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Communities First Financial Corporation Posts Record Profits for 2016; 4Q16 Earnings Increase 73% from 4Q15

FRESNO, Calif., Jan. 12, 2017 (GLOBE NEWSWIRE) -- Communities First Financial Corporation (the “Company”) (OTCQX:CFST), Fresno, CA, the parent company of Fresno First Bank (the “Bank”), today reported record earnings in both the fourth quarter and full year of 2016. Net income increased 73% to $932,000, or $0.34 per diluted share for the fourth quarter of 2016, compared to $537,000, or $0.20 per diluted share, for the fourth quarter a year ago, and grew 32.2% from $705,000, or $0.26 per diluted share, for the third quarter of 2016. For the full year of 2016, net income increased 21.1% to $3.1 million, or $1.12 per diluted share, from $2.5 million, or $0.93 per diluted share for 2015. All results are unaudited.

“We delivered stellar financial results for 2016, achieving solid revenue growth and record net income, while maintaining a very strong balance sheet,” said Steve Miller, President and Chief Executive Officer. “In 2016, our team worked hard, as we balanced decisions on operating efficiencies with opportunities for investing in future growth and addressing our customers’ needs. Our investments in both BodeTree, a cloud-based business management program, and Breakaway Funding, a next generation crowd-funding company, put us on the forefront of financial service providers in California.

“During the year, we were able to attract talented new staff as we continue to build our franchise and build relationships with both existing and new customers,” continued Miller. “As the operating environment continues to improve, we are optimistic about the momentum building in our core business, and are prepared to take advantage of market opportunities due to consolidation in our market.

“The strength of our growing franchise is in our core deposit base. We saw significant growth in both the quantity and quality of our checking account relationships. Our focus is always on developing new relationships in Central California, and we achieved a 30% year-over-year increase in new customer growth,” added Miller. “We are successfully executing our strategies as we continue to deliver sustainable profitability and revenue growth to our franchise. I am proud of our employees and their passionate commitment to creating value for our customers, communities, and shareholders.”

Fourth quarter 2016 Highlights (as of, or for the quarter ended December 31, 2016, except where noted)

  • Total assets grew 23% to $363.5 million at December 31, 2016, compared to $295.7 million a year earlier and were up 9% from $333.5 million at September 30, 2016.

  • Total deposits grew 24% to $332.3 million at December 31, 2016, from $268.1 million a year earlier.

  • Total loans increased 21% to $227.7 million compared to $188.6 million at December 31, 2015.

  • Revenue (net interest income before provision for loan losses, plus non-interest income) grew 29% to $3.8 million, from the fourth quarter 2015. For the full year 2016, revenue increased 20% to $14.2 million from $11.9 million for 2015.

  • Net interest income increased 23% to $3.3 million for the fourth quarter of 2016, compared to $2.7 million for the fourth quarter a year ago. For 2016, net interest income grew 18% to $12.5 million from $10.6 million for 2015.

  • Non-interest income grew 92% to $454,000 for the fourth quarter of 2016, compared to $236,000 a year ago. For the year ended December 31, 2016, non-interest income was $1.7 million, up 31% from $1.3 million for 2015.

  • Net interest margin (“NIM”) improved 18 basis points to 3.89% for the fourth quarter, compared to 3.71% for the fourth quarter a year ago. For the year ended December 31, 2016, NIM was 4.08% compared to 4.04% for the year ended December 31, 2015.

  • Efficiency ratio, which measures overhead cost to revenue, continued to improve, declining to 52.48% in 4Q16, compared to 70.63% a year ago and 53.62% in 3Q16. For the full year 2016, the efficiency ratio was 55.08% compared to 63.48% for the year ended December 31, 2015.

  • Return on average assets (“ROAA”) was 1.06% and return on average equity (“ROAE”) was 12.58% for the fourth quarter 2016. ROAA and ROAE were well above the average of 0.79% and 7.88%, respectively, generated by the 536 banks in the SNL MicroCap U.S. Bank Index, for the third quarter of 2016. For the full year 2016, ROAA and ROAE were 0.98% and 10.90% respectively.

