What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-10 compared with 2022-03-16 · 156 added, 135 removed, 1192 unchanged (20% of the section changed)

23 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Bank First Corporation and Subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of income, stockholders ’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We have audited the accompanying consolidated balance sheets of Bank First Corporation and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

2 unchanged sentences

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Dixon Hughes Goodman LLP

/s/ FORVIS, LLP

(Formerly, Dixon Hughes Goodman LLP)

We have served as the Company's auditor since 2019.

Atlanta, Georgia

March 10, 2023

FORVIS is a trademark of FORVIS, LLP, registration of which is pending with the U.S.

Patent and Trademark Office.

Bank First Corporation and Subsidiaries

4 unchanged sentences

Cash and cash equivalents

Securities held to maturity, at amortized cost ($ 5,922 and $ 6,688 fair value at December 31, 2021 and 2020, respectively)

Securities held to maturity, at amortized cost ( $ 43,770 and $ 5,922 fair value at December 31, 2022 and December 31, 2021, respectively)

Securities available for sale, at fair value

21 unchanged sentences

Authorized - 20,000,000 shares

Issued - 8,478,383 shares as of December 31, 2021 and 2020

Outstanding - 7,616,540 and 7,709,497 shares as of December 31, 2021 and 2020, respectively

Issued - 10,064,858 and 8,478,383 shares as of December 31, 2022 and December 31, 2021, respectively

Outstanding - 9,021,697 and 7,616,540 shares as of December 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Retained earnings

Treasury stock, at cost - 861,843 and 768,886 shares as of December 31, 2021 and 2020, respectively

Accumulated other comprehensive income

Treasury stock, at cost - 1,043,161 and 861,843 shares as of December 31, 2022 and December 31, 2021, respectively

Accumulated other comprehensive income (loss)

Total stockholders’ equity

20 unchanged sentences

Loan servicing income

Valuation adjustment on MSR

Net gain on sales of mortgage loans

Net (loss) gain on sales of securities

Net gain on sale of other investments

Net gain (loss) on sales and valuations of OREO

Total noninterest income

3 unchanged sentences

Postage, stationery, and supplies

Net (gain) loss on sales and valuations of OREO

Net loss (gain) on sale of securities

Charitable contributions

13 unchanged sentences

(In Thousands)

Other comprehensive (loss) income:

Unrealized (losses) gains on available for sale securities:

Other comprehensive income (loss):

Unrealized gains (losses) on available for sale securities:

Unrealized holding (losses) gains arising during period

10 unchanged sentences

Income (loss)

(In Thousands, except share and per share amounts)

(dollars in thousands)

Balance at January 1, 2020

Change in accounting principle in unconsolidated subsidiary

Other comprehensive income

Purchase of treasury stock

Sale of treasury stock

Issuance of treasury stock as deferred compensation payout

Shares issued in the acquisition of Partnership Community Bancshares, Inc.

( 534,659 shares)

Cash dividends ( $ 0.81 per share)

1 unchanged sentence

Vesting of restricted stock awards

Shares issued in the acquisition of Tomah Bancshares, Inc.

( 575,641 shares)

Balance at December 31, 2020

Other comprehensive income

Other comprehensive loss

Purchase of treasury stock

Sale of treasury stock

Issuance of treasury stock as deferred compensation payout

Cash dividends ( $ 1.14 per share)

1 unchanged sentence

Vesting of restricted stock awards

Shares issued in the acquisition of Tomah Bancshares, Inc.

( 575,641 shares)

Balance at December 31, 2021

5 unchanged sentences

Vesting of restricted stock awards

Shares issued in the acquisition of Denmark Bancshares, Inc.

