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BANKFIRST CAPITAL CORPORATION Reports Third Quarter 2021 Earnings of $5.3 Million

10/22/2021

By: BankFirst Capital Corporation

BankFirst Capital Corporation (OTCQX: BFCC) ("BankFirst" or the "Company") reported quarterly net income of $5.3 million, or $1.01 per share, for the third quarter of 2021, an increase of 24% compared to net income of $4.3 million, or $0.81 per share, for the second quarter of 2021, and an increase of 58% compared to net income of $3.4 million, or $0.64 per share, for the third quarter of 2020. The Company also reported net income of $13.9 million, or $2.63 per share, for the first nine months of 2021, compared to net income of $9.5 million, or $2.00 per share, for the first nine months of 2020, an increase of 32%.

2021 Third Quarter Highlights:

  • Net income totaled $5.3 million, or $1.01 per share, in the third quarter of 2021 compared to $3.4 million, or $0.64 per share, for the third quarter of 2020.
  • Earnings per share increased to $2.63 for the first nine months in 2021 compared to $2.00 for the first nine months in 2020, an increase of 32%.
  • Total loan deferrals of $5 million, or 0.4% of the total loan portfolio, in the third quarter of 2021 compared to $7 million, or 0.6% of the total loan portfolio, in the second quarter of 2021.
  • The Company's wholly-owned banking subsidiary, BankFirst Financial Services (the "Bank"), received a Community Development Financial Institution Financial Assistance grant of $1.8 million in the third quarter of 2021.
  • Two new loan production offices were opened, one in Oxford, Mississippi and one in Biloxi, Mississippi.

Recent Developments

  • On October 14, 2021, BankFirst announced the signing of a definitive agreement for the acquisition The Citizens Bank of Fayette, Fayette, Alabama ("Citizens").

CEO Commentary

Moak Griffin, President and Chief Executive Officer of the Company and the Bank, stated, "We are pleased to report another strong quarter of earnings. During the third quarter of 2021, we expanded our footprint in Mississippi with the opening of two new loan production offices, one in Oxford, Mississippi and one in Biloxi, Mississippi. In addition to the new loan production offices that have been announced, we are also excited by our recent announcement that we have signed a definitive agreement providing for the acquisition of Citizens. We believe that the partnership with Citizens will allow BankFirst to continue its strategic plan by partnering with community banks with strong relationships in their local markets."

Financial Condition and Results of Operations

Total assets were $1.79 billion as of September 30, 2021, as compared to $1.80 billion at June 30, 2021 and $1.68 billion at September 30, 2020, a decrease of 0.5% and an increase of 7%, respectively. The increase in total assets from the prior year was primarily due to organic loan and deposit growth, supported by participation in the Paycheck Protection Program ("PPP") created under the Coronavirus Aid, Relief, and Economic Security Act and administered by the U.S. Small Business Administration (the "SBA"). Total loans outstanding, net of the allowance for loan losses, as of September 30, 2021 totaled $1.13 billion as compared to $1.12 billion as of June 30, 2021, an increase of 1%, and as compared to $1.19 billion as of September 30, 2020, a decrease of 5%. The decrease from September 30, 2020 is primarily attributed to PPP loan forgiveness payments received from the SBA in 2021. Net loans outstanding, excluding loans associated with the PPP, as of September 30, 2021 totaled $1.09 billion, as compared to $1.05 billion as of June 30, 2021, an increase of 4%, and as compared to $1.07 billion as of September 30, 2020, an increase of 1%.

Non-interest-bearing deposits increased to $467 million as of September 30, 2021, as compared to $462 million as of June 30, 2021, an increase of 1%, and as compared to $417 million as of September 30, 2020, an increase of 12%. Non-interest- bearing deposits represented 30% of total deposits as of September 30, 2021. Total deposits as of September 30, 2021 were $1.6 billion, as compared to $1.6 billion as of June 30, 2021, and as compared to $1.5 billion as of September 30, 2020, an increase of 7%. Cost of funds as of September 30, 2021 was 0.31% as compared to 0.31% as of June 30, 2021, and as compared to 0.49% as of September 30, 2020.

