For the year ended
“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
“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
“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
- 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 atDecember 31, 2018 . Non-interest-bearing deposits grew by 17%, or$43.71 million , to$307.53 million , compared to$263.82 million atDecember 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% atDecember 31, 2018 and 9.21% atSeptember 30, 2019 .
Results of Operations
Net interest income, before the provision for loan losses, increased 17% to
Total non-interest income increased 40% to
“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
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
“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
The commercial and industrial (C&I) portfolio increased 7% from a year earlier to
Total deposits increased 14% to
“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
Net shareholder’s equity increased 28% to
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
The provision for loan losses was
About
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
SELECT FINANCIAL INFORMATION AND RATIOS (unaudited) | For the Quarter Ended: | Percentage Change From: | Year to Date as of: | |||||||||||||||||||||
2019 | 2019 | 2018 | 2019 | 2018 | 2019 | 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) | 2019 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | Percent Change | |||||||||||
Interest Income | |||||||||||||||||||
Loan interest income | $ | 5,295 | $ | 4,999 | $ | 4,109 | 6 | % | 29 | % | $ | 19,505 | $ | 15,662 | 25 | % | |||
Investment income | 652 | 647 | 636 | 1 | % | 3 | % | 2,619 | 2,009 | 30 | % | ||||||||
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 | 18,875 | 23 | % | ||||||||
Total interest expense | 297 | 283 | 202 | 5 | % | 47 | % | 1,042 | 630 | 65 | % | ||||||||
Net interest income | 5,893 | 5,685 | 5,034 | 4 | % | 17 | % | 22,113 | 18,245 | 21 | % | ||||||||
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 | 17,295 | 24 | % | ||||||||
Non-Interest Income: | |||||||||||||||||||
Total deposit fee income | 110 | 114 | 100 | -4 | % | 10 | % | 429 | 359 | 19 | % | ||||||||
Debit / credit card interchange income | 73 | 68 | 50 | 7 | % | 46 | % | 252 | 172 | 47 | % | ||||||||
Merchant services income | 733 | 501 | 159 | 46 | % | 361 | % | 1,576 | 596 | 164 | % | ||||||||
Gain on sale of loans | 526 | 154 | 18 | 242 | % | 2822 | % | 1,307 | 106 | 1133 | % | ||||||||
Other operating income | 122 | 109 | 794 | 12 | % | -85 | % | 487 | 1,169 | -58 | % | ||||||||
Non-interest income | 1,564 | 946 | 1,121 | 65 | % | 40 | % | 4,051 | 2,402 | 69 | % | ||||||||
Non-Interest Expense: | |||||||||||||||||||
Salaries & employee benefits | 2,278 | 1,990 | 1,656 | 14 | % | 38 | % | 8,009 | 6,391 | 25 | % | ||||||||
Occupancy expense | 200 | 207 | 190 | -3 | % | 5 | % | 799 | 774 | 3 | % | ||||||||
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 | 11,268 | 14 | % | ||||||||
Net income before tax | 3,434 | 3,066 | 2,054 | 12 | % | 67 | % | 12,635 | 8,429 | 50 | % | ||||||||
Tax provision | 873 | 828 | 435 | 5 | % | 101 | % | 3,434 | 2,180 | 58 | % | ||||||||
Net income after tax | $ | 2,561 | $ | 2,238 | $ | 1,619 | 14 | % | 58 | % | $ | 9,201 | $ | 6,249 | 47 | % | |||
BALANCE SHEET ($ in thousands ) | End of Period: | Percentage Change From: | ||||||||||||||
(unaudited) | 2019 | 2019 | 2018 | 2019 | 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 | % | |||||||||
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) | 2019 | 2019 | 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:
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