What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-28 compared with 2024-02-29 · 241 added, 356 removed, 1096 unchanged (35% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm – Financial Statements (PCAOB ID:

Report of Independent Registered Public Accounting Firm – Internal Control over Financial Reporting (PCAOB ID:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Financial Statements:

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Years Ended December 31, 2024, 2023 and 2022

Report of Independent Registered Public Accounting Firm – Financial Statements

Report of Independent Registered Public Accounting Firm – Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements:

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Bank First Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Bank First Corporation and Subsidiaries (the “Company”) as December 31, 2023 and 2022, 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, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2024, expressed an unqualified opinion thereon .

Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Bank First Corporation and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, 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, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

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 PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting 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.

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

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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 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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses - Loans

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

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

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

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

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

Definitions and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,

and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans – Qualitative Factor Adjustments

Description of the Critical Audit Matter

As described in Note 4 to the financial statements the Company’s allowance for credit losses on loans (“ACL-Loans”) was $44.1 million as of December 31, 2024.

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The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses and include 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.

We identified the ACL-Loans as a critical audit matter.

The principal considerations for our determination included the high degree of judgment and subjectivity in auditing management’s determination of the reasonable and supportable forecasts, and the identification and measurement of qualitative factor adjustments.

We identified the qualitative factor adjustments included in the ACL-Loans as a critical audit matter.

The principal considerations for our determination included the high degree of judgment and subjectivity in auditing management’s identification and measurement of qualitative factor adjustments.

This required a high degree of effort, specialized skills and knowledge, and significant judgment.

How the Critical Audit Matter Was Addressed in the Audit

The primary procedures we performed to address this critical audit matter included:

● Evaluated the design and operating effectiveness of controls relating to the ACL-Loans, including:

o Controls over the completeness and accuracy of data included in the model used to determine the ACL-Loans, and

o Controls over management’s review and approval of the ACL-Loans, including management’s determination of the reasonable and supportable forecasts and qualitative factor adjustments applied within the qualitative framework.

● Evaluated forecast inputs and assumptions and involved our internal specialists to test the model through a recalculation of the DCF methodology within the ACL-Loans model.

Controls over the completeness and accuracy of data included in the model used to determine the ACL-Loans, and

Controls over management’s review and approval of the ACL-Loans, including management’s estimation of the qualitative factor adjustments applied within the qualitative framework.

● Evaluated the reasonableness of management’s qualitative factor adjustments, including testing management’s identification of qualitative factors, the application of qualitative factor adjustments within the model, and assessing the completeness and accuracy of data utilized in development of the qualitative adjustments.

● Evaluated management’s judgments and assumptions related to the qualitative adjustments by assessing relevant trends in credit quality and evaluating the relationship of the trends to the qualitative adjustments applied to the ACL-Loans.

Merger with Hometown Bancorp, Ltd.

- Fair Value of Loans Acquired

As described in Note 2 to the financial statements, the Company completed a merger with Hometown Bancorp, Ltd.

on February 10, 2023.

The Company accounted for this acquisition under the acquisition method of accounting.

The Company recognized the full fair value of assets acquired and liabilities and immediately expensed transaction costs.

Determination of the acquisition date fair values of the assets acquired and liabilities assumed required management to make significant estimates and assumptions.

Specifically, a high degree of management judgment was required to determine the fair value loan portfolio acquired in the business combination.

The fair value of the acquired loans was $395.8 million as of February 10, 2023.

We identified the acquisition date fair value of acquired loans as a critical audit matter.

The principal considerations for our determination included the high degree of judgment and subjectivity involved in auditing management’s key inputs and

assumptions, particularly as it relates to the discount rates, prepayment rates, identification and measurement of purchase credit deteriorated (“PCD”) loans, and credit loss assumptions used to determine the fair value of acquired loans.

This required a high degree of auditor effort, specialized skills and knowledge, and significant auditor judgment.

The primary procedures we performed to address this critical audit matter included:

● Evaluated the design and operating effectiveness of controls relating to the valuation of acquired loans, including controls addressing:

o Management’s review of the reasonableness of the discount rates, prepayment rates, identification and measurement of PCD loans, and credit loss assumptions used in the estimate of the fair value of acquired loans.

o Management’s review of the results of the third-party valuation of the acquired loan portfolio, including the review of the completeness and accuracy of the data inputs used as a basis for the valuations.

● Evaluated the completeness and accuracy of data inputs used as a basis for the valuation of the acquired loan portfolio.

● Evaluated, with the assistance of internal specialists, the reasonableness of the discount rates, prepayment rates, identification and measurement of PCD loans, and credit loss assumptions used in the estimate of the fair value of acquired loans, including, for a selected sample of loans, developing an independent expectation for comparison to management’s fair value of the acquired loans.

● Tested the mathematical accuracy of the estimated fair value, including the application of the assumptions used in the calculation.

/s/ FORVIS, LLP

/s/ Forvis Mazars, LLP

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

February 29, 2024

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Bank First Corporation

Opinion on the Internal Control over Financial Reporting

We have audited Bank First Corporation and Subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2023, and 2022, and for each of the three years in the period ended December 31, 2023, and our report dated February 29, 2024, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting .

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the 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.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

As described in management’s annual report on internal control over financial reporting, the scope of management’s assessment of internal control over financial reporting as of December 31, 2023, has excluded Hometown Bancorp, Ltd.

(“Hometown”) acquired on February 10, 2023.

We have also excluded Hometown from the scope of our audit of internal control over financial reporting.

The fair value of assets acquired from Hometown at the acquisition date represented 14.6 percent of the consolidated total assets of the Company as of December 31, 2023.

Definitions and Limitations of Internal Control over Financial Reporting

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ FORVIS, LLP

Atlanta, Georgia

February 28, 2025

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Other real estate owned (“OREO”)

Investment in minority-owned subsidiaries

Investment in Ansay and Associates, LLC ("Ansay")

Liabilities and Stockholders’ Equity

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Authorized - 20,000,000 shares

Issued - 11,515,130 and 10,064,858 shares as of December 31, 2023 and December 31, 2022, respectively

Issued - 11,515,130 shares as of December 31, 2024 and December 31, 2023

Outstanding - 10,012,088 and 10,365,131 shares as of December 31, 2024 and December 31, 2023, respectively

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Service charges

Income from Ansay and Associates, LLC (“Ansay”)

Income from Ansay

Income from UFS, LLC (“UFS”)

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Postage, stationery, and supplies

Net loss (gain) on sales and valuations of OREO

Net (gain) loss on sales and valuations of OREO

Net loss on sale of securities

Charitable contributions

Federal deposit insurance

Outside service fees

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Vesting of restricted stock awards

Shares issued in the acquisition of Denmark Bancshares, Inc.