( 1,579,530 shares)

Balance at December 31, 2022

13 unchanged sentences

Net change in deferred loan fees and costs

(Benefit) expense for deferred income taxes

Benefit from deferred income taxes

Change in fair value of MSR and other investments

4 unchanged sentences

Gain on sales of mortgage loans

Realized (gain) loss on sale of securities available for sale and other investments

Realized loss (gain) on sale of securities

Undistributed income of UFS joint venture

1 unchanged sentence

Net earnings on life insurance

Decrease (increase) in other assets

(Decrease) increase in other liabilities

Decrease in other assets

Decrease in other liabilities

Net cash provided by operating activities

6 unchanged sentences

Proceeds from sale of OREO

Proceeds from sales of other investments

Net purchases of Federal Home Loan Bank (“FHLB”) stock

3 unchanged sentences

Purchases of premises and equipment

Investment in Ansay

Net cash received (used) in business combination

Net cash received in business combination

Net cash used in investing activities

4 unchanged sentences

Cash flows from financing activities, net of effects of business combination:

Net increase in deposits

Net (decrease) increase in securities sold under repurchase agreements

Net increase (decrease) in deposits

Net increase (decrease) in securities sold under repurchase agreements

Proceeds from advances of notes payable

Repayment of notes payable

( 3,129,584 )

Proceeds from subordinated debt

3 unchanged sentences

Repurchase of common stock

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

2 unchanged sentences

Supplemental disclosures of cash flow information:

Cash paid during the year for:

Cash paid during the period for:

Supplemental schedule of noncash activities:

4 unchanged sentences

Change in unrealized gains and losses on investment securities available for sale, net of tax

Payment of deferred compensation through issuance of treasury stock

Initial recognition of right-of-use lease asset and liability

Cancellation of subordinated debt issued to acquired institution

Fair value of assets acquired

17 unchanged sentences

The Corporation provides a variety of financial services to individual and business customers, primarily located in Wisconsin, through the Bank.

The Bank is subject to competition from other traditional and nontraditional financial institutions and is also subjectone to the regulations of certain federal agencies and undergoes periodic examinations by those regulatory authorities including the Office of the Comptroller of the Currency and the Federal Reserve Bank.

The Bank is subject to competition from other traditional and nontraditional financial institutions and is also subject to the regulations of certain federal agencies and undergoes periodic examinations by those regulatory authorities including the Office of the Comptroller of the Currency and the Federal Reserve Bank.

Use of Estimates in Preparation of Financial Statements

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Accounts at each institution that are insured by the Federal Deposit Insurance Corporation have up to $250,000 of insurance.

Total uninsured balances held at December 31, 2021 and 2020 were approximately $ 992,000 and $ 5,284,000 , respectively.

Total uninsured balances held at December 31, 2022 and 2021 were approximately $ 2.9 million and $ 1.0 million, respectively.

The Bank is required to maintain deposits on hand or with the FRB to meet specific reserve requirements.

19 unchanged sentences

Other Investments

Other investments are carried at cost, or, where available, recently observable market prices, which approximates fair value, and consist of FHLB stock, FRB stock, Bankers’ Bancorporation stock and preferred stock in a community development project (sold during 2021).

Other investments are carried at cost, or, where available, recently observable market prices, which approximates fair value, and consist of FHLB stock, FRB stock and Bankers’ Bancorporation stock.

Other investments are evaluated for impairment at least on an annual basis.

125 unchanged sentences

Mortgage Banking Derivatives

Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives.

Commitments to fund mortgage loans, at a set interest rate, (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives.

Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest rate on the loan is locked.

14 unchanged sentences

as defined in Rule 12b-2 of the Exchange Act as of the date ASU 2019-10 was enacted.

The Corporation is 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.

During the first half of 2019 the Corporation engaged a third-party partner to assist in its implementation of this standard.

Over the last three years significant progress has been made working through the assumptions, drivers, documentation and other mechanics for the calculation of the Corporation’s ALL under ASU 2016-13.

Throughout 2022, management ran a calculation of its allowance under ASU 2016-13 parallel to its current modeling to assess the functioning of the ASU 2016-13 model while also documenting the controls that will be in place around the process when the Corporation implements this standard.

Results of these parallel runs indicate that the Bank’s ALL to total loans coverage ratio will increase from 0.78 % as of December 31, 2022, to 1.10 % - 1.20 % upon implementation of ASU 2016-13 on January 1, 2023.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

2 unchanged sentences

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.

