10-Q: Bank First Reports Strong Q3 Earnings, Merger on Track

Bank First Corporation announced a significant increase in net income and earnings per share for the third quarter and first nine months of 2025, driven by higher loan yields and lower deposit costs, alongside progress on a strategic merger.

Summary

• Net income for the three months ended September 30, 2025, increased by $1.4 million to $18.0 million, up 8.4% from $16.6 million in the same period of 2024.
• Basic earnings per share rose to $1.83 for the third quarter of 2025, compared to $1.65 for the third quarter of 2024.
• For the nine months ended September 30, 2025, net income increased by $5.1 million to $53.1 million, up 10.6% from $48.0 million in the prior year.
• Basic earnings per share for the nine months ended September 30, 2025, was $5.36, an increase from $4.75 in the same period of 2024.
• Net interest income increased by $2.4 million to $38.3 million for the three months ended September 30, 2025, and by $9.3 million to $111.5 million for the nine months ended September 30, 2025, primarily due to higher loan yields and lower deposit costs.
• Total assets decreased by $74.6 million, or 1.7%, to $4.42 billion at September 30, 2025, from $4.50 billion at December 31, 2024.
• Net loans increased by $112.1 million, or 3.2%, to $3.59 billion at September 30, 2025, compared to $3.47 billion at December 31, 2024.
• Total deposits decreased by $122.3 million, or 3.3%, to $3.54 billion at September 30, 2025, from $3.66 billion at December 31, 2024.
• Borrowings increased by $74.5 million to $209.9 million at September 30, 2025, from $135.4 million at December 31, 2024, to enhance liquidity.
• The Company entered into an Agreement and Plan of Merger with Centre 1 Bancorp, Inc. on July 18, 2025, with the transaction expected to close on January 1, 2026.

Sentiment

Score: 7

Explanation: The Company reported strong earnings growth and maintained a robust capital position, with a strategic merger underway. However, there was a decrease in total assets and deposits, an increase in nonperforming assets, and a higher provision for credit losses, indicating some underlying challenges despite overall positive performance.

Positives

• Net income increased by 8.4% for the three months and 10.6% for the nine months ended September 30, 2025, demonstrating strong profitability growth.
• Earnings per share (basic) increased by 10.9% for the three months and 12.8% for the nine months ended September 30, 2025.
• Net interest income grew by 6.7% for the three months and 9.1% for the nine months, driven by higher yields on new and renewed loans and a decrease in average rates paid on interest-bearing liabilities.
• The net interest margin (taxable equivalent) improved to 3.88% for the three months and 3.75% for the nine months ended September 30, 2025, up from 3.76% and 3.67% respectively in the prior year.
• Total loans, net, increased by $112.1 million (3.2%) to $3.59 billion, reflecting solid demand for new credit.
• Noninterest income saw substantial growth, increasing by 22% for the three months and 15% for the nine months, boosted by income from Ansay, positive MSR valuation adjustments, and gains on mortgage loan sales.
• The Bank First, N.A. subsidiary remains 'well capitalized' and exceeds all applicable regulatory capital requirements, with a Common Equity Tier 1 capital ratio of 10.99% and a Total capital ratio of 12.14% at September 30, 2025.
• Lower prevailing mortgage interest rates positively impacted retail lending, leading to higher net gains on sales of mortgage loans.
• The Company recognized $1.1 million in gains from death benefits tied to its bank-owned life insurance portfolio during the first nine months of 2025, compared to $0.5 million in the prior year.
• The Company anticipates the national GDP growth rate to rise slightly during the forecast period.

Negatives

• Total assets decreased by $74.6 million (1.7%) from December 31, 2024, to September 30, 2025.
• Cash and cash equivalents significantly decreased by $135.1 million to $126.2 million at September 30, 2025, from $261.3 million at December 31, 2024.
• Total deposits decreased by $122.3 million (3.3%), with a shift from noninterest-bearing to interest-bearing deposits.
• Provision for credit losses increased to $0.7 million for the three months and $1.3 million for the nine months ended September 30, 2025, compared to $0 million and $0.2 million respectively in the prior year.
• Net charge-offs totaled $0.8 million for the nine months ended September 30, 2025, compared to net recoveries of $0.5 million in the same period of 2024.
• Nonperforming loans to total loans increased to 0.38% at September 30, 2025, from 0.24% at December 31, 2024, primarily due to the deterioration of one customer relationship.
• Nonperforming assets to total assets increased to 0.31% at September 30, 2025, from 0.21% at December 31, 2024.
• Noninterest expenses increased by $1.0 million (5%) for the three months and $2.9 million (5%) for the nine months, driven by outside service fees related to the Centre acquisition, occupancy, and data processing expenses.
• Unrealized losses on available-for-sale securities totaled $9.1 million at September 30, 2025, primarily due to changes in interest rates.
• The national unemployment rate is anticipated to rise during the forecast period.

Risks

• Interest rate risk from timing differences in the repricing and maturities of interest-earning assets and interest-bearing liabilities, changes in expected maturities from embedded options, changes in the yield curve, and changes in spread relationships.
• Credit risk inherent in the business of making loans, with potential for losses on existing loans becoming uncollectible.
• Impact of inflation on operating costs, as financial statements are prepared without considering changes in the relative purchasing power of money.
• Regulatory capital requirements; failure to meet minimums could lead to restrictions on operations, management, capital distributions, or growth.
• The Inflation Reduction Act of 2022 (IRA) created a new nondeductible 1% excise tax on stock repurchases, which will impact consolidated financial statements depending on future repurchase activity.
• Economic forecasts indicate a potential rise in the national unemployment rate, which could adversely affect borrowers' financial stability and loan repayment capacity.
• A shift in the deposit portfolio from noninterest-bearing to interest-bearing deposits increases funding costs.
• Reliance on certificates of deposit, which the Company aims to minimize in its long-term strategy.
• Collateral dependent loans, particularly those acquired from Hometown Bancorp, Ltd., where repayment is expected substantially through collateral operation or sale.
• Litigation in the normal course of business, though management believes any liability will not have a material effect.

