2022 from $2.1 million for the same period in 2021.
+Added: The average cost of interest-bearing deposits was 0.36% for the three months ended March 31, 2022, compared to 0.54% for the same period in 2021.
Provision for Loan Losses.
6 unchanged sentences
The determination of the amount is complex and involves a high degree of judgment and subjectivity.
−Removed: We recorded a provision for loan losses of $0.7 million for the three months ended September 30, 2021 compared to $1.4 million for the same period in 2020.
−Removed: We recorded net recoveries of $40,000 for the three months ended September 30, 2021 compared to net charge-offs of $1.3 million for the same period in 2020.
−Removed: The ALL was $20.2 million, or 0.92% of total loans, at September 30, 2021 compared to $16.3 million, or 0.74% of total loans at September 30, 2020.
+Added: We recorded a provision for loan losses of $1.2 million for the three months ended March 31, 2022 compared to $0.9 million for the same period in 2021.
+Added: We recorded net recoveries of $0.2 million for the three months ended March 31, 2022 compared to net charge offs of $27,000 for the same period in 2021.
+Added: The ALL was $21.7 million, or 0.94% of total loans, at March 31, 2022 compared to $18.5 million, or 0.83% of total loans at March 31, 2021.
+Added: The increased ALL coverage was the result of fewer government guaranteed loans (primarily PPP loans) as well as a reduction in total purchased loans which carry a fair value mark in lieu of a portion of the ALL until they are paid off or renewed.
Noninterest Income.
2 unchanged sentences
Other sources of noninterest income include loan servicing fees, gains on sales of mortgage loans, and other income from strategic alliances.
−Removed: Noninterest income decreased $0.1 million to $5.0 million for the three months ended September 30, 2021 compared to $5.1 million for the same period in 2020.
−Removed: Income from service charges increased by 11.0% due to an expanded base of customer relationships, many of which were garnered during the Company’s exhaustive efforts to provide PPP loans to struggling businesses in our markets during the previous 18 months, as well as continued maturing of newer markets for the Company resulting from our recent acquisitions.
−Removed: Income from our investment in Ansay decreased by 22.1% as a result of a continued difficult operating environment due to COVID.
−Removed: Loan servicing income increased by 11.3% resulting from continued additions to the Company’s serviced portfolios.
−Removed: Net gains on sales of mortgage loans declined quarter-over-quarter as the Company experienced a slight decline in secondary market loan originations, combined with lower profitability on a per-unit basis of each loan sold.
+Added: Noninterest income decreased $1.1 million to $5.2 million for the three months ended March 31, 2022 compared to $6.3 million for the same period in 2021.
+Added: Income from our investment in Ansay increased by 13.9%.
+Added: Income from our investment in UFS increased by 92.6% The added profitability of these two unconsolidated subsidiaries was offset by a significant reduction in net gains on sales of mortgage loans quarter-over-quarter as the Company, and the banking industry as a whole, saw an extreme slowdown in residential
+Added: mortgage lending due in part to a higher interest rate environment during the first quarter of 2022 compared to the first quarter of 2021.
The major components of our noninterest income are listed below:
−Removed: Three Months Ended September 30,
+Added: Three Months Ended March 31,
(In thousands)
5 unchanged sentences
Net gain on sales of mortgage loans
−Removed: Net loss on sales of securities
−Removed: Total noninterest income
−Removed: Noninterest Expense.
−Removed: Noninterest expense increased $0.3 million to $12.5 million for the three months ended September 30, 2021 compared to $12.2 million for the same period in 2020.
−Removed: Personnel expense increased 5.7%, or $0.4 million, primarily as a result of customary annual pay increases.
−Removed: The Company was utilizing significant resources during the third quarter of 2020 to equip our employees and offices to provide a safe working environment during COVID.
−Removed: A reduction in needed expenditures in this regard during the third quarter of 2021 led to a 8.6% decline in occupancy expense quarter-over-quarter.
−Removed: Expenses from significant PPP loan originations as well as the acquisition of Timberwood increased data processing and outside service fee expense during the third quarter of 2020.
−Removed: These circumstances did not continue into the third quarter of 2021, leading to decline of 13.9% and 16.6% in these areas, respectively.
−Removed: The major components of our noninterest expense are listed below:
−Removed: Three Months Ended September 30,
−Removed: (In thousands)
−Removed: Noninterest Expense
−Removed: Salaries, commissions, and employee benefits
−Removed: Data Processing
−Removed: Postage, stationary, and supplies
Net gain on sales and valuation of ORE
−Removed: Charitable contributions
−Removed: Outside service fees
−Removed: Amortization of intangibles
−Removed: Total noninterest expenses
−Removed: Income Tax Expense.
−Removed: We recorded a provision for income taxes of $3.6 million for the three months ended September 30, 2021 compared to a provision of $3.5 million for the same period during 2020, reflecting effective tax rates of 24.4% for each period.
−Removed: The effective tax rates were reduced from the statutory federal and state income tax rates during both periods as a result of tax-exempt interest income produced by certain qualifying loans and investments in the Bank’s portfolios.