The updated guidance is effective for all entities from March 12, 2020 through December 31, 2022.

The updated guidance was originally effective for all entities from March 12, 2020 through December 31, 2022.

In December 2022, the FASB issued ASU 2022-06 which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

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 .

This ASU clarifies the requirements for entities to reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 of the stated subtopic for each reporting period.

The ASU was published to clarify the Codification and correct its unintended application and was effective for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2020.

The adoption of this guidance did not have an impact on the Corporation’s consolidated financial statements as all premiums within its securities portfolio were already being amortized to the earliest call date prior to implementation as required under subtopic 310-20.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

This ASU provides guidance on eliminating the requirement for classification of and disclosures around troubled debt restructurings.

The purpose of this guidance is to eliminate unnecessary and overly-complex disclosures of loans that are already incorporated into the allowance for credit losses and related disclosures.

This ASU further requires the disclosure of current-period gross charge-offs by year of origination.

The updated guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for all entities which have implemented ASU 2016-13.

The Corporation has historically had very few credit relationships classified as troubled debt restructurings, and as such does not anticipate that the elimination of accounting for and disclosure of these types of credit relationships will have a significant impact to its financial statements upon implementation of ASU 2016-13 beginning with the first quarter of 2023.

Note 2 Acquisitions

Tomah Bancshares, Inc.

On May 15, 2020, the Company completed a merger with Tomah Bancshares, Inc.

(“Timberwood”), a bank holding company headquartered in Tomah, Wisconsin, pursuant to the Agreement and Plan of Bank Merger, dated as of November 20, 2019, by and among the Company and Timberwood, whereby Timberwood merged with and into the Company, and Timberwood Bank, Timberwood’s wholly-owned banking subsidiary, 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.

Denmark Bancshares, Inc.

On August 12, 2022, the Corporation completed a merger with Denmark Bancshares, Inc.

(“Denmark”), a bank holding company headquartered in Denmark, Wisconsin, pursuant to the Agreement and Plan of Bank Merger, dated as of January 18, 2022 by and between the Corporation and Denmark, whereby Denmark merged with and into the Corporation, and Denmark State Bank, Denmark’s wholly-owned banking subsidiary, merged with and into the Bank.

Denmark’s principal activity was the ownership and operation of Denmark State Bank, a state-chartered banking institution that operated seven ( 7 ) branches in Wisconsin at the time of closing.

The merger consideration totaled approximately $ 128.8 million.

Pursuant to the terms of the Merger Agreement, Timberwood shareholders received 5.1445 shares of the Company’s common stock for each outstanding share of Timberwood common stock, and cash in lieu of any remaining fractional share.

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.

The Company accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of Timberwood prior to the consummation date were not included in the accompanying consolidated financial statements.

Pursuant to the terms of the merger agreement, Denmark shareholders could elect to receive either 0.5276 of a share of the Corporation’s common stock or $ 38.10 in cash for each outstanding share of Denmark common stock, subject to a maximum of 20 % cash consideration in total, with cash paid in lieu of any remaining fractional share.

Corporation stock issued totaled 1,579,530 shares valued at approximately $ 124.8 million, with cash of $ 4.0 million comprising the remainder of merger consideration.

The Corporation accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of Denmark prior to the consummation date were not included in the accompanying consolidated financial statements.

The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition.

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.

The Corporation determined the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities and deposits with the assistance of third party valuations, appraisals and third party advisors.

The estimated fair values will be subject to refinement for up to one year after deal consummation as additional information becomes available relative to the closing date fair values.

The fair value of the assets acquired and liabilities assumed on May 15, 2020 was as follows:

As Recorded by

1 unchanged sentence

(in thousands)

the Corporation

Cash, cash equivalents and securities

3 unchanged sentences

Total assets acquired

Subordinated debt

Other borrowings

3 unchanged sentences

purchase price

Goodwill (originally recorded)

Refinement to fair value estimates (1)

Goodwill (after refinement)

Partnership Community Bancshares, Inc.

