Communities First Financial Corporation Achieves Record Profits: Earnings Increase 50% to $1.1 Million for 3Q17 from 3Q16

FRESNO, Calif., Oct. 12, 2017 (GLOBE NEWSWIRE) — Communities First Financial Corporation (the “Company”) (OTCQX:CFST), the parent company of Fresno First Bank (the “Bank”), today announced record profits for the third quarter and first nine months of 2017.  Net income was $1.1 million, or $0.36 per diluted share, an increase of 50% over net income of $705,000, or $0.26 per diluted share, for the third quarter of 2016, and grew 15% from $915,000, or $0.32 per diluted share, for the second quarter of 2017.  For the nine months ended September 30, 2017, net income increased 31% to $2.8 million, or $0.97 per diluted share, compared to $2.1 million, or $0.78 per diluted share, for the first nine months of 2016.

“We delivered record earnings for the third quarter and year-to-date, fueled by solid revenue growth.  Net interest income increased 28% for the quarter, after the provision for loan losses, compared to the third quarter a year ago, boosted by a solid net interest margin, meaningful deposit inflow and steady year-over-year loan growth,” said Steve Miller, President and Chief Executive Officer.  “As we continue to focus on expanding our client base and increasing business deposits, noninterest-bearing deposits increased 25% from a year ago and represent for 54% of our total deposits.  We aim to be a “top 1%” community bank in regards to financial performance and further strengthening our deposit franchise is a core foundation of that vision.”

“Nonperforming assets remain unchanged from the second quarter.  The few loans on nonaccrual status are isolated to one borrower,” added Miller.  “We are confident we will make full recovery and continue to work diligently with the borrower to bring the accounts current.”  Asset quality remains excellent with NPAs to total assets at 0.78% and reserves to total loans at 1.37%, at September 30, 2017.  The allowance for loan losses was $3.3 million at quarter end.

“Our first customer was recently approved by the SEC for an equity crowd funding raise and we are excited to be a part of this new innovative capital raising platform.  In addition, we were once again the top community bank SBA lender in our district for the 5th consecutive year,” said Miller.  “Whether through traditional programs like SBA or by participating in progressive platforms like equity crowd funding, we are building a significant and well-diversified community business bank in California.”

Third quarter 2017 Highlights (as of, or for the quarter ended September 30, 2017):

  • Net income was $1.1 million, up 50% from $705,000 for the third quarter a year ago.
  • Diluted earnings per share (EPS) increased 40% to $0.36, compared to $0.26 for the third quarter a year ago.
  • Return on average assets (“ROAA”) was 1.12%, compared to the average of 0.83% generated by 538 banks in the SNL MicroCap U.S. Bank Index for 2Q17.
  • Return on average equity (“ROAE”) was 12.66%, compared to 8.38%, generated by SNL MicroCap U.S. Bank Index, for the second quarter of 2017.
  • Net interest income, after the provision for loan losses, increased 28% to $3.4 million for the third quarter of 2017, compared to $2.7 million for the third quarter of 2016. 
  • Noninterest income grew 44% to $634,000 for the third quarter of 2017, compared to $441,000 for the third quarter of 2016.
     
  • Net interest margin (“NIM”) was 4.16%, compared to 4.20% for the third quarter a year ago.  
  • Total deposits grew 13% to $342.1 million from $303.3 million a year earlier.
  • Total loans increased 14% to $244.9 million compared to $214.8 million a year ago.
  • The efficiency ratio was 53.95% for the third quarter of 2017, compared to 53.62% for the third quarter a year earlier. 
  • Nonperforming loans, as a percentage of total loans, were 1.20%.  Asset quality remained sound with total nonperforming assets representing only 0.78% of total assets.
  • The allowance for loan and lease losses (“ALLL”) as a percentage of total loans was 1.37% at September 30, 2017, net of all government guarantees, the ALLL as a percentage of total loans was 1.94%.
  • Capital ratios remain strong with a ratio of tangible shareholders’ equity to total assets of 8.97% at September 30, 2017, compared to 8.88% at September 30, 2016.

