3 unchanged sentences
(In thousands) (Unaudited)
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
Cash flows from financing activities, net of effects of business combination:
−Removed: Net increase (decrease) in deposits
+Added: Net decrease in deposits
Net decrease in securities sold under repurchase agreements
1 unchanged sentence
Repayment of notes payable
−Removed: ( 3,128,950 )
−Removed: Proceeds from issuance of subordinated notes
+Added: Repayment of junior subordinated debentures
Dividends paid
2 unchanged sentences
Net cash used in financing activities
−Removed: Net decrease in cash and cash equivalents
+Added: Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
4 unchanged sentences
MSR resulting from sale of loans
−Removed: 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
19 unchanged sentences
Critical Accounting Policies and Estimates
−Removed: Preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures.
−Removed: These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future.
−Removed: Estimates are used in accounting for, among other items, the allowance for credit losses on securities and loans, valuation of loans in acquisition transactions, valuation of mortgage servicing rights, useful lives for depreciation and amortization, fair value of financial instruments, valuation of deferred tax assets, uncertain income tax positions and contingencies.
−Removed: Estimates that are particularly susceptible to significant change for the Company include the determination of the allowance for credit losses, the determination of the valuation of mortgage servicing rights, the determination and assessment of deferred tax assets and liabilities, and the valuation of loans acquired in acquisition transactions;
−Removed: therefore, these are critical accounting policies.
−Removed: Factors that may cause sensitivity to the aforementioned estimates include but are not limited to:
−Removed: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, changes in applicable banking or tax regulations, and changes to deferred tax estimates.
−Removed: Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual reporting period presented.
−Removed: There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as previously disclosed in the Company’s Annual Report, other than what is disclosed in “Updates to Significant Accounting Policies” noted below.
−Removed: Updates to Significant Accounting Policies
−Removed: On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):
−Removed: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), utilizing the modified retrospective method for financial assets measured at amortized cost.
−Removed: Results for the periods beginning after January 1, 2023 are presented under ASU 2016-13 while prior period amounts are reported in accordance with the previously applicable accounting standards.
−Removed: The Company recorded a reduction to retained earnings of approximately $ 10.1 million upon adoption of ASU 2016-13.
−Removed: The transition adjustment included an increase to the ACL-Loans of $ 11.0 million and an increase in the Allowance for Credit Losses – Unfunded Commitments (“ACL – Unfunded Commitments”) of $ 3.3 million, offset by applicable deferred taxes.
−Removed: The Company adopted ASU 2016-13 using the prospective transition approach for financial assets considered purchased credit deteriorated (“PCD”) that were previously classified as purchase credit impaired (“PCI”).
−Removed: The amortized cost of the PCD assets were adjusted to reflect the addition of $ 0.3 million to the allowance for credit losses.
−Removed: The remaining noncredit discount (based on the adjusted amortized cost) will be accreted into interest income at the effective interest rate over the remaining life of the assets.
−Removed: The following table presents the changes in the allowance for credit losses required as a result of this adoption:
−Removed: January 1, 2023 As
−Removed: December 31, 2022
−Removed: Reported After ASU
−Removed: Pre-ASU 2016-13
−Removed: Allowance for Credit Losses
−Removed: 2016-13 Adoption
−Removed: 2016-13 Adoption
−Removed: Loans held for investments
−Removed: Commercial/industrial
−Removed: Commercial real estate - owner occupied
−Removed: Commercial real estate - non-owner occupied
−Removed: Construction and development
−Removed: Residential 1-4 family
−Removed: Loans held for investments, total
−Removed: Unfunded commitments
−Removed: As a result of adopting ASU 2016-13, certain of the Company’s accounting policies were updated as follows:
−Removed: Securities are classified as held to maturity or available for sale at the time of purchase.
−Removed: Investment securities classified as held to maturity, which management has the intent and ability to hold to maturity, are reported at amortized cost.
−Removed: Investment 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 net carrying value of debt securities classified as held to maturity or available for sale is adjusted for amortization of premiums and accretion of discounts utilizing the effective interest method over the expected estimated maturity.
−Removed: Such amortization and accretion is included as an adjustment to interest income from securities.
−Removed: Interest and dividends are included in interest income from securities.
−Removed: Transfers of debt securities into the held to maturity classification from the available for sale classification are made at fair value as of the date of transfer.
−Removed: The unrealized holding gain or loss as of the date of transfer is retained in other comprehensive income and in the carrying value of the held to maturity securities, establishing the amortized cost of the security.
−Removed: These unrealized holding gains and losses as of the date of transfer are amortized or accreted over the remaining life of the security.
−Removed: Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings.
−Removed: Prior to January 1, 2023, unrealized gains or losses considered temporary and the noncredit portion of unrealized losses deemed other-than-temporary were reported as an increase or decrease in accumulated other comprehensive income.
−Removed: The credit related portion of unrealized losses deemed other-than-temporary were recorded in current period earnings.
−Removed: Subsequent to January 1, 2023, the Bank evaluates securities for potential credit losses at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.
−Removed: As part of such monitoring, the credit quality of individual securities and their issuers are assessed.
−Removed: If, based on information available such as the decline in the credit worthiness of the issuer, external market ratings or the anticipated or realized elimination of associated dividends, potential credit losses are identified on securities an allowance for credit losses would be established.
