FRESNO, Calif., Jan. 14, 2020 (GLOBE NEWSWIRE) -- Communities First Financial Corporation (the “Company”) (OTCQX: CFST), the parent company of Fresno First Bank (the “Bank”), today reported net income increased 58% to a record $2.56 million, or $0.86 per diluted share for the fourth quarter of 2019 compared to $1.62 million, or $0.56 per diluted share for the fourth quarter of 2018.  Net income for the third quarter of 2019 was $2.24 million, or $0.75 per diluted share. 

For the year ended December 31, 2019, net income increased 47% to a record $9.20 million, or $3.09 per diluted share compared to $6.25 million, or $2.14 per diluted share for the year ended December 31, 2018.  All results are unaudited.

“For the fourth quarter and full year, our stellar performance reflects the successful and continued execution of our strategic growth plan which is supported by the expansion of our franchise into Southern California and our national payments business,” said Steve Miller, President and Chief Executive Officer. “We generated record net income and earnings per share, produced topline revenue, delivered industry leading returns on assets and equity, and grew our book value by over 24% from a year earlier.  At the same time, our loan portfolio grew 20% year-over-year, while our total deposit base increased 14% with non-interest bearing deposits increasing 17% year-over-year.

“Our focus on the electronic payments space continued to gain momentum in the second half of 2019, substantially increasing non-interest income.  Overall, non-interest income increased 69% year-over-year, which was largely driven by the growth in merchant services and the gain on sale of loans generated from our Southern California operation,” added Miller.  “We also expanded our net interest margin by 27 basis points by year-end and ended the year with an efficiency ratio of 49%.

“As we head into 2020, we feel confident about the opportunity to gain market share across our franchise and our ability to prudently manage our operating expenses as we continue to invest in the future of our franchise,” said Miller.  “We would like to thank our employees for their hard work and dedication in delivering value to each of our customers and shareholders.”

Fourth Quarter 2019 Highlights (as of, or for the quarter ended December 31, 2019, except where noted):

  • Diluted earnings per share (“EPS”) were $0.86, compared to $0.56 per share for the fourth quarter of 2018. 
  • ROA was 1.88%, compared to 1.37% for the fourth quarter a year ago.  ROAE was 20.15%, compared to 16.07% for the fourth quarter of 2018.
  • Net interest income, before provision for loan losses, increased 17% to $5.89 million from $5.03 million for the fourth quarter in 2018.  A provision for loan losses of $410,000 was booked in the fourth quarter of 2019, compared to a provision of $650,000 reserved in the fourth quarter of 2018.  
  • Non-interest income for the fourth quarter of 2019 was higher by 40%, compared to a year earlier, and increased 65% from the preceding quarter.
  • The increase in non-interest income was driven by significant gain on sale of loans from our Southern California operation, merchant services revenue that was up 164% for the year, a 19% increase in general account fee income and a 47% increase in debit interchange income.
  • Net interest margin (“NIM”) expanded 4 basis points to 4.50% for the fourth quarter of 2019, compared to 4.46% from the fourth quarter a year ago.  For the full year of 2019, the NIM improved by 27 basis points to 4.74% compared to 4.47% for 2018.
  • Total assets grew 15% to $538.39 million compared to $467.21 million a year earlier.  
  • Total deposits increased by 14%, or $58.53 million, to $482.87 million from $424.35 million at December 31, 2018.  Non-interest-bearing deposits grew by 17%, or $43.71 million, to $307.53 million, compared to $263.82 million at December 31, 2018, and represented 64% of total deposits.
  • Total loans grew by $59.83 million, or 20%, to $363.24 million compared to $303.41 million a year earlier.
  • Asset quality continued to improve with nonperforming assets declining to 0.12% of total assets from 0.69% a year ago.
  • The allowance for loan and lease losses (“ALLL”) was 1.25% as a percentage of total loans at December 31, 2019, compared to 1.33% a year earlier.
  • Capital ratios remain strong with a ratio of tangible shareholders’ equity to total assets of 9.65% at December 31, 2019, compared to 8.71% at December 31, 2018 and 9.21% at September 30, 2019. 