Results of Operations

Reflecting strong year-over-year loan growth and a balance sheet positioned to take advantage of rising interest rates, net interest income increased 28%, after the provision for loan losses, to $3.4 million for the third quarter of 2017, compared to $2.7 million for the third quarter of 2016, On a linked quarter basis, net interest income grew 6% from $3.2 million.  For the first nine months of 2017, net interest income increased 25% to $10.1 million, compared to $8.0 million for the first nine months of 2016.  The provision for loan losses was $350,000 for the third quarter of 2017, compared to $565,000 a year earlier and $395,000 for the second quarter of 2017.

Non-interest income was $634,000 for the third quarter of 2017, compared to $441,000 for the third quarter of 2016, and $570,000 for the second quarter of 2017.  “During the third quarter of 2017 we sold fewer SBA loans than in Q2, however we strategically decided to reposition a portion of our securities portfolio which resulted in a gain of $120,000,” said Steve Canfield.  Debit/credit card interchange income was up 33% and merchant services income also increased 17%, year-over-year on higher volumes.  For the first nine months of 2017, non-interest income was up 19% from the like period a year ago.  

The net interest margin was 4.16% for the third quarter of 2017, compared to 4.20% a year earlier, and 4.27% for the second quarter of 2017.  “Our solid net interest margin was primarily due to our low cost of funds and rising yields on our loans, investments and overnight fund balances,” commented Canfield.  The net interest margin continues to remain well above the average of 3.57% generated by the SNL MicroCap U.S. Bank Index at June 30, 2017.  For the first nine months of 2017, the net interest margin was 4.16%, compared to 4.15% for the like period a year ago.

Operating expenses were consistent at $2.3 million for the second and third quarters of 2017, compared to $2.0 million for the third quarter a year ago.  The increase in noninterest expense from a year ago and for the first nine months of 2017, continues to relate to the hiring of additional business development officers and increased occupancy expense resulting from a new lease of office space adjacent to the Bank’s current headquarters that will provide room for expansion.

The efficiency ratio was 53.95% for the third quarter of 2017, compared to 53.62% a year ago, and 54.91% for the quarter ended June 30, 2017. 

Balance Sheet Review

Total assets increased 13% to $377.0 million at September 30, 2017, compared to $333.5 million at September 30, 2016, and grew 7% from $352.0 on a linked quarter basis.

Total loans grew 14% to $244.9 million at September 30, 2017, from $214.8 million a year ago, and declined 1% from $247.6 million at June 30, 2017.

The commercial and industrial (C&I) portfolio totaled $114.6 million, representing 47% of total loans at September 30, 2017.  Commercial real estate (CRE) loans totaled $76.8 million, or 31% of total loans.  Agriculture and land loans totaled $23.0 million, denoting 10% of loans; residential home loans were $12.7 million, or 5% of loans, and real estate construction and land development loans were $17.5 million, or 7% of loans.

Total deposits increased 13% to $342.1 million at September 30, 2017, compared to $303.3 million from a year earlier and grew 7% from $318.3 million at June 30, 2017.  “The acquisition rate for new customers is running 15% ahead of the first nine months of 2016,” said Miller.  “We anticipate our asset and deposit growth to continue through the end of the year.”

Noninterest-bearing demand deposits increased 25% to $184.6 million at September 30, 2017, representing 54% of total deposits, compared to $147.1 million, or 48% of total deposits a year ago.  The ratio of loans to deposits was 71.58% at September 30, 2017, compared to 70.81% one year earlier and 77.79% at June 30, 2017.

Shareholder’s equity, net of accumulated other comprehensive income, was $33.8 million at September 30, 2017, compared to $29.6 million a year ago.  Book value per common share increased 11% to $12.00 at September 30, 2017, compared to $10.85 a year ago.

Asset Quality

Nonperforming assets (“NPAs”) totaled $2.9 million at September 30, 2017, and at June 30, 2017, compared to $295,000 one year earlier.  “The NPAs remain the same as reported in the second quarter of 2017 and represent a series of loans isolated to one borrower,” said Miller.  “The loans are well-secured with good collateral, and we are keeping communications open with the borrower.”

