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Bank First(BFC) - 2023 Q4 - Annual Report
BFCBank First(BFC)2024-02-28 16:00

Loans and Assets - As of December 31, 2023, total loans receivable amounted to 3.34billion,representingapproximately79.33.34 billion, representing approximately 79.3% of total assets[4] - Loans secured by real estate constituted approximately 2.59 billion, or 77.4% of the loan portfolio[8] - The company had 26 nonaccrual loans totaling approximately 5.7million,or0.25.7 million, or 0.2% of total loans[4] - As of December 31, 2023, total consolidated assets were 4.22 billion, total loans were 3.34billion,totaldepositswere3.34 billion, total deposits were 3.43 billion, and total stockholders' equity was 619.8million[43]−AsofDecember31,2023,commercialrealestateloansconstitutedapproximately619.8 million[43] - As of December 31, 2023, commercial real estate loans constituted approximately 1.70 billion or 50.8% of the loan portfolio[77] - Residential mortgage loans and home equity loans accounted for approximately 888.6millionor26.6888.6 million or 26.6% of the loan portfolio[77] - Commercial and industrial loans made up approximately 487.9 million or 14.6% of the loan portfolio[78] - Construction and development loans represented approximately 200.8millionor6.0200.8 million or 6.0% of the loan portfolio[82] - Consumer loans totaled approximately 51.0 million or 1.5% of the loan portfolio[83] - Approximately 77.4% of the loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral[202] Mergers and Acquisitions - The merger with Hometown Bancorp was completed on February 10, 2023, with a total merger consideration of approximately 130.5million[27]−Companystockissuedinthemergertotaled1,450,272sharesvaluedatapproximately130.5 million[27] - Company stock issued in the merger totaled 1,450,272 shares valued at approximately 115.1 million, with cash of 15.4million[28]StrategicPrioritiesandGrowth−Thestrategicprioritiesincludegrowingcapitalthroughstrongearningsandmaintainingastrongcreditculture[31]−TheCompanyisfocusedonmaintainingastrongcreditculturetoensuresoundassetqualityandiscommittedtocreatingvalueforcustomersandshareholdersthroughpersonalizedsolutions[47]−TheCompanyisfocusedonstrategicinitiativestoenhanceoperationalefficiencyandprofitability,whilemanagingrisksassociatedwitheconomicconditionsandmarketfluctuations[39]−Thecompanyisfocusedonorganicgrowthbutmaypursueattractivebankornon−bankacquisitionopportunities,facingcompetitionfromotherfinancialcompanies[176]RegulatoryComplianceandCapitalRequirements−TheCompanyissubjecttovariousregulatoryrequirements,includingmaintainingminimumcapitallevelsbasedoncapital−to−assetratios[56]−Therequiredminimumleverageratioforallbanksis4.015.4 million[28] Strategic Priorities and Growth - The strategic priorities include growing capital through strong earnings and maintaining a strong credit culture[31] - The Company is focused on maintaining a strong credit culture to ensure sound asset quality and is committed to creating value for customers and shareholders through personalized solutions[47] - The Company is focused on strategic initiatives to enhance operational efficiency and profitability, while managing risks associated with economic conditions and market fluctuations[39] - The company is focused on organic growth but may pursue attractive bank or non-bank acquisition opportunities, facing competition from other financial companies[176] Regulatory Compliance and Capital Requirements - The Company is subject to various regulatory requirements, including maintaining minimum capital levels based on capital-to-asset ratios[56] - The required minimum leverage ratio for all banks is 4.0%, which serves as a minimum capital standard[57] - The capital conservation buffer for CET1 is set at 2.5% above the minimum capital ratio requirements[75] - The Company and Bank's regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer in 2023[104] - The Company crossed above the 3 billion asset threshold during Q3 2022, requiring adherence to risk-based capital rules[105] - The Bank's base legal lending limit was 66.9million,whiletheinternallendinglimitwassetat66.9 million, while the internal lending limit was set at 53.6 million as of December 31, 2023[102] - The Company must obtain prior approval from the OCC if total dividends declared exceed the sum of net profits for the year and retained net profits for the preceding two years[109] Competition and Market Position - The Company faces competition from various financial institutions, including commercial banks, credit unions, and fintech companies, which may impact its market position[49] - The estimated aggregate population in the Bank's market area is 1,894,606, with total deposits of approximately 