( 1,579,530 shares)

Balance at December 31, 2022

Other comprehensive loss

Other comprehensive income

Purchase of treasury stock

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Vesting of restricted stock awards

Shares issued in the acquisition of Denmark Bancshares, Inc.

Adoption of new accounting pronouncement

Shares issued in the acquisition of Hometown Bancorp, Ltd.

( 1,450,272 shares)

Balance at December 31, 2023

Other comprehensive income

Other comprehensive loss

Purchase of treasury stock

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Vesting of restricted stock awards

Adoption of new accounting pronouncement (See Note 1)

Shares issued in the acquisition of Hometown Bancorp, Ltd.

( 1,450,272 shares)

Balance at December 31, 2024

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Amortization of intangibles

Net amortization (accretion) of securities

Net (accretion) amortization of securities

Amortization of stock-based compensation

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Net change in deferred loan fees and costs

Benefit from deferred income taxes

Expense (benefit) from deferred income taxes

Change in fair value of MSR and other investments

Loss (gain) from sale and disposal of premises and equipment and valuation allowance

Net loss (gain) on sale of OREO and valuation allowance

Loss from sale and disposal of premises and equipment

Net (gain) loss on sale of OREO and valuation allowance

Proceeds from sales of mortgage loans

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Net earnings on life insurance

Decrease (increase) in other assets

(Increase) decrease in other assets

Increase (decrease) in other liabilities

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Proceeds from sale of OREO

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

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

Net purchases of Federal Reserve Bank (“FRB”) stock

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Net cash received in business combination

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Bank First Corporation and Subsidiaries

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Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Veritas Asset Holdings, LLC (“Veritas”) and Bank First, National Association (“Bank”).

Veritas was dissolved by the Company during the year ended December 31, 2023.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Bank First, National Association (“Bank”).

The Bank’s wholly owned subsidiaries are Bank First Investments, Inc., TVG Holdings, Inc.

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All significant intercompany balances and transactions have been eliminated.

The Bank and TVG have investments in minority-owned subsidiaries that are accounted for using the equity method in the consolidated financial statements.

The Bank owned 49.8 % of UFS, which provides data processing solutions to over 60 banks in the Midwest, through October 1, 2023.

On that date it sold 100 % of its member interest in UFS to a third party.

TVG owns 40.0 % of Ansay providing clients throughout the Midwest with superior insurance and risk management solutions.

TVG has an investment in a minority-owned subsidiary, Ansay, which is accounted for using the equity method in the consolidated financial statements.

TVG owns 40.0 % of Ansay.

The Bank owned 49.8 % of UFS, which provides data processing solutions to over 60 banks in the Midwest.

On October 1, 2023, it sold 100 % of its member interest in UFS to a third party.

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

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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, 2023 and 2022 were approximately $ 3,100,000 and $ 2,900,000 , respectively.

Total uninsured balances held at December 31, 2024 and 2023 were approximately $ 1.6 million and $ 3.1 million, respectively.

Securities are classified as held to maturity (“HTM”) or available for sale (“AFS”) at the time of purchase.

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Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings.

Prior to January 1, 2023, unrealized gains or losses considered temporary and the noncredit portion of unrealized losses deemed other-that-temporary were reported as an increase or decrease in accumulated other comprehensive income.

The credit related portion of unrealized losses deemed other-than-temporary were recorded in current period earnings.

Subsequent to January 1, 2023, as a result of adopting ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), 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.

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.

For AFS securities, management determines whether the decline in fair value below the amortized cost basis (impairment) is due to credit-related or other factors.

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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 and Bankers’ Bancorporation stock.

Other investments are carried at cost, minus impairment if any, or, where available, recently observable market prices, which approximates fair value, and consist of FHLB stock, FRB stock, Bankers’ Bancorporation stock, and public and private company securities.

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

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We believe that construction and development loans generally carry a higher degree of risk than long-term financing of stabilized, rented, and owner-occupied properties because repayment depends on the ultimate completion of the project and usually on the subsequent sale of the property.

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.

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.

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Loans purchased in acquisition transactions are acquired loans, and are recorded at their fair value at the acquisition date.

Prior to January 1, 2023, the Company initially classified acquired loans as either purchased credit impaired (“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).

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.

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.

These credit discounts (“nonaccretable marks”) were included in the determination of the initial fair value for acquired loans;

therefore, no allowance for credit losses was recorded at the acquisition date.

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.

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.

Subsequent to January 1, 2023, as a result of adopting ASU 2016-13, acquired loans that have evidence of more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans.

Acquired loans that have evidence of more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans.

At acquisition, an estimate of expected credit losses is made for PCD loans.

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The Company estimates the ACL – Loans based on the amortized cost 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.

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.

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, the level of potential problem loans, and expected future economic conditions, all of which may be susceptible to significant change.

We establish the ACL – Loans through charges to earnings, which are shown in the statements of income as the provision for credit losses.

Specifically identifiable and quantifiable known losses are promptly charged off against the allowance.

Prior to January 1, 2023, the Company used an incurred loss impairment model.

This methodology assessed the overall appropriateness of the allowance for credit losses and included allocations for specifically 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.

Impaired loans were individually assessed and measured based on the present value of expected future cash flows discounted at the loan’s effective price or the fair value of the collateral if the loan was collateral dependent.

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.

Subsequent to January 1, 2023, as a result of adopting ASU 2016-13, the Company uses a current expected loss model (“CECL”).

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.

The Company uses a current expected loss model (“CECL”) to evaluate the reasonable value of the ACL - Loans.

This methodology considers historical loss rates and other qualitative adjustments, as well as a forward-looking component that considers reasonable and supportable forecasts over the expected life of each loan.

