BANK FIRST CORPORATION
TABLE OF CONTENTS
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| PART I | | 7 | |
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| | Item 1. | Business | 7 |
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| | Item 1A. | Risk Factors | 23 |
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| | Item 1B. | Unresolved Staff Comments | 38 |
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| | Item 1C. | Cybersecurity | 38 |
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| | Item 2. | Properties | 40 |
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| | Item 3. | Legal Proceedings | 40 |
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| | Item 4. | Mine Safety Disclosures | 40 |
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| PART II | | 41 | |
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| | Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 41 |
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| | Item 6. | Reserved | 42 |
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| | Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 43 |
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| | Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 65 |
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| | Item 8. | Financial Statements and Supplementary Data | 67 |
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| | Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 114 |
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| | Item 9A. | Controls and Procedures | 114 |
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| | Item 9B. | Other Information | 115 |
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| | Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 115 |
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| PART III | | 116 | |
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| | Item 10. | Directors, Executive Officers and Corporate Governance | 116 |
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| | Item 11. | Executive Compensation | 116 |
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| | Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 116 |
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| | Item 13. | Certain Relationships and Related Transactions, and Director Independence | 116 |
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| | Item 14. | Principal Accounting Fees and Services | 117 |
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| PART IV | | 117 | |
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| | Item 15. | Exhibits, Financial Statement Schedules | 117 |
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| | | Signatures | 119 |
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In this Annual Report on Form 10-K (this “Annual Report”), references to “we,” “our,” “us,” “Bank First” or “the Company” refer to Bank First Corporation, a Wisconsin corporation, and our wholly-owned banking subsidiary, Bank First, N.A., a national banking association, unless otherwise indicated or the context otherwise requires. References to “Bank” refer to Bank First, N.A., our wholly-owned banking subsidiary.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this Annual Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include statements relating to our projected growth, anticipated future financial performance, financial condition, credit quality and management’s long-term performance goals, as well as statements relating to the anticipated effects on our business, financial condition and results of operations from expected developments or events, our business, growth and strategies. These statements, which are based on certain assumptions and estimates and describe our future plans, results, strategies and expectations, can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “projection” and other variations of such words and phrases and similar expressions.
These forward-looking statements are not historical facts, and are based upon current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. The inclusion of these forward-looking statements should not be regarded as a representation by us or any other person that such expectations, estimates and projections will be achieved. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict and that are beyond our control. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date of this Annual Report, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:
| ● | the impact of current and future economic and market conditions generally (including seasonality) and in the financial services industry, nationally and within our primary market areas (particularly Wisconsin), including the effects of inflationary pressures, changes in interest rates, slowdowns in economic growth, and the potential for high unemployment rates, as well as the financial stress on borrowers and changes to customer and client behavior (including the velocity and levels of deposit withdrawals and loan repayment) and credit risk as a result of the foregoing; |
| ● | the risks of changes in interest rates on the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities and market fluctuations, and interest rate sensitive assets and liabilities; |
| ● | the risk that our cost of funding could increase in the event we are unable to continue to attract stable and cost-efficient deposits; |
| ● | prolonged periods of high inflation and their effects on our business, profitability, and our stock price; |
| ● | concentration of our loan portfolio in real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate; |
| ● | weakness in the real estate market, including the secondary residential mortgage market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, profits on sales of mortgage loans, and the value of mortgage servicing rights; |
| ● | the concentration of our business within our geographic areas of operation in Wisconsin; |
| ● | governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve, as well as legislative, tax and regulatory changes, including those that impact the money supply and inflation and the possibility that the U.S. could default on its debt obligations; |
| ● | the risk that a future economic downturn and contraction could have a material adverse effect on our capital, financial condition, credit quality, results of operations and future growth; |
| ● | the credit risks of lending activities, including our ability to estimate credit losses and the allowance for credit losses, as well as the effects of changes in the level of, and trends in, loan delinquencies and write-offs; |
