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CEO Commentary

Moak Griffin, President and Chief Executive Officer of the Company and the Bank, stated, "We are pleased with our third quarter results as we saw continued modest growth of loans and deposits. Our credit quality remains stable as our non-performing assets continue to remain low. Overall, we remain optimistic about the remainder of 2024 and ahead into 2025."

Financial Condition and Results of Operations

Total assets were $2.8 billion at September 30, 2024, compared to $2.8 billion at June 30, 2024 and $2.7 billion at September 30, 2023. Total loans outstanding, net of the allowance for credit losses, as of September 30, 2024 totaled $1.8 billion, compared to $1.8 billion as of June 30, 2024 and $1.8 billion as of September 30, 2023.

Total deposits as of September 30, 2024 were $2.4 billion, compared to $2.3 billion at June 30, 2024 and $2.3 billion at September 30, 2023. Non-interest-bearing deposits were $529.5 million as of September 30, 2024, compared to $537.5 million as of June 30, 2024, a decrease of 1%, and $586.6 million as of September 30, 2023, a decrease of 10%. Non-interest-bearing deposits represented 23% of total deposits as of September 30, 2024.

The Company's consolidated cost of funds was 2.04% for the third quarter of 2024, compared to 2.05% for the second quarter of 2024 and 1.40% for the third quarter 2023.  The decrease in the Company's consolidated cost of funds during the third quarter of 2024 compared to the prior periods was primarily due to the continued flattening of market interest rates for deposits across the Bank's market areas and due to the retirement of $7.5 million of the Company's subordinated debt, as previously disclosed in the second quarter of 2024. Bank-only cost of funds for the third quarter of 2024 was 2.02% compared to 1.98% for the second quarter of 2024 and 1.31% for the third quarter of 2023.

The ratio of loans to deposits was 78.0% as of September 30, 2024, compared to 79.3% as of June 30, 2024 and 76.8% as of September 30, 2023.

Net interest income was $21.2 million for the third quarter of 2024, compared to $20.9 million for the second quarter of 2024 and $21.6 million for the third quarter of 2023. Net interest margin was 3.44% in the third quarter of 2024, a decrease from 3.46% in the second quarter of 2024 and a decrease from 3.55% in the third quarter of 2023. Yield on interest-earning assets was 5.41% during the third quarter of 2024, compared to 5.44% during the second quarter of 2024 and 4.90% during the third quarter of 2023.

Noninterest income was $7.4 million for the third quarter of 2024, compared to $7.9 million for the second quarter of 2024, an decrease of 7% and compared to $10.1 million for the third quarter of 2023, an decrease of 26%. The decrease in noninterest income in the second quarter is related to the pre-tax gain of gain of approximately $953.6 thousand on the redemption of $7.5 million in subordinated debentures recognized in the second quarter of 2024. The decrease in noninterest income in the second quarter related to the third quarter in 2023 was due to the recognition of the Equitable Recovery Program grant in the amount of $6.2 million. Mortgage banking revenue during the third quarter of 2024 was $818 thousand, a decrease of $40 thousand, or 5%, from $858 thousand in the second quarter of 2024, and an increase of $14 thousand, or 2%, from $804 thousand in the third quarter of 2023. During the third quarter of 2024, the Bank retained $3.6 million of the $37.3 million in secondary market mortgages originated to hold in-house, compared to $28.6 million secondary market loans originated during the third quarter of 2023, of which $3.1 million were retained to hold in-house.

Noninterest expense was $20.0 million for the third quarter of 2024, compared to $19.7 million for the second quarter of 2024 and $20.0 million for the third quarter of 2023.

As of September 30, 2024, tangible common book value per share (non-GAAP) was $23.97. According to OTCQX, there were 451 trades of the Company's shares of common stock during the third quarter of 2024 for a total of 146,732 shares and for a total price of $5,251,604. The closing price of the Company's common stock quoted on OTCQX on September 30, 2024 was $38.50 per share. Based on this closing share price, the Company's market capitalization was $209.1 million as of September 30, 2024.

Credit Quality

The Company recorded a provision for credit losses of $525 thousand during the third quarter of 2024, compared to a provision of $525 thousand for the second quarter of 2024 and a provision of $875 thousand for the third quarter of 2023. The Company continues to closely monitor the continued economic uncertainty, especially in the commercial real estate market, as discussed below.

The Company recorded $944 thousand of net loan charge-offs in the third quarter of 2024, compared to $1.1 million in the second quarter of 2024 and $413 thousand in the third quarter of 2023. Non-performing assets, excluding restructured loans, to total assets were 0.47% for the third quarter of 2024, compared to 0.41% for the second quarter of 2024 and 0.47% for the third quarter of 2023. Annualized net charge-offs to average loans for the third quarter of 2024 were 0.05% compared to annualized net charge-offs of 0.06% for the second quarter of 2024 and 0.02% for the third quarter of 2023.

As of September 30, 2024, the allowance for credit losses equaled $23.3 million, compared to $23.7 million as of June 30, 2024 and $23.7 million as of September 30, 2023.  Allowance for credit losses as a percentage of total loans was 1.27% at September 30, 2024, compared to 1.29% at June 30, 2024 and 1.33% at September 30, 2023.  Allowance for credit losses as a percentage of nonperforming loans was 176% at September 30, 2024, compared to 208% at June 30, 2024 and 185% at September 30, 2023.

The Company continues to closely monitor credit quality in light of the continued economic uncertainty due to the prolonged elevated interest rate environment and persistent inflationary pressures in the United States and our market areas. Accordingly, additional provisions for credit losses may be necessary in future periods.

