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Communities First Financial Corporation Earnings Increase 27% to $3.25 Million for 4Q-2020 from $2.98 Million for 4Q-2019; Earns $11.51 Million for the Full Year of 2020

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FRESNO, Calif., Jan. 20, 2021 (GLOBE NEWSWIRE) -- Communities First Financial Corporation (the "Company") (OTCQX:CFST), the parent company of Fresno First Bank (the "Bank"), today reported net income increased 27% to $3.25 million, or $1.07 per diluted share for the fourth quarter of 2020 (4Q-2020), compared to $2.98 million, or $0.86 per diluted share, for the fourth quarter of 2019 (4Q-2019), and grew 8% from $3.02 million, or $1.00 per diluted share, for the third quarter of 2020 (3Q-2020). For the year ended December 31, 2020, net income increased 25% to $11.51 million, or $3.79 per diluted share, compared to $9.20 million, or $3.09 per diluted share, for the year ended December 2019. All results are unaudited.

Highlights: As of, or for the quarter ended December 31, 2020, compared to quarter ended December 31, 2019:

  • Pre-tax, pre-provision income increased 29% to $4.42 million.
  • Net income increased 27% to $3.25 million or $1.07 per diluted share.
  • Return on average equity of 19.73%.
  • Return on average assets of 1.50%.
  • Revenue (net interest income, before the provision for loan losses, plus non-interest income) increased by 35% to $10.07 million.
  • Total assets increased 62% to $871.35 million.
  • Total loans (ex. HFS) increased 71% to $620.8 million.
  • Total deposits increased 50% to $726.3 million.
  • Shareholder equity increased 32% to $68.5 million.
  • Tangible shareholders' equity to total assets decreased 18% to 7.87%.
  • Book value increased 29% to $22.82 per share.

"We continue to operate in an unprecedented environment, with the economic fallout from the ongoing pandemic and sustained low interest rates," said Steve Miller, President and Chief Executive Officer. "Although the economic outlook remains uncertain, we are encouraged by the resiliency of our customers who are also adapting to challenging operating conditions. At the same time, our team continues to adapt to our new remote work environment and I have been equally impressed with their ability to engage and support our customers in creative ways.

"We generated record earnings for the fourth quarter and the full year of 2020, ending the year with $871.35 million in total assets, growing our loans 71% to $620.77 million and increasing total deposits 50% to $726.24 million year-over-year, with noninterest-bearing deposits representing 62% of total deposits at year end," said Miller. "Additionally, we raised $40 million in subordinated debt in November 2020, strengthening our capital and liquidity position and supporting our growth initiatives in the coming year."

"We will continue to support the Paycheck Protection Program (PPP) which restarted on January 11, 2021," added Miller. "The new program has been initially tailored to give first-time borrowers and underserved business a head start in submitting applications. This is money small businesses need to survive California's ongoing stay-at-home orders amid rising COVID-19 cases. To date, we have over 300 applications in the pipeline and are submitting to the Small Business Administration (SBA) for approval."

COVID-19 Update

As the pandemic has progressed in California, holiday travel and gatherings have fueled surges while the state has changed systems to attempt to control the rapid spread of the coronavirus. The state's unemployment rate fell to 8.2% in November. That's down from 9% in October but exceeds the nationwide rate of 6.7%. But the jobless rate counts only people who are actively looking for work. Economists said November's drop reflected a massive exodus of Californians from the labor force: 327,600 who had stopped seeking employment. https://www.latimes.com/business/story/2020-12-18/california-economy-loses-momentum-covid-19-surge

CDPH: The California Department of Public Health announced the Regional Stay Home Order went into effect on 12/3/2020 in regions with less than 15% ICU availability. Fresno County has been grouped in the San Joaquin Valley region. As of 1/15/2021 the San Joaquin Region (including Fresno County) is at 0.0% ICU capacity. This order applied to all counties in the San Joaquin Valley region, effective Sunday, 12/6/2020 at 11:59PM. Fresno County is where the majority of the Bank's customers reside. https://www.co.fresno.ca.us/departments/public-health/covid-19?locale=en

Credit Risk as a Result of the Pandemic

The Bank's loan portfolio is very diverse, and management continues to monitor and evaluate the Bank's exposure to potentially increased loan losses related to the COVID-19 pandemic in multiple ways. As a result of federal and state stimulus money, state and federally encouraged payment deferrals, and the Small Business Administration ("SBA") making payments for six months on SBA loans, management continues to believe that normal metrics such as delinquencies may understate potential credit issues. Due to the potential distortion of traditional metrics, management and staff are actively monitoring other sources of data more frequently for early indications of distress within the portfolio such as average deposits, overdrafts, line of credit usage and guarantors' credit history. Management has segmented the loan portfolio several ways and examines risk exposure based on quantitative and qualitative information. Management and staff actively communicate with borrowing and key deposit clients to understand and assess the health of and the stress their business may be experiencing, as well as the pandemic's effects on their customers and suppliers. In addition, management and staff are engaging with borrowers more frequently to understand individual challenges and are obtaining more frequent data from borrowers, such as updated financials.