Results of Operations

Net interest income, before the provision for loan losses, increased 17% to $5.89 million for the fourth quarter of 2019, compared to $5.03 million for the fourth quarter a year ago, reflecting higher yield on investment securities and solid year-over-year loan growth.  Net interest income increased 4% from $5.69 million in the preceding quarter.  For the full year, net interest income, before the provision for loan losses, increased 21% to $22.11 million, compared to $18.25 million for 2018.

Total non-interest income increased 40% to $1.56 million for the fourth quarter of 2019, compared to $1.12 million for the fourth quarter of 2018 and grew 65% from $946,000 for the third quarter of 2019.  For the full year, non-interest income was $4.05 million, up 69% from $2.40 million for 2018. 

“Fueling our growth in non-interest income was our gain on sale of loans and merchant services income which boosted revenues significantly both quarter-over-quarter and for the full year,” said Steve Canfield, Chief Financial Officer.  “The Southern California loan team began operations in the fourth quarter of 2018, and we were very pleased with the gain on sale of loan revenue they generated in 2019. Our merchant services team brought on new partnerships in 2019 and a number of highly profitable national accounts that boosted merchant services revenue by more than 164%.”

The net interest margin was 4.50% for the fourth quarter of 2019, compared to 4.46% for the fourth quarter of 2018, and 4.73% for the third quarter of 2019.  “The contraction in the net interest margin from the preceding quarter was primarily due to the shift in earning assets, which resulted in much higher average balances on overnight funds, and to a lesser extent due to the impact of lower fed funds and prime interest rates,” stated Canfield.

For the full year of 2019, the net interest margin expanded 27 basis points to 4.74% from 4.47% for 2018.  “We were able to increase our net interest margin in a challenging interest rate environment, and the increase in our fee income run rates should be a solid buffer against interest income pressure we expect to see in 2020 from the full impact of the Federal Reserve’s recent rate decreases,” added Canfield.  “In the meantime, with 64% of our deposit base in zero interest operating accounts, our net interest margin continues to be strong.”

The yield on interest earning assets was 4.73% for the fourth quarter of 2019, compared to 4.64% for the fourth quarter a year ago and 4.97% on a linked quarter basis.  The cost of funds stayed low at 0.23% in the fourth quarter of 2019 compared to 0.18% for the fourth quarter a year ago, and 0.24% on a linked quarter basis.  For the year of 2019, the yield on earning assets was 4.96% compared to 4.63% for 2018.  

Non-interest expense for the fourth quarter of 2019 was $3.61 million, compared to $3.45 million for the fourth quarter of 2018, and $3.33 million for the third quarter of 2019.  For the full year, non-interest expense totaled $12.88 million compared to $11.27 million for 2018. 

“The higher operating expenses during the year continue to reflect the investment associated with the expansion of our franchise operations and hiring of key talent,” added Canfield.  “We will continue to invest in people and systems to both grow and increase efficiency.  We were pleased to grow top line revenue in 2019 while at the same time driving our efficiency ratio below 50% for the year.”

The efficiency ratio improved to 48.44% for the fourth quarter of 2019, compared to 56.07% for the fourth quarter a year ago, and 50.25% for the third quarter of 2019.  For the full year of 2019, the efficiency ratio was 49.26% compared to 54.56% for 2018. 

Balance Sheet Review

Total assets increased 15% to $538.39 million at December 31, 2019, from $467.21 million at December 31, 2018, and remained flat from $538.73 million at September 30, 2019.  Total portfolio loans increased by $59.83 million, or 20%, to $363.24 million at December 31, 2019, from $303.41 million a year ago, and grew 4% from $348.56 million at September 30, 2019.  

The commercial and industrial (C&I) portfolio increased 7% from a year earlier to $155.33 million and represented 43% of total loans at December 31, 2019.  Commercial real estate (CRE) loans grew 43% to $145.23 million, or 40% of total loans.  Agriculture loans grew 22% from a year ago to $34.13 million and represented 9% of total loans; real estate construction and land development totaled $17.65 million, or 5% of loans, while residential home loans were $10.29 million, or 3% of loans.  At December 31, 2019, the SBA, USDA or other government agencies, guaranteed $93.20 million, or 26% of the loan portfolio.

