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Communities First Financial Corporation Earns $1.63 Million in 3Q18, or $0.56 per Diluted Share, Up 54% from 3Q17; Net Interest Margin Expands to 4.55%

/EIN News/ -- FRESNO, Calif., Oct. 12, 2018 (GLOBE NEWSWIRE) -- Communities First Financial Corporation (the “Company”) (OTCQX: CFST), the parent company of Fresno First Bank (the “Bank”), today reported record profits for the third quarter of 2018 and for the first nine months of 2018. 

Net income increased 54% to $1.63 million, or $0.56 per diluted share for the third quarter of 2018, compared to $1.06 million, or $0.37 per diluted share for the third quarter of 2017.  On a linked quarter basis, net income grew 6% from $1.54 million, or $0.53 per diluted share.  For the first nine months ended September 30, 2018, net income increased 65% to $4.63 million, or $1.59 per diluted share, compared to $2.81 million, or $0.98 per diluted share for the first nine months of 2017.

“We continue to build our momentum delivering strong financial results for the quarter, supported by record revenue, net income, earnings per share and a solid net interest margin.  Our strong reputation established by our team is driving an amazing referral pipeline and we are attracting a steady new client base, demonstrated by the growth in deposits.  Noninterest-bearing deposits are up 32% on a year-over-year basis and represent over 60% of our deposit base,” said Steve Miller, President and Chief Executive Officer.

“Our recent expansion into the Southern California market is a logical progressive step for us,” continued Miller.  “With our team of highly experienced lenders, we look forward to developing a solid customer base initially focusing on commercial lending.  In addition, we will expand our payments business in Southern California to help enhance our fee-based revenue streams.”

Third Quarter 2018 Highlights (as of, or for the period ended September 30, 2018, except where noted):

  • Generated record earnings of $1.63 million and record diluted EPS of $0.56 per share.

  • Return on average assets (“ROAA”) was 1.48%; return on average equity (“ROAE”) was 16.90%, and the efficiency ratio improved to 51.06%.  Industry peer* ROAA was 1.00%, ROAE was 10.03%, and the efficiency ratio was 67.75%, at June 30, 2018.

  • Net interest margin (“NIM”) expanded 29 basis points to 4.55% for the third quarter of 2018, compared to 4.16% from the third quarter a year ago.  At June 30, 2018, industry peer* NIM was 3.74%.

  • Net interest income, after provision for loan losses, increased 30% year-over-year to $4.48 million and grew 4% from the preceding quarter.  Before the provision for loan losses, net interest income improved by 26% to $4.78 million year-over-year and grew 10% on a linked quarter basis.

  • Total deposits increased 18% to $402.93 million from $342.13 million a year earlier.

  • Total loans increased 16% to $282.87 million compared to $244.89 million a year ago.

  • Asset quality remained solid with nonperforming assets representing 0.71% of total assets.  Loans on nonaccrual totaled $3.16 million, compared to $2.93 million a year earlier.  Nonaccrual loans represented 1.12% of total loans.

  • The allowance for loan and lease losses (“ALLL”) was 1.30% as a percentage of total loans, at September 30, 2018, compared to 1.37% a year earlier.  The ALLL as a percentage of total assets was 0.83%.

  • Capital ratios remain strong with a ratio of tangible shareholders’ equity to total assets of 8.71% at September 30, 2018, compared to 8.97% at September 30, 2017.

*Industry peers are the 474 banks that comprised the SNL Microcap U.S. Bank Index, as at June 30, 2018.

Results of Operations

Net interest income, after the provision for loan losses, increased 30% to $4.48 million from $3.44 million in the third quarter a year ago, indicating strong year-over-year loan growth and higher yields on investment securities and overnight funds.  A provision for loan losses of $300,000 was booked in the reporting quarter compared to a provision of $350,000 taken in the third quarter of 2017.  No provision for loan losses was recorded in the preceding quarter.  Year-to-date, after the provision for loan losses, net interest income was up 28% to $12.91 million, compared to $10.06 million for the first nine months of 2017.