On July 12, 2019, the Corporation completed a merger with Partnership Community Bancshares, Inc.

(“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 Corporation and Partnership, whereby Partnership merged with and into the Corporation, and Partnership Bank, Partnership’s wholly-owned banking subsidiary, merged with and into the Bank.

Partnership’s principal activity was the ownership and operation of Partnership Bank, a state-chartered banking institution that operated four branches in Wisconsin at the time of closing.

The merger consideration totaled approximately $ 49,589,000 .

Pursuant to the terms of the Merger Agreement, Partnership shareholders had the option to receive either 0.34879 shares of the Corporation’s common stock or $ 17.3001 in cash for each outstanding share of Partnership common stock, and cash in lieu of any remaining fractional share.

The stock versus cash elections by the Partnership shareholders were subject to final consideration being made up of approximately $ 14,285,000 in cash and 534,659 shares of Corporation common stock, valued at approximately $ 35,303,000 (based on a value of $ 66.03 per share on the closing date).

The purpose of the merger was for strategic reasons beneficial to the Corporation.

The acquisition is consistent with its plan to drive growth and efficiency through increased scale, leverage the strengths of each bank across the combined customer base, enhance profitability, and add liquidity and shareholder value.

The Corporation accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of Partnership prior to the consummation date were not included in the accompanying consolidated financial statements.

(1) Refinement consists of adjustments to the initial fair value estimates of other assets and liabilities, primarily related to accrued and deferred income taxes.

The following unaudited pro forma information is presented for illustrative purposes only.

The pro forma information should not be relied upon as being indicative of the historical results of operations the companies would have had if the merger had occurred before such periods or the future results of operations that the companies will experience as a result of the merger.

The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related expenses, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results.

The unaudited pro forma information set forth below gives effect to the merger as if it had occurred on January 1, 2021, the beginning of the earliest period presented.

(in thousands, except per share data)

December 31, 2022

December 31, 2021

Total revenue, net of interest expense

Diluted earnings per common share

Tomah Bancshares, Inc.

On May 15, 2020, the Corporation completed a merger with Tomah Bancshares, Inc.

(“Timberwood”), a bank holding company headquartered in Tomah, Wisconsin, pursuant to the Agreement and Plan of Bank Merger, dated as of November 20, 2019, by and between the Corporation and Timberwood, whereby Timberwood merged with and into the Corporation, and Timberwood Bank, Timberwood’s wholly-owned banking subsidiary, 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.

The merger consideration totaled approximately $ 29.8 million.

Pursuant to the terms of the merger agreement, Timberwood shareholders received 5.1445 shares of the Corporation’s common stock for each outstanding share of Timberwood common stock, and cash in lieu of any remaining fractional share.

Corporation stock issued totaled 575,641 shares valued at approximately $ 29.4 million, with cash of $ 0.4 million comprising the remainder of merger consideration.

The Corporation accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of Timberwood prior to the consummation date were not included in the accompanying consolidated financial statements.

The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition.

The Corporation 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.

The estimated fair values will be subject to refinement for up to one year after the consummation as additional information becomes available relative to the closing date fair values.

The fair value of the assets acquired and liabilities assumed on July 12, 2019 was as follows:

The estimated fair values will be subject to refinement for up to one year after deal consummation as additional information becomes available relative to the closing date fair values.

The fair value of the assets acquired and liabilities assumed on May 15, 2020 was as follows:

As Recorded by

the Corporation

(in thousands)

10 unchanged sentences

purchase price

Refinement to fair value estimates

Goodwill (after refinement)

Note 3 Securities

10 unchanged sentences

December 31, 2021

Treasury securities

Obligations of U.S.

7 unchanged sentences

December 31, 2022

Treasury securities

Obligations of states and political subdivisions

Total held to maturity securities

December 31, 2021

4 unchanged sentences

Treasury securities, 107 out of 109 mortgage-backed securities, 16 out of 16 obligations of U.S.