To develop the ACL – Loans estimate under CECL, the Company segments the loan portfolio into loan pools based on loan type and similar credit risk elements;

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and determines qualitative adjustments based on factors and conditions unique to the Company’s portfolio.

The Company further individually evaluates PCD loans and other loans that no longer share similar risk characteristics with the collectively evaluated pools based on the amount and timing of estimated future cash flows or collateral values and establishes specific reserves when these estimated future cash flows or collateral values do not justify the carrying value of the loan.

The Company further individually evaluates PCD loans and other loans that no longer share similar risk characteristics with the collectively evaluated pools based on the amount and timing of

estimated future cash flows or collateral values and establishes specific reserves when these estimated future cash flows or collateral values do not justify the carrying value of the loan.

Management believes that the ACL - Loans is adequate.

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Revenue and expenses from operations and changes in the valuation allowance are included in other expenses.

Company Owned Life Insurance

The Company has purchased life insurance policies on certain key executives, and also holds life insurance that was previously purchased by institutions that were subsequently acquired by the Company.

Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Company owned life insurance is included in other assets.

Intangible Assets and Goodwill

Intangible assets consist of the value of core deposits, mortgage servicing assets and the excess of purchase price over fair value of net assets (goodwill).

See Note 2 for additional information on acquisitions completed in 2023 and 2022.

See Note 2 for additional information on an acquisition completed in 2023.

The value of core deposits are typically recorded in connection with a whole bank or branch acquisition.

The value of the core deposit intangible represents the estimated value of the long-term deposit relationships acquired in the transaction.

Determining the value of cored deposits and their average lives involves multiple assumptions and estimates and is typically determined by performing a discounted cash flow analysis, which involves a combination of any or all of the following assumptions:

Determining the value of core deposits and their average lives involves multiple assumptions and estimates and is typically determined by performing a discounted cash flow analysis, which involves a combination of any or all of the following assumptions:

customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates.

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The Company evaluated goodwill and core deposit intangibles for impairment during 2024, 2023 and 2022, determining that there was no goodwill or core deposit intangible impairment.

The Company files one consolidated federal income tax return and four state returns.

The Company files one consolidated federal income tax return, a state tax return in its home state of Wisconsin, and other returns in states where the Company deems its business activity necessitates filing.

Federal income tax expense is allocated to each subsidiary based on an intercompany tax sharing agreement.

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Advertising costs are generally expensed as incurred.

Per Share Computations

Weighted average shares outstanding were 10,231,569 , 8,104,117 , and 7,680,896 for the years ended December 31, 2023, 2022 and 2021, respectively.

All outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends are considered participating securities for basic and diluted earnings per share calculations.

There were 58,359 , 59,211 , and 59,264 average shares of dilutive instruments outstanding during the years ended December 31, 2023, 2022, and 2021.

Earnings Per Share Computations

Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.

Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options ( none for the years ended December 31, 2024, 2023, or 2022).

Loss Contingencies

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The Company uses the fair value method of recognizing expense for stock-based compensation based on the fair value of restricted stock awards at the date of grant as prescribed by accounting standards codification Topic 781-10 Compensation/Stock Compensation.

Mortgage Banking Derivatives

Rate Lock Commitments

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.

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The forward commitments for the future delivery of mortgage loans are based on the Bank’s “best efforts” and therefore the Bank is not penalized if a loan is not delivered to the investor if the loan did not get originated.

Changes in the fair values of these derivatives generally offset each other and are included in “other income” in the consolidated statements of income.

The fair values of the Company’s rate lock commitments to customers as of December 31, 2024 and 2023 were not material and have not been recorded.

Operating Segments

While the Company’s chief decision-makers monitor the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis.

Operating segments are aggregated into one as operating results for all segments are similar.

Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications

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These reclassifications had no effect on the operations, financial condition or cash flows of the Company.

New Accounting Pronouncements

Recently Implemented Accounting Standards

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

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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 Company has been diligent in responding to reference rate reform and does not anticipate a significant impact to its financial statements as a result.

The Company has been diligent in responding to reference rate reform and no longer has any products tied to rates impacted by this reform.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU is intended to improve the disclosures about a public entity’s reportable segments and addresses requests from investors and other decision makers for additional, more detailed information about a reportable segment’s expenses.

The amendment applies to all public entities that are required to report segment information in accordance with Topic 280.

This update was effective for annual periods beginning after December 15, 2023, applied retrospectively to all periods presented.

Adoption of the amendment did not have a material impact on these consolidated financial statement disclosures.

New Accounting Pronouncements That Have Not Yet Been Adopted

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements.

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.

The amendments in this ASU are expected to clarify or improve disclosure and presentation requirements for certain codification topics.

The effective date for each amendment will be the date on which the Security and Exchange Commission’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

1 unchanged sentence

The Company does not anticipate a significant impact to its financial statement disclosures as a result of this ASU.

Recently Implemented Accounting Standards

As a result of implementing ASU 2016-13 on January 1, 2023, the Company recorded a reduction to retained earnings of approximately $ 10,050,000 .

The transition adjustment included an increase to the ACL-Loans of $ 10,972,000 and an increase in the ACL – Unfunded Commitments of $ 3,264,000 , offset by applicable deferred taxes.

The Company adopted ASU 2016-13 using the prospective transition approach for financial assets considered PCD that were previously classified as PCI.

The amortized cost of the PCD assets were adjusted to reflect the addition of $ 0.3 million to the allowance for credit losses.

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.

The following table presents the changes in the allowance for credit losses required as a result of this adoption:

January 1, 2023 As

December 31, 2022

Reported After ASU

Pre-ASU 2016-13

Allowance for Credit Losses

2016-13 Adoption

Loans held for investments

Commercial/industrial

Commercial real estate - owner occupied

Commercial real estate - non-owner occupied

Commercial real estate - multi-family

Construction and development

Residential 1-4 family

Loans held for investments, total

Unfunded commitments

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

Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures .

This ASU eliminated the accounting guidance for TDRs by creditors and enhanced the disclosure requirements for loan modifications to borrowers experiencing financial difficulty.

The ASU also requires public business entities to expand the vintage disclosures to include gross charge-offs by year of origination.

The updated guidance was effective for fiscal years beginning after December 15, 2022.

Adoption of this ASU did not have a material impact on the Company’s consolidated financial statements;

however, it resulted in new disclosures.

