PART I – FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis of Bank First Corporation's financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements of Bank First Corporation, including balance sheets, income statements, and cash flows, with detailed notes on accounting policies and recent acquisitions [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of the Company's assets, liabilities, and stockholders' equity at specific points in time | Metric (in thousands) | June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | | :-------------------- | :------------------------ | :-------------------------- | | **Assets** | | | | Cash and cash equivalents | $98,950 | $247,468 | | Loans, net | $3,383,517 | $3,299,365 | | Total Assets | $4,145,820 | $4,221,842 | | **Liabilities** | | | | Total deposits | $3,399,941 | $3,432,920 | | Notes payable | $90,321 | $35,270 | | Total Liabilities | $3,531,241 | $3,602,044 | | **Stockholders' Equity** | | | | Total Stockholders' Equity | $614,579 | $619,798 | - Total assets decreased by **$76.0 million** (1.8%) from **$4.22 billion** at December 31, 2023, to **$4.15 billion** at June 30, 2024, primarily due to a significant decrease in cash and cash equivalents, partially offset by an increase in net loans[5](index=5&type=chunk)[133](index=133&type=chunk) - Cash and cash equivalents declined by **$148.5 million**, from **$247.5 million** at December 31, 2023, to **$99.0 million** at June 30, 2024, mainly due to investments in the loan portfolio and reductions in deposits and securities sold under repurchase agreements[5](index=5&type=chunk)[133](index=133&type=chunk) - Net loans increased by **$84.2 million**, reaching **$3.38 billion** at June 30, 2024, up from **$3.30 billion** at December 31, 2023[5](index=5&type=chunk)[134](index=134&type=chunk) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) This statement reports the Company's revenues, expenses, and net income over specific periods, reflecting operational profitability | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest income | $49,347 | $45,929 | $98,619 | $86,831 | | Total interest expense | $16,340 | $11,657 | $32,263 | $20,325 | | Net interest income | $33,007 | $34,272 | $66,356 | $66,506 | | Provision for credit losses | $0 | $0 | $200 | $4,182 | | Total noninterest income | $5,877 | $4,554 | $10,274 | $10,403 | | Total noninterest expense | $19,057 | $19,946 | $39,381 | $39,610 | | Net Income | $16,059 | $14,132 | $31,471 | $24,812 | | Earnings per share - basic | $1.59 | $1.37 | $3.10 | $2.46 | - Net income for the three months ended June 30, 2024, increased by **$1.9 million** (13.6%) to **$16.1 million** compared to **$14.1 million** in the same period of 2023[7](index=7&type=chunk)[106](index=106&type=chunk) - Net income for the six months ended June 30, 2024, increased by **$6.7 million** (27.0%) to **$31.5 million** compared to **$24.8 million** in the same period of 2023[7](index=7&type=chunk)[117](index=117&type=chunk) - Basic EPS increased to **$1.59** for Q2 2024 from **$1.37** for Q2 2023, and to **$3.10** for H1 2024 from **$2.46** for H1 2023[7](index=7&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents net income and other comprehensive income, providing a complete view of changes in equity from non-owner sources | Metric (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $16,059 | $14,132 | $31,471 | $24,812 | | Total other comprehensive income (loss) | $40 | $(1,782) | $(625) | $628 | | Comprehensive income | $16,099 | $12,350 | $30,846 | $25,440 | - Comprehensive income for the three months ended June 30, 2024, was **$16.1 million**, up from **$12.4 million** in the prior year, driven by positive other comprehensive income compared to a loss in 2023[10](index=10&type=chunk) - For the six months ended June 30, 2024, comprehensive income was **$30.8 million**, compared to **$25.4 million** in the prior year, despite a total other comprehensive loss of **$0.6 million** in 2024 versus a gain of **$0.6 million** in 2023[10](index=10&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement details changes in stockholders' equity, including net income, dividends, and stock repurchases, over a period | Metric (in thousands) | Balance at January 1, 2024 | Net Income | Other Comprehensive Income (Loss) | Purchase of Treasury Stock | Sale of Treasury Stock | Cash Dividends | Amortization of Stock-Based Compensation | Vesting of Restricted Stock Awards | Balance at June 30, 2024 | | :-------------------- | :------------------------- | :--------- | :-------------------------------- | :------------------------- | :--------------------- | :------------- | :--------------------------------------- | :--------------------------------- | :----------------------- | | Total Stockholders' Equity | $619,798 | $31,471 | $(625) | $(30,226) | $120 | $(7,052) | $1,093 | $(2,145) | $614,579 | - Total stockholders' equity decreased by **$5.2 million** (0.8%) from **$619.8 million** at December 31, 2023, to **$614.6 million** at June 30, 2024[14](index=14&type=chunk)[136](index=136&type=chunk) - The decrease was primarily due to **$30.2 million** in common stock repurchases and **$7.1 million** in cash dividends, partially offset by **$31.5 million** in net income and **$1.1 million** in stock-based compensation amortization during the first six months of 2024[14](index=14&type=chunk)[136](index=136&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement reports cash inflows and outflows from operating, investing, and financing activities, showing liquidity changes | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $16,263 | $15,163 | | Net cash provided by (used in) investing activities | $(69,819) | $221,759 | | Net cash used in financing activities | $(94,962) | $(244,947) | | Net decrease in cash and cash equivalents | $(148,518) | $(8,025) | | Cash and cash equivalents at end of period | $98,950 | $111,326 | - Net cash provided by operating activities increased to **$16.3 million** for the six months ended June 30, 2024, from **$15.2 million** in the prior year[16](index=16&type=chunk) - Net cash used in investing activities was **$69.8 million** for the six months ended June 30, 2024, a significant change from **$221.8 million** provided in the prior year, primarily due to increased net loan growth and reduced proceeds from securities sales[16](index=16&type=chunk) - Net cash used in financing activities decreased to **$95.0 million** for the six months ended June 30, 2024, from **$244.9 million** in the prior year, mainly due to a smaller net decrease in deposits and higher proceeds from notes payable[19](index=19&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the unaudited consolidated financial statements [NOTE 1 – BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note outlines the preparation of interim financial statements under GAAP and discusses the impact of recently issued accounting standards - Interim unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information, with certain information and footnote disclosures omitted or abbreviated[22](index=22&type=chunk) - No material changes or developments occurred regarding critical accounting policies and estimates, including accounting for business combinations, ACL-Loans, and deferred tax assets/liabilities[23](index=23&type=chunk)[24](index=24&type=chunk) - Recently issued accounting standards (ASU 2020-04, ASU 2023-06, ASU 2023-07, ASU 2023-09) are not anticipated to have a significant impact on the Company's financial statements, with ASU 2023-07 on segment reporting effective for annual periods beginning after December 15, 2023, and ASU 2023-09 on income tax disclosures effective after December 15, 2024[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) [NOTE 2 – ACQUISITIONS](index=10&type=section&id=NOTE%202%20%E2%80%93%20ACQUISITIONS) This note details the Company's merger with Hometown Bancorp, Ltd. for **$130.5 million**, resulting in **$64.9 million** in goodwill - On February 10, 2023, the Company completed a merger with Hometown Bancorp, Ltd. for approximately **$130.5 million**[29](index=29&type=chunk) - Merger consideration included **1,450,272 shares** of Company common stock (valued at **$115.1 million**) and **$15.4 million** in cash[30](index=30&type=chunk) | Acquired/Assumed Item (in thousands) | Fair Value as Recorded by Company | | :----------------------------------- | :-------------------------------- | | Total assets acquired | $615,105 | | Total liabilities assumed | $549,564 | | Goodwill | $64,881 | [NOTE 3 – EARNINGS PER SHARE](index=11&type=section&id=NOTE%203%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note explains the two-class method for calculating basic and diluted earnings per share, including participating securities - The two-class method is used for basic and diluted earnings per share calculations, allocating earnings between common shareholders and participating securities (restricted stock awards)[35](index=35&type=chunk)[37](index=37&type=chunk) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $16,059 | $14,132 | $31,471 | $24,812 | | Basic EPS | $1.59 | $1.37 | $3.10 | $2.46 | | Diluted EPS | $1.59 | $1.37 | $3.10 | $2.46 | [NOTE 4 – SECURITIES](index=12&type=section&id=NOTE%204%20%E2%80%93%20SECURITIES) This note summarizes available-for-sale and held-to-maturity securities, their fair values, and unrealized gains/losses, attributing losses to interest rate changes | Security Type (in thousands) | June 30, 2024 (Fair Value) | December 31, 2023 (Fair Value) | | :--------------------------- | :------------------------- | :----------------------------- | | Securities available for sale | $127,977 | $142,197 | | Securities held to maturity | $109,805 | $103,626 | | Unrealized Losses (in thousands) | June 30, 2024 | December 31, 2023 | | :------------------------------- | :------------ | :---------------- | | AFS Securities (Gross Unrealized Losses) | $(12,879) | $(12,207) | | HTM Securities (Gross Unrealized Losses) | $(1,471) | $(1,070) | - No allowance for credit losses has been recognized on AFS securities in an unrealized loss position, as the Company believes these are not credit impaired and unrealized losses are due to interest rate changes, not credit deterioration[41](index=41&type=chunk) - Held-to-maturity securities have zero expected credit losses, with U.S. Treasury securities backed by the U.S. Government[42](index=42&type=chunk) [NOTE 5 – LOANS, ALLOWANCE FOR CREDIT LOSSES, AND CREDIT QUALITY](index=14&type=section&id=NOTE%205%20%E2%80%93%20LOANS,%20ALLOWANCE%20FOR%20CREDIT%20LOSSES,%20AND%20CREDIT%20QUALITY) This note details the loan portfolio, ACL-Loans, and credit quality, noting an increase in non-accrual loans due to an acquired customer relationship | Loan Type (in thousands) | June 30, 2024 | December 31, 2023 | | :----------------------- | :------------ | :---------------- | | Commercial/industrial | $507,895 | $488,498 | | Commercial real estate - owner occupied | $921,204 | $893,977 | | Commercial real estate - non-owner occupied | $472,392 | $473,829 | | Multi-family | $333,660 | $332,959 | | Construction and development | $230,791 | $201,823 | | Residential 1-4 family | $896,957 | $888,412 | | Consumer | $52,946 | $50,741 | | Other | $14,795 | $14,980 | | Subtotals | $3,430,640 | $3,345,219 | | ACL - Loans | $(45,118) | $(43,609) | | Loans, net | $3,383,517 | $3,299,365 | | ACL - Loans Activity (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Beginning Balance | $43,609 | $22,680 | | Provision for credit losses | $700 | $4,092 | | Net recoveries | $809 | $131 | | Ending Balance | $45,118 | $43,409 | - Non-accrual loans increased to **$7.3 million** at June 30, 2024, from **$5.7 million** at December 31, 2023, primarily due to one customer relationship acquired from Hometown[52](index=52&type=chunk)[53](index=53&type=chunk)[158](index=158&type=chunk) - Past due loans (90+ days, still accruing) increased to **$3.4 million** at June 30, 2024, from **$0.9 million** at December 31, 2023, mainly in Commercial real estate - owner occupied[52](index=52&type=chunk)[53](index=53&type=chunk) [NOTE 6 – MORTGAGE SERVICING RIGHTS](index=22&type=section&id=NOTE%206%20%E2%80%93%20MORTGAGE%20SERVICING%20RIGHTS) This note describes Mortgage Servicing Rights (MSRs) recognized at fair value, with a balance of **$13.7 million** at June 30, 2024 - MSRs are recognized as separate assets at fair value when loans are sold with servicing retained[63](index=63&type=chunk) | MSR Metric (in thousands) | Six Months Ended June 30, 2024 | Year Ended December 31, 2023 | | :------------------------ | :----------------------------- | :--------------------------- | | Fair value at beginning of period | $13,668 | $9,582 | | Servicing asset additions | $488 | $879 | | Loan payments and payoffs | $(819) | $(1,624) | | Changes in valuation inputs and assumptions | $357 | $1,140 | | Fair value at end of period | $13,694 | $13,668 | - Primary economic assumptions for MSR valuation include constant prepayment speeds of **7.8 months** (June 30, 2024) and **7.5 months** (December 31, 2023), and a discount rate of **10.19%** for both periods[65](index=65&type=chunk) [NOTE 7 – NOTES PAYABLE](index=22&type=section&id=NOTE%207%20%E2%80%93%20NOTES%20PAYABLE) This note details FHLB advances, which significantly increased to **$90.5 million** to support loan growth, with **$737.1 million** in additional availability - FHLB advances increased by **$55.0 million** to **$90.5 million** at June 30, 2024, from **$35.5 million** at December 31, 2023, to provide liquidity for loan growth[66](index=66&type=chunk)[135](index=135&type=chunk) | Maturity | Rate (June 30, 2024) | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------- | :------------------- | :--------------------------- | :------------------------------- | | 1 year or less | 5.16% | $25,000 | $0 | | 1 to 2 years | 4.02% | $10,000 | $10,000 | | 2 to 3 years | 4.77% | $15,000 | $0 | | 3 to 4 years | 3.91% | $10,000 | $10,000 | | 4 to 5 years | 4.57% | $15,000 | $0 | | Over 5 years | 3.85% | $10,000 | $10,000 | | Total | | $90,508 | $35,508 | - The Company had an additional **$737.1 million** in borrowing availability at the FHLB as of June 30, 2024[68](index=68&type=chunk) [NOTE 8 – SUBORDINATED NOTES AND JUNIOR SUBORDINATED DEBENTURES](index=24&type=section&id=NOTE%208%20%E2%80%93%20SUBORDINATED%20NOTES%20AND%20JUNIOR%20SUBORDINATED%20DEBENTURES) This note covers **$12.0 million** in subordinated notes qualifying as Tier 2 capital and the redemption of junior subordinated debentures - Subordinated notes totaled **$12.0 million** at June 30, 2024, with fixed interest rates (**5.0%** through June 30, 2025, and **5.25%** through August 6, 2027) and qualifying as Tier 2 capital[69](index=69&type=chunk)[70](index=70&type=chunk) - Junior subordinated debentures acquired from Hometown Bancorp, totaling **$4.1 million** (Trust I) and **$8.2 million** (Trust II), were redeemed in December 2023 (Trust II) and January 2024 (Trust I), leading to the dissolution of the trusts[71](index=71&type=chunk)[135](index=135&type=chunk) [NOTE 9 – REGULATORY MATTERS](index=25&type=section&id=NOTE%209%20%E2%80%93%20REGULATORY%20MATTERS) This note confirms the Company and Bank met all regulatory capital adequacy requirements and were classified as 'well capitalized' - The Company and Bank met all capital adequacy requirements, including the **2.5%** conservation buffer, as of June 30, 2024, and December 31, 2023[73](index=73&type=chunk) | Capital Ratio | Company (June 30, 2024) | Bank (June 30, 2024) | Company (December 31, 2023) | Bank (December 31, 2023) | | :------------ | :---------------------- | :------------------- | :-------------------------- | :----------------------- | | Total capital (to risk-weighted assets) | 13.66% | 12.32% | 13.99% | 12.91% | | Tier 1 capital (to risk-weighted assets) | 12.17% | 11.17% | 12.65% | 11.92% | | Common Equity Tier 1 capital (to risk-weighted assets) | 12.17% | 11.17% | 12.54% | 11.92% | | Tier 1 capital (to average assets) | 10.98% | 10.07% | 11.05% | 10.40% | - The Bank was well capitalized at June 30, 2024, exceeding the minimum requirements for CET1 (**6.5%**), Tier 1 (**8.0%**), Total Capital (**10.0%**), and Leverage (**5.0%**) ratios[193](index=193&type=chunk) [NOTE 10 – COMMITMENTS AND CONTINGENCIES](index=27&type=section&id=NOTE%2010%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines off-balance sheet financial instruments, with total commitments of **$797.6 million** at June 30, 2024 - Notional amount of rate-lock commitments increased to **$13.2 million** at June 30, 2024, from **$5.9 million** at December 31, 2023[75](index=75&type=chunk) | Commitment Type (in thousands) | June 30, 2024 (Notional Amount) | December 31, 2023 (Notional Amount) | | :----------------------------- | :------------------------------ | :---------------------------------- | | Commitments to extend credit: Fixed | $59,958 | $92,113 | | Commitments to extend credit: Variable | $704,141 | $707,285 | | Credit card arrangements | $22,273 | $21,213 | | Letters of credit | $11,265 | $9,785 | | Total commitments | $797,637 | $830,396 | [NOTE 11 – FAIR VALUE MEASUREMENTS](index=27&type=section&id=NOTE%2011%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note describes fair value measurements using a three-level hierarchy, primarily Level 2 for recurring assets and Level 3 for non-recurring assets - Fair value measurements are categorized into a three-level hierarchy (Level 1: quoted prices in active markets; Level 2: significant other observable inputs; Level 3: significant unobservable inputs)[77](index=77&type=chunk)[78](index=78&type=chunk) | Recurring Fair Value Assets (in thousands) | June 