  • The allowance for loan and lease losses (“ALLL”) was $2.9 million at December 31, 2016, down 19% when compared to $3.6 million a year earlier, reflecting the significant improvement in asset quality. Net of all government guarantees, the ALLL as a percentage of total loans was 1.76%.

  • Capital ratios remain strong with a ratio of tangible shareholders’ equity to total assets of 8.23% at December 31, 2016.

Results of Operations

Mainly driven by strong loan growth, net interest income grew 23% to $3.3 million for the fourth quarter of 2016, compared to $2.7 million for the fourth quarter a year ago. For 2016, net interest income increased 18% to $12.5 million, from $10.6 million for 2015.

The provision for loan losses was $176,000 for the fourth quarter of 2016, compared to $565,000 for the third quarter of 2016. No provision for loan losses was taken in the fourth quarter a year ago. “While asset quality is very strong, we continue to add to our allowance for loan losses to provide for the robust loan growth we are achieving,” said Steve Canfield, Chief Financial Officer.

Non-interest income increased 92% to $454,000 for the fourth quarter of 2016, compared to $236,000 for the fourth quarter of 2015. Although non-interest income increased in almost all categories year-over-year, the growth was primarily due to increased income from Merchant Services activities and an increase in gains from the sale of SBA loans. For 2016, non-interest income increased 31% to $1.7 million from $1.3 million in 2015.

The net interest margin expanded 18 basis points to 3.89% for the fourth quarter of 2016, compared to 3.71% for the fourth quarter a year ago and contracted 32 basis points from 4.21% on a linked quarter basis. The year-over-year improvement in the net interest margin was principally due to loan growth replacing lower yielding overnight funds. The decline in the net interest margin on a linked quarter basis primarily reflected the rapid growth in deposits resulting in a higher percentage of overnight and short term investments in the earning asset mix. “Although we saw some seasonal decline in our net interest margin in Q4 similar to prior years, our net interest margin remains above the average of 3.58% generated by the SNL MicroCap U.S. Bank Index at September 30, 2016,” said Canfield.

Total operating expenses declined to $2.0 million for the third and fourth quarter of 2016, compared to $2.1 million for the fourth quarter of 2015. Noninterest expense for 2016 increased 4% to $7.8 million, compared to $7.5 million for 2015. The increase in year-over-year operating expense was mainly due to increased compensation expense driven by the hiring of additional staff. Operating expenses on a linked quarter basis were relatively flat. Q4 2016 operating expenses compared to the fourth quarter of 2015 declined by $100,000. Operating expense in Q4 2015 contained one-time costs associated with the recruitment and hiring of CEO Steve Miller.

The efficiency ratio improved to 52.48%, for the fourth quarter of 2016, compared to 70.63% for the fourth quarter of 2015 and 53.62% for the third quarter of 2016. For 2016, the efficiency ratio improved to 55.08% compared to 63.48% in 2015. The SNL MicroCap Index averaged an efficiency ratio of 69.03% for the third quarter of 2016.

Balance Sheet Review

Total assets increased 23% to $363.5 million at December 31, 2016, compared to $295.7 million a year earlier and were up 9% from $333.5 million at September 30, 2016. The total loans outstanding increased 21% to $227.7 million at December 31, 2016, compared to $188.6 million at December 31, 2015, and increased 6% compared to $214.8 million three months earlier.

The commercial and industrial (C&I) portfolio, an area of specialty for Fresno First Bank, totaled $100.3 million and represented 44% of the total loans at December 31, 2016. Commercial real estate (CRE) loans totaled $76.6 million and comprise 34% of loans. Agriculture and land loans totaled $22.9 million represented 10% of loans, residential home loans were $13.6 million, or 6% of loans and, real estate construction and land development loans were $14.1 million, or 6% of loans.

