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Communities First Financial Corporation Earnings Grow to Record $0.26 Per Share in 1Q16

FRESNO, Calif., April 20, 2016 (GLOBE NEWSWIRE) -- Communities First Financial Corporation (the “Company”) (OTCQX:CFST), Fresno, CA, the parent company of Fresno First Bank (the “Bank”), today reported earnings grew 30% to a record of $701,000, or $0.26 per diluted share, in the first quarter of 2016, from $537,000, or $0.20 per diluted share, in the fourth quarter of 2015 and increased 8% from $646,000, or $0.24 per diluted share in the first quarter of 2015.

“We are proud of the financial performance achieved by our team, who are also all shareholders of the Company. As a result of their hard work, we generated solid revenue growth and posted record profits,” said Steve Miller, President and Chief Executive Officer. “We continue to deliver above average performance with a return on average assets of 0.96%, a return on average equity of 10.66%, and an efficiency ratio of 58.54%.” The 627 banks in the SNL MicroCap Index, which includes CFST, averaged an ROAA of 0.88%, an ROAE of 8.87%, and an efficiency ratio of 70.92%.

“We have built the Bank by catering to successful businesses and individuals in Central California,” Miller noted. “Our customers have long-term perspectives on business, and our customized, consultative approach has been successful in forging long-term relationships with them, creating longevity throughout our customer base.”

First Quarter 2016 Highlights (at or for the three month period ended March 31, 2016, except where noted)

  • Posted record earnings fueled by loan and deposit growth, improving operating efficiency and a strong net interest margin.
  • Revenues (net interest income before the provision for loan losses, plus non-interest income) increased 10% to $3.3 million compared to $3.0 million in both the preceding and year ago quarter, driven by a 12% increase in loans and 57% growth in merchant services income during the last 12 months.
  • Net interest margin was 3.99% in the first quarter, compared to 3.71% in the preceding quarter and 4.25% in the first quarter a year earlier.
  • Efficiency ratio continued to improve, dropping to 58.54% in 1Q16 from 63.48% in 4Q15 and 60.71% in 1Q15.
  • Total loans increased 12% to $192.2 million compared to $171.7 million a year earlier.
  • Total deposits grew 13% to $268.9 million at March 31, 2016, from $238.9 million a year ago.
  • Capital ratios remain strong with a tangible shareholders equity ratio of 9.41% at March 31, 2016.

The Fresno Market

Agriculture and related agri-business is the backbone of California’s Central Valley, employing nearly 20% of the workforce and providing more than $7.04 billion to California’s economy in 2014, a 9.26% increase from 2013. A majority of America's produce is grown in California's Central Valley, and Fresno County is one of the top agricultural producing counties in the United States, with a widely diversified crop production of more than 350 products.

“Although water management and the ongoing drought have impacted some of the farmers in our area, we continue to see record production and record profits in the region’s agricultural sector,” Miller noted. “Farmers have adapted, as they always do, by making changes in crops, adding technology to improve efficiency of water use and taking acreage out of production."

Home to over one million people, Fresno is also a regional business hub for medical, education, legal and other professional services. Within 3 hours driving distance to Silicon Valley, Fresno is also developing a thriving high-tech sector and attracting entrepreneurs who are starting new businesses at a rapid clip. The new technology initiatives are helping to revitalize Fresno’s historic downtown.

Sources: http://www.fcfb.org/Fresno-Ag/Commodities.php; http://www.fresnobee.com/news/business/article40756125.html

Results of Operations

Net interest income increased 5% to $2.9 million for the first quarter of 2016, compared to $2.7 million on a linked quarter basis, and grew 11% from $2.6 million for the first quarter a year ago, reflecting strong year over year loan growth.

There was a $210,000 provision for loan losses for the first quarter of 2016, compared to a $145,000 provision for the first quarter a year ago. No provision for loan losses was taken in the fourth quarter of 2015.

Non-interest income increased 65% to $390,000 for the first quarter of 2016, compared to $236,000 for the fourth quarter of 2015 and grew 2% from $383,000 for the first quarter of 2015, reflecting strong growth in Merchant Services income and gains from the sale of SBA loans.

SBA loans totaling $1.64 million were sold into the secondary market, generating $135,000 in gain on sale in the first quarter, compared to $1.48 million sold for a $120,000 gain in the first quarter a year ago. No SBA loans were sold in the fourth quarter of 2015.

Net interest margin expanded 28 basis points to 3.99% for the first quarter of 2016, compared to 3.71% for the fourth quarter of 2015, and contracted 26 basis points from 4.25% a year ago. The decrease in the net interest margin from the first quarter of 2015 was primarily due to higher volumes of lower yielding overnight funds in 1Q16 and slightly lower yields on both the investment and loan portfolios. The improvement in the net interest margin from the fourth quarter of 2015 was mainly due to higher volumes of loans and investments which replaced lower yielding overnight funds. “Our net interest margin remains well above the average of 3.59% generated by the 627 banks in the SNL MicroCap Index in December of 2015,” said Steve Canfield, EVP/Chief Financial Officer.

