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CST: 11/11/2019 13:45:35   

Communities First Financial Corporation Earns $2.24 Million for 3Q19, up 38% from 3Q18; Net Income Increased 43%, to $6.64 Million, for the First Nine Months of 2019

25 Days ago

FRESNO, Calif., Oct. 16, 2019 (GLOBE NEWSWIRE) -- Communities First Financial Corporation (the “Company”) (OTCQX: CFST), the parent company of Fresno First Bank (the “Bank”), today reported net income increased 38% to $2.24 million, or $0.75 per diluted share for the third quarter of 2019, compared to $1.63 million, or $0.56 per diluted share for the third quarter of 2018.  Net income for the second quarter of 2019 was $2.27 million, or $0.76 per diluted share. 

For the nine months ended September 30, 2019, net income increased 43% to a record $6.64 million, or $2.23 per diluted share, compared to $4.63 million, or $1.59 per diluted share, for the nine months ended September 30, 2018.  All results are unaudited.

“Once again we delivered strong financial results, and generated record earnings for the first nine months of 2019, highlighted by robust growth in non-interest income, which grew more than two-fold from a year ago, solid credit quality and a continued disciplined approach to cost controls,” said Steve Miller, President and Chief Executive Officer.  “We produced strong performance metrics with a net interest margin of 4.73%, a return on average equity (“ROAE”) of 18.41%, a return on average assets (“ROAA”) of 1.78%, and an efficiency ratio of 52.05%, for the third quarter of 2019.

“We continue to invest in the future and are encouraged with the progress we have made to date,” added Miller.  “As a team, we are excited to achieve $538 million in total assets.  We also achieved significant growth in core deposits, which is a result of our strategy to focus on fostering long-term customer relationships centered on the operating accounts of our customers. 

“With the launch of a new payment partner in August, together with several other payment-related initiatives gaining traction, we saw significant non-interest income growth in the quarter.  We expect to build upon these initiatives for the remainder of the year,” said Miller.  “This is a noninterest income stream that should position us for 2020 and should help buffer any NIM compression we may see due to the current declining rate environment.”

Third Quarter 2019 Highlights (as of, or for the quarter ended September 30, 2019, except where noted):

  • Diluted earnings per share (“EPS”) were $0.75, compared to $0.56 per share for the third quarter of 2018. 
  • ROA was 1.78%, compared to 1.48% for the third quarter a year ago.  ROAE was 18.41%, compared to 16.89% for the third quarter of 2018.
  • Net interest income, before provision for loan losses, increased 19% to $5.69 million from $4.78 million for the third quarter a year ago.  A provision for loan losses of $235,000 was booked in the third quarter of 2019, compared to a provision of $300,000 reserved in the third quarter of 2018.   
  • Non-interest income for the third quarter 2019 grew 107% from one year earlier and increased 8% from the preceding quarter. 
  • The increase in non-interest income for the quarter was a result of gains across several channels including gain on sale of loans, a robust growth in merchant services revenue, which was up over 227% year-over-year, as well as general deposit service charges.
  • Net interest margin (“NIM”) expanded 15 basis points to 4.73% for the third quarter of 2019, compared to 4.58% from the third quarter a year ago.  For the first nine months of 2019, NIM improved by 36 basis points to 4.83%, compared to 4.47% for the first nine months of 2018.
  • Total assets reached an all-time high of $538.73 million, up 21% from $443.45 million a year earlier.
  • Total deposits increased by $83.25 million, or 21%, to $486.18 million from $402.93 million at September 30, 2018.  Non-interest-bearing deposits grew by $58.86 million, or 24%, to $302.44 million from $243.58 million at September 30, 2018 and represent 62% of total deposits. 
  • Total loans grew by $65.69 million, or 23%, to $348.56 million compared to $282.87 million a year earlier.
  • Asset quality improved with nonperforming assets declining to 0.14% of total assets from 0.71% a year ago.
  •  The allowance for loan and lease losses (“ALLL”) was 1.18% as a percentage of total loans, at September 30, 2019, compared to 1.30% a year earlier.
  •  Capital ratios remain strong with a ratio of tangible shareholders’ equity to total assets of 9.21% at September 30, 2019, compared to 8.71% at September 30, 2018 and 10.24% at June 30, 2019.  The decline in the capital ratio in Q3 2019 was the result of the significant asset growth for the quarter.

Results of Operations

Net interest income, before the provision for loan losses, increased 19% to $5.69 million for the third quarter of 2019, compared to $4.78 million for the third quarter a year ago, reflecting solid year-over-year loan growth and higher yields on investment securities.  Net interest income increased 7% from $5.32 million in the preceding quarter.  For the first nine months of 2019, net interest income, before the provision for loan losses, increased 23% to $16.22 million compared to $13.21 million for the first nine months of 2018.

