Bank First(BFC) - 2024 Q2 - Quarterly Results

Executive Summary & Highlights Financial Performance Highlights 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 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 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] - The Bank has grown through both acquisitions and de novo branch expansion, employing approximately 371 full-time equivalent staff[25] 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) 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] - 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] Provision for Credit Losses 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] - 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] Noninterest Income 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][19] - A $0.3 million positive valuation adjustment to mortgage servicing rights in Q2 2024 contrasted with negative adjustments in prior periods[9][19] Noninterest Expense 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][19] - 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] - 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][19] Balance Sheet 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 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] Asset Quality Nonperforming Assets and Loan Performance 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] Capital Position Stockholders' Equity and Book Value 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] Non-GAAP Financial Measures Explanation of Non-GAAP Measures 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] - 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] - Non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP results[26] Adjusted Net Income Reconciliation 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 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 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][18] - Actual results may differ materially due to various factors, including business and economic conditions, interest rate policies, credit management, acquisitions, and competitive conditions[1][18] - 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][38] Consolidated Financial Summary (Unaudited) Results of Operations 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 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 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 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% |