−Removed: Results of Operations for the Nine Months Ended September 30, 2021 and September 30, 2020
−Removed: Net income increased $7.8 million to $34.3 million for the nine months ended September 30, 2021, compared to $26.5 million for the same period in 2020.
−Removed: This increase was primarily due to the added scale of one office acquired in the Timberwood acquisition during the second quarter of 2020, strong residential mortgage production during the first nine months of 2021, a reduction of funding costs based on lower rate deposits in 2021, and a $3.0 million reduction in provisions for loan losses period-over-period.
−Removed: Net Interest Income.
−Removed: Net interest and dividend income increased by $4.5 million to $66.9 million for the nine months ended September 30, 2021, compared to $62.4 million for nine months ended September 30, 2020.
−Removed: The increase in net interest income was primarily due to the added scale of the Timberwood acquisition along with a reduction in funding costs on interest bearing liabilities, which declined 0.46% period-over-period.
−Removed: Total average interest-earning assets increased to $2.61 billion for the nine months ended September 30, 2021, compared to $2.26 billion for the same period in 2020.
−Removed: Tax equivalent net interest margin decreased 0.30% to 3.47% for the nine months ended September 30, 2021, down from 3.77% for the same period in 2020.
−Removed: Net interest margin decreased by 0.14% due to a decrease in purchase accounting accretion period-over-period which added to a decrease of 0.16% in core net interest margin.
−Removed: Net interest margin and net interest income are influenced by internal and external factors.
−Removed: Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve.
−Removed: Interest Income.
−Removed: Total interest income decreased $0.3 million, or 0.4%, to $73.3 million for the nine months ended September 30, 2021 compared to $73.6 million for the same period in 2020.
−Removed: The decrease in total interest income was primarily due to a reduction of 0.64% in yield on interest-earning assets through nine months of 2021 compared to the same period in 2020, somewhat offset by an increase in average interest-earning assets of $359.0 million period-over-period.
−Removed: Interest Expense .
−Removed: Interest expense decreased $4.7 million, or 42.3%, to $6.5 million for the nine months ended September 30, 2021 compared to $11.2 million for the same period in 2020.
−Removed: The decrease in interest expense was primarily due to the lower overall interest rate environment, which was counteracted to a certain extent by an increase of $151.4 million in interest-bearing liabilities.
−Removed: Interest expense on interest-bearing deposits decreased by $4.1 million to $5.9 million for the nine months ended September 30, 2021, from $10.0 million for the same period in 2020.
−Removed: The average cost of interest-bearing deposits was 0.48% for the nine months ended September 30, 2021, compared to 0.91% for the same period in 2020.
−Removed: Provision for Loan Losses.
−Removed: We recorded a provision for loan losses of $2.5 million for the nine months ended September 30, 2021, compared to $5.5 million for the same period in 2020.
−Removed: We recorded net recoveries of $0.1 million for the nine months ended September 30, 2021 compared to net charge-offs of 0.6 million for the same period in 2020.
−Removed: The ALL was $20.2 million, or 0.92% of total loans, at September 30, 2021 compared to $16.3 million, or 0.74% of total loans at September 30, 2020.
−Removed: The elevated provision during the three quarters of 2020 compared to the provision during the same period of 2021 was primarily the result of heightened economic risks and uncertainties resulting from the COVID-19 pandemic.
−Removed: Noninterest Income.
−Removed: Noninterest income increased $1.0 million to $17.8 million for the nine months ended September 30, 2021 compared to $16.8 million for the same period in 2020.
−Removed: Income from service charges increased by 33.3% due to an expanded base of customer relationships, many of which were the result of the Timberwood acquisition and PPP loan originations.
−Removed: Income from our investment in Ansay decreased by 14.3% as a result of a continued difficult operating environment due to COVID.
−Removed: Income from our investment in UFS decreased by 27.9% as a result of extra ordinary one-time fees collected in 2020 which did not recur in 2021.
−Removed: Loan servicing income increased by 86.1% resulting from a positive adjustment to the Company’s mortgage servicing rights of $0.6 million during the first half of 2021 which compared favorably to a negative $0.5 million adjustment to these same rights during the first half of 2020.
−Removed: Net gains on sales of mortgage loans saw a very significant increase period-over-period as the Company experienced very robust activity in secondary market loan originations.
−Removed: During the second quarter of 2020 the Company sold $36.6 million of U.S.
−Removed: Treasury notes, resulting in a gain of $3.1 million.
−Removed: There were no similar sales of investments during the first nine months of 2021, causing a negative comparison between periods.
−Removed: The major components of our noninterest income are listed below:
−Removed: Nine Months Ended September 30,
−Removed: (In thousands)
−Removed: Noninterest Income
−Removed: Service Charges
−Removed: Income from Ansay
−Removed: Income from UFS
−Removed: Loan Servicing income
−Removed: Net gain on sales of mortgage loans
−Removed: Net (loss) gain on sales of securities
Total noninterest income
Noninterest Expense.
−Removed: Noninterest expense decreased $2.5 million to $36.9 million for the nine months ended September 30, 2021 compared to $39.4 million for the same period in 2020.
−Removed: Personnel expense increased 7.8%, or $1.5 million, as a result of the added scale from the Timberwood acquisition in addition to customary annual pay increases.
