Bank First Announces Net Income for the Second Quarter of 2020

MANITOWOC, Wis., July 22, 2020 /PRNewswire/ -- Bank First Corporation (NASDAQ: BFC) ("Bank First"), the holding company for Bank First, N.A., reported net income of $8.3 million, or $1.11 per share, for the second quarter of 2020, compared with net income of $6.0 million, or $0.91 per share, for the respective prior-year period. For the six months ended June 30, 2020, Bank First earned $15.6 million, or $2.14 per share, compared to $12.6 million, or $1.91 per share for the same period in 2019.

Operating Results

Net interest income ("NII") during the second quarter of 2020 was $20.8 million, up $2.2 million from the previous quarter and up $5.4 million from the second quarter of 2019. NII for the first six months of 2020 was $39.4 million, up from $30.6 million for the first six months of 2019.

NII related to purchased loan accounting entries, resulting from our purchases of Waupaca Bancorporation, Inc. ("Waupaca") during the fourth quarter of 2017, Partnership Community Bancshares, Inc. ("Partnership") during the third quarter of 2019, and Tomah Bancshares, Inc. ("Tomah") during the second quarter of 2020  increased net income (after tax) during the second quarter of 2020 by $0.7 million, or $0.09 per share, compared to $0.7 million, or $0.10 per share, for the second quarter of 2019. For the first six months of 2020 and 2019 the impact of these purchase loan accounting entries increased net income (after tax) by $1.4 million, or $0.20 per share, and $1.4 million, or $0.21 per share, respectively.

Net interest margin ("NIM") was 3.67% for the second quarter of 2020, compared to 3.76% for the second quarter of 2019. The aforementioned purchase loan accounting entries added 0.16% and 0.21% to NIM for each of these periods, respectively. NIM was 3.74% for the first six months of 2020, including 0.19% from the impact of purchase accounting entries, compared to 3.79%, including 0.23% from the impact of purchase accounting entries, for the first six months of 2019. Bank First's NIM has remained resilient to the impact of a severe drop in the overall interest rate environment which has resulted from the economic fallout of the COVID-19 pandemic ("COVID"). This resiliency has been the result of swift response to the falling rate environment on the funding side, reducing costs of interest-bearing funds by 0.36% quarter-over-quarter and by 0.77% compared to the second quarter of 2019. Based on average interest-bearing liabilities of $1.59 billion during the second quarter of 2020, the quarter-over-quarter decline in costs of funds equates to annualized interest expense savings of over $5.7 million. Bank First's low reliance on time deposits compared to peers allowed for this swift response without the need to wait for the maturity of significant levels of high-rate time deposits entered into in prior periods.

Bank First recorded a provision for loan losses of $3.2 million during the second quarter of 2020, compared to $0.5 million during the second quarter of 2019. Provision expense was $4.1 million for the first six months of 2020 compared to $1.1 million for the same period during 2019. Net recoveries of previously charged-off loan balances in excess of current loan balance charge-offs further increased the allowance for loan losses by $0.6 million during the first six months of 2020. The increase in provision expense during 2020 is in response to the heightened economic risks related to COVID. As mentioned in its 2020 first quarter earnings release and further explained later in this release, Bank First entered this time of heightened economic turbulence with strong asset quality metrics. Management continues to monitor the stress on the overall economy caused by COVID as well as specific impacts on our customers, which have been limited to date, and these factors will guide assessments of the adequacy of the allowance for loan losses in future quarters.

Noninterest income was $7.8 million for the second quarter of 2020, compared to $2.7 million for the second quarter of 2019. One-time events that led to significant variances in noninterest income in year-over-year quarters included the sale of $36.6 million of U.S. Treasury notes, generating a gain on sale of $3.1 million, and $0.4 million in satisfaction fees on fixed-rate customer loans that were paid off prior to contractual maturity. These items were partially offset by a negative adjustment to the value of mortgage servicing rights on Bank First's balance sheet totaling $0.5 million. Outside of these one-time events, the largest change in noninterest income from the year-over-year second quarter comparison was net gains on sales of mortgage loans to the secondary market which totaled $1.3 million during the second quarter of 2020, comparing favorably to $0.2 million during the second quarter of 2019. Service charges earned by Bank First increased from $0.8 million during the second quarter of 2019 to $1.2 million during the second quarter of 2020, reflecting the increased scale resulting from the acquisitions of Partnership and Tomah over the previous twelve months.

