UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name on each exchange on which registered |
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The number of shares of the issuer’s common stock, par value $0.01, outstanding as of May 10, 2022 was
TABLE OF CONTENTS
2
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
BANK FIRST CORPORATION
Consolidated Balance Sheets
(In thousands, except share and per share data)
March 31, 2022 | December 31, 2021 | |||||
(Unaudited) | (Audited) | |||||
Assets | ||||||
Cash and due from banks | $ | | $ | | ||
Interest-bearing deposits |
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Cash and cash equivalents |
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Securities held to maturity, at amortized cost ($ |
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Securities available for sale, at fair value |
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Loans held for sale | | | ||||
Loans, net |
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Premises and equipment, net |
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Goodwill |
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Other investments |
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Cash value of life insurance |
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Identifiable intangible assets, net |
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Mortgage Servicing Rights ("MSR") | | | ||||
Other real estate owned (“OREO”) |
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Investment in minority-owned subsidiaries |
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Other assets |
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TOTAL ASSETS | $ | | $ | | ||
Liabilities and Stockholders’ Equity |
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Liabilities: |
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Deposits: |
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Interest-bearing deposits | $ | | $ | | ||
Noninterest-bearing deposits |
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Total deposits |
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Securities sold under repurchase agreements |
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Notes payable |
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Subordinated notes |
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Other liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Serial preferred stock - $ |
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Authorized - |
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Common stock - $ |
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Authorized - |
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Issued - |
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Outstanding - |
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Additional paid-in capital |
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Retained earnings |
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Treasury stock, at cost - |
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Accumulated other comprehensive income |
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Total stockholders’ equity |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | | $ | |
See accompanying notes to consolidated financial statements.
3
ITEM 1. Financial Statements Continued:
BANK FIRST CORPORATION
Consolidated Statements of Income
(In thousands, except per share data) (Unaudited)
| Three months ended March 31, | |||||
2022 |
| 2021 | ||||
Interest income: | ||||||
Loans, including fees | $ | | $ | | ||
Securities: |
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Taxable |
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Tax-exempt |
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Other |
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Total interest income |
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Interest expense: |
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Deposits |
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Securities sold under repurchase agreements |
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Borrowed funds |
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Total interest expense |
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Net interest income |
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Provision for loan losses |
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Net interest income after provision for loan losses |
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Noninterest income: |
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Service charges |
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Income from Ansay and Associates, LLC (“Ansay”) |
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Income from UFS, LLC (“UFS”) |
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Loan servicing income |
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Net gain on sales of mortgage loans |
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Net gain on sales and valuations of OREO |
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Other |
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Total noninterest income |
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Noninterest expense: |
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Salaries, commissions, and employee benefits |
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Occupancy |
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Data processing |
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Postage, stationery, and supplies |
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Advertising |
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Charitable contributions |
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Outside service fees |
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Amortization of intangibles |
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Other |
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Total noninterest expense |
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Income before provision for income taxes |
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Provision for income taxes |
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Net Income | $ | | $ | | ||
Earnings per share - basic | $ | | $ | | ||
Earnings per share - diluted | $ | | $ | | ||
Dividends per share | $ | | $ | |
See accompanying notes to unaudited consolidated financial statements
4
ITEM 1. Financial Statements Continued:
BANK FIRST CORPORATION
Consolidated Statements of Comprehensive Income
(In thousands) (Unaudited)
Three Months Ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 | ||||
Net Income | $ | | $ | | |||
Other comprehensive loss: |
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Unrealized losses on available for sale securities: |
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Unrealized holding losses arising during period |
| ( |
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Income tax benefit |
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Total other comprehensive loss |
| ( |
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Comprehensive income | $ | | $ | |
See accompanying notes to unaudited consolidated financial statements.
5
ITEM 1. Financial Statements Continued:
BANK FIRST CORPORATION
Consolidated Statement of Stockholders’ Equity
(In thousands, except share and per share data) (Unaudited)
Accumulated | |||||||||||||||||||||
Serial | Additional | Other | Total | ||||||||||||||||||
Preferred | Common | Paid-in | Retained | Treasury | Comprehensive | Stockholders' | |||||||||||||||
| Stock |
| Stock |
| Capital |
| Earnings |
| Stock |
| Income (loss) |
| Equity | ||||||||
Balance at January 1, 2021 | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | |||||||
Net income |
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Other comprehensive loss |
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Purchase of treasury stock |
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Sale of treasury stock |
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Cash dividends ($ |
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Amortization of stock-based compensation |
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Vesting of restricted stock awards |
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Balance at March 31, 2021 | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | |||||||
Balance at January 1, 2022 | $ | | $ | | $ | | $ | | $ | ( | $ | | $ | | |||||||
Net income |
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Other comprehensive loss |
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Purchase of treasury stock | | | | | ( |
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Sale of treasury stock | | | | | | | | ||||||||||||||
Cash dividends ($ |
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Amortization of stock-based compensation |
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Vesting of restricted stock awards |
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Balance at March 31, 2022 | $ | | $ | | $ | | $ | | $ | ( | $ | ( | $ | |
See accompanying notes to unaudited consolidated financial statements.