See Note 4 for the new disclosures.

Note 2 Acquisitions

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

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.

All public entities must also provide additional information for reconciling items that meet a specific quantitative threshold.

This update is effective for annual periods beginning after December 15, 2024.

The Company anticipates that this standard will require expanded disclosure related to its income tax exposure, but will not cause any change in the accounting for operational results.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220):

Disaggregation of Income Statement Expenses .

This ASU is intended to improve the disclosures about a public entity’s income statement expense categories and addresses requests from investors and other decision makers for additional, more detailed information about income statement expense categories.

The amendment applies to all public entities that are required to report income statement categories in accordance with Topic 280.

The effective date for this update was amended by ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date, and is now effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

Note 2 Acquisition

Hometown Bancorp, Ltd.

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The carrying value of these loans at acquisition was as follows:

The Company purchased loans through the acquisition of Hometown for which there was, at the date of acquisition, more than insignificant deterioration of credit quality since origination.

The carrying amount of these loans at acquisition was as follows:

February 10, 2023

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Par value of PCD acquired loans at acquisition

Denmark Bancshares, Inc .

On August 12, 2022, the Company 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 Company and Denmark, whereby Denmark merged with and into the Company, 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 $ 128,781,000 .

Pursuant to the terms of the merger agreement, Denmark shareholders could elect to receive either 0.5276 of a share of the Company’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.

Company stock issued totaled 1,579,530 shares valued at approximately $ 124,771,000 , with cash of $ 4,010,000 comprising the remainder of merger consideration.

The fair value of the assets acquired and liabilities assumed on August 12, 2022 was as follows:

As Recorded by

(in thousands)

Cash, cash equivalents and securities

Other investments

Premises and equipment, net

Core deposit intangible

Total assets acquired

Other borrowings

Other liabilities

Total liabilities assumed

Excess of assets acquired over liabilities assumed

purchase price

Goodwill (originally recorded)

Refinement to fair value estimates (1)

Goodwill (after refinement)

(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

Total revenue, net of interest expense

Diluted earnings per common share

The Company accounted for these transactions under the acquisition method of accounting, and thus, the financial position and results of operations of Hometown and Denmark prior to the consummation dates were not included in the accompanying consolidated financial statements.

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

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.

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.

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.

Note 3 Securities

1 unchanged sentence

December 31, 2024

Treasury securities

Obligations of U.S.

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Corporate notes

Certificates of deposit

Total available for sale securities

December 31, 2023

Treasury securities

Obligations of U.S.

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Corporate notes

Certificate of deposits

December 31, 2024 - Held to Maturity

Treasury securities

Obligations of states and political subdivisions

December 31, 2023 - Available for Sale

Treasury securities

Obligations of U.S.

21 unchanged sentences

Due after one year through 5 years

Due after 5 years through ten years

Due after 5 years through 10 years

Due after 10 years

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Gross losses on sales

As of December 31, 2023 and 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 $ 204,848,000 and $ 226,892,000 , respectively.

The tax benefit for 2024 related to these net realized losses was negligible, and for 2023 was $ 1.7 million.

As of December 31, 2024 and 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 $ 273.4 million and $ 204.8 million, respectively.

At year-end 2024 and 2023, there were no holdings of securities of any one issuer, other than the U.S.

Government and its agencies, in an amount greater than 10% of shareholders’ equity .

Note 4 Loans and Allowance for Credit Losses

The composition of loans at December 31 is as follows (dollar amounts in thousands):

6 unchanged sentences

Deferred loan fees, net

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.

other relevant factors.

Loans with similar risk characteristics are evaluated in pools and the Company utilizes a discounted cash flow (“DCF”) method to estimate ACL for all loan pools.

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As of December 31, 2024, the Company anticipates the national unemployment rate to rise during the forecast period and the national GDP growth rate to decline.

Due to a lack of reliable forecasts, the Company utilized long-term averages for the remaining loss drivers.

The Company utilized long-term averages for the remaining loss drivers.

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.

The Company performed a loss driver refresh study to determine whether the utilized loss drivers remained appropriate along with a study analyzing assumptions around prepayments, curtailments and funding within the model during 2024.

While the fundamental methodology remained unchanged, these studies along with improved economic forecasts throughout 2024 served to marginally reduce the risk of loss projected within the model.

The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.

The qualitative adjustments either increase or decrease the quantitative model estimation.

The Company considers factors that are relevant within the qualitative framework which include the following:

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.

The Company considers factors that are relevant within the qualitative framework which include the following (including respective weighting):

lending policy ( 10 % of factor), changes in nature and volume of loans ( 10 % of factor), staff experience ( 5 % of factor), changes in volume and trends of problem loans ( 10 % of factor), concentration risk ( 10 % of factor), trends in underlying collateral values ( 10 % of factor), external factors (i.e.

competition, legal and regulatory requirements;

20 % of factor), quality of loan review system ( 5 % of factor) and changes in economic conditions ( 20 % of factor).

Changes in economic conditions, changes in volume and trends of problem loans, and changes in underlying collateral values were adjusted to reflect slight reductions to the risk characteristics in each during 2024.

All other qualitative factors remained consistent throughout the year.

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.

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.

In addition to several minor refinements to the model during the fourth quarter of 2023, the Company performed a loss driver refresh study to determine whether the utilized loss drivers remained appropriate.

While the fundamental methodology remained unchanged, as a result of this study, the real retail and food services sales index was introduced and applied to the consumer loan pool.

In addition, multi-family loans were separated from commercial real estate – non-owner occupied into their own pool.

The net impact of these changes during the fourth quarter of 2023 were not material to the model as the ACL-Loans to total loans ratio was 1.30 % both prior to and after these changes were made.

A summary of the activity in ACL - Loans by loan type as of December 31, 2024 is as follows (dollar amounts in thousands):

2 unchanged sentences

ACL - Loans - January 1, 2024

Adoption of CECL

ACL - Loans on PCD loans acquired

ACL - Loans - December 31, 2024

A summary of the activity in the allowance for loan losses (“ALL”) by loan type as of December 31, 2022 is as follows (dollar amounts in thousands):

A summary of the activity in ACL - Loans by loan type as of December 31, 2023 is as follows (dollar amounts in thousands):

Real Estate -

ALL - January 1, 2022

ALL December 31, 2022

ALL ending balance individually evaluated for impairment

ALL ending balance collectively evaluated for impairment

Loans outstanding - December 31, 2022

Loans ending balance individually evaluated for impairment

Loans ending balance collectively evaluated for impairment

ACL - Loans - January 1, 2023

Adoption of ASU 2016-13

ACL - Loans on PCD loans acquired

ACL - Loans - December 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.