Total deposits increased 14% to $482.87 million at December 31, 2019, compared to $424.35 million from a year earlier, and declined slightly from $486.18 million at September 30, 2019.  Non-interest-bearing demand deposits grew 17% to $307.53 million at December 31, 2019, compared to 2018, and represented 64% of total deposits.

“We have welcomed many new customers this year; in fact, this is our best year ever for adding new customer relationships, which speaks highly of our franchise and the products and services we offer,” said Canfield.  “During the fourth quarter we disbursed a $20.0 million deposit account we were escrowing for a school district as part of a loan syndication which impacted overall deposit growth for the quarter.”

Net shareholder’s equity increased 28% to $51.96 million at December 31, 2019, compared to $40.71 million a year ago.  Book value per common share grew 24% to $17.67 at December 31, 2019, compared to $14.24 at December 31, 2018.

Asset Quality

“The continued overall improvement in the quality of our loan portfolio reflects the hard work of our lending and credit teams,” stated Miller.  All credit quality metrics improved compared to three months ago and year-over-year.  Nonperforming assets (“NPAs”) declined to $619,000 or 0.12% of total assets at December 31, 2019, compared to $3.22 million, or 0.69% of total assets, at December 31, 2018, and $765,000, or 0.14% of total assets at September 30, 2019.  Performing restructured loans, consisting of one loan, improved during the quarter, dropping to $501,000 at December 31, 2019.  This loan is performing under a restructured arrangement that is being closely monitored. 

The provision for loan losses was $410,000 for the fourth quarter of 2019, compared to $650,000 for the fourth quarter a year ago and $235,000 recorded in the third quarter of 2019.  For the full year, net charge-offs totaled $152,000 at December 31, 2019, compared to $265,000 in 2018. The allowance for loan losses to total loans ratio was 1.25% at December 31, 2019, compared to 1.33% a year earlier, and 1.18% at September 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 RATIOS (unaudited)
For the Quarter Ended: Percentage Change From: Year to Date as of:
Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
 Sept. 30,
2019
Dec. 31,
2018
 Dec. 31,
2019
Dec. 31,
2018
Percent
Change
BALANCE SHEET DATA - PERIOD END BALANCES:        
 Total assets$538,392 $538,725 $467,208  0%15%    
 Total Loans 363,236  348,556  303,410  4%20%    
 Investment securities 109,158  99,456  95,949  10%14%    
 Total deposits 482,874  486,183  424,346  -1%14%    
 Shareholders equity, net 51,961  49,628  40,714  5%28%    
            
SELECT INCOME STATEMENT DATA:          
 Gross revenue$7,457 $6,631 $6,155  12%21% $26,164 $20,647 27%
 Operating expense 3,613  3,330  3,451  8%5%  12,884  11,268 14%
 Pre-tax, pre-provision income 3,844  3,301  2,704  16%42%  13,925  10,329 35%
 Net income after tax$2,561 $2,238 $1,619  14%58% $9,201 $6,249 47%
            
SHARE DATA:         
 Basic earnings per share$0.87 $0.76 $0.57  14%54% $3.14 $2.19 44%
 Fully diluted earnings per share$0.86 $0.75 $0.56  14%54% $3.09 $2.14 44%
 Book value per common share$17.67 $16.87 $14.24  5%24%    
 Common shares outstanding 2,940,996  2,940,996  2,858,172  0%3%    
 Fully diluted shares 2,990,887  2,989,842  2,917,075  0%3%    
 CFST - Stock price$28.75 $24.75 $19.55  16%47%    
            
