BANKFIRST CAPITAL CORPORATION Reports Fourth Quarter 2022 Earnings of $7.0 Million

COLUMBUS, Miss., Jan. 30, 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 $7.0 million, or $1.31 per share, for the fourth quarter of 2022, compared to net income of $5.3 million, or $1.00 per share, for the third quarter of 2022, and compared to net income of $4.4 million, or $0.84 per share, for the fourth quarter of 2021. The Company also reported net income of $23.0 million, or $4.30 per share, for the year ended December 31, 2022, an increase of 25% compared to net income of $18.3 million, or $3.47 per share for the year ended December 31, 2021.

2022 Fourth Quarter Highlights:

• On December 9, 2022, the Company paid a cash dividend of $0.85 per share to shareholders of record as of December 1, 2022.
• Total assets increased 37% to $2.5 billion at December 31, 2022 from $1.8 billion at December 31, 2021.
• Total loans increased 26% to $1.5 billion at December 31, 2022 from $1.2 billion at December 31, 2021.
• Total deposits increased 32% to $2.1 billion at December 31, 2022 from $1.6 billion at December 31, 2021
• Net income totaled $7.0 million, or $1.31 per share, in the fourth quarter of 2022 compared to $4.4 million, or $0.84 per share, for the fourth quarter of 2021.
• Net interest income increased 32% to $20.4 million in the fourth quarter of 2022 from $15.5 million in the fourth quarter of 2021.
• Net interest margin (net of Paycheck Protection Program ("PPP") fees) increased 76 basis points to 4.09% in the fourth quarter of 2022 from 3.33% in fourth quarter of 2021.
• Nonperforming assets improved to 0.46% of total assets at December 31, 2022 from 0.54% at September 30, 2022. Excluding loans restructured during the period, nonperforming assets improved to 0.46% of total assets at December 31, 2022 from 0.54% at September 30, 2022.
• On October 1, 2022, the Company completed its acquisition of Tate Financial Corporation ("Tate") and Sycamore Bank, Senatobia, Mississippi ("Sycamore Bank") for all cash consideration. On September 30, 2022, Sycamore Bank had total assets of $321.3 million, total loans of $151.5 million, and total deposits of $302.8 million. The acquisition of Tate resulted in the Bank having 42 locations serving Mississippi and Alabama, with total assets of approximately $2.5 billion, total loans of approximately $1.5 billion and total deposits of approximately $2.1 billion as of October 1, 2022.

Recent Developments

• On January 1, 2023, the Company completed its acquisition of Mechanics Banc Holding Company ("Mechanics"), the parent company of Mechanics Bank, Water Valley, Mississippi ("Mechanics Bank") for all cash consideration. On December 31, 2022, Mechanics Bank had total assets of 323.3 million, total loans of $211.4 million, and total deposits of $291.6 million.
• The acquisitions of Tate and Mechanics resulted in the Bank having 47 locations serving Mississippi and Alabama, with total assets of approximately $2.8 billion, total loans of approximately $1.7 billion and total deposits of approximately $2.4 billion as of January 1, 2023.

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. The fourth quarter of 2022 was an exciting time for BankFirst, as we completed our acquisition of Tate and Sycamore Bank, further expanding our branch network for our customers across Mississippi and Alabama, and reinforcing our strategic plan of partnering with community banks with strong relationships in our local markets.  This acquisition drove much of our growth in total assets, total loans and total deposits during the period."

Financial Condition and Results of Operations

Total assets were $2.5 billion at December 31, 2022, compared to $2.2 billion at September 30, 2022 and $1.8 billion at December 31, 2021, an increase of 12% and 37%, respectively. The increase in total assets since December 31, 2021 was primarily due to organic loan and deposit growth, and the acquisitions of The Citizens Bank of Fayette, Fayette, Alabama ("Citizens Bank") after the close of business on December 31, 2021, the issuance of senior perpetual noncumulative preferred stock (the "Senior Preferred") to the U.S. Department of the Treasury ("Treasury") pursuant to the Emergency Capital Investment Program ("ECIP"), and our acquisition of Tate and Sycamore Bank on October 1, 2022. Total loans outstanding, net of the allowance for loan losses, as of December 31, 2022 totaled $1.5 billion, compared to $1.3 billion as of September 30, 2022 and $1.2 billion as of December 31, 2021, an increase of 15% and 26%, respectively.

