What changed in this filing

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Item 1. Business

2024-03-05 compared with 2023-03-07 · 38 added, 27 removed, 205 unchanged (24% of the section changed)

15 unchanged sentences

WIA provided insurance products to the Bank’s customers and was sold on June 30, 2020.

On October 19, 2018, the Company completed its previously announced acquisition (the “Acquisition”) of United Bank for a total cash consideration of approximately $51.1 million, subject to certain post-closing purchase price adjustments and future indemnity claims.

In connection with the acquisition, the Company merged United Bank with and into the Bank, with the Bank surviving the merger.

On October 19, 2018, the Company completed its acquisition of United Bank for a total cash consideration of approximately $51.1 million, subject to certain post-closing purchase price adjustments and future indemnity claims.

In connection with this acquisition, the Company merged United Bank with and into the Bank, with the Bank surviving the merger.

On December 3, 2018, the Bank entered into a Purchase and Assumption Agreement with Lake Michigan Credit Union providing for the sale of the Bank’s one branch located in Rochester Hills, MI.

2 unchanged sentences

The Bank retained all loans associated with the branch.

On January 21, 2019, the Company and F&M Merger Sub, Inc., a newly formed Minnesota corporation and wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with F.

On January 21, 2019, the Company and F&M Merger Sub, Inc., a newly formed Minnesota corporation and wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger with F.

of Tomah, Inc., a Wisconsin corporation (“F&M”).

26 unchanged sentences

Investment Activities

We maintain a portfolio of investments, consisting primarily of mortgage-backed securities, corporate asset-backed securities, U.S.

Government sponsored agency securities, corporate debt securities and trust preferred securities.

We maintain a portfolio of investments, consisting primarily of mortgage-backed securities, asset-backed securities, U.S.

Government sponsored agency securities and corporate debt securities.

We attempt to balance our portfolio to manage interest rate risk, regulatory requirements, and liquidity needs while providing an appropriate rate of return commensurate with the risk of the investment.

17 unchanged sentences

Competition for loans comes primarily from other banks, mortgage banking firms, credit unions, finance companies, leasing companies and other financial intermediaries.

Some of our competitors

are not subject to the same degree of regulation as that imposed on national banks or federally insured institutions, and these other institutions may be able to price loans and deposits more aggressively.

Some of our competitors are not subject to the same degree of regulation as that imposed on national banks or federally insured institutions, and these

other institutions may be able to price loans and deposits more aggressively.

We also face direct competition from other banks and their holding companies that have greater assets and resources than ours.

35 unchanged sentences

Section 404(b) requires that an independent registered public accounting firm provide an attestation report on the Company’s internal control over financial reporting and the operating effectiveness of these controls, making the public reporting process more costly.

The Dodd-Frank Act

In July 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

The Dodd-Frank Act has significantly changed the bank regulatory structure and affected the lending, investment, trading and operating activities of financial institutions and their holding companies.

Many of the provisions of the Dodd-Frank Act are subject to delayed effective dates and/or require the issuance of implementing regulations, some of which have not yet been issued in final form.

The Dodd-Frank Act and implementing regulations have increased the regulatory burden, compliance cost and interest expense for the Company and the Bank.

In May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Regulatory Relief Act”) was enacted to modify or remove certain financial reform rules and regulations, including some of those implemented under the Dodd-Frank Act.

While the Regulatory Relief Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion.

Many of these changes could result in meaningful regulatory changes for community banks such as the Bank, and their holding companies.

Federal Banking Regulation

Federal banking institutions, like the Bank, their holding companies and their affiliates are extensively regulated under federal law.

As a result, our growth and earnings performance may be affected not only by management decisions and general economic conditions, but also by the requirements of applicable statutes and by the regulations and policies of various bank regulatory agencies, including our primary regulator, the Federal Reserve, and the Bank’s primary regulator, the OCC, as well as the FDIC, as the insurer of our deposits, and the Consumer Financial Protection Bureau (“CFPB”), as the regulator of consumer financial services and their providers.

Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (“FASB”), securities laws administered by the Securities and Exchange Commission (“SEC”) and state securities authorities, and anti-money laundering laws enforced by the U.S.

Department of the Treasury (“Treasury”) have an impact on our business.

The effect of these statutes, regulations, regulatory policies and accounting rules are significant to our operations and results.

Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of federal banking institutions, their holding companies and affiliates that is intended primarily for the protection of the FDIC-insured deposits and depositors of banks, rather than stockholders.

These laws, and the regulations of the bank regulatory agencies issued under them, affect, among other things, the scope of our business, the kinds and amounts of investments we may make, required capital levels relative to assets, the nature and amount of collateral for loans, the establishment of branches, our ability to merge, consolidate and acquire, dealings with the Company’s and the Bank’s insiders and affiliates and our payment of dividends.

In reaction to the global financial crisis and particularly following passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), we experienced heightened regulatory requirements and scrutiny.