Total non-interest income increased 107% to $946,000 for the third quarter of 2019, compared to $456,000 for the third quarter of 2018, and grew 8% from $872,000 for the second quarter of 2019.  For the first nine months of 2019, non-interest income was $2.49 million, an increase of 94% over $1.28 million for the first nine months of 2018.  “Our merchant services revenue was up 168% compared to the second quarter of 2019 and has doubled year-over-year,” said Steve Canfield, Chief Financial Officer.  “Our Southern California team is doing a great job and income from gain on sale of loans also increased substantially year-over-year.  Although we sold fewer loans than in the preceding quarter, we are holding $14.51 million in loans for sale at quarter end and expect to generate additional sales during the fourth quarter.”

The net interest margin improved by 15 basis points to 4.73% for the third quarter of 2019, compared to 4.58% for the third quarter of 2018, and contracted 21 basis points from 4.94% for the preceding quarter.  For the first nine months of 2019, the net interest margin expanded 36 basis points to 4.83% compared to 4.47% for the first nine months of 2018. 

“With 62% of our deposit base in zero interest operating accounts, our net interest margin continues to be strong.  With that funding mix, we expect our margin to continue to exceed industry averages, but we are slightly asset sensitive and the net interest margin will compress slightly with the cut in prime interest rates,” added Canfield.  “The yield on earning assets was 4.97% on a linked quarter basis, and 5.05% year-over-year, while our cost to fund earning assets remained low at 0.24%, at quarter end.”

Non-interest expense for the third quarter of 2019 was $3.33 million, compared to $2.68 million for the third quarter of 2018, and $3.02 million for the second quarter of 2019.  For the first nine months of 2019, non-interest expense totaled $9.27 million compared to $7.82 million for the first nine months of 2018. 

“The increase in operating expenses year-over-year and for the first nine months of 2019 reflect our continued execution of our growth strategy, including support of our franchise expansion into Southern California, through our recruitment of excellent Southern California bankers,” Canfield added.  “In late September we opened a small commercial SBA loan production office in San Diego to further support our operations.”

The efficiency ratio was 52.05% for the third quarter of 2019, compared to 51.06% for the third quarter a year ago, and 48.74% for the second quarter of 2019.  Year-to-date, the efficiency ratio was 50.20% compared to 53.91% for the first nine months of 2018.

Balance Sheet Review

Total assets reached $538.73 million at September 30, 2019, up 21% from $443.45 million at September 30, 2018, and increased 17% from $460.03 million at June 30, 2019.  Total portfolio loans increased by 23% to $348.56 million at September 30, 2019, from $282.87 million a year ago, and grew 13% from $307.20 million at June 30, 2019.  

The commercial and industrial (C&I) portfolio increased 15% from a year earlier to $162.99 million and represented 47% of total loans at September 30, 2019.  Commercial real estate (CRE) loans grew 48% to $129.09 million, or 37% of total loans.  Agriculture loans grew 11% from a year ago to $31.11 million and represented 9% of total loans; real estate construction and land development totaled $15.34 million, or 4% of loans, while residential home loans were $10.00 million, or 3% of loans.  At September 30, 2019, $93.08 million, or 27% of the loan portfolio was guaranteed by the SBA, USDA or other government agencies.

Total deposits increased 21% to $486.18 million at September 30, 2019, from $402.93 million from a year earlier, and grew 19% from $409.98 at June 30, 2019.  Noninterest-bearing demand deposits grew 24% to $302.44 million at September 30, 2019, representing 62% of total deposits.

“Although seasonal outflows together with a large escrow account that closed suppressed growth in the first two quarters, we have consistently added new customers throughout the year.  The growth during the third quarter reflects those efforts,” said Canfield.  “We currently have a $20.0 million deposit account we are escrowing for a school district as part of a loan syndication.  These funds will be disbursed in October; however, even with this outflow we expect positive deposit flows to continue for the remainder of the year.”

Net shareholder’s equity increased 29% to $49.63 million at September 30, 2019, compared to $38.61 million a year ago.  Book value per common share grew 25% to $16.87 at September 30, 2019, compared to $13.53 at September 30, 2018.

Asset Quality

Asset quality continues to improve with nonperforming assets (“NPAs”) declining to $765,000, or 0.14% of total assets at September 30, 2019, compared to $3.16 million, or 0.71% of total assets at September 30, 2018, and $793,000, or 0.17% of total assets at June 30, 2019.  “We have made significant progress reducing our nonperforming assets and we will continue to monitor the remaining balance which is performing under a restructured arrangement,” stated Miller.  Performing restructured loans totaled $529,000 at September 30, 2019.

