Community First Bancorporation, Inc. (OTC: CFOK), parent company for Community First Bank, Inc. (the "Bank") and SeaTrust Mortgage Company ("STM"), announced its financial results for the second quarter of 2021. Highlights of the results include:
• Total consolidated earnings were $564,000 for the second quarter, an increase of 57.1% over the first quarter and an increase of 638.0% over the second quarter of 2020. Earnings for the six-month period ended June 30, 2021 totaled $923,000, an increase of 98.5% over the first six months of 2020.
• Net interest income grew by 21.4% year over year for the first half of 2021.
• Noninterest income included results for STM for the entire six-month period in 2021 and increased 157.4% over the level reported in the first half of 2020.
• Total assets at June 30, 2021 were $638,618,000, an increase of $7,664,000, or 1.2%, compared to total assets of $630,954,000 as of March 31, 2021, and an increase of 17.4% compared to total assets of $543,988,000 as of December 31, 2020.
• Total net loans held for investment increased 1.8% to $444,960,000 during the quarter, and loans held for sale increased 20.9% to $15,301,000 compared to $12,655,000 as of March 31, 2021.
• Deposits increased 1.4% during the quarter and 20.7% during the first six months of 2021. The Company completed its acquisition of Security Federal Bank in March 2021 adding two full-service offices in eastern Tennessee to its existing network of two offices in North Carolina and eight offices in South Carolina.
Total consolidated earnings of $564,000 were recorded for the second quarter of 2021 compared to $359,000 for the first quarter of 2021 and $110,000 for the second quarter of 2020. Earnings per common share for the second quarter totaled $0.10 compared to $.06 and $.01, respectively, for the first and second quarter of 2020. Compared to the first quarter of 2021, in the second quarter the Company recorded higher net interest income, a slightly lower provision for loan losses, and a lower provision for income taxes.
Net interest income grew 11.6% in the second quarter of 2021 compared to the first quarter of 2021 and 29.0% over the second quarter of 2020. Loans held for investment grew a net 1.8% during the second quarter.
The provision for loan losses was lower in the second quarter of 2021 in comparison to both the first quarter of 2021 and the second quarter of 2020. The Bank experienced a net recovery of previous charge-offs for the first six months of 2021.
Noninterest income was $545,000 lower in the second quarter of 2021 than in the first quarter of 2021 due to declines in insufficient funds revenues, mortgage banking income, gains on the sale of SBA loans, and in swap revenue. The quarter-over-quarter decline was partially offset by a gain on a securities sale and increases in interchange income.
Noninterest expense increased 49.8% for the second quarter in comparison to the second quarter of 2020 but declined slightly (.9%) from the first quarter of 2021. Merger-related expenses totaled $106,000 in the second quarter in comparison to $489,000 in the first quarter of 2021. There were no merger-related expenses in the second quarter of 2020. Salaries and benefits expense declined slightly during the second quarter, even with the addition of Security Federal Bank personnel, due to a decline in benefit costs and commissions on mortgage banking activities. This decline in noninterest expense was partially offset during the second quarter by increases in marketing and in occupancy expenses related to the addition of the Tennessee branches.
Net interest income grew by 21.4% year over year for the first half of 2021 driven primarily by the increase in the loan portfolio resulting from the merger and loan growth experienced over the period. Loans held for investment grew 20.1% year over year and $47,440,000, or 11.9%, net, over the six months ended June 30, 2021.
The provision for loan losses declined 52.5% in the first half of 2021 in comparison to the first half of 2020. In the second quarter of 2020 the impact of COVID-19 was just beginning to be felt and uncertainty impacted the allowance for loan and lease losses ("ALLL") through our qualitative and environmental factors analyses. In addition, the ALLL is typically impacted by the mix of loans in the portfolio across various loan types and various historical loss figures. In 2020 our Sales Finance division experienced significant growth. This growth impacted ratios used in the calculation of the ALLL. However, by the first part of 2021, vaccinations allowed many businesses to open and operate, decreasing uncertainty for many borrowers and growth in the Sales Finance division moderated somewhat. We have not experienced substantial pandemic-related losses, and an increased provision for loan losses was not warranted in the second quarter of 2021. However, unforeseen lingering risks associated with the ongoing pandemic could impact the ALLL estimates going forward.
Noninterest income increased 157.4% in the first six months of 2021 compared to the first six months of 2020. STM operated for the full first six months of 2021, closing approximately $108,000,000 of loans. It began making mortgage loans at the end of February in 2020. Monthly volume increased throughout the year of 2020 as STM hired more loan officers.