60.4billionasofJune30,2023[48]−BankFirstrankedinthetopthreeofmarketshareinsixofthefourteencountieswhereitsbranchesarelocatedasofJune30,2023[32]−Thecompanyfacessignificantcompetitionfromvariousfinancialinstitutions,includingnationalandregionalbanks,fintechcompanies,andcreditunions,whichmayaffectitsmarketposition[168]−Thecompany’sabilitytoattractandretainexperiencedbankersiscrucialforexecutingitsbusinessstrategy,butcompetitionfortalentisintense[175]CybersecurityandTechnology−Thecompanyaimstoadvanceitsdigitalstrategyandenhancecybersecuritymeasuresaspartofitsinformationtechnologypriorities[31]−TheBankmustnotifyregulatorswithin36hoursofasignificantcybersecurityincident,aspernewSECrulesadoptedonJuly26,2023[123]−Thecompanyisundercontinuousthreatofcyberattacks,whichcouldleadtoincreasedoperatingcostsandreputationaldamage[184]−Thefinancialservicesindustryisexperiencingrapidtechnologicalchanges,withagrowingdemandfortechnology−drivenproductsandservices,includingartificialintelligenceandmobilebankingapplications[180]−Thecompanycontinuestoinvestsignificantresourcesincoreinformationtechnologysystemstoimproveoperatingefficiencyandclientexperience[181]EconomicConditionsandRisks−TheBank′soperationsarevulnerabletoeconomicconditions,includinginflationandrecession,whichcouldleadtoincreasedloandelinquenciesandreduceddemandforproducts[131]−Inflationarypressurescontinuedtorisein2023,potentiallyimpactingprofitabilitythroughincreasedfundingcostsandreducedconsumerpurchasingpower[163]−Adversedevelopmentsaffectingrealestatevaluescouldincreasecreditriskassociatedwiththerealestateloanportfolio,potentiallyleadingtolosses[202]−Theprovisionandallowanceforcreditlossesmaynotbeadequatetocoveractualcreditlosses,posingarisktofinancialstability[197]−Changesininterestratesmayadverselyaffectnetinterestincome,withdecreasingratesreducingyieldsonvariablerateloansandinvestmentsecurities[190]DiversityandInclusion−TheCompanyiscommittedtodiversityandinclusionwithinitsworkforceandcommunity,whichisseenasafoundationforinnovation[47]−Thecompanyemphasizesdiversity,withapproximately7360.4 billion as of June 30, 2023[48] - Bank First ranked in the top three of market share in six of the fourteen counties where its branches are located as of June 30, 2023[32] - The company faces significant competition from various financial institutions, including national and regional banks, fintech companies, and credit unions, which may affect its market position[168] - The company’s ability to attract and retain experienced bankers is crucial for executing its business strategy, but competition for talent is intense[175] Cybersecurity and Technology - The company aims to advance its digital strategy and enhance cybersecurity measures as part of its information technology priorities[31] - The Bank must notify regulators within 36 hours of a significant cybersecurity incident, as per new SEC rules adopted on July 26, 2023[123] - The company is under continuous threat of cyberattacks, which could lead to increased operating costs and reputational damage[184] - The financial services industry is experiencing rapid technological changes, with a growing demand for technology-driven products and services, including artificial intelligence and mobile banking applications[180] - The company continues to invest significant resources in core information technology systems to improve operating efficiency and client experience[181] Economic Conditions and Risks - The Bank's operations are vulnerable to economic conditions, including inflation and recession, which could lead to increased loan delinquencies and reduced demand for products[131] - Inflationary pressures continued to rise in 2023, potentially impacting profitability through increased funding costs and reduced consumer purchasing power[163] - Adverse developments affecting real estate values could increase credit risk associated with the real estate loan portfolio, potentially leading to losses[202] - The provision and allowance for credit losses may not be adequate to cover actual credit losses, posing a risk to financial stability[197] - Changes in interest rates may adversely affect net interest income, with decreasing rates reducing yields on variable rate loans and investment securities[190] Diversity and Inclusion - The Company is committed to diversity and inclusion within its workforce and community, which is seen as a foundation for innovation[47] - The company emphasizes diversity, with approximately 73% of employees self-identifying as female and 5% as people of color[65] - The company aims to increase the diversity of its Board in the coming year[65] Deposits and Liquidity - The Bank's deposits are insured by the FDIC up to 250,000 per depositor, per insured bank[115] - The Bank was well capitalized at December 31, 2023, with no restrictions on brokered deposits[103] - The Bank's lending activities are subject to various federal lending limits, including a base legal limit of 15% of the Bank's capital for loans to a single borrower[102] - The Bank's ability to grow and retain deposits is critical to avoid liquidity risk and higher funding costs[138] - The company must manage liquidity at the holding company level for capital infusions, debt servicing, and dividend payments, which are dependent on the bank's future profits and overall condition[164]