BANKFIRST CAPITAL CORPORATION Reports First Quarter 2023 Earnings of $7.1 Million

COLUMBUS, Miss., April 27, 2023 /PRNewswire/ -- BankFirst Capital Corporation (OTCQX: BFCC) ("BankFirst" or the "Company"), parent company of BankFirst Financial Services, Macon, Mississippi (the "Bank"), reported quarterly net income of $7.1 million, or $1.33 per share, for the first quarter of 2023, compared to net income of $7.0 million, or $1.31 per share, for the fourth quarter of 2022, and compared to net income of $4.5 million, or $0.85 per share, for the first quarter of 2022.

First Quarter 2023 Highlights:

• Net income totaled $7.1 million, or $1.33 per share, in the first quarter of 2023 compared to $4.5 million, or $0.85 per share, in the first quarter of 2022.
• Net interest income increased 53% to $23.5 million in the first quarter of 2023 from $15.3 million in the first quarter of 2022.
• Total assets increased 32% to $2.7 billion at March 31, 2023 from $2.0 billion at March 31, 2022.
• Total loans increased 42% to $1.7 billion at March 31, 2023 from $1.2 billion at March 31, 2022.
• Total deposits increased 26% to $2.3 billion at March 31, 2023 from $1.8 billion at March 31, 2022.
• Available liquidity sources totaled $987.6 million as of March 31, 2023.
• There were no brokered deposits or borrowings as of March 31, 2023.
• Nonperforming assets, excluding restructured loans, improved to 0.47% of total assets at March 31, 2023 from 0.72% March 31, 2022.
• The Bank adopted the current expected credit loss (CECL) methodology for estimating credit losses effective January 1, 2023.
• As previously announced, on January 1, 2023, the Company completed its acquisition of Mechanics Banc Holding Company ("Mechanics"), parent company of Mechanics Bank, Water Valley, Mississippi ("Mechanics Bank") for all cash consideration. The acquisition of Mechanics resulted in the Bank having 47 locations serving Mississippi and Alabama.

Recent Developments

On April 10, 2023, the Bank and Mechanics Bank were each named a recipient of a grant award under the Community Development Financial Institution Equitable Recovery Program (the "CDFI ERP"). The Bank was awarded $6.2 million and Mechanics Bank was awarded $4.9 million, which will be received by the Bank as the successor entity in the Bank's acquisition of Mechanics Bank. The grants may be received in the second quarter of 2023 and may be used to support lending to small businesses and microenterprises, community facilities, affordable housing, commercial real estate and intermediary lending to non-profits and community development financial institutions, as well as used for financial services, development services to support borrowers, and operational support.

CEO Commentary

Moak Griffin, President and Chief Executive Officer of the Company and the Bank, stated, "We are pleased to report another strong quarter of earnings, particularly in light of the recent headlines and uncertainty in other parts of the banking industry. We are proud of our consistent results during the ongoing period of rising interest rates, persistent inflation in the U.S., and a more challenging overall economy with increased scrutiny on bank liquidity and capital. In addition, during the first quarter of 2023, we completed our acquisition of Mechanics and Mechanics Bank, which further expanded our branch network and drove considerable balance sheet growth. We were also very excited to fully welcome our customers from the Sycamore Bank acquisition last year through our completion of the conversion of the Sycamore Bank core data processing systems on February 13, 2023."

Financial Condition and Results of Operations

Total assets were $2.7 billion at March 31, 2023, compared to $2.5 billion at December 31, 2022 and $2.0 billion at March 31, 2022, an increase of 8% and 32%, respectively. The increase in total assets since March 31, 2022 was primarily due to organic loan and deposit growth, the issuance of senior perpetual noncumulative preferred stock to the U.S. Department of the Treasury pursuant to the Emergency Capital Investment Program, our acquisition of Tate Financial Corporation and Sycamore Bank effective on October 1, 2022, and our acquisition of Mechanics and Mechanics Bank effective on January 1, 2023. Total loans outstanding, net of the allowance for credit losses, as of March 31, 2023 totaled $1.7 billion, compared to $1.5 billion as December 31, 2022 and $1.2 billion as of March 31, 2022, an increase of 14% and 42%, respectively.

Total deposits as of March 31, 2023 were $2.3 billion, compared to $2.1 billion as of December 31, 2022 and $1.8 billion as of March 31, 2022, an increase of 9% and 26%, respectively. Non-interest-bearing deposits increased to $546.7 million as of March 31, 2023, compared to $525.0 million as of December 31, 2022, an increase of 4%, and $494.5 million as of March 31, 2022, an increase of 11%. Non-interest-bearing deposits represented 24% of total deposits as of March 31, 2023. The increase in non-interest-bearing deposits year-over-year is primarily due to our acquisitions of Sycamore Bank and Mechanics Bank. Cost of funds as of March 31, 2023 was 0.70% compared to 0.28% as of December 31, 2022, and 0.25% as of March 31, 2022. The increase during the quarter is due to the overall increase in market interest rates for deposits across the Bank's market areas.

