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CST: 18/08/2019 04:31:22   

Communities First Financial Corporation Earns $2.27 Million for 2Q19, Up 47% from 2Q18; Profits Grow 46% in the First Six Months of 2019

30 Days ago

FRESNO, Calif., July 18, 2019 (GLOBE NEWSWIRE) -- Communities First Financial Corporation (the “Company”) (OTCQX: CFST), the parent company of Fresno First Bank (the “Bank”), today reported two of the most profitable periods in its history for both the second quarter and for the first six months of 2019.  Net income increased 47% to $2.27 million, or $0.76 per diluted share for the second quarter of 2019, compared to $1.54 million, or $0.53 per diluted share for the second quarter of 2018.  Net income for the first quarter of 2019 was $2.13 million, or $0.71 per diluted share. 

For the first six months ended June 30, 2019, net income increased 46% to $4.40 million, or $1.48 per diluted share, compared to $3.00 million, or $1.03 per diluted share, for the first half of 2018.  All results are unaudited.

“We extended our momentum from the first quarter generating record profits, supported by a strong net interest margin of 4.94%, an appreciably improved asset quality and disciplined expense management, resulting in a return on average equity of 20.00% and return on average assets of 2.01%,” said Steve Miller, President and Chief Executive Officer. 

“Our fee based income strategy is progressing well with non-interest income more than doubling from a year ago and higher by 30% on a linked quarter basis.  Year-to-date, non-interest income is up 86%,” added Miller.  “We are encouraged that our fee income gains are diversified across several channels including, gain on sale of loans, growth in merchant processing revenue and general deposit service charges.  We are excited to implement several payment-related initiatives in the third quarter, which should help further enhance our deposit franchise and grow our fee income revenue.” 

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

  • Diluted earnings per share (“EPS”) were $0.76, compared to $0.53 per share for the second quarter of 2018. 
  • Return on average assets was 2.01%, compared to 1.54% for the second quarter a year ago.  Return on average equity was 20.00%, compared to 16.95% for the second quarter of 2018.
  • Net interest income increased 23% to $5.32 million, from $4.33 million for the second quarter a year ago.  No provision for loan losses was booked in the second quarter of 2019 or the second quarter of 2018. 
  • Non-interest income for the second quarter 2019 grew 107% from the year ago period and increased 30% from the preceding quarter.  Year-to-date, non-interest income increased 86% compared to the same period in 2018.
  • Net interest margin (“NIM”) expanded 39 basis points to 4.94% for the second quarter of 2019, compared to 4.55% from the second quarter a year ago, and improved by 12 basis points from 4.82% from the first quarter of 2019.
  • Total deposits increased 9% to $409.98 million from $375.08 million a year earlier.  Non-interest-bearing deposits also increased 9% over the same period and represent 60% of the entire deposit base.
  • Total portfolio loans grew 10% to $307.20 million compared to $279.69 million a year ago.
  • The efficiency ratio improved to 48.74% for the second quarter of 2019, from 54.91% for the second quarter a year earlier.
  •  Asset quality improved substantially with nonperforming assets declining to 0.17% of total assets.   
  •  The allowance for loan and lease losses (“ALLL”) was 1.27% as a percentage of total loans, at June 30, 2019, compared to 1.20% a year earlier.  The ALLL as a percentage of total assets was 0.85% at June 30, 2019.
  • Capital ratios remain strong with a ratio of tangible shareholders’ equity to total assets of 10.24% at June 30, 2019, compared to 8.97% at June 30, 2018.

“We have one of the stronger deposit franchises in the country, and we have never been interested in chasing ‘hot money.’ Our team is focused on developing long-term relationships, which starts with the business or personal checking account.” said Miller.  “Our expanding payments franchise enables us to diversify the source of these low cost funds beyond our physical footprint here in the Central Valley.”

Results of Operations

Net interest income increased 23% to $5.32 million for the second quarter of 2019, compared to $4.33 million for the second quarter a year ago, reflecting higher yields on investment securities and modest year-over-year loan growth.  Net interest income increased 2% from $5.21 million in the preceding quarter.  For the first half of 2019, net interest income increased 25% to $10.53 million, compared to $8.43 million for the first half of 2018.