−Removed: Loans and Related Interest Income – Originated :
−Removed: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are carried at their amortized cost basis, which is the unpaid principal balance outstanding, net of deferred loan fees and costs and any direct principal charge-offs.
−Removed: The Company made an accounting policy election to exclude accrued interest from the amortized cost basis of loans and report such accrued interest as part of other assets on the consolidated balance sheets.
−Removed: Interest income is accrued on the unpaid principal balance using the simple interest method.
−Removed: The accrual of interest income on loans is discontinued when, in the opinion of management, there is reasonable doubt as to the borrower’s ability to meet payment of interest or principal when due.
−Removed: Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal, though may be placed in such status earlier.
−Removed: Loans past due 90 days or more may continue on accrual only when they are well secured and/or in process of collection or renewal.
−Removed: When interest accrual is discontinued, all previously accrued but uncollected interest is reversed against current period interest income.
−Removed: Except in very limited circumstances, cash collections on nonaccrual loans are credited to the loan receivable balance and no interest income is recognized on those loans until the principal balance is paid in full.
−Removed: Accrual of interest may be resumed when the customer is current on all principal and interest payments and has been paying on a timely basis for a sustained period of time.
−Removed: See Note 5 for additional information and disclosures on loans.
−Removed: Loans and Related Interest Income – Acquired:
−Removed: Loans purchased in acquisition transactions are acquired loans, and are recorded at their estimated fair value at the acquisition date.
−Removed: Prior to January 1, 2023, as described in further detail in the Company’s Annual Report, the Company initially classified acquired loans as either PCI loans (i.e., loans that reflect credit deterioration since origination and it is probable at acquisition that the Company will be unable to collect all contractually required payments) or purchased non-impaired loans (i.e., “performing acquired loans”).
−Removed: The Company estimated the fair value of PCI loans based on the amount and timing of expected principal, interest and other cash flows for each loan.
−Removed: The excess of the loan’s contractual principal and interest payments over all cash flows expected to be collected at acquisition was considered an amount that should not be accreted.
−Removed: These credit discounts (“nonaccretable marks”) were included in the determination of the initial fair value for acquired loans;
−Removed: therefore, no allowance for credit losses was recorded at the acquisition date.
−Removed: Differences between the estimated fair values and expected cash flows of acquired loans at the acquisition date that were not credit-based (“accretable marks”) were subsequently accreted to interest income over the estimated life of the loans.
−Removed: Subsequent to the acquisition date for PCI loans, increases in cash flows over those expected at the acquisition date resulted in a move of the discount from nonaccretable to accretable, while decreases in expected cash flows after the acquisition date were recognized through the provision for credit losses.
−Removed: Subsequent to January 1, 2023, acquired loans that have evidence of more-than-insignificant deterioration in credit quality since origination are considered PCD loans.
−Removed: At acquisition, an estimate of expected credit losses is made for PCD loans.
−Removed: This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair value to establish the initial amortized cost basis of the PCD loans.
−Removed: Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors, resulting in a discount or premium that is amortized to interest income.
−Removed: For acquired loans not deemed PCD loans at acquisition, the difference between the initial fair value mark and the unpaid principal balance are recognized in interest income over the estimated life of the loans.
−Removed: In addition, an initial allowance for expected credit losses is estimated and recorded as provision expense at the acquisition date.
−Removed: The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans.
−Removed: See Note 5 for additional information and disclosures on loans.
−Removed: Allowance for Credit Losses - Loans:
−Removed: The ACL-Loans represents management’s estimate of expected credit losses in the Company’s loan portfolio at the balance sheet date.
−Removed: The Company estimates the ACL-Loans based on the amortized costs basis of the underlying loan and has made an accounting policy election to exclude accrued interest from the loan’s amortized cost basis and the related measurement of the ACL-Loans.
−Removed: Estimating the amount of the ACL-Loans is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge-offs, trends in past due and nonaccrual loans, and the level of potential problem loans, all of which may be susceptible to significant change.
−Removed: Prior to January 1, 2023, as described in further detail in the Company’s Annual Report, the Company used an incurred loss impairment model.
−Removed: This methodology assessed the overall appropriateness of the allowance for credit losses and included allocations for specifically identified impaired loans and loss factors for all remaining loans, with a component primarily based on historical loss rates and another component primarily based on other qualitative factors.
−Removed: Impaired loans were individually assessed and measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market
−Removed: price or the fair value of the collateral if the loan was collateral dependent.
−Removed: Loans that were determined not to be impaired were collectively evaluated for impairment, stratified by type and allocated loss ranges based on the Company’s actual historical loss ratios for each strata, and adjustments were also provided for certain environmental and other qualitative factors.
−Removed: Subsequent to January 1, 2023, the Company uses a current expected loss model (“CECL”).
−Removed: This methodology also considers historical loss rates and other qualitative adjustments, as well as a new forward-looking component that considers reasonable and supportable forecasts over the expected life of each loan.
−Removed: To develop the ACL-Loans estimate under the current expected loss model, the Company segments the loan portfolio into loan pools based on loan type and similar credit risk elements;
−Removed: performs an individual evaluation of PCD loans;
−Removed: calculates the historical loss rates for the segmented loan pools;
−Removed: applies the loss rates over the calculated life of the pooled loans;
−Removed: adjusts for forecasted macro-level economic conditions;
−Removed: and determines qualitative adjustments based on factors and conditions unique to the Bank's portfolio.
