What changed in this filing

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Item 1A. Risk Factors

2025-03-13 compared with 2024-03-05 · 54 added, 52 removed, 222 unchanged (32% of the section changed)

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Additional risks that we do not yet know of or that we currently believe are immaterial may also impair our future business operations.

If any of the events or circumstances described in the

following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected.

If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected.

In such cases, the trading price of our common stock could decline.

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Economic conditions have a significant impact on the demand for our products and services, as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources.

A significant decline in general economic conditions caused by inflation, recession, tariffs, unemployment, changes in securities markets, changes in housing market prices, geopolitical uncertainties, natural disasters, pandemics and election outcomes or other factors could impact economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.

A significant decline in general economic conditions caused by inflation, recession, tariffs, unemployment, changes in securities markets, rate cuts by the Federal Reserve, changes in housing market prices, geopolitical uncertainties, natural disasters, pandemics and election outcomes or other factors could impact economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.

Inflation may have an adverse impact on our business and on our customers.

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Inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expenses.

Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.

Geopolitical tensions, including current or anticipated impact of military conflicts , could adversely affect general economic industry conditions.

Geopolitical tensions may affect our earnings.

Adverse economic conditions may result from a variety of factors including domestic and global economic and political developments, including civil unrest, terrorism, foreign investment restrictions, or military action, such as the armed conflict between Ukraine and Russia and corresponding sanctions imposed by the United States and other countries or the conflict in Israel and the surrounding areas, and new or evolving legal and regulatory requirements on business investment, hiring, migration, labor supply and global supply chains.

Adverse economic conditions may result from a variety of factors including domestic and global economic and political developments, including civil unrest, terrorism, foreign investment restrictions, various political or military action, such as the armed conflict between Ukraine and Russia and corresponding sanctions imposed by the United States and other countries or the conflict in Israel and the surrounding areas, geopolitical events (including China-Taiwan and U.S.-China relations), and new or evolving legal and regulatory requirements on business investment, hiring, migration, labor supply and global supply chains.

We are subject to higher lending risks with respect to our commercial and agricultural banking activities which could adversely affect our financial condition and results of operations.

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Farming operations may be affected by factors outside of the borrower’s control, including adverse weather conditions, such as drought, hail or floods that can severely limit crop yields and declines in market prices for agricultural products.

Furthermore, severe weather events such as catastrophic fire, tornado, or

other events could impact the markets that we serve and adversely impact our customers, such as hindering our borrowers’ ability to timely repay their loans and diminish the value of the collateral held by us.

Although the Bank manages lending risks through its underwriting and credit administration policies, no assurance can be given that such risks will not materialize, in which event, our financial condition, results of operations, cash flows and business prospects could be materially adversely affected.

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These risks could materially and adversely impact our results of operations, financial position and/or liquidity.

For a further discussion of risks that can impact us as a result of financial market disruption or an economic downturn, see “ Our business may be adversely affected by conditions in the financial markets and economic conditions generally .”

RISKS RELATED TO OUR BUSINESS AND OPERATIONS

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We rely on the secure processing, storage and transmission of confidential and other information on our computer systems and networks.

Unauthorized disclosure of sensitive or confidential

client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business.

Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business.

Although we have implemented measures to prevent security breaches, cyber incidents and other security threats, our facilities and systems, and those of third party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human error, or other similar events that could have a material adverse effect on our business.

Although, to date, we have not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future.

Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the outsourcing of some of our business operations, the continued uncertain global economic environment, the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, nation-state supported actors, activists and other external parties.

Additionally, the techniques used by cyber criminals change frequently, may not be recognized until launched (or may evade detection for considerable time), can be initiated from a variety of sources, and may increase in frequency and effectiveness by the use of artificial intelligence.

As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

Our ability to maintain, timely update and replace systems can become more challenging as the speed, frequency, volume, interconnectivity and complexity of the information on these systems increases.

Furthermore, the storage and transmission of such data is regulated at the federal and state level.

Privacy information security laws and regulation changes, and compliance therewith, may result in cost increases due to system changes and the development of new administrative processes.

Increasing privacy information security laws and regulation changes, and compliance therewith, may result in cost increases due to system changes and the development of new administrative processes.

If we fail to comply with applicable laws and regulations or experience a data security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us or our vendors, our reputation could be damaged, possibly resulting in lost future business, and we could be subject to fines, penalties, administrative orders and other legal risks as a result of a breach or non-compliance.