Non-interest income increased 107% to $872,000 for the second quarter of 2019, compared to $421,000 for the second quarter of 2018, and increased 30% from $669,000 for the first quarter of 2019.  For the first six months of 2019, non-interest income was $1.54 million, an increase of 86% over $827,000 for the first six months of 2018.  The growth in non-interest income in the first half of 2019 was primarily due to the increase in the gain on sale of loans, higher merchant service revenue, and fees derived from deposit and transaction charges.  

Gain on sale of loans grew significantly to $627,000 for the first six months of 2019, compared to $45,000 for the first six months of 2018.  Fees generated from deposit services increased 36% from a year ago and grew 25% in the first half of 2019, which added to operating income.  Merchant services revenue was up 23% from the second quarter a year ago, and grew 20% in the first six months of 2019, which also added to non-interest income.  Debit/credit card interchange income increased 43% from the second quarter of 2018 and grew 42% in the first half of 2019.

The net interest margin improved by 39 basis points to 4.94% for the second quarter of 2019, compared to 4.55% for the second quarter of 2018, and expanded by 12 basis points from 4.82% for the preceding quarter.  For the first six months of 2019, the net interest margin expanded 47 basis points to 4.88% compared to 4.41% for the first half of 2018.  “The continued improvement in the margin for the current quarter was due, in part, to a shift in our earning asset mix with higher than average balances on our loans driving the up the yield and secondarily to higher index rates linked to our loans and securities,” said Steve Canfield, Executive Vice President and Chief Financial Officer.  “The yield on earning assets increased both year-over-year and on a linked quarter basis to 5.18%, while our cost to fund earning assets remained low at 0.23%, at quarter end.”

Non-interest expense for the second quarter of 2019 was $3.02 million, compared to $2.61 million for the second quarter of 2018, and $2.92 million for the first quarter of 2019.  For the first six months of 2019, non-interest expense totaled $5.94 million compared to $5.14 million for the first half of 2018.  “As we continue to shape our Southern California loan operations, the increase in operating expenses year-over-year and for the first six months of 2019 was primarily a result of salaries/employee benefits and occupancy costs associated with supporting this expansion,” Canfield added.  “Operating expenses grew only 3% on a linked quarter basis.”

The efficiency ratio improved to 48.74% for the second quarter of 2019, compared to 54.91% for the second quarter a year ago, and 49.71% for the first quarter of 2019. 

Balance Sheet Review

Total assets were $460.03 million at June 30, 2019, compared to $413.56 million at June 30, 2018, and $471.54 million at March 31, 2019.  Total portfolio loans increased by 10% to $307.20 million at June 30, 2019, from $279.69 million a year ago, and remained relatively flat from $310.33 million three months earlier.  

The commercial and industrial (C&I) portfolio grew to $148.06 million and represented 48% of total loans at June 30, 2019.  Commercial real estate (CRE) loans totaled $105.82 million, or 34% of total loans.  Agriculture loans grew 10% from a year ago to $27.35 million and represented 9% of total loans; real estate construction and land development totaled $14.15 million, or 5% of loans, while residential home loans were $11.71 million, or 4% of loans.  At June 30, 2019, $91.57 million, or 30% of the loan portfolio, was guaranteed by the SBA, USDA or other government agencies.

Deposits totaled $409.98 million at June 30, 2019, compared to $375.08 million from a year earlier and $424.42 at March 31, 2019.  Noninterest-bearing demand deposits grew by 9% to $245.24 million at June 30, 2019, representing 60% of total deposits. “The decline in total deposits on a linked quarter basis is primarily a result of seasonal deposit outflows,” said Canfield.  “We expect growth to pick up in the second half of the year as normal deposit flow patterns emerge.”  The loan to deposit ratio increased to 74.93% at June 30, 2019, from 74.57% a year earlier, and 73.12% at March 31, 2019.

Net shareholder’s equity increased 27% to $47.13 million at June 30, 2019, compared to $37.11 million a year ago.  Book value per common share grew 24% to $16.09 at June 30, 2019, compared to $13.00 at June 30, 2018.