3 unchanged sentences

No credit loss estimate is recorded for off-balance sheet credit exposures that are unconditionally cancelable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

The ACL - Unfunded Commitments was $ 3,849,000 and $ 0 at December 31, 2023 and 2022, respectively.

The ACL - Unfunded Commitments was $ 2.9 million and $ 3.8 million at December 31, 2024 and 2023, respectively.

See Note 20 for further information on commitments.

3 unchanged sentences

December 31, 2023

December 31, 2022

Provision for credit losses on:

9 unchanged sentences

A summary of past due loans as of December 31, 2023 are as follows (dollar amounts in thousands):

allocated ACL

Commercial/industrial

5 unchanged sentences

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.

The following table presents collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation (dollar amounts in thousands).

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.

The following tables present collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation (dollar amounts in thousands).

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.

8 unchanged sentences

Residential 1 ‑ 4 family

Prior to the adoption of ASU 2016-13, the allowance included specific reserves for certain individually evaluated impaired loans.

Specific reserves reflected estimated losses on impaired loans from management’s analysis developed through specific credit allocations.

The following table shows a summary of impaired loans individually evaluated as of December 31, 2022 (dollar amounts in thousands):

Real Estate -

With an allowance recorded:

Recorded investment

Unpaid principal balance

Related allowance

With no related allowance recorded:

Recorded investment

Unpaid principal balance

Related allowance

Recorded investment

Unpaid principal balance

Related allowance

Average recorded investment

The Company utilizes a numerical risk rating system for commercial relationships.

Collateral Type

As of December 31, 2023

Business Assets

Commercial/industrial

Commercial real estate - owner occupied

Commercial real estate - non-owner occupied

Construction and development

Residential 1 ‑ 4 family

The Company utilizes a numerical risk rating system for commercial relationships and certain residential 1-4 family relationships that have commercial characteristics.

All other types of relationships (ex:

residential, consumer, other) are assigned a “Pass” rating, unless they have fallen 90 days past due or more, at which time they receive a rating of 7.

most residential, consumer, other) are assigned a “Pass” rating, unless they have fallen 90 days past due or more, at which time they receive a rating of 7.

The Company uses split ratings for government guaranties on loans.

11 unchanged sentences

collection or liquidation in full is not probable.

The following table presents total loans by risk ratings and year of origination.

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 (dollar amounts in thousands).

15 unchanged sentences

Total current-period gross charge-offs

The breakdown of loans by risk rating as of December 31, 2022 is as follows (dollar amounts in thousands):

Commercial/industrial

Commercial real estate - owner occupied

Commercial real estate - non-owner occupied

Commercial real estate - multi-family

Construction and development

Residential 1 ‑ 4 family

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.

Loans that were both experiencing financial difficulty and were modified during the year ended December 31, 2023, were insignificant to these consolidated financial statements.

The Company also had no new TDRs during the year ended December 31, 2022.

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 (dollar amounts in thousands).

December 31, 2022

Amortized Cost Basis by Origination Year

As of December 31, 2023

Commercial/industrial

Current-period gross charge-offs

Commercial real estate - owner occupied

Current-period gross charge-offs

Commercial real estate - non-owner occupied

Current-period gross charge-offs

Commercial real estate - multi-family

Current-period gross charge-offs

Construction and development

Current-period gross charge-offs

Residential 1 ‑ 4 family

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

Non-accretable

Balance at beginning of period

Acquired balance, net

Reclassifications between accretable and non-accretable

Accretion to loan interest income

Balance at end of period

Current-period gross charge-offs

Total current-period gross charge-offs

Note 5 Related Party Matters

3 unchanged sentences

Balances at beginning

Net increase from change in composition of officers and directors

New loans and advances

Balance at end

Deposits from directors, executive officers, principal shareholders, and their affiliates totaled approximately $ 19,073,000 and $ 27,524,000 as of December 31, 2023 and 2022, respectively.

Deposits from directors, executive officers, principal shareholders, and their affiliates totaled approximately $ 22.5 million and $ 19.1 million as of December 31, 2024 and 2023, respectively.

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.

The Company utilizes a third-party consulting firm to determine an accurate assessment of the mortgage servicing rights fair value.

The Company utilizes a third-party consulting firm to assist in determining an accurate assessment of the mortgage servicing rights fair value.

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

30 unchanged sentences

Premises and equipment, net

Included in buildings and improvements at December 31, 2023 and 2022, is $ 5,743,000 and $ 190,000 , respectively, in construction in progress.

Included in buildings and improvements at December 31, 2024 and 2023, is $ 0.8 million and $ 5.7 million, respectively, in construction in progress.

These amounts relate to branch locations which were under construction.

These balances begin accumulating depreciation upon being placed in service.

Depreciation and amortization of premises and equipment charged to operating expense totaled approximately $ 2,073,000 , $ 1,657,000 , and $ 1,778,000 for the years ended December 31, 2023, 2022, and 2021, respectively.

Depreciation and amortization of premises and equipment charged to operating expense totaled approximately $ 2.3 million, $ 2.1 million, and $ 1.7 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Note 8 Other Real Estate Owned

2 unchanged sentences

Assets Acquired

(Loss) gain on sale of OREO and valuation allowance

Gain (loss) on sale of OREO and valuation allowance

Activity in the valuation allowance for the years ended December 31 was as follows (dollar amounts in thousands):

5 unchanged sentences

Ansay is an independent insurance agency that has operated in southeastern Wisconsin since 1946, managing the insurance and risk needs of commercial and personal insurance clients in Wisconsin and the Midwest.

As of December 31, 2023 and 2022, Ansay had total assets of $ 86,853,000 and $ 87,271,000 and liabilities of $ 41,398,000 and $ 44,178,000 , respectively.

The Company’s investment in Ansay, which is accounted for using the equity method, was $ 32,926,000 and $ 31,928,000 at December 31, 2023 and 2022, respectively.