−Removed: The Company further individually evaluates certain impaired loans based on the amount and timing of estimated future cash flows and collateral values and establishes specific reserves when these estimated future cash flows or collateral values do not justify the carrying value of the loan.
−Removed: Allowance for Credit Losses - Unfunded Commitments :
−Removed: In addition to the ACL-Loans, the Company has established an allowance for unfunded commitments, included in other liabilities on the consolidated balance sheets, representing expected credit losses over the contractual period for which the Company is exposed to credit risk resulting from a contractual obligation to extend credit.
−Removed: The ACL-Unfunded Commitments is maintained at a level that management believes is sufficient to absorb losses arising from unfunded loan commitments, and is determined quarterly based on methodology similar to the methodology for determining the ACL-Loans.
−Removed: Other Recently Implemented Accounting Standards
−Removed: In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):
−Removed: Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures .
−Removed: This ASU eliminated the accounting guidance for TDRs by creditors and enhanced the disclosure requirements for loan modifications to borrowers experiencing financial difficulty.
−Removed: The ASU also requires public business entities to expand the vintage disclosures to include gross charge-offs by year of origination.
−Removed: The updated guidance was effective for fiscal years beginning after December 15, 2022.
−Removed: Adoption of this ASU did not have a material impact on the Company’s consolidated financial statements;
−Removed: however, it resulted in new disclosures.
−Removed: See Note 5 for the new disclosures.
+Added: The accounting and reporting policies of the Company conform to GAAP in the United States and general practices within the financial institution industry.
+Added: To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information.
+Added: These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement.
+Added: As disclosed in the Company’s Annual Report, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.
+Added: These include accounting for business combinations (primarily related to core deposit intangibles and acquired loans), accounting for the ACL-Loans, and the valuation and recording of deferred tax assets and liabilities.
+Added: There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as previously disclosed in the Company’s Annual Report.
Recently Issued Not Yet Effective Accounting Standards
7 unchanged sentences
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements.
−Removed: This ASU modifies the dis closure or presentation requirements of a variety of Topics in the Codification.
+Added: This ASU modifies the disclosure or presentation requirements of a variety of Topics in the Codification.
Certain of the amendments represent clarifications to or technical corrections of the current requirements.
2 unchanged sentences
The Company does not anticipate a significant impact to its financial statement disclosures as a result of this ASU.
+Added: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):
+Added: Improvements to Income Tax Disclosures.
+Added: This ASU is intended to improve the transparency and decision usefulness of income tax disclosures by requiring specific categories in the rate reconciliation table and disaggregation of taxes paid by jurisdiction.
+Added: All public entities must also provide additional information for reconciling items that meet a specific quantitative threshold.
+Added: This update is effective for annual periods beginning after December 15, 2024.
NOTE 2 – ACQUISITIONS
1 unchanged sentence
(“Hometown”), a bank holding company headquartered in Fond du Lac, Wisconsin, pursuant to the Agreement and Plan of Bank Merger (“Merger Agreement”), dated as of July 25, 2022 by and among the Company and Hometown, whereby Hometown merged with and into the Company, and Hometown Bank, Hometown’s wholly-owned banking subsidiary, merged with and into the Bank.
−Removed: Hometown’s principal activity was the
−Removed: ownership and operation of Hometown Bank, a state-chartered banking institution that operated ten ( 10 ) branches in Wisconsin at the time of closing.
+Added: Hometown’s principal activity was the ownership and operation of Hometown Bank, a state-chartered banking institution that operated ten ( 10 ) branches in Wisconsin at the time of closing.
The merger consideration totaled approximately $ 130.5 million.
22 unchanged sentences
Purchase price of PCD loans at acquisition
+Added: Non-credit discount on PCD loans at acquisition
Allowance for credit losses on PCD loans at acquisition
3 unchanged sentences
The Company 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.
−Removed: 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.
+Added: The estimated fair values were subject to refinement for up to one year after deal consummation as additional information became available relative to the closing date fair values.
For more information concerning the Company’s acquisitions, see “Note 2 – Acquisition” in the Company’s audited consolidated financial statements included in the Company’s Annual Report.
2 unchanged sentences
Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings.
−Removed: There were no anti-dilutive stock options for the nine months ended September 30, 2023 or 2022.
+Added: There were no anti-dilutive stock options for the three months ended March 31, 2024 or 2023.
The following table presents the factors used in the earnings per share computations for the period indicated:
−Removed: Three Months Ended September 30,
−Removed: Nine Months Ended September 30,
−Removed: (in thousands, except per share data)
+Added: Three Months Ended March 31,
Net income available to common shareholders
13 unchanged sentences
The following is a summary of available for sale securities:
−Removed: September 30, 2023
−Removed: Treasury securities
+Added: March 31, 2024
Obligations of U.S.
3 unchanged sentences
Corporate notes
−Removed: Certificates of deposit
Total available for sale securities
December 31, 2023
−Removed: Treasury securities
Obligations of U.S.
6 unchanged sentences
The following is a summary of held to maturity securities:
−Removed: September 30, 2023
+Added: March 31, 2024
Treasury securities
8 unchanged sentences
Greater Than 12 Months
−Removed: September 30, 2023 - Available for Sale
−Removed: Treasury securities
+Added: March 31, 2024 - Available for Sale
Obligations of U.S.