Asset Quality

Nonperforming assets (“NPAs”) improved significantly, declining to $793,000, or 0.17% of total assets at June 30, 2019, compared to $2.93 million, or 0.71% of total assets at June 30, 2018, and $3.25 million, or 0.69% of total assets at March 31, 2019.  “We have made considerable progress in reducing our nonperforming assets after receiving a substantial paydown on the large non-accrual loan relationship we have held on our books,” said Miller.  “We will continue to monitor the remaining balance, which is now performing under a restructured arrangement.”  Performing restructured loans totaled $557,000 at June 30, 2019.

Given the balance in our ALLL, there was no provision for loan losses booked for the current quarter, the second quarter of 2018, or the preceding quarter.  The ratio of allowance for loan losses to total loans was 1.27% at June 30, 2018, compared to 1.20% a year earlier and 1.31% at March 31, 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 OTCQCX 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 RATIOS (unaudited) For the Quarter Ended:   Percentage Change From:   Year to Date as of:
June 30,
2019
Mar. 31,
2019
June 30,
2018
  Mar. 31, 2019 June 30, 2018   Jun. 30,
2019
Jun. 30,
2018
Percent Change
BALANCE SHEET DATA - PERIOD END BALANCES:                 
  Total assets    $   460,033   $   471,535   $   413,565     -2 % 11 %        
  Total Loans        307,196       310,333       279,688     -1 % 10 %        
  Investment securities        94,216       95,695       78,443     -2 % 20 %        
  Total deposits        409,975       424,415       375,083     -3 % 9 %        
  Shareholders equity, net        47,130       44,188       37,111     7 % 27 %        
                       
SELECT INCOME STATEMENT DATA:                    
  Gross revenue $   6,196   $   5,878   $   4,750     5 % 30 %   $   12,074   $   9,254   30 %
  Operating expense     3,020       2,922       2,608     3 % 16 %       5,942       5,138   16 %
  Pre-tax, pre-provision income     3,176       2,956       2,142     7 % 48 %       6,132       4,116   49 %
  Net income after tax    $   2,270   $   2,130   $   1,540     7 % 47 %   $   4,400   $   3,005   46 %
                       
SHARE DATA:                   
  Basic earnings per share $   0.77   $   0.73   $   0.54     6 % 44 %   $   1.51   $   1.05   43 %
  Fully diluted earnings per share    $   0.76   $   0.71   $   0.53     6 % 44 %   $   1.48   $   1.03   44 %
  Book value per common share  $   16.09   $   15.14   $   13.00     6 % 24 %        
  Common shares outstanding        2,929,757       2,917,950       2,853,672     0 % 3 %        
  Fully diluted shares        2,985,259       2,981,143       2,919,432     0 % 2 %        
  CFST - Stock price    $   25.15   $   23.30   $   23.05     8 % 9 %        
                       
RATIOS:                    
  Return on average assets      2.01 %   1.87 %   1.54 %   7 % 31 %     1.94 %   1.50 % 30 %
  Return on average equity      20.00 %   20.41 %   16.95 %   -2 % 18 %     20.20 %   16.92 % 19 %
  Efficiency ratio      48.74 %   49.71 %   54.91 %   -2 % -11 %     49.21 %   55.52 % -11 %
  Yield on earning assets      5.18 %   5.02 %   4.69 %   3 % 10 %     5.10 %   4.56 % 12 %
  Cost to fund earning assets      0.23 %   0.19 %   0.14 %   21 % 63 %     0.21 %   0.14 % 48 %
  Net Interest Margin      4.94 %   4.82 %   4.55 %   3 % 9 %     4.88 %   4.41 % 11 %
  Equity to assets      10.24 %   9.37 %   8.97 %   9 % 14 %        
  Loan to deposits ratio   74.93 %   73.12 %   74.57 %   2 % 0 %        
  Full time equivalent employees        47       45       42     4 % 13 %        
                       
BALANCE SHEET DATA - AVERAGES:                 
  Total assets    $   452,763   $   461,704   $   401,254     -2 % 13 %   $   457,209   $   404,465   13 %
  Total loans        309,393       297,651       270,235     4 % 14 %       303,554       267,477   13 %
  Investment securities        94,940       94,087       78,994     1 % 20 %       94,516       76,563   23 %
  Deposits        404,081       417,787       363,044     -3 % 11 %       410,896       367,025   12 %
  Shareholders equity, net        45,516       42,331       36,436     8 % 25 %       43,933       35,830   23 %
                       