Non-interest-bearing deposits decreased to $525.0 million as of December 31, 2022, compared to $543.0 million as of September 30, 2022, a decrease of 3%, and $474 million as of December 31, 2021, an increase of 11%. Non-interest-bearing deposits represented 25% of total deposits as of December 31, 2022. Total deposits as of December 31, 2022 were $2.1 billion, compared to $1.8 billion as of September 30, 2022 and $1.6 billion as of December 31, 2021, an increase of 15% and 32%, respectively. The increase in non-interest-bearing deposits year-over-year is primarily due to our acquisitions of Citizens Bank and Sycamore Bank. Cost of funds as of December 31, 2022 was 0.28% compared to 0.22% as of September 30, 2022, and 0.31% as of December 31, 2021. Moving forward in 2023, management anticipates that cost of funds will continue to slowly rise to remain competitive in the markets we serve.

The ratio of loans to deposits was 72% as of December 31, 2022 compared to 72% as of September 30, 2022, and 76% as of December 31, 2021.

Net interest income was $20.4 million for the fourth quarter of 2022, compared to $17.1 million for the third quarter of 2022, an increase of 19%, and $15.5 million for the fourth quarter of 2021, an increase of 23%. Net interest margin increased to 4.09% in the fourth quarter of 2022, compared to 3.89% in the third quarter of 2022 and 4.00% in the fourth quarter of 2021. Yield on earning assets was 4.36% in the fourth quarter of 2022, compared to 4.07% during the third quarter of 2022 and 4.39% during the fourth quarter of 2021, an increase of 29 basis points and a decrease of 3 basis points, respectively.

Noninterest income was $5.7 million for the fourth quarter of 2022, compared to $5.4 million for the third quarter of 2022, an increase of 5%, and $4.8 million for the fourth quarter of 2021, an increase of 18%. Mortgage banking revenue was $413 thousand in the fourth quarter of 2022, a decrease of $175 thousand from $588 thousand in the third quarter of 2022, or 30%, and a decrease of $479 thousand from $892 thousand in the fourth quarter of 2021, or 54%. The decline in mortgage banking revenue during the period was primarily due to decreased demand in the residential mortgage market as a result of rising market interest rates and seasonality. During the second quarter of 2021, the Bank implemented a Mortgage Purchase Program to maintain mortgage loans in-house. During the fourth quarter of 2022, the Bank purchased $2.6 million of the $20.2 million secondary market mortgages originated to hold in-house, compared to $43.3 million secondary market loans originated during the fourth quarter of 2021, of which $2.2 million were held in-house. Gross mortgage fees during the fourth quarter of 2022 were $472 thousand compared to $655 thousand during the third quarter of 2022 and compared to $1.1 million in the fourth quarter of 2021.  

As of December 31, 2022, tangible book value per share was $16.25. According to OTCQX, there were 504 trades of the Company's shares of common stock during the fourth quarter of 2022 for a total of 109,880 shares and for a total price of 4,243,158. The closing price of the Company's common stock quoted on OTCQX on December 31, 2022 was $41.00 per share. Based on this closing share price, the Company's market capitalization was $219.5 million as of December 31, 2022.

Credit Quality

The Company recorded a provision for loan losses of $450 thousand during the fourth quarter of 2022 compared to $300 thousand for the third quarter of 2022, and $400 thousand for the fourth quarter of 2021. Net loan charge-offs in the fourth quarter of 2022 were $464 thousand, compared to $260 thousand in the third quarter of 2022 and $1.4 million in the fourth quarter of 2021. Non-performing assets to total assets were 0.49% for the fourth quarter of 2022, a decrease of 5 basis points compared to 0.54% for the third quarter of 2022, and a decrease of 34 basis points compared to 0.80% for the fourth quarter of 2021. Annualized net charge-offs to average loans for the fourth quarter of 2022 were 0.03%, compared to 0.02% for the third quarter of 2022 and 0.9% for the fourth quarter of 2021.  The Company continues to closely monitor credit quality as concerns regarding forecasted economic conditions continue to worsen due to the rising interest rate environment and persistent high inflation levels in the United States and our market areas, and additional provisions for loan losses may be necessary in future periods.