The provision for loan losses was $235,000 for the third quarter of 2019, compared to $300,000 for the third quarter of 2018.  There was no provision for loan losses recorded in the preceding quarter.  Year-to-date, net charge-offs totaled $154,000 at September 30, 2019, compared to recoveries of $5,000 a year earlier.  The allowance for loan losses to total loans ratio was 1.18% at September 30, 2019, compared to 1.30% a year earlier and 1.27% at June 30, 2019. 

About Communities First Financial Corporation

Communities First Financial Corporation, a bank holding company established in 2014, is the parent company of Fresno First Bank, founded in 2005 in Fresno, California.  Fresno First Bank is a leading SBA Lender in California’s Central Valley and has expanded into Southern California.  The Bank is also a direct acquiring bank with VISA and MasterCard and processes payments for merchants across the country directly and through partners.  Named to the 2019 OTCQX Best 50, and ranked one of the top performing OTCQX companies in the country, based on total return and growth in average daily dollar volume for 2018. The Bank was named to the Inc. 5000 Fastest Growing Companies list in 2017 and to Forbes Best 25 Small Businesses in America for 2016.  Additional information is available from the Company’s website at www.fresnofirstbank.com or by calling 559-439-0200.   

Forward Looking Statement Disclaimer

This earnings release may contain forward-looking statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. The forward-looking statements are based on managements’ expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, the Company’s ability to effectively execute its business plans; changes in general economic and financial market conditions; changes in interest rates; changes in the competitive environment; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; losses, customer bankruptcy, claims and assessments; changes in banking regulations or other regulatory or legislative requirements affecting the Company’s business; international developments; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. The Company undertakes no obligation to release publicly the results of any revisions to the forward-looking statements included herein to reflect events or circumstances after today, or to reflect the occurrence of unanticipated events.  The Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

SELECT FINANCIAL INFORMATION AND
For the Quarter Ended:   Percentage Change From:   Year to Date as of:
RATIOS (unaudited) Sept. 30,
2019
June 30,
2019
Sept. 30,
2018
  June 30,
2019
Sept. 30,
2018
  Sept. 30,
2019
Sept. 30,
2018
Percent
Change
BALANCE SHEET DATA - PERIOD END BALANCES:                
  Total assets $ 538,725   $ 460,033   $ 443,449     17 % 21 %        
  Total Loans   348,556     307,196     282,867     13 % 23 %        
  Investment securities   99,456     94,216     82,153     6 % 21 %        
  Total deposits   486,183     409,975     402,933     19 % 21 %        
  Shareholders equity, net   49,628     47,130     38,610     5 % 29 %        
                       
SELECT INCOME STATEMENT DATA:                    
  Gross revenue $ 6,631   $ 6,196   $ 5,237     7 % 27 %   $ 18,705   $ 14,492   29 %
  Operating expense   3,330     3,020     2,678     10 % 24 %     9,272     7,817   19 %
  Pre-tax, pre-provision income   3,301     3,176     2,559     4 % 29 %     9,668     6,975   39 %
  Net income after tax $ 2,238   $ 2,270   $ 1,625     -1 % 38 %   $ 6,637   $ 4,630   43 %
                       
SHARE DATA:                  
  Basic earnings per share $ 0.76   $ 0.77   $ 0.57     -2 % 34 %   $ 2.27   $ 1.62   40 %
  Fully diluted earnings per share $ 0.75   $ 0.76   $ 0.56     -2 % 35 %   $ 2.23   $ 1.59   41 %
  Book value per common share $ 16.87   $ 16.09   $ 13.53     5 % 25 %        
  Common shares outstanding   2,940,996     2,929,757     2,853,672     0 % 3 %        
  Fully diluted shares   2,989,842     2,985,259     2,923,728     0 % 2 %        
  CFST - Stock price $ 24.75   $ 25.15   $ 25.10     -2 % -1 %        
                       
RATIOS:                    
  Return on average assets   1.78%     2.01%     1.48%     -11 % 20 %     1.88 %   1.49 % 26 %
  Return on average equity   18.41%     20.00%     16.89%     -8 % 9 %     19.56 %   16.91 % 16 %
  Efficiency ratio   52.05%     48.74%     51.06%     7 % 2 %     50.20 %   53.91 % -7 %
  Yield on earning assets   4.97%     5.17%     4.73%     -4 % 5 %     5.05 %   4.62 % 9 %
  Cost to fund earning assets   0.24%     0.23%     0.15%     1 % 61 %     0.22 %   0.15 % 53 %
  Net Interest Margin   4.73%     4.94%     4.58%     -4 % 3 %     4.83 %   4.47 % 8 %
  Equity to assets   9.21%     10.24%     8.71%     -10 % 6 %        
  Loan to deposits ratio   71.69%     74.93%     70.20%     -4 % 2 %        
  Full time equivalent employees   50     47     42     6 % 19 %        
                       