ASSET QUALITY:                    
  Total delinquent accruing loans    $   147   $   419   $   0     -65 % 0 %        
  Nonperforming assets    $   793   $   3,253   $   2,927     -76 % -73 %        
  Non Accrual / Total Loans    .26%   1.05 %   1.05 %   -75 % -75 %        
  Nonperforming assets to total assets    .17% .69% .71%   -75 % -76 %        
  LLR / Total loans      1.27 %   1.31 %   1.20 %   -3 % 5 %        
                       

 

STATEMENT OF INCOME ($ in thousands) For the Quarter Ended:   Percentage Change From:   For the Year Ended
(unaudited) June 30,
2019
Mar. 31,
2019
June 30,
2018
  Mar. 31,
2019
June 30,
2018
  June 30,
2019
June 30,
2018
Percent
Change
Interest Income                   
  Loan interest income    $   4,735 $   4,475 $   3,817   6 % 24 %    9,211  7,403 24 %
  Investment income        668     651     468   3 % 43 %    1,319  892 48 %
  Int. on fed funds & CDs in other banks        141     260     153   -46 % -8 %    401  353 14 %
  Dividends from non-marketable equity        33     32     28   3 % 18 %    65  55 18 %
  Interest income        5,577     5,418     4,466   3 % 25 %    10,996  8,703 26 %
  Total interest expense        253     209     137   21 % 85 %    462  276 67 %
  Net interest income        5,324     5,209     4,329   2 % 23 %    10,534  8,427 25 %
  Provision for loan losses        -      -      -    0 % 0 %    0  0 0 %
  Net interest income after provision        5,324     5,209     4,329   2 % 23 %    10,534  8,427 25 %
                       
Non-Interest Income:                    
  Total deposit fee income        114     91     84   25 % 36 %    204  163 25 %
  Debit / credit card interchange income        60     50     42   20 % 43 %    111  78 42 %
  Merchant services income        187     155     152   21 % 23 %    342  284 20 %
  Gain on sale of loans        386     242     22   60 % 1655 %    627  45 1293 %
  Other operating income        125     131     121   -5 % 3 %    256  257 0 %
  Non-interest income        872     669     421   30 % 107 %    1,540  827 86 %
                     
Non-Interest Expense:                   
  Salaries & employee benefits        1,878     1,864     1,524   1 % 23 %    3,742  3,122 20 %
  Occupancy expense        198     195     167   2 % 19 %    393  328 20 %
  Other operating expense        944     863     917   9 % 3 %    1,807  1,688 7 %
  Non-interest expense        3,020     2,922     2,608   3 % 16 %    5,942  5,138 16 %
                     
  Net income before tax        3,176     2,956     2,142   7 % 48 %    6,132  4,116 49 %
  Tax provision        906     826     602   10 % 50 %    1,732  1,111 56 %
  Net income after tax    $   2,270 $   2,130 $   1,540   7 % 47 %    4,400  3,005 46 %
                       

 

BALANCE SHEET   ($ in thousands )     End of Period:   Percentage Change From:  
(unaudited) June 30,
2019
Mar. 31,
2019
June 30,
2018
  Mar. 31,
2019
June 30,
2018
 
ASSETS               
  Cash and due from banks    $   13,513   $   11,982   $   9,251     13 % 46 %  
  Fed funds sold and deposits in banks        18,194       24,774       28,266     -27 % -36 %  
  CDs in other banks        10,657       11,151       6,682     -4 % 59 %  
  Investment securities        94,216       95,695       78,443     -2 % 20 %  
  Loans held for sale     4,542       6,599       -      -31 % 0 %  
  Portfolio loans outstanding:             
  RE constr & land development        14,146       18,606       17,544     -24 % -19 %  
  Residential RE 1-4 Family        11,714       10,023       10,658     17 % 10 %  
  Commercial Real Estate        105,819       98,841       80,295     7 % 32 %  
  Agriculture        27,345       28,975       24,758     -6 % 10 %  
  Commercial and Industrial        148,063       153,802       146,396     -4 % 1 %  
  Consumer and Other        109       86       37     27 % 195 %  
  Total Portfolio Loans        307,196       310,333       279,688     -1 % 10 %  
  Deferred fees & discounts        55       121       252     -55 % -78 %  
  Allowance for loan losses        (3,892 )     (4,051 )     (3,366 )   -4 % 16 %  
  Loans, net        303,359       306,403       276,574     -1 % 10 %  
  Non-marketable equity investments        2,512       2,441       2,476     3 % 1 %  
  Cash value of life insurance     7,885       7,832       8,185     1 % -4 %  
  Accrued interest and other assets        5,155       4,658       3,688     11 % 40 %  
  Total assets    $   460,033   $   471,535   $   413,565     -2 % 11 %  
               
