Bank First Corp. 2023 Form 10-K Summary
Business context and reporting period
Bank First Corporation is a Wisconsin bank holding company whose principal subsidiary, Bank First, N.A., operates 26 offices across 14 Wisconsin counties and provides commercial, residential, consumer, mortgage, deposit and treasury-management services. This filing covers the fiscal year ended December 31, 2023; it is an annual filing rather than a standalone fourth-quarter report.
The February 10, 2023 acquisition of Hometown Bancorp, Ltd. added approximately $615.1 million of assets and ten branches. The merger consideration was approximately $130.5 million, including 1,450,272 shares valued at approximately $115.1 million and $15.4 million of cash.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total assets | $4.22 billion | $3.66 billion | 15.3% increase |
| Total loans | $3.34 billion | $2.89 billion | 15.5% increase |
| Total deposits | $3.43 billion | $3.06 billion | 12.2% increase |
| Stockholders’ equity | $619.8 million | $453.1 million | 36.8% increase |
| Net interest income | $133.5 million | $104.1 million | 28.2% increase |
| Net income | $74.5 million | $45.2 million | 64.8% increase |
| Diluted EPS | $7.28 | $5.58 | 30.5% increase |
| Net interest margin | 3.69% | 3.41% | 28 basis-point increase |
| Net cash from operating activities | $52.9 million | $40.0 million | Increase |
Interest income increased to $182.5 million from $116.5 million, primarily due to higher asset yields and growth in average interest-earning assets. Interest expense rose to $49.0 million from $12.4 million as deposit and borrowing costs increased. Net interest income after provision for credit losses was $128.8 million.
Noninterest income was $58.1 million versus $19.7 million, including a $38.9 million pretax gain on the sale of the Company’s UFS investment. Noninterest expense increased to $88.1 million from $62.0 million, including a $7.9 million pretax loss on the sale of available-for-sale securities, higher personnel and data-processing costs, increased amortization of acquisition-related intangibles, and losses on other real estate owned. The effective tax rate was 24.6%, compared with 24.2% in 2022.
Credit quality, capital, debt and liquidity
- Real estate-secured loans were approximately 77.4% of total loans, including commercial real estate loans of approximately $1.70 billion, or 50.8% of total loans.
- The allowance for credit losses on loans increased to $43.6 million, or 1.30% of loans, from $22.7 million, or 0.78%. The increase primarily reflected CECL adoption, loan growth and the Hometown acquisition.
- Total provision for credit losses was $4.7 million, compared with $2.2 million. Net loan recoveries were $0.1 million, and management reported negligible net charge-offs.
- Nonaccrual loans were $5.7 million, or 0.17% of loans, compared with $3.6 million, or 0.13%. Total nonperforming assets were $9.1 million, or 0.21% of assets.
- Cash and cash equivalents increased to $247.5 million from $119.4 million. Investment securities declined to $245.5 million from $349.7 million after security sales and maturities.
- Borrowings included $35.3 million of FHLB advances, $12.0 million of subordinated notes, $4.1 million of junior subordinated debt and $75.7 million of repurchase agreements.
- At December 31, 2023, Bank First, N.A. reported a 12.91% total risk-based capital ratio, an 11.92% CET1 ratio, and a 10.40% leverage ratio, exceeding well-capitalized standards and the capital conservation buffer.
- The Bank reported approximately $806.2 million of available FHLB liquidity and maintained a $7.5 million commercial-bank line of credit with no outstanding balance.
Material changes versus the prior comparable period
- Hometown’s results were included from February 10, 2023, increasing assets, loans, deposits, branches, income and operating expenses.
- The Company adopted CECL on January 1, 2023, reducing retained earnings by approximately $10.1 million and increasing the loan allowance by $11.0 million and the unfunded-commitment allowance by $3.3 million.
- UFS was sold on October 1, 2023, generating a $38.9 million pretax gain and eliminating a recurring investment-income stream after the sale.
- Available-for-sale securities were reduced substantially, and the Company recognized a $7.9 million pretax loss on sales. The remaining available-for-sale portfolio had $12.2 million of unrealized losses at year-end, which management attributed to interest-rate and market-spread changes rather than credit impairment.
- Deposits increased in total, but interest-bearing deposits grew faster than noninterest-bearing deposits and deposit pricing materially increased funding costs.
- The Company repurchased approximately $10.0 million of common stock in 2023 and paid $12.0 million of dividends. The active repurchase authorization permitted up to $26 million of repurchases through April 17, 2024.
Outlook, management commentary, risks and unusual items
The filing does not provide specific earnings, revenue, loan-growth or margin guidance for 2024. Management states that it expects the Company and Bank to continue exceeding applicable well-capitalized regulatory requirements and believes current liquidity is adequate for anticipated needs.
Management identified the interest-rate environment, deposit competition, funding costs, inflation, Wisconsin economic conditions, commercial real estate concentrations, borrower credit quality, liquidity, regulatory changes and banking-industry confidence as principal areas of risk. The Federal Reserve held rates steady late in 2023 and indicated that rates could decline in 2024; the effect on net interest income remains uncertain. The Company’s interest-rate simulation estimated minimal 12-month net-interest-income sensitivity under parallel rate shocks, but those estimates depend on assumptions about deposit pricing, prepayments and customer behavior.
Other notable matters include the redemption of the Hometown-related Trust II junior subordinated debenture in December 2023 and the redemption of Trust I debt on January 8, 2024. Management reported no cybersecurity incident that materially affected strategy, operations or financial condition. The Company and its auditors reported effective internal control over financial reporting, although Hometown was excluded from the scope of management’s and the auditor’s internal-control assessment because it was acquired during 2023.
Most important facts for investors to verify
- Whether the $38.9 million UFS gain and other acquisition-related effects materially inflate 2023 earnings relative to sustainable recurring earnings.
- Deposit retention, deposit mix and funding costs as certificates of deposit reprice and competition remains elevated.
- Credit migration and collateral values within the $1.70 billion commercial real estate portfolio, particularly owner-occupied, non-owner-occupied and multifamily exposures.
- Whether nonaccrual loans, nonperforming assets and the $43.6 million CECL allowance remain adequate under weaker economic or real estate conditions.
- The effect of lower interest rates on net interest margin, mortgage-servicing-right valuations and mortgage-banking activity.
- The carrying value and unrealized losses in the securities portfolio, along with the Company’s ability to avoid forced sales.
- Post-acquisition integration results, goodwill of $175.1 million and core deposit intangibles of $27.0 million, including potential impairment risk.
- Actual 2024 capital distributions, share repurchases, dividend capacity and the Company’s reliance on dividends from the Bank for holding-company liquidity.