The following is a recap of areas considered higher risk due to the pandemic and a status of customers with deferred loan payments.

Higher Risk Industries: Management has identified the following industry segments most at risk, as of December 31, 2020, due to the effects of the pandemic. Exposure to higher risk industries comprises approximately 5.2%, or $19.3 million, of the Bank's loan portfolio, net of government guarantees, and is spread over 80 loans.

Industry Segments Considered Higher Risk due to COVID
($ in thousands)
  # of Loans Book Loan
Balance
Govt.
Guaranteed
Balances
Net Exposure
(Book - Govt. Gte.)
% of Total
Loans less
Govt. Gte.
Undisbursed Exposure
Including
Undisbursed
% of Total
Commitments
less Govt. Gte.
                 
Higher Risk                
Retail Sales 32 $ 9,416 $ 6,537 $ 2,878 0.8 % $ 879 $ 3,757 0.8 %
Entertainment & Recreation 2   366   285   81 0.0 %   0   81 0.0 %
Lodging & Travel 7   11,887   631   11,256 3.0 %   60   11,316 2.3 %
Restaurants & Bars 39   7,423   2,332   5,091 1.4 %   2,481   7,572 1.5 %
Total 80 $ 29,092 $ 9,785 $ 19,306 5.2 % $ 3,420 $ 22,726 4.6 %
                 
                 
Total Loan Portfolio 1,566 $ 620,766 $ 246,650 $ 374,115 100.0 % $ 119,512 $ 493,627 100.0 %


Many of these customers received Paycheck Protection Program ("PPP") loans and some customers were granted payment deferrals. Management believes it is likely many customers in these industries will apply for additional PPP funds under the PPP-2 program and the Bank is actively taking applications at this time. SBA loans originated prior to December 31, 2020, are eligible to receive six months of payments made by the SBA. As of December 31, 2020, the majority of the loans on deferral have returned to a regular payment schedule.

Status of, and Requests for, Loan Payment Deferral

"We have granted payment deferrals on 62 individual loans covering 39 borrowers," added Miller. "Subsequently several borrowers asked to be taken off deferral, six loans have paid off in full, and the majority have now returned to normal payment schedules."

At December 31, 2020, 8 loans totaling $2.4 million remain on payment deferral. Of the eight loans remaining on deferral, seven are SBA loans requesting deferral after the six monthly payments made by the SBA under the CARES Act program and one loan was granted a second deferral. All are in high COVID impacted industries including restaurants, motels and a used clothing store.

The following table(s) break down the status of loans granted payment deferrals.

Trend of Loan Deferrals
  Number of Loans
on Deferral
Loan Balances
June 2020 57 $25,845
Sept. 2020 12 $11,200
Dec. 2020 8 $2,444


Status of all loans given a deferral as of 12/31/2020 Count Balance % of balance of all
loans given a
deferral
No longer in deferment and paid current 48 $21,078 89.6 %
Loan provided a deferment - now paid off 6 $0 0.0 %
No longer in deferment - past due at 12/31 *** 0 $0 0.0 %
Total no longer in deferment 54 $21,078 89.6 %
       
Remaining in initial deferment 0 $0 0.0 %
New loan granted deferment Q4 7 $1,960 8.3 %
2nd deferment granted 1 $484 2.1 %
Total in deferment as of 12/31/2020 8 $2,444 10.4 %
       
Grand Total 62 $23,522 100.0 %
       
       
       
Current scheduled end of deferral period Count Balance % of balance loans
remaining on
deferral
Jan. 6 $1,914 78.3 %
Feb. 2 $530 21.7 %
Grand Total 8 $2,444 100.0 %
       
       
       
SBA vs. Non-SBA breakdown of current deferred Count Balance % of balance loans
remaining on
deferral
Non-SBA 1 $484 19.8 %
SBA 7 $1,960 80.2 %
Grand Total 8 $2,444 100.0 %
       