30, 2024 (Level 2) | December 31, 2023 (Level 2) | | :--------------------------------------- | :---------------------- | :-------------------------- | | Securities available for sale | $127,977 | $142,197 | | Mortgage servicing rights | $13,694 | $13,668 | | Non-Recurring Fair Value Assets (in thousands) | June 30, 2024 (Level 3) | December 31, 2023 (Level 3) | | :--------------------------------------------- | :---------------------- | :-------------------------- | | OREO | $712 | $2,573 | | Loans individually evaluated, net of reserve | $9,653 | $9,242 | [NOTE 12 – STOCK BASED COMPENSATION](index=30&type=section&id=NOTE%2012%20%E2%80%93%20STOCK%20BASED%20COMPENSATION) This note details stock-based compensation expense of **$1.1 million** for H1 2024, with **$3.0 million** unrecognized cost remaining - Compensation expense for restricted stock awards was **$0.5 million** for Q2 2024 (vs. **$0.6 million** in Q2 2023) and **$1.1 million** for H1 2024 (vs. **$1.0 million** in H1 2023)[88](index=88&type=chunk) - As of June 30, 2024, **$3.0 million** of unrecognized compensation cost related to non-vested restricted stock awards is expected to be recognized over a weighted average period of **1.66 years**[89](index=89&type=chunk) | Restricted Stock Activity | Outstanding at beginning of period | Granted | Vested | Forfeited or cancelled | Outstanding at end of period | | :------------------------ | :--------------------------------- | :------ | :----- | :--------------------- | :--------------------------- | | Shares (June 30, 2024) | 58,196 | 24,581 | (30,143) | 0 | 52,634 | | Weighted-Average Grant-Date Fair Value (June 30, 2024) | $72.28 | $85.85 | $71.14 | $0 | $79.27 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Bank First Corporation's financial condition and operational results, covering performance, liquidity, and capital [OVERVIEW](index=31&type=section&id=OVERVIEW) Bank First Corporation operates as a full-service financial institution in Wisconsin, with primary income from loans and investments, and recently merged with Hometown Bancorp - Bank First Corporation operates as a full-service financial institution in Wisconsin with **twenty-six banking locations**[94](index=94&type=chunk) - Primary income is derived from interest on loans and investments, with deposits as the main funding source. Net interest income is maximized by managing asset/liability volumes and rates[95](index=95&type=chunk) - The Company completed its merger with Hometown Bancorp, Ltd. on February 10, 2023, expanding its presence in Fond du Lac, Columbia, Dane, and Waushara counties[96](index=96&type=chunk) [SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA](index=33&type=section&id=SELECTED%20HISTORICAL%20CONSOLIDATED%20FINANCIAL%20DATA) This section provides a historical snapshot of key consolidated financial data, including results of operations, balances, and ratios | Metric (in thousands, except per share data) | 6/30/2024 | 12/31/2023 | 6/30/2023 | | :------------------------------------------- | :-------- | :--------- | :-------- | | Net income | $16,059 | $34,898 | $14,132 | | Earnings per common share - basic | $1.59 | $3.39 | $1.37 | | Total assets | $4,145,820 | $4,221,842 | $4,092,071 | | Total liabilities | $3,531,241 | $3,602,044 | $3,521,199 | | Stockholders' equity | $614,579 | $619,798 | $570,872 | | Return on average assets | 1.58 % | 3.34 % | 1.38 % | | Net interest margin, taxable equivalent | 3.63 % | 3.53 % | 3.77 % | | Nonperforming loans to total loans | 0.31 % | 0.20 % | 0.15 % | [GAAP RECONCILIATION AND MANAGEMENT EXPLANATION OF NON-GAAP FINANCIAL MEASURES](index=34&type=section&id=GAAP%20RECONCILIATION%20AND%20MANAGEMENT%20EXPLANATION%20OF%20NON-GAAP%20FINANCIAL%20MEASURES) This section defines and reconciles non-GAAP financial measures like tangible book value and tangible equity, excluding intangibles for capital comparison - Non-GAAP financial measures include tangible book value per common share and tangible equity to tangible assets[101](index=101&type=chunk) - These non-GAAP measures exclude goodwill and other intangibles to facilitate comparison of capital adequacy among companies[104](index=104&type=chunk) | Metric (in thousands, except per share data) | 6/30/2024 | 12/31/2023 | | :------------------------------------------- | :-------- | :--------- | | Total assets | $4,145,820 | $4,221,842 | | Goodwill | $(175,106) | $(175,106) | | Core deposit intangible, net | $(24,021) | $(26,996) | | Tangible assets | $3,946,693 | $4,019,740 | | Total stockholders' equity | $614,579 | $619,798 | | Tangible common equity | $415,452 | $417,696 | | Book value per common share | $61.27 | $59.80 | | Tangible book value per common share | $41.42 | $40.30 | | Tangible common equity to tangible assets | 10.53 % | 10.39 % | [RESULTS OF OPERATIONS](index=35&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the Company's financial performance for Q2 and H1 2024, detailing changes in net income, interest income/expense, and noninterest items [Results of Operations for the Three Months Ended June 30, 2024 and June 30, 2023](index=35&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030,%202024%20and%20June%2030,%202023) Net income increased by **$1.9 million** to **$16.1 million**, driven by MSR adjustments and OREO gains, despite lower net interest income due to higher funding costs - Net income increased by **$1.9 million** to **$16.1 million** for Q2 2024, compared to **$14.1 million** for Q2 2023, partly due to positive MSR valuation adjustments and OREO gains[106](index=106&type=chunk) - Net interest income decreased by **$1.3 million** to **$33.0 million** for Q2 2024, primarily due to increased cost of funding liabilities, despite a **7.4%** increase in total interest income to **$49.3 million**[108](index=108&type=chunk)[109](index=109&type=chunk) - Interest expense increased by **$4.7 million** (**40.2%**) to **$16.3 million** for Q2 2024, driven by higher crediting interest rates on interest-bearing liabilities[110](index=110&type=chunk) - Noninterest income increased by **$1.3 million** to **$5.9 million** for Q2 2024, with service charges up **19.0%** and positive MSR valuation adjustments of **$0.3 million** (compared to a **$0.5 million** negative adjustment in Q2 2023)[114](index=114&type=chunk) - Noninterest expense decreased by **$0.9 million** to **$19.1 million** for Q2 2024, benefiting from net gains on OREO sales (**$0.5 million**) compared to losses in Q2 2023, and well-managed operating costs[115](index=115&type=chunk) - Provision for income taxes decreased to **$3.8 million** for Q2 2024 (**19.0%** effective tax rate) from **$4.7 million** for Q2 2023 (**25.1%** effective tax rate), due to a Wisconsin state budget provision exempting certain commercial loan income from state tax[116](index=116&type=chunk) [Results of Operations for the Six months Ended June 30, 2024 and June 30, 2023](index=39&type=section&id=Results%20of%20Operations%20for%20the%20Six%20months%20Ended%20June%2030,%202024%20and%20June%2030,%202023) Net income increased by **$6.7 million** to **$31.5 million**, driven by the Hometown acquisition and lower expenses, while net interest income remained stable - Net income increased by **$6.7 million** to **$31.5 million** for H1 2024, compared to **$24.8 million** for H1 2023, benefiting from the Hometown acquisition and lower acquisition expenses in 2024[117](index=117&type=chunk) - Net interest income slightly decreased by **$0.1 million** to **$66.4 million** for H1 2024, as increases in rates paid on interest-bearing liabilities outpaced increases in rates earned on interest-earning assets[119](index=119&type=chunk) - Total interest income increased by **$11.8 million** (**13.6%**) to **$98.6 million** for H1 2024, driven by a **0.48%** increase in average interest rates earned on interest-earning assets[120](index=120&type=chunk) - Interest expense increased by **$11.9 million** (**58.7%**) to **$32.3 million** for H1 2024, due to elevated crediting rates on interest-bearing liabilities, with the average cost of interest-bearing deposits rising to **2.57%** from **1.55%**[121](index=121&type=chunk) - Provision for credit losses was **$0.2 million** for H1 2024, significantly lower than **$4.2 million** for H1 2023, which included provisions related to Hometown acquired loans[123](index=123&type=chunk) - Noninterest income decreased slightly by **$0.1 million** to **$10.3 million** for H1 2024. Increases in service charges and Ansay income were offset by the absence of UFS income (due to its sale in October 2023)[124](index=124&type=chunk) - Noninterest expense decreased by **$0.2 million** to **$39.4 million** for H1 2024, benefiting from gains on OREO sales (**$0.5 million**) and lower acquisition-related expenses compared to H1 2023[126](index=126&type=chunk) - Provision for income taxes decreased to **$5.6 million** for H1 2024 (**15.1%** effective tax rate) from **$8.3 million** for H1 2023 (**25.1%** effective tax rate), primarily due to a Wisconsin state tax exemption on certain commercial loans and a **$1.3 million** reduction in estimated 2023 tax liability[127](index=127&type=chunk) [NET INTEREST MARGIN](index=44&type=section&id=NET%20INTEREST%20MARGIN) This section analyzes the Company's net interest margin (NIM) and rate/volume changes, noting a decrease to **3.62%** due to higher funding costs | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----- | :----------------------------- | :----------------------------- | | Earning asset yield | 5.37 % | 4.89 % | | Cost of funds | 2.61 % | 1.72 % | | Net interest spread (3) | 2.76 % | 3.18 % | | Net interest margin (4) | 3.62 % | 3.76 % | - The tax-equivalent net interest margin decreased by **0.14%** to **3.62%** for the six months ended June 30, 2024, from **3.76%** in the same period of 2023[119](index=119&type=chunk) - The decrease in NIM was primarily due to increases in rates paid on interest-bearing liabilities (up **0.89%**) outpacing increases in rates earned on interest-earning assets (up **0.48%**) over the last twelve months[119](index=119&type=chunk) | Change in Net Interest Income (in thousands) | Six Months Ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | | Due to Volume | $4,952 | | Due to Rate | $(5,601) | | Total Change | $(649) | [CHANGES IN FINANCIAL CONDITION](index=46&type=section&id=CHANGES%20IN%20FINANCIAL%20CONDITION) This section details balance sheet changes, including a **$76.0 million** asset decrease, driven by lower cash and higher loans, and a slight equity reduction [Total Assets](index=46&type=section&id=Total%20Assets) Total assets decreased by **$76.0 million** (1.8%) to **$4.15 billion** at June 30, 2024, from **$4.22 billion** at December 31, 2023 - Total assets decreased by **$76.0 million** (1.8%) to **$4.15 billion** at June 30, 2024, from **$4.22 billion** at December 31, 2023[133](index=133&type=chunk) [Cash and Cash Equivalents](index=46&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and cash equivalents decreased by **$148.5 million** to **$99.0 million**, primarily due to loan portfolio growth and deposit reductions - Cash and cash equivalents decreased by **$148.5 million** to **$99.0 million** at June 30, 2024, from **$247.5 million** at December 31, 2023[133](index=133&type=chunk) - This decline was primarily due to funds invested in loan portfolio growth and a reduction in deposits and securities sold under repurchase agreements[133](index=133&type=chunk) [Investment Securities](index=46&type=section&id=Investment%20Securities) The carrying value of total investment securities decreased by **$6.9 million** to **$238.6 million** at June 30, 2024 - The carrying value of total investment securities decreased by **$6.9 million** to **$238.6 million** at June 30, 2024, from **$245.5 million** at December 31, 2023[133](index=133&type=chunk) [Loans](index=46&type=section&id=Loans) Net loans increased by **$84.2 million**, totaling **$3.38 billion** at June 30, 2024, reflecting continued portfolio growth - Net loans increased by **$84.2 million**, totaling **$3.38 billion** at June 30, 2024, compared to **$3.30 billion** at December 31, 2023[134](index=134&type=chunk) [Deposits](index=47&type=section&id=Deposits) Deposits decreased by **$33.0 million** (1.0%) to **$3.40 billion** at June 30, 2024, reflecting a typical seasonal decline - Deposits decreased by **$33.0 million** (1.0%) to **$3.40 billion** at June 30, 2024, from **$3.43 billion** at December 31, 2023, reflecting a typical seasonal decline in the first half of the year[135](index=135&type=chunk) [Borrowings](index=47&type=section&id=Borrowings) FHLB borrowings increased by **$55.1 million** to **$90.3 million** to support loan growth, while junior subordinated debentures were repaid - FHLB borrowings increased by **$55.1 million** (**156.1%**) to **$90.3 million** at June 30, 2024, from **$35.3 million** at December 31, 2023, to support near-term loan growth[135](index=135&type=chunk) - Subordinated debt remained stable at **$12.0 million**, while a **$4.1 million** junior subordinated debenture (from Hometown acquisition) was repaid in Q1 2024[135](index=135&type=chunk) [Stockholders' Equity](index=48&type=section&id=Stockholders'%20Equity) Total stockholders' equity decreased by **$5.2 million** to **$614.6 million**, primarily due to share repurchases and dividends - Total stockholders' equity decreased by **$5.2 million** (0.8%) to **$614.6 million** at June 30, 2024, from **$619.8 million** at December 31, 2023[136](index=136&type=chunk) - This decrease was due to **$30.2 million** in common stock repurchases and **$7.1 million** in dividends, partially offset by **$31.5 million** in net earnings[136](index=136&type=chunk) [LOANS](index=48&type=section&id=LOANS) The loan portfolio, the Company's largest earning asset, grew by **$85.7 million** to **$3.43 billion**, driven by strong demand in commercial and construction sectors - The loan portfolio is the most significant earning asset, comprising **82.7%** of total assets at June 30, 2024[138](index=138&type=chunk) - Loans increased by **$85.7 million** (**2.6%**) to **$3.43 billion** as of June 30, 2024, driven by demand for new credit[139](index=139&type=chunk) | Loan Category | June 30, 2024 (Amount) | June 30, 2024 (% of Total) | December 31, 2023 (Amount) | December 31, 2023 (% of Total) | | :------------ | :--------------------- | :------------------------- | :------------------------- | :----------------------------- | | Commercial & industrial | $507,406 | 15 % | $487,893 | 15 % | | Commercial real estate | $1,726,254 | 51 % | $1,699,084 | 51 % | | Construction & development | $229,934 | 7 % | $200,835 | 6 % | | Residential 1-4 family | $897,087 | 26 % | $888,639 | 27 % | | Consumer and other | $67,954 | 2 % | $65,933 | 2 % | | Total Loans | $3,428,635 | 100 % | $3,342,974 | 100 % | - Loans to directors, officers, and their associates totaled **$75.7 million** at June 30, 2024, all performing according to original terms[141](index=141&type=chunk) [Commercial and Industrial (C&I)](index=50&type=section&id=Commercial%20and%20Industrial%20(C%26I)) The C&I portfolio totaled **$507.4 million**, representing **15%** of total loans, primarily serving small and middle-market businesses - C&I portfolio totaled **$507.4 million** at June 30, 2024, representing **15%** of total loans[142](index=142&type=chunk) - Customers are small and middle-market businesses across various sectors, with loans typically secured by corporate assets and personal guarantees[142](index=142&type=chunk) [Commercial Real Estate (CRE)](index=50&type=section&id=Commercial%20Real%20Estate%20(CRE)) The CRE loan portfolio totaled **$1.73 billion**, representing **51%** of total loans, with growth primarily in owner-occupied properties - CRE loan portfolio totaled **$1.73 billion** at June 30, 2024, representing **51%** of total loans[143](index=143&type=chunk) - Growth in H1 2024 was primarily in owner-occupied CRE, which management views as an extension of C&I lending[143](index=143&type=chunk) - Loans are secured by various property types, generally for terms up to **ten years** with loan-to-values not exceeding **80%**[144](index=144&type=chunk) [Construction and Development (C&D)](index=50&type=section&id=Construction%20and%20Development%20(C%26D)) The C&D loan portfolio totaled **$229.9 million**, representing **7%** of total loans, typically increasing during the primary construction season - C&D loan portfolio totaled **$229.9 million** at June 30, 2024, representing **7%** of total loans[145](index=145&type=chunk) - C&D loans typically increase through the middle of the year, aligning with the primary construction season[145](index=145&type=chunk) - These short-term loans are for construction/development work and recreational land purchases, with borrowers required to inject equity before disbursements[146](index=146&type=chunk) [Residential 1 – 4 Family](index=51&type=section&id=Residential%201%20%E2%80%93%204%20Family) Residential 1-4 family loans totaled **$897.1 million**, representing **26%** of total loans, with MSRs retained on all secondary market sales - Residential 1-4 family loans totaled **$897.1 million** at June 30, 2024, representing **26%** of total loans[147](index=147&type=chunk) - The Bank offers fixed and adjustable-rate mortgages up to **30 years**, generally underwritten to Fannie Mae guidelines, including 'jumbo' loans[148](index=148&type=chunk) - The Bank does not offer reverse mortgages, negative amortization loans, subprime loans, or Alt-A loans[149](index=149&type=chunk) - Mortgage servicing rights (MSRs) are retained on all loans sold to the secondary market, with a net balance of **$13.7 million** at June 30, 