The provision for loan losses was $350,000 for the third quarter of 2017, compared to $565,000 for the third quarter of 2016 and $395,000 for the preceding quarter.  The provision for loan losses declined to $825,000 for the first nine months of 2017, compared to $1,090,000 for the first nine months of 2016.

Net charge-offs were $31,000 for the third quarter of 2017, compared to $2.0 million for the third quarter a year ago.  Year-to-date, net charge-offs totaled $358,000, compared to $2.0 million a year ago.  The allowance for loan losses to total loans ratio was 1.37% at September 30, 2017, compared to 1.25% a year earlier and 1.22% at June 30, 2017. 

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 Bank 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 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:
Sept. 30,
2017
June 30,
2017
Sept. 30,
2016
  June 30,
2017
Sept. 30,
2016
  Sept. 30,
2017
Sept. 30,
2016
Percent
Change
BALANCE SHEET DATA – PERIOD END BALANCES:           
  Total assets    $   377,043   $   352,023   $   333,464     7 % 13 %  
  Total Loans        244,890       247,637       214,795     -1 % 14 %  
  Investment securities        62,323       67,320       66,707     -7 % -7 %  
  Total deposits        342,126       318,325       303,319     7 % 13 %  
  Shareholders equity, net    $   33,804   $   32,836   $   29,622     3 % 14 %  
 
SELECT INCOME STATEMENT DATA:                    
  Gross revenue $   4,426   $   4,210   $   3,693     5 % 20 %   $   12,402   $   10,406   19 %
  Operating expense     2,328       2,312       1,980     1 % 18 %       6,952       5,826   19 %
  Pre-tax, pre-provision income     2,448       2,293       2,278     7 % 7 %       6,275       5,670   11 %
  Net income after tax    $   1,055   $   915   $   705     15 % 50 %   $   2,806   $   2,143   31 %
                       
SHARE DATA:                   
  Fully diluted earnings per share    $   0.36   $   0.32   $   0.26     14 % 40 %   $   0.97   $   0.78   24 %
  Book value per common share  $   12.00   $   11.65   $   10.85     3 % 11 %        
  Common shares outstanding        2,818,066       2,818,066       2,730,898     0 % 3 %        
  Fully diluted shares        2,951,555       2,910,808       2,750,746     1 % 7 %        
  CFST – Stock price    $   17.60   $   15.00   $   9.91     17 % 78 %        
                       
RATIOS:                    
  Return on average assets      1.12 %   1.05 % .89%   7 % 26 %     1.05 % .95% 10 %
  Return on average equity      12.66 %   11.51 %   9.85 %   10 % 29 %     11.66 %   10.28 % 13 %
  Efficiency ratio      53.95 %   54.91 %   53.62 %   -2 % 1 %     56.60 %   56.02 % 1 %
  Yield on earning assets      4.29 %   4.39 %   4.36 %   -2 % -1 %     4.29 %   4.30 % 0 %
  Cost to fund earning assets      0.13 %   0.13 %   0.15 %   4 % -15 %     0.13 %   0.15 % -13 %
  Net Interest Margin      4.16 %   4.27 %   4.20 %   -2 % -1 %     4.16 %   4.15 % 0 %
  Equity to assets      8.97 %   9.33 %   8.88 %   -4 % 1 %        
  Loan to deposits ratio   71.58 %   77.79 %   70.81 %   -8 % 1 %        
  Full time equivalent employees        41       41       38     0 % 8 %        
                       
BALANCE SHEET DATA – AVERAGES:                 
  Total assets    $   372,648   $   349,251   $   317,130     7 % 18 %   $   357,929   $   299,615   19 %
  Total loans        249,047       248,380       211,215     0 % 18 %       245,704       199,105   23 %
  Investment securities        67,137       67,103       66,232     0 % 1 %       67,582       67,218   1 %
  Deposits        338,002       316,059       287,149     7 % 18 %       324,662       270,643   20 %
  Shareholders equity, net    $   33,532   $   32,293   $   29,268     4 % 15 %   $   32,194   $   28,334   14 %
                       