Government sponsored agency securities, 7 out of 16 corporate notes and 5 out of 121 obligations of states and political subdivisions contained unrealized losses.

At December 31, 2021 and 2020, management has both the intent and ability to hold securities containing unrealized losses.

Government sponsored agency securities, 8 out of 16 corporate notes, 105 out of 135 obligations of states and political subdivisions and 4 out of 4 certificates of deposit contained unrealized losses.

At December 31, 2022 and 2021, management has both the intent and ability to hold securities containing material unrealized losses.

The following table shows the fair value and gross unrealized losses of securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (dollar amounts in thousands):

8 unchanged sentences

Corporate notes

Certificate of Deposits

December 31, 2022 - Held to Maturity

Treasury securities

Obligations of states and political subdivisions

December 31, 2021 - Available for Sale

Treasury securities

Obligations of U.S.

Government sponsored agencies

Obligations of states and political subdivisions

Mortgage-backed securities

Corporate notes

60 unchanged sentences

A weighted average is taken of these individual scores to arrive at the overall rating.

This rating is subject to adjustment by the loan officer based on facts and circumstances pertaining to the borrower.

This rating is

subject to adjustment by the loan officer based on facts and circumstances pertaining to the borrower.

Risk ratings are subject to independent review.

28 unchanged sentences

The general reserve is based in part on the Bank’s historical loss experience which is updated quarterly.

The general reserve portion of the ALL also includes consideration of certain qualitative factors such as 1) changes in lending policies and/or underwriting practices, 2) national and local economic conditions, 3) changes in portfolio volume and nature, 4) experience, ability and depth of lending management and other relevant staff, 5) levels of and trends in past-due and nonaccrual loans and quality, 6) changes in loan review and oversight, 7) impact and effects of concentrations and 8) other issues deemed relevant.

reserve portion of the ALL also includes consideration of certain qualitative factors such as 1) changes in lending policies and/or underwriting practices, 2) national and local economic conditions, 3) changes in portfolio volume and nature, 4) experience, ability and depth of lending management and other relevant staff, 5) levels of and trends in past-due and nonaccrual loans and quality, 6) changes in loan review and oversight, 7) impact and effects of concentrations and 8) other issues deemed relevant.

There are many factors affecting ALL;

39 unchanged sentences

(Increase) Reduction in interest income

The following table presents loans acquired with deteriorated credit quality as of December 31, 2021 and 2020.

The following table presents loans acquired with deteriorated credit quality.

No loans in this table had a related allowance at December 31, 2022 and 2021, and therefore, the below disclosures were not expanded to include loans with and without a related allowance (dollar amounts in thousands).

8 unchanged sentences

Management regularly monitors these loan relationships, and if information becomes available that indicates expected cash flows will differ from initial expectations, it may necessitate reclassification between accretable and non-accretable components of the original discount calculation.

The following table represents the change in the accretable and non-accretable components of discounts on loans acquired with deteriorated credit quality during the year ended December 31, 2021 and 2020 (dollar amounts in thousands):

The following table represents the change in the accretable and non-accretable components of discounts on loans acquired with deteriorated credit quality (dollar amounts in thousands):

December 31, 2022

6 unchanged sentences

Accretion to loan interest income

Disposals of loans

Balance at end of year

4 unchanged sentences

Loans modified under the guidance of the Cares Act are not considered TDRs and as such are not included in the tables below.

The Corporation had no new troubled debt restructurings during the year ended December 31, 2022.

The following table presents the troubled debt restructurings during the year ended December 31, 2021 (dollar amounts in thousands):

5 unchanged sentences

Commercial Real Estate

The following table presents the troubled debt restructurings during the year ended December 31, 2020 (dollar amounts in thousands):

Pre-Modification

Post-Modification

Outstanding Recorded

Commercial Real Estate

Residential 1-4 Family

Note 5 Related Party Matters

11 unchanged sentences

The third party firm collects relevant data points from numerous sources.