Additionally risks could arise in connection with any failure, or perceived failure, to timely or sufficiently update or expand our privacy notices and policies to be fully compliant with quickly evolving state privacy requirements, and any failure to sufficiently respond to, or respond in a sufficiently timely manner to, consumer rights and other requests exercised under such state privacy laws, in each case to the extent they are applicable to us.

The impact of larger or similar-sized financial institutions encountering financial difficulties may adversely affect the Company's business, earnings and financial condition.

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Uncertainty may be compounded by the reach and depth of media attention and its ability to disseminate concerns about these types of events.

This public uncertainty and concern could potentially affect the Bank despite its relatively high percentage of deposits (82% as of December 31, 2023) that are either insured or collateralized and its balance sheet liquidity and collateralized borrowing capacity being well in excess of the uninsured deposit balances.

This public uncertainty and concern could potentially affect the Bank despite its relatively high percentage of deposits (82% as of December 31, 2024) that are either insured or collateralized and its balance sheet liquidity

and collateralized borrowing capacity being well in excess of the uninsured deposit balances.

While the Company does not believe that the circumstances of these three banks' failures are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the banking industry, including the Company.

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Through our banking subsidiary, the Bank, our profitability depends in large part on our net interest income, which is the difference between interest earned from interest earning assets, such as loans and mortgage-backed securities, and interest paid on interest bearing liabilities, such as deposits and borrowings.

Our net interest income will be adversely affected if market interest rates change such that the interest we pay on deposits and borrowings increase faster than the interest earned on loans and investments.

Our net interest income has been, and will continue to be, adversely affected if market interest rates change such that the interest we pay on deposits and borrowings increase faster than the interest earned on loans and investments.

The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time.

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general economic conditions and government policy decisions, especially policies of the Federal Reserve Bank.

Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities.

Accordingly, our results of operations, like those of other financial institutions, are, and have been, impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities.

The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk.

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Although we exercise prudent due diligence when making loans, we could be subject to environmental liabilities with respect to these properties.

See also “ The COVID-19 pandemic may continue to impact economic conditions and affect our financial condition, our results of operations and other aspects of our business.

Changes in the fair value or ratings downgrades of our securities may reduce our stockholders’ equity, net earnings, or regulatory capital ratios.

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In the case of debt securities, if these securities are never sold, the decrease will be recovered over the life of the securities.

We conduct a periodic review and evaluation of our securities portfolio to determine if the decline in the fair value of any security below its cost basis is other-than-temporary.

We conduct a periodic review and evaluation of our securities portfolio to determine if the decline in the fair value of any security below its cost basis is due to credit impairment.

Factors which we consider in our analysis include, but are not limited to, the severity and duration of the decline in fair value of the security, the financial condition and near-term prospects of the issuer, whether the decline appears to be related to issuer conditions or general market or industry conditions, our intent and ability to retain the security for a period of time sufficient to allow for any anticipated recovery in fair value and the likelihood of any near-term fair value recovery.

We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience.

If we deem such decline to be other-than-temporary related to credit losses, an allowance for credit losses(“ACL”) will be established.

At December 31, 2023, no ACL was established for available for sale securities or held to maturity securities.

At December 31, 2023, U.S.

government issued or U.S.

agency issued securities were carried at $181.3 million or 73.4% of the combined AFS and HTM portfolio.

If we deem such decline to be due to credit impairment, an allowance for credit losses(“ACL”) will be established.

The capital that we are required to maintain for regulatory purposes is impacted by, among other factors, the securities ratings on our portfolio.

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To address risks inherent in our loan portfolio, we maintain an allowance for credit losses that represents the Company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining life of the assets.

Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and modifications, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates.

where the Company operates.

The Company estimates the appropriate level of allowance for credit losses by evaluating loans collectively on a pooled basis when similar risk characteristics exist, and on an individual basis when management determines that a loan does not share similar risk characteristics with other loans.

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Technology and other changes are allowing customers to complete financial transactions that historically have involved banks at one or both ends of the transaction.

For example, customers can now pay bills and transfer funds directly without

going through a bank.

For example, customers can now pay bills and transfer funds directly without going through a bank.

The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits.

Additionally, customers may decide to remove money from accounts with us in favor of other banks or other types of cash management products, such as emerging financial technologies, including digital wallets, non-fungible tokens and digital currencies and cryptocurrencies.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

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If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected.

Additionally, we are subject to reputational risk associated with environmental, social and governance, issues – including different perspectives on the meaning of these issues.

Such differing perspectives may expose us to increased scrutiny and criticism.