2024[150](index=150&type=chunk) [Consumer Loans](index=51&type=section&id=Consumer%20Loans) The consumer loan portfolio totaled **$53.2 million**, representing **1%** of total loans, carrying greater risk due to reliance on borrower financial stability - Consumer loan portfolio totaled **$53.2 million** at June 30, 2024, representing **1%** of total loans[151](index=151&type=chunk) - Consumer loans carry greater risk due to reliance on borrower financial stability and potential for inadequate collateral repayment[151](index=151&type=chunk) [Other Loans](index=51&type=section&id=Other%20Loans) Other loans totaled **$14.8 million**, primarily consisting of over-drafted depository accounts, securities-backed loans, and loans to nonprofit organizations - Other loans totaled **$14.8 million** at June 30, 2024, primarily consisting of over-drafted depository accounts, securities-backed loans, and loans to nonprofit organizations[152](index=152&type=chunk) [Loan Portfolio Maturities](index=52&type=section&id=Loan%20Portfolio%20Maturities) This table presents the maturity distribution of the loan portfolio, broken down by fixed and floating rate loans | Maturity (in thousands) | Total Loans | Fixed Rate Loans | Floating Rate Loans | | :---------------------- | :---------- | :--------------- | :------------------ | | One Year or Less | $343,683 | $167,155 | $176,528 | | One to Five Years | $1,293,497 | $1,090,891 | $202,606 | | Five to Fifteen Years | $1,082,652 | $612,639 | $470,013 | | Over Fifteen Years | $708,803 | $343,359 | $365,444 | | Total | $3,428,635 | $2,214,044 | $1,214,591 | [NONPERFORMING ASSETS](index=54&type=section&id=NONPERFORMING%20ASSETS) Total nonperforming assets increased to **$11.4 million**, primarily due to one acquired customer relationship, with rigorous monitoring in place - Nonperforming assets (NPAs) consist of nonperforming loans (nonaccrual loans and loans 90+ days past due but still accruing) and foreclosed real estate (OREO)[157](index=157&type=chunk) | Nonperforming Assets (in thousands) | June 30, 2024 | December 31, 2023 | June 30, 2023 | | :---------------------------------- | :------------ | :---------------- | :------------ | | Total nonaccrual loans | $7,283 | $5,662 | $4,600 | | Total loans past due > 90 days, but still accruing | $3,385 | $893 | $601 | | Total nonperforming loans | $10,668 | $6,555 | $5,201 | | Total OREO | $712 | $2,573 | $2,239 | | Total nonperforming assets (NPAs) | $11,380 | $9,128 | $7,440 | - The increase in nonaccrual loans during H1 2024 primarily related to one customer relationship acquired as part of the Hometown acquisition[158](index=158&type=chunk) | Ratios | June 30, 2024 | December 31, 2023 | June 30, 2023 | | :----- | :------------ | :---------------- | :------------ | | Nonaccrual loans to total loans | 0.21 % | 0.17 % | 0.14 % | | NPAs to total assets | 0.27 % | 0.21 % | 0.18 % | | ACL - Loans to nonaccrual loans | 619 % | 770 % | 944 % | | ACL - Loans to total loans | 1.32 % | 1.30 % | 1.31 % | [ALLOWANCE FOR CREDIT LOSSES - LOANS](index=56&type=section&id=ALLOWANCE%20FOR%20CREDIT%20LOSSES%20-%20LOANS) The ACL-Loans was **$45.1 million** (**1.32%** of total loans) at June 30, 2024, remaining consistent due to stable economic conditions - The ACL-Loans was **$45.1 million** (**1.32%** of total loans) at June 30, 2024, consistent with recent quarters due to stable economic conditions and strong asset quality[160](index=160&type=chunk) - Net recoveries totaled **$0.8 million** during the first half of 2024[160](index=160&type=chunk) | ACL - Loans Activity (in thousands) | Six Months Ended June 30, 2024 | Year Ended December 31, 2023 | Six Months Ended June 30, 2023 | | :---------------------------------- | :----------------------------- | :--------------------------- | :----------------------------- | | Balance at beginning of period | $43,609 | $22,680 | $22,680 | | Net loans recovered | $809 | $131 | $131 | | Provision charged to operating expense | $200 | $4,292 | $4,092 | | Transfer from ACL - Unfunded Commitments | $500 | $0 | $0 | | Balance at end of period | $45,118 | $43,609 | $43,409 | | Loan Type (in thousands) | June 30, 2024 (Amount) | June 30, 2024 (% of Loans) | | :----------------------- | :--------------------- | :------------------------- | | Commercial & industrial | $5,755 | 15 % | | Commercial real estate - owner occupied | $13,338 | 27 % | | Commercial real estate - non-owner occupied | $5,639 | 14 % | | Commercial real estate - multi-family | $4,670 | 10 % | | Construction & development | $4,169 | 7 % | | Residential 1-4 family | $10,809 | 26 % | | Consumer | $610 | 1 % | | Other loans | $128 | 0 % | | Total allowance | $45,118 | 100 % | [SOURCES OF FUNDS](index=57&type=section&id=SOURCES%20OF%20FUNDS) This section details funding sources, primarily deposits, which decreased slightly, and FHLB borrowings, which significantly increased to support loan growth [General](index=57&type=section&id=General) Deposits are the primary source of funds, supplemented by FHLB borrowings and correspondent bank lines, along with scheduled payments and fee income - Deposits are the primary source of funds, supplemented by FHLB borrowings and correspondent bank lines[165](index=165&type=chunk) - Additional sources include scheduled payments and prepayments on loans and investment securities, and fee income[165](index=165&type=chunk) [Deposits](index=57&type=section&id=Deposits) Deposit liabilities accounted for **82.0%** of total liabilities and equity, decreasing to **$3.40 billion** with a shift to interest-bearing accounts - Deposit liabilities accounted for approximately **82.0%** of total liabilities and equity at June 30, 2024[166](index=166&type=chunk) - Total deposits decreased to **$3.40 billion** at June 30, 2024, from **$3.43 billion** at December 31, 2023[167](index=167&type=chunk) - There was a shift from noninterest-bearing deposits to interest-bearing deposits due to increased prevailing interest rates[167](index=167&type=chunk) | Deposit Type (in thousands) | Six Months Ended June 30, 2024 (Average) | Six Months Ended June 30, 2024 (% of Total) | | :-------------------------- | :--------------------------------------- | :------------------------------------------ | | Noninterest-bearing demand deposits | $984,490 | 28.8 % | | Interest-bearing checking deposits | $410,955 | 12.0 % | | Savings deposits | $813,963 | 23.8 % | | Money market accounts | $616,236 | 18.0 % | | Certificates of deposit | $597,593 | 17.5 % | | Brokered deposits | $748 | 0.0 % | | Total | $3,423,985 | 100 % | [Borrowings](index=58&type=section&id=Borrowings) FHLB advances increased to **$90.3 million** to support loan growth, while securities sold under repurchase agreements were redeemed - The Company redeemed all securities sold under repurchase agreements during the first quarter of 2024[170](index=170&type=chunk) - FHLB advances outstanding increased to **$90.3 million** at June 30, 2024, from **$35.3 million** at December 31, 2023[171](index=171&type=chunk) | FHLB Borrowings (in thousands) | Six Months Ended June 30, 2024 | Year Ended December 31, 2023 | | :----------------------------- | :----------------------------- | :--------------------------- | | Average daily amount outstanding | $37,035 | $30,697 | | Weighted average interest rate | 4.01 % | 3.92 % | | Borrowing outstanding at period end | $90,321 | $35,270 | - Subordinated notes totaled **$12.0 million** at June 30, 2024, with fixed rates of **5.0%** and **5.25%**, qualifying as Tier 2 capital[173](index=173&type=chunk) - Junior subordinated debentures from the Hometown acquisition were fully redeemed in December 2023 and January 2024[174](index=174&type=chunk) [INVESTMENT SECURITIES](index=61&type=section&id=INVESTMENT%20SECURITIES) The investment portfolio, comprising AFS and HTM securities, totaled **$238.6 million**, with unrealized losses primarily due to interest rate changes - The investment portfolio consists of securities available for sale (AFS) and held to maturity (HTM), managed for liquidity, neutral interest rate-sensitive positions, and adequate investment income[175](index=175&type=chunk) - AFS securities (fair value) totaled **$128.0 million** at June 30, 2024, with gross unrealized losses of **$12.9 million**[176](index=176&type=chunk) - HTM securities (amortized cost) totaled **$110.6 million** at June 30, 2024[177](index=177&type=chunk) - Unrealized losses on debt securities are considered temporary and primarily due to changing interest rates, not credit-related factors. No allowance for credit losses on securities was recognized[182](index=182&type=chunk) | Security Type (in thousands) | June 30, 2024 (Amortized Cost) | June 30, 2024 (Weighted Average Yield) | | :--------------------------- | :----------------------------- | :------------------------------------- | | Available for sale securities | $140,845 | 3.4 % | | Held to maturity securities | $110,648 | 3.9 % | | Total | $251,493 | 3.6 % | [LIQUIDITY AND CAPITAL RESOURCES](index=63&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Liquidity is maintained through investments, deposits, and borrowings, with **$1.73 billion** in additional funding, while capital ratios remain strong - Liquidity is managed through the investment portfolio, deposits, FHLB borrowings, and lines from correspondent banks, with a focus on growing noninterest-bearing deposits[187](index=187&type=chunk) - The Company has **$1.73 billion** in availability from borrowings and brokered deposits for future funding needs[187](index=187&type=chunk) - Total stockholders' equity was **$614.6 million** at June 30, 2024, a slight decrease from **$619.8 million** at December 31, 2023[187](index=187&type=chunk) - Both the Company and Bank met all regulatory capital requirements and were classified as 'well capitalized' at June 30, 2024[193](index=193&type=chunk)[196](index=196&type=chunk) [FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK](index=67&type=section&id=FINANCIAL%20INSTRUMENTS%20WITH%20OFF-BALANCE-SHEET%20RISK) This section describes off-balance-sheet instruments, including unused lines of credit and letters of credit, totaling **$797.6 million** - Off-balance-sheet arrangements include unused lines of credit, standby and direct pay letters of credit, and credit card arrangements[198](index=198&type=chunk) - These instruments involve credit risk and are managed with the same credit policies as on-balance-sheet instruments[198](index=198&type=chunk) | Off-Balance Sheet Commitment (in thousands) | June 30, 2024 (Total) | December 31, 2023 (Total) | | :------------------------------------------ | :-------------------- | :------------------------ | | Unused lines of credit | $764,099 | $799,398 | | Standby and direct pay letters of credit | $11,265 | $9,785 | | Credit card arrangements | $22,273 | $21,213 | | Total commitments | $797,637 | $830,396 | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=68&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses interest rate risk management through gap analysis and simulations, indicating increased sensitivity to rate changes - Market risk primarily arises from interest rate risk inherent in lending, investment, and deposit-taking activities[200](index=200&type=chunk) - The Company manages interest rate risk to minimize adverse impacts on net interest income and capital, using tools like interest rate sensitivity analysis (gap analysis), market value of portfolio equity analysis, and interest rate simulations[201](index=201&type=chunk)[205](index=205&type=chunk) | Change in Interest Rates (in Basis Points) | Percentage Change in Net Interest Income (June 30, 2024) | | :--------------------------------------- | :------------------------------------------------------- | | +400 | (9.0)% | | +300 | (6.3)% | | +200 | (4.2)% | | +100 | (1.9)% | | -100 | (1.4)% | - The increased sensitivity to interest rate changes at June 30, 2024, resulted from management's reconsideration of interest rate betas for loan and deposit products[209](index=209&type=chunk) - Economic Value of Equity analysis as of June 30, 2024, estimated a **0.64%** increase in EVE for an instantaneous **200 basis point** rate increase and a **1.90%** decrease for a **100 basis point** rate decrease[210](index=210&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=70&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2024[212](index=212&type=chunk) - No material changes were made to internal control over financial reporting during the quarter ended June 30, 2024[213](index=213&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=70&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is involved in various litigation, but management believes any resulting liability will not materially affect its financial position - The Company is a party to various litigation in the normal course of business[214](index=214&type=chunk) - Management believes any liability from litigation will not have a material effect on financial position, results of operations, or liquidity[214](index=214&type=chunk) [ITEM 1A. RISK FACTORS](index=70&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes occurred during the quarter ended June 30, 2024, to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - No material changes occurred during the quarter ended June 30, 2024, to the risk factors previously disclosed in the Company's Annual Report on Form 10-K[215](index=215&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=71&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The Company renewed its share repurchase program for up to **$30 million** and repurchased **98,623 shares** in Q2 2024, subject to a **1%** excise tax - The Company renewed its share repurchase program on February 21, 2024, authorizing up to **$30 million** in common stock repurchases until February 20, 2025[217](index=217&type=chunk) | Month (2024) | Total Number of Shares Repurchased | Average Price Paid per Share | | :----------- | :--------------------------------- | :--------------------------- | | April | 35,791 | $79.64 | | May | 40,424 | $81.70 | | June | 22,408 | $80.42 | | Total | 98,623 | $80.59 | - The Inflation Reduction Act of 2022 imposes a new **1%** excise tax on corporate stock repurchases, which applies to the Company[219](index=219&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=71&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities during the reported period - No defaults upon senior securities occurred[220](index=220&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=71&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) There are no mine safety disclosures to report - No mine safety disclosures[220](index=220&type=chunk) [ITEM 5. OTHER INFORMATION](index=71&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No Rule 10b5-1 trading arrangements were adopted, terminated, or modified by directors and officers during Q2 2024 - No Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements were adopted, terminated, or modified by directors and officers during Q2 2024[221](index=221&type=chunk) [ITEM 6. EXHIBITS](index=72&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer - Exhibits include Rule 13a-14(a) and Section 1350 certifications from the CEO and CFO, and various Inline XBRL documents[222](index=222&type=chunk) SIGNATURES The report is duly signed on behalf of Bank First Corporation by Kevin M. LeMahieu, Chief Financial Officer, on August 7, 2024 - The report was signed by Kevin M. LeMahieu, Chief Financial Officer, on August 7, 2024[223](index=223&type=chunk)

Core Viewpoint - Bank First National Corporation (BFC) has reached a significant support level and is considered a potential investment opportunity due to a recent "golden cross" technical indicator, suggesting a bullish breakout may be imminent [1] Technical Analysis - BFC's 50-day simple moving average has recently crossed above its 200-day moving average, indicating a "golden cross" which is a bullish signal for traders [1] - The formation of a golden cross typically involves three stages: a downtrend that bottoms out, a crossover of the shorter moving average above the longer one, and continued upward momentum [1] - In contrast, a "death cross" indicates potential bearish momentum, highlighting the significance of the golden cross for BFC [1] Performance Metrics - BFC has experienced a rally of 14.6% over the past four weeks, indicating strong upward momentum [1] - The company currently holds a 2 (Buy) rating on the Zacks Rank, further supporting the bullish outlook for BFC [1] Earnings Outlook - There have been no downward revisions in earnings estimates for BFC in the past two months, with one revision higher, indicating a positive earnings outlook [2] - The Zacks Consensus Estimate for BFC has also increased, reinforcing the bullish case for potential gains in the near future [2]

Bank First Corporation (BFC) came out with quarterly earnings of $1.56 per share, beating the Zacks Consensus Estimate of $1.43 per share. This compares to earnings of $1.42 per share a year ago. These figures are adjusted for non-recurring items. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. There are no easy answers to this key question, but one reliable ...

Net income of $16.1 million and $31.5 million for the three and six months ended June 30, 2024, respectively Earnings per common share of $1.59 and $3.10 for the three and six months ended June 30, 2024, respectively Annualized return on average assets of 1.58% and 1.54% for the three and six months ended June 30, 2024, respectively Quarterly cash dividend of $0.40 per share declared, 14.3% higher than the prior quarter and a 33.3% increase from the prior-year second quarter Operating Results Net interest m ...