BALANCE SHEET DATA - AVERAGES:                
  Total assets $ 498,526   $ 452,763   $ 434,466     10 % 15 %   $ 471,133   $ 414,576   14 %
  Total loans   320,729     309,393     280,510     4 % 14 %     309,342     271,869   14 %
  Investment securities   94,860     94,940     78,439     0 % 21 %     94,632     77,195   23 %
  Deposits   447,486     404,081     394,646     11 % 13 %     423,227     376,333   12 %
  Shareholders equity, net   48,246     45,516     38,159     6 % 26 %     45,386     36,615   24 %
                       
ASSET QUALITY:                    
  Total delinquent accruing loans $ 433   $ 147   $ 158     195 % 174 %        
  Nonperforming assets $ 765   $ 793   $ 3,155     -4 % -76 %        
  Non Accrual / Total Loans   .22%     .26%     1.12%     -15 % -80 %        
  Nonperforming assets to total assets   .14%     .17%     .71%     -18 % -80 %        
  LLR / Total loans   1.18%     1.27%     1.30%     -6 % -9 %        
                       


STATEMENT OF INCOME ($ in thousands) For the Quarter Ended:   Percentage Change From:   For the Year Ended
(unaudited) Sept. 30,
2019
June 30,
2019
Sept. 30,
2018
  June 30,
2019
Sept. 30,
2018
  Sept. 30,
2019
Sept. 30,
2018
Percent
Change
Interest Income                  
  Loan interest income $ 4,999 $ 4,735 $ 4,149   6 % 20 %   14,210 11,552 23 %
  Investment income   647   668   481   -3 % 35 %   1,966 1,373 43 %
  Int. on fed funds & CDs in other banks   295   141   272   109 % 8 %   696 625 11 %
  Dividends from non-marketable equity   27   33   32   -18 % -16 %   92 87 6 %
  Interest income   5,968   5,577   4,934   7 % 21 %   16,964 13,637 24 %
  Total interest expense   283   253   153   12 % 85 %   745 428 74 %
  Net interest income   5,685   5,324   4,781   7 % 19 %   16,219 13,209 23 %
  Provision for loan losses   235   -   300   0 % -22 %   235 300 -22 %
  Net interest income after provision   5,450   5,324   4,481   2 % 22 %   15,984 12,909 24 %
                       
Non-Interest Income:                    
  Total deposit fee income   114   114   96   0 % 19 %   318 260 22 %
  Debit / credit card interchange income   68   60   44   13 % 55 %   179 122 47 %
  Merchant services income   501   187   153   168 % 227 %   843 437 93 %
  Gain on sale of loans   154   386   44   -60 % 250 %   781 88 788 %
  Other operating income   109   125   119   -13 % -8 %   365 376 -3 %
  Non-interest income   946   872   456   8 % 107 %   2,486 1,283 94 %
                     
Non-Interest Expense                  
  Salaries & employee benefits   1,990   1,878   1,612   6 % 23 %   5,731 4,735 21 %
  Occupancy expense   207   198   256   5 % -19 %   600 584 3 %
  Other operating expense   1,133   944   810   20 % 40 %   2,941 2,498 18 %
  Non-interest expense   3,330   3,020   2,678   10 % 24 %   9,272 7,817 19 %
                     
  Net income before tax   3,066   3,176   2,259   -3 % 36 %   9,198 6,375 44 %
  Tax provision   828   906   634   -9 % 31 %   2,561 1,745 47 %
  Net income after tax $ 2,238 $ 2,270 $ 1,625   -1 % 38 %   6,637 4,630 43 %
                       