       
       
RE secured vs. Non-RE breakdown of current deferred Count Balance % of balance loans
remaining on
deferral
RE Secured 1 $128 5.2 %
Non-RE Secured 7 $2,317 94.8 %
Grand Total 8 $2,444 100.0 %


Results of Operations

Operating revenue, consisting of net interest income and non-interest income, increased 35% to $10.07 million for the fourth quarter of 2020, compared to $7.46 million for the fourth quarter a year ago and was higher by 14% from $8.83 million for the third quarter of 2020. For the year ended December 31, 2020, operating revenue grew 32% to $34.52 million, compared to $26.16 million for the year ended December 31, 2019.

Net interest income, before the provision for loan losses, increased 35% to $7.96 million for the fourth quarter of 2020, compared to $6.55 million for the fourth quarter a year ago and increased 12% from $7.09 million for the third quarter of 2020. For the full year of 2020, net interest income increased 24% to $27.44 million from $22.11 million for the year ended December 31, 2019. Net interest income in the fourth quarter of 2020, and for the full year of 2020, benefitted from larger loan and investment portfolios, helping offset the overall lower interest rate environment.

The net interest margin ("NIM") contracted to 3.76% for the fourth quarter of 2020, from 4.50% for the fourth quarter of 2019, and expanded from 3.68% for the third quarter of 2020. "The contraction in the net interest margin from the preceding year was primarily due to the impact of lower rates and changes in the mix of our earnings assets. The improvement of 8 basis points on a linked quarter basis was mainly the result of PPP loan payoffs and the immediate recognition of outstanding deferred fees," stated Steve Canfield, Chief Financial Officer. For the full year of 2020, the net interest margin was 3.92% compared to 4.72% for the year ended December 31, 2019.

The yield on earning assets was 4.01% for the fourth quarter of 2020, compared to 4.73% for the fourth quarter a year ago, and 3.80% on a linked quarter basis. The cost of funds increased two basis points to 0.25% for the fourth quarter of 2020 from 0.23% for the fourth quarter of 2019. The yield on earning assets declined to 4.10% for the full year of 2020, compared to 4.96% for 2019. The cost to fund earning assets for the full year of 2020 decreased four basis points to 0.18%, compared to 0.22% for the year ended December 31, 2019.

Interest expense and ratios such as the cost of interest bearing liabilities and cost to fund earning assets were impacted in November and December by interest expense on the Company's newly issued $40 million, 4.25% subordinated debt. "The first full quarter this expense will impact the Company's ratios will be Q1-2021," commented Canfield. "This is something our investors may note when comparing our current results to historical going forward. Our core funding is so heavily weighted towards non-interest bearing deposits, and our cost of funds on deposits is so low, the expense of our sub-debt is going to distort certain ratios."

Total non-interest income increased by 35% to $2.10 million for the fourth quarter of 2020, compared to $1.79 million for the fourth quarter of 2019, and grew 21% from $1.73 million on a linked quarter basis, mainly due to the gain on sale of loans and deposit fee income. For the full year of 2020, non-interest income increased 75% to $7.07 million, compared to $4.05 million for the full year of 2019, primarily due to higher merchant service revenue and from fee income from deposit and transaction charges.

Merchant services revenue increased 38%, or $1.01 million, for the fourth quarter of 2020 compared to the fourth quarter of 2019, as a result of strong customer growth from organic sources and through ISO partners. Total deposit fee income almost doubled to $219,000 for the fourth quarter of 2020, compared to the fourth quarter a year ago, and grew by 24% from the linked quarter. Debit/credit card interchange income grew by 23%, or $90,000, year-over-year and increased by 14% from the third quarter of 2020. In the fourth quarter of 2020, gain on sale of loans increased by 12% to $587,000 from the fourth quarter a year earlier, and increased by 127% on a linked quarter basis. "We are very pleased with the increase in non-interest income this year," stated Miller. "Merchant services revenue increased as a result of growth in our own customer portfolio, but also from new strategic alliances with ISO partners who are now running significant volumes under our sponsorship. Deposit fee income benefited from significant growth in our client base as well as the Bank appropriately collecting higher fees for managing accounts in higher risk verticals. Debit card interchange income increased as a result of expansion of our client base, and we cannot overlook the impact COVID has had on consumers purchasing patterns through online channels which has increased card usage. Our loan production was very strong this past year and during the fourth quarter our Southern California team originated and sold approximately $25 million of multi-family loans at premiums averaging 2.25%."