Executive Summary & Highlights [Financial Performance Highlights](index=1&type=section&id=Financial%20Performance%20Highlights) Bank First Corporation reported strong net income and earnings per common share for Q2 and H1 2024, with significant year-over-year growth, while adjusted net income also showed positive trends Net Income and EPS (GAAP) | Metric | Q2 2024 (3 months) | Q2 2023 (3 months) | H1 2024 (6 months) | H1 2023 (6 months) | | :---------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Net Income | $16.1 million | $14.1 million | $31.5 million | $24.8 million | | EPS (basic & diluted) | $1.59 | $1.37 | $3.10 | $2.46 | Adjusted Net Income and EPS (Non-GAAP) | Metric | Q2 2024 (3 months) | Q2 2023 (3 months) | H1 2024 (6 months) | H1 2023 (6 months) | | :---------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Adjusted Net Income | $15.7 million | $14.6 million | $31.1 million | $29.3 million | | Adjusted EPS | $1.56 | $1.42 | $3.06 | $2.92 | Annualized Return on Average Assets (ROAA) | Period | Q2 2024 | H1 2024 | | :----- | :------ | :------ | | ROAA | **1.58%** | **1.54%** | [Dividend Declaration](index=1&type=section&id=Dividend%20Declaration) Bank First's Board of Directors approved a quarterly cash dividend of $0.40 per common share, marking significant increases from both the prior quarter and the prior-year second quarter Quarterly Cash Dividend | Metric | Amount | Change from Prior Quarter | Change from Prior-Year Q2 | | :---------------------- | :------- | :------------------------ | :------------------------ | | Dividend per common share | **$0.40** | **14.3% increase** | **33.3% increase** | Company Information [Business Overview](index=4&type=section&id=Business%20Overview) Bank First Corporation, established in 1894, provides comprehensive financial services through its subsidiary, Bank First, N.A., operating 26 banking locations in Wisconsin and managing approximately $4.1 billion in assets - Bank First, N.A. offers loan, deposit, and treasury management products across **26 banking locations** in Wisconsin[25](index=25&type=chunk) - The Bank has grown through both acquisitions and de novo branch expansion, employing **approximately 371 full-time equivalent staff**[25](index=25&type=chunk) Company Snapshot | Metric | Value | | :------------ | :---------------- | | Total Assets | **~$4.1 billion** | | Staff (FTE) | **~371** | | Locations | **26 in Wisconsin** | Operating Results [Net Interest Income and Margin (NII & NIM)](index=2&type=section&id=Net%20Interest%20Income%20and%20Margin%20(NII%20%26%20NIM)) Net interest income slightly decreased quarter-over-quarter and year-over-year, while net interest margin remained stable sequentially but declined year-over-year. The Bank observed a slowing in the increase of rates paid on liabilities and continued growth in rates earned on assets, supported by a high percentage of noninterest-bearing deposits Net Interest Income (NII) | Period | NII (Q2 2024) | Change from Prior Quarter | Change from Prior-Year Q2 | | :------ | :------------ | :------------------------ | :------------------------ | | Q2 2024 | **$33.0 million** | Down **$0.3 million** | Down **$1.3 million** | Net Interest Margin (NIM) | Period | NIM (Q2 2024) | Prior Quarter | Prior-Year Q2 | | :------ | :------------ | :------------ | :------------ | | Q2 2024 | **3.63%** | **3.62%** | **3.77%** | - Average rates earned on interest-earning assets continued to rise due to fixed-rate loan renewals at higher rates and higher prevailing market rates on new loan growth[5](index=5&type=chunk) - Noninterest-bearing deposits positively impacted NIM, adding **89 basis points** in Q2 2024, up from **84 basis points** in the prior quarter and **65 basis points** in Q2 2023[5](index=5&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) Bank First recorded no provision for credit losses in Q2 2024, a decrease from the prior quarter and significantly lower for the first six months of 2024 compared to 2023, largely due to the prior year's acquisition-related provision. Loan recoveries continued to exceed charge-offs Provision for Credit Losses | Period | Q2 2024 | Prior Quarter | Q2 2023 | H1 2024 | H1 2023 | | :------ | :------ | :------------ | :------ | :------ | :------ | | Amount | **$0** | **$0.2 million** | **$0** | **$0.2 million** | **$4.2 million** | - The **$4.2 million** provision in H1 2023 included a **$3.6 million** day-1 provision for credit losses from the Hometown Bancorp acquisition[12](index=12&type=chunk) - Recoveries of previously charged-off loans exceeded currently charged-off loans by **$0.8 million** in H1 2024, compared to **$0.1 million** in H1 2023[12](index=12&type=chunk) [Noninterest Income](index=3&type=section&id=Noninterest%20Income) Noninterest income increased significantly in Q2 2024, driven by higher service charge income due to a new vendor incentive program, increased income from the Ansay & Associates investment, and a positive valuation adjustment on mortgage servicing rights Noninterest Income | Metric | Q2 2024 | Prior Quarter | Prior-Year Q2 | | :---------------------- | :------------ | :------------ | :------------ | | Total Noninterest Income | **$5.9 million** | **$4.4 million** | **$4.6 million** | Service Charge Income | Metric | Q2 2024 | Change from Prior Quarter | Change from Prior-Year Q2 | | :---------------------- | :------------ | :------------------------ | :------------------------ | | Service Charge Income | Up **$0.5 million** (**28.6%**) | Up **$0.3 million** (**19.0%**) | | - Income from the investment in Ansay & Associates, LLC totaled **$1.4 million** in Q2 2024, up **$0.4 million** from both the prior quarter and prior-year second quarter[9](index=9&type=chunk)[19](index=19&type=chunk) - A **$0.3 million** positive valuation adjustment to mortgage servicing rights in Q2 2024 contrasted with negative adjustments in prior periods[9](index=9&type=chunk)[19](index=19&type=chunk) [Noninterest Expense](index=3&type=section&id=Noninterest%20Expense) Noninterest expense decreased in Q2 2024, primarily due to well-managed personnel expenses following employee retirements. However, outside service fees increased due to advisory firm payments and commissions from branch building sales, which also generated net gains on sales of other real estate owned Noninterest Expense | Metric | Q2 2024 | Prior Quarter | Prior-Year Q2 | | :---------------------- | :------------ | :------------ | :------------ | | Total Noninterest Expense | **$19.1 million** | **$20.3 million** | **$19.9 million** | - Personnel expense decreased by **$0.9 million** from the prior quarter due to employee retirements and staffing level adjustments[13](index=13&type=chunk)[19](index=19&type=chunk) - Outside service fees included **$0.2 million** for vendor negotiation advisory services (projected **$1.1 million** savings over five years) and **$0.3 million** in commissions for branch building sales[13](index=13&type=chunk) - Net gains on sale of other real estate owned totaled **$0.5 million** in Q2 2024, compared favorably to negligible gains in the prior quarter and net losses of **$0.5 million** in Q2 2023[13](index=13&type=chunk)[19](index=19&type=chunk) Balance Sheet [Assets](index=3&type=section&id=Assets) Total assets at June 30, 2024, were $4.15 billion, showing a slight decline from December 31, 2023, but an increase from June 30, 2023. Total loans also increased both year-to-date and year-over-year Total Assets | Metric | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :------------ | :------------ | :----------- | :------------ | | Total Assets | **$4.15 billion** | **$4.22 billion** | **$4.09 billion** | Total Loans | Metric | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :------------ | :------------ | :----------- | :------------ | | Total Loans | **$3.43 billion** | **$3.34 billion** | **$3.31 billion** | [Liabilities and Deposits](index=3&type=section&id=Liabilities%20and%20Deposits) Total deposits experienced a modest decline year-to-date and year-over-year. Noninterest-bearing demand deposits, while still a high percentage of core deposits, saw a slight shift towards interest-bearing deposits. The Bank secured new FHLB borrowings to fund loan demand Total Deposits | Metric | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :------------ | :------------ | :----------- | :------------ | | Total Deposits | **$3.40 billion** | **$3.43 billion** | **$3.41 billion** | Noninterest-bearing Demand Deposits as % of Total Core Deposits | Period | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :------------ | :------------ | :----------- | :------------ | | Percentage | **28.7%** | **30.6%** | **31.8%** | - Bank First entered **$55.0 million** in Federal Home Loan Bank borrowings with maturities of one to three years to fund loan demand outpacing deposit growth[15](index=15&type=chunk) Asset Quality [Nonperforming Assets and Loan Performance](index=4&type=section&id=Nonperforming%20Assets%20and%20Loan%20Performance) Nonperforming assets remained low but increased slightly compared to prior periods. The Bank continued its trend of loan recoveries exceeding charge-offs for the sixth consecutive quarter Nonperforming Assets | Metric | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :---------------------- | :------------ | :----------- | :------------ | | Nonperforming Assets | **$11.0 million** | **$9.1 million** | **$7.2 million** | Nonperforming Assets to Total Assets | Period | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :---------------------- | :------------ | :----------- | :------------ | | Ratio | **0.27%** | **0.21%** | **0.18%** | - Recoveries of previously charged-off loans have exceeded currently charged-off loans for **six consecutive quarters**[22](index=22&type=chunk) Capital Position [Stockholders' Equity and Book Value](index=4&type=section&id=Stockholders'%20Equity%20and%20Book%20Value) Stockholders' equity increased year-over-year but slightly decreased from year-end 2023, primarily due to dividends and share repurchases outpacing earnings. Both book value and tangible book value per common share showed positive growth year-over-year Stockholders' Equity | Metric | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :---------------------- | :------------ | :----------- | :------------ | | Stockholders' Equity | **$614.6 million** | **$619.8 million** | **$570.9 million** | Book Value per Common Share | Metric | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :---------------------- | :------------ | :----------- | :------------ | | Book Value per Share | **$61.27** | **$59.80** | **$54.95** | Tangible Book Value per Common Share (Non-GAAP) | Metric | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :---------------------- | :------------ | :----------- | :------------ | | Tangible Book Value per Share | **$41.42** | **$40.30** | **$35.18** | - The decline in capital from year-end 2023 was due to **$7.1 million** in dividends and **$29.5 million** in share repurchases outpacing **$31.5 million** in earnings during the first six months of 2024[23](index=23&type=chunk) Non-GAAP Financial Measures [Explanation of Non-GAAP Measures](index=5&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Management uses non-GAAP financial measures like adjusted net income and tangible book value to provide investors with a clearer understanding of operating performance, trends, and capital strengths, while acknowledging their limitations compared to GAAP - Non-GAAP measures are used to help management, investors, and others understand Bank First's operating results and financial position[26](index=26&type=chunk) - These measures aid in comparing Bank First's financial performance to peer banks and are considered critical metrics for analyzing financial condition and capital strengths[26](index=26&type=chunk) - Non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP results[26](index=26&type=chunk) [Adjusted Net Income Reconciliation](index=8&type=section&id=Adjusted%20Net%20Income%20Reconciliation) This section provides a reconciliation of GAAP net income to adjusted net income, detailing adjustments for acquisition-related expenses, severance, acquisition-related provision for credit losses, fair value amortization, and gains/losses on sales of securities and OREO Adjusted Net Income Reconciliation (Q2 2024) | Metric | Q2 2024 (3 months) | | :------------------------------------------ | :----------------- | | Net income (GAAP) | $16.1 million | | Acquisition related expenses | - | | Severance from organizational restructure | - | | Provision for credit losses related to acquisition | - | | Fair value amortization on Trust Preferred redemption | - | | Gain on sale of UFS | - | | Losses (gains) on sales of securities and OREO valuations | ($461 thousand) | | Adjusted net income before income tax impact | $15.6 million | | Income tax impact of adjustments | $97 thousand | | **Adjusted net income (non-GAAP)** | **$15.7 million** | [Tangible Book Value and Assets Reconciliation](index=9&type=section&id=Tangible%20Book%20Value%20and%20Assets%20Reconciliation) This section reconciles GAAP stockholders' equity to tangible common equity and GAAP total assets to tangible assets by removing goodwill and core deposit intangibles Tangible Common Equity Reconciliation (June 30, 2024) | Metric | June 30, 2024 | | :-------------------------------------- | :------------ | | Total stockholders' equity (GAAP) | $614.6 million | | Goodwill | ($175.1 million) | | Core deposit intangible, net of amortization | ($24.0 million) | | **Tangible common equity (non-GAAP)** | **$415.5 million** | Tangible Assets Reconciliation (June 30, 2024) | Metric | June 30, 2024 | | :-------------------------------------- | :------------ | | Total assets (GAAP) | $4.15 billion | | Goodwill | ($175.1 million) | | Core deposit intangible, net of amortization | ($24.0 million) | | **Tangible assets (non-GAAP)** | **$3.95 billion**| Tangible Equity to Tangible Assets (Non-GAAP) | Period | June 30, 2024 | | :------------ | :------------ | | Ratio | **10.53%** | Forward-Looking Statements [Disclaimer](index=5&type=section&id=Disclaimer) This section contains a standard disclaimer regarding forward-looking statements, emphasizing that they are not historical facts and are subject to inherent uncertainties, risks, and assumptions that could cause actual results to differ materially. Bank First does not undertake to update these statements - Forward-looking statements are based on current expectations, estimates, and projections, which are inherently uncertain and beyond Bank First's control[1](index=1&type=chunk)[18](index=18&type=chunk) - Actual results may differ materially due to various factors, including business and economic conditions, interest rate policies, credit management, acquisitions, and competitive conditions[1](index=1&type=chunk)[18](index=18&type=chunk) - Shareholders and investors should not place undue reliance on forward-looking statements, and Bank First undertakes no obligation to publicly update or review them, except as required by law[1](index=1&type=chunk)[38](index=38&type=chunk) Consolidated Financial Summary (Unaudited) [Results of Operations](index=6&type=section&id=Results%20of%20Operations) This table provides a detailed breakdown of the Bank's income statement for the three and six months ended June 30, 2024, and comparable prior periods, covering interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expense, and net income Consolidated Results of Operations (Selected Data) | Metric | Q2 2024 (3 months) | Q1 2024 (3 months) | Q2 2023 (3 months) | H1 2024 (6 months) | H1 2023 (6 months) | | :------------------------------ | :----------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Interest income | $49.3 million | $49.3 million | $45.9 million | $98.6 million | $86.8 million | | Interest expense | $16.3 million | $15.9 million | $11.7 million | $32.3 million | $20.3 million | | Net interest income | $33.0 million | $33.3 million | $34.3 million | $66.4 million | $66.5 million | | Provision for credit losses | $0 | $200 thousand | $0 | $200 thousand | $4.2 million | | Noninterest income | $5.9 million | $4.4 million | $4.6 million | $10.3 million | $10.4 million | | Noninterest expense | $19.1 million | $20.3 million | $19.9 million | $39.4 million | $39.6 million | | Net income | $16.1 million | $15.4 million | $14.1 million | $31.5 million | $24.8 million | | Earnings per common share | $1.59 | $1.51 | $1.37 | $3.10 | $2.46 | [Period-End Balances](index=6&type=section&id=Period-End%20Balances) This table presents key balance sheet items at the end of various periods, including cash, investment securities, loans, allowance for credit losses, premises, goodwill, mortgage servicing rights, other assets, deposits, borrowings, and stockholders' equity Consolidated Period-End Balances (Selected Data) | Metric | June 30, 2024 | March 31, 2024 | Dec 31, 2023 | June 30, 2023 | | :-------------------------------------- | :------------ | :------------- | :----------- | :------------ | | Cash and cash equivalents | $99.0 million | $83.4 million | $247.5 million | $111.3 million | | Loans | $3.43 billion | $3.38 billion | $3.34 billion | $3.31 billion | | Allowance for credit losses - loans | ($45.1 million) | ($44.4 million) | ($43.6 million) | ($43.4 million) | | Total assets | $4.15 billion | $4.10 billion | $4.22 billion | $4.09 billion | | Deposits | $3.40 billion | $3.42 billion | $3.43 billion | $3.41 billion | | Interest-bearing deposits | $2.42 billion | $2.43 billion | $2.38 billion | $2.32 billion | | Noninterest-bearing deposits | $975.8 million | $990.5 million | $1.05 billion | $1.08 billion | | Borrowings | $102.3 million | $47.3 million | $51.4 million | $70.3 million | | Total liabilities | $3.53 billion | $3.49 billion | $3.60 billion | $3.52 billion | | Stockholders' equity | $614.6 million | $609.3 million | $619.8 million | $570.9 million | [Average Balances and Rates Earned/Paid](index=10&type=section&id=Average%20Balances%20and%20Rates%20Earned/Paid) This section provides detailed average balances for interest-earning assets and interest-bearing liabilities, along with their corresponding interest income/expenses and rates earned/paid for the three and six months ended June 30, 2024, and June 30, 2023 Average Balances and Rates Earned/Paid (Q2 2024 vs Q2 2023) | Metric | Average Balance (Q2 2024) | Rate Earned/Paid (Q2 2024) | Average Balance (Q2 2023) | Rate Earned/Paid (Q2 2023) | | :------------------------------ | :------------------------ | :------------------------- | :------------------------ | :------------------------- | | **Interest-earning assets:** | | | | | | Loans (taxable) | $3.29 billion | 5.54% | $3.21 billion | 5.22% | | Total interest-earning assets | $3.70 billion | 5.40% | $3.68 billion | 5.04% | | **Interest-bearing liabilities:** | | | | | | Checking accounts | $400.1 million | 2.96% | $294.1 million | 1.79% | | Total interest-bearing deposits | $2.42 billion | 2.63% | $2.32 billion | 1.74% | | Total interest-bearing liabilities | $2.47 billion | 2.66% | $2.44 billion | 1.92% | | Net interest spread | | 2.74% | | 3.12% | | Net interest margin | | 3.63% | | 3.77% | Average Balances and Rates Earned/Paid (H1 2024 vs H1 2023) | Metric | Average Balance (H1 2024) | Rate Earned/Paid (H1 2024) | Average Balance (H1 2023) | Rate Earned/Paid (H1 2023) | | :------------------------------ | :------------------------ | :------------------------- | :------------------------ | :------------------------- | | **Interest-earning assets:** | | | | | | Loans (taxable) | $3.27 billion | 5.49% | $3.12 billion | 5.10% | | Total interest-earning assets | $3.72 billion | 5.37% | $3.60 billion | 4.89% | | **Interest-bearing liabilities:** | | | | | | Checking accounts | $411.0 million | 2.84% | $294.6 million | 1.64% | | Total interest-bearing deposits | $2.44 billion | 2.57% | $2.28 billion | 1.55% | | Total interest-bearing liabilities | $2.49 billion | 2.61% | $2.39 billion | 1.72% | | Net interest spread | | 2.76% | | 3.18% | | Net interest margin | | 3.62% | | 3.76% | [Financial Ratios](index=8&type=section&id=Financial%20Ratios) This table provides a summary of key financial ratios, including profitability, capital adequacy, and asset quality metrics, for various quarterly and year-to-date periods Key Financial Ratios (Selected Data) | Metric | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | H1 2024 | H1 2023 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Return on average assets * | **1.58%** | **1.50%** | **3.34%** | **1.44%** | **1.38%** | **1.54%** | **1.25%** | | Return on average common equity * | **10.57%** | **10.11%** | **22.58%** | **10.19%** | **9.99%** | **10.34%** | **9.20%** | | Stockholders' equity to assets | **14.82%** | **14.86%** | **14.68%** | **14.12%** | **13.95%** | **14.82%** | **13.95%** | | Tangible equity to tangible assets (non-GAAP) | **10.53%** | **10.48%** | **10.39%** | **9.62%** | **9.40%** | **10.53%** | **9.40%** | | Net interest margin, taxable equivalent * | **3.63%** | **3.62%** | **3.53%** | **3.71%** | **3.77%** | **3.62%** | **3.76%** | | Nonperforming loans to total loans | **0.31%** | **0.29%** | **0.20%** | **0.10%** | **0.15%** | **0.31%** | **0.15%** | | Nonperforming assets to total assets | **0.27%** | **0.31%** | **0.21%** | **0.13%** | **0.18%** | **0.27%** | **0.18%** | | Allowance for credit losses - loans to total loans | **1.32%** | **1.31%** | **1.30%** | **1.29%** | **1.31%** | **1.32%** | **1.31%** |