Future Outlook

The Company anticipates the national unemployment rate to rise during the forecast period, while the national GDP growth rate is expected to rise slightly. The merger with Centre 1 Bancorp, Inc. is expected to close on January 1, 2026, which would result in a combined entity with approximately $6.0 billion in total assets, $4.6 billion in loans, and $4.8 billion in deposits. The Bank expects to continue exceeding all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2025. The Company's long-term strategy is to minimize reliance on certificates of deposits by increasing relationship deposits in lower earning savings and demand deposit accounts.

Management Comments

• Net income continues to benefit from new and renewed loans being priced at higher yields, while deposits continue to reprice lower.
• The Bank's loan portfolio continues to exhibit very little credit stress.
• Our highest priority is placed on growing noninterest bearing deposits through strong community involvement in the markets that we serve.
• Borrowings and brokered deposits are considered short-term supplements to our overall liquidity but are not intended to be relied upon for long-term needs.
• We believe that our present position is adequate to meet our current and future liquidity needs, and management knows of no trend or event that will have a material impact on the Company's ability to maintain liquidity at satisfactory levels.
• Based on current estimates, we believe that the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2025.

Industry Context

Bank First Corporation operates as a community bank in Wisconsin, deriving significant income from loans and investments, funded primarily by deposits. The banking industry is currently navigating a higher interest rate environment, which has allowed the Company to price new and renewed loans at higher yields while managing deposit costs. The strategic merger with Centre 1 Bancorp, Inc. reflects a trend of consolidation within the community banking sector to achieve greater scale and market presence. The Company's focus on growing noninterest-bearing deposits and minimizing reliance on certificates of deposit aligns with broader industry efforts to optimize funding costs amidst competitive pressures. Regulatory changes, such as the implementation of CECL and the excise tax on stock repurchases, continue to shape financial reporting and capital management strategies for financial institutions.

Comparison to Industry Standards

• The Company's net charge-offs are lower compared to many peer banks, which is attributed to a strong commitment to collecting on all loans, potentially leading to higher loan recoveries.

Corporate Governance

Legal Proceedings

• The Company is a party to various litigation in the normal course of business. Management, after consulting with legal counsel, believes that any liability resulting from litigation will not have a material effect on the financial position, results of operations, or liquidity.

Related Party Transactions

• The Company has outstanding balances of $6.0 million under subordinated note agreements with two separate commercial banks, issued in July 2020.
• The Company has outstanding balances of $6.0 million under subordinated note agreements with an individual, issued in August 2022.

Stakeholder Impact

• Shareholders: Benefited from increased net income and EPS, cash dividends paid ($48.1 million), and a share repurchase program ($22.0 million).
• Customers: Experienced solid loan growth and new credit demand, supported by the Bank's digital banking platform upgrade and continued focus on competitive pricing and quality service.
• Employees: Received standard cost-of-living and merit compensation adjustments, contributing to increased personnel expense.
• Regulators: The Company and its subsidiary Bank First, N.A. maintained strong capital ratios, exceeding all applicable regulatory capital requirements, ensuring compliance and stability.
• Creditors: Borrowings from the FHLB increased to enhance liquidity, and subordinated notes remain outstanding, indicating continued access to funding sources.

Next Steps

• The merger with Centre 1 Bancorp, Inc. is expected to close on January 1, 2026, subject to customary closing conditions including shareholder approval.
• The Company will continue to monitor the impact of recently implemented tariffs on C&I loan customers' input costs and customer relationships.
• Management will continue to monitor the impact of the uncertain economic environment on the loan portfolio and its credit quality.
• The Company's long-term strategy is to minimize reliance on certificates of deposits by increasing relationship deposits in lower earning savings and demand deposit accounts.
• The Bank is expected to continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2025.

Key Dates

Recommendation

Bank First Corporation demonstrated strong financial performance with significant increases in net income and EPS for both the quarter and year-to-date periods. The Company effectively managed its net interest margin in a dynamic interest rate environment, leading to robust net interest income growth. Loan growth was solid, and noninterest income showed substantial improvement, diversifying revenue streams. While there was an increase in nonperforming assets and a higher provision for credit losses, management asserts the loan portfolio exhibits 'very little credit stress,' and the Bank remains 'well capitalized,' exceeding all regulatory requirements. The pending merger with Centre 1 Bancorp, Inc. is a strategic move expected to enhance scale and market position. The combination of strong earnings, healthy capital, and strategic expansion makes BFC an attractive investment.

Keywords

Bank First Corporation, BFC, SEC Filing, 10-Q, Quarterly Report, Financial Results, Net Income, Earnings Per Share, Net Interest Income, Loan Growth, Deposits, Credit Quality, Nonperforming Assets, Merger, Acquisition, Centre 1 Bancorp, Bank First N.A., Capital Adequacy, Interest Rate Risk, Wisconsin Banking, Community Bank, Stock Repurchase, Mortgage Servicing Rights, Commercial Real Estate, Commercial & Industrial Loans