Bank First Announces Net Income for the Third Quarter of 2022

• Successfully closed acquisition of Denmark Bancshares, Inc. during the quarter impacting quarterly results and period-end balances
• Net income of $10.5 and $32.4 million for the three and nine months ended September 30, 2022, respectively
• Earnings per common share of $1.26 and $4.15 for the three and nine months ended September 30, 2022, respectively
• Quarterly cash dividend of $0.25 per share declared, matching the prior quarter and a 13.6% increase from the prior-year third quarter

MANITOWOC, Wis., Oct. 18, 2022 /PRNewswire/ -- Bank First Corporation (NASDAQ: BFC) ("Bank First" or the "Bank"), the holding company for Bank First, N.A., reported net income of $10.5 million, or $1.26 per share, for the third quarter of 2022, compared with net income of $11.2 million, or $1.46 per share, for the prior-year third quarter. For the nine months ended September 30, 2022, Bank First earned $32.4 million, or $4.15 per share, compared to $34.3 million, or $4.45 per share for the same period in 2021. Pre-tax expenses related to the Bank's acquisition of Denmark Bancshares, Inc. ("Denmark") and planned acquisition of Hometown Bancorp, Ltd. totaled $4.6 million during the third quarter of 2022, reducing after-tax earnings per share by approximately $0.43. Year-to-date these expenses have reduced after-tax earnings per share by $0.57.

Operating Results
Net interest income ("NII") during the third quarter of 2022 was $27.7 million, up $4.2 million from the previous quarter and up $4.8 million from the third quarter of 2021. Interest income on loans originated through the Small Business Administration's Paycheck Protection Program ("PPP") totaled $0.1 million during the third quarter of 2022, compared to $0.4 million during the previous quarter and $2.3 million during the third quarter of 2021.

Purchase accounting entries, resulting from our acquisition of Denmark during the third quarter of 2022, as well as acquisitions of other institutions over the last several years, increased NII during the third quarter of 2022 by $0.7 million, or $0.07 per share after tax, compared to $0.4 million and $0.3 million, or $0.04 and $0.03 per share after tax, for the previous quarter and third quarter of 2021, respectively. For the first nine months of 2022 and 2021 the impact of these purchase accounting entries increased NII by $1.4 million, or $0.13 per share after tax, and $1.2 million, or $0.12 per share after tax, respectively.

Net interest margin ("NIM") was 3.63% for the third quarter of 2022, compared to 3.21% for the previous quarter and 3.47% for the third quarter of 2021. Purchase accounting entries added 0.10%, 0.05% and 0.04% to NIM for each of these periods, respectively.

During much of the first half of 2022 the Bank engaged in a strategy to enhance NII, utilizing $300.0 million in short-term borrowings from the Federal Home Loan Bank and investing these funds in short-term, liquid, risk-free, interest-earning assets. This strategy was discontinued during the third quarter of 2022 contributing approximately 0.27% to the increase in NIM quarter-over-quarter.

Bank First did not record a provision for loan losses during the third quarter of 2022, compared to a provision of $0.5 million during the previous quarter and $0.7 million during the third quarter of 2021. Provision expense was $1.7 million for the first nine months of 2022 compared to $2.5 million for the same period during 2021. Recoveries of previously charged-off loans exceeded currently charged-off loans by $0.3 million during the third quarter of 2022 and $1.0 million through the first nine months of 2022. These net recoveries along with continued strong asset quality metrics in the Bank's loan portfolio led to management's decision that there was not a need for provision expense during the third quarter of 2022.

Noninterest income was $5.2 million for the third quarter of 2022, compared to $5.6 million during the previous quarter and $5.0 million for the third quarter of 2021. As noted in recent quarters, noninterest income for the Bank during 2022 has been negatively impacted by an industry-wide slowdown in residential mortgage lending, leading to a decline in gains on sales of mortgage loans to the secondary market of $0.9 million in the third quarter of 2022 compared to the prior-year third quarter. Through the first nine months of 2022, these gains were $4.9 million less than the first nine months of 2021. Offsetting these declines, the Bank experienced a $1.1 million increase in loan servicing income during the third quarter of 2022 compared to the prior-year third quarter and an increase of $2.6 million through the first nine months of 2022 compared to the first nine months of 2021. These increases resulted from a combination of higher overall balances of sold-but-serviced loans and increased valuations of mortgage servicing rights on the Bank's balance sheet. The Bank's acquisition of Denmark included approximately $159.5 million in loans sold-but-serviced, bringing the Bank's total sold-but-serviced loan portfolio to approximately $873.4 million.