Non-interest income was $456,000 for the third quarter of 2018, compared to $634,000 for the third quarter of 2017, and $421,000 for the second quarter of 2018.  The year-over-year decline in non-interest income was primarily due to the lower gain on sale of SBA loans.  Gains on SBA loan sales totaled $88,000 for the first nine months of 2018, compared to $443,000 for the like period of 2017.  Adding to non-interest income was merchant services income, which was up 8% from the third quarter a year ago, and 14% for the first nine months of 2018.  Debit/credit card interchange income increased 22% compared to the third quarter of 2017 and grew 27% in the first nine months of 2018.

The net interest margin improved by 39 basis points to 4.55% for the third quarter of 2018, compared to 4.16% for the third quarter of 2017, and expanded three basis point from 4.52% for the second quarter of 2018.  Year-to-date, the net interest margin expanded 29 basis points to 4.45% compared to 4.16% for the first nine months of 2017.  “Our strong net interest margin continued to benefit from a higher fed funds and prime interest rate advancing the yield on our earning assets to 4.70% for the third quarter of 2018, whereas our cost of funds remained low at 0.15%,” said Steve Canfield, Executive Vice President and Chief Financial Officer.  The net interest margin is well above the average of 3.71% generated by industry peers.

Operating expenses totaled $2.68 million for the third quarter of 2018, compared to $2.34 million for the third quarter of 2017 and $2.61 million on a linked quarter basis.  “The increase in noninterest expense both from a year ago and from the second quarter this year was primarily due to compensation and operating costs associated with establishing our loan production office in Los Angeles,” added Canfield.

The efficiency ratio improved to 51.06% for the third quarter of 2018, compared to 54.15% for the third quarter a year ago, and 54.91% for the second quarter of 2018.  For the first nine months of 2018, the efficiency ratio was 53.90%, compared to 56.67% for the first nine months of 2017.

Balance Sheet Review

Total assets grew 18% to $443.45 million at September 30, 2018, compared to $377.04 million at September 30, 2017, and increased 7% from $413.57 million at June 30, 2018.

Total loans increased 16% to $282.87 million at September 30, 2018, from $244.89 million a year ago, and increased 1% from $279.69 million on a linked quarter basis.  The commercial and industrial (C&I) portfolio represented just over 50% of total loans at September 30, 2018.  Commercial real estate (CRE) loans totaled $87.4 million, or 31% of total loans.  Agriculture loans grew 13% from the preceding quarter to $28.1 million and represented 10% of total loans; real estate construction and land development totaled $14.6 million, or 5% of loans, while residential home loans were $11.2 million, or 4% of loans.  At September 30, 2018, $90.28 million or 31.9% of the loan portfolio was guaranteed by the SBA, USDA or other government agencies.

Total deposits increased 18% to $402.93 million at September 30, 2018, compared to $342.13 million from a year earlier and grew 7% from $375.08 million at June 30, 2018.  Noninterest-bearing demand deposits increased by 32% to $243.58 million at September 30, 2018, representing 61% of total deposits, compared to $184.56 million, or 54% of total deposits a year ago.  The ratio of loans to deposits was 70.20% at September 30, 2018, compared to 71.58% one year earlier and 74.57% at June 30, 2018.

Net shareholder’s equity increased 14% to $38.61 million at September 30, 2018, compared to $33.80 million a year ago.  Book value per common share increased 13% to $13.53 at September 30, 2018, compared to $12.00 a year ago.

Asset Quality

Nonperforming assets (“NPAs”) increased 8% from the preceding quarter, primarily due to the addition of two small government guaranteed business loans placed on non-accrual during the quarter.  “We continue to closely monitor the $2.9 million NPA which consists of a series of loans isolated to one borrower; they are well-secured with strong underlying collateral,” added Miller. At September 30, 2018, NPAs totaled $3.16 million compared to $2.93 million a year earlier.