| ● | the risk that our asset quality may deteriorate or that our allowance for credit losses may prove to be inadequate or may be negatively affected by credit risk exposures; |
| ● | disruptions to the credit and financial markets, either nationally or globally; |
| ● | increased competition in the banking and mortgage banking industry, nationally, regionally or locally, including competition from nontraditional banking institutions such as Fintechs; |
| ● | our ability to realize the expected benefits from our strategic initiatives or other operational and execution goals in the time period expected, which could negatively affect our future profitability; |
| ● | our ability to maintain our operating efficiency; |
| ● | failure to keep pace with technological change or difficulties when implementing new technologies; |
| ● | our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; |
| ● | our ability to attract sufficient loans that meet prudent credit standards, including in our commercial and industrial and owner-occupied commercial real estate loan categories; |
| ● | our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; |
| ● | our inability to receive dividends from our bank subsidiary and to service debt, pay dividends to our common shareholders, repurchase our shares of common stock and satisfy obligations as they become due; |
| ● | restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the operations of the Bank; |
| ● | inability of our risk management framework to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, cybersecurity risk, operational risk, strategic risk and reputational risk, including by virtue of our relationships with third-party business partners and other service providers; |
| ● | our business relationships with, and reliance upon, third parties that have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and disruptions in service or financial difficulties with a third-party vendor or business relationship; |
| ● | our ability to oversee the performance of third-party service providers that provide material services to our business; |
| ● | our ability to maintain expenses in line with current projections; |
| ● | our dependence on our management team and our ability to motivate and retain our management team; |
| ● | our ability to attract and retain qualified employees; |
| ● | we may not be able to identify suitable bank and non-bank acquisition opportunities as part of our growth strategy and even if we are able to identify attractive acquisition opportunities, we may not be able to complete such transactions on favorable terms or realize the anticipated benefits from such acquisitions; |
| ● | the risk that the regulatory environment may not be conducive to, or may prohibit the consummation of, future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and the potential to reduce anticipated benefits from such mergers or combinations; |
| ● | system failures, including as a result of cyberattacks, or failures to prevent breaches of our network security; |
| ● | data processing system failures and errors; |
| ● | fraudulent and negligent acts by our clients, employees or vendors; |
| ● | our financial reporting controls and procedures’ ability to prevent or detect all errors or fraud; |
| ● | our ability to identify and address potential cybersecurity risks, which may be exacerbated by recent developments in generative artificial intelligence, including brute force attacks (i.e., credential stuffing), ransomware or other malware, “denial-of-service” attacks, “hacking” and identify theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation; |
| ● | our current and future information technology system enhancements and operational initiatives may not be successfully implemented, which could negatively impact our operations; |
| ● | we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services industry; |
| ● | fluctuations in the market value and its impact on our stock price and the securities held in our securities portfolio; |
| ● | the adequacy of our reserves and the appropriateness of our methodology for calculating such reserves; |
| ● | increased credit losses or impairment of goodwill and other intangibles; |
| ● | the makeup of our asset mix and investments; |
| ● | our focus on small and mid-sized businesses; |
| ● | the institution and outcome of litigation and other legal proceeding against us or to which we become subject; |
| ● | changes in our accounting standards; |
| ● | the impact of recent and future legislative and regulatory changes; |
| ● | uncertainties surrounding geopolitical events, trade policy, taxation policy, and monetary policy which continue to impact the outlook for future economic growth, including U.S. imposition of tariffs against Mexico, Canada, and China and consideration of responsive actions by these nations or the expansion of import fees and tariffs among a larger group of nations, which is bringing greater ambiguity to the outlook for future economic growth; |
| ● | the potential implementation of a regulatory reform agenda under the new presidential administration that is significantly different than that of the prior administration, impacting rulemaking, supervision, examination and enforcement priorities of the federal banking agencies; |
| ● | examinations by our regulatory authorities; |
| ● | changes in the scope and cost of Federal Deposit Insurance Corporation (“FDIC”) insurance and other coverage; |
| ● | political instability, acts of God, or of war or terrorism, natural disasters, including in the Company’s footprint, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions; |
| ● | risks related to diversity, equity and inclusion (“DEI”) and environmental, social and governance (“ESG”) strategies and initiatives, the scope and pace of which could alter Bank First’s reputation and shareholder, associate, customer and third-party affiliations or result in litigation in connection with anti-DEI and anti-ESG laws, rules or activism; |
| ● | the impact of recent adverse developments in the banking industry, highlighted by high-profile bank failures, on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), the Company's ability to effectively manage its liquidity risk and any growth plans, and the availability of capital and funding; and |
| ● | other factors and risks described under the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections herein. |
The foregoing factors should not be construed as exhaustive and should be read in conjunction with the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in
this Annual Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this Annual Report, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect us.