ASSET QUALITY:                    
  Total delinquent accruing loans    $   0   $   250   $   0     -100 % Inf           
  Nonperforming assets    $   2,930   $   2,931   $   295     0 % 893 %        
  Non Accrual / Total Loans      1.20 %   1.18 % .14%   1 % 771 %        
  Nonperforming assets to total assets      .78 %   .83 %   .09 %   -7 % 778 %        
  LLR / Total loans      1.37 %   1.22 %   1.25 %   12 % 9 %        

STATEMENT OF INCOME ($ in thousands) For the Quarter Ended:   Percentage Change From:     For the Year Ended 
 
(unaudited) Sept. 30,
2
017
June 30,
2
017
Sept. 30,
2016
June 30,
2
017
Sept. 30,
2016
    Sept. 30,
2
017
Sept. 30,
2
016
Percent
Change
Interest Income                         
  Loan interest income    $   3,381   $   3,286   $   2,964     3 %   14 %       $   9,760   $   8,239   18 %  
  Investment income        367       350       310     5 %   18 %           1,059       926   14 %  
  Int. on fed funds & CDs in other banks      142       79       69     80 %   106 %           317       206   54 %  
  Dividends from non-marketable equity      21       33       25     -36 %   -16 %           91       91   0 %  
  Interest income        3,911       3,748       3,368     4 %   16 %           11,227       9,462   19 %  
  Total interest expense      119       108       116     10 %   3 %           342       335   2 %  
  Net interest income        3,792       3,640       3,252     4 %   17 %           10,885       9,127   19 %  
  Provision for loan losses      350       395       565     -11 %   -38 %           825       1,090   -24 %  
  Net interest income after provision      3,442       3,245       2,687     6 %   28 %           10,060       8,037   25 %  
                           
Non-Interest Income:                          
  Total deposit fee income      79       82       76     -4 %   4 %           244       209   17 %  
  Debit / credit card interchange inc.      36       31       27     16 %   33 %           96       85   13 %  
  Merchant services income      142       130       121     9 %   17 %           382       335   14 %  
  Gain on sale of loans        161       264       166     -39 %   -3 %           443       492   -10 %  
  Other operating income      216       63       51     243 %   324 %           352       158   123 %  
  Non-interest income        634       570       441     11 %   44 %           1,517       1,279   19 %  
                           
Non-Interest Expense:                         
  Salaries & employee benefits      1,388       1,341       1,175     4 %   18 %           4,116       3,411   21 %  
  Occupancy expense        185       183       132     1 %   40 %           501       390   28 %  
  Other operating expense      755       788       673     -4 %   12 %           2,335       2,025   15 %  
  Non-interest expense      2,328       2,312       1,980     1 %   18 %           6,952       5,826   19 %  
                           
  Net income before tax      1,748       1,503       1,148     16 %   52 %           4,625       3,490   33 %  
  Tax provision        693       588       443     18 %   56 %           1,819       1,347   35 %  
  Net income after tax    $   1,055   $   915   $   705     15 %   50 %       $   2,806   $   2,143   31 %  

 

BALANCE SHEET  ($ in thousands )  End of Period:
  Percentage Change From:
(unaudited) Sept. 30,
2017
June 30,
2017
Sept. 30,
2016
  June 30,
2
017
Sept. 30,
2016
ASSETS             
  Cash and due from banks $ 8,466   $ 7,627   $ 10,394     11 % -19 %
  Fed funds sold and deposits in banks   45,267     21,103     34,800     115 % 30 %
  CDs in other banks   5,199     5,199     5,447     0 % -5 %
  Investment securities   62,323     67,320     66,707     -7 % -7 %
  Total loans outstanding:        
  RE constr & land development   17,525     16,875     17,406     4 % 1 %
  Residential RE 1-4 Family   12,747     13,515     14,673     -6 % -13 %
  Commercial Real Estate   76,848     78,702     73,700     -2 % 4 %
  Agriculture   23,029     24,838     22,674     -7 % 2 %
  Commercial and Industrial   114,638     113,677     86,148     1 % 33 %
  Consumer and Other   103     30     194     243 % -47 %
  Total Loans   244,890     247,637     214,795     -1 % 14 %
  Deferred fees & discounts   174     292     (476 )   -40 % -137 %
  Allowance for loan losses   (3,347 )   (3,028 )   (2,685 )   11 % 25 %
  Loans, net   241,717     244,901     211,634     -1 % 14 %
  Non-marketable equity investments   2,207     1,990     1,808     11 % 22 %
  Cash value of life insurance   8,015             100 % 100 %
  Accrued interest and other assets   3,849     3,883     2,674     -1 % 44 %
  Total assets $ 377,043   $ 352,023   $ 333,464     7 % 13 %
 