“We keep tight control over operating expenses and expect to further leverage our platform to continue our growth trends in 2016,” said Canfield. First quarter 2016 non-interest expense totaled $1.9 million compared to $2.1 million in the linked quarter and $1.8 million in the first quarter one year ago.

The efficiency ratio for the first quarter of 2016 improved to 58.54%, compared to 63.48% for the fourth quarter of 2015 and 60.71% for the first quarter of 2015.

Balance Sheet Review

Total assets were $297.7 million at March 31, 2016, compared to $265.3 million a year earlier and $295.7 million at December 31, 2015. The total loan portfolio, excluding loans held for sale, was up 12% to $192.2 million at March 31, 2016, compared to $171.7 million a year ago, and increased 2% compared to $180.4 million three months earlier.

The commercial and industrial (C&I) portfolio, an area of specialty for Fresno First Bank, totaled $79.5 million and represented 41% of the total loans at March 31, 2016. Commercial real estate (CRE) loans totaled $64.6 million and comprise 34% of loans. Agriculture and land loans totaled $19.8 million represented 10% of loans, residential home loans were $15.4 million, or 8% of loans and, real estate construction and land development loans were $12.9 million, or 7% of loans.

Total deposits increased 13% reaching $268.9 million at March 31, 2016, compared to $238.9 million from a year earlier, and were relatively unchanged from $268.1 million at December 31, 2015. Non-interest bearing demand deposits increased 8% to $111.7 million, representing 42% of total deposits, compared to $103.5 million, or 38% of deposits a year ago. Core deposits, excluding certificates of deposits, grew to 87% of total deposits from 85% a year ago.

The ratio of loans to deposits was 71.48% at March 31, 2016, compared to 70.35% in the preceding quarter and 71.85% a year ago.

Total stockholder equity was $28.0 million at March 31, 2016, compared to $25.4 million a year ago. Book value per share was $10.26 at March 31, 2016, compared to $9.64 a year ago.

Asset Quality

Non-performing assets consisted of one commercial and industrial loan relationship totaling $2.7 million at March 31, 2016, unchanged from December 31, 2015, and an increase from $49,000 at March 31, 2015. Total delinquent loans (30 to 90 days past due and still accruing) were $2,000 at the end of the quarter compared to $1.1 million a year earlier. There were no delinquent loans at the end of 2015. Loan loss reserves were 1.96% of total loans and 1.27% of total assets at March 31, 2016, compared to 1.89% of loans and 1.20% of assets at December 31, 2015 and 1.87% of loans and 1.21% of assets at March 31, 2015. “At this time, the full resolution of our non-accrual loan relationship appears like it could be a protracted process,” added Miller. “We continue to forecast above average loan growth and as a result we will continue to build our reserves in anticipation of a larger loan portfolio.”

About Community 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 by Forbes as one of the Best 25 Small Businesses in America for 2016, and received the All-Star Performance Award from the Great Game of Business in 2015. 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.