The ratio of loans to deposits was 73% as of September 30, 2021 as compared to 72% as of June 30, 2021, and as compared to 82% as of September 30, 2020. The ratio of loans, net of PPP loans, to deposits was 69% as of September 30, 2021 as compared to 67% as of June 30, 2021, and as compared to 73% as of September 30, 2020.

Net interest income was $14.1 million for the third quarter of 2021, an increase of 10% as compared to $12.9 million for the second quarter of 2021. Net interest margin decreased to 3.00% in the third quarter of 2021, compared to 3.02% in the second quarter of 2021. The decrease is primarily due to the increase in interest expense on Federal Home Loan Bank advances due to early prepayment costs and due to changes in the mix of our interest-bearing deposits and non-interest deposits. Yield on earning assets decreased 1 basis point to 3.31% in the third quarter of 2021, compared to 3.32% during the second quarter of 2021. The decrease, despite an increase in loan volume, is primarily due to the lower interest rate environment as a result of the Federal Reserve's sustained interest rate reductions in response to the ongoing COVID-19 pandemic.

Noninterest income was $6.7 million for the third quarter of 2021, an increase of 20% as compared to $5.6 million for the second quarter of 2021, and a decrease of 15% as compared to $7.9 million for the third quarter of 2020. Mortgage banking revenue decreased $531 thousand to $1.2 million in the third quarter of 2021 from $1.7 million in the second quarter of 2021, a decrease of 29%, and decreased $665 thousand from $1.9 million in the third quarter of 2020, a decrease of 35%. In the third quarter of 2021, the Bank received a Community Development Financial Institution Financial Assistance grant of $1.8 million.

As of September 30, 2021, tangible book value per share was $22.39. According to OTCQX, there were 106 trades of the Company's shares of common stock during the third quarter of 2021 for a total of 30,525 shares and for a total price of $838,916. The closing price of the Company's common stock quoted on OTCQX on September 30, 2021 was $28.25 per share. Based on this closing share price, the Company's market cap was $150.617 million as of September 30, 2021.

Credit Quality

The Company recorded $322,000 provision for credit losses during the third quarter of 2021 as compared to $144,000 for the second quarter of 2021, and as compared to $5.161 million for the third quarter of 2020. As of September 30, 2021, the allowance for loan losses was equal to 1.43% of gross loans and equal to 1.48% of gross loans less loans originated through the PPP. Net loan charge-offs in the third quarter of 2021 were $490,000 as compared to $265,000 in the second quarter 2021, and as compared to $136,000 in the third quarter 2020. Non-performing assets to total assets were 0.58% for the third quarter of 2021, a decrease of 5 basis points compared to 0.63% for the second quarter of 2021 and a decrease of 10 basis points compared to 0.68% for the third quarter of 2020. Annualized net charge-offs to average loans for the third quarter of 2021 were 0.04%, compared to 0.02% for the second quarter of 2021 compared to 0.01% for the third quarter of 2020.

Paycheck Protection Program ("PPP")

The Bank participated in the PPP, a $944 billion low-interest business loan program funded by the U.S. Treasury Department and administered by the SBA, which officially ended on May 31, 2021. The PPP provided U.S. government guarantees for lenders, as well as loan forgiveness incentives for borrowers that predominately utilize the loan proceeds to cover employee compensation-related business costs. The Bank participated in Rounds 1 and 2 of the PPP during 2020 and in Round 3 of the PPP in 2021 until its expiration on May 31, 2021. In 2020, during Rounds 1 and 2 of the PPP, the Bank approved 1,489 PPP loans totaling $115.6 million. Through September 30, 2021, the Bank has received loan forgiveness payments from the SBA totaling $112 million on PPP loans originated in Rounds 1 and 2 of the PPP. The Bank received approximately $4.4 million in fees (net of expenses) paid by the SBA on PPP loans originated in Rounds 1 and 2 of the PPP, which we have recognized $1.1 million as loan fee income during the third quarter of 2021 and recognized $2 million during the first nine months of 2021, compared to $2.4 million for the first nine months of 2020.