“We continue to purchase 100% government guaranteed SBA and USDA loans with our excess liquidity as an investment alternative. Additionally, we have been the largest Community Bank SBA lender by volume in California’s Central Valley for the last four consecutive years and we remain very active in the program,” added Miller. “Approximately $64.3 million or 28% of our loans have a guarantee from the U.S. Government either through the SBA, USDA or FSA. These guarantees substantially reduce the credit risk on a significant portion of our loan portfolio and are a factor when determining our overall reserve levels. See chart below:

LOAN LOSS RESERVE RATIOS: Period Ended:
($ in thousands, unaudited)Dec. 31,
2016
Sept. 30,
2016
Dec. 31,
2015
Reserve for loan losses$2,880 $2,685 $3,556
Total loans$227,662 $214,795 $188,607
Purchased govt. guaranteed loans$37,113 $24,650 $20,784
Originated govt. guaranteed loans$27,209 $24,626 $24,321
LLR / Total loans 1.27% 1.25% 1.89%
LLR / Loans less purchased govt. guaranteed loans 1.51% 1.41% 2.12%
LLR / Loans less all govt. guaranteed loans 1.76% 1.62% 2.48%
LLR / Total assets .79% .81% 1.20%

Total deposits increased 24% reaching $332.3 million at December 31, 2016, compared to $268.1 million from a year earlier. “Total deposits grew 10% on a linked quarter basis, fostered by our strong marketing efforts, opportunities generated by market disruptions and due to normal seasonal effects of our deposit stream,” added Canfield.

Non-interest bearing demand deposits increased 41% to $169.5 million, representing 51% of total deposits, compared to $120.3 million, or 48% of non-interest bearing deposits a year ago. The ratio of loans to deposits was 68.50% at December 31, 2016, compared to 70.35% one year earlier and 70.81% at September 30, 2016.

Total stockholder equity was $29.8 million at December 31, 2016, compared to $26.6 million a year ago. Book value per common share increased 10% to $10.97 at December 31, 2016, compared to $10.00 a year ago.

Asset Quality

Nonperforming assets declined to $295,000 at December 31, 2016, compared to $2.4 million at year end 2015. The ratio of nonperforming assets to total assets was .08% at December 31 2016, compared to 0.80% at December 31, 2015. The substantial improvement in nonperforming assets was primarily driven by the charge-off in Q3 2016 of $1.96 million from the $2.4 million isolated nonperforming asset that has remained in nonaccrual loans since the second quarter of 2015. Net of all government guarantees, the ALLL as a percentage of total loans was 1.76% and was 976% of nonperforming assets.

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 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.

For the Quarter Ended: Percentage Change From: For the Year Ended:
SELECT FINANCIAL INFORMATION
AND RATIOS (unaudited)

Dec. 31,
2016
Sept. 30,
2016
Dec. 31,
2015
Sept. 30,
2016
Dec. 31,
2015
Dec. 31,
2016
Dec. 31,
2015
Percent
Change
BALANCE SHEET DATA - PERIOD END BALANCES:
Total assets$363,533 $333,463 $295,736 9%23%
Total Loans 227,662 214,795 188,607 6%21%
Investment securities 66,292 66,707 68,775 -1%-4%
Total deposits 332,331 303,319 268,111 10%24%
Shareholders equity, net$29,930 $29,621 $26,978 1%11%
SELECT INCOME STATEMENT DATA:
Core revenue$3,803 $3,694 $2,948 3%29% $14,202 $11,877 20%
Operating expense 1,996 1,980 2,082 1%-4% 7,822 7,540 4%
Pre-tax, pre-provision income 1,807 1,713 866 5%109% 6,380 4,337 47%
Net income after tax$932 $705 $537 32%73% $3,075 $2,539 21%
SHARE DATA:
Fully diluted earnings per share$0.34 $0.26 $0.20 31%72% $1.12 $0.93 20%
Book value per common share$10.97 $10.86 $10.00 1%10%
Common shares outstanding 2,728,164 2,727,019 2,698,417 0%1%
Fully diluted shares 2,768,739 2,746,867 2,727,493 1%2%
CFST - Stock price$11.50 $9.91 $10.16 16%13%
RATIOS:
Return on average assets 1.06%.90%.71% 18%49% .98%.94%4%
Return on average equity 12.58% 9.73% 8.09% 29%56% 10.90% 9.96%9%
Efficiency ratio 52.48% 53.62% 70.63% -2%-26% 55.08% 63.48%-13%
Yield on earning assets 4.03% 4.36% 3.86% -7%4% 4.23% 4.20%1%
Cost to fund earning assets 0.14% 0.15% 0.15% -5%-6% 0.15% 0.16%-7%
Net Interest Margin 3.89% 4.21% 3.71% -8%5% 4.08% 4.04%1%
Equity to assets 8.23% 8.88% 9.12% -7%-10%
Loan to deposits ratio 68.50% 70.81% 70.35% -3%-3%
Full time equivalent employees 37 38 32 -3%16%
BALANCE SHEET DATA - AVERAGES:
Total assets$350,342 $309,399 $300,268 13%17% $314,684 $271,182 16%
Total loans 222,958 210,096 180,391 6%24% 206,235 174,976 18%
Investment securities 66,212 66,288 64,366 0%3% 66,804 61,491 9%
Deposits 319,609 279,380 272,612 14%17% 285,099 244,327 17%
Shareholders equity, net$30,018 $29,268 $26,828 3%12% $28,855 $25,982 11%
ASSET QUALITY:
Total delinquent accruing loansHighlights$0 $0 0%0%
Nonperforming assets$295 $295 $2,361 0%-88%
Non Accrual / Total Loans .13% .14% 1.25% -6%-90%
Nonperforming assets to total assets .08% .09% .80% -8%-90%
LLR / Total loans 1.27% 1.25% 1.89% 1%-33%