Quarterly Select Financial Information
Quarter EndedQuarter EndedChange forQuarter EndedChange Year
($ in thousands, except per share data)Mar 31, 2016Dec 31, 2015QuarterMar 31, 2015Over Year
STATEMENT OF INCOME
Interest Income
Loan interest income $ 2,565 $ 2,449 4.7%$ 2,289 12.0%
Investment income 298 293 1.7% 332 -10.3%
Interest on fed funds sold & CDs in other banks 79 62 27.4% 28 179.4%
Dividends from non-marketable equity 30 30 0.0% 30 1.1%
Interest income 2,971 2,833 4.9% 2,679 10.9%
Total Interest expense 110 112 -1.1% 107 3.0%
Net Interest Income 2,861 2,721 5.1% 2,572 11.2%
Provision for loan losses 210 - 145 44.8%
Net interest income after provision 2,651 2,721 -2.6% 2,427 9.2%
Operating Expense
Total Deposit Fee Income 67 68 -1.3% 85 -21.0%
Debit / Credit Card Interchange Income 33 27 23.3% 22 50.8%
Merchant Services Income 104 84 23.3% 66 56.8%
Gain (Loss) on Sale of Loans 135 5 2739.3% 120 12.8%
Other operating income 50 52 -3.8% 90 -44.4%
Non-interest income 390 236 65.1% 383 1.7%
Non-Interest Expense:
Salaries & employee benefits 1,080 1,186 -8.9% 1,042 3.6%
Occupancy expense 117 137 -14.5% 123 -4.5%
Other operating expense 685 742 -7.6% 573 19.7%
Non-interest expense 1,900 2,082 -8.8% 1,758 8.1%
Net income before tax 1,141 875 30.4% 1,052 8.5%
Tax provision (benefit) 440 338 30.4% 406 8.5%
Net income after tax $ 701 $ 537 30.4%$ 646 8.4%
SHARE DATA:
Earnings per share:
Basic earnings per share $ 0.26 $ 0.20 28.8%$ 0.25 2.6%
Fully diluted earnings per share $ 0.26 $ 0.20 30.0%$ 0.24 8.1%
Book Value per Common Share (Assumes Conversion of Mandatorily Convertible Preferred) $ 10.26 $ 10.00 2.6%$ 9.64 6.4%
Common shares outstanding 2,725,917 2,698,417 1.0% 1,968,811
Fully diluted shares 2,746,555 2,727,493 0.7% 2,712,663
CFST - Stock Price 9.95 10.16 10.25
SELECTED RATIOS:
Return on average assets 0.96% 0.72% 1.03%
Return on average equity 10.66% 8.25% 10.85%
Equity to assets 9.41% 9.12% 9.58%
Net interest margin 3.99% 3.71% 4.25%
BALANCE SHEET DATA: ($ in thousands ) Change for Change Year
Mar 31, 2016Dec 31, 2015QuarterMar 31, 2015Over Year
ASSETS - PERIOD END BALANCES:
Cash and due from banks $ 9,272 $ 11,391 -18.6%$ 7,952 16.6%
Fed funds sold and deps in banks 22,738 20,514 10.8% 21,075 7.9%
CDs in Other Banks 5,699 5,695 0.1% 5,450 4.6%
Investment securities 67,071 68,775 -2.5% 58,309 15.0%
Total loans outstanding:
RE Constr & Land Development 12,885 11,823 9.0% 9,223 39.7%
Residential RE 1-4 Family 15,388 15,069 2.1% 14,849 3.6%
Commercial Real Estate 64,553 63,535 1.6% 55,158 17.0%
Agriculture 19,790 23,232 -14.8% 21,283 -7.0%
Commercial and Industrial 79,484 74,864 6.2% 71,037 11.9%
Consumer and Other 85 84 1.3% 104 -17.9%
Total Loans 192,186 188,607 1.3% 171,654 12.0%
Deferred fees & discounts (341) (212) (83) 309.1%
Allowance for loan losses (3,766) (3,556) 5.9% (3,205) 17.5%
Loans, net 188,078 184,839 1.8% 168,365 11.7%
Non marketable equity investments 1,653 1,649 0.2% 1,602 3.2%
Accrued interest and other assets 2,585 2,705 -4.4% 2,262 14.3%
Total assets $ 297,238 $ 295,736 0.5%$ 265,295 12.0%
LIABILITIES AND EQUITY
Non-interest bearing deposits 111,694 120,303 -7.2% 103,513 7.9%
Interest Checking 7,439 6,525 14.0% 6,015 23.7%
Savings 46,196 42,732 8.1% 44,315 4.2%
Money Market 66,664 59,231 12.5% 49,864 33.7%
Certificates of Deposit 36,889 39,320 -6.2% 35,183 4.8%
Total deposits 268,881 268,111 0.3% 238,890 12.6%
Borrowings 0 0 0
Other liabilities 385 647 -40.5% 997 -61.4%
Total liabilities 269,267 268,758 0.2% 239,887 12.2%
Common, preferred & paid in capital 26,943 26,916 0.1% 26,867 0.3%
Retained earnings (deficit) 400 (300) -233.2% (2,042) -119.6%
Total equity 27,343 26,616 2.7% 24,825 10.1%
Accumulated other comprehensive income (loss) 628 362 73.6% 583 7.8%
Shareholders equity, net 27,971 26,978 3.7% 25,408 10.1%
Total Liabilities and shareholders' equity 297,238 295,736 0.5% 265,295 12.0%
BALANCE SHEET DATA - AVERAGES:
Total assets 297,991 300,268 -0.8% 253,389 17.6%
Total loans 190,531 180,391 5.6% 168,368 13.2%
Investment securities 68,620 64,366 6.6% 64,824 5.9%
Deposits 270,197 272,612 -0.9% 227,140 19.0%
Shareholders equity, net 27,405 26,828 2.1% 25,100 9.2%
Loans to deposits 71.48% 70.35% 71.85%
ASSET QUALITY ($ in thousands)Mar 31, 2016Dec 31, 2015Mar 31, 2015
Loans on Non Accrual 2,360 2,361 49
Other real estate owned $ - $ - $ -
Nonperforming Assets$ 2,360 $ 2,361 $ 49
Performing restructured loans$ 31 $ - $ -
Non Accrual / Total Loans 1.23% 1.25%.03%
Nonperforming assets to total assets .79%.80%.02%
Charge-Offs - - -
Recoveries - 3 18
Net Charge-Offs 0 (3) (18)
Net loan losses (recoveries) to average loans .00%-.00%-.01%
Loan Loss Reserve
LLR / Total Loans 1.96% 1.89% 1.87%
LLR / Total Assets 1.27% 1.20% 1.21%


Contact Steve Miller - CEO or Steve Canfield – CFO 559-439-0200 The Cereghino Group IR CONTACT: 206-388-5785

Source:Communities First Financial Corporation