In 2021, during Round 3 of the PPP, the Bank approved 1,382 PPP loans totaling $62 million. Through September 30, 2021, the Bank has received forgiveness payments from the SBA totaling $23.9 million on PPP loans originated in Round 3 of the PPP. The Bank received approximately $4 million in fees (net of expenses) paid by the SBA on PPP loans originated in Round 3 of the PPP, which we have recognized $500,000 as loan fee income during the third quarter of 2021 and recognized $550,000 during the first nine months of 2021.

Lending

The Company regularly takes actions to identify and assess its COVID-19 related credit exposures by asset classes and borrower types. In addition, the Company implemented a loan modification program to assist both consumer and business borrowers that experienced or expect to experience financial hardships due to COVID-19 related challenges. As of September 30, 2021, 0.44% of the Bank's loan portfolio had active COVID-19-related modifications compared to 0.59% as of June 30, 2021 and 2.03% as of December 31, 2020.

Modified loans with deferred payments will continue to accrue interest during the deferral period unless otherwise classified as nonperforming. Consistent with bank regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals will continue to be reported as current loans throughout the agreed upon deferral periods. COVID-19 related loan modifications are also deemed to be insignificant borrower concessions, and therefore, such modified loans were not classified as troubled-debt restructured loans as of September 30, 2021.

The COVID-19 pandemic continued to impact our financial results, as well as demand for our services and products during the third quarter of 2021 and potentially beyond. The short and long-term implications of the COVID-19 pandemic, and related monetary and fiscal stimulus measures, on our future revenues, earnings results, allowance for credit losses, capital reserves and liquidity are unknown at present.

Recent Developments

On October 14, 2021, BankFirst announced that it has entered into a definitive agreement to acquire The Citizens Bank of Fayette, headquartered in Fayette, Alabama. On September 30, 2021, Citizens had total assets of $221 million, total loans of $29 million, and total deposits of $174 million. The acquisition of Citizens will result in the Bank having 32 locations serving Mississippi and Alabama, with total assets of approximately $2.0 billion, gross loans of approximately $1.2 billion and total deposits of approximately $1.7 billion.

ABOUT BANKFIRST CAPITAL CORPORATION
BankFirst Capital Corporation (OTCQX: BFCC) is a registered bank holding company based in Columbus, Mississippi with approximately $1.8 billion in total assets. BankFirst Financial Services, the Company's wholly-owned banking subsidiary, was founded in 1888 that is locally owned, controlled, and operated. The Bank is headquartered in Macon, Mississippi, with additional branch offices in Columbus, Flowood, Hattiesburg, Jackson, Louin, Macon, Madison, Newton, Starkville, and West Point, Mississippi and Addison, Aliceville, Arley, Bear Creek, Carrollton, Curry, Double Springs, Gordo, Haleyville, Lynn, Northport, and Tuscaloosa, Alabama. The Bank operates one mortgage production office in Brookhaven, Mississippi. The Bank also operates three loan production offices, one in Brookhaven, Mississippi one in Oxford, Mississippi, and one in Biloxi, Mississippi. 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.

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, (i) statements regarding certain of the Company's goals and expectations with respect to future events that are subject to various risks and uncertainties, (ii) statements about the merger of The Citizens Bank of Fayette with and into the Bank (the "acquisition"), and (iii) 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: fluctuation in market rates of interest and loan and deposit pricing, adverse changes in the overall national economy as well as adverse economic conditions in our specific market areas, including as a result of the coronavirus pandemic, our ability to complete the Citizens acquisition and recognize the expected benefits and synergies of the Citizens acquisition, maintenance and development of well-established and valued client relationships and referral source relationships, and acquisition or loss of key production personnel. 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. 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.

AVAILABLE INFORMATION
The Company maintains an Internet web site at www.bankfirstfs.com/about-us/investors. 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-us/investors/). 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.

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