8-K: Bank First Corporation to Acquire Centre 1 Bancorp in All-Stock Deal Valued at $174.3 Million

Bank First Corporation (BFC) has signed a definitive agreement to acquire Centre 1 Bancorp, Inc. (Centre) 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 transaction, 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 on July 17, 2025.
• The transaction is expected to close in the first quarter of 2026, subject to customary closing conditions, regulatory approval, and Centre shareholder approval.
• The system conversion is anticipated in the second quarter of 2026.
• Centre's directors and executive officers have entered into voting agreements to support the merger.
• Centre directors and First National Bank directors will enter into two-year non-competition and non-disclosure agreements effective upon closing, restricting activities in counties where First National Bank operates and contiguous counties.
• Centre will pay BFC a termination fee of $5.3 million under certain conditions, including if Centre's board breaches non-solicitation obligations, changes its recommendation, or if Centre terminates to accept a superior proposal and subsequently completes an acquisition within 12 months.
• Centre has the right to terminate the agreement if BFC's stock price declines by more than 12.5% from July 17, 2025, and this decline is 12.5% greater than the change in the NASDAQ Bank Index, with BFC having the option to adjust the merger consideration to prevent termination.

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 complementary business models. The projected financial impacts significantly exceed typical industry benchmarks, indicating a very favorable transaction for Bank First Corporation.

Positives

• The merger combines two community banks with shared commitments to relationship-based banking and deep community roots.
• It strategically expands Bank First's geographic footprint into southern Wisconsin and northern Illinois, marking its first out-of-state expansion.
• The combined entity will have nearly $6 billion in assets, increasing lending capacity and service capabilities.
• The transaction is projected to be highly accretive to earnings per share, with 33.9% accretion in 2026 and 31.1% in 2027.
• Tangible book value dilution is manageable at 5.1% at closing, with an estimated earnback period of 0.75 years using the crossover method.
• The projected internal rate of return (IRR) exceeds 20%, surpassing internal targets.
• Both institutions maintain strong, low-cost deposit franchises with over one-quarter of deposits in non-interest-bearing checking accounts, providing excess core deposit liquidity.
• Bank First customers will gain access to First National Bank and Trust's wealth management services.
• Centre shareholders and customers will benefit from Bank First's 40% ownership interest in Ansay & Associates, an independent insurance agency.
• The transaction is considered low risk due to well-aligned values, similar credit cultures, comprehensive due diligence, and identified cost savings opportunities (40% of Centre's expense base, or $22.0 million fully-phased in).

Negatives

• The transaction will result in a tangible book value dilution of 5.1% at closing for Bank First.
• Estimated pre-tax deal expenses are $21.5 million, which will impact tangible book value.
• There are significant purchase accounting adjustments, including a loan credit mark of $15.1 million (1.48% of gross loans) and a loan interest rate mark of $33.8 million (3.31% of gross loans).
• Centre's pre-tax loss on AFS securities of $32.4 million will be accreted through earnings over 3.8 years.
• A net pre-tax write-down of $3.8 million related to deposits and borrowings is expected.
• The merger is subject to various closing conditions, including regulatory and shareholder approvals, which could delay or prevent consummation.

Risks

• Cost savings and revenue synergies from the merger may not be realized or may take longer than anticipated.
• Disruption from the merger could occur with customers, suppliers, employees, or other business partners.
• 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 necessary approval by Centre's shareholders could prevent the merger.
• The actual costs, fees, expenses, and charges related to the merger may be higher than anticipated.
• The parties may fail to obtain required governmental approvals for the merger.
• Reputational risk and negative reactions from customers, suppliers, employees, or other business partners could arise.
• Closing conditions in the merger agreement may not be satisfied, or unexpected delays in closing could occur.
• Integration of Centre's operations into Bank First's operations could be materially delayed, more costly, or more 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 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 anticipates significant EPS accretion of 33.9% in 2026 and 31.1% in 2027, a tangible book value earnback period of 0.75 years, and an internal rate of return exceeding 20%. The combined entity aims to leverage its increased asset base to expand lending capacity and service capabilities, supporting long-term value creation for all stakeholders.

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 continuation of the consolidation trend within the U.S. banking sector, particularly among community banks seeking to expand their geographic reach and enhance financial capacity. By entering northern Illinois, Bank First is strategically diversifying its market presence beyond Wisconsin, a common move for regional banks aiming for growth. The focus on relationship-driven banking and low-cost deposits aligns with broader industry efforts to maintain stable funding in a competitive environment. The emphasis on wealth management services also reflects a trend towards offering a more comprehensive suite of financial products to customers.