6
ITEM 1. Financial Statements Continued:
BANK FIRST CORPORATION
Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
Three Months Ended March 31, | |||||||
| 2022 |
| 2021 | ||||
Cash flows from operating activities: | |||||||
Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Provision for loan losses |
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Depreciation and amortization of premises and equipment |
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Amortization of intangibles |
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Net amortization of securities |
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Amortization of stock-based compensation |
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Accretion of purchase accounting valuations |
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Net change in deferred loan fees and costs |
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Change in fair value of mortgage servicing rights ("MSR") and other investments | ( |
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Gain on sale and disposal of premises and equipment | | ( | |||||
Gain on sale of OREO and valuation allowance |
| ( |
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Proceeds from sales of mortgage loans |
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Originations of mortgage loans held for sale |
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Gain on sales of mortgage loans |
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Undistributed income of UFS joint venture |
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Undistributed income of Ansay joint venture |
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Net earnings on life insurance |
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Decrease in other assets |
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Decrease in other liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities, net of effects of business combination: |
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Activity in securities available for sale and held to maturity: |
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Maturities, prepayments, and calls | | | |||||
Purchases |
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Net increase in loans |
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Dividends received from UFS |
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Dividends received from Ansay |
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Proceeds from sale of OREO |
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Net purchases of Federal Home Loan Bank (“FHLB”) stock | ( | | |||||
Proceeds from sale of premises and equipment |
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Purchases of premises and equipment |
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Net cash used in investing activities |
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7
ITEM 1. Financial Statements Continued:
BANK FIRST CORPORATION
Consolidated Statements of Cash Flows (Continued)
(In thousands) (Unaudited)
Three Months Ended March 31, | |||||||
| 2022 |
| 2021 | ||||
Cash flows from financing activities, net of effects of business combination: |
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Net increase in deposits | $ | | $ | | |||
Net increase (decrease) in securities sold under repurchase agreements |
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Proceeds from advances of notes payable |
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Repayment of notes payable |
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Dividends paid |
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Proceeds from sales of common stock |
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Repurchase of common stock |
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Net cash provided by (used in) financing activities |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ | | $ | | |||
Supplemental disclosures of cash flow information: |
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Cash paid during the period for: | |||||||
Interest | $ | | $ | | |||
Supplemental schedule of noncash activities: |
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MSR resulting from sale of loans |
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Change in unrealized gains and losses on investment securities available for sale, net of tax |
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See accompanying notes to consolidated financial statements.
8
BANK FIRST CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTE 1 – BASIS OF PRESENTATION
Bank First Corporation (the “Company”) provides a variety of financial services to individual and corporate customers through its wholly-owned subsidiary, Bank First, N.A. (the “Bank”). The Bank operates as a full-service financial institution with a primary market area including, but not limited to, the counties in which the Bank’s branches are located. The Bank has twenty-one locations located in Manitowoc, Outagamie, Brown, Winnebago, Sheboygan, Waupaca, Ozaukee, Monroe, and Jefferson counties in Wisconsin. The Company and Bank are subject to the regulations of certain federal agencies and undergo periodic examinations by those regulatory authorities.
These interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures required by GAAP have been omitted or abbreviated. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”).
The unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.
Critical Accounting Policies and Estimates
Preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, the allowance for loan losses (“ALL”), valuation of loans in acquisition transactions, useful lives for depreciation and amortization, fair value of financial instruments, other-than-temporary impairment calculations, valuation of deferred tax assets, uncertain income tax positions and contingencies. Estimates that are particularly susceptible to significant change for the Company include the determination of the ALL, the determination and assessment of deferred tax assets and liabilities, and the valuation of loans acquired in acquisition transactions; therefore, these are critical accounting policies. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, changes in applicable banking or tax regulations, and changes to deferred tax estimates. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual reporting period presented.
There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as previously disclosed in the Company’s Annual Report.