Noninterest expense was $18.9 million in the third quarter of 2022, compared to $13.2 million during the previous quarter and $12.5 million during the third quarter of 2021. As noted earlier, the elevated level of noninterest expense during the third quarter of 2022 was primarily a result of one-time acquisition expenses. To a lesser extent, added scale for approximately half of the third quarter of 2022 resulting from the Denmark acquisition and inflationary pressures also increased noninterest expense. Personnel expense for the third quarter of 2022 was $3.8 million higher than the prior quarter and prior-year third quarter, primarily the result of $3.0 million in one-time severance and employment agreement payments resulting from the Denmark transaction. Data processing expense, which included $0.1 million in expenses during the third quarter of 2022 directly linked to acquisitions, was $0.1 million higher than the prior quarter and $0.3 million higher than the prior-year third quarter. Outside services fees, which included $1.5 million in expenses during the third quarter of 2022 directly linked to acquisitions, was $1.2 million higher than the prior quarter (which also included $0.4 million in expenses directly linked to acquisitions) and $1.8 million higher than the prior-year third quarter. Finally, amortization expense related to core deposit intangibles on the Bank's balance sheet increased $0.5 million from the prior quarter and $0.4 million from the prior-year third quarter. The acquisition of Denmark created a core deposit intangible of approximately $15.1 million (3.1% of core deposits acquired). Amortization of this core deposit intangible, which began during the third quarter of 2022, added $0.5 million in amortization expense for the quarter.

Balance Sheet
Total assets were $3.64 billion at September 30, 2022, a $703.2 million increase from December 31, 2021, and up $794.1 million from September 30, 2021. The preliminary fair value of assets acquired in the Denmark acquisition during the third quarter of 2022 totaled approximately $687.5 million.

Total loans were $2.86 billion at September 30, 2022, up $623.8 million from December 31, 2021, and up $650.4 million from June 30, 2021. Excluding the impact of PPP repayments or forgiveness as well as approximately $458.1 million in loans acquired from Denmark as of September 30, 2022, loans grew by 12.2% over the trailing twelve months. Annualized loan growth during the third quarter of 2022 and first nine months of 2022, also excluding PPP activity and acquired loans from Denmark, amounted to 4.8% and 12.5%, respectively. The Federal Reserve Board has made several significant increases to the effective Federal Funds rate during 2022, causing significant volatility in financial markets and generally an increasing overall rate environment. Competitors in the Bank's markets have been slow to raise loan offering rates with many remaining at or near the US Treasury yield curve. Management has elected to raise loan offering rates more proportionate to the overall rising yield curve while reserving the most aggressive rate offerings for customers who maintain their full banking relationship with Bank First. This decision is intended to conserve the Bank's liquidity until market competition better aligns with recent rate environment movements. Management anticipates that year-to-date and anticipated future rate increases by the Federal Reserve Board will minimize the impact of this decision on the Bank's overall NII and NIM.

Total deposits, nearly all of which remain core deposits, were $3.14 billion at September 30, 2022, up $609.8 million from December 31, 2021, and up $665.9 million from September 30, 2021. The preliminary fair value of deposits acquired in the Denmark acquisition totaled $606.5 million. Noninterest-bearing demand deposits comprised 31.3% of the Bank's total core deposits at September 30, 2022, compared to 32.1% at September 30, 2021. The high-quality deposit portfolio mix acquired from Denmark allowed this critical component of the Bank's profitability to remain strong subsequent to that transaction.

Asset Quality
Nonperforming assets at September 30, 2022, totaled $6.2 million, down $1.6 million and $5.4 million from the end of the fourth and third quarters of 2021, respectively. Nonperforming assets to total assets ended the third quarter of 2022 at 0.18%, down from 0.28% and 0.42% at the end of the fourth and third quarters of 2021, respectively. Nonperforming assets at September 30, 2022, include $1.4 million in properties acquired from Denmark which will not be utilized by the Bank and have been listed for sale.

Capital Position
Stockholders' equity totaled $439.4 million at September 30, 2022, an increase of $116.8 million from the end of 2021 and an increase of $124.2 million from September 30, 2021. Interest rate movements during the first nine months of 2022 impacted the value of investments in the Bank's available-for-sale investment portfolio, creating a loss in other comprehensive income which reduced stockholders' equity by $6.7 million during the third quarter of 2022 and $22.3 million year-to-date. Dividends totaling $5.6 million and share repurchases totaling $13.8 million further reduced capital through the first nine months of 2022. Strong earnings served to partially offset these items, increasing capital by $32.4 million. Finally, the acquisition of Denmark increased total stockholders' equity by $125.3 million. Tangible book value increased by $46.8 million through the first nine months of 2022 and $54.5 million for the trailing twelve months ending September 30, 2022. Tangible book value per common share outstanding totaled $34.34 at September 30, 2022 compared to $34.56 and $33.44 at December 31 and September 30, 2021, respectively.

Dividend Declaration
Bank First's Board of Directors approved a quarterly cash dividend of $0.25 per common share, payable on January 4, 2023, to shareholders of record as of December 21, 2022. This dividend matches the previous quarter's dividend and represents a 13.6% increase over the dividend declared one year earlier.

Bank First Corporation provides financial services through its subsidiary, Bank First, 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 company employs approximately 335 full-time equivalent staff and has assets of approximately $3.6 billion. Insurance services are available through its 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. The bank is a co-owner of a bank technology outfitter, UFS, LLC, which provides digital, core, cybersecurity, managed IT, and 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