Comparison to Industry Standards

• The projected EPS accretion of 33.9% in 2026 and 31.1% in 2027 is significantly higher than typical bank M&A transactions, which often target mid-single to low-double digit accretion.
• The tangible book value (TBV) dilution of 5.1% at closing is within an acceptable range for bank acquisitions, which can vary widely but are often between 3-7%.
• The TBV earnback period of 0.75 years (crossover method) is exceptionally fast compared to industry averages, which typically range from 2 to 5 years, indicating a highly efficient and value-accretive deal.
• The Internal Rate of Return (IRR) exceeding 20% is a strong indicator of value creation, generally considered excellent for bank mergers, with many deals targeting IRRs in the mid-teens.
• The 40% cost savings target is robust and suggests significant operational efficiencies are expected from the integration, which is a key driver of accretion in bank M&A.
• The valuation multiple of 195% of Tangible Book Value is on the higher end for bank acquisitions, but justified by the strong accretion and quick earnback period.
• The 7.7% premium on core deposits is a reasonable valuation for a low-cost deposit franchise, reflecting the value of stable funding in the current banking environment.

Management Changes

Corporate Governance

Legal Proceedings

• No material civil, criminal, administrative, or regulatory actions, suits, demand letters, claims, hearings, notices of violation, arbitrations, investigations, orders to show cause, market conduct examinations, notices of non-compliance, or other proceedings of any nature pending or threatened against Centre or any of its Subsidiaries or their current/former directors/executive officers that would challenge the validity or propriety of the merger.
• No material injunction, order, judgment, decree, or regulatory restriction imposed upon Centre or any of its Subsidiaries (or that would apply to the Surviving Entity) other than those generally applicable to all businesses similar to Centre's.

Related Party Transactions

• No outstanding amounts payable to or receivable from, or advances by Centre or any of its Subsidiaries to, and neither Centre nor any of its Subsidiaries is otherwise a creditor or debtor to (a) any director, executive officer, 5% or greater shareholder of Centre or any of its Subsidiaries or to any of their respective Affiliates or Associates, other than as part of the normal and customary terms of such persons employment or service as a director with Centre or any of its Subsidiaries and other than deposits held by First National Bank in the Ordinary Course of Business, or (b) any other Affiliate of Centre or any of its Subsidiaries, except as disclosed in Centre Disclosure Schedule 3.29.
• All agreements between First National Bank and any of its Affiliates comply with Sections 23A and 23B of the Federal Reserve Act and Regulation W of the FRB, to the extent applicable.

Stakeholder Impact

• **Shareholders (Centre):** Will receive 0.9200 shares of BFC common stock for each Centre share, representing a value of approximately $115.72 per share based on BFC's July 17, 2025 closing price. Centre's directors and executive officers have committed to vote in favor of the merger.
• **Shareholders (BFC):** Expected to benefit from significant EPS accretion (33.9% in 2026, 31.1% in 2027) and a rapid tangible book value earnback (0.75 years), indicating strong value creation.
• **Employees (Centre):** Covered Employees will receive substantially comparable employee benefits and cash-based compensation opportunities for at least six months post-merger. Prior service will be credited for eligibility and vesting in BFC's plans. Accrued but unused paid time off will be carried over (with limitations). A retention bonus pool will be established to encourage employee retention. Severance payments will be provided to non-retained employees (excluding for cause/voluntary resignation).
• **Customers (Centre & BFC):** Customers will benefit from expanded financial capacity, greater lending capabilities, and broader service offerings. BFC customers will gain access to Centre's wealth management services, while Centre customers will benefit from BFC's ownership in an independent insurance agency.
• **Communities:** The merger is framed as a partnership that will continue to support and strengthen the communities served by both banks, maintaining a focus on relationship-based banking.

Next Steps

• BFC and Centre will cooperate in preparing and filing the Registration Statement on Form S-4 with the SEC.
• BFC will use commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC.
• Centre will convene a special meeting of its shareholders to vote on the approval of the Merger Agreement and the transactions contemplated.
• BFC will use commercially reasonable efforts to cause its common stock to be issued in the merger to be approved for listing on NASDAQ.
• BFC and Centre will work to obtain all necessary regulatory approvals from the FRB, FDIC, OCC, and state banking agencies.
• Centre will take actions to accrue costs for and terminate designated material contracts prior to the Calculation Date.
• Centre will cause resignations of all its directors and its subsidiaries' directors to be effective as of the Effective Time.
• 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 to its board of directors.
• Centre will cause First National Bank to take all necessary actions to terminate its 401(k) Plan effective immediately preceding the Effective Time.
• BFC and Centre will take actions necessary for BFC to enter into a supplemental indenture with the trustee for Centre's outstanding trust preferred securities.
• BFC and Centre will facilitate the integration of Centre's operations and informational systems with BFC's following the merger.
• Centre and First National Bank will dispose of any impermissible assets at BFC's request prior to the Closing Date, after regulatory approvals.

Key Dates

Recommendation

Keywords

Bank First Corporation, Centre 1 Bancorp, Merger, Acquisition, Banking, Financial Services, Wisconsin, Illinois, Community Bank, All-stock transaction, SEC Filing, 8-K, Financial Performance, Shareholder Value, Integration, Regulatory Approval, Corporate Governance