The Company recognized undistributed earnings of approximately $ 2,922,000 , $ 2,558,000 and $ 2,587,000 and received dividends of $ 1,924,000 , $ 1,960,000 and $ 1,840,000 from its investment in Ansay during the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023 and 2022, Ansay had term loans with the Bank totaling approximately $ 19,731,000 and $ 19,838,000 , respectively.

Ansay also has available revolving lines of credit totaling $ 18,000,000 with the Company, under which there were no outstanding balances as of December 31, 2023 or 2022.

Ansay maintained deposits at the Bank totaling $ 11,498,000 and $ 10,797,000 as of December 31, 2023 and 2022, respectively.

As of December 31, 2024 and 2023, Ansay had total assets of $ 87.1 million and $ 86.9 million and liabilities of $ 38.5 million and $ 41.4 million, respectively.

The Company’s investment in Ansay, which is accounted for using the equity method, was $ 34.1 million and $ 32.9 million at December 31, 2024 and 2023, respectively.

The Company recognized undistributed earnings of approximately $ 3.5 million, $ 2.9 million and $ 2.6 million and received dividends of $ 2.3 million, $ 1.9 million and $ 2.0 million from its investment in Ansay during the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2024 and 2023, Ansay had term loans with the Bank totaling approximately $ 19.0 million and $ 19.7 million, respectively.

Ansay also has available revolving lines of credit totaling $ 12.0 million with the Company with an outstanding balance of $ 0.2 million as of December 31, 2024.

There were no outstanding balances as of December 31, 2023.

Ansay maintained deposits at the Bank totaling $ 8.5 million and $ 11.5 million as of December 31, 2024 and 2023, respectively.

The CEO of Ansay, Michael G.

Ansay, served as a member of the Board of the Company until retiring on January 15, 2024.

As a related party, during 2023, 2022 and 2021 the Company received insurance consulting services and purchased director and officer fidelity bond and commercial insurance coverage through Ansay spending approximately $ 417,000 , $ 357,000 and $ 329,000 , respectively.

As a related party, during 2024, 2023 and 2022 the Company received insurance consulting services and purchased director and officer fidelity bond and commercial insurance coverage through Ansay spending approximately $ 0.5 million, $ 0.4 million and $ 0.4 million, respectively.

The Company’s proportionate share of earnings of Ansay flow through to its tax return.

Deferred income taxes of approximately $ 944,000 and $ 1,125,000 were provided to account for the difference in the tax and book basis of assets and liabilities held at Ansay as of December 31, 2023 and 2022, respectively.

The Company had a 49.8 % membership interest in UFS which it sold on October 1, 2023, resulting in a $ 38,904,000 gain on sale.

Deferred income taxes of approximately $ 1.1 million and $ 0.9 million were provided to account for the difference in the tax and book basis of assets and liabilities held at Ansay as of December 31, 2024 and 2023, respectively.

The Company had a 49.8 % membership interest in UFS which it sold on October 1, 2023, resulting in a $ 38.9 million gain on sale.

Prior to this sale, the investment was accounted for on the equity method.

The Company’s undistributed earnings from its investment in UFS prior to sale were approximately $ 2,265,000 , $ 3,055,000 , and $ 2,556,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Data processing service fees paid by the Company to UFS were approximately $ 5,545,000 , $ 4,348,000 , and $ 3,754,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company’s undistributed earnings from its investment in UFS prior to sale were approximately $ 2.3 million and $ 3.1 million for the years ended December 31, 2023 and 2022, respectively.

Data processing service fees paid by the Company to UFS were approximately $ 5.5 million and $ 4.3 million for the years ended December 31, 2023 and 2022, respectively.

The business operations of UFS consist of providing data processing and other information technology services to the Company and other financial institutions.

As of December 31, 2022 UFS had total assets of $ 31,309,000 and liabilities of $ 6,680,000 .

The Company’s investment in UFS was $ 12,252,000 at December 31, 2022.

The Company’s proportionate share of earnings of UFS flow through to its tax return.

Deferred income taxes of approximately $ 1,509,000 were provided to account for the difference in the tax and book basis of assets and liabilities held at UFS at December 31, 2022.

During 2023, 2022 and 2021, the Company received $ 1,747,000 , $ 2,408,000 , and $ 2,646,000 in dividends from UFS, respectively.

During 2023 and 2022 the Company received $ 1.7 million and $ 2.4 million in dividends from UFS, respectively.

Note 10 Core Deposit Intangibles

1 unchanged sentence

Core deposit intangible

Amortization expense was $ 6,324,000 , $ 2,318,000 and $ 1,405,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Amortization expense was $ 5.8 million, $ 6.3 million and $ 2.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The following table shows the estimated future amortization expense of core deposit intangibles.

1 unchanged sentence

Note 11 Goodwill

Goodwill was $ 175,106,000 and $ 110,206,000 at December 31, 2023 and 2022, respectively.

In addition to minor refinement of goodwill during the year, $ 64,911,000 in goodwill originally recorded from the acquisition of Hometown was the primary cause of the increase in goodwill during 2023.

Goodwill was $ 175.1 million at December 31, 2024 and 2023.

Note 12 Deposits

6 unchanged sentences

Total deposits

Time deposits of $250,000 or more were approximately $ 70,195,000 and $ 47,192,000 at December 31, 2023 and 2022, respectively.

Time deposits of $250,000 or more were approximately $ 77.8 million and $ 70.2 million at December 31, 2024 and 2023, respectively.

The scheduled maturities of time deposits at December 31, 2024, are summarized as follows (dollar amounts in thousands):

10 unchanged sentences

Note 14 Notes Payable

There were $ 35,508,000 and $ 1,915,000 of advances outstanding from the FHLB at December 31, 2023 and 2022, respectively.

There were $ 135.5 million and $ 35.5 million of advances outstanding from the FHLB at December 31, 2024 and 2023, respectively.

From time to time the Bank utilized short-term FHLB advances to fund liquidity during these years.

8 unchanged sentences

Fixed rate, fixed term

Purchase accounting adjustment

2 unchanged sentences

1 year or less

At December 31, 2023 and 2022, respectively, total loans available to be pledged as collateral on FHLB borrowings were approximately $ 1,492,916,000 and $ 1,152,655,000 and, of that total, $ 841,765,000 and $ 668,328,000 qualified as eligible collateral.