3 unchanged sentences
Corporate notes
−Removed: Certificate of Deposits
−Removed: September 30, 2023 - Held to Maturity
+Added: March 31, 2024 - Held to Maturity
Treasury securities
−Removed: Obligations of states and political subdivisions
December 31, 2023 - Available for Sale
−Removed: Treasury securities
Obligations of U.S.
7 unchanged sentences
Obligations of states and political subdivisions
−Removed: As of September 30, 2023, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired.
+Added: As of March 31, 2024, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired.
This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to these securities.
The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities.
−Removed: As of September 30, 2023, the Company did not intend to sell these securities and it was more likely than not that the Company would not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity.
+Added: As of March 31, 2024, the Company did not intend to sell these securities and it was more likely than not that the Company would not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity.
The unrealized losses have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration.
Furthermore, based on its analysis the Company has determined that held to maturity securities have zero expected credit losses.
−Removed: Treasury securities have the full faith and credit backing of the United States Government and the amount of Obligations of states and political subdivisions in an unrealized loss position at September 30, 2023 are not material to the financial statements.
−Removed: The following is a summary of amortized cost and estimated fair value of securities by contractual maturity as of September 30, 2023.
+Added: Treasury securities have the full faith and credit backing of the United States Government.
+Added: The following is a summary of amortized cost and estimated fair value of securities by contractual maturity as of March 31, 2024.
Contractual maturities will differ from expected maturities for mortgage-backed securities because borrowers may have the right to call or prepay obligations without penalties.
3 unchanged sentences
Due after one year through 5 years
−Removed: Due after 5 years through ten years
+Added: Due after 5 years through 10 years
Due after 10 years
Mortgage-backed securities
−Removed: As of September 30, 2023 and December 31, 2022, the carrying values of securities pledged to secure public deposits, securities sold under repurchase agreements, and for other purposes required or permitted by law were approximately $ 148.4 million and $ 226.9 million, respectively.
−Removed: Sales of securities available for sale produced $ 34.2 million in proceeds, $ 0.1 million in gross gains and $ 0.2 million in gross losses for the nine months ended September 30, 2023.
−Removed: There were no sales of securities during the nine months ended September 30, 2022.
+Added: As of March 31, 2024 and December 31, 2023, the carrying values of securities pledged to secure public deposits, securities sold under repurchase agreements, and for other purposes required or permitted by law were approximately $ 203.8 million and $ 204.8 million, respectively.
+Added: Sales of securities available for sale produced $ 10.2 million in proceeds with immaterial gross losses for three months ended March 31, 2024.
+Added: Sales of securities available for sale produced $ 34.2 million in proceeds, $ 0.1 million in gross gains and $ 0.2 million in gross losses for the three months ended March 31, 2023.
NOTE 5 – LOANS, ALLOWANCE FOR CREDIT LOSSES, AND CREDIT QUALITY
−Removed: The following table presents total loans by portfolio segment and class of loan as of September 30, 2023 and December 31, 2022:
+Added: The following table presents total loans by portfolio segment and class of loan as of March 31, 2024 and December 31, 2023:
Commercial/industrial
6 unchanged sentences
The ACL - Loans is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors.
−Removed: Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method.
−Removed: The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates, gross domestic product and indexes which are indicative of the value of underlying collateral.
−Removed: Losses are forecasted over the expected life of the loan, first by predicting over a period of time determined to be reasonable and supportable (currently four calendar quarters), and at the end of the reasonable and supportable period reverting to long term historical averages.
−Removed: The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors.
−Removed: The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.
−Removed: The qualitative adjustments either increase or decrease the quantitative model estimation.
−Removed: The Company considers factors that are relevant within the qualitative framework which include the following:
−Removed: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.
−Removed: Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis.
−Removed: Individual evaluations are performed for nonaccrual loans, loans rated substandard, and modified loans (previously classified as TDRs).
−Removed: Specific allocations of the ACL for credit losses on individually evaluated loans are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.
−Removed: A summary of the activity in the ACL - Loans by loan type for the nine-months ended September 30, 2023 is summarized as follows:
+Added: More information regarding the Company’s methodology related to the ACL-Loans can be found in the Company’s Annual Report.
+Added: The Company utilized the high-end range of the Federal Reserve Bank Open Market Committee forecast for national unemployment and the low-end range for national GDP growth at March 31, 2024 and December 31, 2023.
+Added: As of March 31, 2024, the Company anticipates the national unemployment rate to rise during the forecast period and the national GDP growth rate to decline.
+Added: Due to recent volatility in forecasts, the Company utilized long-term averages for the remaining loss drivers.
