What changed in this filing

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Item 1. Business

2025-02-28 compared with 2024-02-29 · 37 added, 57 removed, 453 unchanged (17% of the section changed)

20 unchanged sentences

For more information, see the Bank’s website at www.bankfirst.com.

Recent acquisition

Hometown Bancorp, Ltd.

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

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

Hometown'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.

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

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

The Company accounts for these transactions under the acquisition method of accounting, and thus, the financial position and results of operations of acquired institutions prior to the consummation date are not included in the accompanying consolidated financial statements.

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

The Company determines the fair value of core

deposit intangibles, securities, premises and equipment, loans, other assets and liabilities, deposits and borrowings with the assistance of third-party valuations, appraisals, and third-party advisors.

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

Strategic Plan

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We have also added a sixth category to prioritize our strategic goals surrounding Information Technology.

Under the heading of Capital, our priorities include (i) growing capital through strong earnings, and (ii) assessing and monitoring short and long-term capital goals.

Under the heading of Capital, our priorities include (i) growing capital through strong earnings, (ii) assessing and monitoring short and long term capital goals, and (iii) deploying capital in the best interest of our shareholders.

Under the heading of Asset Quality, our top priority is maintaining a strong credit culture.

Under the heading of Management, our priorities are (i) to review and reassess our organizational structure, and (ii) to sustain and build upon employee engagement.

Under the Earnings heading, our priorities include (i) growing and strengthening relationships, (ii) exploring and evaluating current and alternative revenue sources, and (iii) evaluating and pursuing prudent acquisitions.

Under the Liquidity heading, our priorities are to (i) ensure that liquidity levels are adequate for anticipated needs, and (ii) maintain a relationship-centric customer portfolio.

Under the heading of Management, our priorities are (i) to evaluate our talent to ensure alignment with core competencies, (ii) sustain and build upon employee engagement, and (iii) to maintain a robust vendor management program.

Under the heading of Earnings, our priorities include (i) growing and strengthening relationships, and (ii) evaluating and pursuing prudent acquisitions and de novo growth.

Under the Liquidity heading, our priorities are (i) ensure that liquidity levels are adequate for anticipated needs, and (ii) to maintain a relationship-centric customer portfolio.

Under the heading of Sensitivity to Market Risk, our priorities include (i) minimizing optionality, and (ii) maintaining rate neutrality.

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Bank First is a full-service community bank, offering business and retail products and services in communities throughout Wisconsin.

Our branches are located in Brown, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Shawano, Sheboygan, Waupaca, and Winnebago counties.

With the closing of the merger with Hometown on February 10, 2023, we also entered Columbia, Dane, Fond du Lac, and Waushara counties.

Our branches are located in Brown, Columbia, Dane, Fond du Lac, Jefferson, Manitowoc, Monroe, Outagamie, Ozaukee, Shawano, Sheboygan, Waupaca, and Winnebago counties.

Our main office is located at 402 N.

8th Street, Manitowoc, Wisconsin.

Based on the deposit market share reports published by the FDIC on June 30, 2023, Bank First ranked in the top three of market share in six of the fourteen counties in which its branches are located.

Based on the deposit market share reports published by the FDIC on June 30, 2024, Bank First ranked in the top three of market share in five of the fourteen counties in which its branches are located.

The fourteen counties in which the Bank has offices have an estimated aggregate population of 1,894,606, based on 2020 U.S.

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We compete with commercial banks, credit unions, savings institutions, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, fintech companies, as well as regional and national financial institutions that operate offices in our market areas and elsewhere.

The competing major commercial banks have greater resources that may provide them a competitive advantage by enabling

them to maintain numerous branch offices, mount extensive advertising campaigns and invest in new technologies.

The competing major commercial banks have greater resources that may provide them a competitive advantage by enabling them to maintain numerous branch offices, mount extensive advertising campaigns and invest in new technologies.

In addition, competition from nontraditional banking institutions, often known as fintech and non-bank lenders, continues to increase and accelerate, with consumers and businesses having the opportunity to select from a growing variety of traditional and nontraditional alternatives.

The ability of such non-banking financial institutions to provide services previously limited to commercial banks has intensified competition.

Because non-banking financial institutions are not subject to many of the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures.

These competitors have been successful in developing products that are in direct competition with or are alternatives to the banking services offered by traditional banking institutions.

The increasingly competitive environment is the result of changes in regulation, changes in technology and product delivery systems, additional financial service providers, and the accelerating pace of consolidation among financial services providers.

