Bank First Corporation ($BFC) presents a compelling investment opportunity within the US regional banking sector. Despite a recent Q2 2025 earnings miss that tempered market enthusiasm, the bank’s underlying fundamentals remain robust, underpinned by a geographically diversified loan portfolio, consistent profitability, and a shareholder-friendly capital allocation strategy. This report argues that the current valuation offers an attractive entry point for long-term investors, given BFC’s durable competitive advantages, resilient business model, and potential for sustained earnings growth.
Industry Overview
The US regional banking industry is characterised by a fragmented landscape, with numerous small and mid-sized institutions serving local markets. While competition from larger national banks and emerging fintech players remains a constant pressure, regional banks like BFC maintain a critical role in providing essential financial services to businesses and individuals within their communities. The industry is currently navigating a complex operating environment marked by evolving regulatory scrutiny, technological disruption, and fluctuating interest rates.
Company Analysis
BFC operates primarily in Wisconsin, offering a comprehensive suite of banking products and services through its network of branches. The bank’s core business focuses on commercial and industrial lending, residential mortgages, and deposit gathering. BFC’s strategic focus on relationship banking within a defined geographic footprint fosters customer loyalty and provides valuable insights into local market dynamics. This localized approach, coupled with prudent risk management practices, is reflected in BFC’s consistently low non-performing asset ratio (0.31% as of Q2 2025). [1]
Investment Thesis
Our investment thesis rests on the conviction that BFC’s current market undervaluation fails to reflect the bank’s intrinsic worth and long-term growth prospects. Several key factors support this view:
- Durable Competitive Advantages: BFC’s deep roots within Wisconsin’s diverse economy create strong customer relationships and a resilient deposit base, providing a significant competitive edge against larger, less agile institutions.
- Consistent Profitability and Capital Return: The bank’s history of steady net interest income growth, coupled with its commitment to shareholder distributions through dividends and share repurchases, underscores its financial strength and management’s dedication to maximizing shareholder value.
- Attractive Valuation: Despite its consistent performance, BFC trades at a modest price-to-book ratio, offering an attractive entry point for investors seeking exposure to a stable, high-quality regional bank.
Valuation & Forecasts
We employ a combination of valuation methodologies to assess BFC’s intrinsic value, including a discounted cash flow (DCF) analysis and peer group comparisons. Our base case DCF model, incorporating a 9% discount rate and a conservative terminal growth rate of 2%, projects a fair value meaningfully above the current market price. Sensitivity analysis across various discount rates and growth assumptions confirms a margin of safety at current levels.
| Metric | 2024A | 2025E | 2026E |
|---|---|---|---|
| Revenue ($M) | 148.2 | 163.4 | 179.8 |
| Net Income ($M) | 60.4 | 65.9 | 71.8 |
| EPS | $6.34 | $6.91 | $7.53 |
Source: Company filings, author’s estimates
Risks
While we are bullish on BFC’s prospects, several risks warrant careful consideration:
- Interest Rate Risk: A rapid shift in interest rates could impact net interest margins and loan demand. BFC manages this risk through a diversified loan portfolio and active asset-liability management.
- Credit Risk: Economic downturns could lead to higher loan defaults. BFC’s stringent underwriting standards and historically low non-performing loan ratios mitigate this risk.
- Competitive Pressures: Competition from larger banks and fintech companies could erode market share. BFC’s focus on personalized service and local market expertise provides a degree of insulation.
Recommendation
We initiate coverage on BFC with a Buy rating and a 12-month price target of $72, representing a 16% upside from the current market price. This target is based on our blended valuation approach, incorporating both DCF analysis and peer multiples. We believe BFC’s consistent profitability, robust capital position, and attractive valuation create a compelling opportunity for long-term investors.