Core Insights - Bank First has successfully implemented the Empowered Core banking technology platform developed by UFS, enhancing its growth strategies and operational capabilities [1][2][4] - The migration to the new platform was completed on June 23, 2024, after a seven-month build-out, ensuring a seamless transition without customer impact [2] - Bank First, headquartered in Manitowoc, WI, has $4 billion in assets and offers a wide range of financial products and services [3] Company Strategy - The implementation of the Empowered Core platform allows Bank First to achieve strategic goals with greater control, speed, and flexibility, ultimately benefiting customers and stockholders [2][4] - The partnership with UFS has been expanded to leverage their technology solutions, which are designed specifically for community banks [2][5] Industry Context - UFS, as a bank technology outfitter, provides tailored technology services to community banks, enhancing their operational efficiency and competitive edge [5] - The addition of Bank First to UFS's customer base demonstrates UFS's capability to support regional banks in optimizing their technology platforms [5]

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) This section presents Bank First Corporation's unaudited consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2024 [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Bank First Corporation, including balance sheets, income statements, comprehensive income statements, statements of changes in stockholders' equity, and cash flow statements for the three months ended March 31, 2024 and 2023, along with detailed notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a decrease in total assets and stockholders' equity from December 31, 2023, to March 31, 2024, primarily due to a significant reduction in cash and cash equivalents and securities sold under repurchase agreements, partially offset by an increase in loans | Metric | March 31, 2024 (Unaudited) | December 31, 2023 (Audited) | | :------------------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $4,099,924 | $4,221,842 | | Total Liabilities | $3,490,594 | $3,602,044 | | Total Stockholders' Equity | $609,330 | $619,798 | | Cash and cash equivalents | $83,374 | $247,468 | | Loans, net | $3,339,017 | $3,299,365 | | Total deposits | $3,416,039 | $3,432,920 | | Securities sold under repurchase agreements | $0 | $75,747 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income significantly increased for the three months ended March 31, 2024, compared to the same period in 2023, driven by higher interest income from loans and securities, despite an increase in interest expense on deposits. The provision for credit losses also saw a substantial decrease | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Interest income | $49,272 | $40,902 | | Interest expense | $15,923 | $8,668 | | Net interest income | $33,349 | $32,234 | | Provision for credit losses | $200 | $4,182 | | Noninterest income | $4,397 | $5,849 | | Noninterest expense | $20,324 | $19,664 | | Net Income | $15,412 | $10,680 | | Earnings per share - basic | $1.51 | $1.09 | | Earnings per share - diluted | $1.51 | $1.09 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the three months ended March 31, 2024, was $14.7 million, a decrease from $13.1 million in the prior year, primarily due to unrealized losses on available-for-sale securities | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net Income | $15,412 | $10,680 | | Unrealized holding gains (losses) on available for sale securities | $(853) | $3,226 | | Reclassification adjustment for losses included in net income | $34 | $75 | | Income tax benefit (expense) | $154 | $(891) | | Total other comprehensive income (loss) | $(665) | $2,410 | | Comprehensive income | $14,747 | $13,090 | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity decreased from January 1, 2024, to March 31, 2024, primarily due to significant treasury stock repurchases and cash dividends, partially offset by net income and stock-based compensation amortization | Metric | Balance at January 1, 2024 | Balance at March 31, 2024 | | :------------------------------------- | :------------------------- | :------------------------ | | Total Stockholders' Equity | $619,798 | $609,330 | | Net income | $15,412 | $15,412 | | Other comprehensive loss | $(665) | $(665) | | Purchase of treasury stock | $(22,283) | $(22,283) | | Cash dividends ($0.35 per share) | $(3,541) | $(3,541) | | Amortization of stock-based compensation | $554 | $554 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased significantly in Q1 2024 compared to Q1 2023. Investing activities shifted from providing cash in 2023 (due to an acquisition) to using cash in 2024, primarily for loan growth and security purchases. Financing activities continued to use cash, mainly due to deposit decreases and common stock repurchases | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $1,329 | $4,114 | | Net cash provided by (used in) investing activities | $(42,929) | $205,568 | | Net cash used in financing activities | $(122,494) | $(159,342) | | Net increase (decrease) in cash and cash equivalents | $(164,094) | $50,340 | | Cash and cash equivalents at end of period | $83,374 | $169,691 | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed information on the Company's accounting policies, recent acquisitions, earnings per share calculations, securities portfolio, loan quality, mortgage servicing rights, various borrowings, regulatory capital, commitments, fair value measurements, stock-based compensation, and leases, offering context to the financial statements [NOTE 1 – BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) The interim financial statements are prepared in accordance with GAAP, with certain disclosures abbreviated. Management's critical accounting policies and estimates, including those for business combinations, ACL-Loans, and deferred taxes, remain consistent. Recent ASUs on Reference Rate Reform and Disclosure Improvements are not expected to have a significant impact - The Company's accounting and reporting policies conform to GAAP, with critical accounting policies identified for business combinations, ACL-Loans, and deferred tax assets/liabilities[93](index=93&type=chunk) - ASU 2020-04 (Reference Rate Reform) and ASU 2023-06 (Disclosure Improvements) are not anticipated to have a significant impact on the Company's financial statements or disclosures[94](index=94&type=chunk)[95](index=95&type=chunk) [NOTE 2 – ACQUISITIONS](index=10&type=section&id=NOTE%202%20%E2%80%93%20ACQUISITIONS) On February 10, 2023, the Company completed the merger with Hometown Bancorp, Ltd., acquiring assets and assuming liabilities at fair value. The acquisition consideration totaled approximately $130.5 million, resulting in $64.9 million in goodwill - On February 10, 2023, the Company merged with Hometown Bancorp, Ltd., expanding its presence in Wisconsin with ten additional branches[96](index=96&type=chunk)[244](index=244&type=chunk) Acquisition Details (in thousands) | Metric | Amount (in thousands) | | :------------------------------------- | :-------------------- | | Total assets acquired | $615,105 | | Total liabilities assumed | $549,564 | | Purchase price | $130,452 | | Goodwill (after refinement) | $64,881 | | Company stock issued | $115,079 | | Cash consideration | $15,400 | - The acquisition method of accounting was used, recording assets and liabilities at fair value, with estimated fair values subject to refinement for up to one year post-consummation[121](index=121&type=chunk)[187](index=187&type=chunk) [NOTE 3 – EARNINGS PER SHARE](index=11&type=section&id=NOTE%203%20%E2%80%93%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per common share for the three months ended March 31, 2024, increased to $1.51, up from $1.09 in the prior year, reflecting higher net income and a slight increase in weighted average common shares outstanding Earnings Per Share | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income allocated to common shareholders | $15,328 | $10,616 | | Weighted average common shares outstanding (basic) | 10,177,932 | 9,714,184 | | Basic earnings per common share | $1.51 | $1.09 | | Diluted earnings per common share | $1.51 | $1.09 | - The two-class method is used for EPS calculation, allocating earnings between common shareholders and participating securities (restricted stock awards)[122](index=122&type=chunk)[123](index=123&type=chunk) [NOTE 4 – SECURITIES](index=12&type=section&id=NOTE%204%20%E2%80%93%20SECURITIES) The Company's investment securities portfolio, comprising available-for-sale (AFS) and held-to-maturity (HTM) securities, saw a slight increase in carrying value. AFS securities are carried at fair value with significant unrealized losses, primarily due to interest rate changes, not credit deterioration. HTM securities are reported at amortized cost, with no expected credit losses Investment Securities (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Total available for sale securities (Fair Value) | $138,420 | $142,197 | | Total held to maturity securities (Amortized Cost) | $111,732 | $103,324 | | Total AFS Gross Unrealized Losses | $(12,957) | $(12,207) | | Total HTM Gross Unrealized Losses | $(1,536) | $(1,070) | - Unrealized losses on AFS securities are primarily due to changes in interest rates, market spreads, and market conditions, not credit deterioration. The Company does not intend to sell these securities and expects to recover amortized cost[149](index=149&type=chunk)[352](index=352&type=chunk) - Held-to-maturity securities, including U.S. Treasury securities, have zero expected credit losses due to their backing by the U.S. Government[126](index=126&type=chunk)[322](index=322&type=chunk) [NOTE 5 – LOANS, ALLOWANCE FOR CREDIT LOSSES, AND CREDIT QUALITY](index=14&type=section&id=NOTE%205%20%E2%80%93%20LOANS%2C%20ALLOWANCE%20FOR%20CREDIT%20LOSSES%2C%20AND%20CREDIT%20QUALITY) The loan portfolio increased by $40.4 million, driven by commercial and industrial loans and non-owner occupied commercial real estate. The Allowance for Credit Losses (ACL) on loans increased to $44.4 million, representing 1.31% of total loans, reflecting consistent asset quality and net recoveries. Nonperforming loans also increased, primarily due to one customer relationship Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Commercial/industrial | $510,930 | $488,498 | | Commercial real estate - owner occupied | $892,994 | $893,977 | | Commercial real estate - non-owner occupied | $502,569 | $473,829 | | Multi-family | $323,248 | $332,959 | | Construction and development | $208,807 | $201,823 | | Residential 1-4 family | $880,029 | $888,412 | | Consumer | $52,086 | $50,741 | | Other | $14,844 | $14,980 | | Subtotals | $3,385,507 | $3,345,219 | | ACL - Loans | $(44,378) | $(43,609) | | Loans, net | $3,339,017 | $3,299,365 | Nonperforming Assets (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Total nonaccrual loans | $7,610 | $5,662 | | Total loans past due > 90 days, but still accruing | $2,267 | $893 | | Total nonperforming loans | $9,877 | $6,555 | | Total nonperforming assets ("NPAs") | $12,551 | $9,128 | | Nonaccrual loans to total loans | 0.22% | 0.17% | | NPAs to total loans plus OREO | 0.37% | 0.27% | - The ACL - Loans was **$44.4 million** (1.31% of period-end loans) at March 31, 2024, remaining consistent due to strong asset quality and economic conditions. The Company recorded net recoveries of **$0.6 million** in Q1 2024[4](index=4&type=chunk)[155](index=155&type=chunk) - Nonaccrual loans increased in Q1 2024, primarily due to one customer relationship acquired from Hometown being moved to nonaccrual status[340](index=340&type=chunk) [NOTE 6 – MORTGAGE SERVICING RIGHTS](index=20&type=section&id=NOTE%206%20%E2%80%93%20MORTGAGE%20SERVICING%20RIGHTS) Mortgage Servicing Rights (MSRs) are recognized as separate assets at fair value when loans are sold with servicing retained. The MSR asset decreased slightly to $13.4 million at March 31, 2024, from $13.7 million at December 31, 2023, influenced by loan payments and negative valuation adjustments - MSRs are recognized at fair value when loans are sold with servicing retained, with valuation assisted by a third-party consulting firm[139](index=139&type=chunk) Mortgage Servicing Rights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Fair value at end of period | $13,356 | $13,668 | | Servicing asset additions | $189 | $879 | | Loan payments and payoffs | $(363) | $(1,624) | | Valuation adjustment on MSR | $(312) | $395 | | Unpaid principal balance of loans serviced for others | $1,170,466 | $1,175,709 | [NOTE 7 – NOTES PAYABLE](index=20&type=section&id=NOTE%207%20%E2%80%93%20NOTES%20PAYABLE) Notes payable, primarily FHLB advances, remained stable at $35.3 million at March 31, 2024. The Company also maintains a $7.5 million line of credit with a commercial bank, which had no outstanding balance - The Company's borrowings primarily consist of FHLB advances, totaling **$35.3 million** at March 31, 2024 and December 31, 2023[346](index=346&type=chunk) Notes Payable (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Borrowing outstanding at period end | $35,295 | $35,270 | | Weighted average interest rate on borrowing at period end | 3.59% | 3.59% | | Borrowing availability at FHLB | $805.7 million | N/A | - A **$7.5 million** line of credit with a commercial bank had no outstanding balance at March 31, 2024[56](index=56&type=chunk)[317](index=317&type=chunk) [NOTE 8 – SUBORDINATED NOTES AND JUNIOR SUBORDINATED DEBENTURES](index=21&type=section&id=NOTE%208%20%E2%80%93%20SUBORDINATED%20NOTES%20AND%20JUNIOR%20SUBORDINATED%20DEBENTURES) The Company had $12.0 million in subordinated notes outstanding at March 31, 2024, carrying a fixed interest rate of 5.0% or 5.25% through mid-2025 or mid-2027, respectively. A $4.1 million junior subordinated debenture, acquired from Hometown, was fully repaid in Q1 2024, leading to the dissolution of related trusts - Subordinated note agreements totaling **$12.0 million** were outstanding at March 31, 2024, with fixed interest rates of **5.0%** (callable Jan 2026) and **5.25%** (callable Aug 2027)[10](index=10&type=chunk)[197](index=197&type=chunk)[349](index=349&type=chunk) - A **$4.1 million** junior subordinated debenture, assumed from the Hometown acquisition, was fully repaid in January 2024, resulting in the dissolution of Trust I[68](index=68&type=chunk)[318](index=318&type=chunk) [NOTE 9 – REGULATORY MATTERS](index=22&type=section&id=NOTE%209%20%E2%80%93%20REGULATORY%20MATTERS) Both the Company and the Bank exceeded all applicable well-capitalized regulatory capital requirements and the capital conservation buffer as of March 31, 2024, and December 31, 2023. The Bank does not intend to opt into the Community Bank Leverage Ratio Framework - The Bank's regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer at March 31, 2024, and December 31, 2023[21](index=21&type=chunk)[199](index=199&type=chunk) Company Capital Ratios | Capital Ratio (Company) | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Total capital (to risk-weighted assets) | 13.49% | 13.99% | | Tier 1 capital (to risk-weighted assets) | 12.06% | 12.65% | | Common Equity Tier 1 capital (to risk-weighted assets) | 12.06% | 12.54% | | Tier 1 capital (to average assets) | 10.73% | 11.05% | - The Bank does not intend to opt into the Community Bank Leverage Ratio Framework, which sets a minimum Tier 1 capital to average total consolidated assets ratio at **9%** for qualifying community banks[360](index=360&type=chunk) [NOTE 10 – COMMITMENTS AND CONTINGENCIES](index=23&type=section&id=NOTE%2010%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The Company engages in off-balance-sheet financial instruments, including loan commitments, standby letters of credit, and credit card arrangements, to meet customer financing needs. These instruments involve credit and interest rate risk, with total commitments at March 31, 2024, amounting to $829.7 million - The Company is party to financial instruments with off-balance-sheet risk, primarily commitments to originate and sell loans, standby/direct pay letters of credit, and unused lines of credit[39](index=39&type=chunk)[201](index=201&type=chunk) Commitments (in thousands) | Commitment Type | March 31, 2024 (Total) | December 31, 2023 (Total) | | :------------------------------------- | :--------------------- | :------------------------ | | Unused lines of credit | $796,930 | $799,398 | | Standby and direct pay letters of credit | $10,951 | $9,785 | | Credit card arrangements | $21,807 | $21,213 | | Total commitments | $829,688 | $830,396 | - Loan commitments and letters of credit have credit risk similar to extending loans and are subject to normal credit policies, with collateral obtained based on credit assessment[40](index=40&type=chunk) [NOTE 11 – FAIR VALUE MEASUREMENTS](index=23&type=section&id=NOTE%2011%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) The Company uses a fair value hierarchy (Level 1, 2, and 3) for financial instruments. Available-for-sale securities and mortgage servicing rights are measured on a recurring basis using Level 2 inputs. Non-recurring fair value measurements for OREO and individually evaluated loans primarily use Level 3 unobservable inputs, such as collateral discounts and estimated selling costs - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted active market prices), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[172](index=172&type=chunk)[202](index=202&type=chunk) Fair Value Measurements (in thousands) | Asset Type (March 31, 2024) | Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------- | :--------- | :------ | :------ | :------ | | Securities available for sale | $138,420 | $0 | $138,420 | $0 | | Mortgage servicing rights | $13,356 | $0 | $13,356 | $0 | | OREO (non-recurring) | $2,674 | $0 | $0 | $2,674 | | Loans individually evaluated, net of reserve (non-recurring) | $9,482 | $0 | $0 | $9,482 | Level 3 Asset Valuation (March 31, 2024) | Level 3 Asset (March 31, 2024) | Valuation Technique | Unobservable Inputs | Range of Discounts | Weighted Average Discount | | :------------------------------------- | :------------------ | :------------------ | :----------------- | :------------------------ | | Other real estate owned | Third-party brokered appraisals | Collateral discounts and estimated costs to sell | 3% - 61% | 42% | | Loans individually evaluated | Third-party appraisals and discounted cash flows | Collateral discounts and discount rates | 18% - 38% | 35% | [NOTE 12 – STOCK BASED COMPENSATION](index=26&type=section&id=NOTE%2012%20%E2%80%93%20STOCK%20BASED%20COMPENSATION) The Company grants restricted stock awards under its 2020 Equity Plan to incentivize employees and directors. As of March 31, 2024, $3.5 million in unrecognized compensation cost remains, expected to be recognized over a weighted average period of 1.91 years. Compensation expense for Q1 2024 was $0.6 million - The Bank First Corporation 2020 Equity Plan allows for the issuance of up to **700,000 shares**, with **100,954 shares** awarded as of March 31, 2024[237](index=237&type=chunk) - Unrecognized compensation cost related to non-vested restricted stock awards was **$3.5 million** at March 31, 2024, with a weighted average recognition period of **1.91 years**[209](index=209&type=chunk) Stock-Based Compensation (in thousands) | Metric | March 31, 2024 | March 31, 2023 | | :------------------------------------- | :------------- | :------------- | | Restricted Stock Outstanding at end of period | 52,634 | 58,065 | | Weighted Average Grant-Date Fair Value | $79.27 | $71.41 | | Compensation expense recognized | $0.6 million | $0.5 million | [NOTE 13 – LEASES](index=27&type=section&id=NOTE%2013%20%E2%80%93%20LEASES) The Company's lessee leases are operating leases for real estate, recognized on-balance sheet as ROU assets and liabilities. Total undiscounted cash flows for operating leases were $3.48 million at March 31, 2024, with a weighted average lease term of 29.75 years and a discount rate of 5.50% - The Company's lessee leases are operating leases for real estate, requiring recognition of a Right-of-Use (ROU) lease asset and liability on the balance sheet for terms longer than 12 months[182](index=182&type=chunk)[210](index=210&type=chunk) Operating Lease Details (in thousands) | Metric | March 31, 2024 | | :------------------------------------- | :------------- | | Total undiscounted cash flows | $3,475 | | Discount on cash flows | $(1,891) | | Total operating lease liabilities | $1,584 | | Weighted Average Lease Term (Years) - Operating Leases | 29.75 | | Weighted Average Discount Rate - Operating Leases | 5.50% | - The Company uses the Wall Street Journal Prime Rate on the lease commencement date as its fully secured incremental borrowing rate for operating leases[183](index=183&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, highlighting key drivers of net income, changes in interest income and expense, credit quality trends, and shifts in the balance sheet. It also includes forward-looking statements and a reconciliation of non-GAAP financial measures [FORWARD-LOOKING STATEMENTS](index=28&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section contains forward-looking statements regarding the Company's future performance, plans, and expectations, which are subject to inherent uncertainties and risks. Investors are cautioned not to place undue reliance on these statements, as actual results may differ materially - Forward-looking statements are based on current expectations, estimates, and projections, but are subject to risks and uncertainties that could cause actual results to differ materially[242](index=242&type=chunk) - The Company does not undertake any obligation to publicly update or review any forward-looking statement, except as required by law[242](index=242&type=chunk) [OVERVIEW](index=28&type=section&id=OVERVIEW) Bank First Corporation, through its subsidiary Bank First, N.A., provides financial services across Wisconsin. Its primary income is from interest on loans and investments, funded by deposits. The Bank manages credit risk with an Allowance for Credit Losses (ACL) and generates non-interest income from loan sales and servicing - Bank First, N.A. operates **26 banking locations** across various Wisconsin counties, offering loan, deposit, and treasury management products[186](index=186&type=chunk) - The Bank's primary income source is interest from loans and investments, with deposits as the main funding source. Net interest income is maximized by managing asset/liability volumes and pricing[214](index=214&type=chunk) - Credit risk is managed through an Allowance for Credit Losses (ACL) on loans, established by charging a provision against operating earnings[214](index=214&type=chunk) [SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA](index=30&type=section&id=SELECTED%20HISTORICAL%20CONSOLIDATED%20FINANCIAL%20DATA) This section provides a five-quarter overview of key financial metrics, showing trends in average balances, financial ratios, and income statement components. Net income and earnings per share have generally increased, while nonperforming assets have fluctuated Selected Financial Data (in thousands, except per share data) | Metric | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | | :------------------------------------- | :-------- | :--------- | :-------- | :-------- | :-------- | | Net income | $15,412 | $34,898 | $14,804 | $14,132 | $10,680 | | Earnings per common share - basic | $1.51 | $3.39 | $1.43 | $1.37 | $1.09 | | Total assets (period-end) | $4,099,924 | $4,221,842 | $4,087,519 | $4,092,071 | $4,167,228 | | Total deposits (period-end) | $3,416,039 | $3,432,920 | $3,398,293 | $3,405,736 | $3,463,235 | | Nonperforming loans to total loans | 0.29% | 0.20% | 0.10% | 0.15% | 0.14% | | Nonperforming assets to total assets | 0.31% | 0.21% | 0.13% | 0.18% | 0.22% | | Allowance for credit losses - loans to total loans | 1.31% | 1.30% | 1.29% | 1.31% | 1.30% | [GAAP RECONCILIATION AND MANAGEMENT EXPLANATION OF NON-GAAP FINANCIAL MEASURES](index=31&type=section&id=GAAP%20RECONCILIATION%20AND%20MANAGEMENT%20EXPLANATION%20OF%20NON-GAAP%20FINANCIAL%20MEASURES) The Company presents non-GAAP financial measures, specifically tangible book value per common share and tangible equity to tangible assets, to provide investors with a clearer comparison of capital adequacy by excluding goodwill and other intangibles. These measures are reconciled to their most comparable GAAP figures - Non-GAAP financial measures, such as tangible book value per common share and tangible equity to tangible assets, are used to evaluate capital adequacy by excluding goodwill and other intangibles[221](index=221&type=chunk)[248](index=248&type=chunk) - These non-GAAP measures should not be considered in isolation or as a substitute for GAAP measures, and their calculation may differ from other companies[249](index=249&type=chunk) Non-GAAP Reconciliation (in thousands, except per share data) | Metric | 3/31/2024 | 12/31/2023 | | :------------------------------------- | :-------- | :--------- | | Total assets | $4,099,924 | $4,221,842 | | Goodwill | $(175,106) | $(175,106) | | Core deposit intangible, net of amortization | $(25,496) | $(26,996) | | Tangible assets | $3,899,322 | $4,019,740 | | Total stockholders' equity | $609,330 | $619,798 | | Tangible common equity | $408,728 | $417,696 | | Book value per common share | $60.16 | $59.80 | | Tangible book value per common share | $40.35 | $40.30 | | Tangible common equity to tangible assets | 10.48% | 10.39% | [RESULTS OF OPERATIONS](index=32&type=section&id=RESULTS%20OF%20OPERATIONS) Net income increased by $4.7 million to $15.4 million for Q1 2024, compared to $10.7 million in Q1 2023. This improvement was driven by higher net interest income and a significantly lower provision for credit losses, partially offset by a decrease in noninterest income - Net income increased by **$4.7 million** to **$15.4 million** for the three months ended March 31, 2024, compared to **$10.7 million** for the same period in 2023[222](index=222&type=chunk) - The increase in net income was partially attributed to the added operational scale from the Hometown acquisition in Q1 2023 and a lower provision for credit losses[222](index=222&type=chunk) [Net Interest Income](index=32&type=section&id=Net%20Interest%20Income) Net interest and dividend income increased by $1.1 million to $33.3 million for Q1 2024, primarily due to growth in interest-earning assets and an increase in the average interest rate earned on these assets, despite rising interest expense - Net interest and dividend income increased by **$1.1 million** to **$33.3 million** for Q1 2024, up from **$32.2 million** in Q1 2023[223](index=223&type=chunk) - The increase was primarily driven by a **$216.8 million** growth in average interest-earning assets and a **0.59%** increase in the average interest rate earned on these assets[223](index=223&type=chunk)[253](index=253&type=chunk) [Interest Expense](index=33&type=section&id=Interest%20Expense) Total interest expense surged by $7.2 million, or 83.7%, to $15.9 million in Q1 2024, mainly due to elevated interest-bearing liabilities and higher crediting interest rates on deposits - Interest expense increased by **$7.2 million (83.7%)** to **$15.9 million** in Q1 2024, compared to **$8.7 million** in Q1 2023[225](index=225&type=chunk) - The increase was primarily due to higher average balances (**$2.46 billion** vs. **$2.24 billion**) and increased cost (**2.51%** vs. **1.35%**) of interest-bearing deposits[254](index=254&type=chunk) [Provision for Credit Losses](index=33&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses significantly decreased to $0.2 million in Q1 2024 from $4.2 million in Q1 2023, with the prior year's expense primarily driven by the Hometown acquisition. Asset quality remains strong, and the ACL-Loans was $44.4 million (1.31% of total loans) - Provision for credit losses decreased to **$0.2 million** in Q1 2024 from **$4.2 million** in Q1 2023[255](index=255&type=chunk) - The elevated expense in Q1 2023 was primarily due to a **$3.6 million** provision related to acquired loans from Hometown[255](index=255&type=chunk) - The ACL - Loans was **$44.4 million**, or **1.31%** of total loans, at March 31, 2024, with net recoveries of **$0.6 million** during the quarter[255](index=255&type=chunk) [Noninterest Income](index=33&type=section&id=Noninterest%20Income) Noninterest income decreased by $1.4 million to $4.4 million in Q1 2024, primarily due to the sale of UFS in October 2023 and negative valuation adjustments on Mortgage Servicing Rights (MSRs) - Noninterest income decreased by **$1.4 million** to **$4.4 million** in Q1 2024, compared to **$5.8 million** in Q1 2023[256](index=256&type=chunk) - The decline was mainly due to no income from UFS (following its sale in October 2023) and negative MSR valuation adjustments of **$0.3 million**[256](index=256&type=chunk) Noninterest Income (in thousands) | Noninterest Income | Q1 2024 | Q1 2023 | $ Change | % Change | | :------------------------------------- | :------ | :------ | :------- | :------- | | Service charges | $1,634 | $1,599 | $35 | 2% | | Income from Ansay | $979 | $1,071 | $(92) | (9)% | | Income from UFS | $0 | $890 | $(890) | (100)% | | Loan servicing income | $726 | $636 | $90 | 14% | | Valuation adjustment on MSR | $(312) | $779 | $(1,091) | NM | | Net gain on sales of mortgage loans | $219 | $140 | $79 | 56% | | Other | $1,151 | $734 | $417 | 57% | | Total noninterest income | $4,397 | $5,849 | $(1,452) | (25)% | [Noninterest Expense](index=34&type=section&id=Noninterest%20Expense) Noninterest expense increased by $0.7 million to $20.3 million in Q1 2024, primarily due to increased operational scale from the Hometown acquisition impacting salaries, data processing, and other expenses. One-time acquisition-related expenses in Q1 2023 led to a decline in postage and outside service fees in Q1 2024 - Noninterest expense increased by **$0.7 million** to **$20.3 million** in Q1 2024, compared to **$19.7 million** in Q1 2023[258](index=258&type=chunk) - Increases in salaries, data processing, and other noninterest expenses were due to the full-quarter impact of the Hometown acquisition[258](index=258&type=chunk) - Postage, stationery, supplies, and outside service fees decreased due to the absence of one-time acquisition-related expenses present in Q1 2023[258](index=258&type=chunk) Noninterest Expense (in thousands) | Noninterest Expense | Q1 2024 | Q1 2023 | $ Change | % Change | | :------------------------------------- | :------ | :------ | :------- | :------- | | Salaries, commissions, and employee benefits | $10,893 | $9,912 | $981 | 10% | | Data processing | $2,389 | $1,864 | $525 | 28% | | Outside service fees | $1,293 | $2,202 | $(909) | (41)% | | Total noninterest expenses | $20,324 | $19,664 | $660 | 3% | [Income Tax Expense](index=34&type=section&id=Income%20Tax%20Expense) Income tax expense decreased to $1.8 million in Q1 2024 from $3.6 million in Q1 2023, resulting in effective tax rates of 10.5% and 25.0%, respectively. This reduction was primarily due to a $1.3 million decrease in estimated 2023 tax liability following new Wisconsin legislation exempting certain commercial loan income from state tax - Provision for income taxes decreased to **$1.8 million** in Q1 2024 (**10.5%** effective rate) from **$3.6 million** in Q1 2023 (**25.0%** effective rate)[259](index=259&type=chunk) - The lower tax provision was mainly due to a **$1.3 million** reduction in estimated 2023 tax liability, resulting from new Wisconsin legislation exempting income from certain commercial loans (**$5.0 million** or less) from state tax[259](index=259&type=chunk) - Effective tax rates were further reduced by tax-exempt interest income from qualifying loans and investments[259](index=259&type=chunk) [NET INTEREST MARGIN](index=34&type=section&id=NET%20INTEREST%20MARGIN) The net interest margin, on a fully taxable equivalent basis, decreased to 3.62% in Q1 2024 from 3.74% in Q1 2023. While interest income increased due to higher asset yields, interest expense grew at a faster pace due to rising deposit costs, compressing the margin - Net interest margin, on a fully taxable equivalent basis, was **3.62%** for Q1 2024, down from **3.74%** for Q1 2023[218](index=218&type=chunk)[261](index=261&type=chunk) - The average rate earned on interest-earning assets increased to **5.33%** in Q1 2024 from **4.74%** in Q1 2023[261](index=261&type=chunk) - The average rate paid on interest-bearing liabilities increased to **2.55%** in Q1 2024 from **1.51%** in Q1 2023[261](index=261&type=chunk) [Rate/Volume Analysis](index=36&type=section&id=Rate%2FVolume%20Analysis) Interest income increased significantly due to both volume and rate changes, with rate changes contributing more. Interest expense also rose substantially, predominantly driven by higher rates on deposits and other borrowed funds, leading to a net increase in interest income Rate/Volume Analysis (in thousands) | Metric | Volume Increase/(Decrease) | Rate Increase/(Decrease) | Total Change | | :------------------------------------- | :------------------------- | :----------------------- | :----------- | | Total interest income | $12,310 | $19,991 | $32,301 | | Total interest expense | $3,091 | $25,797 | $28,888 | | Change in net interest income | $9,219 | $(5,806) | $3,413 | - The increase in total interest income was primarily driven by rate changes (**$19.99 million**) rather than volume changes (**$12.31 million**)[263](index=263&type=chunk) - The increase in total interest expense was overwhelmingly due to rate changes (**$25.80 million**), with volume changes contributing **$3.09 million**[263](index=263&type=chunk) [CHANGES IN FINANCIAL CONDITION](index=36&type=section&id=CHANGES%20IN%20FINANCIAL%20CONDITION) The Company experienced a decrease in total assets and stockholders' equity in Q1 2024, primarily due to a reduction in cash and cash equivalents and common stock repurchases. However, the loan portfolio continued to grow, and investment securities saw a slight increase. Deposits and borrowings also saw some shifts [Total Assets](index=36&type=section&id=Total%20Assets) Total assets decreased by $121.9 million, or 2.9%, to $4.10 billion at March 31, 2024, from $4.22 billion at December 31, 2023 - Total assets decreased by **$121.9 million (2.9%)** to **$4.10 billion** at March 31, 2024, from **$4.22 billion** at December 31, 2023[290](index=290&type=chunk) [Cash and Cash Equivalents](index=36&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and cash equivalents significantly decreased by $164.1 million to $83.4 million at March 31, 2024, from $247.5 million at December 31, 2023. This decline was primarily due to investments in loan portfolio growth and a reduction in securities sold under repurchase agreements - Cash and cash equivalents decreased by **$164.1 million** to **$83.4 million** at March 31, 2024, from **$247.5 million** at December 31, 2023[263](index=263&type=chunk) - The decline was primarily a result of funds being invested in loan portfolio growth and a reduction in securities sold under repurchase agreements[263](index=263&type=chunk) [Investment Securities](index=36&type=section&id=Investment%20Securities) The carrying value of total investment securities increased by $4.6 million to $250.2 million at March 31, 2024, from $245.5 million at December 31, 2023 - The carrying value of total investment securities increased by **$4.6 million** to **$250.2 million** at March 31, 2024, from **$245.5 million** at December 31, 2023[235](index=235&type=chunk) [Loans](index=37&type=section&id=Loans) The loan portfolio, the Company's most significant earning asset, increased by $40.4 million (1.2%) to $3.38 billion at March 31, 2024, driven by strong demand for new credit. Commercial & Industrial and non-owner occupied Commercial Real Estate loans saw notable increases, while residential 1-4 family and multi-family loans decreased - The loan portfolio is the most significant earning asset, comprising **82.5%** of total assets at March 31, 2024[267](index=267&type=chunk) - Loans increased by **$40.4 million (1.2%)** to **$3.38 billion** at March 31, 2024, driven by solid demand for new credit from existing customer relationships[295](index=295&type=chunk) Loan Portfolio by Category (in thousands) | Loan Category | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Commercial & industrial | $510,396 (15%) | $487,893 (15%) | | Commercial real estate (Owner occupied) | $892,275 (26%) | $894,596 (27%) | | Commercial real estate (Non-owner occupied) | $502,429 (15%) | $472,321 (14%) | | Multi-family | $323,047 (10%) | $332,757 (10%) | | Construction & development | $207,866 (6%) | $200,835 (6%) | | Residential 1-4 family | $880,241 (26%) | $888,639 (27%) | | Consumer | $52,296 (2%) | $50,950 (1%) | | Other loans | $14,845 (0%) | $14,983 (0%) | | Total Loans | $3,383,395 (100%) | $3,342,974 (100%) | [NONPERFORMING ASSETS](index=40&type=section&id=NONPERFORMING%20ASSETS) Nonperforming assets, comprising nonperforming loans and foreclosed real estate, increased to $12.6 million at March 31, 2024, from $9.1 million at December 31, 2023. This rise was primarily driven by an increase in nonaccrual loans, particularly one customer relationship acquired from Hometown - Nonperforming assets increased to **$12.55 million** at March 31, 2024, from **$9.13 million** at