BANKFIRST CAPITAL CORPORATION Reports Second Quarter 2023 Earnings of $6.2 Million

COLUMBUS, Miss., July 27, 2023 /PRNewswire/ -- BankFirst Capital Corporation (OTCQX: BFCC) ("BankFirst" or the "Company"), parent company of BankFirst Financial Services, Macon, Mississippi (the "Bank"), reported net income of $6.2 million, or $1.15 per share, for the second quarter of 2023, compared to net income of $7.1 million, or $1.33 per share, for the first quarter of 2023, and compared to net income of $6.1 million, or $1.14 per share, for the second quarter of 2022.

Second Quarter 2023 Highlights:

• Net income totaled $6.2 million, or $1.15 per share, in the second quarter of 2023 compared to $6.1 million, or $1.14 per share, in the second quarter of 2022.
• Net interest income increased 50% to $22.7 million in the second quarter of 2023 from $15.1 million in the second quarter of 2022.
• Total assets increased 22% to $2.7 billion at June 30, 2023 from $2.2 billion at June 30, 2022.
• Total loans increased 42% to $1.7 billion at June 30, 2023 from $1.2 billion at June 30, 2022.
• Total deposits increased 25% to $2.2 billion at June 30, 2023 from $1.8 billion at June 30, 2022.
• Available liquidity sources totaled approximately $1.1 billion as of June 30, 2023.
• There were no brokered deposits as of June 30, 2023.
• Federal funds purchased totaled $3.3 million as of June 30, 2023.
• Nonperforming assets, excluding restructured loans, improved to 0.44% of total assets at June 30, 2023 from 0.58% June 30, 2022.

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 ("CDFI") Equitable Recovery Program (the "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 on January 1, 2023. The ERP grants may be received in the third 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 CDFIs, as well as used for financial services, development services to support borrowers, and operational support.

The Bank is currently preparing for an upcoming conversion of its core data processing system where the Bank will convert from Jack Henry CIF 20/20 to Jack Henry SilverLake. This core conversion is scheduled to occur over the weekend of August 11, 2023 through August 12, 2023 and should be completed prior to the start of business on August 14, 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, particularly in light of the uncertainty and headwinds in the current environment. We are proud of our consistent results during the ongoing period of rising market interest rates, persistent inflation in the U.S., and a more challenging overall economy. Despite these challenges, our credit quality remains solid and our liquidity and capital positions are strong."

Financial Condition and Results of Operations

Total assets were $2.7 billion at June 30, 2023, compared to $2.7 billion at March 31, 2023 and $2.2 billion at June 30, 2022, an increase of 22% from the prior year. The increase in total assets since June 30, 2022 was primarily due to organic loan and deposit growth during the period, 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 June 30, 2023 totaled $1.7 billion, compared to $1.7 billion as of March 31, 2023 and $1.2 billion as of June 30, 2022, an increase 42% from the prior year.

Total deposits as of June 30, 2023 were $2.2 billion, compared to $2.3 billion as of March 31, 2023 and $1.8 billion as of June 30, 2022, an increase of 25% from the prior year. Non-interest-bearing deposits decreased to $592.7 million as of June 30, 2023, compared to $618.2 million as of March 31, 2023, a decrease of 4%, and compared to $541.5 million as of June 30, 2022, an increase of 9%. Non-interest-bearing deposits represented 27% of total deposits as of June 30, 2023. While the Bank has seen a decrease in non-interest-bearing deposits since the beginning of 2023, management believes the average balance has been steady over the past 60 days. The Company's consolidated cost of funds as of June 30, 2023 was 1.03%, compared to 0.69% as of March 31, 2023 and 0.34% as of June 30, 2022.  The increase in the Company's consolidated cost of funds during the second quarter of 2023 compared to the prior periods was primarily due to the overall increase in market interest rates for deposits across the Bank's market areas and competition from bank and non-bank alternatives.  Bank-only cost of funds as of June 30, 2023 was 0.79%, compared to 0.50% as of March 31, 2023 and 0.20% as of June 30, 2022.

The ratio of loans to deposits was 78% as of June 30, 2023, compared to 77% as of March 31, 2023 and 69% as of June 30, 2022.

Net interest income was $22.7 million for the second quarter of 2023, compared to $23.5 million for the first quarter of 2023, a decrease of 3%, and compared to $15.1 million for the second quarter of 2022, an increase of 50%. Net interest margin was 3.82% in the second quarter of 2023, a decrease from 4.20% in the first quarter of 2023 and an increase from 3.60% in the second quarter of 2022. Yield on earning assets was 4.83% during the second quarter of 2023, compared to 4.63% during the first quarter of 2023 and 3.81% during the second quarter of 2022, an increase of 20 basis points and an increase of 102 basis points, respectively.

Noninterest income was $6.1 million for the second quarter of 2023, compared to $5.5 million for the first quarter of 2023, an increase of 12%, and compared to $5.0 million for the second quarter of 2022, an increase of 24%. Mortgage banking revenue was $739 thousand in the second quarter of 2023, an increase of $187 thousand from $552 thousand in the first quarter of 2023, or 34%, and a decrease of $1 thousand from $740 thousand in the second quarter of 2022, or 0.14%. The increase in mortgage banking revenue during the second quarter of 2023 compared to the first quarter of 2023 was primarily due to increased demand in the residential mortgage market as a result of seasonality. During the second quarter of 2023, the Bank retained $1.8 million of the $31.9 million in secondary market mortgages originated to hold in-house, compared to $36.9 million secondary market loans originated during the second quarter of 2022, of which $2.9 million were held in-house.

