Business Context and Reporting Period
Company: Bank First Corporation (BFC)
Reporting Period: Fiscal Year Ended December 31, 2024
Business Overview: Bank First Corporation is a Wisconsin-based bank holding company operating through its wholly-owned subsidiary, Bank First, N.A. The bank serves businesses, professionals, and consumers in 14 counties across Wisconsin through 26 offices. Its primary activities include commercial and industrial lending, commercial and residential real estate lending, and deposit gathering. The company completed a merger with Hometown Bancorp, Ltd. in February 2023.
Key Financial Metrics
| Metric | 2024 | 2023 |
|---|---|---|
| Total Assets | $4.50 billion | $4.22 billion |
| Total Loans | $3.52 billion | $3.34 billion |
| Total Deposits | $3.66 billion | $3.43 billion |
| Net Interest Income | $137.8 million | $133.5 million |
| Net Interest Margin | 3.65% | 3.69% |
| Noninterest Income | $19.7 million | $58.1 million |
| Noninterest Expense | $78.8 million | $88.1 million |
| Net Income | $65.6 million | $74.5 million |
| Earnings Per Share (Diluted) | $6.50 | $7.28 |
| Stockholders' Equity | $639.7 million | $619.8 million |
| Allowance for Credit Losses (Loans) | $44.2 million (1.26% of loans) | $43.6 million (1.30% of loans) |
| Nonperforming Assets | $9.2 million (0.21% of assets) | $9.1 million (0.21% of assets) |
Material Changes vs. Prior Period
- Net Income Decline: Net income decreased 12.0% to $65.6 million. This decline was primarily driven by the absence of a $38.9 million pre-tax gain on the sale of the company's interest in UFS, LLC, which occurred in 2023 but not in 2024.
- Noninterest Income Drop: Noninterest income fell 66.1% to $19.7 million, almost entirely due to the one-time gain on the UFS sale in the prior year. Excluding this item, service charge income and income from the Ansay insurance subsidiary increased.
- Expense Reduction: Noninterest expenses decreased 10.7% to $78.8 million. This was largely due to a $7.9 million pre-tax loss on the sale of securities in 2023, which was negligible in 2024, and the absence of acquisition-related expenses.
- Provision for Credit Losses: The company recorded a negative provision (benefit) of $0.8 million in 2024, compared to a positive provision of $4.7 million in 2023. The 2024 benefit resulted from improved financial trends in specific relationships acquired from Hometown, allowing for a reduction in specific reserves.
- Deposit Growth: Total deposits increased 6.7% to $3.66 billion, driven by significant growth in the fourth quarter. However, there was a shift in customer behavior from noninterest-bearing to interest-bearing accounts, increasing the cost of funds.
Guidance, Outlook, and Risks
Management Commentary: Management maintains a strong credit culture and focuses on relationship-based banking. The company expects to continue exceeding well-capitalized regulatory capital requirements in 2025. Strategic priorities include growing capital through earnings, maintaining asset quality, and advancing digital strategies.
Outlook: The company anticipates continued loan growth driven by new customer relationships and inflationary impacts on existing customers. Management notes that the Federal Reserve began decreasing interest rates in the third quarter of 2024, creating uncertainty regarding future rate movements and their impact on net interest income.
Key Risks:
- Interest Rate Risk: Changes in interest rates could compress net interest margins. The company is currently liability-sensitive in certain scenarios, where rising rates could increase funding costs faster than asset yields.
- Commercial Real Estate (CRE) Concentration: CRE loans comprise approximately 50% of the loan portfolio. Deterioration in real estate values or borrower cash flows could lead to increased credit losses.
- Geographic Concentration: All operations are within Wisconsin, exposing the company to local economic downturns.
- Cybersecurity: The company faces evolving cyber threats, including ransomware and AI-driven attacks, which could disrupt operations or lead to data breaches.
- Regulatory Changes: Potential changes in banking regulations, capital requirements, and tax laws (specifically Wisconsin tax legislation regarding loan income) could impact profitability.
Investor Verification Checklist
- One-Time Items: Verify the impact of the 2023 UFS sale gain ($38.9M) and securities loss ($7.9M) on year-over-year comparisons to understand core operating performance.
- Deposit Mix: Monitor the shift from noninterest-bearing to interest-bearing deposits and its effect on the cost of funds and net interest margin in future quarters.
- CRE Exposure: Review the composition of the $1.75 billion CRE portfolio, specifically the ratio of owner-occupied vs. non-owner-occupied loans, to assess sensitivity to economic downturns.
- Capital Ratios: Confirm that the company remains "well-capitalized" under prompt corrective action provisions, with a CET1 ratio of 12.7% and Total Capital ratio of 14.1% as of year-end 2024.
- Share Repurchases: Note the reactivation of the $30 million share repurchase program in February 2024, which expired in February 2025 with $175,611 shares remaining available for purchase.