Some of these data points relate directly to the pricing level or relative value of the mortgage servicing while other data points relate to the assumptions used to derive fair value.

Some of these data points relate directly to the pricing level or relative

value of the mortgage servicing while other data points relate to the assumptions used to derive fair value.

In addition, the valuation evaluates specific collateral types, and current and historical performance of the collateral in question.

2 unchanged sentences

The valuation data also contains interest rate shock analyses for monitoring fair value changes in differing interest rate environments.

Following is an analysis of activity for the years ended December 31 in servicing rights assets that are measured at fair value (dollar amounts in thousands):

Fair value at beginning of year

MSR asset acquired

Following is an analysis of activity in servicing rights assets that are measured at fair value (dollar amounts in thousands):

December 31, 2022

December 31, 2021

Fair value at beginning of period

Servicing asset additions

2 unchanged sentences

Amount recognized through earnings

Fair value at end of year

MSR asset acquired

Fair value at end of period

Unpaid principal balance of loans serviced for others

1 unchanged sentence

During the years ended December 31, 2022 and 2021, the Corporation utilized economic assumptions in measuring the initial value of MSRs for loans sold whereby servicing is retained by the Corporation.

The economic assumptions used at December 31, 2021 and 2020 included constant prepayment speed of 13.8 and 16.3 months, respectively, and a discount rate of 10.28 % at the end of both years.

The economic assumptions used at December 31, 2022 and 2021 included constant prepayment speed of 7.5 and 13.8 months and a discount rate of 10.21 % and 10.28 %, respectively.

The constant prepayment speeds are obtained from publicly available sources for each of the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation loan programs that the Corporation originates under.

18 unchanged sentences

Beginning of year

Assets Acquired

(Loss) gain on sale of OREO and valuation allowance

21 unchanged sentences

As of December 31, 2022 and 2021, Ansay had term loans with the Bank totaling approximately $ 19,838,000 and $ 16,936,000 , respectively.

Ansay also has available revolving lines of credit totaling $ 18,940,000 with the Corporation, under which there were outstanding balances of $ 1,944,000 as of December 31, 2021.

There were no balances outstanding under these revolving lines as of December 31, 2020.

Ansay also has available revolving lines of credit totaling $ 18,010,000 with the Corporation, under which there were no outstanding balances as of December 31, 2022.

Outstanding balances under these lines totaled $ 1,944,000 as of December 31, 2021.

Ansay maintained deposits at the Bank totaling $ 10,797,000 and $ 10,304,000 as of December 31, 2022 and 2021, respectively.

45 unchanged sentences

Fixed rate, fixed term

Purchase accounting adjustment

3 unchanged sentences

At December 31, 2022 and 2021, respectively, total loans available to be pledged as collateral on FHLB borrowings were approximately $ 1,152,655,000 and $ 915,512,000 and, of that total, $ 668,328,000 and $ 527,199,000 qualified as eligible collateral.

The Bank owned $ 3,353,000 of FHLB stock at December 31, 2021 and 2020.

In addition to the fixed rate, fixed term advances noted above, as of December 31, 2020, the Bank had $ 800,000 of credit outstanding from the FHLB which consisted entirely of letters of credit.

There were no such letters of credit as of December 31, 2021.

The Bank owned $ 4,645,000 and $ 3,353,000 of FHLB stock at December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, the Bank had available liquidity of $ 666,424,000 and $ 519,242,000 for future draws, respectively.

9 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.

During July 2020, the Company entered into subordinated note agreements with two separate commercial banks.

The Company had through December 31, 2020, to borrow funds up to a maximum availability of $ 6,000,000 under each agreement, or $ 12,000,000 total.

During July 2020, the Corporation entered into subordinated note agreements with two separate commercial banks.

The Corporation had through December 31, 2020, to borrow funds up to a maximum availability of $ 6,000,000 under each agreement, or $ 12,000,000 total.

These notes were issued with 10 -year maturities, carry interest at a fixed rate of 5.0 % through June 30, 2025, and at a variable rate thereafter, payable quarterly.