+Added: A summary of the activity in the ACL - Loans by loan type for the three months ended March 31, 2024 is summarized as follows:
Real Estate -
1 unchanged sentence
ACL - Loans - January 1, 2024
−Removed: Adoption of CECL
−Removed: ACL - Loans on PCD loans acquired
−Removed: ACL - Loans - September 30, 2023
−Removed: A summary of the activity in the allowance for loan losses (“ALL”) by loan type for the nine-months ended September 30, 2022 is as follows:
+Added: ACL - Loans - March 31, 2024
+Added: A summary of the activity in the ACL – Loans by loan type for the three months ended March 31, 2023 is summarized as follows:
Real Estate -
Real Estate -
−Removed: ALL - January 1, 2022
−Removed: ALL September 30, 2022
−Removed: ALL ending balance individually evaluated for impairment
−Removed: ALL ending balance collectively evaluated for impairment
−Removed: Loans outstanding - September 30, 2022
−Removed: Loans ending balance individually evaluated for impairment
−Removed: Loans ending balance collectively evaluated for impairment
+Added: ACL - Loans - January 1, 2023
+Added: Adoption of CECL
+Added: ACL - Loans on PCD loans acquired
+Added: ACL - Loans - March 31, 2023
In addition to the ACL-Loans, the Company has established an ACL-Unfunded Commitments, classified in other liabilities on the consolidated balance sheets.
This allowance is maintained to absorb losses arising from unfunded loan commitments, and is determined quarterly based on methodology similar to the methodology for determining the ACL-Loans.
−Removed: The ACL - Unfunded Commitments was $ 3.5 million at September 30, 2023.
+Added: The ACL - Unfunded Commitments was $ 3.8 million at March 31, 2024 and December 31, 2023.
See Note 10 for further information on commitments.
1 unchanged sentence
The following table presents the components of the provision for credit losses.
−Removed: Nine Months Ended
−Removed: September 30, 2023
−Removed: September 30, 2022
+Added: Three Months Ended
+Added: March 31, 2024
+Added: March 31, 2023
December 31, 2023
2 unchanged sentences
Total provision for credit losses
−Removed: The Company’s past due and non-accrual loans as of September 30, 2023 is summarized as follows:
+Added: The Company’s past due and non-accrual loans as of March 31, 2024 is summarized as follows:
allocated ACL
5 unchanged sentences
The Company’s past due and non-accrual loans as of December 31, 2023 is summarized as follows:
+Added: allocated ACL
Commercial/industrial
3 unchanged sentences
Residential 1‑4 family
−Removed: Interest recognized on non-accrual loans is considered immaterial to the consolidated financial statements for the nine months ended September 30, 2023 and 2022.
+Added: Interest recognized on non-accrual loans is considered immaterial to the consolidated financial statements for the three months ended March 31, 2024 and 2023.
A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial
1 unchanged sentence
For collateral dependent loans, expected credit losses are based on the estimated fair value of the collateral at the balance sheet date, with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral.
−Removed: The following table presents collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation.
−Removed: A significant portion of the loan balances in this table and essentially all of the allowance allocations relate to PCD loans which were acquired from Hometown.
+Added: The following tables present collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation.
+Added: A significant portion of the loan balances in these tables and essentially all of the allowance allocations relate to PCD loans which were acquired from Hometown.
Real estate collateral primarily consists of operating facilities of the underlying borrowers.
−Removed: Other business assets collateral primarily consists of receivables and inventory of the underlying borrowers.
+Added: Other business assets collateral primarily consists of equipment, receivables and inventory of the underlying borrowers.
Collateral Type
−Removed: As of September 30, 2023
+Added: As of March 31, 2024
Business Assets
4 unchanged sentences
Residential 1‑4 family
−Removed: Prior to the adoption of ASU 2016-13, the allowance included specific reserves for certain individually evaluated impaired loans.
−Removed: Specific reserves reflected estimated losses on impaired loans from management’s analysis developed through specific credit allocations.
−Removed: The following table shows a summary of impaired loans individually evaluated as of December 31, 2022:
−Removed: Real Estate -
−Removed: Real Estate -
−Removed: With an allowance recorded:
−Removed: Recorded investment
−Removed: Unpaid principal balance
−Removed: Related allowance
−Removed: With no related allowance recorded:
−Removed: Recorded investment
−Removed: Unpaid principal balance
−Removed: Related allowance
−Removed: Recorded investment
−Removed: Unpaid principal balance
−Removed: Related allowance
−Removed: Average recorded investment
+Added: Collateral Type
+Added: As of December 31, 2023
+Added: Business Assets
+Added: Commercial/industrial
+Added: Commercial real estate - owner occupied
+Added: Commercial real estate - non-owner occupied
+Added: Construction and development
+Added: Residential 1‑4 family
The Company utilizes a numerical risk rating system for commercial relationships.
14 unchanged sentences
collection or liquidation in full is not probable.
−Removed: The following table presents total loans by risk ratings and year of origination.
+Added: The following tables present total loans by risk ratings and year of origination.
Loans acquired from other previously acquired institutions have been included in the table based upon the actual origination date.
Amortized Cost Basis by Origination Year
−Removed: As of September 30, 2023
+Added: As of March 31, 2024
Commercial/industrial
4 unchanged sentences
Current-period gross charge-offs
+Added: Current-period gross charge-offs
Construction and development
4 unchanged sentences
Current-period gross charge-offs
−Removed: The breakdown of loans by risk rating as of December 31, 2022 is as follows:
−Removed: Commercial/industrial
−Removed: Commercial real estate - owner occupied
−Removed: Commercial real estate - non-owner occupied
−Removed: Construction and development
−Removed: Residential 1‑4 family
−Removed: On January 1, 2023, the Company adopted ASU 2022-02, which eliminated the accounting guidance for TDRs by creditors and enhanced the disclosure requirements for certain loan modifications to borrowers experiencing financial difficulty.