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The Bank’s board of directors is involved in credits above this level after they have been through the serial sign-off process.

We do not make any loans to any director, executive officer

of the Bank, or the related interests of each, unless the loan is approved by the full board of directors of the Bank and is on terms not more favorable than would be available to a person not affiliated with the Bank.

We do not make any loans to any director, executive officer of the Bank, or the related interests of each, unless the loan is approved by the full board of directors of the Bank and is on terms not more favorable than would be available to a person not affiliated with the Bank.

Credit Administration and Loan Review

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Our retail review consists of selecting a percentage of specific files on an annual basis, and reviewing them for policy compliance.

Results of completed loan reviews are disclosed in writing, along with management responses, to the Directors Loan Committee.

Results of completed loan reviews are disclosed in writing, along with management responses, to the Loan Committee.

Lending Limits

Our lending activities are subject to a variety of lending limits imposed by federal law.

In general, the Bank is subject to a base legal limit on loans to a single borrower equal to 15% of the Bank’s capital and unimpaired surplus, plus an additional 10 percent of the Bank’s capital and surplus, if the amount that exceeds the 15 percent general limit is fully secured by readily marketable collateral.

In general, the Bank is subject to a base legal limit on loans to a single borrower equal to 15 percent of the Bank’s capital and unimpaired surplus, plus an additional 10 percent of the Bank’s capital and surplus, if the amount that exceeds the 15 percent general limit is fully secured by readily marketable collateral.

This legal lending limit will increase or decrease as the Bank’s level of capital increases or decreases.

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We attempt to reduce risk associated with construction and development loans by obtaining personal guaranties and by keeping the maximum loan-to-value ratio at or below 85% of the lesser of cost or appraised value, depending on the project type.

Generally, we do not have interest reserves built into loan commitments but require periodic cash payments for interest

from the borrower’s cash flow.

Generally, we do not have interest reserves built into loan commitments but require periodic cash payments for interest from the borrower’s cash flow.

As of December 31, 2024, construction and development loans made up approximately $278.0 million or 7.9% of our loan portfolio.

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Our investment portfolio is comprised primarily of U.S.

government securities, mortgage-backed securities backed by government-sponsored entities, and taxable and tax-exempt municipal securities.

government securities, mortgage-backed securities backed by government-sponsored entities, corporate notes, and taxable and tax-exempt municipal securities.

Our investment policy is reviewed annually by our board of directors.

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Our board of directors has delegated the responsibility of monitoring our investment activities to our ALCO.

Day-to-day activities pertaining to the securities portfolio

are conducted under the supervision of our CEO and CFO.

Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our CEO and CFO.

We actively monitor our investments on an ongoing basis to identify any material changes in the securities.

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Our Company culture emphasizes our longstanding dedication to being respectful to others and having a workforce that is representative of the communities we serve.

Diversity, equity and inclusion (“DEI”) are fundamental to our culture.

Embracing inclusivity and a sense of belonging is at the core of our values, recognizing that diverse perspectives, backgrounds, and experiences strengthen our ability to meet the needs of our associates, communities, clients and shareholders.

We believe in attracting, retaining and promoting quality talent and recognize that diversity makes us stronger as a Company.

Our talent acquisition teams partner with hiring managers in sourcing and presenting a diverse slate of qualified candidates to strengthen our organization.

We believe employees to be our greatest asset and that our future success depends on our ability to attract, retain and develop employees.

All of our employees are chosen on the basis of their qualifications and merit.

We believe employees to be our greatest asset and that our future success depends on our ability to attract, retain and develop a qualified workforce representative of the customers and communities we serve.

Professional development is a key priority, which is facilitated through our many corporate development initiatives including extensive training programs, corporate mentoring, leadership programs, and educational reimbursement.

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As of December 31, 2024, approximately 73% of our employees self-identified as female and approximately 7% self-identified as people of color.

Twenty-seven percent (27%) of our Board members and 46% of our Senior Management team identify as female.

One of our strategic goals is to increase the diversity of our Board in the coming year.

Our talent acquisition, development, and retention focus was on rewarding merit and achievement while nurturing and progressing skilled talent across various segments of the Bank.

One-third (33%) of our Board members and 42% of our Senior Management team identify as female.

None of our employees are represented by any collective bargaining unit or is a party to a collective bargaining agreement.

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The required minimum leverage ratio for all banks is 4.0%.

In addition, the capital rules require a capital conservation buffer of CET1 of 2.5% above each of the minimum capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress.