These notes are callable on or after January 1, 2026 and qualify for Tier 2 capital for regulatory purposes.

The Company had outstanding balances of $ 6,000,000 under these agreements at December 31, 2021 and 2020.

The Corporation had outstanding balances of $ 6,000,000 under these agreements at December 31, 2022 and 2021.

During August 2022, the Corporation entered into subordinated note agreements with an individual.

The Corporation had outstanding balances of $ 6,000,000 under these agreements as of December 31, 2022.

These notes were issued with 10 -year maturities, carry interest at a fixed rate of 5.25 % through August 6, 2027, and at a variable rate thereafter, payable quarterly.

These notes are callable on or after August 6, 2027 and qualify for Tier 2 capital for regulatory purposes.

Note 16 Income Taxes

2 unchanged sentences

Total current

Deferred tax expenses (benefit):

Deferred tax benefit:

Total deferred

18 unchanged sentences

Other real estate owned

Unrealized loss on securities available for sale

Total deferred tax assets

10 unchanged sentences

Total deferred tax liabilities

Net deferred tax liability

Net deferred tax asset (liability)

Tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position.

24 unchanged sentences

Compensation expense for restricted stock is based on the fair value of the awards of Bank First Corporation common stock at the time of grant.

The value of restricted stock grants that are expected to vest is amortized into expense over the vesting periods.

The value of restricted stock grants that are expected to vest is amortized into expense over the vesting periods of the respective grants.

For the year ended December 31, 2022, 2021 and 2020, compensation expense of $ 1,662,000 , $ 1,393,000 and $ 1,081,000 , respectively, was recognized related to restricted stock awards.

34 unchanged sentences

The Federal Reserve may, however, require smaller bank holding companies to maintain certain minimum capital levels, depending upon general economic conditions and a bank holding company's particular condition, risk profile and growth plans.

Under regulatory guidance for non-advanced approaches institutions, the Bank is required to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets, including an additional conservation buffer determined by banking regulators.

Due to the acquisition of Denmark, the Corporation became subject to compliance with risk-based capital rules beginning with the third quarter of 2022, and will remain so as long as it remains above the $ 3 billion threshold.

Under regulatory guidance for non-advanced approaches institutions, the Bank and Corporation are required to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets, including an additional conservation buffer determined by banking regulators.

As of December 31, 2022 and 2021, this buffer was 2.50 %.

As of December 31, 2021 and 2020, the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2022 and 2021, the Bank and Corporation met all capital adequacy requirements to which they are subject.

Actual and required capital amounts and ratios are presented below (dollar amounts in thousands):

45 unchanged sentences

Notional Amount

December 31, 2022

December 31, 2021

Commitments to extend credit:

7 unchanged sentences

and stocks and bonds.

Letters of credit include $ 100,000 of direct pay letters of credit and $ 8,962,000 of standby letters of credit.

Letters of credit include $ 10,343,000 of standby letters of credit and no direct pay letters of credit and.

Standby letters of credit are conditional lending commitments issued by the Corporation to guaranty the performance of a customer to a third party.

Direct pay letters of credit generally are issued to support the marketing of industrial development revenue and housing bonds and provide that all debt service payments will be paid by drawing on the letter of credit.

The letter of credit draws are then repaid by draws from the customer’s bank account.

Standby letters of credit are conditional lending commitments issued by the Corporation to guaranty the performance of a customer to a third party.

Generally, all standby letters of credit issued have expiration dates within one year.

8 unchanged sentences

Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Corporation leases certain properties under operating leases that resulted in the recognition of ROU lease assets of approximately $ 1,580,000 and $ 1,591,000 and corresponding lease liabilities of the same value on the Corporation’s Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively.

The Corporation leases certain properties under operating leases that resulted in the recognition of ROU lease assets of approximately $ 1,582,000 and $ 1,580,000 and corresponding lease liabilities of similar value on the Corporation’s Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively.

GAAP provides a number of optional practical expedients in transition.