Noninterest expense was $14.4 million in the second quarter of 2020, compared to $10.0 million during the second quarter of 2019. Expenses related to Bank First's acquisition of Tomah, which closed on May 15, 2020, totaled $0.8 million during the second quarter of 2020. These acquisition related expenses consisted primarily of personnel expense, data processing and outside service fees. Net losses on sales and valuations of other real estate owned totaled $0.5 million during the second quarter of 2020 compared to net gains of $0.1 million during the second quarter of 2019, as the continued effects of COVID impacted two large property sales during the recently completed quarter. Amortization of intangible assets increased from $0.2 million to $0.4 million in the year-over-year second quarters as the acquisitions of Partnership and Tomah resulted in additional core deposit intangible assets. Finally, during the second quarter of 2020 Bank First paid off $30.0 million in borrowings from the Federal Home Loan Bank of Chicago ("FHLB") which had contractual maturities ranging from August 2022 through August 2024 and carried contractual interest rates ranging from 1.74% to 1.76%. While the repayment of these FHLB borrowings resulted in the recognition of a prepayment penalty totaling $1.3 million during the second quarter of 2020, it will save the Bank $1.7 million in interest expense over the next four years.

Balance Sheet

Total assets were $2.66 billion at June 30, 2020, up $447.6 million from December 31, 2019, and up $851.4 million from June 30, 2019. Total loans were $2.12 billion at June 30, 2020, up $378.7 million from December 31, 2019, and up $695.8 million from June 30, 2019. Purchased loan balances totaled $111.9 million from the acquisition of Tomah in May 2020 and $275.3 million from the acquisition of Partnership in July 2019. Bank First also originated $278.1 million in loans through the Paycheck Protection Program ("PPP") during the second quarter of 2020. Total deposits, nearly all of which remain core deposits, were $2.26 billion at June 30, 2020, up $419.8 million from December 31, 2019, and up $688.1 million from June 30, 2019. Assumed deposit balances totaled $171.1 million from the acquisition of Tomah in May 2020 and $268.8 million from the acquisition of Partnership in July 2019. Depending on the application by customers of funds produced by PPP loans, the origination of these loans caused a combination of reduced non-PPP loan balances and increased deposit balances during the second quarter of 2020. Noninterest-bearing demand deposits increased $304.7 million year-over-year, comprising 31.4% of total deposits at June 30, 2020 compared to 30.6% one year earlier.

Asset Quality

Nonperforming assets at June 30, 2020 totaled $25.0 million, up from $11.5 million and $19.8 million at the end of the fourth and second quarters of 2019, respectively. Nonperforming assets to total assets ended the second quarter of 2020 at 0.94%, up from 0.52% at the end of the fourth quarter of 2019, but down from 1.10% at the end of the second quarter of 2019. As mentioned earlier in this release, the economic impact of COVID on our customers has been limited to date, but has caused loans classified as nonaccrual to elevate to $23.0 million at June 30, 2020, compared to $5.1 million at December 31, 2019, and $13.6 million at June 30, 2019. A majority of this increase in nonaccrual loans during the first six months of 2020 consisted of six customer relationships totaling $17.2 million, one of which was acquired in the Tomah transaction.

Capital Position

Stockholders' equity totaled $276.1 million at June 30, 2020, an increase of $45.9 million from the end of 2019 and $90.7 million from June 30, 2019. The acquisition of Tomah during May 2020 added $29.4 million to capital. The distribution of balances from a previously terminated deferred compensation plan added another $2.1 million to capital during the first quarter of 2020. Finally, continued strong earnings offset by dividends totaling $3.0 million through the six months of 2020 led to the remainder of the increase in capital year-to-date.

On July 22, 2020, Bank First entered into subordinated note agreements with two Wisconsin-based community banks. Bank First will have the availability to draw up to $12.0 million under these agreements through December 31, 2020. Borrowings will have a stated maturity of July 22, 2030, and will be redeemable by Bank First at its option, in whole or in part, after December 31, 2025. Borrowings will bear interest at an annual fixed rate of 5.0% through June 30, 2025, converting to a variable rate of the Wall Street Journal Prime Rate plus 0.5% for the remaining term. These notes are intended to qualify as Tier 2 capital of Bank First for regulatory capital purposes.

Dividend Declaration

Bank First's Board of Directors approved a quarterly cash dividend of $0.20 per common share, payable on October 7, 2020, to shareholders of record as of September 23, 2020.

For further information, contact: 
Kevin M LeMahieu, Chief Financial Officer
Phone: (920) 652-3200  /  [email protected]

SOURCE Bank First Corporation