−Removed: The Timberwood acquisition occurred during the second quarter of 2020, causing significant third-party professional expenses which were not repeated during the first nine months of 2021, leading to a significant reduction in outside service fees.
−Removed: Finally, during the second quarter of 2020, the Company repaid $30.0 million in borrowings from the Federal Home Loan Bank of Chicago prior to the contractual maturity dates of these borrowings, leading to prepayment penalties of $1.3 million.
−Removed: There were no similar prepayment penalties during the first nine months of 2021.
−Removed: Net gains and losses from sales of ORE and securities are specific to the properties and securities which are sold and will vary greatly period to period, as they did in the first nine months of 2021 compared to the first nine months of 2020.
+Added: Noninterest expense increased $0.3 million to $12.7 million for the three months ended March 31, 2022 compared to $12.4 million for the same period in 2021.
+Added: Occupancy expenses decreased 7.9%, the result of significant investments made to branch locations during the first quarter of 2021 to enhance safety and experience for our staff and customers that were not repeated in the first quarter of 2022.
+Added: Outside service fees increased $0.4 million, or 55.2%, quarter-over-quarter, primarily as a result of $0.5 million in costs associated with the pending acquisition of Denmark.
The major components of our noninterest expense are listed below:
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
(In thousands)
+Added: (In thousands)
Noninterest Expense
2 unchanged sentences
Postage, stationary, and supplies
−Removed: Net (gain) loss on sales and valuation of ORE
Charitable contributions
1 unchanged sentence
Amortization of intangibles
−Removed: Penalty for early extinguishment of debt
Total noninterest expenses
Income Tax Expense.
−Removed: We recorded a provision for income taxes of $11.0 million for the nine months ended September 30, 2021 compared to a provision of $7.8 million for the same period during 2020, reflecting effective tax rates of 24.2% and 22.7%, respectively.
−Removed: The effective tax rates were reduced from the statutory federal and state income tax rates largely as a result of tax-exempt interest income produced by certain qualifying loans and investments in the Bank’s portfolios.
+Added: We recorded a provision for income taxes of $3.4 million for the three months ended March 31, 2022 compared to a provision of $3.7 million for the same period during 2021, reflecting effective tax rates of 25.1% and 24.2%, respectively.
+Added: The effective tax rates were reduced from the statutory federal and state income tax rates during both periods as a result of tax-exempt interest income produced by certain qualifying loans and investments in the Bank’s portfolios.
NET INTEREST MARGIN
6 unchanged sentences
Three Months Ended
−Removed: September 30, 2021
−Removed: September 30, 2020
+Added: March 31, 2022
+Added: March 31, 2021
Rate Earned/ Paid
30 unchanged sentences
Net interest margin (4)
−Removed: (1) Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% for the three months ended September 30, 2021 and 2020.
−Removed: (2) Nonaccrual loans are included in average amounts outstanding.
−Removed: (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.
−Removed: (4) Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets.
−Removed: Nine Months Ended
−Removed: September 30,2021
−Removed: September 30,2020
−Removed: (dollars in thousands)
−Removed: Interest-earning assets
−Removed: Taxable (available for sale)
−Removed: Tax-exempt (available for sale)
−Removed: Taxable (held to maturity)
−Removed: Tax-exempt (held to maturity)
−Removed: Cash and due from banks
−Removed: Total interest-earning assets
−Removed: Non interest-earning assets
−Removed: Allowance for loan losses
−Removed: LIABILITIES AND SHAREHOLDERS’ EQUITY
−Removed: Interest-bearing deposits
−Removed: Checking accounts
−Removed: Savings accounts
−Removed: Money market accounts
−Removed: Certificates of deposit
−Removed: Brokered Deposits
−Removed: Total interest bearing deposits
−Removed: Other borrowed funds
−Removed: Total interest-bearing liabilities
−Removed: Non-interest bearing liabilities
−Removed: Demand Deposits
−Removed: Other liabilities
−Removed: Total Liabilities
−Removed: Shareholders’ equity
−Removed: Total liabilities & sharesholders' equity
−Removed: Net interest income on a fully taxable equivalent basis
−Removed: Less taxable equivalent adjustment
−Removed: Net interest income
−Removed: Net interest spread (3)
−Removed: Net interest margin (4)
−Removed: (1) Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% for the nine months ended September 30, 2021 and 2020.
+Added: Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% for the three months ended March 31, 2022 and 2021.
Nonaccrual loans are included in average amounts outstanding.
5 unchanged sentences
(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.
−Removed: Three Months Ended September 30, 2021
−Removed: Nine Months Ended September 30, 2021
−Removed: Compared with
+Added: Three Months Ended March 31, 2022
Compared with
−Removed: Three Months Ended September 30, 2020
−Removed: Nine Months Ended September 30, 2020
−Removed: Increase/(Decrease) Due to Change in
+Added: Three Months Ended March 31, 2021
Increase/(Decrease) Due to Change in
(dollars in thousands)
−Removed: (dollars in thousands)
Interest income
1 unchanged sentence
Tax-exempt (AFS)
−Removed: Taxable (HTM)
Tax-exempt (HTM)
13 unchanged sentences
Total Assets.