Maintaining or increasing our market share may depend on lowering prices and market acceptance of new products and services.

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We may not be successful in introducing new products and services, achieving market acceptance of our products and services, or developing and maintaining loyal customers, which in turn, could adversely affect our results of operations and profitability.

We may not have sufficient pre-tax net income in future periods to fully realize the benefits of our net deferred tax assets.

Assessing the need for, or the sufficiency of, a valuation allowance requires management to evaluate all available evidence.

Based on future pre-tax net income projections and the planned execution of existing tax planning strategies, we believe that it is more likely than not that we will fully realize the benefits of our net deferred tax assets.

However, our current assessment is based on assumptions and judgments that may or may not reflect actual future results.

If a valuation allowance becomes necessary, it could have a material adverse effect on our consolidated results of operations and financial condition.

We could experience an unexpected inability to obtain needed liquidity.

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The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities.

The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds.

The ability of a

financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets and its access to alternative sources of funds.

We seek to ensure our funding needs are met by maintaining an appropriate level of liquidity through asset/liability management.

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We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations.

To the extent our future operating results erode capital or we elect to expand through loan growth or acquisition, we may be required to raise additional capital.

Our ability to raise capital will depend on conditions in the capital markets, which are outside of our control, and on our financial performance.

To the extent our future operating results erode capital or we elect to expand through loan growth, we may be required to raise additional capital.

Furthermore, our strategy includes growth through acquisition.

Such expansion may also require us to raise additional capital which will depend on conditions in the capital markets, which are outside of our control, and on our financial performance.

Accordingly, we cannot be assured of our ability to raise capital when needed or on favorable terms.

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Our growth strategy includes selectively acquiring businesses through acquisitions of other banks, and our ability to consummate these acquisitions on economically advantageous terms acceptable to us in the future is unknown.

Our growth strategy includes acquisitions of other banks that serve customers or markets we find desirable, including our acquisitions of Community Bank of Northern Wisconsin (“CBN”), WFC, United Bank and F&M.

Our growth strategy includes acquisitions of other banks that serve customers or markets we find desirable.

The market for acquisitions remains highly competitive, and we may be unable to find satisfactory acquisition candidates in the future that fit our acquisition and growth strategy.

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Any such acquisitions could be funded through cash from operations, the issuance of equity and/or the incurrence of additional indebtedness, which amount may be material, or a combination thereof.

Any acquisition could be dilutive to our earnings and stockholders’ equity per share of our common stock.

Any acquisition could be dilutive to our earnings and

stockholders’ equity per share of our common stock.

Also, acquisitions are subject to various regulatory approvals.

If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests.

Regulatory approval is required for acquisitions we seek to consummate.

Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals.

To the extent that we are unable to find suitable acquisition candidates, an important component of our growth strategy may be lost.

If we are unable to find suitable acquisition candidates, this component of our growth strategy may be lost.

Acquisition and expansion activities may disrupt our business, dilute existing stockholders and adversely affect our operating results.

We acquired F&M in July 2019, United Bank in October 2018, WFC in August 2017 and CBN in May 2016.

We intend to continue to evaluate potential acquisitions and expansion opportunities in the normal course of our business.

Although the integration of F&M, United Bank, WFC and CBN have been successfully completed, we cannot assure you that we will be able to adequately or profitably manage the ongoing integration of any future acquisitions.

We seek to expand through acquisition and are evaluating potential acquisitions and expansion opportunities in the normal course of our business.

We cannot assure you that we will be able to adequately or profitably manage the ongoing integration of any future acquisitions.

Acquiring other banks or financial service companies, as well as other geographic and product expansion activities, involve various risks including:

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• diversion of our management’s time and attention from our existing operations and business.

Our failure to execute our acquisition strategy could adversely affect our business, results of operations, financial condition and future prospects.

Our failure to execute our acquisition growth strategy could adversely affect our business, results of operations, financial condition and future prospects.

Our ability to pay dividends depends primarily on dividends from our banking subsidiary, the Bank, which is subject to regulatory and other limitations.

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Because our common stock is thinly traded, its market price may fluctuate significantly more than the stock market in general or the stock prices of similar companies, which are exchanged, listed or quoted on the NASDAQ Stock Market.

We believe there are 9,047,304 shares of our common stock held by nonaffiliates as of March 5, 2024.

Thus, our common stock will be less liquid than the stock of companies with broader public ownership, and as a result, the trading prices for our shares of common stock may be more volatile, which may make it difficult for investors to resell shares at the volume, prices and times desired.