In addition, the capital rules require a capital conservation buffer of CET1 of 2.5% above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress.

These buffer requirements must be met for a bank to be able to pay dividends, engage in share buybacks or make discretionary bonus payments to executive management without restriction.

43 unchanged sentences

● it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

Prior approval by the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank’s profits for that year combined with its retained net profits for the preceding two calendar years.

Regulation of the Bank

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In addition, as discussed in more detail below, the Bank and any other of our subsidiaries that offer consumer financial products and services are subject to regulation and potential supervision by the Consumer Financial Protection Bureau (“CFPB”).

Authority to supervise and examine the Company and the Bank for compliance with federal consumer laws

remains largely with the Federal Reserve and the OCC, respectively.

Authority to supervise and examine the Company and the Bank for compliance with federal consumer laws remains largely with the Federal Reserve and the OCC, respectively.

However, the CFPB may participate in examinations on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators.

The CFPB also may participate in examinations of our other direct or indirect subsidiaries that offer consumer financial products or services.

The CFPB also may participate in examinations of our other direct or indirect subsidiaries that offer consumer financial products

In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB, and state attorneys general are permitted to enforce certain federal consumer financial protection rules adopted by the CFPB.

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The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for Safety and Soundness to implement these required standards.

These guidelines set

forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired.

Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.

These guidelines set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired.

Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed

by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.

Anti-Money Laundering .

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FinCEN is required to implement regulations to specify how covered financial institutions, such as the Company, should incorporate these national priorities into their AML programs.

As of December 31, 2023, no such regulations have been proposed.

Economic Sanctions .

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The Bank had a rating of “Outstanding” in its most recent CRA evaluation.

On May 5, 2022, the OCC, FRB, and FDIC issued a notice of proposed rulemaking to provide for a coordinated approach to modernize their respective CRA regulations, such that all banks will be subject to the same set of CRA rules.

Key elements are expected to include (i) expanding access to credit, investment, and basic banking services in low- and moderate-income communities;

(ii) updating CRA assessment areas by including activities associated with online and mobile banking, branchless banking, and hybrid models;

and (iii) better tailoring CRA evaluations and data collection requirements by bank size and type.

The final rule was released on October 24, 2023, and will take effect on April 1, 2024, with staggered compliance dates of January 1, 2026 and January 1, 2027.

On October 24, 2023, the Office of the Comptroller of the Currency (“OCC”), Federal Reserve, and FDIC issued a final rule to modernize their respective CRA regulations.

The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026, and revised data reporting requirements taking effect January 1, 2027.

Among other things, the revised rules evaluate lending outside traditional assessment areas generated by the growth of non-branch delivery systems, such as online and mobile banking, apply a metrics-based benchmarking approach to assessment, and clarify eligible CRA activities.

The final rules were challenged in federal court and a preliminary injunction was granted in March 2024 enjoining implementation of the rules.

The effective dates will be extended for each day the injunction remains in place, pending the resolution of the lawsuit.

If the final rules are reinstated, they are likely to make it more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on its CRA exam.

Privacy and Data Security.

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Customers must be notified when unauthorized disclosure involves sensitive customer information that may be misused.

On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” On July 26, 2023 the SEC adopted rules requiring registrants such as the Bank to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance.

The federal banking agencies additionally require banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” The SEC has also adopted rules requiring registrants such as the Bank to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy and governance.

See Item 1C for further discussion of the Bank’s processes for assessing, identifying and managing materials risks from cybersecurity threats.

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The Bank is also subject to, among other things, the provisions of the Equal Credit Opportunity Act (“ECOA”) and the Fair Housing Act (“FHA”), both of which prohibit discrimination based on race or color, religion, national origin, sex, and familial status in any aspect of a consumer or commercial credit or residential real estate transaction.

The Department of Justice (“DOJ”), and the federal bank regulatory agencies have issued an Interagency Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether discrimination exists, how the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices.

the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices.

The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and FHA.

On March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to address references to LIBOR in contracts that (i) are governed by U.S.

(ii) will not mature before June 30, 2023;

and (iii) lack fallback provisions providing for a clearly defined and practicable replacement for LIBOR.

On December 16, 2022, the FRB adopted a final rule to implement the LIBOR Act by identifying benchmark rates based on SOFR (Secured Overnight Financing

Rate) that replaced LIBOR in certain financial contracts after June 30, 2023.

The final rule identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the LIBOR Act.

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 1. Business