“Primarily due to the growth in our loan portfolio, we prudently added to our reserves,” commented Canfield. A provision for loan losses of $300,000 was booked in the current quarter compared to $350,000 in the third quarter a year ago.  No provision was taken in the second quarter of 2018.  The allowance for loan losses to total loans ratio was 1.30% at September 30, 2018, compared to 1.37% a year earlier and 1.20% at June 30, 2018. 

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. 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 call 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 management’s 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:
Sept. 30,
2018
June 30,
2018
Sept. 30,
2017
  June 30, 2018 Sept. 30, 2017   Sept. 30,
2018
Sept. 30,
2017
Percent Change
BALANCE SHEET DATA - PERIOD END BALANCES:                 
  Total assets    $   443,449   $   413,565   $   377,042     7 % 18 %        
  Total Loans        282,867       279,688       244,890     1 % 16 %        
  Investment securities        82,153       78,443       62,323     5 % 32 %        
  Total deposits        402,933       375,083       342,126     7 % 18 %        
  Shareholders equity, net        38,610       37,111       33,804     4 % 14 %        
                       
SELECT INCOME STATEMENT DATA:                    
  Gross revenue $   5,237   $   4,750   $   4,426     10 % 18 %   $   14,492   $   12,402   17 %
  Operating expense     2,678       2,608       2,337     3 % 15 %       7,817       6,961   12 %
  Pre-tax, pre-provision income     2,559       2,142       2,089     19 % 22 %       6,675       5,441   23 %
  Net income after tax    $   1,625   $   1,540   $   1,055     6 % 54 %   $   4,630   $   2,806   65 %
                       
SHARE DATA:                   
  Basic earnings per share $   0.57   $   0.54   $   0.37     6 % 54 %   $   1.62   $   1.00   62 %
  Fully diluted earnings per share    $   0.56   $   0.53   $   0.37     6 % 51 %   $   1.59   $   0.98   62 %
  Book value per common share    $   13.53   $   12.99   $   12.00     4 % 13 %        
  Common shares outstanding        2,853,672       2,855,895       2,818,066     0 % 1 %        
  Fully diluted shares        2,923,728       2,921,040       2,882,400     0 % 1 %        
  CFST - Stock price    $   25.10   $   23.05   $   17.60     9 % 43 %        
                       
RATIOS:                    
  Return on average assets      1.48 %   1.54 %   1.12 %   -4 % 32 %     1.49 %   1.05 % 42 %
  Return on average equity      16.90 %   16.95 %   12.62 %   0 % 34 %     16.91 %   11.66 % 45 %
  Efficiency ratio      51.06 %   54.91 %   54.15 %   -7 % -6 %     53.90 %   56.67 % -5 %
  Yield on earning assets      4.70 %   4.66 %   4.29 %   1 % 10 %     4.59 %   4.29 % 7 %
  Cost to fund earning assets      0.15 %   0.14 %   0.13 %   7 % 15 %     0.14 %   0.13 % 8 %
  Net Interest Margin      4.55 %   4.52 %   4.16 %   1 % 9 %     4.45 %   4.16 % 7 %
  Equity to assets      8.71 %   8.97 %   8.97 %   -3 % -3 %        
  Loan to deposits ratio   70.20 %   74.57 %   71.58 %   -6 % -2 %        
  Full time equivalent employees        42       42       41     0 % 2 %        
                       
BALANCE SHEET DATA - AVERAGES:                 
    Total assets    $   434,466   $   401,254   $   372,648     8 % 17 %   $   414,576   $   357,929   16 %
  Total loans        280,510       270,235       249,047     4 % 13 %       271,869       245,704   11 %
  Investment securities        78,439       78,994       67,137     -1 % 17 %       77,195       67,582   14 %
  Deposits        394,646       363,044       338,002     9 % 17 %       376,333       324,662   16 %
  Shareholders equity, net    $   38,159   $   36,436   $   33,532     5 % 14 %   $   36,615   $   32,194   14 %
                       