Non-interest expense for the fourth quarter of 2020 was $4.30 million, a 19% increase over $3.46 million for the fourth quarter of 2019, and increased 8% from $3.96 from the third quarter of 2020. The increase in non-interest expense year-over-year and on a linked quarter basis reflects higher employee benefits and, to a lesser extent, investments made in enhancing the Company's digital technology.

For the year ended December 31, 2020, non-interest expense totaled $15.51 million, compared to $12.88 million for the year ended December 31, 2019. The increase in non-interest expense in 2020 was mainly due to higher compensation costs resulting from new hires, increased consulting fees related to merchant services, marketing, and data processing expenses due to the acquisition of new software and automation of remote banking initiatives. "We view the efficiency ratio as a key metric for long term success," stated Canfield. "While non-interest expense increased 20% for the year, the Bank grew significantly and revenue was up 32%. Growth of the balance sheet, revenue, and greater efficiency are all positives for generating shareholder value in our view."

The efficiency ratio improved to 42.70% for the fourth quarter of 2020, compared to 48.44% for the fourth quarter a year ago, and 44.90% for the third quarter of 2020. For the year ended December 30, 2020, the efficiency ratio was 45.01% compared to 49.25% for 2019.

Balance Sheet Review

Total assets increased 62% to $871.35 million, at December 31, 2020, from $538.39 million at December 31, 2019. Total assets grew 5% from $831.00 million, at September 30, 2020.

Total portfolio loans increased by $257.53 million, or 71%, to $620.77 million at December 31, 2020, from $363.24 million a year ago, and grew $31.68 million, or 5%, from $589.09 million at September 30, 2020. Total loans at December 31, 2020, included $159.49 million of SBA PPP loans. "During Q4-2020, we sold the portfolio of loans held for sale consisting of multi-family loans originated by the SoCal team," explained Canfield. "We anticipate new production from this team will be held for investment, which will generate significant interest income and absorb liquidity in 2021, with a higher yielding, and better structured asset, than is available from other investment options."

The commercial and industrial (C&I) portfolio increased 11% to $172.62 million from $155.33 million recorded a year ago and grew 6% when compared to the linked quarter. C&I loans represented 28% of total loans at December 31, 2020. Commercial real estate loans grew 56% to $226.25 million from the fourth quarter of 2019, and increased 23% on a linked quarter basis, representing 36% of total loans at December 31, 2020. Agriculture loans declined 3% to $33.03 million from a year ago and grew 3% from the third quarter of 2020, representing 5% of the loan portfolio at the end of 2020. Real estate construction and land development totaled $15.75 million, or 3% of loans, while residential RE 1-4 family loans totaled $13.51 million, or 2% of loans. SBA PPP loans represented 26% of the portfolio and there were $2.98 million in unamortized PPP fees capitalized on the balance sheet at quarter end. At December 31, 2020, the SBA, USDA, or other government agencies, guaranteed $246.65 million, or 40% of the loan portfolio.

The investment portfolio increased by $113.65 million, or 104%, to $222.81 million at December 31, 2020, from $109.16 million at December 31, 2019, and by $40.64 million, or 22%, from $182.17 million at September 30, 2020. The growth in the investment securities was primarily a result of the significant deposit growth during the year resulting in tremendous liquidity coupled with overnight rates available for investment falling to near zero.

Total deposits increased 50% to $726.25 million at December 31, 2020, compared to $482.87 million from a year earlier, and declined 4% from $753.15 million at September 30, 2020. Noninterest-bearing demand deposits grew 45% to $446.92 million at December 31, 2020, compared to $307.53 million at December 31 2019, and remained flat from $445.95 at September 30, 2020. Noninterest-bearing demand deposits represented 62% of total deposits at year end. "We continue to attract quality customers, and our loan officers and relationship managers continue to reach out and cultivate strong customer relationships. At the same time, we are beginning to broaden our geographic reach, through our SBA and Merchant Services initiatives, and through the use of digital marketing and tools that allow our customers to bank virtually," said Miller.

"Two large certificates of deposits primarily accounted for the 50% increase in our certificates of deposits on a linked quarter basis; one very large deposit was brought in during the fourth quarter of 2021. Overall, our liquidity remains solid with over $200 million in secured and unsecured credits available," added Canfield.

