425: Bank First Corporation to Acquire Centre 1 Bancorp in $174.3 Million All-Stock Deal

Bank First Corporation announced a definitive agreement to acquire Centre 1 Bancorp, Inc. in an all-stock transaction valued at approximately $174.3 million, expanding its footprint into southern Wisconsin and northern Illinois.

Summary

• Bank First Corporation (BFC) will acquire Centre 1 Bancorp, Inc. (Centre) in an all-stock merger, with Centre merging into BFC and Centre's subsidiary bank, The First National Bank and Trust Company, merging into BFC's subsidiary bank, Bank First, N.A.
• Each outstanding share of Centre common stock will be converted into the right to receive 0.9200 shares of BFC common stock.
• The aggregate merger consideration is valued at approximately $174.3 million, based on BFC's closing stock price of $125.78 per share on July 17, 2025.
• The transaction is expected to close in the first quarter of 2026, with system conversion anticipated in the second quarter of 2026.
• As of June 30, 2025, Centre had approximately $1.55 billion in consolidated assets, $994.9 million in gross loans, $1.29 billion in deposits, and $112.6 million in consolidated stockholders' equity.
• The combined pro forma entity, based on June 30, 2025 financials, will have total assets of approximately $5.91 billion, loans of approximately $4.58 billion, and deposits of approximately $4.89 billion.
• The deal is projected to be 33.9% accretive to EPS in 2026 and 31.1% in 2027, with a tangible book value dilution of 5.1% at closing and an earnback period of 0.75 years using the crossover method.
• The transaction implies a valuation of 195% of Centre's tangible book value and 25.0x its LTM earnings.
• Cost savings of 40.0% of Centre's expense base ($22.0 million fully-phased in) are anticipated, with 75% realized in 2026 and 100% thereafter.
• Steven M. Eldred, Centre's Chairman and CEO, will join the Board of Directors of Bank First and Bank First, N.A. upon completion of the merger.

Sentiment

Score: 9

Explanation: The document presents a highly positive outlook on the merger, emphasizing strong financial accretion, rapid tangible book value earnback, strategic geographic expansion, and cultural alignment. The detailed financial projections and management's enthusiastic comments contribute to a very favorable sentiment, despite standard merger-related risks being acknowledged.

Positives

• Combines two strong community banks with relationship-driven deposit franchises and deep community roots.
• Expands Bank First's geographic footprint into southern Wisconsin and northern Illinois, marking its first out-of-state expansion into complementary markets without overlap.
• Increases the combined asset base to nearly $6 billion, enhancing lending capacity and service capabilities.
• Delivers strong projected EPS accretion of 33.9% in 2026 and 31.1% in 2027.
• Features a manageable tangible book value dilution of 5.1% at closing with a quick earnback period of 0.75 years.
• Achieves a projected internal rate of return (IRR) exceeding 20%, surpassing internal targets.
• Provides excess core deposit liquidity to support Bank First's earning asset generation capabilities.
• Both institutions maintain over one-quarter of deposits in non-interest-bearing checking accounts, indicating strong and stable customer relationships.
• Bank First's 40% ownership interest in Ansay & Associates, an independent insurance agency, will benefit Centre shareholders and customers.

Negatives

• The transaction will result in a tangible book value dilution of 5.1% at closing.
• There are estimated pre-tax deal expenses of $21.5 million, fully realized in the pro forma tangible book value estimate at closing.
• Loan credit and interest rate marks, along with pre-tax loss on AFS securities, will impact earnings and book value.

Risks

• Cost savings and revenue synergies from the merger may not be realized or may take longer than anticipated.
• Disruption from the merger with customers, suppliers, employees, or other business partners could occur.
• The merger agreement could be terminated due to various events, changes, or circumstances.
• There is a risk of unsuccessful integration of Centre's business into Bank First.
• Failure to obtain the necessary approval by Centre's shareholders could prevent the merger.
• The amount of costs, fees, expenses, and charges related to the merger could be higher than anticipated.
• The parties may fail to obtain required governmental approvals for the merger.
• Reputational risk and the reaction of each company's customers, suppliers, employees, or other business partners to the merger could be negative.
• Closing conditions in the merger agreement may not be satisfied, or there could be unexpected delays in closing.
• The integration of Centre's operations into Bank First's operations could be materially delayed or be more costly or difficult than expected.
• The merger may be more expensive to complete than anticipated due to unexpected factors or events.
• Dilution caused by Bank First's issuance of additional shares of its common stock in the merger transaction.
• General competitive, economic, political, and market conditions could adversely affect the combined entity.

Future Outlook

The merger is expected to close in the first quarter of 2026, with system conversion anticipated in the second quarter of 2026. Management projects significant EPS accretion of 33.9% in 2026 and 31.1% in 2027, along with a quick tangible book value earnback of 0.75 years and an Internal Rate of Return exceeding 20%. The combined entity aims to leverage increased financial capacity for greater lending and expanded service capabilities.