STATEMENT OF INCOME ($ in thousands)For the Quarter Ended: Percentage Change From: For the Year Ended
(unaudited)Dec. 31,
2016
Sept. 30,
2016
Dec. 31,
2015
Sept. 30,
2016
Dec. 31,
2015
Dec. 31,
2016
Dec. 31,
2015
Percent
Change
Interest Income
Loan interest income $ 2,981$ 2,964$ 2,449 1%22% $ 11,220$ 9,49418%
Investment income 319 310 293 3%9% 1,246 1,2341%
Int. on fed funds & CDs in other banks 100 69 62 44%61% 305 16189%
Dividends from non-marketable equity 72 25 30 186%142% 163 1518%
Interest income 3,472 3,368 2,833 3%23% 12,934 11,04117%
Total interest expense 123 116 112 5%10% 458 4229%
Net interest income 3,349 3,252 2,721 3%23% 12,476 10,61917%
Provision for loan losses 176 565 - -69%0% 1,266 270369%
Net interest income after provision 3,173 2,687 2,721 18%17% 11,210 10,3498%
Non-Interest Income:
Total deposit fee income 75 76 68 -2%10% 284 290-2%
Debit / credit card interchange inc. 29 27 27 8%6% 114 9717%
Merchant services income 113 121 84 -7%34% 448 31940%
Gain on sale of loans 177 166 5 6%3608% 669 38972%
Other operating income 60 51 52 18%16% 219 231-5%
Non-interest income 454 442 236 3%92% 1,734 1,32731%
Non-Interest Expense:
Salaries & employee benefits 1,195 1,175 1,186 2%1% 4,607 4,18210%
Occupancy expense 99 106 137 -7%-28% 424 517-18%
Other operating expense 675 673 742 0%-9% 2,700 2,762-2%
Non-interest expense 1,996 1,980 2,082 1%-4% 7,822 7,5404%
Net income before tax 1,631 1,148 875 42%86% 5,122 4,13524%
Tax provision 699 443 338 58%107% 2,047 1,59628%
Net income after tax $ 932$ 705$ 537 32%73% $ 3,075$ 2,53921%