LIABILITIES AND EQUITY            
  Non-interest bearing deposits $ 184,556   $ 173,188   $ 147,068     7 % 25 %
  Interest checking   10,264     11,783     9,479     -13 % 8 %
  Savings   37,029     35,954     35,384     3 % 5 %
  Money Market   71,444     58,937     66,807     21 % 7 %
  Certificates of Deposit   38,833     38,463     44,581     1 % -13 %
  Total deposits   342,126     318,325     303,319     7 % 13 %
  Borrowings               0 % 0 %
  Other liabilities   1,113     862     523     29 % 113 %
  Total liabilities   343,239     319,187     303,842     8 % 13 %
             
  Common, preferred & paid in capital   27,861     27,757     27,019     0 % 3 %
  Retained earnings (deficit)   5,582     4,528     1,843     23 % 203 %
  Total equity   33,443     32,285     28,862     4 % 16 %
  Accumulated other comprehensive income   361     551     760     -34 % -53 %
  Shareholders equity, net   33,804     32,836     29,622     3 % 14 %
  Total Liabilities and shareholders’ equity $ 377,043   $ 352,023   $ 333,464     7 % 13 %

  

ASSET QUALITY ($ in thousands) Period Ended:
(unaudited) Sept. 30,
2017
June 30,
2017
Sept. 30,
2016
  Delinquent accruing loans 30-60 days $ 0   $ 250   $ 0  
  Delinquent accruing loans 60-90 days $ 0   $ 0   $ 0  
  Delinquent accruing loans 90+ days $ 0   $ 0   $ 0  
  Total delinquent accruing loans $ 0   $ 250   $ 0  
       
  Loans on non accrual $ 2,930   $ 2,931   $ 295  
  Other real estate owned $ 0   $ 0   $ 0  
  Nonperforming assets $ 2,930   $ 2,931   $ 295  
       
  Performing restructured loans $ 0   $ 31   $ 31  
       
       
  Delq 30-60 / Total Loans .00 % .10 % .00 %
  Delq 60-90 / Total Loans .00 % .00 % .00 %
  Delq 90+ / Total Loans .00 % .00 % .00 %
  Delinquent Lns / Total Lns .00 % .10 % .00 %
  Non Accrual / Total Loans   1.20 %   1.18 % .14 %
  Nonperforming assets to total assets .78 % .83 % .09 %
         
       
  Year-to-date charge-off activity  
  Charge-offs $ 358   $ 327   $ 1,961  
  Recoveries $ 0   $ 0   $ 0  
  Net charge-offs $ 358   $ 327   $ 1,961  
  Annualized net loan losses (recoveries) to average loans .19 % .26 %   1.30 %
       
  LOAN LOSS RESERVE RATIOS:  
  Reserve for loan losses $ 3,347   $ 3,028   $ 2,685  
       
  Total loans $ 244,890   $ 247,637   $ 214,795  
  Purchased govt. guaranteed loans $ 48,692   $ 47,108   $ 24,650  
  Originated govt. guaranteed loans $ 23,427   $ 26,885   $ 24,626  
       
  LLR / Total loans   1.37 %   1.22 %   1.25 %
  LLR / Loans less purchased govt. guaranteed loans   1.71 %   1.51 %   1.41 %
  LLR / Loans less all govt. guaranteed loans   1.94 %   1.74 %   1.62 %
  LLR / Total assets .89 % .86 % .81 %

Transmitted on Globenewswire on October 12, 2017, at 6:00 a.m. PDT.

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

Left Menu Icon
Right Menu Icon