Management Comments

• Mike Molepske, Chairman and Chief Executive Officer of Bank First, stated: "This partnership brings together two long-standing, community-focused institutions united by a shared commitment to responsive, relationship-based banking. The combination of our organizations enhances our ability to serve customers across Wisconsin and northern Illinois with greater capabilities and expanded resources."
• Steve Eldred, Chairman and Chief Executive Officer of Centre, stated: "Joining forces with Bank First allows us to build on a legacy of trust and service while expanding opportunities to care for the communities we serve. This merger reflects a shared promise to remain dependable, approachable, and resilient, all values that have long defined our approach to banking."

Industry Context

This acquisition represents a strategic consolidation within the regional banking sector, allowing Bank First to expand its geographic reach into southern Wisconsin and northern Illinois. The focus on combining two community-oriented banks with strong deposit franchises and similar credit cultures aligns with a trend of regional banks seeking growth through M&A to achieve greater scale, enhance lending capacity, and diversify their market presence. The emphasis on low-cost deposits (non-interest-bearing checking accounts significantly above industry average) highlights a strategic advantage in a competitive interest rate environment, positioning the combined entity for more efficient funding.

Comparison to Industry Standards

• The projected EPS accretion of 33.9% in 2026 and 31.1% in 2027 is robust, indicating a financially attractive deal compared to many bank mergers which often target high single-digit to low double-digit accretion.
• A tangible book value dilution of 5.1% at closing is within an acceptable range for bank M&A, and the 0.75-year earnback period is significantly faster than the typical 3-5 year earnback often seen in similar transactions, suggesting a highly efficient capital deployment.
• The Internal Rate of Return (IRR) exceeding 20% is a strong indicator of value creation, generally surpassing the cost of capital and typical hurdle rates for strategic acquisitions in the banking sector.
• The 40% cost savings target is aggressive but achievable in bank mergers, particularly those involving system conversions and branch network optimization, aligning with best practices for maximizing synergy realization.
• Both Bank First and Centre maintain over one-quarter of deposits in non-interest-bearing checking accounts, which is significantly above the industry average of under 20%, indicating a strong, stable, and low-cost deposit base that is highly valued in the current banking environment.

Management Changes

Corporate Governance

Related Party Transactions

• Directors and executive officers of Centre and First National Bank have entered into voting agreements with BFC to vote their shares in favor of the merger.
• Directors of Centre and First National Bank will enter into Non-Competition and Non-Disclosure Agreements with Centre, effective upon Closing.
• Directors and executive officers of Centre and First National Bank will execute Claims Letters releasing certain claims against Centre entities, effective upon Closing.

Stakeholder Impact

• **Shareholders (BFC):** Expected to benefit from significant EPS accretion (33.9% in 2026, 31.1% in 2027) and a strong IRR (20%+), indicating enhanced shareholder value.
• **Shareholders (Centre):** Will receive 0.9200 shares of BFC common stock for each Centre share, providing them with shares in a larger, expanding financial institution.
• **Customers (Both Banks):** Expected to benefit from expanded financial capacity, greater lending capabilities, and access to wealth management services (for BFC customers) and integrated insurance solutions (for Centre customers).
• **Employees (Centre):** Will receive comparable employee benefits and cash-based compensation opportunities for at least six months post-merger, credit for prior service, and a retention bonus pool. Severance payments are outlined for those not retained.
• **Communities:** The merger aims to continue supporting the communities served by both banks, leveraging combined resources and a shared commitment to relationship-based banking.

Next Steps

• Centre shareholders will vote on the approval of the Agreement and Plan of Merger at a special meeting.
• Bank First will file a registration statement on Form S-4 with the SEC, including a proxy statement for Centre and a prospectus for BFC.
• The parties will seek necessary regulatory approvals from the SEC, NASDAQ, FRB, FDIC, OCC, and state banking agencies.
• BFC will work to obtain listing approval for its common stock on The Nasdaq Stock Market.
• The merger is expected to close in the first quarter of 2026.
• The system conversion is anticipated in the second quarter of 2026.
• BFC will expand its board of directors by one seat to appoint Steven M. Eldred as a director.
• BFC may consider appointing an additional member from Centre's board, subject to consultation and meeting BFC's director standards.
• Centre will terminate its 401(k) Plan effective immediately preceding the Effective Time.
• Centre and First National Bank directors will execute Non-Competition and Non-Disclosure Agreements and Claims Letters effective upon Closing.

Key Dates

Recommendation

Keywords

Bank First Corporation, Centre 1 Bancorp, Merger, Acquisition, Banking, Financial Services, Wisconsin, Illinois, Community Bank, All-stock transaction, SEC filing, Form 8-K, Bank Merger, Financial Integration, Shareholder Value, EPS Accretion, TBV Dilution, Regulatory Approval