BALANCE SHEET  ($ in thousands ) End of Period:   Percentage Change From:
(unaudited) Sept. 30,
2019
June 30,
2019
Sept. 30,
2018
  June 30,
2019
Sept. 30,
2018
ASSETS            
  Cash and due from banks $ 16,191   $ 11,215   $ 11,369     44 % 42 %
  Fed funds sold and deposits in banks   38,603     20,492     48,078     88 % -20 %
  CDs in other banks   10,409     10,657     7,699     -2 % 35 %
  Investment securities   99,456     94,216     82,153     6 % 21 %
  Loans held for sale   14,511     4,542     -     219 % 0 %
  Portfolio loans outstanding:          
  RE constr & land development   15,341     14,146     14,590     8 % 5 %
  Residential RE 1-4 Family   10,003     11,714     11,174     -15 % -10 %
  Commercial Real Estate   129,089     105,819     87,368     22 % 48 %
  Agriculture   31,106     27,345     28,099     14 % 11 %
  Commercial and Industrial   162,992     148,063     141,602     10 % 15 %
  Consumer and Other   25     109     34     -77 % -26 %
  Total Portfolio Loans   348,556     307,196     282,867     13 % 23 %
  Deferred fees & discounts   (144 )   55     191     -362 % -175 %
  Allowance for loan losses   (4,130 )   (3,892 )   (3,668 )   6 % 13 %
  Loans, net   344,282     303,359     279,390     13 % 23 %
  Non-marketable equity investments   2,572     2,512     2,475     2 % 4 %
  Cash value of life insurance   7,938     7,885     8,240     1 % -4 %
  Accrued interest and other assets   4,763     5,155     4,045     -8 % 18 %
  Total assets $ 538,725   $ 460,033   $ 443,449     17 % 21 %
             
LIABILITIES AND EQUITY            
  Non-interest bearing deposits $ 302,435   $ 245,244   $ 243,580     23 % 24 %
  Interest checking   13,800     12,183     13,583     13 % 2 %
  Savings   37,098     36,024     30,887     3 % 20 %
  Money market   90,440     83,043     77,514     9 % 17 %
  Certificates of deposits   42,410     33,481     37,369     27 % 13 %
  Total deposits   486,183     409,975     402,933     19 % 21 %
  Borrowings   -     -     -     0 % 0 %
  Other liabilities   2,914     2,928     1,906     0 % 53 %
  Total liabilities   489,097     412,903     404,839     18 % 21 %
             
  Common stock & paid in capital   29,763     29,527     28,350     1 % 5 %
  Retained earnings   19,346     17,108     11,089     13 % 74 %
  Total equity   49,109     46,635     39,439     5 % 25 %
  Accumulated other comprehensive income   519     495     (829 )   5 % -163 %
  Shareholders equity, net   49,628     47,130     38,610     5 % 29 %
  Total Liabilities and shareholders' equity $ 538,725   $ 460,033   $ 443,449     17 % 21 %
               


ASSET QUALITY ($ in thousands) Period Ended:
(unaudited) Sept. 30, 2019 June 30, 2019 Sept. 30, 2018
Delinquent accruing loans 30-60 days $ 431   $ 145   $ 158  
Delinquent accruing loans 60-90 days $ 0   $ 0   $ 0  
Delinquent accruing loans 90+ days $ 2   $ 2   $ 0  
Total delinquent accruing loans $ 433   $ 147   $ 158  
       
Loans on non accrual $ 765   $ 793   $ 3,155  
Other real estate owned $ 0   $ 0   $ 0  
Nonperforming assets $ 765   $ 793   $ 3,155  
       
Performing restructured loans $ 529   $ 557   $ 0  
       
       
Delq 30-60 / Total Loans .12%     .05%     .06%  
Delq 60-90 / Total Loans   .00%     .00%     .00%  
Delq 90+ / Total Loans   .00%     .00%     .00%  
Delinquent Loans / Total Loans   .12%     .05%     .06%  
Non Accrual / Total Loans   .22%     .26%     1.12%  
Nonperforming assets to total assets   .14%     .17%     .71%  
       
       
Year-to-date charge-off activity      
Charge-offs $ 163   $ 163   $ 0  
Recoveries $ 9   $ 6   $ 5  
Net charge-offs $ 154   $ 157   $ (5 )
Annualized net loan losses (recoveries) to average loans .07%   .10%   -.00%  
       
LOAN LOSS RESERVE RATIOS:    
Reserve for loan losses $ 4,130   $ 3,892   $ 3,668  
       
Total loans $ 348,556   $ 307,196   $ 282,866  
Purchased govt. guaranteed loans $ 58,421   $ 60,839   $ 62,741  
Originated govt. guaranteed loans $ 34,661   $ 30,626   $ 27,542  
       
LLR / Total loans   1.18%     1.27%     1.30%  
LLR / Loans less purchased govt. guaranteed loans   1.42%     1.58%     1.67%  
LLR / Loans less all govt. guaranteed loans   1.62%     1.80%     1.90%  
LLR / Total assets .77%   .85%   .83%  
       

Contact: 
Steve Miller – President & CEO
Steve Canfield – Executive Vice President & CFO
(559) 439-0200

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