The Bank owned $ 5,056,000 and $ 4,645,000 of FHLB stock at December 31, 2023 and 2022, respectively.

At December 31, 2023 and 2022, the Bank had available liquidity of $ 806,180,000 and $ 666,424,000 for future draws, respectively.

At December 31, 2024 and 2023, respectively, total loans available to be pledged as collateral on FHLB borrowings were approximately $ 1.47 billion and $ 1.49 billion and, of that total, $ 818.2 million and $ 841.8 million qualified as eligible collateral.

The Bank owned $ 6.3 million and $ 5.1 million of FHLB stock at December 31, 2024 and 2023, respectively.

At December 31, 2024 and 2023, the Bank had available liquidity of $ 682.6 million and $ 806.2 million for future draws, respectively.

FHLB stock is included in other investments at December 31, 2024 and 2023.

This stock is recorded at cost, which approximates fair value.

The Company maintains a $ 7,500,000 line of credit with a commercial bank, which was entered into on May 15, 2022.

There were no outstanding balances on this note at December 31, 2023 or 2022.

Any future borrowings will require monthly payments of interest at a variable rate, and will be due in full on May 15, 2024.

Note 15 Subordinated Debt

During September 2017, the Company entered into subordinated note agreements with three separate commercial banks under which it borrowed $ 11,500,000 .

These notes were all issued with 10 -year maturities, carried interest at a variable rate payable quarterly, were callable on or after the sixth anniversary of the issuance dates, and qualified for Tier 2 capital for regulatory purposes.

These notes were repaid in full during October 2023.

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.

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.

The Company had outstanding balances of $ 6,000,000 under these agreements at December 31, 2023 and 2022.

The Company had outstanding balances of $ 6.0 million under these agreements at December 31, 2024 and 2023.

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

The Company had outstanding balances of $ 6,000,000 under these agreements as of December 31, 2023 and 2022.

The Company had outstanding balances of $ 6.0 million under these agreements as of December 31, 2024 and 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.

The junior subordinated debentures issued to Trust I and Trust II totaled $ 4,124,000 and $ 8,248,000 , respectively, carried interest at floating rates resetting on each quarterly payment date, and were due on January 7, 2034 and December 15, 2036, respectively.

Applicable discounts originally totaling $ 1,464,000 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.

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.

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.

Both junior subordinated debentures were redeemable by the Company, subject to prior approval by the Federal Reserve Bank, on any quarterly payment date.

2 unchanged sentences

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.

Trust I and Trust II also provided the Company with $ 12,000,000 in Tier 1 capital for regulatory capital purposes.

Trust I and Trust II also provided the Company with $ 12.0 million in Tier 1 capital for regulatory capital purposes.

The Company redeemed the junior subordinated debenture related to Trust II during December 2023, resulting in Trust II’s dissolution.

7 unchanged sentences

Total provision for income taxes

(1) The state of Wisconsin produced legislation during 2023 which exempted a significant portion of the Company’s interest income from taxability.

Wisconsin did not produce guidelines for application of this new legislation until late in the first quarter of 2024.

The Company’s 2023 Wisconsin tax obligation was estimated utilizing the best understanding of what the final guidelines would stipulate.

When the final guidelines were produced, the Company’s actual 2023 Wisconsin tax obligation was $ 1.7 million less than estimated.

The state tax benefit noted above consists of the difference between the initial estimate and the actual obligation for 2023.

A summary of the sources of differences between income taxes at the federal statutory rate and the provision for income taxes for the years ended December 31 follows (dollar amounts in thousands):

22 unchanged sentences

Deferred tax liabilities:

Investment in acquisition and discount accretion

Investment discount accretion

Mortgage servicing rights

Other investments

Prepaid expenses

Other real estate owned

Investment in minority owned subsidiaries

2 unchanged sentences

Valuation allowance

Net deferred tax asset (liability)

Net deferred tax asset

In assessing the ability of the Company to realize the benefit of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

2 unchanged sentences

Based upon the level of historical taxable income and projections for future taxable income over the periods which deferred tax assets are deductible, management believes it is more likely than not the Company will generate sufficient federally taxable income to realize the benefits of these deductible differences at December 31, 2024.

Due to legislation during 2023 related to exempting interest income on significant portions of the Company’s loan portfolio to taxability in the state of Wisconsin, however, management estimates that future state taxable income will be insufficient to fully realize the benefits of these deductible differences, resulting in a valuation allowance of $ 2,447,000 on the net deferred tax asset related to state income taxes at December 31, 2023.

Due to legislation during 2023 related to exempting interest income on significant portions of the Company’s loan portfolio to taxability in the state of Wisconsin, however, management estimates that future state taxable income will be insufficient to fully realize the benefits of these deductible differences, resulting in a valuation allowance of $ 3.1 million and $ 2.4 million on the net deferred tax asset related to state income taxes at December 31, 2024 and 2023, respectively.

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.

14 unchanged sentences

The Company may make discretionary contributions up to the limits established by IRS regulations.

The discretionary match was 35 % of participant contributions up to 10 % of the employee’s salary in 2023, 2022, and 2021.

The Company made additional discretionary contributions to the plan of $ 801,000 , $ 591,000 , $ 600,000 in 2023, 2022 and 2021, respectively.

Total expense associated with the plans was approximately $ 1,596,000 , $ 1,197,000 and $ 1,169,000 in 2023, 2022 and 2021, respectively.

The Company discretionary match was 60 % of participant contributions up to 10 % of the employee’s salary in 2024 and 35 % of participant contributions up to 10 % of the employee’s salary in 2023, and 2022.

With the increase in discretionary match, the Company discontinued the discretionary contributions to the plan in 2024.

The Company made additional discretionary contributions to the plan of $ 0.8 million and $ 0.6 million in 2023 and 2022, respectively.

Total expense associated with the plans was approximately $ 1.3 million, $ 1.6 million and $ 1.2 million in 2024, 2023 and 2022, respectively.

Share-based Compensation

6 unchanged sentences

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 years ended December 31, 2023, 2022 and 2021, compensation expense of $ 2,142,000 , $ 1,662,000 and $ 1,393,000 , respectively, was recognized related to restricted stock awards.