−Removed: Total assets increased $128.6 million, or 4.7%, to $2.85 billion at September 30, 2021, from $2.72 billion at December 31, 2020.
+Added: Total assets decreased $12.6 million, or 0.4%, to $2.92 billion at March 31, 2022, from $2.94 billion at December 31, 2021.
Cash and Cash Equivalents.
−Removed: Cash and cash equivalents increased by $129.8 million to $300.0 million at September 30, 2021 from $170.2 million at December 31, 2020.
+Added: Cash and cash equivalents decreased by $189.5 million to $107.4 million at March 31, 2022 from $296.9 million at December 31, 2021, the result of significant loan growth as well as investing approximately $100.0 million in one-year treasury notes during the first quarter of 2022.
Investment Securities.
−Removed: The carrying value of total investment securities decreased by $17.4 million to $154.3 million at September 30 2021, from $171.7 million at December 31, 2020.
−Removed: Net loans increased by $14.9 million, totaling $2.19 billion at September 30, 2021 compared to $2.17 billion at December 31, 2020.
+Added: The carrying value of total investment securities increased by $84.3 million to $302.9 million at March 31, 2022, from $218.6 million at December 31, 2021.
+Added: Net loans increased by $79.7 million, totaling $2.29 billion at March 31, 2022 compared to $2.21 billion at December 31, 2021.
Bank-Owned Life Insurance.
−Removed: At September 30, 2021, our investment in bank-owned life insurance was $31.7 million, an increase of $0.3 million from $31.4 million at December 31, 2020.
−Removed: Deposits increased $151.3 million, or 6.5%, to $2.47 billion at September 30, 2021 from $2.32 billion at December 31, 2020.
−Removed: At September 30, 2021, borrowings consisted of advances from the FHLB of Chicago, as well as subordinated debt to other banks.
−Removed: FHLB borrowings decreased to $9.2 million at September 30, 2021, from $23.5 million at December 31, 2020.
−Removed: Subordinated debt owed to other banks totaled $17.5 million at September 30, 2021 and December 31, 2020.
+Added: At March 31, 2022, our investment in bank-owned life insurance was $32.1 million, an increase of $0.2 million from $31.9 million at December 31, 2021.
+Added: Deposits increased $28.7 million, or 1.1%, to $2.56 billion at March 31, 2022 from $2.53 billion at December 31, 2021.
+Added: At March 31, 2022, borrowings consisted of advances from the FHLB of Chicago, as well as subordinated debt to other banks.
+Added: FHLB borrowings decreased to $7.7 million at March 31, 2022, from $8.0 million at December 31, 2021.
+Added: Subordinated debt owed to other banks totaled $17.5 million at March 31, 2022 and December 31, 2021.
Stockholders’ Equity.
−Removed: Total stockholders’ equity increased $20.4 million, or 6.9%, to $315.3 million at September 30, 2021, from $294.9 million at December 31, 2020.
+Added: Total stockholders’ equity decreased $4.4 million, or 1.4%, to $318.3 million at March 31, 2022, from $322.7 million at December 31, 2021.
+Added: Strong earnings during the quarter were offset by valuation adjustments to the Bank’s available for sale investment portfolio, which is accounted for through the comprehensive income component of equity, due to significant movements in the interest rate environment.
Our lending activities are conducted principally in Wisconsin.
4 unchanged sentences
Repayment of the Bank’s residential loans are generally dependent on the health of the employment market in the borrowers’ geographic areas and that of the general economy with liquidation of the underlying real estate collateral being typically viewed as the primary source of repayment in the event of borrower default.
−Removed: Our loan portfolio is our most significant earning asset, comprising 77.6% and 80.6% of our total assets as of September 30, 2021 and December 31, 2020, respectively.
+Added: Our loan portfolio is our most significant earning asset, comprising 79.2% and 76.1% of our total assets as of March 31, 2022 and December 31, 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 our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.
−Removed: Loans increased $17.5 million, or 0.8%, to $2.21 billion as of September 30, 2021 as compared to $2.19 billion as of December 31, 2020.
−Removed: This increase during the first nine months of 2021 has been comprised of a decrease of $91.4 million or 20.5% in commercial and industrial loans, an increase of $117.5 million or 11.8% in commercial real estate loans, a decrease of $23.3 million or 16.6% in construction and development loans, an increase of $27.1 million or 5.0% in residential 1-4 family loans and a decrease of $12.5 million or 18.2% in consumer and other loans.
−Removed: The following table presents the balance and associated percentage of each major category in our loan portfolio at September 30, 2021, December 31, 2020, and September 30, 2020:
−Removed: September 30,
−Removed: September 30,
+Added: Loans increased $81.2 million, or 3.6%, to $2.32 billion as of March 31, 2022 as compared to $2.24 billion as of December 31, 2021.
+Added: This increase during the first three months of 2022 has been comprised of a decrease of $0.9 million or 0.2% in commercial and industrial loans, an increase of $32.0 million or 5.6% in owner occupied commercial real estate loans, an increase of $13.4 million or 2.5% in non-owner occupied commercial real estate, an increase of $19.3 million or 14.6% in construction and development loans, an increase of $16.3 million or 2.9% in residential 1-4 family loans and an increase of $1.0 million or 3.2% in consumer and other loans.