Net shareholders' equity increased 32% to $68.55 million at December 31, 2020, compared to $51.96 million a year ago and grew 6% from $64.58 million at September 30, 2020. Book value per common share increased 29% to $22.82 at December 31, 2020, compared to $17.67 at December 31, 2019, and 6% compared to $21.49 at September 30, 2020.

Asset Quality

Nonperforming assets were $1.69 million, 0.19% of total assets at December 31, 2020, compared to $1.07 million at September 30, 2020. There was $40,000 of charge-offs in the fourth quarter of 2020 and $47,000 in recoveries for the year. Performing restructured loans declined to $430,000 at year end and this one loan continues to perform under a restructured arrangement that is being closely monitored.

Past due loans 30-60 days totaled $1.02 million at December 31, 2020, compared to $829,000 at September 30, 2020. Past due loans from 60-90 days were $10,000 at December 31, 2020 and there were no past due loans 90+ days at year end.

The provision for loan losses was $1.35 million for the fourth quarter of 2020, compared to $750,000 recorded in the third quarter of 2020. "Although our asset quality remained strong at year end, we prudently added to reserves for loan losses as we continue to face an uncertain economy as a result of the impact of the Coronavirus pandemic," said Miller. For the full year of 2020, the provision for loan losses was $3.3 million compared to $645,000 for the year ended December 31,2019. The ratio of allowance for loan losses to total portfolio held for investment loans was 1.26%, at December 31, 2020, compared to 1.25% a year earlier and 1.11% at September 30, 2020.

"A large portion of our portfolio consists of loans guaranteed by the U.S. Government. This group of loans consists of fully guaranteed loans the Company has purchased, the PPP loans, as well as organic SBA and USDA loans the bank has originated. When the effect of these guarantees is considered relative to the loan portfolio, the ratio of allowance to loan losses to the total, non-guaranteed, loan portfolio was 2.10%, as of December 31, 2020," added Miller.

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 Statements

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, our borrowers' actual payment performance as loan deferrals related to the COVID-19 pandemic expire, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance, 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.

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



SELECT FINANCIAL INFORMATION AND RATIOS (unaudited) For the Quarter Ended:   Percentage Change From:   Year to Date as of:
Dec. 31,
2020
Sept. 30,
2020
Dec. 31,
2019
  Sept. 30,
2020
Dec. 31,
2019
  Dec. 31,
2020
Dec. 31,
2019
Percent
Change
BALANCE SHEET DATA - PERIOD END BALANCES:                
  Total assets $ 871,347   $ 831,003   $ 538,392     5 % 62 %        
  Total Loans   620,766     589,090     363,236     5 % 71 %        
  Investment securities   222,808     182,168     109,158     22 % 104 %        
  Total deposits   726,254     753,145     482,874     -4 % 50 %        
  Shareholders equity, net $ 68,546   $ 64,576   $ 51,961     6 % 32 %        
                       
SELECT INCOME STATEMENT DATA:                    
  Gross revenue $ 10,068   $ 8,826   $ 7,458     14 % 35 %   $ 34,516   $ 26,164   32 %
  Operating expense   4,299     3,963     3,613     8 % 19 %     15,508     12,884   20 %
  Pre-tax, pre-provision income   5,769     4,863     3,845     19 % 50 %     19,008     13,280   43 %
  Net income after tax $ 3,252   $ 3,022   $ 2,562     8 % 27 %   $ 11,512   $ 9,201   25 %
                       
SHARE DATA:                  
  Basic earnings per share $ 1.08   $ 1.01   $ 0.87     8 % 24 %   $ 3.84   $ 3.14   22 %
  Fully diluted earnings per share $ 1.07   $ 1.00   $ 0.86     7 % 25 %   $ 3.79   $ 3.09   23 %
  Book value per common share $ 22.82   $ 21.49   $ 17.67     6 % 29 %        
  Common shares outstanding   3,004,331     3,004,331     2,940,996     0 % 2 %        
  Fully diluted shares   3,038,743     3,034,214     2,990,887     0 % 2 %        
  CFST - Stock price $ 31.01   $ 23.50   $ 28.75     32 % 8 %        
                       