BALANCE SHEET ($ in thousands ) End of Period: Percentage Change From:
(unaudited)Dec. 31,
2016
Sept. 30,
2016
Dec. 31,
2015
Sept. 30,
2016
Dec. 31,
2015
ASSETS
Cash and due from banks $ 5,933 $ 10,394 $ 11,391 -43%-48%
Fed funds sold and deposits in banks 56,459 34,800 20,514 62%175%
CDs in other banks 5,199 5,447 5,695 -5%-9%
Investment securities 66,292 66,707 68,775 -1%-4%
Total loans outstanding:
RE constr & land development 14,087 17,406 11,823 -19%19%
Residential RE 1-4 Family 13,643 14,673 15,069 -7%-9%
Commercial Real Estate 76,561 73,700 63,535 4%21%
Agriculture 22,870 22,674 23,232 1%-2%
Commercial and Industrial 100,279 86,148 74,864 16%34%
Consumer and Other 222 194 84 14%164%
Total Loans 227,662 214,795 188,607 6%21%
Deferred fees & discounts (427) (476) (212) -10%101%
Allowance for loan losses (2,880) (2,685) (3,556) 7%-19%
Loans, net 224,355 211,634 184,839 6%21%
Non-marketable equity investments 1,918 1,808 1,649 6%16%
Accrued interest and other assets 3,209 2,516 2,705 28%19%
Total assets 363,533 333,463 295,736 9%23%
LIABILITIES AND EQUITY
Non-interest bearing deposits 169,539 147,068 120,303 15%41%
Interest checking 11,022 9,479 6,525 16%69%
Savings 36,780 35,384 42,732 4%-14%
Money Market 72,153 66,807 59,231 8%22%
Certificates of Deposit 42,837 44,581 39,320 -4%9%
Total deposits 332,331 303,319 268,111 10%24%
Borrowings 0 0 0 0%0%
Other liabilities 1,273 522 647 144%97%
Total liabilities 333,603 303,841 268,758 10%24%
Common, preferred & paid in capital 27,054 27,019 26,916 0%1%
Retained earnings (deficit) 2,775 1,843 (300) 51%-1023%
Total equity 29,829 28,861 26,616 3%12%
Accumulated other comprehensive inc. 101 760 362 -87%-72%
Shareholders equity, net 29,930 29,621 26,978 1%11%
Total Liabilities and shareholders' equity 363,533 333,463 295,736 9%23%


ASSET QUALITY ($ in thousands)Period Ended:
(unaudited)Dec. 31,
2016
Sept. 30,
2016
Dec. 31,
2015
Delinquent accruing loans 30-60 days $ 0 $ 0 $ 0
Delinquent accruing loans 60-90 days $ 0 $ 0 $ 0
Delinquent accruing loans 90+ days $ 0 $ 0 $ 0
Total delinquent accruing loans $ 0 $ 0 $ 0
Loans on non accrual $ 295 $ 295 $ 2,361
Other real estate owned $ 0 $ 0 $ 0
Nonperforming assets $ 295 $ 295 $ 2,361
Performing restructured loans $ 31 $ 31 $ 1,208
Delq 30-60 / Total Loans .00% .00% .00%
Delq 60-90 / Total Loans .00% .00% .00%
Delq 90+ / Total Loans .00% .00% .00%
Delinquent Lns / Total Lns .00% .00% .00%
Non Accrual / Total Loans .13% .14% 1.25%
Nonperforming assets to total assets .08% .09% .80%
Year-to-date charge-off activity
Charge-offs $ 1,963 $ 1,961 $ 66
Recoveries $ 21 $ 0 $ 310
Net charge-offs $ 1,942 $ 1,961 $ (244)
Annualized net loan losses (recoveries) to average loans .94% 1.30% -.12%
LOAN LOSS RESERVE RATIOS:
Reserve for loan losses $ 2,880 $ 2,685 $ 3,556
Total loans $ 227,662 $ 214,795 $ 188,607
Purchased govt. guaranteed loans $ 37,113 $ 24,650 $ 20,784
Originated govt. guaranteed loans $ 27,209 $ 24,626 $ 24,321
LLR / Total loans 1.27% 1.25% 1.89%
LLR / Loans less purchased govt. guaranteed loans 1.51% 1.41% 2.12%
LLR / Loans less all govt. guaranteed loans 1.76% 1.62% 2.48%
LLR / Total assets .79% .81% 1.20%


Contact Steve Miller - CEO or Steve Canfield – CFO 559-439-0200

Source:Communities First Financial Corporation