BANKFIRST CAPITAL CORPORATION Reports Third Quarter 2022 Earnings of $5.3 Million

COLUMBUS, Miss., Oct. 28, 2022 /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 $5.3 million, or $1.00 per share, for the third quarter of 2022, compared to net income of $6.1 million, or $1.14 per share, for the second quarter of 2022, and compared to net income of $5.3 million, or $1.01 per share, for the third quarter of 2021. The Company also reported net income of $15.9 million, or $2.99 per share, for nine months ended September 30, 2022, an increase of 15% compared to net income of $13.9 million, or $2.63 per share for nine months ended September 30, 2021.

• Net income totaled $5.3 million, or $1.00 per share, in the third quarter of 2022 compared to $5.3 million, or $1.01 per share, for the third quarter of 2021.
• Total assets increased 24% to $2.2 billion at September 30, 2022 from $1.8 billion at September 30, 2021.
• Total loans increased 15% to $1.3 billion at September 30, 2022 from $1.1 billion at September 30, 2021.
• Total deposits increased 16% to $1.8 billion at September 30, 2022 from $1.6 billion at September 30, 2021.
• Net interest income increased 21% to $17.1 million in the third quarter of 2022 from $14.1 million in the third quarter of 2021.
• Net interest margin (net of PPP fees) increased 47 basis point to 3.72% in the third quarter of 2022 from 3.25% in third quarter of 2021.
• Nonperforming assets (excluding restructured) improved to 0.54% of total assets at September 30, 2022 from 0.58% at September 30, 2021

• On September 1, 2022, the Company announced the signing of a definitive merger agreement with Mechanics Banc Holding Company ("Mechanics"), the parent company of Mechanics Bank, Water Valley, Mississippi ("Mechanics Bank"), pursuant to which the Company will acquire Mechanics and Mechanics Bank for all-cash consideration. The acquisition is subject to customary closing conditions, including approval from the shareholders of Mechanics and bank regulatory authorities, and is expected to close in the first quarter of 2023.
• On October 1, 2022, the Company completed its acquisition of Tate Financial Corporation ("Tate") and Sycamore Bank, Senatobia, Mississippi ("Sycamore Bank"). 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.

Moak Griffin, President and Chief Executive Officer of the Company and the Bank, stated, "We are pleased to report another strong quarter of earnings. We are excited about the recent completion of our acquisition of Tate and Sycamore Bank and are equally excited about our recent announcement that we have signed a definitive agreement providing for our acquisition of Mechanics and Mechanics Bank. We believe that the partnership with Mechanics Bank will allow BankFirst to continue its strategic plan by partnering with community banks with strong relationships in their local markets."

Mr. Griffin continued, "Our outlook remains positive for the future, as we have an encouraging pipeline for loan growth in our expanded footprint, including our core markets and our loan production offices. We believe the Bank is well positioned to navigate the uncertain economic forecast and current rising rate environment, which is expected to continue in light of the persistent high inflation levels in the United States and our market area."

Total assets were $2.21 billion at September 30, 2022, compared to $2.2 billion at June 30, 2022 and $1.8 billion at September 30, 2021, an increase of 1% and 24%, respectively. The increase in total assets since September 30, 2021 was primarily due to organic loan and deposit growth, the acquisition of The Citizens Bank of Fayette, Fayette, Alabama ("Citizens") after the close of business on December 31, 2021, and 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"). Total loans outstanding, net of the allowance for loan losses, as of September 30, 2022 totaled $1.3 billion, compared to $1.2 billion as of June 30, 2022 and $1.1 billion as of September 30, 2021, an increase of 7% and 15%, respectively.

Non-interest-bearing deposits increased to $543.0 million as of September 30, 2022, compared to $541.5 million as of June 30, 2022, an increase of 0.3%, and $467.4 million as of September 30, 2021, an increase of 16%. Non-interest-bearing deposits represented 30% of total deposits as of September 30, 2022. Total deposits as of September 30, 2022 were $1.8 billion, compared to $1.8 billion as of June 30, 2022 and $1.6 billion as of September 30, 2021, an increase of 16% since September 30, 2021. The increase in non-interest-bearing deposits is due to the acquisition of Citizens. Cost of funds as of September 30, 2022 was 0.22% compared to 0.24% as of June 30, 2022, and 0.31% as of September 30, 2021. The Company expects the cost of funds to begin to slowly rise to be able to remain competitive in the markets we serve.

The ratio of loans to deposits was 72.4% as of September 30, 2022 compared to 68.8% as of June 30, 2022, and 73% as of September 30, 2021.