RATIOS:                    
  Return on average assets   1.50 %   1.54 %   1.88 %   -3 % -20 %     1.60 %   1.88 % -15 %
  Return on average equity   19.73 %   19.25 %   20.15 %   2 % -2 %     19.29 %   19.79 % -3 %
  Efficiency ratio   42.70 %   44.90 %   48.44 %   -5 % -12 %     45.01 %   49.25 % -9 %
  Yield on earning assets   4.01 %   3.80 %   4.73 %   5 % -15 %     4.10 %   4.94 % -17 %
  Cost to fund earning assets   0.25 %   0.12 %   0.23 %   105 % 9 %     0.18 %   0.22 % -17 %
  Net Interest Margin   3.76 %   3.68 %   4.50 %   2 % -16 %     3.92 %   4.72 % -17 %
  Equity to assets   7.87 %   7.77 %   9.65 %   1 % -18 %        
  Loan to deposits ratio   85.48 %   78.22 %   75.22 %   9 % 14 %        
  Full time equivalent employees   58     61     56     -5 % 5 %        
                       
BALANCE SHEET DATA - AVERAGES:                
  Total assets $ 862,478   $ 781,339   $ 541,013     10 % 59 %   $ 718,199   $ 488,529   47 %
  Total loans   595,544     570,970     354,288     4 % 68 %     513,925     320,671   60 %
  Investment securities   198,824     156,249     104,990     27 % 89 %     148,507     97,243   53 %
  Deposits   758,302     705,333     487,413     8 % 56 %     638,094     439,267   45 %
  Shareholders equity, net $ 65,570   $ 62,441   $ 50,458     5 % 30 %   $ 59,678   $ 46,483   28 %
                       
ASSET QUALITY:                    
  Total delinquent accruing loans $ 1,031   $ 829   $ 322     24 % 220 %        
  Nonperforming assets $ 1,689   $ 1,070   $ 619     58 % 173 %        
  Non Accrual / Total Loans   .27   .18   .17   50 % 60 %        
  Nonperforming assets to total assets   .19   .13   .12   51 % 69 %        
  LLR / Total loans   1.26 %   1.11 %   1.25 %   14 % 1 %        



STATEMENT OF INCOME ($ in thousands) For the Quarter Ended:   Percentage Change From:   For the Year Ended
(unaudited) Dec. 31,
2020
Sept. 30,
2020
Dec. 31,
2019
  Sept. 30,
2020
Dec. 31,
2019
  Dec. 31,
2020
Dec. 31,
2019
Percent
Change
Interest Income                  
  Loan interest income $ 7,098 $ 6,297 $ 5,949   13 % 34 %   $ 24,661 $ 19,505 26 %
  Investment income   1,276   927   726   38 % 96 %     3,624   2,619 38 %
  Int. on fed funds & CDs in other banks   81   77   78   5 % -60 %     330   901 -63 %
  Dividends from non-marketable equity   34   24   28   42 % -11 %     119   130 -8 %
  Interest income   8,489   7,325   6,781   16 % 37 %     28,734   23,155 24 %
                       
  Int. on deposits   229   232   229   -1 % -23 %     963   1,039 -7 %
  Int. on short-term borrowings   0   0   5   0 % 0 %     33   3 1000 %
  Int. on long-term debt   296   0   0   0 % 0 %     296   0 0 %
  Interest expense   525   232   234   126 % 77 %     1,292   1,042 24 %
  Net interest income   7,964   7,093   6,547   12 % 35 %     27,442   22,113 24 %
  Provision for loan losses   1,350   750   800   80 % 229 %     3,300   645 412 %
  Net interest income after provision   6,614   6,343   5,747   4 % 21 %     24,142   21,468 12 %
                       
Non-Interest Income:                    
  Total deposit fee income   219   176   118   24 % 99 %     637   429 48 %
  Debit / credit card interchange income   90   79   66   14 % 23 %     302   252 20 %
  Merchant services income   1,009   1,096   1,155   -8 % 38 %     3,959   1,576 151 %
  Gain on sale of loans   587   259   351   127 % 12 %     1,491   1,307 14 %
  Other operating income   199   123   101   62 % 63 %     685   487 41 %
  Non-interest income   2,104   1,733   1,791   21 % 35 %     7,074   4,051 75 %
                     
Non-Interest Expense:                  
  Salaries & employee benefits   2,928   2,605   1,908   12 % 29 %     9,696   8,009 21 %
  Occupancy expense   193   211   204   -9 % -4 %     823   799 3 %
  Other operating expense   1,178   1,147   1,349   3 % 4 %     4,989   4,076 22 %
  Non-interest expense   4,299   3,963   3,461   8 % 19 %     15,508   12,884 20 %
                     
