Bank First Announces Net Income for the Third Quarter of 2023

• Net income of $14.8 million and $39.6 million for the three and nine months ended September 30, 2023, respectively
• Earnings per common share of $1.43 and $3.89 for the three and nine months ended September 30, 2023, respectively
• Annualized return on average assets of 1.44% and 1.31% for the three and nine months ended September 30, 2023, respectively
• Quarterly cash dividend of $0.30 per share declared, matching the prior quarter and a 20.0% increase from the prior-year third quarter

MANITOWOC, Wis., Oct. 17, 2023 /PRNewswire/ -- Bank First Corporation (NASDAQ: BFC) ("Bank First" or the "Bank"), the holding company for Bank First, N.A., reported net income of $14.8 million, or $1.43 per share, for the third quarter of 2023, compared with net income of $10.5 million, or $1.26 per share, for the prior-year third quarter. For the nine months ended September 30, 2023, Bank First earned $39.6 million, or $3.89 per share, compared to $32.4 million, or $4.15 per share for the same period in 2022. After removing the impact of one-time expenses related to acquisitions as well as gains and losses on sales of securities and other real estate owned ("OREO"), the Bank reported adjusted net income (non-GAAP) of $15.1 million, or $1.46 per share, for the third quarter of 2023, compared with $14.0 million, or $1.70 per share, for the prior-year third quarter. For the first nine months of 2023, adjusted net income (non-GAAP) totaled $44.4 million, or $4.38 per share, compared to $36.6 million, or $4.69 per share for the same period in 2022.

Operating Results
Net interest income ("NII") during the third quarter of 2023 was $34.1 million, down $0.2 million from the previous quarter but up $6.4 million from the third quarter of 2022. The impact of purchase accounting increased NII by $1.8 million, or $0.13 per share after tax, during the third quarter of 2023, compared to $2.5 million, or $0.18 per share after tax, during the previous quarter and $0.7 million, or $0.07 per share after tax, during the third quarter of 2022.

Net interest margin ("NIM") was 3.71% for the third quarter of 2023, compared to 3.77% for the previous quarter and 3.63% for the third quarter of 2022. NII from purchase accounting increased NIM by 0.19%, 0.27% and 0.10% for each of these periods, respectively. While the Bank's average rate paid on interest-bearing liabilities has continued to rise throughout 2023, increasing average rates earned on interest-earning assets as well as the beneficial impact of the Bank's continuing high percentage of noninterest-bearing deposits (32.1% of the Bank's total core deposits at September 30, 2023) have allowed the Bank's net interest margin, excluding purchase accounting impacts, to expand quarter-over-quarter for the last two quarters.

Bank First did not record a provision for credit losses during the third quarter of 2023, matching the previous quarter and the third quarter of 2022. Provision expense was $4.2 million for the first nine months of 2023 compared to $1.7 million for the same period during 2022. The acquisition of the loan portfolio of Hometown Bancorp, Ltd. ("Hometown") during the first quarter of 2023 resulted in a day 1 provision for credit losses expense of $3.6 million as required under the Current Expected Credit Losses ("CECL") methodology, which the Bank adopted on January 1, 2023. The lack of a provision for credit losses during the second and third quarter of 2023 was the result of continued strong asset quality metrics discussed later in this release. Recoveries of previously charged-off loans exceeded currently charged-off loans by $0.1 million through the first nine months of 2023, compared to recoveries exceeding charge-offs by $1.0 million through the first nine months of 2022.

Noninterest income was $5.3 million for the third quarter of 2023, compared to $4.6 million and $5.2 million for the prior quarter and third quarter of 2022, respectively. Service charge income increased by $0.1 million, or 3.1%, and $0.4 million, or 31.7%, from the prior quarter and prior-year third quarter, respectively, as a result of the added scale from the acquisitions of Denmark Bancshares, Inc. ("Denmark") and Hometown. Income provided by the Bank's investment in Ansay & Associates increased by $0.1 million from the prior-year third quarter while declining $0.2 million from the prior quarter. Income from this investment increased by $0.5 million, or 21.4%, through the first nine months of 2023 compared to the same period in 2022. Loan servicing income from loans previously sold to the secondary market with servicing rights, and therefore servicing income, retained by the Bank matched the prior quarter but increased by $0.2 million, or 49.5% from the prior-year third quarter. Sold but serviced loan portfolios acquired from Denmark and Hometown totaled $159.5 million and $343.6 million, respectively, leading to this increase in loan servicing income. The Bank experienced a $0.2 million positive valuation adjustment to its mortgage servicing rights asset during the third quarter of 2023 which compared favorably to a $0.5 million negative adjustment in the prior quarter, but unfavorably to a $0.9 million positive adjustment during the prior-year third quarter.