Recently Issued Not Yet Effective Accounting Standards
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Certain aspects of this ASU were updated in November 2018 by the issuance of ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”. The main objective of the ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in the ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. During 2019 FASB issued ASU 2019-10 which delayed the effective date of ASU 2016-13 for smaller, publicly traded companies, until interim and annual periods beginning after December 15, 2022. This delay applies to the Company as it was classified as a “Smaller reporting company” as defined in Rule 12b-2 of the Exchange Act as of the date ASU 2019-10 was enacted. During the first half of 2019 the Company
9
engaged a third-party partner to assist it in implementation of this standard. Over the last three years significant progress has been made working through the assumptions, drivers, documentation and other mechanics for the calculation of the Company’s ALL under ASU 2016-13. Throughout this process, Management has evaluated the impact of this update. While the general expectation in the banking industry is that the implementation of this standard will result in higher required balances within the ALL, it is not anticipated to have a significant impact on the Company’s overall ALL balances.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying GAAP to contracts hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The updated guidance is effective for all entities from March 12, 2020 through December 31, 2022. The Company has been diligent in responding to reference rate reform and does not anticipate a significant impact to its financial statements as a result.
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU provides guidance on eliminating the requirement for classification of and disclosures around troubled debt restructurings. The purpose of this guidance is to eliminate unnecessary and overly-complex disclosures of loans that are already incorporated into the allowance for credit losses and related disclosures. This ASU further requires the disclosure of current-period gross charge-offs by year of origination. The updated guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for all entities which have implemented ASU 2016-13. The Company has historically had very few credit relationships classified as troubled debt restructurings, and as such does not anticipate that the elimination of accounting for and disclosure of these types of credit relationships will have a significant impact to its financial statements upon implementation of ASU 2016-13 beginning with the first quarter of 2023.
NOTE 2 – ACQUISITIONS
On January 18, 2022, the Company entered into an Agreement and Plan of Merger with Denmark Bancshares, Inc. (“Denmark”), a Wisconsin Corporation, under which Denmark will merge with and into the Company and Denmark’s banking subsidiary, Denmark State Bank, will merge with and into the Bank. The transaction is expected to close during the third quarter of 2022, and is subject to, among other items, approval by the shareholders of both institutions and regulatory agencies. Merger consideration will consist of up to
For more information concerning the Company’s acquisitions, see “Note 2 – Acquisition” in the Company’s audited consolidated financial statements included in the Company’s Annual Report.
NOTE 3 – EARNINGS PER SHARE
The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. There were
10
The following table presents the factors used in the earnings per share computations for the period indicated:
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Basic | ||||||
Net income available to common shareholders | $ | | $ | | ||
Less: Earnings allocated to participating securities | ( | ( | ||||
Net income allocated to common shareholders | $ | | $ | | ||
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Weighted average common shares outstanding including participating securities | | | ||||
Less: Participating securities (1) | ( | ( | ||||
Average shares | | | ||||
Basic earnings per common shares | $ | | $ | | ||
Diluted | ||||||
Net income available to common shareholders | $ | | $ | | ||
Weighted average common shares outstanding for basic earnings per common share | | | ||||
Add: Dilutive effects of stock based compensation awards | | | ||||
Average shares and dilutive potential common shares | | | ||||
Diluted earnings per common share | $ | | $ | |
(1) | Participating securities are restricted stock awards whereby the stock certificates have been issued, are included in outstanding shares, receive dividends and can be voted, but have not vested. |
NOTE 4 – SECURITIES
The following is a summary of available for sale securities:
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Amortized | Unrealized | Unrealized | Estimated | ||||||||||
Cost | Gains | Losses | Fair Value | ||||||||||
March 31, 2022 |
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U.S. Treasury securities | $ | | $ | — | $ | ( | $ | | |||||
Obligations of U.S. Government sponsored agencies |
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Obligations of states and political subdivisions | | | ( | | |||||||||
Mortgage-backed securities | | | ( | | |||||||||
Corporate notes |
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Certificates of deposit | | — | ( | | |||||||||
Total available for sale securities | $ | | $ | | $ | ( | $ | | |||||
December 31, 2021 |
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U.S. Treasury securities | $ | | $ | | $ | ( | $ | | |||||
Obligations of U.S. Government sponsored agencies | | | ( | | |||||||||
Obligations of states and political subdivisions | | | ( | | |||||||||
Mortgage-backed securities |
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Corporate notes |
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Certificates of deposit | | | — | | |||||||||
Total available for sale securities | $ | | $ | | $ | ( | $ | |
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The following is a summary of held to maturity securities:
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| Gross |
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Amortized | Unrealized | Unrealized | Estimated | |||||||||
Cost | Gains | Losses | Fair Value | |||||||||
March 31, 2022 | ||||||||||||
Obligations of states and political subdivisions | $ | | $ | | $ | | $ | | ||||
December 31, 2021 |
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Obligations of states and political subdivisions | $ | | $ | | $ | | $ | |
The following table shows the fair value and gross unrealized losses of securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
Less Than 12 Months | Greater Than 12 Months | Total | ||||||||||||||||
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | |||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||
March 31, 2022 - Available for Sale | ||||||||||||||||||
U.S. Treasury securities |