+Added: The following table presents the balance and associated percentage of each major category in our loan portfolio at March 31, 2022, December 31, 2021, and March 31, 2021:
(dollars in thousands)
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
Our directors and officers and their associates 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 September 30, 2021 and December 31, 2020, total loans outstanding to such directors and officers and their associates were $69.9 million and $67.1 million, respectively.
−Removed: During the nine months ended September 30, 2021, $15.3 million of additions and $12.5 million of repayments were made to these loans.
−Removed: At September 30, 2021 and December 31, 2020, all of the loans to directors and officers were performing according to their original terms, other than standard and customary payment deferrals allowed under the CARES act, which were provided under the same terms as all other customers of the Bank.
+Added: At March 31, 2022 and December 31, 2021, total loans outstanding to such directors and officers and their associates were $75.3 million and $73.5 million, respectively.
+Added: During the three months ended March 31, 2022, $12.5 million of additions and $10.7 million of repayments were made to these loans.
+Added: At March 31, 2022 and December 31, 2021, all of the loans to directors and officers were performing according to their original terms, other than standard and customary payment deferrals allowed under the CARES act, which were provided under the same terms as all other customers of the Bank.
Loan categories
1 unchanged sentence
Commercial and Industrial (C&I).
−Removed: Our C&I portfolio totaled $353.6 million and $445.0 million at September 30, 2021 and December 31, 2020, respectively, and represented 16% and 20% of our total loans at those dates.
−Removed: As a result of forgiveness, PPP loan balances declined from $172.4 at December 31, 2020, to $62.6 million at September 30, 2021, causing the reduction in the C&I portfolio.
+Added: Our C&I portfolio totaled $365.2 million and $366.2 million at March 31, 2022 and December 31, 2021, respectively, and represented 16% of our total loans at those dates.
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.
1 unchanged sentence
Many of the loans to this segment are secured by liens on corporate assets and the personal guarantees of the principals.
−Removed: The regional economic strength or weakness
−Removed: impacts the relative risks in this loan category.
+Added: The regional economic strength or weakness impacts the relative risks in this loan category.
There is little concentration in any one business sector, and loan risks are generally diversified among many borrowers.
Commercial Real Estate (CRE).
−Removed: Our CRE loan portfolio totaled $1.1 billion and $992.2 million at September 30, 2021 and December 31, 2020, respectively, and represented 50% and 45% of our total loans at those dates.
+Added: Our CRE loan portfolio totaled $1.17 billion and $1.11 billion at March 31, 2022 and December 31, 2021, respectively, and represented 50% of our total loans at those dates.
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.
4 unchanged sentences
Construction and Development (C&D).
−Removed: Our C&D loan portfolio totaled $116.8 million and $140.1 million at September 30, 2021 and December 31, 2020, respectively, and represented 5% and 7% of our total loans at those dates.
+Added: Our C&D loan portfolio totaled $151.8 million and $132.5 million at March 31, 2022 and December 31, 2021, respectively, and represented 7% and 6% of our total loans at those dates.
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.
4 unchanged sentences
Residential 1 – 4 Family.
−Removed: Residential 1 – 4 family loans held in portfolio amounted to $572.9 million and $545.8 million at September 30, 2021 and December 31, 2020, respectively, and represented 26% and 25% of our total loans at those dates.
+Added: Residential 1 – 4 family loans held in portfolio amounted to $588.2 million and $571.8 million at March 31, 2022 and December 31, 2021, respectively, and represented 25% and 26% of our total loans at those dates.
We offer fixed and adjustable-rate residential mortgage loans with maturities up to 30 years.
4 unchanged sentences
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.
−Removed: We also do not offer “subprime loans” (loans that are made with low down payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (defined as loans having less than full documentation).
+Added: We also do not offer “subprime loans” (loans that are made with low down payments to borrowers with weakened
+Added: credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (defined as loans having less than full documentation).
Residential real estate loans are originated both for sale to the secondary market as well as for retention in the Bank’s loan portfolio.
1 unchanged sentence
Servicing rights are retained on all loans sold to the secondary market.
−Removed: We were servicing mortgage loans sold to others without recourse of approximately $682.4 million at September 30, 2021 and $612.7 million at December 31, 2020.
+Added: We were servicing mortgage loans sold to others without recourse of approximately $715.6 million at March 31, 2022 and $705.5 million at December 31, 2021.
Loans sold with the retention of servicing assets result in the capitalization of servicing rights.
Loan servicing rights are included in other assets and are carried at fair value.
−Removed: The net balance of capitalized servicing rights amounted to $4.3 million and $3.7 million at September 30, 2021 and December 31, 2020.
+Added: The net balance of capitalized servicing rights amounted to $5.5 million and 5.0 million at March 31, 2022 and December 31, 2021, respectively.
Consumer Loans.
−Removed: Our consumer loan portfolio totaled $33.1 million and $30.5 million at September 30, 2021 and December 31, 2020, respectively, and represented 2% and 1% of our total loans at those dates.
+Added: Our consumer loan portfolio totaled $33.1 million and $32.1 million at March 31, 2022 and December 31, 2021, respectively, and represented 1% of our total loans at those dates.
