BANKFIRST CAPITAL CORPORATION Enters into ECIP Securities Purchase Option Agreement

Rhea-AI Summary

BankFirst Capital (OTCQX: BFCC) has entered into an ECIP Securities Purchase Option Agreement with the U.S. Treasury, granting BFCC an option to purchase all 218,585 shares of its Senior Non-Cumulative Preferred Stock held by Treasury. The shares include 175,000 issued on April 26, 2022, and 43,585 issued on September 19, 2023, following BFCC's acquisition of Mechanics Banc Holding Company.

The purchase option extends for fifteen years from the Original Closing Date, with the purchase price expected to be at a substantial discount from face value. However, during the first ten years, exercise requires meeting specific Threshold Conditions: either achieving 60% Deep Impact Lending over 16 quarters, 85% Qualified Lending over 24 quarters, or maintaining a 0.5% dividend rate for six consecutive Reset Dates.

The earliest possible date to meet these conditions is June 30, 2026. Currently, BFCC has not met any Threshold Conditions and must maintain CDFI or MDI qualification among other criteria to exercise the option.

Positive

• Option to repurchase preferred stock at substantial discount from face value
• Extended 15-year window for purchase option execution
• Multiple pathways available to meet threshold conditions for early repurchase

Negative

• Company currently unable to meet any threshold conditions for early repurchase
• Must wait until April 26, 2032, for repurchase if threshold conditions aren't met
• Continued CDFI/MDI qualification and regulatory compliance required for option exercise

COLUMBUS, Miss., Jan. 22, 2025 /PRNewswire/ -- BankFirst Capital Corporation (OTCQX: BFCC) ("BankFirst" or the "Company"), parent company of BankFirst Financial Services, Macon, Mississippi (the "Bank"), today announced that it has entered into an ECIP Securities Purchase Option Agreement (the "Option Agreement") with the United States Department of the Treasury ("Treasury").

Treasury is currently the record and beneficial owner of all 218,585 shares of the Company's Senior Non-Cumulative Preferred Stock, Series ECIP, no par value (the "Preferred Stock"), 175,000 of which were issued by the Company pursuant to the Treasury's Emergency Capital Investment Program ("ECIP") on April 26, 2022 (the "Original Closing Date"), and 43,585 of which were issued by the Company to Treasury on September 19, 2023, following the Company's acquisition of another ECIP participant, Mechanics Banc Holding Company, on January 1, 2023. Established by the Consolidated Appropriations Act of 2021, the ECIP was created to encourage Community Development Financial Institutions, such as the Bank, and minority depository institutions to augment their efforts to support small and minority-owned businesses and consumers in low-income and underserved communities. For more information on the ECIP, please visit Treasury's website regarding ECIP available at: https://home.treasury.gov/policy-issues/coronavirus/assistance-for-small-businesses/emergency-capital-investment-program.

Pursuant to the Option Agreement, Treasury granted the Company an option to purchase all of the Preferred Stock during the "Option Period," which is the first fifteen years following the Original Closing Date. The purchase price for the Preferred Stock pursuant to the purchase option is determined based on a formula equal to the present value of the Preferred Stock, calculated as set forth in the Option Agreement, together with any accrued and unpaid dividends thereon, as of the closing date. Subject to variations in interest rates and the equity risk premium, which are components included in the purchase price calculation, the Company presently expects that the purchase price will be at a substantial discount from the face value of the Preferred Stock.

The purchase option may not be exercised during the ECIP period, which is the first ten years following the Original Closing Date, unless and until at least one of the "Threshold Conditions" defined under the Option Agreement has been met. The Threshold Conditions are as follows: during the ten years that follow the Original Closing Date (the "ECIP Period") either (1) over any sixteen consecutive quarters, an average of at least 60% of the Company's Total Originations, as defined pursuant to the ECIP Disposition Policy (the "Policy"), qualifies as "Deep Impact Lending," as defined pursuant to the Policy (the "Deep Impact Condition"); (2) over any twenty-four consecutive quarters, an average of at least 85% of the Company's Total Originations qualifies as "Qualified Lending," as defined pursuant to the Policy (the "Qualified Lending Condition"); or (3) the Preferred Stock has a dividend rate of no more than 0.5% at each of six consecutive Reset Dates, as defined pursuant to the Policy.

The earliest possible date by which a Threshold Condition may be met is June 30, 2026. However, there can be no assurance if and when any of the Threshold Conditions will be met. Presently, the Company has been unable to meet any of the Threshold Conditions. If the Company is unable to meet the requirements for early disposition in the future, the Company may be able to repurchase the shares at the Present Value Purchase Price, as defined pursuant to the Option Agreement, after April 26, 2032, which is the first day following the end of the ECIP Period. 

In addition to the requirement that a Threshold Condition be met, the Option Agreement requires that the Company meet certain other eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of the original ECIP purchase agreement and the terms of the Preferred Stock, maintaining qualification as either a CDFI or an MDI, and meeting other legal and regulatory criteria. Although the Company currently meets the general eligibility criteria, other than satisfying one of the Threshold Conditions, there can be no assurance that the Company will meet such criteria in the future.

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, 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.

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 uncertainty in the banking industry as a whole; increased competition for deposits and related changes in deposit customer behavior; the impact of changes in market interest rates, whether due to a continuation of the elevated interest rate environment or further reductions in interest rates and a resulting decline in net interest income; the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, 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, including potential changes in U.S. and international trade policies and the resulting impact on the Company and its customers; 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 costs related to the 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

FAQ

What are the threshold conditions for BFCC to exercise its ECIP stock purchase option early?

BFCC must meet one of three conditions: 60% Deep Impact Lending over 16 quarters, 85% Qualified Lending over 24 quarters, or maintain a 0.5% dividend rate for six consecutive Reset Dates.

When can BFCC first exercise its ECIP stock purchase option?

The earliest possible date to meet threshold conditions is June 30, 2026, but if conditions aren't met, BFCC must wait until April 26, 2032.

How many ECIP preferred shares does BFCC have the option to purchase?

BFCC has the option to purchase 218,585 shares, consisting of 175,000 shares issued in April 2022 and 43,585 shares issued in September 2023.

What is the purchase price for BFCC's ECIP preferred stock under the option agreement?

The purchase price will be calculated based on present value formula and is expected to be at a substantial discount from the face value of the Preferred Stock.