ASSET QUALITY:                    
  Total delinquent accruing loans    $   158   $   0   $   0     0 % 0 %        
  Nonperforming assets    $   3,155   $   2,927   $   2,930     8 % 8 %        
  Non Accrual / Total Loans      1.12 %   1.05 %   1.20 %   7 % -7 %        
  Nonperforming assets to total assets    .71% .71% .78%   1 % -8 %        
  LLR / Total loans      1.30 %   1.20 %   1.37 %   8 % -5 %        
                       

 

STATEMENT OF INCOME ($ in thousands) For the Quarter Ended:   Percentage Change From:   For the Year Ended
(unaudited) Sept. 30,
2018
June 30,
2018
Sept. 30,
2017
  June 30,
2018
Sept. 30, 2017   Sept. 30,
2018
Sept. 30,
2017
Percent Change
Interest Income                   
  Loan interest income    $   4,149 $   3,817 $   3,381   9 % 23 %   $   11,552 $   9,760 18 %
  Investment income        481     468     367   3 % 31 %       1,373     1,059 30 %
  Int. on fed funds & CDs in other banks        272     153     142   78 % 92 %       625     317 97 %
  Dividends from non-marketable equity        32     28     21   14 % 52 %       87     91 -4 %
    Interest income        4,934     4,466     3,911   10 % 26 %       13,637     11,227 21 %
  Total interest expense        153     137     119   12 % 29 %       428     342 25 %
  Net interest income        4,781     4,329     3,792   10 % 26 %       13,209     10,885 21 %
  Provision for loan losses        300     0     350   0 % -14 %       300     825 -64 %
  Net interest income after provision        4,481     4,329     3,442   4 % 30 %       12,909     10,060 28 %
                       
Non-Interest Income:                    
  Total deposit fee income        96     84     79   14 % 22 %       260     244 7 %
  Debit / credit card interchange inc.        44     42     36   5 % 22 %       122     96 27 %
  Merchant services income        153     152     142   1 % 8 %       437     382 14 %
  Gain on sale of loans        44     22     161   100 % -73 %       88     443 -80 %
  Other operating income        119     121     216   -2 % -45 %       376     352 7 %
  Non-interest income        456     421     634   8 % -28 %       1,283     1,517 -15 %
                     
Non-Interest Expense:                   
  Salaries & employee benefits        1,612     1,524     1,397   6 % 15 %       4,735     4,125 15 %
  Occupancy expense        256     167     185   53 % 38 %       584     501 17 %
  Other operating expense        810     917     755   -12 % 7 %       2,498     2,335 7 %
  Non-interest expense        2,678     2,608     2,337   3 % 15 %       7,817     6,961 12 %
                     
  Net income before tax        2,259     2,142     1,739   5 % 30 %       6,375     4,616 38 %
  Tax provision        634     602     684   5 % -7 %       1,745     1,810 -4 %
  Net income after tax    $   1,625 $   1,540 $   1,055   6 % 54 %   $   4,630 $   2,806 65 %
                       


BALANCE SHEET  ($ in thousands )    End of Period:   Percentage Change From:
(unaudited) Sept. 30,
2018
June 30,
2018
Sept. 30,
2017
  Sept. 30,
2018
Sept. 30,
2017
ASSETS             
    Cash and due from banks    $   10,973   $   8,944   $   8,130     23 % 35 %
  Fed funds sold and deposits in banks        48,474       28,573       45,602     70 % 6 %
  CDs in other banks        7,699       6,682       5,199     15 % 48 %
  Investment securities        82,153       78,443       62,323     5 % 32 %
  Total loans outstanding:           
  RE constr & land development        14,590       17,544       17,525     -17 % -17 %
  Residential RE 1-4 Family        11,174       10,658       12,747     5 % -12 %
  Commercial Real Estate        87,368       80,295       76,848     9 % 14 %
  Agriculture        28,099       24,758       23,029     13 % 22 %
  Commercial and Industrial        141,602       146,396       114,638     -3 % 24 %
  Consumer and Other        34       37       103     -8 % -67 %
  Total Loans        282,867       279,688       244,890     1 % 16 %
  Deferred fees & discounts        191       252       174     -24 % 10 %
  Allowance for loan losses        (3,668 )     (3,366 )     (3,347 )   9 % 10 %
  Loans, net        279,390       276,574       241,717     1 % 16 %
  Non-marketable equity investments        2,475       2,476       2,207     0 % 12 %
  Cash value of life insurance     8,240       8,185       8,015     1 % 3 %
  Accrued interest and other assets        4,045       3,688       3,849     10 % 5 %
  Total assets    $   443,449   $   413,565   $   377,042     7 % 18 %
             