15 unchanged sentences

For the year ended

(dollars in thousands)

December 31, 2022

December 31, 2021

(dollar amounts in Thousands)

Amortization of ROU Assets - Operating Leases

1 unchanged sentence

Operating Lease Cost (Cost resulting from lease payments)

New ROU Assets - Operating Leases

Weighted Average Lease Term (Years) - Operating Leases

2 unchanged sentences

December 31, 2022

December 31, 2020

Operating lease payments due:

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Securities available for sale

Treasury securities

Obligations of U.S.

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Collateral discounts and discount rates

As of December 31, 2021

Other real estate owned

Third party appraisals, sales contracts or brokered price options

Collateral discounts and estimated costs to sell

Impaired loans

Third party appraisals and discounted cash flows

Collateral discounts and discount rates

The following methods and assumptions were used by the Corporation to estimate fair value of financial instruments.

11 unchanged sentences

Securities sold under repurchase agreements - The fair value of securities sold under repurchase agreements with variable rates or due on demand is the amount payable at the reporting date.

The fair value of securities sold under repurchase agreements with fixed terms is estimated using discounted cash flows with discount rates at interest rates currently offered for securities sold under repurchase agreements of similar remaining values.

The fair value of securities sold under repurchase

agreements with fixed terms is estimated using discounted cash flows with discount rates at interest rates currently offered for securities sold under repurchase agreements of similar remaining values.

Notes payable and Subordinated notes - Rates currently available to the Corporation for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

36 unchanged sentences

Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

the fair value estimates may not be realized in an immediate settlement of the instrument.

Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Corporation.

23 unchanged sentences

Treasury stock, at cost

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Total stockholders’ equity

18 unchanged sentences

Cash flows from investing activities, net of effects of business combination:

Sale of other investments

Dividends received from Bank

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Cash and cash equivalents at end

Supplemental schedule of noncash activities:

Amortization of unrealized holding gains on securities transferred from available for sale to held to maturity recognized in other comprehensive income, net of tax

Change in unrealized gains and losses on investment securities available for sale, net of tax

Note 24 Earnings Per Common Share

2 unchanged sentences

Years ended December 31,

(in thousands, except per share data)

Net income available to common shareholders

41 unchanged sentences

Earnings per share, diluted

Note 26 Pending Merger Transaction

On January 18, 2022, the Corporation entered into an Agreement and Plan of Merger with Denmark Bancshares, Inc.

(“Denmark”), a Wisconsin Corporation, under which Denmark will merge with and into the Corporation and Denmark’s banking subsidiary, Denmark State Bank, will merge with and into the Bank.

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.

Merger consideration will consist of up to 20 % cash and no less than 80 % of common stock of the Corporation, and will total approximately $ 119 million, subject to the fair market value of the Corporation’s common stock on the date of closing.

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.

Note 26 Subsequent Merger Transaction

On February 10, 2023, the Corporation completed a merger with Hometown Bancorp, Ltd.

("Hometown"), a bank holding company headquartered in Fond Du Lac, Wisconsin, pursuant to the Agreement and Plan of Bank Merger, dated as of July 25, 2022, by and between the Corporation and Hometown, whereby Hometown merged with and into the Corporation, and Hometown Bank, Hometown's wholly-owned banking subsidiary, merged with and into the Bank.

Hometown's principal activity was the ownership and operation of Hometown Bank, a state-chartered banking institution.

The merger consideration totaled approximately $ 130.5 million.

Pursuant to the terms of the merger agreement, Hometown shareholders could elect to receive either 0.3962 of a share of the Corporation’s common stock or $ 29.16 in cash for each outstanding share of Hometown common stock, subject to a maximum of 30 % cash consideration in total, and cash in lieu of any remaining fractional share.

Corporation stock issued totaled 1,450,272 shares valued at approximately $ 115.1 million, with cash of $ 15.4 million comprising the remainder of merger consideration.

At close, the combined company had total assets of approximately $ 4.2 billion, loans of approximately $ 3.3 billion and deposits of approximately $ 3.5 billion.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data