Although the reforms primarily targeted systemically significant financial service providers, their influence filtered down in varying degrees to community banks over time and caused our compliance and risk management processes, and the costs thereof, to increase.

The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“Regulatory Relief Act”) eliminated questions about the applicability of certain Dodd-Frank Act reforms to community bank systems, including relieving us of any requirement to engage in mandatory stress tests, maintain a risk committee or comply with the Volcker Rule’s complicated prohibitions on proprietary trading and ownership of private funds.

In 2022, the Company adopted a clawback policy that is consistent with Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended, and the listing standards adopted by the Nasdaq Stock Market, each of which were mandated by the Dodd-Frank Act.

The supervisory framework for U.S.

banking organizations subjects banks and bank holding companies to regular examination by their respective regulatory agencies, which results in examination reports and ratings that are not publicly available and that can impact the conduct and growth of their business.

These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, and various other factors.

The regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations.

The following is a summary of the material elements of the supervisory and regulatory framework applicable to the Company and the Bank.

It does not describe all of the statutes, regulations and regulatory policies that apply, nor does it restate all of the requirements of those that are described.

The descriptions are qualified in their entirety by reference to the particular statutory and regulatory provision.

Capital Adequacy

7 unchanged sentences

The Bank’s capital categories are determined solely for the purpose of applying the “prompt corrective action” rules described below and they are not necessarily an accurate representation of its overall financial condition or prospects for other purposes.

Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business.

Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement

remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business.

See “Bank Regulation - Prompt Corrective Action” below.

11 unchanged sentences

Under the federal Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company, such as the Company, and the OCC before acquiring control of any national bank, such as the Bank.

The Change in Bank Control

Act (“CBCA”) prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction.

The Change in Bank Control Act (“CBCA”) prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction.

Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as the Company, would, under the circumstances set forth in the presumption, constitute acquisition of control of the Company.

4 unchanged sentences

These indicia of control include nonvoting equity ownership, director representation, management interlocks, business relationship and restrictive contractual covenants.

Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence.

Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily being deemed to have a controlling influence.

Bank Regulation

5 unchanged sentences

Regulations promulgated under the Patriot Act impose various requirements on financial institutions, such as standards for verifying client identification at account opening and maintaining expanded records (including “Know Your Customer” and “Enhanced Due Diligence” practices) and other obligations to maintain appropriate policies, procedures and controls to aid the process of preventing, detecting, and reporting money laundering and terrorist financing.

An institution subject to the Patriot Act must provide AML training to employees, designate an AML compliance officer and annually audit the AML program to assess its effectiveness.

An institution subject to the Patriot Act must provide AML training to employees, designate an AML compliance

officer and annually audit the AML program to assess its effectiveness.

The FDIC continues to issue regulations and additional guidance with respect to the application and requirements of BSA and AML.

14 unchanged sentences

Under this system, the federal banking regulators have established five capital categories:

well capitalized, adequately capitalized, undercapitalized,

significantly undercapitalized, and critically undercapitalized, in which all institutions are placed.

well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, in which all institutions are placed.

The federal banking agencies have also specified by regulation the relevant capital levels for each category.

8 unchanged sentences

The deposits of the Bank are insured by the Deposit Insurance Fund (DIF) of the FDIC up to the limits set forth under applicable law and are subject to the deposit insurance premium assessments of the DIF.

Under the Dodd-Frank Act, the maximum per depositor FDIC insurance amount increased from $100,000 to $250,000.

The FDIC applies a risk-based system for setting deposit insurance assessments, which was amended by the Dodd-Frank Act.

The current maximum per depositor FDIC insurance amount is $250,000.

The FDIC applies a risk-based system for setting deposit insurance assessments.

Under this system, the assessment rates for an insured depository institution vary according to the level of risk incurred in its activities.

3 unchanged sentences

In addition to deposit insurance assessments, the FDIC is authorized to collect assessments from FDIC insured depository institutions to service the outstanding obligations of Financing Corporation (FICO).

The Dodd-Frank Act changed the assessment formula for determining deposit insurance premiums and modified certain insurance coverage provisions of the FDIA.

The FDIC’s implementing rules redefined the base for FDIC insurance assessments from the amount of insured deposits to average consolidated total assets less average tangible equity.

The FDIC currently defines the base for FDIC insurance assessments based on average consolidated total assets less average tangible equity.

Federal Home Loan Bank (“FHLB”) System .

The Bank is a member of the FHLB of Chicago, which is one of the 11 regional Federal Home Loan Banks.

The primary purpose of the FHLBs is to provide funding to their saving association members in support of the home financing credit function of the members.

The primary purpose of the FHLBs is to provide funding to their saving association

members in support of the home financing credit function of the members.

Each FHLB serves as a reserve or central bank for its members within its assigned region.

32 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 1. Business