  Net income before tax   4,419   4,113   4,077   7 % 29 %     15,708   12,635 24 %
  Tax provision   1,167   1,091   1,099   7 % 34 %     4,196   3,434 22 %
  Net income after tax $ 3,252 $ 3,022 $ 2,978   8 % 27 %   $ 11,512 $ 9,201 25 %



BALANCE SHEET ($ in thousands ) End of Period:   Percentage Change From:
(unaudited) Dec. 31,
2020
Sept. 30,
2020
Dec. 31,
2019
  Sept. 30,
2020
Dec. 31,
2019
ASSETS            
  Cash and due from banks $ 9,788   $ 15,615   $ 12,570     -37 % -22 %
  Fed funds sold and deposits in banks   618     698     19,068     -11 % -97 %
  CDs in other banks   9,175     9,669     9,914     -5 % -7 %
  Investment securities   222,808     182,168     109,158     22 % 104 %
  Loans held for sale   0     28,294     13,201     -100 % -100 %
  Portfolio loans outstanding:          
  RE constr & land development   15,754     12,414     17,649     27 % -11 %
  Residential RE 1-4 Family   13,507     13,135     10,290     3 % 31 %
  Commercial Real Estate   226,246     183,869     145,234     23 % 56 %
  Agriculture   33,026     32,103     34,131     3 % -3 %
  Commercial and Industrial   172,624     163,444     155,332     6 % 11 %
  SBA PPP Loans   159,491     184,110     0     -13 % 0 %
  Consumer and Other   118     15     600     687 % -80 %
  Total Portfolio Loans   620,766     589,090     363,236     5 % 71 %
  Deferred fees & discounts   (3,728 )   (4,570 )   (1 )   -18 % 372700 %
  Allowance for loan losses   (7,848 )   (6,538 )   (4,542 )   20 % 73 %
  Loans, net   609,190     577,982     358,693     5 % 70 %
  Non-marketable equity investments   3,059     3,019     2,612     1 % 17 %
  Cash value of life insurance   8,198     8,147     7,991     1 % 3 %
  Accrued interest and other assets   8,511     5,411     5,185     57 % 64 %
  Total assets $ 871,347   $ 831,003   $ 538,392     5 % 62 %
             
LIABILITIES AND EQUITY            
  Non-interest bearing deposits $ 446,920   $ 445,952   $ 307,531     0 % 45 %
  Interest checking   19,543     76,476     13,990     -74 % 40 %
  Savings   56,949     54,261     39,117     5 % 46 %
  Money market   131,904     129,025     83,250     2 % 58 %
  Certificates of deposits   70,938     47,431     38,986     50 % 82 %
  Total deposits   726,254     753,145     482,874     -4 % 50 %
  Short-term borrowings   31,000     10,000     0     210 % 0 %
  Long-term debt   39,126     0     0     0 % 0 %
  Other liabilities   6,421     3,282     3,557     96 % 81 %
  Total liabilities   802,801     766,427     486,431     5 % 65 %
             
  Common stock & paid in capital   30,997     30,858     29,869     0 % 4 %
  Retained earnings   33,421     30,170     21,909     11 % 53 %
  Total equity   64,418     61,028     51,778     6 % 24 %
  Accumulated other comprehensive income   4,128     3,548     183     16 % 2156 %
  Shareholders equity, net   68,546     64,576     51,961     6 % 32 %
  Total Liabilities and shareholders' equity $ 871,347   $ 831,003   $ 538,392     5 % 62 %



ASSET QUALITY ($ in thousands) Period Ended:
(unaudited) Dec. 31,
2020
Sept. 30,
2020
Dec. 31,
2019
Delinquent accruing loans 30-60 days $ 1,021   $ 829   $ 8  
Delinquent accruing loans 60-90 days $ 10     0.0   $ 314  
Delinquent accruing loans 90+ days   0.0     0.0     0.0  
Total delinquent accruing loans $ 1,031   $ 829   $ 322  
       
Loans on non accrual $ 1,689   $ 1,070   $ 619  
Other real estate owned   0.0     0.0     0.0  
Nonperforming assets $ 1,689   $ 1,070   $ 619  
       
Performing restructured loans $ 430   $ 469   $ 501  
       
       
Delq 30-60 / Total Loans   .16 %   .14 %   .00 %
Delq 60-90 / Total Loans   .00 %   .00 %   .09 %
Delq 90+ / Total Loans   .00 %   .00 %   .00 %
Delinquent Loans / Total Loans   .17 %   .14 %   .09 %
Non Accrual / Total Loans   .27 %   .18 %   .17 %
Nonperforming assets to total assets   .19 %   .13 %   .12 %
                   