Net interest income was $17.1 million for the third quarter of 2022, compared to $15.1 million for the second quarter of 2022, an increase of 13%, and $14.1 million for the third quarter of 2021, an increase of 21%. Net interest margin increased to 3.87% in the third quarter of 2022, compared to 3.60% in the second quarter of 2022 and 3.60% in the third quarter of 2021. Yield on earning assets was 4.09% in the third quarter of 2022, compared to 3.84% during the second quarter of 2022 and 3.91% during the third quarter of 2021, an increase of 25 basis points and 18 basis points, respectively. Accretion of deferred PPP-related Small Business Administration ("SBA") fees of $249 thousand were recognized upon the receipt of forgiveness payments from the SBA for PPP loans during the third quarter of 2022, which contributed 15 basis points of the overall net interest margin, compared to the recognition of $258 thousand of deferred PPP-related SBA fees during the second quarter of 2022, which contributed 15 basis points. Net interest margin, net of PPP-related SBA fees, increased in the third quarter of 2022 to 3.72% from 3.45% in the second quarter of 2022.

Noninterest income was $5.4 million for the third quarter of 2022, compared to $5.0 million for the second quarter of 2022, an increase of 9%, and $6.7 million for the third quarter of 2021, a decrease of 20%.  The decrease in noninterest income was primarily due to decreases in mortgage banking revenue and mortgage fees. Mortgage banking revenue was $588 thousand in the third quarter of 2022, a decrease of $152 thousand from $740 thousand in the second quarter of 2022, or 21%, and a decrease of $618 thousand from $1.2 million in the third quarter of 2021, or 51%. 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 third quarter of 2022, the Bank purchased $4.1 million of the $8.2 million secondary market mortgages originated to hold in-house, compared to $41.3 million secondary market loans originated during the third quarter of 2021, of which $2.2 million were held in-house. Gross mortgage fees during the third quarter of 2022 were $655 thousand compared to $810 thousand during the second quarter of 2022 and compared to $1.3 million in the third quarter of 2021.  

As of September 30, 2022, tangible book value per share was $20.76. According to OTCQX, there were 199 trades of the Company's shares of common stock during the third quarter of 2022 for a total of 80,910 shares and for a total price of $2,702,977. The closing price of the Company's common stock quoted on OTCQX on September 30, 2022 was $37.25 per share. Based on this closing share price, the Company's market capitalization was $200 million as of September 30, 2022.

The Company recorded a provision for credit losses of $300 thousand during the third quarter of 2022 compared to $150 thousand for the second quarter of 2022, and $322 thousand for the third quarter of 2021. Net loan charge-offs in the third quarter of 2022 were $260 thousand, compared to $2.1 million in the second quarter of 2022 and $490 thousand in the third quarter of 2021. The increase in the second quarter of 2022 is primarily due to a $1.9 million charge-off related to a single credit which was previously classified as impaired. As a result, the non-performing assets to total assets were 0.54% for the third quarter of 2022, a decrease of 4 basis points compared to 0.58% for the second quarter of 2022, and a decrease of 4 basis points compared to 0.58% for the third quarter of 2021. Annualized net charge-offs to average loans for the third quarter of 2022 were 0.02%, compared to 0.17% for the second quarter of 2022 and 0.04% for the third 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.

The Bank participated in the PPP, a $943.0 billion low-interest business loan program funded by Treasury and administered by 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 September 30, 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 September 30, 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 we recognized $249 thousand as loan fee income during the third quarter of 2022, $258 thousand as loan fee income during the second quarter of 2022, and compared to $200 thousand for the third quarter of 2021. The Bank recognized the remainder of the deferred PPP-related SBA loan fees during the third quarter of 2022.

As previously disclosed, on September 1, 2022, the Company announced the signing of a definitive merger agreement with Mechanics and Mechanics Bank, pursuant to which the Company will acquire Mechanics and Mechanics Bank for all-cash consideration. On September 30, 2022, Mechanics Bank had total assets of $324.3 million, total loans of $208.3 million, and total deposits of $293.3 million. The acquisition of Mechanics and Mechanics Bank would result in the Bank having 47 locations serving Mississippi and Alabama, with total assets of approximately $2.8 billion, gross loans of approximately $1.7 billion and total deposits of approximately $2.4 billion, if the acquisition closed on September 30, 2022. The acquisition of Mechanics and Mechanics Bank is subject to customary closing conditions, including approval from the shareholders of Mechanics and bank regulatory authorities.

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. 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):

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.

BankFirst Capital Corporation (OTCQX: BFCC) is a registered bank holding company based in Columbus, Mississippi with approximately $2.2 billion in total assets as of September 30, 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, 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 five loan production offices in Birmingham, Alabama as well as Biloxi, Brookhaven, Oxford, and Tupelo, Mississippi. 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.

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 complete the proposed acquisition of Mechanics and Mechanics 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.

The Company maintains an Internet web site at www.BankFirstfs.com/about-us/investors. 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-us/investors/). 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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