As of December 31, 2023, there was $ 1,993,000 of unrecognized compensation cost related to non-vested restricted stock awards granted under the plan.

For the years ended December 31, 2024, 2023 and 2022, compensation expense of $ 2.2 million, $ 2.1 million and $ 1.7 million, respectively, was recognized related to restricted stock awards.

As of December 31, 2024, there was $ 1.9 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 1.16 years.

The aggregate grant date fair value of restricted stock awards that vested during 2023 was approximately $ 1,655,000 .

For the year ended

The aggregate grant date fair value of restricted stock awards that vested during 2024 was approximately $ 2.1 million.

For the period ended

December 31, 2024

5 unchanged sentences

Restricted Stock

Outstanding at beginning of year

Outstanding at beginning of period

Forfeited or cancelled

Outstanding at end of year

Outstanding at end of period

Deferred Compensation Plan

3 unchanged sentences

The payoff is for the participant’s lifetime and is guaranteed to the participant or their surviving beneficiary for a minimum of 15 years .

Related expense for this agreement was approximately $ 5,000 , $ 10,000 , and $ 15,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

The vested present value of future payments of approximately $ 53,000 and $ 156,000 at December 31, 2023 and 2022, respectively, is included in other liabilities.

During 2023 and 2022 the discount rate used to present value the future payments of this obligation was 4.95 %.

Related expense for this agreement was approximately negligible for the years ended December 31, 2024, 2023 and 2022.

Note 18 Stockholders’ Equity and Regulatory Matters

1 unchanged sentence

Under such restrictions, the Bank may not, without the prior approval of the Office of the Comptroller of the Currency, declare dividends in excess of the sum of the current year’s earnings (as defined) plus the retained earnings (as defined) from the prior two years.

The dividends that the Bank could declare without the prior approval of the Office of the Comptroller of the Currency as of December 31, 2023 totaled approximately $ 128,790,000 .

The dividends that the Bank could declare without the prior approval of the Office of the Comptroller of the Currency as of December 31, 2024 totaled approximately $ 101.1 million.

The payment of dividends may be further limited because of the need for the Bank to maintain capital ratios satisfactory to applicable regulatory agencies.

32 unchanged sentences

Note 19 Segment Information

The Company, through the branch network of its subsidiary, the Bank, provides a full range of consumer and commercial financial institution services to individuals and businesses in Wisconsin.

These services include credit cards;

secured and unsecured consumer, commercial, and real estate loans;

demand, time, and savings deposits;

and ATM processing.

The Company also offers a full-line of insurance services through its equity investment in Ansay.

While the Company’s chief decision makers monitor the revenue streams of various Company products and services, operations are managed and financial performance is evaluated on a Company-wide basis.

Accordingly, all of the Company’s financial institution operations are considered by management to be aggregated in one reportable operating segment.

The Company’s reportable segment is determined by the Chief Executive Officer, who is the designated chief operating decision maker, based upon information provided by the Company’s products and services offered, primarily banking operations.

The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review the performance of various components of the business such as branches, which are then aggregated as operating performance, products and services, and customers are similar.

The chief operating decision maker will then evaluate the financial performance of the Company’s business components such as by evaluating significant revenues and expenses and budget to actual results in assessing the Company’s segment and in the determination of allocating resources.

The chief decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets.

The chief decision maker uses consolidated net income and return on assets to benchmark the Company against its competitors.

The benchmarking analysis, coupled with monitoring of budget to actual results, are used in the assessment of performance and in establishing compensation.

Loans, investments, service charges, and deposits in other banks provide the significant revenues in the banking operation.

Interest expense, provisions for credit losses, data processing and payroll provide the significant expenses in banking operation.

All operations are domestic.

Information reported internally for performance assessment by the chief operating decision maker is identical to that which is shown in the Consolidated Statements of Income.

Note 20 Commitments and Contingencies

1 unchanged sentence

Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives.

Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans.

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.

The notional amount of rate lock commitments at December 31, 2023 and 2022, respectively, was $ 5,854,000 and $ 3,736,000 .

The fair values of the Company’s rate lock commitments to customers as of December 31, 2024 and 2023 were not material and have not been recorded.

The notional amount of rate lock commitments at December 31, 2024 and 2023, respectively, was $ 8.2 million and $ 5.9 million.

The Bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.

16 unchanged sentences

and stocks and bonds.

Letters of credit include $ 9,785,000 of standby letters of credit and no direct pay letters of credit.

Letters of credit include $ 11.1 million of standby letters of credit and no direct pay letters of credit.

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

11 unchanged sentences

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

The Company leases certain properties under operating leases that resulted in the recognition of ROU lease assets of approximately $ 1,583,000 and $ 1,582,000 and corresponding lease liabilities of similar value on the Company’s Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.

The Company leases certain properties under operating leases that resulted in the recognition of ROU lease assets of approximately $ 1.6 million and corresponding lease liabilities of similar value on the Company’s Consolidated Balance Sheets as of December 31, 2024 and 2023.

GAAP provides a number of optional practical expedients in transition.

46 unchanged sentences

Securities available for sale

Treasury securities

Obligations of U.S.

3 unchanged sentences

Corporate notes

Certificates of deposit

Mortgage servicing rights

1 unchanged sentence

Securities available for sale

Treasury securities

Obligations of U.S.

12 unchanged sentences

December 31, 2023

Impaired Loans, net of impairment reserve

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.

4 unchanged sentences

As of December 31, 2024

Other real estate owned

Third party appraisals, sales contracts or brokered price options

4 unchanged sentences

As of December 31, 2023

Other real estate owned

Third party appraisals, sales contracts or brokered price options

Collateral discounts and estimated costs to sell

Impaired loans

Loans individually evaluated

Third party appraisals and discounted cash flows

7 unchanged sentences

Other investments

Mortgage servicing rights

Financial liabilities:

Securities sold under repurchase agreements

Notes payable

Subordinated notes

Junior subordinated debentures

December 31, 2023

4 unchanged sentences

Other investments

Mortgage servicing rights

Financial liabilities:

2 unchanged sentences

Subordinated notes

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.

20 unchanged sentences

Investment in Bank

Investment in Veritas (Dissolved during 2023)

Liabilities and Stockholders’ Equity

63 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data