−Removed: Loans that were both experiencing financial difficulty and were modified during the nine months ended September 30, 2023, were insignificant to these consolidated financial statements.
−Removed: The Company also had no new TDRs during the nine months ended September 30, 2022.
−Removed: The following tables present loans acquired with deteriorated credit quality and the change in the accretable and non-accretable components of the related discounts prior to the adoption of ASU 2016-13.
−Removed: December 31, 2022
+Added: Total current-period gross charge-offs
+Added: Amortized Cost Basis by Origination Year
+Added: As of December 31, 2023
Commercial/industrial
+Added: Current-period gross charge-offs
Commercial real estate - owner occupied
+Added: Current-period gross charge-offs
Commercial real estate - non-owner occupied
+Added: Current-period gross charge-offs
+Added: Commercial real estate - multi-family
+Added: Current-period gross charge-offs
Construction and development
+Added: Current-period gross charge-offs
Residential 1 ‑ 4 family
−Removed: September 30, 2022
−Removed: December 31, 2022
−Removed: Non-accretable
−Removed: Non-accretable
−Removed: Balance at beginning of period
−Removed: Acquired balance, net
−Removed: Reclassifications between accretable and non-accretable
−Removed: Accretion to loan interest income
−Removed: Balance at end of period
+Added: Current-period gross charge-offs
+Added: Current-period gross charge-offs
+Added: Current-period gross charge-offs
+Added: Total current-period gross charge-offs
+Added: Loans that were both experiencing financial difficulty and were modified during the three months ended March 31, 2024 and 2023, were insignificant to these consolidated financial statements.
NOTE 6 – MORTGAGE SERVICING RIGHTS
1 unchanged sentence
MSRs are recognized as separate assets when loans sold in the secondary market are sold with servicing retained.
−Removed: The Company utilizes a third-party consulting firm to determine an accurate assessment of the MSRs fair value.
+Added: The Company utilizes a third-party consulting firm to assist with determining an accurate assessment of the MSRs fair value.
The third-party firm collects relevant data points from numerous sources.
5 unchanged sentences
Following is an analysis of activity in the MSR asset:
−Removed: Nine Months Ended
−Removed: September 30, 2023
+Added: Three Months Ended
+Added: March 31, 2024
December 31, 2023
8 unchanged sentences
Mortgage servicing rights as a percent of loans serviced for others
−Removed: The primary economic assumptions utilized by the Company in measuring the value of MSRs were constant prepayment speeds of 7.7 and 7.9 months as of September 30, 2023 and December 31, 2022 and discount rates of 10.19 % and 10.21 % as of each of those periods, respectively.
+Added: The primary economic assumptions utilized by the Company in measuring the value of MSRs were constant prepayment speeds of 8.0 and 7.5 months as of March 31, 2024 and December 31, 2023, respectively, and discount rates of 10.19 % as of each of those periods.
+Added: The constant prepayment speeds are obtained from publicly available sources for each of the loan programs the Company originates under.
NOTE 7 – NOTES PAYABLE
−Removed: From time to time the Company utilizes FHLB advances to fund liquidity.
−Removed: At September 30, 2023 and December 31, 2022, the Company had outstanding balances borrowed from the FHLB of $ 36.1 million and $ 1.9 million, respectively.
+Added: The Company utilizes FHLB advances to fund liquidity.
+Added: The Company had outstanding balances borrowed from the FHLB of $ 35.5 million at March 31, 2024 and December 31, 2023.
The advances, rate, and maturities of FHLB advances were as follows:
−Removed: September 30,
Fixed rate, fixed term
3 unchanged sentences
Fixed rate, fixed term
−Removed: Fixed rate, fixed term
−Removed: Fixed rate, fixed term
Adjustment due to purchase accounting
Future maturities of borrowings were as follows:
−Removed: September 30,
1 year or less
−Removed: As of September 30, 2023, the Company had borrowing availability at the FHLB totaling $ 773.6 million in addition to the existing borrowings noted in the tables above.
+Added: As of March 31, 2024, the Company had borrowing availability at the FHLB totaling $ 805.7 million in addition to the existing borrowings noted in the tables above.
The Company maintains a $ 7.5 million line of credit with a commercial bank, which was entered into on May 15, 2022.
−Removed: There were no outstanding balances on this note at September 30, 2023 or December 31, 2022.
+Added: There were no outstanding balances on this note at March 31, 2024 or December 31, 2023.
Any future borrowings will require monthly payments of interest at a variable rate, and will be due in full on May 15, 2024.
NOTE 8 – SUBORDINATED NOTES AND JUNIOR SUBORDINATED DEBENTURES
−Removed: During September 2017, the Company entered into subordinated note agreements with three separate commercial banks.
−Removed: The Company had outstanding balances of $ 11.5 million under these agreements as of September 30, 2023 and December 31, 2022.
−Removed: 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 the issuance dates, and qualify for Tier 2 capital for regulatory purposes.
−Removed: See Note 14 for information regarding activity related to these notes subsequent to September 30, 2023.
During July 2020, the Company entered into subordinated note agreements with two separate commercial banks.
−Removed: The Company had outstanding balances of $ 6.0 million under these agreements as of September 30, 2023 and December 31, 2022.
+Added: The Company had through December 31, 2020, to borrow funds up to a maximum availability of $ 6.0 million under each agreement, or $ 12.0 million 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.