December 31, 2023[2](index=2&type=chunk) Nonperforming Assets (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Total nonaccrual loans | $7,610 | $5,662 | | Total loans past due > 90 days, but still accruing | $2,267 | $893 | | Total nonperforming loans | $9,877 | $6,555 | | Total OREO | $2,674 | $2,573 | | Total nonperforming assets ("NPAs") | $12,551 | $9,128 | - The increase in nonaccrual loans was primarily related to one customer relationship, acquired as part of the Hometown acquisition, moved from accrual status during Q1 2024[340](index=340&type=chunk) [ALLOWANCE FOR CREDIT LOSSES - LOANS](index=42&type=section&id=ALLOWANCE%20FOR%20CREDIT%20LOSSES%20-%20LOANS) The Allowance for Credit Losses (ACL) on loans increased to $44.4 million at March 31, 2024, from $43.6 million at December 31, 2023, representing 1.31% of total loans. This increase reflects a $0.2 million provision for credit losses and net recoveries of $0.6 million during Q1 2024, with asset quality remaining strong - The ACL - Loans was **$44.4 million** (**1.31%** of period-end loans) at March 31, 2024, remaining consistent over recent quarters due to strong economic conditions and asset quality[4](index=4&type=chunk) Allowance for Credit Losses - Loans (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Balance of ACL - Loans at end of period | $44,378 | $43,609 | | Provision charged to operating expense | $200 | $4,292 | | Total net loans recovered | $569 | $131 | | ACL - Loans to total loans | 1.31% | 1.30% | - The ACL - Loans is assessed quarterly based on historical experience, economic conditions, asset quality trends, and inherent portfolio risks[341](index=341&type=chunk) [SOURCES OF FUNDS](index=43&type=section&id=SOURCES%20OF%20FUNDS) Deposits remain the primary source of funds, totaling $3.42 billion at March 31, 2024, a slight decrease from December 31, 2023. The Company also utilizes FHLB borrowings and subordinated debt, which remained stable. Securities sold under repurchase agreements were fully redeemed in Q1 2024 - Deposits are the primary source of funds for investment and lending activities, supplemented by FHLB borrowings[6](index=6&type=chunk) Deposit Composition (in thousands) | Deposit Type | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Total deposits | $3,416,039 | $3,432,920 | | Noninterest-bearing demand deposits | $1,016,452 | $1,078,468 | | Interest-bearing checking deposits | $421,776 | $293,568 | | Certificates of deposit | $590,116 | $509,273 | | Brokered deposits | $748 | $3,184 | - Securities sold under repurchase agreements were fully redeemed during the first quarter of 2024, reducing this liability from **$75.7 million** to zero[8](index=8&type=chunk)[315](index=315&type=chunk) - FHLB borrowings and subordinated debt remained stable at **$35.3 million** and **$12.0 million**, respectively, at March 31, 2024[347](index=347&type=chunk)[349](index=349&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=48&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The Company maintains strong liquidity through its investment portfolio, deposits, FHLB borrowings, and correspondent bank lines, with $1.71 billion in available funding. Capital adequacy remains robust, with the Bank exceeding all 'well-capitalized' regulatory requirements. Total stockholders' equity decreased slightly due to stock repurchases and dividends - Liquidity is maintained through the investment portfolio, deposits, FHLB borrowings, and lines from correspondent banks, with **$1.71 billion** in available funding[17](index=17&type=chunk)[355](index=355&type=chunk) - The Bank was 'well capitalized' at March 31, 2024, exceeding all minimum capital requirements, including CET1, Tier 1, Total Capital, and Leverage ratios[328](index=328&type=chunk)[329](index=329&type=chunk)[361](index=361&type=chunk) - Total stockholders' equity decreased by **$10.5 million** to **$609.3 million** at March 31, 2024, primarily due to **$22.3 million** in common stock repurchases and **$3.5 million** in dividends, partially offset by **$15.4 million** in net income[293](index=293&type=chunk)[356](index=356&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=51&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Company's primary market risk is interest rate risk, which is actively managed to minimize adverse impacts on net interest income and capital. Management uses various tools, including interest rate sensitivity analysis and economic value of equity models, to assess and control exposure to interest rate movements. The increased sensitivity noted at March 31, 2024, was due to a reconsideration of interest rate betas for loan and deposit products - The primary market risk is interest rate risk, arising from timing differences in repricing assets and liabilities, embedded options, yield curve changes, and spread relationships[334](index=334&type=chunk)[365](index=365&type=chunk) - Interest rate risk is managed through asset-liability structure, investment portfolio management, loan/deposit terms, and wholesale funding, with oversight by the ALCO[25](index=25&type=chunk)[335](index=335&type=chunk)[380](index=380&type=chunk) Net Interest Income Sensitivity | Change in Interest Rates (in Basis Points) | Percentage Change in Net Interest Income (March 31, 2024) | | :------------------------------------- | :-------------------------------------------------------- | | +400 | 0.1% | | +300 | 0.1% | | +200 | 0.1% | | +100 | 0.2% | | -100 | (0.1)% | - The increased sensitivity to interest rate changes at March 31, 2024, resulted from management's reconsideration of interest rate betas for loan and deposit products[28](index=28&type=chunk) - An instantaneous **200 basis point** increase in interest rates was estimated to result in a **4.61%** increase in economic value of equity, while a **100 basis point** decrease was estimated to result in a **3.79%** decrease[367](index=367&type=chunk) [ITEM 4. Controls and Procedures](index=55&type=section&id=ITEM%204.%20Controls%20and%20Procedures) The CEO and CFO evaluated the Company's disclosure controls and procedures as of March 31, 2024, concluding they were effective. No material changes to internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2024[368](index=368&type=chunk) - No material changes were made to internal control over financial reporting during the quarter ended March 31, 2024[384](index=384&type=chunk) [Part II. Other Information](index=55&type=section&id=Part%20II.%20Other%20Information) This section provides additional information on legal proceedings, risk factors, equity security sales, defaults, mine safety, and exhibits [ITEM 1. Legal Proceedings](index=55&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is involved in various litigation in the normal course of business, but management believes any resulting liability will not materially affect its financial position, results of operations, or liquidity - The Company is party to various litigation in the normal course of business[46](index=46&type=chunk) - Management believes that any liability from litigation will not have a material effect on the Company's financial position, results of operations, or liquidity[46](index=46&type=chunk) [ITEM 1A. Risk Factors](index=55&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, during the quarter ended March 31, 2024 - No material changes occurred during Q1 2024 to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[30](index=30&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company renewed its share repurchase program in February 2024, authorizing up to $30 million in common stock repurchases. During Q1 2024, the Company repurchased 261,193 shares at an average price of $85.27 per share, with 294,982 shares remaining available under the program - The Company renewed its share repurchase program on February 21, 2024, authorizing repurchases of up to **$30 million** of common stock until February 20, 2025[386](index=386&type=chunk) Share Repurchase Activity | Month | Total Number of Shares Repurchased | Average Price Paid per Share | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | | :------------------------------------- | :--------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | | January 2024 | — | — | 270,346 | | February 2024 | 223,863 | $85.54 | 332,312 | | March 2024 | 37,330 | $83.63 | 294,982 | | Total | 261,193 | $85.27 | 294,982 | - The Inflation Reduction Act of 2022 (IRA) imposes a new **1%** excise tax on corporate stock repurchases, which applies to the Company[47](index=47&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=56&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - No defaults upon senior securities occurred during the reporting period[33](index=33&type=chunk)[48](index=48&type=chunk) [ITEM 4. Mine Safety Disclosures](index=56&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) There were no mine safety disclosures for the quarter ended March 31, 2024. Additionally, no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, terminated, or modified by directors and officers during the quarter - No mine safety disclosures were reported for the quarter ended March 31, 2024[31](index=31&type=chunk) - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, terminated, or modified by directors and officers during the quarter[373](index=373&type=chunk) [ITEM 5. Other Information](index=56&type=section&id=ITEM%205.%20Other%20Information) No other information was reported in this section for the period - No other information was reported in this section[34](index=34&type=chunk) [ITEM 6. Exhibits](index=57&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and the cover page interactive data file - The exhibits include certifications (CEO, CFO), XBRL instance and taxonomy documents, and the cover page interactive data file[374](index=374&type=chunk) [Signatures](index=58&type=section&id=Signatures) The report was duly signed on behalf of Bank First Corporation by Kevin M. LeMahieu, Chief Financial Officer, on May 9, 2024, pursuant to the requirements of the Securities Exchange Act of 1934 - The report was signed by Kevin M. LeMahieu, Chief Financial Officer, on May 9, 2024[52](index=52&type=chunk) - The signing confirms compliance with the requirements of the Securities Exchange Act of 1934[37](index=37&type=chunk)

Net income of $15.4 million and earnings per common share of $1.51 for the three months ended March 31, 2024 Annualized return on average assets of 1.50% for the three months ended March 31, 2024 261,340 common shares repurchased, 2.5% of outstanding shares as of the beginning of the period, during the first quarter of 2024 Quarterly cash dividend of $0.35 per share declared, matching the prior-quarter and 16.7% higher than the prior-year first quarter MANITOWOC, Wis., April 16, 2024 /PRNewswire/ -- Bank ...

[Executive Summary](index=1&type=section&id=Executive%20Summary) Bank First Corporation achieved strong Q1 2024 financial performance, marked by significant net income and EPS growth, stable dividends, and substantial share repurchases [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) Bank First Corporation reported strong Q1 2024 net income and EPS growth, alongside a stable dividend and significant share repurchases, demonstrating solid financial performance **Q1 2024 Key Financial Highlights:** | Metric | Q1 2024 | Q1 2023 | YoY Change | | :-------------------------- | :------ | :------ | :--------- | | Net Income ($M) | 15.4 | 10.7 | +43.9% | | EPS ($) | 1.51 | 1.09 | +38.5% | | Annualized Return on Average Assets | 1.50% | - | - | | Quarterly Cash Dividend per Share | $0.35 | $0.30 | +16.7% | | Common Shares Repurchased | 261,340 | - | - | [Operating Performance](index=1&type=section&id=Operating%20Performance) Operating performance in Q1 2024 was characterized by increased net income and net interest income, partially offset by lower noninterest income, while credit loss provisions significantly decreased [Net Income and Earnings Per Share](index=1&type=section&id=Net%20Income%20and%20Earnings%20Per%20Share) Net income for Q1 2024 increased significantly year-over-year, both on a GAAP and adjusted non-GAAP basis, driven by higher net interest income and lower provision for credit losses, despite a decrease in noninterest income **Net Income and EPS (GAAP):** | Period | Net Income ($M) | EPS ($) | | :----- | :-------------- | :------ | | Q1 2024 | 15.4 | 1.51 | | Q1 2023 | 10.7 | 1.09 | | YoY Change | +43.9% | +38.5% | **Adjusted Net Income and EPS (Non-GAAP):** | Period | Adjusted Net Income ($M) | Adjusted EPS ($) | | :----- | :----------------------- | :--------------- | | Q1 2024 | 15.4 | 1.51 | | Q1 2023 | 14.7 | 1.50 | | YoY Change | +4.8% | +0.7% | [Net Interest Income and Margin](index=1&type=section&id=Net%20Interest%20Income%20and%20Margin) Net interest income saw a modest increase year-over-year and quarter-over-quarter, with net interest margin slightly improving QoQ but decreasing YoY. Purchase accounting significantly contributed to NII and NIM **Net Interest Income (NII):** | Period | NII ($M) | | :----- | :------- | | Q1 2024 | 33.3 | | Q4 2023 | 32.9 | | Q1 2023 | 32.2 | | QoQ Change | +1.2% | | YoY Change | +3.4% | **Net Interest Margin (NIM):** | Period | NIM (%) | | :----- | :------ | | Q1 2024 | 3.62 | | Q4 2023 | 3.53 | | Q1 2023 | 3.74 | | QoQ Change | +0.09 pp | | YoY Change | -0.12 pp | - Purchase accounting increased NII by **$1.2 million** (Q1 2024) and NIM by **0.13%** (Q1 2024)[9](index=9&type=chunk)[18](index=18&type=chunk) [Noninterest Income](index=2&type=section&id=Noninterest%20Income) Noninterest income decreased year-over-year, primarily due to the absence of income from UFS, LLC following its sale in October 2023, and a negative valuation adjustment to mortgage servicing rights **Noninterest Income:** | Period | Noninterest Income ($M) | | :----- | :---------------------- | | Q1 2024 | 4.4 | | Q1 2023 | 5.8 | | YoY Change | -24.1% | - Key Differentiators YoY: * Absence of UFS income in Q1 2024 (vs. **$0.9 million** in Q1 2023) due to sale on October 1, 2023[2](index=2&type=chunk)[30](index=30&type=chunk) * Negative valuation adjustment of **$0.3 million** to mortgage servicing rights in Q1 2024 (vs. **$0.8 million** favorable adjustment in Q1 2023)[2](index=2&type=chunk)[30](index=30&type=chunk) [Noninterest Expense](index=2&type=section&id=Noninterest%20Expense) Noninterest expense increased year-over-year, mainly due to higher personnel expenses from the Hometown acquisition and increased data processing costs for platform upgrades, partially offset by lower acquisition-related expenses **Noninterest Expense:** | Period | Noninterest Expense ($M) | | :----- | :----------------------- | | Q1 2024 | 20.3 | | Q1 2023 | 19.7 | | YoY Change | +3.0% | - Key Drivers of Increase: * Personnel expense increased by **$1.0 million** YoY due to additional staff from the Hometown acquisition[34](index=34&type=chunk) * Data processing expenses increased by **$0.5 million** YoY, including **$0.3 million** for online customer platform upgrades[34](index=34&type=chunk) - Offsetting Factors: Postage, stationery, supplies, and outside service fees saw YoY reductions due to one-time acquisition expenses from the Hometown acquisition in Q1 2023[34](index=34&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses significantly decreased year-over-year, primarily due to a large day-one provision related to the Hometown acquisition in Q1 2023, with Q1 2024 seeing net recoveries contributing to the credit loss reserve **Provision for Credit Losses:** | Period | Provision for Credit Losses ($M) | | :----- | :------------------------------- | | Q1 2024 | 0.2 | | Q4 2023 | 0.5 | | Q1 2023 | 4.2 | | YoY Change | -95.2% | - The significant YoY variance is due to a **$3.6 million** day-one provision for credit losses from the Hometown acquisition in Q1 2023[25](index=25&type=chunk) - Net recoveries of previously charged-off loan balances totaled **$0.6 million** during Q1 2024, contributing to the credit loss reserve[25](index=25&type=chunk) [Income Tax Expense](index=2&type=section&id=Income%20Tax%20Expense) Income tax expense in Q1 2024 was influenced by an additional $1.3 million benefit recorded due to the finalization of rules for a Wisconsin state income tax exclusion on certain commercial and agricultural loans from 2023 **Income Tax Expense:** | Period | Income Tax Expense ($M) | | :----- | :---------------------- | | Q1 2024 | 1.8 | | Q1 2023 | 3.6 | | YoY Change | -50.0% | - An additional benefit of **$1.3 million** was recorded in Q1 2024 as a refinement to 2023 income tax provisions, following the finalization of rules for a Wisconsin state income tax exclusion on certain commercial and agricultural loans[10](index=10&type=chunk) [Financial Position](index=3&type=section&id=Financial%20Position) The company's financial position at Q1 2024 showed a decrease in total assets and deposits, alongside growth in total loans [Total Assets](index=3&type=section&id=Total%20Assets) Total assets decreased both quarter-over-quarter and year-over-year, standing at **$4.10 billion** at March 31, 2024 **Total Assets:** | Period | Total Assets ($B) | | :----------- | :---------------- | | Mar 31, 2024 | 4.10 | | Dec 31, 2023 | 4.22 | | Mar 31, 2023 | 4.17 | | QoQ Change | -$121.9M | | YoY Change | -$67.3M | [Deposits](index=3&type=section&id=Deposits) Total deposits experienced a slight decrease quarter-over-quarter and year-over-year, with a modest shift from noninterest-bearing to interest-bearing balances **Total Deposits:** | Period | Total Deposits ($B) | | :----------- | :------------------ | | Mar 31, 2024 | 3.42 | | Dec 31, 2023 | 3.43 | | Mar 31, 2023 | 3.46 | | QoQ Change | -$16.9M | | YoY Change | -$47.2M | - Noninterest-bearing demand deposits comprised **29.0%** of total deposits at March 31, 2024, down from **31.8%** at March 31, 2023, indicating a modest shift towards interest-bearing balances[11](index=11&type=chunk) [Loans](index=3&type=section&id=Loans) Total loans showed growth both quarter-over-quarter and year-over-year, with significant annualized growth in Q1 2024, expected to benefit future earnings **Total Loans:** | Period | Total Loans ($B) | | :----------- | :--------------- | | Mar 31, 2024 | 3.38 | | Dec 31, 2023 | 3.34 | | Mar 31, 2023 | 3.32 | | QoQ Change | +$40.4M | | YoY Change | +$60.1M | - Loans grew by **4.9%** annualized during Q1 2024, with most growth occurring later in the quarter, expected to benefit future earnings[35](index=35&type=chunk) [Asset Quality](index=3&type=section&id=Asset%20Quality) Asset quality metrics in Q1 2024 indicated an increase in nonperforming assets, primarily due to a single large loan moving to nonaccrual status [Nonperforming Assets](index=3&type=section&id=Nonperforming%20Assets) Nonperforming assets increased quarter-over-quarter and year-over-year, primarily due to one large loan from previous acquisitions moving to nonaccrual status **Nonperforming Assets:** | Period | Nonperforming Assets ($M) | Nonperforming Assets to Total Assets (%) | | :----------- | :------------------------ | :--------------------------------------- | | Mar 31, 2024 | 12.5 | 0.31 | | Dec 31, 2023 | 9.1 | 0.21 | | Mar 31, 2023 | 9.1 | 0.22 | | QoQ Change | +$3.4M | +0.10 pp | | YoY Change | +$3.4M | +0.09 pp | - The increase in nonperforming assets resulted from one loan totaling **$3.6 million**, primarily from previous acquisitions, which was moved to nonaccrual status[4](index=4&type=chunk) [Capital and Shareholder Returns](index=1&type=section&id=Capital%20and%20Shareholder%20Returns) Capital and shareholder returns in Q1 2024 reflected increased book values, substantial share repurchases, and a stable dividend, despite a slight