LIABILITIES AND EQUITY               
  Non-interest bearing deposits    $   245,244   $   256,700   $   224,068     -4 % 9 %  
  Interest checking        12,183       13,483       10,907     -10 % 12 %  
  Savings        36,024       36,052       31,424     0 % 15 %  
  Money market        83,043       84,787       70,525     -2 % 18 %  
  Certificates of deposits        33,481       33,393       38,159     0 % -12 %  
  Total deposits        409,975       424,415       375,083     -3 % 9 %  
  Borrowings        -        -        -      0 % 0 %  
  Other liabilities        2,928       2,932       1,371     0 % 114 %  
  Total liabilities        412,903       427,347       376,454     -3 % 10 %  
               
  Common stock & paid in capital        29,527       29,318       28,240     1 % 5 %  
  Retained earnings      17,108       14,838       9,464     15 % 81 %  
  Total equity        46,635       44,156       37,704     6 % 24 %  
  Accumulated other comprehensive income        495       32       (593 )   1447 % -183 %  
  Shareholders equity, net        47,130       44,188       37,111     7 % 27 %  
  Total Liabilities and shareholders' equity $   460,033   $   471,535   $   413,565     -2 % 11 %  
                 

 

ASSET QUALITY ($ in thousands) Period Ended:  
(unaudited) June 30,
2019
Mar. 31,
2019
June 30,
2018
 
Delinquent accruing loans 30-60 days    $   145   $   419   $   0    
Delinquent accruing loans 60-90 days    $   0   $   0   $   0    
Delinquent accruing loans 90+ days    $   2   $   0   $   0    
Total delinquent accruing loans  $   147   $   419   $   0    
         
Loans on non accrual  $   793   $   3,253   $   2,927    
Other real estate owned  $   0   $   0   $   0    
Nonperforming assets  $   793   $   3,253   $   2,927    
         
Performing restructured loans  $   557   $   0   $   0    
         
         
Delq 30-60 / Total Loans    .05 %   .14 %   .00 %  
Delq 60-90 / Total Loans    .00 %   .00 %   .00 %  
Delq 90+ / Total Loans    .00 %   .00 %   .00 %  
Delinquent Loans / Total Loans      .05 %   .14 %   .00 %  
Non Accrual / Total Loans    .26 %   1.05 %   1.05 %  
Nonperforming assets to total assets    .17 %   .69 %   .71 %  
         
         
Year-to-date charge-off activity         
Charge-offs  $   163   $   0   $   0    
Recoveries  $   6   $   2   $   3    
Net charge-offs  $   157   $   (2 ) $   (3 )  
Annualized net loan losses (recoveries) to average loans    .10 %   -.00 %   -.00 %  
         
LOAN LOSS RESERVE RATIOS:       
Reserve for loan losses  $   3,892   $   4,051   $   3,366    
         
Total loans  $   307,196   $   310,334   $   279,688    
Purchased govt. guaranteed loans    $   60,839   $   66,048   $   63,071    
Originated govt. guaranteed loans    $   30,626   $   31,118   $   27,941    
         
LLR / Total loans    1.27 %   1.31 %   1.20 %  
LLR / Loans less purchased govt. guaranteed loans      1.58 %   1.66 %   1.55 %  
LLR / Loans less all govt. guaranteed loans      1.80 %   1.90 %   1.78 %  
LLR / Total assets    .85 %   .86 %   .81 %  
         


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

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