+Added: The Company had outstanding balances of $ 6.0 million under these agreements at March 31, 2024 and December 31, 2023.
During August 2022, the Company entered into subordinated note agreements with an individual.
−Removed: The Company had outstanding balances of $ 6.0 million under these agreements as of September 30, 2023.
+Added: The Company had outstanding balances of $ 6.0 million under these agreements as of March 31, 2024 and December 31, 2023.
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.
4 unchanged sentences
The Company also assumed adjustable rate junior subordinated debentures issued to these trusts.
−Removed: The junior subordinated debentures issued to Trust I and Trust II total $ 4.1 and $ 8.2 million, respectively, carry interest at floating rates resetting on each quarterly payment date, and are due on January 7, 2034 and December 15, 2036, respectively.
−Removed: Both junior subordinated debentures are redeemable by the Company, subject to prior approval by the Federal Reserve Bank, on any quarterly payment date.
−Removed: The junior subordinated debentures represent the sole asset of Trust I and Trust II.
−Removed: The trusts are not included in the consolidated financial statements.
−Removed: The net effect of all agreements assumed with respect to Trust I and Trust II is that the Company, through payments on its debentures, is liable for the distributions and other payments required on the trusts’ preferred securities.
−Removed: Trust I and Trust II also provide the Company with $ 12.0 million in Tier 1 capital for regulatory capital purposes.
−Removed: Interest on all debentures is current.
−Removed: Applicable discounts (initially recorded to carry the acquired debentures at their then estimated fair value) are being accreted to interest expense over the remaining life of the debentures, and total $ 1.4 million at September 30, 2023.
+Added: The junior subordinated debentures issued to Trust I and Trust II totaled $ 4.1 million and $ 8.2 million, respectively, carried interest at floating rates resetting on each quarterly payment date, and were due on January 7, 2034 and December 15, 2036, respectively.
+Added: Applicable discounts originally totaling $ 1.5 million were recorded to carry the assumed debentures at their then estimated fair value and were being accreted to interest expense over the remaining life of the debentures.
+Added: Both junior subordinated debentures were redeemable by the Company, subject to prior approval by the Federal Reserve Bank, on any quarterly payment date.
+Added: The junior subordinated debentures represented the sole asset of Trust I and Trust II.
+Added: The trusts were not included in the Company’s consolidated financial statements.
+Added: The net effect of all agreements assumed with respect to Trust I and Trust II is that the Company, through payments on its debentures, was liable for the distributions and other payments required on the trusts’ preferred securities.
+Added: Trust I and Trust II also provided the Company with $ 12.0 million in Tier 1 capital for regulatory capital purposes.
+Added: The Company redeemed the junior subordinated debenture related to Trust II during December 2023 and the junior subordinated debenture related to Trust I during January 2024, resulting in the trusts’ dissolution.
+Added: As a result of the redemption of the junior subordinated debenture related to Trust II and notification of the Company’s intent to redeem the junior subordinated debenture of Trust I prior to December 31, 2023, the Company amortized the remaining original fair value discounts into interest expense during December 2023.
NOTE 9 – REGULATORY MATTERS
3 unchanged sentences
Failure to meet capital requirements can initiate regulatory action.
−Removed: The Economic Growth, Regulatory Relief, and Consumer Protection Act, signed into law in May 2018 raised the threshold for those bank holding companies subject to the Federal Reserve’s Small Bank Holding Company Policy Statement to $ 3 billion.
−Removed: As a result, as of the effective date of that change in 2018, the Company was no longer required to comply with the risk-based capital rules applicable to the Bank.
−Removed: 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.
−Removed: Due to the acquisition of Denmark Bancshares, Inc.
−Removed: (“Denmark”) the Company is 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.
−Removed: 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.
−Removed: As of September 30, 2023 and December 31, 2022, this buffer was 2.5 %.
−Removed: The Bank met all capital adequacy requirements to which they are subject as of September 30, 2023 and December 31, 2022.
+Added: Under regulatory guidance for non-advanced approaches institutions, the Bank and Company 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.
+Added: As of March 31, 2024 and December 31, 2023, this buffer was 2.5 %.
+Added: The Bank met all capital adequacy requirements to which they are subject as of March 31, 2024 and December 31, 2023.
Actual and required capital amounts and ratios are presented below at period-end:
6 unchanged sentences
Action Provisions
−Removed: September 30, 2023
+Added: March 31, 2024
Total capital (to risk-weighted assets):
12 unchanged sentences
Fair value is based on fees currently charged to enter into similar agreements and for fixed rate commitments also considers the difference between current levels of interest rates and committed rates.
−Removed: The notional amount of rate-lock commitments at September 30, 2023 and December 31, 2022 was approximately $ 10.4 million and $ 3.7 million, respectively.
+Added: The notional amount of rate-lock commitments at March 31, 2024 and December 31, 2023 was approximately $ 7.4 million and $ 5.9 million, respectively.
The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.
5 unchanged sentences
Notional Amount
−Removed: September 30, 2023
+Added: March 31, 2024
December 31, 2023
12 unchanged sentences
for Identical
−Removed: September 30, 2023
+Added: March 31, 2024
Securities available for sale
−Removed: Treasury securities
Obligations of U.S.