Consumer loans include secured and unsecured loans, lines of credit and personal installment loans.
2 unchanged sentences
As a result, consumer loan repayments are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.
−Removed: Our other loans totaled $22.8 million and $37.9 million at September 30, 2021 and December 31, 2020, respectively, and are immaterial to the overall loan portfolio.
+Added: Our other loans totaled $21.5 million at March 31, 2022 and December 31, 2021, respectively, and are immaterial to the overall loan portfolio.
The other loans category consists primarily of over-drafted depository accounts, loans utilized to purchase or carry securities and loans to nonprofit organizations.
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 September 30, 2021 and December 31, 2020, 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 March 31, 2022.
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 September 30, 2021
+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, 2020
−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 September 30, 2021 and December 31, 2020, 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 September 30, 2021
−Removed: (dollars in thousands)
−Removed: Predetermined interest rates
−Removed: Floating or adjustable interest rates
−Removed: As of December 31, 2020
−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.
8 unchanged sentences
The composition of our nonperforming assets is as follows:
−Removed: September 30,
−Removed: September 30,
+Added: As of March 31,
+Added: As of December 31,
+Added: As of March 31,
(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 restructured loans
−Removed: Nonperforming loans as a percent of gross loans
−Removed: Nonperforming loans as a percent of total assets
−Removed: At September 30, 2021 and December 31, 2020, impaired loans had specific reserves of $0.5 million and $0.9 million, respectively.
+Added: Nonaccrual loans to total loans
+Added: NPAs to total loans plus OREO
+Added: NPAs to total assets
+Added: ALL to nonaccrual loans
+Added: ALL to total loans
+Added: At March 31, 2022 and December 31, 2021, impaired loans had specific reserves of $0.9 million and $0.8 million, respectively.
Nonaccrual Loans
11 unchanged sentences
If a TDR is placed on nonaccrual status, which would occur based on the same criteria as non-TDR loans, it remains there until a sufficient period of performance under the restructured terms has occurred at which it returned to accrual status, generally 6 months.
−Removed: As of September 30, 2021 and December 31, 2020 the Company had no specific reserves for TDRs.
−Removed: During 2020 the Bank experienced an increase in customer requests for loan modifications and payment deferrals as a result of impacts of the COVID-19 pandemic.
−Removed: The CARES act, signed into law on March 27, 2020, allowed financial institutions the option to exempt loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a TDR from consideration for TDR treatment.
−Removed: Modifications in the scope of the exemption include forbearance agreements, interest-rate modifications, repayment plan changes and any other similar arrangements that would delay payments of principal or interest.
−Removed: This relief was allowable on modifications on loans which were not more than 30 days past due as of December 31, 2019, and that occur after March 1, 2020, and before the earlier of 60 days after the date on which the national emergency related to the COVID-19 outbreak is terminated.
−Removed: The Company granted payment deferrals to over 625 customers on loans totaling over $271.5 million.
−Removed: These deferrals were primarily for lengths in the range of 60 to 180 days, and were a combination of deferrals of principal payments only (89.7% by dollar value) or both principal and interest payments (10.3% by dollar value).
−Removed: None of these deferrals remained as of September 30, 2021.
−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 ALL, 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 $64.4 million and $50.1 million were classified substandard under the Bank’s policy at September 30, 2021 and December 31, 2020, respectively.
−Removed: The following table sets forth information related to the credit quality of our loan portfolio at September 30, 2021 and December 31, 2020.
−Removed: Loan type (in thousands)
−Removed: As of September 30, 2021 (unaudited)
−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, 2020
−Removed: Commercial & industrial
−Removed: Commercial real estate
−Removed: Construction & Development
−Removed: Residential 1-4 family
+Added: As of March 31, 2022 and December 31, 2021 the Company had specific reserves of $7,000 for TDRs, and none of them have subsequently defaulted.
ALLOWANCE FOR LOAN LOSSES
18 unchanged sentences
The following table summarizes the changes in our ALL for the periods indicated:
−Removed: Nine months ended
−Removed: Nine months ended
−Removed: September 30,
−Removed: September 30,
+Added: Three months ended
+Added: Three months ended
(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 ALL 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 ALL 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
−Removed: Provision charged to operating expense
−Removed: Balance at end of period
−Removed: Ratio of net charge offs 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.
3 unchanged sentences
The following table summarizes an allocation of the ALL and the related percentage of loans outstanding in each category for the periods below.
−Removed: September 30,
−Removed: September 30,
(in thousands, except %)
10 unchanged sentences
Our current deposit products include non-interest bearing and interest-bearing checking accounts, savings accounts, money market accounts, and certificate of deposits.
−Removed: As of September 30, 2021, deposit liabilities accounted for approximately 86.8% of our total liabilities and equity.
+Added: As of March 31, 2022, deposit liabilities accounted for approximately 87.4% 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.
1 unchanged sentence
Deposit rates and terms are based primarily on current business strategies, market interest rates, liquidity requirements and our deposit growth goals.
−Removed: Total deposits were $2.47 billion and $2.32 billion as of September 30, 2021 and December 31, 2020, respectively.