quarter-over-quarter decrease in stockholders' equity [Stockholders' Equity](index=3&type=section&id=Stockholders'%20Equity) Stockholders' equity increased year-over-year but decreased quarter-over-quarter, as dividends and share repurchases outpaced earnings during the quarter **Stockholders' Equity:** | Period | Stockholders' Equity ($M) | | :----------- | :------------------------ | | Mar 31, 2024 | 609.3 | | Dec 31, 2023 | 619.8 | | Mar 31, 2023 | 562.4 | | QoQ Change | -$10.5M | | YoY Change | +$47.0M | - The quarter-over-quarter decline in capital was due to dividends totaling **$3.5 million** and share repurchases of **$22.3 million** outpacing earnings of **$15.4 million**[12](index=12&type=chunk) [Book Value and Tangible Book Value Per Share](index=3&type=section&id=Book%20Value%20and%20Tangible%20Book%20Value%20Per%20Share) Both book value and tangible book value per common share increased year-over-year and slightly quarter-over-quarter, reflecting overall capital growth **Book Value Per Common Share:** | Period | Book Value Per Share ($) | | :----------- | :----------------------- | | Mar 31, 2024 | 60.16 | | Dec 31, 2023 | 59.80 | | Mar 31, 2023 | 54.04 | **Tangible Book Value Per Common Share (Non-GAAP):** | Period | Tangible Book Value Per Share ($) | | :----------- | :-------------------------------- | | Mar 31, 2024 | 40.35 | | Dec 31, 2023 | 40.30 | | Mar 31, 2023 | 34.14 | [Dividends and Share Repurchases](index=1&type=section&id=Dividends%20and%20Share%20Repurchases) Bank First declared a quarterly cash dividend matching the prior quarter and significantly higher than the prior year, while also executing substantial share repurchases during Q1 2024 - A quarterly cash dividend of **$0.35** per common share was declared, payable on July 10, 2024[24](index=24&type=chunk)[36](index=36&type=chunk) - The declared dividend matches the prior quarter and is **16.7%** higher than the prior-year first quarter[24](index=24&type=chunk) - **261,340** common shares were repurchased during Q1 2024, representing **2.5%** of outstanding shares as of the beginning of the period[24](index=24&type=chunk)[33](index=33&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) Bank First Corporation is a Wisconsin-based financial services provider, established in 1894, offering comprehensive banking products through 26 locations with approximately $4.1 billion in assets [About Bank First Corporation](index=4&type=section&id=About%20Bank%20First%20Corporation) Bank First Corporation, established in 1894, is a Wisconsin-based financial services provider offering a range of banking products through 26 locations, with approximately **$4.1 billion** in assets and **361** full-time equivalent staff - Incorporated in 1894, Bank First, N.A. operates **26** banking locations in Wisconsin[5](index=5&type=chunk) - Offers loan, deposit, and treasury management products, and has grown through acquisitions and de novo branch expansion[5](index=5&type=chunk) - Employs approximately **361** full-time equivalent staff and manages assets of approximately **$4.1 billion**[5](index=5&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) Management utilizes non-GAAP financial measures, such as adjusted net income and tangible book value, to provide additional insights into the company's operating performance, financial position, and for peer comparison, while also emphasizing their limitations - Non-GAAP measures (e.g., adjusted net income, tangible book value per common share) are used by management and investors to understand operating performance, financial position, and for peer comparison[6](index=6&type=chunk) - Comparable GAAP measures and reconciliations are provided, and non-GAAP measures should not be considered in isolation or as a substitute for GAAP results due to their limitations[6](index=6&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements regarding future performance, financial condition, and strategic plans, which are subject to inherent uncertainties and risks that could cause actual results to differ materially - Statements relate to projected growth, anticipated future financial performance, financial condition, credit quality, management's long-term goals, and anticipated effects of developments or events[13](index=13&type=chunk) - These statements are based on current expectations, estimates, and projections, which are inherently uncertain and beyond Bank First's control[29](index=29&type=chunk) - Actual results may differ materially due to various factors, including business and economic conditions, interest rate policies, credit management, acquisition risks, and general market conditions[29](index=29&type=chunk) [Consolidated Financial Summary (Unaudited)](index=6&type=section&id=Consolidated%20Financial%20Summary%20(Unaudited)) This section provides detailed unaudited consolidated financial statements, including results of operations, period-end balances, key financial ratios, and reconciliations of non-GAAP measures across multiple quarters [Results of Operations](index=6&type=section&id=Results%20of%20Operations) This section provides a detailed breakdown of Bank First Corporation's interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expense, and net income over the past five quarters **Results of Operations (in thousands):** | Metric | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | | :------------------------------------- | :-------- | :--------- | :-------- | :-------- | :-------- | | Interest income | $49,272 | $48,663 | $46,989 | $45,929 | $40,902 | | Interest expense | $15,923 | $15,747 | $12,931 | $11,657 | $8,668 | | Net interest income | $33,349 | $32,916 | $34,058 | $34,272 | $32,234 | | Provision for credit losses | $200 | $500 | $- | $- | $4,182 | | Noninterest income | $4,397 | $42,458 | $5,254 | $4,554 | $5,849 | | Noninterest expense | $20,324 | $28,862 | $19,647 | $19,946 | $19,664 | | Net income | $15,412 | $34,898 | $14,804 | $14,132 | $10,680 | | Earnings per common share - basic | $1.51 | $3.39 | $1.43 | $1.37 | $1.09 | [Period-End Balances](index=6&type=section&id=Period-End%20Balances) This section provides a snapshot of key balance sheet items at the end of each of the last five quarters, including cash, investment securities, loans, total assets, deposits, and stockholders' equity **Period-End Balances (in thousands):** | Metric | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | | :------------------------------------- | :-------- | :--------- | :-------- | :-------- | :-------- | | Cash and cash equivalents | $83,374 | $247,468 | $75,776 | $111,326 | $169,691 | | Investment securities available-for-sale | $138,420 | $142,197 | $179,046 | $191,303 | $197,895 | | Loans | $3,383,395 | $3,342,974 | $3,355,549 | $3,314,481 | $3,323,296 | | Total assets | $4,099,924 | $4,221,842 | $4,087,519 | $4,092,071 | $4,167,228 | | Deposits | $3,416,039 | $3,432,920 | $3,398,293 | $3,405,736 | $3,463,235 | | Stockholders' equity | $609,330 | $619,798 | $577,329 | $570,872 | $562,372 | [Financial Ratios](index=7&type=section&id=Financial%20Ratios) This section presents key financial ratios, including profitability, capital adequacy, asset quality, and interest rate metrics, for the last five quarters, providing a comprehensive view of the bank's performance and health **Financial Ratios:** | Metric | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | | :------------------------------------- | :-------- | :--------- | :-------- | :-------- | :-------- | | Return on average assets * | 1.50% | 3.34% | 1.44% | 1.38% | 1.11% | | Return on average common equity * | 10.11% | 22.58% | 10.19% | 9.99% | 8.33% | | Stockholders' equity to assets | 14.86% | 14.68% | 14.12% | 13.95% | 13.50% | | Tangible equity to tangible assets (non-GAAP) | 10.48% | 10.39% | 9.62% | 9.40% | 8.97% | | Net interest margin, taxable equivalent * | 3.62% | 3.53% | 3.71% | 3.77% | 3.74% | | Nonperforming loans to total loans | 0.29% | 0.20% | 0.10% | 0.15% | 0.14% | | Nonperforming assets to total assets | 0.31% | 0.21% | 0.13% | 0.18% | 0.22% | | Allowance for credit losses - loans to total loans | 1.31% | 1.30% | 1.29% | 1.31% | 1.30% | [Adjusted Net Income Reconciliation](index=7&type=section&id=Adjusted%20Net%20Income%20Reconciliation) This section provides a reconciliation of GAAP net income to non-GAAP adjusted net income, detailing adjustments for acquisition-related expenses, gains/losses on sales of securities, and other non-recurring items across multiple quarters **Adjusted Net Income Reconciliation (in thousands):** | Metric | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | | :------------------------------------- | :-------- | :--------- | :-------- | :-------- | :-------- | | Net income (GAAP) | $15,412 | $34,898 | $14,804 | $14,132 | $10,680 | | Acquisition related expenses | $- | $29 | $312 | $171 | $1,342 | | Provision for credit losses related to acquisition | $- | $- | $- | $- | $3,552 | | Gain on sale of UFS | $- | $(38,904) | $- | $- | $- | | Losses (gains) on sales of securities and OREO valuations | $(13) | $9,780 | $53 | $489 | $75 | | Adjusted net income (non-GAAP) | $15,396 | $14,792 | $15,092 | $14,627 | $14,678 | | Adjusted earnings per share (non-GAAP) | $1.51 | $1.44 | $1.46 | $1.42 | $1.50 | [Tangible Assets Reconciliation](index=7&type=section&id=Tangible%20Assets%20Reconciliation) This section provides a reconciliation of GAAP total assets to non-GAAP tangible assets by deducting goodwill and core deposit intangibles for the past five quarters **Tangible Assets Reconciliation (in thousands):** | Metric | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | | :------------------------------------- | :-------- | :--------- | :-------- | :-------- | :-------- | | Total assets (GAAP) | $4,099,924 | $4,221,842 | $4,087,519 | $4,092,071 | $4,167,228 | | Goodwill | $(175,106) | $(175,106) | $(175,106) | $(175,104) | $(175,125) | | Core deposit intangible, net of amortization | $(25,496) | $(26,996) | $(28,599) | $(30,225) | $(31,897) | | Tangible assets (non-GAAP) | $3,899,322 | $4,019,740 | $3,883,814 | $3,886,742 | $3,960,206 | [Tangible Common Equity Reconciliation](index=8&type=section&id=Tangible%20Common%20Equity%20Reconciliation) This section provides a reconciliation of GAAP total stockholders' equity to non-GAAP tangible common equity by deducting goodwill and core deposit intangibles for the past five quarters **Tangible Common Equity Reconciliation (in thousands):** | Metric | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | | :------------------------------------- | :-------- | :--------- | :-------- | :-------- | :-------- | | Total stockholders' equity (GAAP) | $609,330 | $619,798 | $577,329 | $570,872 | $562,372 | | Goodwill | $(175,106) | $(175,106) | $(175,106) | $(175,104) | $(175,125) | | Core deposit intangible, net of amortization | $(25,496) | $(26,996) | $(28,599) | $(30,225) | $(31,897) | | Tangible common equity (non-GAAP) | $408,728 | $417,696 | $373,624 | $365,543 | $355,350 | [Tangible Book Value Per Common Share Calculation](index=8&type=section&id=Tangible%20Book%20Value%20Per%20Common%20Share%20Calculation) This section details the calculation of non-GAAP tangible book value per common share using tangible common equity and common shares outstanding for the past five quarters **Tangible Book Value Per Common Share Calculation:** | Metric | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | | :------------------------------------- | :-------- | :--------- | :-------- | :-------- | :-------- | | Tangible common equity (non-GAAP) | $408,728 | $417,696 | $373,624 | $365,543 | $355,350 | | Common shares outstanding at period end | 10,129,190 | 10,365,131 | 10,379,071 | 10,389,240 | 10,407,114 | | Tangible book value per common share (non-GAAP) | $40.35 | $40.30 | $36.00 | $35.18 | $34.14 | [Average Assets, Liabilities and Stockholders' Equity, and Average Rates Earned or Paid](index=8&type=section&id=Average%20Assets,%20Liabilities%20and%20Stockholders'%20Equity,%20and%20Average%20Rates%20Earned%20or%20Paid) This section provides a detailed breakdown of average balances for interest-earning assets, liabilities, and stockholders' equity, along with average rates earned or paid, offering insights into the bank's interest rate sensitivity and profitability for Q1 2024 and Q1 2023 **Average Balances and Rates (in thousands, except rates):** | Metric | 3/31/2024 | 3/31/2023 | | :------------------------------------- | :-------- | :-------- | | **ASSETS** | | | | Total interest-earning assets | $3,741,498 | $3,524,672 | | Total assets | $4,144,896 | $3,901,713 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Total interest-bearing deposits | $2,463,041 | $2,240,368 | | Total interest-bearing liabilities | $2,512,304 | $2,334,956 | | Shareholders' equity | $613,190 | $520,212 | | **RATES** | | | | Total interest-earning assets yield | 5.33% | 4.74% | | Total interest-bearing liabilities cost | 2.55% | 1.51% | | Net interest spread | 2.78% | 3.24% | | Net interest margin | 3.62% | 3.74% |

Loans and Assets - As of December 31, 2023, total loans receivable amounted to $3.34 billion, representing approximately 79.3% of total assets[4] - Loans secured by real estate constituted approximately $2.59 billion, or 77.4% of the loan portfolio[8] - The company had 26 nonaccrual loans totaling approximately $5.7 million, or 0.2% of total loans[4] - As of December 31, 2023, total consolidated assets were $4.22 billion, total loans were $3.34 billion, total deposits were $3.43 billion, and total stockholders' equity was $619.8 million[43] - As of December 31, 2023, commercial real estate loans constituted approximately $1.70 billion or 50.8% of the loan portfolio[77] - Residential mortgage loans and home equity loans accounted for approximately $888.6 million or 26.6% of the loan portfolio[77] - Commercial and industrial loans made up approximately $487.9 million or 14.6% of the loan portfolio[78] - Construction and development loans represented approximately $200.8 million or 6.0% of the loan portfolio[82] - Consumer loans totaled approximately $51.0 million or 1.5% of the loan portfolio[83] - Approximately 77.4% of the loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral[202] Mergers and Acquisitions - The merger with Hometown Bancorp was completed on February 10, 2023, with a total merger consideration of approximately $130.5 million[27] - Company stock issued in the merger totaled 1,450,272 shares valued at approximately $115.1 million, with cash of $15.4 million[28] Strategic Priorities and Growth - The strategic priorities include growing capital through strong earnings and maintaining a strong credit culture[31] - The Company is focused on maintaining a strong credit culture to ensure sound asset quality and is committed to creating value for customers and shareholders through personalized solutions[47] - The Company is focused on strategic initiatives to enhance operational efficiency and profitability, while managing risks associated with economic conditions and market fluctuations[39] - The company is focused on organic growth but may pursue attractive bank or non-bank acquisition opportunities, facing competition from other financial companies[176] Regulatory Compliance and Capital Requirements - The Company is subject to various regulatory requirements, including maintaining minimum capital levels based on capital-to-asset ratios[56] - The required minimum leverage ratio for all banks is 4.0%, which serves as a minimum capital standard[57] - The capital conservation buffer for CET1 is set at 2.5% above the minimum capital ratio requirements[75] - The Company and Bank's regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer in 2023[104] - The Company crossed above the $3 billion asset threshold during Q3 2022, requiring adherence to risk-based capital rules[105] - The Bank's base legal lending limit was $66.9 million, while the internal lending limit was set at $53.6 million as of December 31, 2023[102] - The Company must obtain prior approval from the OCC if total dividends declared exceed the sum of net profits for the year and retained net profits for the preceding two years[109] Competition and Market Position - The Company faces competition from various financial institutions, including commercial banks, credit unions, and fintech companies, which may impact its market position[49] - The estimated aggregate population in the Bank's market area is 1,894,606, with total deposits of approximately $60.4 billion as of June 30, 2023[48] - Bank First ranked in the top three of market share in six of the fourteen counties where its branches are located as of June 30, 2023[32] - The company faces significant competition from various financial institutions, including national and regional banks, fintech companies, and credit unions, which may affect its market position[168] - The company’s ability to attract and retain experienced bankers is crucial for executing its business strategy, but competition for talent is intense[175] Cybersecurity and Technology - The company aims to advance its digital strategy and enhance cybersecurity measures as part of its information technology priorities[31] - The Bank must notify regulators within 36 hours of a significant cybersecurity incident, as per new SEC rules adopted on July 26, 2023[123] - The company is under continuous threat of cyberattacks, which could lead to increased operating costs and reputational damage[184] - The financial services industry is experiencing rapid technological changes, with a growing demand for technology-driven products and services, including artificial intelligence and mobile banking applications[180] - The company continues to invest significant resources in core information technology systems to improve operating efficiency and client experience[181] Economic Conditions and Risks - The Bank's operations are vulnerable to economic conditions, including inflation and recession, which could lead to increased loan delinquencies and reduced demand for products[131] - Inflationary pressures continued to rise in 2023, potentially impacting profitability through increased funding costs and reduced consumer purchasing power[163] - Adverse developments affecting real estate values could increase credit risk associated with the real estate loan portfolio, potentially leading to losses[202] - The provision and allowance for credit losses may not be adequate to cover actual credit losses, posing a risk to financial stability[197] - Changes in interest rates may adversely affect net interest income, with decreasing rates reducing yields on variable rate loans and investment securities[190] Diversity and Inclusion - The Company is committed to diversity and inclusion within its workforce and community, which is seen as a foundation for innovation[47] - The company emphasizes diversity, with approximately 73% of employees self-identifying as female and 5% as people of color[65] - The company aims to increase the diversity of its Board in the coming year[65] Deposits and Liquidity - The Bank's deposits are insured by the FDIC up to $250,000 per depositor, per insured bank[115] - The Bank was well capitalized at December 31, 2023, with no restrictions on brokered deposits[103] - The Bank's lending activities are subject to various federal lending limits, including a base legal limit of 15% of the Bank's capital for loans to a single borrower[102] - The Bank's ability to grow and retain deposits is critical to avoid liquidity risk and higher funding costs[138] - The company must manage liquidity at the holding company level for capital infusions, debt servicing, and dividend payments, which are dependent on the bank's future profits and overall condition[164]