RATIOS:          
 Return on average assets 1.88% 1.78% 1.37% 5%37%  1.88% 1.46%29%
 Return on average equity 20.15% 18.41% 16.07% 9%25%  19.72% 16.68%18%
 Efficiency ratio 48.44% 50.25% 56.07% -4%-14%  49.26% 54.56%-10%
 Yield on earning assets 4.73% 4.97% 4.64% -5%2%  4.96% 4.63%7%
 Cost to fund earning assets 0.23% 0.24% 0.18% -4%27%  0.22% 0.15%45%
 Net Interest Margin 4.50% 4.73% 4.46% -5%1%  4.74% 4.47%6%
 Equity to assets 9.65% 9.21% 8.71% 5%11%    
 Loan to deposits ratio 75.22% 71.69% 71.50% 5%5%    
 Full time equivalent employees 56  50  44  11%26%    
            
BALANCE SHEET DATA - AVERAGES:        
 Total assets$541,013 $498,526 $467,238  9%16% $488,746 $427,849 14%
 Total loans 354,288  320,729  282,480  10%25%  320,671  274,543 17%
 Investment securities 104,990  94,860  90,250  11%16%  97,243  80,486 21%
 Deposits 487,413  447,486  424,861  9%15%  439,405  388,565 13%
 Shareholders equity, net 50,458  48,246  39,981  5%26%  46,665  37,464 25%
            
ASSET QUALITY:          
 Total delinquent accruing loans$322 $433 $397  -26%-19%    
 Nonperforming assets$619 $765 $3,220  -19%-81%    
 Non Accrual / Total Loans .17% .22% 1.06% -22%-84%         
 Nonperforming assets to total assets .12% .14% .69% -19%-83%         
 LLR / Total loans 1.25% 1.18% 1.33% 6%-6%    
            



STATEMENT OF INCOME ($ in thousands)For the Quarter Ended: Percentage Change From: For the Year Ended
(unaudited)Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
 Sept. 30,
2019
Dec. 31,
2018
 Dec. 31,
2019
Dec. 31,
2018
Percent
Change
Interest Income           
 Loan interest income$5,295$4,999$4,109 6%29% $19,505$15,66225%
 Investment income 652 647 636 1%3%  2,619 2,00930%
 Int. on fed funds & CDs in other banks 205 295 421 -31%-51%  901 1,047-14%
 Dividends from non-marketable equity 38 27 70 41%-46%  130 157-17%
 Interest income 6,190 5,968 5,236 4%18%  23,155 18,87523%
 Total interest expense 297 283 202 5%47%  1,042 63065%
 Net interest income 5,893 5,685 5,034 4%17%  22,113 18,24521%
 Provision for loan losses 410 235 650 74%-37%  645 950-32%
 Net interest income after provision 5,483 5,450 4,384 1%25%  21,468 17,29524%
              
Non-Interest Income:            
 Total deposit fee income 110 114 100 -4%10%  429 35919%
 Debit / credit card interchange income 73 68 50 7%46%  252 17247%
 Merchant services income 733 501 159 46%361%  1,576 596164%
 Gain on sale of loans 526 154 18 242%2822%  1,307 1061133%
 Other operating income 122 109 794 12%-85%  487 1,169-58%
 Non-interest income 1,564 946 1,121 65%40%  4,051 2,40269%
             
Non-Interest Expense:           
 Salaries & employee benefits 2,278 1,990 1,656 14%38%  8,009 6,39125%
 Occupancy expense 200 207 190 -3%5%  799 7743%
 Other operating expense 1,135 1,133 1,605 0%-29%  4,076 4,103-1%
 Non-interest expense 3,613 3,330 3,451 8%5%  12,884 11,26814%
             
 Net income before tax 3,434 3,066 2,054 12%67%  12,635 8,42950%
 Tax provision 873 828 435 5%101%  3,434 2,18058%
 Net income after tax$2,561$2,238$1,619 14%58% $9,201$6,24947%
              



BALANCE SHEET ($ in thousands ) End of Period: Percentage Change From: 
(unaudited)Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
 Sept. 30,
2019
Dec. 31,
2018
 