CECL Adoption

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.

Effective January 1, 2023, the date the Company adopted the CECL methodology, the difference in total loan loss reserves between the two models will be recorded through stockholders' equity, net of applicable income tax.  The Company currently anticipates that, under the CECL methodology, an adjustment to the allowance for credit losses will be needed in the first quarter of 2023 in an amount equal to approximately $10.0 million, before applicable income tax.  However, the Company has not finalized the exact amount of the adjustment to be made to the allowance for credit losses under the CECL methodology, and, accordingly, the anticipated amount of such adjustment remains subject to change.   

PPP Loans

The Bank participated in the PPP, a $943.0 billion low-interest business loan program funded by Treasury and administered by the U.S. Small Business Administration (the "SBA"), which officially ended on May 31, 2021. The PPP provided U.S. government guarantees for lenders, as well as loan forgiveness incentives for borrowers that predominately utilize the loan proceeds to cover employee compensation-related business costs. The Bank participated in Rounds 1 and 2 of the PPP during 2020 and in Round 3 of the PPP in 2021 until its expiration on May 31, 2021. In 2020, during Rounds 1 and 2 of the PPP, the Bank originated 1,489 PPP loans totaling $115.6 million. Through December 31, 2022, the Bank has received loan forgiveness payments from the SBA on all PPP loans originated in Rounds 1 and 2 of the PPP. The Bank received and recognized approximately $4.4 million in fees (net of expenses) paid by the SBA on PPP loans originated in Rounds 1 and 2 of the PPP.

In 2021, during Round 3 of the PPP, the Bank originated an additional 1,382 PPP loans totaling $62.0 million. Through December 31, 2022, the Bank has received forgiveness payments from the SBA on all PPP loans originated in Round 3 of the PPP. The Bank received approximately $4.1 million in fees (net of expenses) paid by the SBA on PPP loans originated in Round 3 of the PPP, from which the bank recognized the remaining $249 thousand as loan fee income during the third quarter of 2022.

Merger & Acquisition Activity

As previously disclosed, the Company completed its acquisition of Tate and Sycamore Bank on October 1, 2022. Under the terms of the definitive agreement with Tate and Sycamore Bank, the Company paid a fixed amount of cash consideration. The following table presents the impact on certain financial information for the Company (in thousands, except per share data):

In addition, the Company completed its acquisition of Mechanics and Mechanics Bank 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):

Emergency Capital Investment Program

As previously disclosed, the Company closed on the issuance of $175.0 million of the Senior Preferred to Treasury pursuant to the ECIP on April 26, 2022. The ECIP investment from Treasury is intended to qualify as Tier 1 capital of the Company for regulatory capital purposes. The Senior Preferred issued to Treasury will pay non-cumulative dividends, payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year beginning on the second dividend payment date after the two-year anniversary of the date of issuance. The dividend rate to be paid on the Senior Preferred will adjust annually based on certain measurements of the Company's extensions of credit to minority, rural, and urban low-income and underserved communities and low- and moderate-income borrowers. The Company is entitled to redeem the Senior Preferred on or after the fifth anniversary of the issuance of the Senior Preferred, subject to approval by the Board of Governors of the Federal Reserve System (the "Federal Reserve") and in accordance with applicable regulatory capital regulations.

ABOUT BANKFIRST CAPITAL CORPORATION  

BankFirst Capital Corporation (OTCQX: BFCC) is a registered bank holding company based in Columbus, Mississippi with approximately $2.5 billion in total assets as of December 31, 2022. 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 four loan production offices in Biloxi, Brookhaven, Oxford, 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 Citizens with and into the Bank, (iii) statements about the proposed merger of Tate and Sycamore Bank with and into the Company and the Bank, respectively, and (iv) 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: 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 Federal Reserve, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, including as a result of the ongoing COVID-19 pandemic, 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 Sycamore Bank and 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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