−Removed: Noninterest-bearing deposits at September 30, 2021 and December 31, 2020, were $790.2 million and $715.6 million, respectively, while interest-bearing deposits were $1.68 billion and $1.61 billion at September 30, 2021 and December 31, 2020, respectively.
−Removed: At September 30, 2021, we had a total of $265.0 million in certificates of deposit, including $12.5 million of brokered deposits.
+Added: Total deposits were $2.56 billion and $2.53 billion as of March 31, 2022 and December 31, 2021, respectively.
+Added: Noninterest-bearing deposits at March 31, 2022 and December 31, 2021, were $798.3 million and $799.9 million, respectively, while interest-bearing deposits were $1.76 billion and $1.73 billion at March 31, 2022 and December 31, 2021, respectively.
+Added: At March 31, 2022, we had a total of $230.6 million in certificates of deposit, including $10.7 million of brokered deposits.
Based on historical experience and our current pricing strategy, we believe we will retain a majority of these accounts upon maturity, although our long-term strategy is to minimize reliance on certificates of deposits by increasing relationship deposits in lower earning savings and demand deposit accounts.
The following tables set forth the average balances of our deposits for the periods indicated:
−Removed: Nine months ended
−Removed: Nine months ended
−Removed: September 30, 2021
+Added: Three months ended
+Added: Three months ended
+Added: March 31, 2022
December 31, 2021
−Removed: September 30, 2020
+Added: March 31, 2021
(dollars in thousands)
5 unchanged sentences
Brokered deposits
−Removed: Certificates of deposit of $100,000 or greater by maturity are as follows:
−Removed: September 30,
−Removed: September 30,
−Removed: (dollars in thousands)
−Removed: Less than 3 months remaining
−Removed: 3 to 6 months remaining
−Removed: 6 to 12 months remaining
−Removed: 12 months or more remaining
−Removed: Retail certificates of deposit of $100,000 or greater totaled $112.0 million and $154.1 million at September 30, 2021 and December 31, 2020, respectively.
−Removed: Interest expense on retail certificates of deposit of $100,000 or greater was $1.3 million for the nine months ended September 30, 2021, and $3.1 million for the year ended December 31, 2020.
−Removed: The following table sets forth certificates of deposit classified by interest rate as of the dates indicated:
−Removed: September 30,
−Removed: September 30,
+Added: The following table provides information on maturities of certificates of deposits which exceed FDIC insurance limits of $250,000 as of March 31,2022:
+Added: Time Deposits over FDIC
+Added: Portion of Time Deposits in
+Added: Insurance Limits
+Added: Excess of FDIC Insurance Limits
(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%
+Added: 3 months or less remaining
+Added: Over 3 to 6 months remaining
+Added: Over 6 to 12 months remaining
+Added: Over 12 months or more remaining
Securities sold under repurchase agreements
3 unchanged sentences
The following table summarizes securities sold under repurchase agreements, and the weighted average interest rates paid:
−Removed: Nine months ended
−Removed: Nine months ended
+Added: Three months ended
+Added: Three months ended
(dollars in thousands)
−Removed: September 30, 2021
+Added: March 31, 2022
December 31, 2021
−Removed: September 30, 2020
+Added: March 31, 2021
Average daily amount of securities sold under repurchase agreements during the period
4 unchanged sentences
The Company’s borrowings have historically consisted primarily of 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 $9.1 million of advances outstanding from the FHLB at September 30, 2021, and $23.3 million as of December 31, 2020.
−Removed: The total loans pledged as collateral were $878.2 million at September 30, 2021 and $825.3 million at December 31, 2020.
−Removed: The company had no outstanding letters of credit from the FHLB at September 30, 2021 and $0.8 million outstanding at December 31, 2020.
+Added: There were $7.7 million of advances outstanding from the FHLB at March 31, 2022, and $8.0 million as of December 31, 2021.
+Added: The total loans pledged as collateral were $960.9 million at March 31, 2022 and $915.5 million at December 31, 2021.
+Added: There were no outstanding letters of credit from the FHLB at March 31, 2022 and December 31, 2021.
The following table summarizes borrowings, which consist of borrowings from the FHLB, and the weighted average interest rates paid:
+Added: Three months ended
+Added: Three months ended
(dollars in thousands)
−Removed: September 30, 2021
−Removed: September 30, 2020
+Added: March 31, 2022
+Added: December 31, 2021
+Added: March 31, 2021
Average daily amount of borrowings outstanding during the period
8 unchanged sentences
During September 2017, the Company entered into subordinated note agreements with three separate commercial banks.
−Removed: As of September 30, 2021 and December 31, 2020, outstanding balances under these agreements totaled $11.5 million.
+Added: As of March 31, 2021 and December 31, 2020, outstanding balances under these agreements totaled $11.5 million.
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.
During July 2020, the Company entered into subordinated note agreements with two separate commercial banks.
−Removed: As of September 30, 2021 and December 31, 2020, outstanding balances under these agreements totaled $6.0 million.
+Added: As of March 31, 2021 and December 31, 2020, outstanding balances under these agreements totaled $6.0 million.
These notes were issued with 10-year maturities, will carry interest at a fixed rate of 5.0% through June 30, 2025, and at a variable rate thereafter, payable quarterly.