ASSETS       
 Cash and due from banks$12,570 $16,191 $7,507  -22%67% 
 Fed funds sold and deposits in banks 19,068  38,603  34,874  -51%-45% 
 CDs in other banks 9,914  10,409  10,906  -5%-9% 
 Investment securities 109,158  99,456  95,949  10%14% 
 Loans held for sale 13,201  14,511  4,081  -9%223% 
 Portfolio loans outstanding:      
 RE constr & land development 17,649  15,341  17,794  15%-1% 
 Residential RE 1-4 Family 10,290  10,003  10,350  3%-1% 
 Commercial Real Estate 145,234  129,089  101,667  13%43% 
 Agriculture 34,131  31,106  28,080  10%22% 
 Commercial and Industrial 155,332  162,992  145,390  -5%7% 
 Consumer and Other 600  25  129  2300%365% 
 Total Portfolio Loans 363,236  348,556  303,410  4%20% 
 Deferred fees & discounts (1) (144) 141  -99%-101% 
 Allowance for loan losses (4,542) (4,130) (4,049) 10%12% 
 Loans, net 358,693  344,282  299,502  4%20% 
 Non-marketable equity investments 2,612  2,572  2,440  2%7% 
 Cash value of life insurance 7,991  7,938  7,780  1%3% 
 Accrued interest and other assets 5,185  4,763  4,169  9%24% 
 Total assets$538,392 $538,725 $467,208  0%15% 
        
LIABILITIES AND EQUITY       
 Non-interest bearing deposits$307,531 $302,435 $263,818  2%17% 
 Interest checking 13,990  13,800  11,210  1%25% 
 Savings 39,117  37,098  30,805  5%27% 
 Money market 83,250  90,440  82,420  -8%1% 
 Certificates of deposits 38,986  42,410  36,093  -8%8% 
 Total deposits 482,874  486,183  424,346  -1%14% 
 Borrowings -  -  -  0%0% 
 Other liabilities 3,557  2,914  2,148  22%66% 
 Total liabilities 486,431  489,097  426,494  -1%14% 
        
 Common stock & paid in capital 29,869  29,763  28,453  0%5% 
 Retained earnings 21,909  19,346  12,708  13%72% 
 Total equity 51,778  49,109  41,161  5%26% 
 Accumulated other comprehensive income 183  519  (447) -65%-141% 
 Shareholders equity, net 51,961  49,628  40,714  5%28% 
 Total Liabilities and shareholders' equity$538,392 $538,725 $467,208  0%15% 
         


ASSET QUALITY ($ in thousands)Period Ended: 
(unaudited)Dec. 31,
2019
Sept. 30,
2019
Dec. 31,
2018
 
Delinquent accruing loans 30-60 days$8 $431 $397  
Delinquent accruing loans 60-90 days$314  0  0  
Delinquent accruing loans 90+ days 0 $2  0  
Total delinquent accruing loans$322 $433 $397  
     
Loans on non accrual$619 $765 $3,220  
Other real estate owned 0  0  0  
Nonperforming assets$619 $765 $3,220  
     
Performing restructured loans$501 $529  0  
     
     
Delq 30-60 / Total Loans .00% .12% .13% 
Delq 60-90 / Total Loans .09% .00% .00% 
Delq 90+ / Total Loans .00% .00% .00% 
Delinquent Loans / Total Loans .09% .12% .13% 
Non Accrual / Total Loans .17% .22% 1.06% 
Nonperforming assets to total assets .12% .14% .69% 
           
           
Year-to-date charge-off activity   
Charge-offs$163 $163 $272  
Recoveries$11 $9 $7  
Net charge-offs$152 $154 $265  
           
Annualized net loan losses (recoveries) to average loans .05% .07% .10% 
     
LOAN LOSS RESERVE RATIOS:   
Reserve for loan losses$4,542 $4,130 $4,049  
     
Total loans$363,235 $348,556 $303,410  
Purchased govt. guaranteed loans$56,842 $58,421 $63,442  
Originated govt. guaranteed loans$36,358 $34,661 $30,363  
     
LLR / Total loans 1.25% 1.18% 1.33% 
LLR / Loans less purchased govt. guaranteed loans 1.48% 1.42% 1.69% 
LLR / Loans less all govt. guaranteed loans 1.68% 1.62% 1.93% 
LLR / Total assets .84% .77% .87% 
     

 

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