Noninterest expense was $19.6 million in the third quarter of 2023, compared to $19.9 million during the prior quarter and $18.9 million during the third quarter of 2022. Most areas of noninterest expense have increased over the past five quarters as a result of added operational scale from the acquisitions of Denmark and Hometown, which increased the Bank's total assets by $1.13 billion, or 38.0%, from the end of the second quarter of 2022 to the end of the third quarter of 2023. Expenses directly attributable to these acquisitions have also caused volatility in several noninterest expense areas, most notably personnel, occupancy and outside service fee expenses during the third quarter of 2022 and the first quarter of 2023. Core deposit intangible assets of $15.1 million and $16.5 million created by the Denmark and Hometown acquisitions, respectively, have also created an increase in amortization of intangible assets expense over the last five quarters. Finally, net losses on sales of OREO totaled $0.1 million during the third quarter of 2023 compared to $0.5 million during the prior quarter and no loss during the third quarter of 2022. All losses noted in the current and prior quarter related to operating locations acquired from Hometown and Denmark, as well as one from a previously acquired institution, which were not utilized as operating locations by Bank First. At the start of the second quarter of 2023 Bank First held nine such buildings, but finished the third quarter with only two as a result of these sales.

The current Wisconsin state budget, signed by Governor Evers on July 5, 2023, included a provision offering an income tax exclusion on income earned from commercial loans of $5 million or less, originated for business or agricultural purposes to borrowers who reside or are located in the state of Wisconsin. This exclusion is retroactive to January 1, 2023. As a result of this provision, Bank First reversed $2.4 million in income tax expense which had been recorded during the first two quarters of 2023. Also as a result of this provision, Bank First's lower anticipated future effective tax rate required an allowance to be made against the Bank's deferred tax asset, which increased income tax expense by $2.9 million. These two entries netted to a one-time $0.5 million increase to income tax expense for the third quarter of 2023.

Balance Sheet
Total assets were $4.09 billion at September 30, 2023, a $427.1 million increase from December 31, 2022, and a $446.8 million increase from September 30, 2022. The preliminary fair value of assets acquired in the Hometown acquisition during the first quarter of 2023 totaled approximately $614.4 million.

Total loans were $3.36 billion at September 30, 2023, up $416.6 million from December 31, 2022, and up $496.3 million from September 30, 2022. Loans grew 5.0% on an annualized basis during the third quarter of 2023.

Total deposits, nearly all of which remain core deposits, were $3.40 billion at September 30, 2023, up $338.1 million from December 31, 2022, and up $260.1 million from September 30, 2022. As mentioned earlier in this release, noninterest-bearing demand deposits comprised 32.1% of the Bank's total core deposits at September 30, 2023, compared to 31.1% and 31.3% at December 31 and September 30, 2022, respectively.

Asset Quality
Nonperforming assets at September 30, 2023 remained negligible, totaling $5.2 million compared to $6.7 million and $6.2 million at the end of the fourth and third quarters of 2022, respectively. Nonperforming assets to total assets ended the third quarter of 2023 at 0.13%, down from 0.18% at the end of the fourth and third quarters of 2022. Nonperforming assets at September 30, 2023 included two properties valued at $1.8 million that were previously operating branch locations of acquired institutions which are no longer part of the Bank's branch network. These properties have all been listed for sale.

Capital Position
Stockholders' equity totaled $577.3 million at September 30, 2023, an increase of $124.2 million from the end of 2022 and $137.9 million from September 30, 2022. The acquisition of Hometown during the first quarter of 2023 increased total stockholders' equity by $115.1 million. Bank First's tangible common equity (non-GAAP) increased by $47.6 million and $63.6 million during the first nine months of 2023 and trailing twelve months, respectively. The Bank's book value per common share totaled $55.62 at September 30, 2023 compared to $50.22 at December 31, 2022 and $48.67 at September 30, 2022. Tangible book value per common share (non-GAAP) totaled $36.00 at September 30, 2023 compared to $36.14 at December 31, 2022 and $34.34 at September 30, 2022.

Dividend Declaration
Bank First's Board of Directors approved a quarterly cash dividend of $0.30 per common share, payable on January 10, 2024, to shareholders of record as of December 27, 2023. This dividend represents a 20.0% increase over the dividend declared one year earlier.

Subsequent Transactions
The Bank sold 100% of its member interest in UFS, LLC in a transaction which closed on October 1, 2023. This transaction resulted in proceeds of $52.2 million and a pre-tax gain of $39.3 million which will be realized during the fourth quarter of 2023.

On October 2, 2023, the Bank repaid $11.5 million in subordinated debt owed to three financial institutions. Interest expense related to this debt, each of which carried an interest rate of 9.0%, totaled over $1.0 million annually.

Bank First Corporation provides financial services through its subsidiary, Bank First, N.A., which was incorporated in 1894. Bank First offers loan, deposit and treasury management products at each of its 26 banking locations in Wisconsin. The Bank has grown through both acquisitions and de novo branch expansion. The Bank employs approximately 385 full-time equivalent staff and has assets of approximately $4.1 billion. Insurance services are available through our bond with Ansay & Associates, LLC. Trust, investment advisory and other financial services are offered through the Bank's partnership with Legacy Private Trust and an alliance with Morgan Stanley. Prior to October 1, 2023, the Bank was a co-owner of a bank technology outfitter, UFS, LLC, which provides digital, core, cybersecurity, managed information technology and private cloud services. Further information about Bank First Corporation is available by clicking on the Shareholder Services tab at www.bankfirst.com.

For further information, contact:
Kevin M LeMahieu, Chief Financial Officer
Phone: (920) 652-3200 / klemahieu@bankfirst.com

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SOURCE Bank First Corporation