LIABILITIES AND EQUITY             
  Non-interest bearing deposits    $   243,580   $   224,068   $   184,556     9 % 32 %
  Interest checking        13,583       10,907       10,264     25 % 32 %
  Savings        30,887       31,424       37,029     -2 % -17 %
  Money market        77,514       70,525       71,444     10 % 8 %
  Certificates of deposits        37,369       38,159       38,833     -2 % -4 %
  Total deposits        402,933       375,083       342,126     7 % 18 %
  Borrowings        -        -        -      0 % 0 %
  Other liabilities        1,906       1,371       1,112     39 % 71 %
  Total liabilities        404,839       376,454       343,238     8 % 18 %
             
  Common stock & paid in capital        28,350       28,240       27,861     0 % 2 %
  Retained earnings      11,089       9,464       5,582     17 % 99 %
  Total equity        39,439       37,704       33,443     5 % 18 %
  Accumulated other comprehensive income        (829 )     (593 )     361     40 % -330 %
  Shareholders equity, net        38,610       37,111       33,804     4 % 14 %
  Total Liabilities and shareholders' equity $   443,449   $   413,565   $   377,042     7 % 18 %
               

 

ASSET QUALITY ($ in thousands) Period Ended:  
(unaudited) Sept. 30,
2018
June 30,
2018
Sept. 30,
2017
 
Delinquent accruing loans 30-60 days    $   158   $   0   $   0    
Delinquent accruing loans 60-90 days    $   0   $   0   $   0    
Delinquent accruing loans 90+ days    $   0   $   0   $   0    
Total delinquent accruing loans  $   158   $   0   $   0    
         
Loans on non accrual  $   3,155   $   2,927   $   2,930    
Other real estate owned  $   0   $   0   $   0    
Nonperforming assets  $   3,155   $   2,927   $   2,930    
         
Performing restructured loans  $   0   $   0   $   0    
         
         
Delq 30-60 / Total Loans  .06% .00% .00%  
Delq 60-90 / Total Loans  .00% .00% .00%  
Delq 90+ / Total Loans  .00% .00% .00%  
Delinquent Lns / Total Lns  .06% .00% .00%  
Non Accrual / Total Loans    1.12 %   1.05 %   1.20 %  
Nonperforming assets to total assets  .71% .71% .78%  
         
         
Year-to-date charge-off activity         
Charge-offs  $   0   $   0   $   358    
Recoveries  $   5   $   3   $   0    
Net charge-offs  $   (5 ) $   (3 ) $   358    
Annualized net loan losses (recoveries) to average loans  -.00% -.00% .19%  
         
LOAN LOSS RESERVE RATIOS:       
Reserve for loan losses  $   3,668   $   3,366   $   3,347    
         
Total loans  $   282,866   $   279,688   $   244,890    
Purchased govt. guaranteed loans    $   62,741   $   63,071   $   48,692    
Originated govt. guaranteed loans    $   27,542   $   27,941   $   23,427    
         
LLR / Total loans    1.30 %   1.20 %   1.37 %  
LLR / Loans less purchased govt. guaranteed loans      1.67 %   1.55 %   1.71 %  
LLR / Loans less all govt. guaranteed loans      1.90 %   1.78 %   1.94 %  
LLR / Total assets  .83% .81% .89%  
         

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

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