Noninterest expense was $20.5 million for the second quarter of 2023, compared to $19.5 million for the first quarter of 2023 and $11.9 million for the second quarter of 2022, an increase of 5% and 72%, respectively. While non-interest expense has increased over the respective periods, a portion is attributable to one-time expenses related to the Bank's forthcoming core conversion and recent acquisitions. Core conversion expenses were $323 thousand for the second quarter of 2023 compared to $154 thousand for the first quarter of 2023.  Acquisition-related expenses were $173 thousand for the second quarter of 2023 compared to $289 thousand for the first quarter of 2023.

As of June 30, 2023, tangible book value per share was $16.78. According to OTCQX, there were 536 trades of the Company's shares of common stock during the second quarter of 2023 for a total of 116,582 shares and for a total price of $4,337,482. The closing price of the Company's common stock quoted on OTCQX on June 30, 2023 was $35.50 per share. Based on this closing share price, the Company's market capitalization was $191.5 million as of June 30, 2023.

Credit Quality

The Company recorded a provision for credit losses of $375 thousand during the second quarter of 2023, compared to $375 thousand for the first quarter of 2023 and $150 thousand for the second quarter of 2022.  While the provision for credit losses in the second quarter 2023 was consistent with the provision for credit losses in the first quarter of 2023 to adequately fund the reserve due to organic growth in the Company's loan portfolio, the Company continues to closely monitor the increasing economic uncertainty, especially in the commercial real estate market.

Net loan charge-offs in the second quarter of 2023 were $333 thousand, compared to net loan charge-offs of $168 thousand in the first quarter of 2023 and $2.1 million in the second quarter of 2022. Non-performing assets, excluding restructured loans, to total assets were 0.44% for the second quarter of 2023, a decrease of 3 basis points compared to 0.47% for the first quarter of 2023, and a decrease of 14 basis points compared to 0.58% for the second quarter of 2022. Annualized net charge-offs to average loans for the second quarter of 2023 were 0.02%, compared to annualized net charge-offs of 0.01% and 0.17% for the first quarter of 2023 and the second quarter of 2022, respectively. 

As of June 30, 2023, the allowance for credit losses equaled $23.2 million, compared to $23.2 million as of March 31, 2023 and $13.9 million as of June 30, 2022.  Allowance for credit losses as a percentage of total loans was 1.33% at June 30, 2023, compared to 1.35% at March 31, 2023 and 1.13% at June 30, 2022.  Allowance for credit losses as a percentage of nonperforming loans was 200.0% at June 30, 2023, compared to 184.0% at March 31, 2023 and 110.6% at June 30, 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 and capital position at June 30, 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 up to approximately $823.6 million from the Federal Home Loan Bank of Dallas, $15.2 million from the Federal Reserve Bank of St. Louis ("FRB") Discount Window and an estimated additional $55.0 million in funding through several relationships with correspondent banks. 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 June 30, 2023, the Company's consolidated leverage ratio amounted to 11.92% and the Bank's bank-only leverage ratio amounted to 9.95%. These levels exceeded the minimum regulatory levels necessary to be deemed "well-capitalized" under the CBLR framework.  Included in shareholders' equity at June 30, 2023 was an unrealized loss in accumulated other comprehensive income of $14.1 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 $276.9 million, or 45.04%, classified as available-for-sale while $337.9 million, or 54.96%, of the Bank's investment securities portfolio is classified as held to maturity, at June 30, 2023. All investments in our investment securities portfolio are expected to mature at par value.

Our investment securities portfolio made up 23.11% of our total assets at June 30, 2023 compared to 23.72% and 27.33% at March 31, 2023 and June 30, 2022, respectively.

ABOUT BANKFIRST CAPITAL CORPORATION  

BankFirst Capital Corporation (OTCQX: BFCC) is a registered bank holding company headquartered in Columbus, Mississippi with approximately $2.7 billion in total assets as of June 30, 2023. BankFirst Financial Services, the Company's wholly-owned banking subsidiary, was founded in 1888 and is locally owned, controlled, and operated. The Bank is headquartered in Macon, Mississippi, and operates additional branch offices in Coldwater, Columbus, Flowood, Hattiesburg, Hernando, Independence, Jackson, Louin, 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 and Brookhaven, Mississippi, and in 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, statements regarding certain of the Company's goals and expectations with respect to future events that are subject to various risks and uncertainties, and 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: adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, 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 ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System, effects of declines in housing prices in the United States and our market areas, increases in unemployment rates in the United States and our market areas, declines in commercial real estate prices, uncertainty regarding United States fiscal debt and budget matters, severe weather, natural disasters, acts of war or terrorism or other external events, regulatory considerations, our ability to recognize the expected benefits and synergies of our completed acquisitions, our ability to successfully complete the upcoming conversion of the Bank's core data processing systems, 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, acquisition or loss of key production personnel, changes in tax laws, and current or future litigation, regulatory examinations or other legal and/or regulatory actions. 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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