3 unchanged sentences
Corporate notes
−Removed: Certificates of deposit
Mortgage servicing rights
1 unchanged sentence
Securities available for sale
−Removed: Treasury securities
Obligations of U.S.
6 unchanged sentences
There were no assets measured on a recurring basis using significant unobservable inputs (Level 3) during these periods.
+Added: Furthermore, there were no liabilities measured on a recurring basis during the periods.
Information regarding the fair value of assets measured at fair value on a non-recurring basis is as follows:
1 unchanged sentence
for Identical
−Removed: September 30, 2023
+Added: March 31, 2024
Loans individually evaluated, net of reserve
December 31, 2023
−Removed: Impaired Loans, net of impairment reserve
+Added: Loans individually evaluated, net of reserve
The following is a description of the valuation methodologies used by the Company for the items noted in the table above, including the general classification of such instruments in the fair value hierarchy.
−Removed: For loans individually evaluated (referred to as impaired loans prior to January 1, 2023), the amount of reserve is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note.
+Added: For loans individually evaluated, the amount of reserve is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note.
For OREO, the fair value is based upon the estimated fair value of the underlying collateral adjusted for the expected costs to sell.
1 unchanged sentence
Valuation Technique
−Removed: As of September 30, 2023
+Added: As of March 31, 2024
Other real estate owned
8 unchanged sentences
Collateral discounts and estimated costs to sell
−Removed: Impaired loans
+Added: Loans individually evaluated
Third party appraisals and discounted cash flows
Collateral discounts and discount rates
−Removed: The carrying value and estimated fair value of financial instruments at September 30, 2023 and December 31, 2022 follows:
−Removed: September 30, 2023
+Added: The carrying value and estimated fair value of financial instruments not measured and reported at fair value on a recurring or non-recurring basis at March 31, 2024 and December 31, 2023 are as follows:
+Added: March 31, 2024
Financial assets:
1 unchanged sentence
Securities held to maturity
−Removed: Securities available for sale
Loans held for sale
−Removed: Other investments, at cost
+Added: Other investments
Mortgage servicing rights
Financial liabilities:
−Removed: Securities sold under repurchase agreements
Notes payable
Subordinated notes
−Removed: Junior subordinated debentures
December 31, 2023
2 unchanged sentences
Securities held to maturity
−Removed: Securities available for sale
Loans held for sale
−Removed: Other investments, at cost
+Added: Other investments
Mortgage servicing rights
3 unchanged sentences
Subordinated notes
+Added: Junior subordinated debentures
The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation.
19 unchanged sentences
The number of shares of Company stock that may be issued pursuant to awards under the 2020 Plan shall not exceed, in the aggregate, 700,000 .
−Removed: As of September 30, 2023, 76,373 shares of Company stock have been awarded under the 2020 Plan.
+Added: As of March 31, 2024, 100,954 shares of Company stock have been awarded under the 2020 Plan.
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.
−Removed: For the nine months ended September 30, 2023 and 2022, compensation expense of $ 1.6 million and $ 1.2 million, respectively, was recognized related to restricted stock awards.
−Removed: As of September 30, 2023, there was $ 2.6 million of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan.
+Added: For the three months ended March 31, 2024 and 2023, compensation expense of $ 0.6 million and $ 0.5 million, respectively, was recognized related to restricted stock awards.
+Added: As of March 31, 2024, there was $ 3.5 million of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan.
That cost is expected to be recognized over a weighted average period of 1.91 years.
−Removed: The aggregate grant date fair value of restricted stock awards that vested during the nine months ended September 30, 2023, was approximately $ 1.6 million.
+Added: The aggregate grant date fair value of restricted stock awards that vested during the three months ended March 31, 2024, was approximately $ 2.1 million.
For the period ended
For the period ended
−Removed: September 30, 2023
−Removed: September 30, 2022
+Added: March 31, 2024
+Added: March 31, 2023
Average Grant-
3 unchanged sentences
Restricted Stock
−Removed: Outstanding at beginning of year
+Added: Outstanding at beginning of period
Forfeited or cancelled
−Removed: Outstanding at end of year
+Added: Outstanding at end of period
NOTE 13 – LEASES
13 unchanged sentences
The Company is electing to utilize the Wall Street Journal Prime Rate on the date of lease commencement.
−Removed: Nine Months Ended
+Added: Three Months Ended
(dollars in thousands)
−Removed: September 30, 2023
−Removed: September 30, 2022
+Added: March 31, 2024
+Added: March 31, 2023
Amortization of ROU Assets - Operating Leases
3 unchanged sentences
Weighted Average Discount Rate - Operating Leases
−Removed: A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liabilities as of September 30, 2023 is as follows:
−Removed: September 30, 2023
+Added: A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liabilities as of March 31, 2024 is as follows:
+Added: March 31, 2024
Operating lease payments due:
8 unchanged sentences
Total operating lease liabilities
−Removed: NOTE 14 – SUBSEQUENT EVENTS
−Removed: The Bank sold 100 % of its member interest in UFS, LLC in a transaction which closed on October 1, 2023.
−Removed: The transaction resulted in proceeds of $ 52.2 million and a pre-tax gain of $ 39.3 million which will be realized during the fourth quarter of 2023.
−Removed: The Bank repaid $ 11.5 million in subordinated notes on October 2, 2023.
−Removed: These notes were originated during September 2017 and qualified for Tier 2 capital for regulatory purposes.
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.