The ratio of loans to deposits was 77% as of March 31, 2023 compared to 73% as of December 31, 2022, and 68% as of March 31, 2022.

Net interest income was $23.5 million for the first quarter of 2023, compared to $21.3 million for the fourth quarter of 2022, an increase of 10%, and $15.3 million for the first quarter of 2022, an increase of 53%. Net interest margin decreased to 4.20% in the first quarter of 2023, compared to 4.24% in the fourth quarter of 2022 and 3.80% in the first quarter of 2022. Yield on earning assets was 4.90% during the first quarter of 2023, compared to 4.50% during the fourth quarter of 2022 and 4.23% during the first quarter of 2022, an increase of 40 basis points and 67 basis points, respectively.

Noninterest income was $5.5 million for the first quarter of 2023, compared to $4.5 million for the fourth quarter of 2022, an increase of 22% and $5.1 million for the first quarter of 2022, an increase of 9%. Mortgage banking revenue was $552 thousand in the first quarter of 2023, an increase of $139 thousand from $413 thousand in the fourth quarter of 2022, or 34%, and a decrease of $130 thousand from $682 thousand in the first quarter of 2022, or 19%. The increase in mortgage banking revenue during the period was primarily due to increased demand in the residential mortgage market as a result of seasonality. During the first quarter of 2023, the Bank retained $2.5 million of the $26.3 million secondary market mortgages originated to hold in-house, compared to $31.8 million secondary market loans originated during the first quarter of 2022, of which $5.3 million were held in-house.

As of March 31, 2023, tangible book value per share was $16.00. According to OTCQX, there were 662 trades of the Company's shares of common stock during the first quarter of 2023 for a total of 147,482 shares and for a total price of $5,997,812. The closing price of the Company's common stock quoted on OTCQX on March 31, 2023 was $37.00 per share. Based on this closing share price, the Company's market capitalization was $199.6 million as of March 31, 2023.

Credit Quality

Effective January 1, 2023, the Company adopted the Financial Accounting Standards Board's Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments, including the current expected credit losses ("CECL") methodology for estimating the allowance for credit losses. The CECL methodology requires earlier recognition of credit losses using a life of loan, expected loss methodology that incorporates reasonable and supportable forecasts into the estimate.

The Company's adoption of the CECL methodology resulted in an $8.9 million increase to the allowance for credit losses and a $1.8 million increase to allowance for unfunded commitments, and a corresponding decrease to retained earnings with a one-time cumulative adjustment of $6.4 million, net of tax, effective January 1, 2023. The Company recorded a provision for credit losses of $375 thousand during the first quarter of 2023 compared to $450 thousand for the fourth quarter of 2022, and $150 thousand for the first quarter of 2022.  The increases in the provision for credit losses since the first quarter of 2022 resulted primarily from growth in the Company's loan portfolio as a result of the acquisitions of Sycamore Bank and Mechanics Bank.

Net loan charge-offs in the first quarter of 2023 were $168 thousand, compared to net loan charge-offs of $464 thousand in the fourth quarter of 2022 and $1 thousand in the first quarter of 2022. Non-performing assets, excluding restructured loans, to total assets were 0.47% for the first quarter of 2023, a decrease of 2 basis points compared to 0.49% for the fourth quarter of 2022, and a decrease of 25 basis points compared to 0.72% for the first quarter of 2022. Annualized net charge-offs to average loans for the first quarter of 2023 were 0.01%, compared to annualized net charge-offs of 0.03% for the fourth quarter of 2022 and 0.00% for the first quarter of 2022. 

As of March 31, 2023, the allowance for credit losses equaled $23.2 million, compared to $14.1 million as of December 31, 2022 and $15.9 million as of March 31, 2022.  Allowance for credit losses as a percentage of total loans was 1.35% at March 31, 2023, compared to 0.94% at December 31, 2022 and 1.30% at March 31, 2022.  Allowance for credit losses as a percentage of nonperforming loans was 184.0% at March 31, 2023, compared to 116.0% at December 31, 2022 and 109.0% at March 31, 2022. 

The Company continues to closely monitor credit quality in light of the recent events in the banking industry, including the recent bank failures, and a continued worsening of forecasted economic conditions due to the rising interest rate environment and persistent high inflation levels in the United States and our market areas. Accordingly, additional provisions for credit losses may be necessary in future periods.

Liquidity and Capital Position

Recent events in other parts of the banking industry have brought additional focus on investment securities portfolios, interest rate risk, liquidity management and capital. As a result, we are providing additional information on our liquidity position at March 31, 2023 to help illustrate the more traditional and stable nature of our banking model compared to other financial institutions who have recently experienced liquidity and capital challenges.

Liquidity – We have a limited reliance on wholesale funding. We currently have no brokered deposits and currently have the capacity to borrow $703.0 million from the Federal Home Loan Bank of Dallas, $15.5 million from the Federal Reserve Bank of St. Louis ("FRB") Discount Window and have several relationships with correspondent banks which we estimate could provide an additional $55.0 million in funding. We have not applied for the Bank Term Funding Program ("BTFP") of the FRB, but management continues to consider establishing an account with the FRB under the BTFP to further expand and diversify our funding capacity.