                   
Year-to-date charge-off activity                  
Charge-offs $ 40     0.0   $ 163  
Recoveries $ 47   $ 47   $ 11  
Net charge-offs $ (7 ) $ (47 ) $ 152  
Annualized net loan losses (recoveries) to average loans   -.00 %   -.01 %   .05 %
       
LOAN LOSS RESERVE RATIOS:      
Reserve for loan losses $ 7,848   $ 6,538   $ 4,542  
       
Total loans $ 620,766   $ 589,089   $ 363,235  
Purchased govt. guaranteed loans $ 46,567   $ 52,072   $ 56,842  
Originated govt. guaranteed loans $ 200,083   $ 225,780   $ 36,358  
       
LLR / Total loans   1.26 %   1.11 %   1.25 %
LLR / Loans less 100% govt. gte. loans (PPP and purchased)   1.89 %   1.85 %   1.48 %
LLR / Loans less all govt. guaranteed loans   2.10 %   2.10 %   1.68 %
LLR / Total assets   .90 %   .79 %   .84 %



SELECT FINANCIAL TREND INFORMATION
(unaudited)
For the Quarter Ended:
Dec. 31,
2020
Sept. 30,
2020
June 30,
2020
Mar. 31,
2020
Dec. 31,
2019
BALANCE SHEET DATA - PERIOD END BALANCES:      
  Total assets $ 871,347 $ 831,003 $ 756,739 $ 548,322 $ 538,392
  Loans held for sale   0   28,294   18,306   17,534   13,201
  Loans held for investment ex. PPP   461,275   404,980   388,544   381,092   363,236
  PPP Loans   159,491   184,110   184,151   0   0
  Investment securities   222,808   182,168   139,688   120,037   109,158
             
  Non-interest bearing deposits   446,920   445,952   414,395   292,449   307,531
  Interest bearing deposits   279,334   307,193   264,435   178,079   175,343
  Total deposits   726,254   753,145   678,830   470,528   482,874
  Short-term borrowings   31,000   10,000   11,761   17,000   0
  Long-term debt   39,126   0   0   0   0
             
  Total equity   64,418   61,028   57,863   54,741   51,778
  Accumulated other comprehensive income   4,128   3,548   2,912   2,063   183
  Shareholders equity, net $ 68,546 $ 64,576 $ 60,775 $ 56,804 $ 51,961
             
             
INCOME STATEMENT - QUARTERLY VALUES:          
  Interest income $ 8,489 $ 7,325 $ 6,781 $ 6,140 $ 6,191
             
  Int. on dep. & short-term borrowings   229   232   234   300   297
  Int. on long-term debt   296   0   0   0   0
  Interest expense   525   232   234   300   297
  Net interest income   7,964   7,093   6,547   5,840   5,894
  Non-interest income   2,104   1,733   1,791   1,445   1,564
  Gross revenue   10,068   8,826   8,338   7,285   7,458
  Provision for loan losses   1,350   750   800   400   410
  Non-interest expense   4,299   3,963   3,461   3,785   3,613
  Net income before tax   4,419   4,113   4,077   3,100   3,435
  Tax provision   1,167   1,091   1,099   839   873
  Net income after tax $ 3,252 $ 3,022 $ 2,978 $ 2,261 $ 2,562
             
             
BALANCE SHEET DATA - QUARTERLY AVERAGES:      
  Total assets $ 862,478 $ 781,339 $ 697,443 $ 529,257 $ 541,013
  Loans held for sale   9,934   23,677   17,213   14,902   18,212
  Loans held for investment ex. PPP   422,505   386,819   380,025   369,888   354,288
  PPP Loans   173,039   184,151   137,750   0   0
  Investment securities   198,824   156,249   129,574   108,744   104,990
             
  Non-interest bearing deposits   463,311   430,149   402,777   280,235   301,049
  Interest bearing deposits   294,991   275,184   219,504   184,166   186,364
  Total deposits   758,302   705,333   622,281   464,401   487,413
  Short-term borrowings   8,223   10,277   13,566   8,193   0
  Long-term debt   25,121   0   0   0   0
  Total equity   62,258   58,927   54,812   52,878   49,991
  Accumulated other comprehensive income   3,311   3,515   2,229   685   467
  Shareholders equity, net $ 65,570 $ 62,441 $ 57,042 $ 53,563 $ 50,458


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