There are approximately 9.6 million shares of our common stock held by nonaffiliates as of March 13, 2025.

Thus, our common stock will be less liquid than the stock of

companies with broader public ownership, and as a result, the trading prices for our shares of common stock may be more volatile, which may make it difficult for investors to resell shares at the volume, prices and times desired.

Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger.

Climate change manifesting as physical or transition risks could adversely affect our operations, businesses, and customers.

There is an increasing concern over the risks of climate change and related environmental sustainability matters.

The physical risks of climate change include discrete events, such as flooding and wildfires, and longer-term shifts in climate patterns, such as extreme heat, and more frequent and prolonged drought.

Under medium or longer-term scenarios, such events, if uninterrupted or unaddressed, could disrupt our operations or those of our customers or third parties on which we rely, including through direct damage to assets and indirect impacts from supply chain disruption and market volatility.

Additionally, transitioning to a low-carbon economy may entail extensive policy, legal, technology and market initiatives.

Transition risks, including changes in consumer preferences and additional regulatory requirements or supervisory expectations or taxes, could increase our expenses and undermine our strategies.

In addition, our reputation and client relationships may be damaged as a result of our practices related to climate change, including our involvement, or our customers’ involvement, in certain industries or projects, in the absence of mitigation and/or transition measures, associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.

REGULATORY AND COMPLIANCE RISKS

A new accounting standard may require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.

The Financial Accounting Standards Board (“FASB”) adopted a new accounting standard referred to as Current Expected Credit Loss, or CECL, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses.

CECL became effective in January 2023 for smaller reporting companies such as the Company.

This changed the current method of providing allowances for loan losses that are probable, which may require us to increase our allowance for loan losses, and to greatly increase the types of data we will need to collect and review to determine the appropriate level of the allowance for loan losses.

Banking regulators expect the new accounting standard will increase the allowance for loan losses.

Any change in the allowance for loan losses will be an adjustment to retained earnings and would change the Bank’s capital levels.

Any increase in our allowance for loan losses or expenses incurred to determine the appropriate level of the allowance for loan losses may have a material adverse effect on our financial condition and results of operations.

We operate in a highly regulated environment, and are subject to changes, which could increase our cost structure or have other negative impacts on our operations.

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Regulation includes, among other things, capital and reserve requirements, the level of deposit insurance premiums assessed, permissible investments and lines of business, mergers and acquisitions, restrictions on transactions with insiders and affiliates, anti-money laundering regulations, dividend limitations, community reinvestment requirements, limitations on products and services offered, loan limits, geographical limits, and consumer credit regulations.

The system of supervision and regulation applicable to us establishes a comprehensive framework for our operations and is intended primarily for the protection of the Deposit Insurance Fund, our depositors and the public, rather than our stockholders.

The system of supervision and regulation applicable to us establishes a comprehensive framework for our operations and is intended primarily for the protection of the DIF, our depositors and the public, rather than our stockholders.

The election of a new President together with changes in the membership of Congress, including change in control of the Senate, will likely lead to changes in the laws or policies applicable to us and the agencies that regulate us.

Further, some of the laws and regulations finalized in the prior administration that are applicable to financial institutions are subject to ongoing litigation creating further uncertainty.

Additionally, different approaches to regulation by different jurisdictions, including potentially conflicting state-level regulation, could increase compliance costs or risks of non-compliance.

Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations or legislation, or additional deposit insurance premiums could have a material impact on our operations.

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Under the BHCA and Federal Reserve guidance thereunder, a person or group will be presumed to control a bank holding company if they acquire a certain percentage of the bank holding company or if one or more other control factors are present.

On October 1, 2020, a Federal Reserve Board final rule became effective that clarified and codified the Federal Reserve’s standards for determining whether one company has control over another.

The final rule established four categories of tiered presumptions of non-control that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control.

The Board of Governors of the Federal Reserve clarified and codified the Federal Reserve’s standards for determining whether one company has control over another.

The rule established four categories of tiered presumptions of non-control that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control.

As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of non-control.

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In addition, the Company is currently considered a “non-accelerated filer” and will maintain that status for so long as the Company’s annual revenues are less than $100 million, and its public float is more than $75 million but less than $700 million.

If the Company were to be classified as an “accelerated filer” rather than a “non-accelerated filer,” then we would become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act.

If the Company were to be classified as an “accelerated filer” rather than a “non-accelerated filer,” which we believe is probable in 2025, then we would become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act.

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.

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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 1A. Risk Factors