Noninterest expense increased to $13,054,000 for the six-month period ended June 30, 2021 compared to $8,518,000 for the six-month ended June 30, 2020. Noninterest expense related to salaries and payroll increased by $2,668,000 in the first six months of 2021 as compared to the comparable period of 2020. Total salaries and benefits were primarily impacted by additional commissions paid to mortgage lenders on the increased volume as well as additional operations personnel at STM and additional personnel added from the merger with Security Federal Bank. Occupancy-related expenses also increased in 2021 over the comparable 2020 period. The Bank's Charlotte and Dallas, North Carolina offices opened during the first quarter of 2020. The first six months of 2021 include a full six months of costs for those locations, additional rents for STM locations opened after June 30, 2020, and costs of operating the Tennessee branches acquired in the merger. Noninterest expense increases were also impacted by loan-related costs and data processing and software costs resulting from increases in STM volumes. Noninterest expense in 2021 also included merger-related expenses of $594,000.
President and CEO Richard D. Burleson commented: "In review of our second quarter numbers and the year to date results we are very encouraged by the significant progress we have made. Especially when considering the merger cost impact, it's a significant change from years past. However, we are also concerned with the slow down in the mortgage market over the last several months. During the highest part of the pandemic much of our mortgage volume came from the refinancing and new purchase money boom. We are beginning to see a slow-down in mortgage applications in the markets we serve. Several of our communities have experienced a lack of supply, pushing up prices. We will be closely monitoring the markets over the next several months."
At June 30, 2021, total gross loans held for investment were $450,040,000, an increase of $47,440,000 or 11.8%, compared to total gross loans held for investment of $402,600,000 at December 31, 2020. The acquisition of Security Federal Bank added $39,319,000 to loans in March 2021. Total deposits at June 30, 2021 were $534,523,000 compared to $442,868,000 at December 31, 2020, an increase of $91,655,000, or 20.7%, over December 31, 2020 totals. The acquisition of Security Federal Bank added $45,616,000 to total deposits in March 2021.
Mr. Burleson continued, "The impact of the pandemic on our customer base was fairly moderate early in the pandemic. The majority of our small business customers have begun to rebound despite issues with staffing. The majority of the PPP loans made by the Bank during 2020 have been repaid via the SBA PPP forgiveness process, and there is only one remaining pandemic-related deferral in the loan portfolio. We will continue to closely monitor credit quality over the coming months."
The Bank continues to have strong asset quality. During the second quarter nonperforming assets (comprising nonperforming loans and foreclosed assets) decreased slightly to $1,379,000 from $1,534,000 at March 31, 2021. Nonperforming assets were $976,000 at December 31, 2020. At June 30, 2021, we had six loans totaling approximately $331,000 in our foreclosure pipeline and our past due percentages for the period remained below .40% on a monthly basis. At June 30, 2021, our ALLL totaled $5,080,000, or 1.13%, of loans held for investment, an increase of 6.5% over December 31, 2020 levels. This increase was primarily due to an increase in outstanding loans. The Company provided $126,000 and $343,000 to the ALLL in the second quarters of 2021 and 2020, respectively. The increase in the ALLL was primarily due to organic growth in the loan portfolio.
Mr. Burleson stated, "We are very pleased about the opportunities provided by our new branches in eastern Tennessee. Our new teammates are excited to offer our brand of community banking into their markets, and our legacy offices in the Carolinas are looking forward to expanded mortgage lending opportunities provided by the Freddie Mac seller/ servicer capabilities we acquired in the merger. Our data processing systems were successfully converted in July 2021, and these offices now proudly display our signage and branding."
Mr. Burleson closed his comments by noting: "Our highest priority, along with maintaining our well capitalized status, satisfactory liquidity levels, and our strong credit culture, is serving our communities. We are excited about the opportunities we see for the remainder of 2021."
Community First Bank has twelve full-service financial centers in North and South Carolina and Tennessee, with two each in Seneca and Anderson and single locations in Greenville, Williamston, Walhalla and Westminster, South Carolina, locations in Dallas and Charlotte, North Carolina, and two locations in Elizabethton, Tennessee. The Company operates loan production offices in Concord and Waynesville, North Carolina and Kingsport, Tennessee. In addition, its SeaTrust Mortgage subsidiary operates offices in North Carolina, South Carolina, Florida and Tennessee.
Richard D. Burleson, Jr. - President and CEO
Jennifer M. Champagne - Executive Vice President and CFO
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Original Source: Community First Bancorporation Announces Second Quarter 2021 Financial Results