Capital – The Company and the Bank have opted into the Community Bank Leverage Ratio ("CBLR") framework and, at March 31, 2023, the Company's consolidated leverage ratio amounted to 11.72% and the Bank's bank-only leverage ratio amounted to 9.62%. These levels exceeded the minimum regulatory levels necessary to be deemed "well-capitalized."  Included in shareholders' equity at March 31, 2023 was an unrealized loss in accumulated other comprehensive income ("AOCI") of $11.4 million related to the unrealized loss in the Company's investment securities portfolio primarily due to the significant increases in market interest rates since March 2022. The composition of the Bank's investment securities portfolio includes $289.1 million, or 45.7% classified as available for-sale- while $343.5 million, or 54.30% of the Bank's investment securities portfolio is classified as held to maturity, at March 31, 2023. All investments in our investment securities portfolio are expected to mature at par value.

Our investment securities portfolio made up 23.72% of our total assets at March 31, 2023 compared to 25.48% and 29.10% at December 31, 2022 and March 31, 2022, respectively.

Merger & Acquisition Activity

As previously disclosed, the Company completed its acquisition of Mechanics and Mechanics Bank effective on January 1, 2023.  Under the terms of the definitive agreement with Mechanics and Mechanics Bank, the Company paid a fixed amount of cash consideration. Although the Company has not finalized the exact amounts of the purchase accounting adjustments, the following table presents the estimated impact on certain financial information for the Company (in thousands, except per share data):

ABOUT BANKFIRST CAPITAL CORPORATION  

BankFirst Capital Corporation (OTCQX: BFCC) is a registered bank holding company based in Columbus, Mississippi with approximately $2.7 billion in total assets as of March 31, 2023. BankFirst Financial Services, the Company's wholly-owned banking subsidiary, was founded in 1888 and is locally owned, controlled, and operated. The Company is headquartered in Columbus, Mississippi, and the Bank operates additional branch offices in Coldwater, Columbus, Flowood, Hattiesburg, Hernando, Independence, Jackson, Louin, Macon, Madison, Newton, Oxford, Senatobia, Southaven, Starkville, Tupelo, Water Valley, and West Point, Mississippi; and Addison, Aliceville, Arley, Bear Creek, Carrollton, Curry, Double Springs, Fayette, Gordo, Haleyville, Northport, and Tuscaloosa, Alabama. The Bank also operates three loan production offices in Biloxi, Brookhaven, Mississippi, and Birmingham, Alabama. BankFirst offers a wide variety of services for businesses and consumers. The Bank also offers internet banking, no-fee ATM access, checking, CD, and money market accounts, merchant services, mortgage loans, remote deposit capture, and more. For more information, visit www.BankFirstfs.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This press release contains, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of the Company's goals and expectations with respect to future events that are subject to various risks and uncertainties, (ii) statements about the merger of Mechanics and Mechanics Bank with and into the Company and the Bank, respectively, and (iii) statements preceded by, followed by, or that include the words "may," "will," "could," "should," "expect," "plan," "project," "intend," "anticipate," "believe," "estimate," "predict," "potential," "pursuant," "target," "continue," and similar expressions. These statements are based upon the current belief and expectations of the Company's management team and are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company's control). Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations include, but are not limited to: potential recession in the United States and our market areas, the impacts related to or resulting from recent bank failures and any continuation of the recent uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto, increased competition for deposits and related changes in deposit customer behavior, fluctuations in market rates of interest and loan and deposit pricing, the persistence of the inflationary environment in the United States and our market areas, the uncertain impacts of quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, our ability to recognize the expected benefits and synergies of our completed acquisitions, our ability to successfully complete the conversion of the core data processing systems of Mechanics Bank into the core data processing system of the Bank, the maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. These forward-looking statements are based on current information and/or management's good faith belief as to future events. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this press release. The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that the future events, plans or expectations contemplated by the Company will be achieved. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. The forward-looking statements are made as of the date of this press release. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. All forward-looking statements, express or implied, included in the press release are qualified in their entirety by this cautionary statement.

AVAILABLE INFORMATION

The Company maintains an Internet web site at www.BankFirstfs.com/about/investor-relations. The Company makes available, free of charge, on its web site the Company's annual reports, quarterly earnings reports, and other press releases. In addition, the OTC Markets Group maintains an Internet site that contains reports, proxy and information statements, and other information regarding the Company (at www.otcmarkets.com/stock/BFCC/overview).

The Company routinely posts important information for investors on its web site (under www.BankFirstfs.com and, more specifically, under the Investor Relations tab at www.BankFirstfs.com/about/investor-relations). The Company intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under the OTC Markets Group OTCQX Rules for U.S. Banks. Accordingly, investors should monitor the Company's web site, in addition to following the Company's press releases, OTC filings, public conference calls, presentations and webcasts.

The information contained on, or that may be accessed through, the Company's web site is not incorporated by reference into, and is not a part of, this press release.

Member FDIC

SOURCE BankFirst Capital Corporation

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