Liquidity and Capital Position

Liquidity – We have a limited reliance on wholesale funding and currently have no brokered deposits. We currently have the capacity to borrow up to approximately $910.5 million from the FHLB, $14.7 million from the FRB Discount Window and an estimated additional $60.0 million in funding through several relationships with correspondent banks.

Capital Requirements and the Community Bank Leverage Ratio Framework – Pursuant to federal regulations, bank holding companies and banks, like the Company and the Bank, must maintain capital levels commensurate with the level of risk to which they are exposed, including the volume and severity of problem loans. Federal banking regulations implementing the international regulatory capital framework, referred to as the "Basel III Rules," apply to both depository institutions and (subject to certain exceptions not applicable to the Company) their holding companies. The Basel III Rules also establish a "capital conservation buffer" of 2.5% above the regulatory minimum risk-based capital requirements. The Basel III minimum capital ratios with the full capital conservation buffer are summarized in the table below.

On September 17, 2019, the federal banking agencies jointly finalized a rule intended to simplify the Basel III regulatory capital requirements described above for qualifying community banking organizations that opt into the Community Bank Leverage Ratio ("CBLR") framework, as required by Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The final rule became effective on January 1, 2020, and the CBLR framework became available for banks to use beginning with their March 31, 2020 Call Reports. Under the final rule, if a qualifying community banking organization opts into the CBLR framework and meets all requirements under the framework, it will be considered to have met the "well-capitalized" regulatory capital ratio requirements under the "prompt corrective action" regulations promulgated by the federal banking agencies and will not be required to report or calculate risk-based capital under the Basel III Rules. In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9.0%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities.

The Company and the Bank are qualifying community banking organizations and, on June 15, 2022, the Company and the Bank elected to opt into the CBLR framework. However, the Company currently operates under the Small Bank Holding Company Policy Statement of the Board of Governors of the Federal Reserve System (the "Federal Reserve") and, therefore, is not currently subject to the Federal Reserve's consolidated capital reporting requirements. Accordingly, the Company's election to opt into the CBLR framework will commence for the first reporting period for which the Company no longer operates under the Federal Reserve's Small Bank Holding Company Policy Statement, at which time the Company will become subject to the Federal Reserve's consolidated capital requirements.

By electing to opt into the CBLR framework, the Company and the Bank are not required to report or calculate risk-based capital under the Basel III Rules described above. As of September 30, 2024, the Bank's bank-only CBLR amounted to 11.23%. While the Company is currently not subject to the Federal Reserve's consolidated capital requirements, as discussed above, the Company's consolidated CBLR would have amounted to 12.50% as of September 30, 2024. These levels exceeded the 9.0% minimum CBLR necessary to be deemed "well-capitalized."

Included in shareholders' equity at September 30, 2024 was an unrealized loss in accumulated other comprehensive income of $7.4 million related to the unrealized loss in the Company's investment securities portfolio primarily due to continued elevated market interest rates during the period. At September 30, 2024, the composition of the Bank's investment securities portfolio includes $234 million, or 43%, classified as available-for-sale, and $312 million, or 57%, classified as held to maturity. All investments in our investment securities portfolio are expected to mature at par value.

Our investment securities portfolio made up 19.5% of our total assets at September 30, 2024, compared to 20.0% and 20.9% at June 30, 2024 and September 30, 2023, respectively.

ABOUT BANKFIRST CAPITAL CORPORATION  

BankFirst Capital Corporation (OTCQX: BFCC) is a registered bank holding company headquartered in Columbus, Mississippi with approximately $2.8 billion in total assets as of September 30, 2024. BankFirst Financial Services, the Company's wholly-owned banking subsidiary, was founded in 1888 and is locally owned, controlled, and operated. The Bank is headquartered in Macon, Mississippi, and operates additional branch offices in Coldwater, Columbus, Flowood, Hattiesburg, Hernando, Independence, Jackson, Louin, Madison, Newton, Oxford, Senatobia, Southaven, Starkville, Tupelo, Water Valley, 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 four loan production offices in Biloxi and Brookhaven, Mississippi, and in Birmingham and Huntsville, Alabama. 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.

NON-GAAP FINANCIAL MEASURES

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures include tangible book value per share. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company's financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures.

We classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.

A reconciliation of non-GAAP financial measures to GAAP financial measures is provided at the end of this press release.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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, statements regarding certain of the Company's goals and expectations with respect to future events that are subject to various risks and uncertainties, and 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: the impact on us or our customers of a decline in general economic conditions and any regulatory responses thereto; potential recession in the United States and our market areas; the impacts related to or resulting from bank failures and any continuation of uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto; increased competition for deposits and related changes in deposit customer behavior; the impact of changes in market interest rates, whether due to the current elevated interest rate environment or future reductions in interest rates and a resulting decline in net interest income; the resurgence of elevated levels of inflation or inflationary pressures in the United States and our market areas; the uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Federal Reserve; increases in unemployment rates in the United States and our market areas; declines in commercial real estate values and prices; uncertainty regarding United States fiscal debt, deficit and budget matters; cyber incidents or other failures, disruptions or breaches of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber attacks; severe weather, natural disasters, acts of war or terrorism, geopolitical instability or other external events; the impact of changes in U.S. presidential administrations or Congress; the maintenance and development of well-established and valued client relationships and referral source relationships; acquisition or loss of key production personnel; changes in tax laws; the risks related to the development, implementation, use and management of emerging technologies, including artificial intelligence and machine learnings; potential increased regulatory requirements and costs related to the transition and physical impacts of climate change; and current or future litigation, regulatory examinations or other legal and/or regulatory actions. 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.

AVAILABLE INFORMATION

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

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SOURCE BankFirst Capital Corporation