9 unchanged sentences
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.
−Removed: The fair value of securities available for sale totaled $148.4 million and included gross unrealized gains of $6.3 million and gross unrealized losses of $0.3 at September 30, 2021.
+Added: The fair value of securities available for sale totaled $297.1 million and included gross unrealized gains of $1.6 million and gross unrealized losses of $7.9 at March 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.
1 unchanged sentence
These securities, which management has the intent and ability to hold to maturity, are reported at amortized cost.
−Removed: Securities held to maturity totaled $5.9 million and $6.7 million at September 30, 2021 and December 31, 2020, respectively.
−Removed: The Company recognized a net loss on sale of available for sale securities of $3,000 during the nine-months ended September 30, 2021.
−Removed: The Company recognized a net gain on sale of available for sale securities of $0.1 million during the nine-months ended September 30, 2020.
−Removed: The Company recognized a net gain of $3.1 million on sale of held to maturity securities during the nine-months ended September 30, 2020.
−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: September 30,
−Removed: (dollars in thousands)
−Removed: Available for sale securities, at estimated fair value
−Removed: Treasury 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, at amortized cost
−Removed: Obligations of states and political subdivisions
−Removed: The following tables set forth the composition and maturities of investment securities as of September 30, 2021 and December 31, 2020.
+Added: Securities held to maturity totaled $5.9 million at March 31, 2022 and December 31, 2021, respectively.
+Added: The Company had no sales of securities during the three months ended March 31, 2022 or March 31, 2021.
+Added: The following tables set forth the composition and maturities of investment securities as of March 31, 2022 and December 31, 2021.
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.
5 unchanged sentences
After Ten Years
+Added: At March 31, 2022
(dollars in thousands)
−Removed: At September 30, 2021
Available for sale securities
15 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.
7 unchanged sentences
Obligations of states and political subdivisions
−Removed: Weighted Average Yield is shown on a fully taxable equivalent basis using a federal tax rate of 21% at September 30, 2021 and December 31, 2020, respectively.
+Added: Weighted Average Yield is shown on a fully taxable equivalent basis using a federal tax rate of 21% at March 31, 2022 and December 31, 2021, respectively.
The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market conditions warrant such evaluation.
3 unchanged sentences
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 September 30, 2021, 5 debt securities had gross unrealized losses, with an aggregate depreciation of 0.2% from our amortized cost basis.
−Removed: The largest unrealized loss percentage of any single security was 4.93% (or $237,000 of its amortized cost.
−Removed: This was also the largest unrealized dollar loss of any security.
+Added: As of March 31, 2022, 117 debt securities had gross unrealized losses, with an aggregate depreciation of 3.2% from our amortized cost basis.
+Added: The largest unrealized loss percentage of any single security was 12.3% (or $0.3 million) of its amortized cost.
+Added: The largest unrealized dollar loss of any security was $0.6 million (or 6.0%).
As of December 31, 2021, 26 debt securities had gross unrealized losses, with an aggregate depreciation of 0.98% from our amortized cost basis.
−Removed: The largest unrealized loss percentage of any single security was 1.9% (or $74,000) of its amortized cost.
+Added: The largest unrealized loss percentage of any single security was 5.31% (or $0.3 million) of its amortized cost.
This was also the largest unrealized dollar loss of any single security.
20 unchanged sentences
Capital Adequacy.
−Removed: Total stockholders’ equity was $315.3 million at September 30, 2021 compared to $294.9 million at December 31, 2020.
+Added: Total stockholders’ equity was $318.3 million at March 31, 2022 compared to $322.7 million at December 31, 2021.
Our capital management consists of providing adequate equity to support our current and future operations.
26 unchanged sentences
All of the federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels for federally insured depository institutions.
−Removed: The Bank was well capitalized at September 30, 2021, and brokered deposits are not restricted.
+Added: The Bank was well capitalized at December 31, 2018, and brokered deposits are not restricted.
To be well-capitalized, the Bank must maintain at least the following capital ratios:
21 unchanged sentences
The following table reflects capital ratios computed utilizing the implemented Basel III regulatory capital framework discussed above:
−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: Basel III Fully
+Added: for Capital Adequacy Plus
+Added: Capitalized Under prompt
+Added: Required for Capital
+Added: Capital Conservation Buffer
corrective Action
−Removed: Capital Adequacy
+Added: Basel III Phase-In Schedule
(dollars in thousands)
−Removed: At September 30, 2021
+Added: At March 31, 2022
Bank First Corporation:
19 unchanged sentences
Tier I capital (to average assets)
−Removed: As previously mentioned, the Company carried $17.5 million of subordinated debt as of September 30, 2021 and December 31, 2020, respectively, which is included in total capital for the Company in the tables above.
+Added: As previously mentioned, the Company carried $17.5 million of subordinated debt as of March 31, 2022 and December 31, 2021, respectively, which is included in total capital for the Company in the tables above.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
17 unchanged sentences
Our off-balance sheet arrangements at the dates indicated were as follows:
−Removed: Amounts of Commitments Expiring - By Period as of September 30, 2021
+Added: Amounts of Commitments Expiring - By Period as of March 31, 2022
Less Than One
15 unchanged sentences
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.