December 5, 2021

Centric Financial Corporation Announces Third Quarter 2021 Results

HARRISBURG, Pa., Nov. 5, 2021 /PRNewswire/ — Centric Financial Corporation (“Centric” or “the Company”) (OTC: CFCX), the parent company…

HARRISBURG, Pa., Nov. 5, 2021 /PRNewswire/ — Centric Financial Corporation (“Centric” or “the Company”) (OTC: CFCX), the parent company of Centric Bank (“the Bank”), reported a net loss of $711 thousand, or $-0.08 per common share diluted, for the third quarter 2021. For the first nine months of 2021, net income was $6.5 million, or $0.77 per common share diluted, compared to $0.72 per common share diluted for the same period last year.  Pre-tax, pre-provision income was $5.2 million for the quarter.

Highlights of Performance:

  • Quarterly net income was a loss of $711 thousand compared to the second quarter’s net income of $3.6 million. The decline in net income was due to an increase in provision for credit loss expense of $5.6 million related to losses and reserves posted during the quarter.
  • Net interest margin increased 13 basis points over prior quarter and 51 basis points over third quarter 2020, ending at 4.07%.
  • Cost of deposits decreased to 0.38%, an improvement of 2 and 9 basis points from the previous quarter and third quarter 2020, respectively.
  • For the first nine months of 2021 Return on Average Assets was 0.79%, down from the 0.89% for the same period last year. Return on Average Equity decreased 7% from the prior year-to-date period and ended at 9.65%.
  • Tangible book value per share ended the quarter at $10.72, decreasing $0.07 per share from the previous quarter and increasing $1.08 per share, or 11%, over the third quarter 2020.
  • Organic loan growth increased $100 million over the third quarter 2020. Annualized organic loan growth is 12% for 2021.

Patricia A. Husic, President & CEO of Centric Financial Corporation and Centric Bank stated, “The financial results for the third quarter of 2021 were adversely affected from the loan charge-offs and increased provision for loan losses, largely attributed to a single commercial lending relationship with purported fraud. Despite the credit loss in the third quarter, we have experienced positive momentum from the second quarter to include:  loan growth of $20 million, resulting in an 8% overall loan growth for 2021; yield on loans increased by 14 basis points to 4.79%; cost of deposits decreasing further to 0.38%, the lowest level in the history of the bank. We continue to focus on executing our key initiatives and remain well positioned for future sustainable growth and profitability.”

Results of Operations – Third Quarter

The quarter ended September 30, 2021 was a net loss of $711 thousand, or –$0.08 per diluted share, down from net income of $3.6 million reported for the second quarter 2021.  Earnings for the third quarter 2021 were adversely affected by a provision for credit losses of $6.1 million, which was primarily due to one commercial relationship with an impact of $5.1 million, which involved alleged fraudulent activities by the borrower.  Pre-tax, pre-provision income was $5.2 million for the quarter.

Net interest income for the quarter was $10.4 million, on par with the prior quarter.  PPP loan servicing fees contributed $1.7 million to interest income in the current quarter.  Net interest income increased $1.4 million, or 16%, over third quarter 2020, increasing the net interest margin by 51 basis points.  This was achieved through organic loan growth of $100 million, as well as a 41 basis point increase in loan yields, and a reduction in the cost of funds of 15 basis points as the bank has shifted the mix of deposits.  There is a balance of $2.1 million in remaining PPP deferred income to be recognized in future periods.

Noninterest income totaled $879 thousand for the third quarter, down slightly from the second quarter 2021 and third quarter 2020.  During the third quarter 2021, the Bank has seen a reemergence of prior sources of income and recognized a gain on sale of SBA loans of $116 thousand, an increase of $90 thousand from third quarter 2020.  Mortgage related income decreased $163 thousand, or 47%, from the prior quarter and 33% from third quarter 2020. The market adjustment on equity securities increased $100 thousand over the second quarter 2021. 

Noninterest expense of $6.1 million for the third quarter 2021 improved from the second quarter by $239 thousand.  Salaries and benefits decreased $193 thousand, from lower incentive compensation expense during the quarter.  Loan and collection expense increased $79 thousand due to legal expenses related to collection efforts, offset by a reduction in marketing expense and amortization of mortgage servicing rights.  Compared to third quarter 2020, noninterest expenses increased $316 thousand.  FDIC assessment expense rose $87 thousand due to the increased customer base related to PPP, salary and benefits expense increased $68 thousand related to increased benefits cost and a decrease in incentive compensation.  Licensing & software expense grew by $52 thousand related to PPP forgiveness processing. 

Results of Operations – Year to Date

Net income for the nine months of 2021 was $6.5 million, or $0.78 and $0.77 per basic and diluted share, respectively, compared to the $0.72 per basic and diluted share for the prior year.  Provision for credit loss expense increased $4.2 million due to the loan losses and specific allocations discussed in the asset quality section below.  Pre-tax pre-provision income was $15.2 million.

Net interest income was $31.1 million and increased $6.7 million, or 27%, over the nine months ended September 30, 2020.   Interest and fees on loans increased $4.7 million, with an increase in PPP deferred fee income of $3.4 million as well as increases in core lending of $100 million.  Although average balances on deposits grew year over year by $160 million, rates on deposits declined 36 basis points, reducing funding expense by $1.5 million.  Net interest margin for the period ending September 30, 2021, was 4.00%, a 35 basis-point improvement from the 3.65% achieved during the first nine months of 2020.

Noninterest income totaled $2.8 million for the first nine months of 2021, an increase of $411 thousand, or 17%, from the same period 2020.  Mortgage income rose 58%, or $337 thousand, from the production and sale of residential mortgage loans.  The return of Small Business Administration lending produced a gain on sale of SBA loans of $263 thousand for 2021, an increase of $158 thousand.  Cash management account analysis products added $100 thousand to service charges on deposit accounts, debit card income increased by $72 thousand, offset by a reduction of other service fees on loans of $129 thousand related to lower origination fee income on commercial lines of credit. 

Noninterest expense totaled $18.7 million, an increase of 16%, or $2.6 million, over 2020.  The Bank’s largest noninterest expense continues to be the investment in our employees as salaries and benefits, which rose 13%, or $1.3 million. The increase is due to a $72 thousand increase in mortgage commission expense, $112 thousand in other lending-based incentives, and increases in health care and other benefit expense of $291 thousand.  Occupancy and equipment expense increased by $197 thousand related to the expansion in the Philadelphia market.  FDIC assessment expense expanded $356 thousand due to the increase in our customer base related to PPP and core growth, loan and collection expense increased $152 thousand, and advertising and marketing grew $152 thousand, or 55%, as these activities were significantly limited in 2020.  License and software fees increased $180 thousand with PPP related licensing expense of $105 thousand.

Asset Quality

Provision expense of $6.1 million was taken in the third quarter 2021 as a result of a $20 million increase in core lending activity, an impact of $5.1 million related to one commercial relationship with alleged fraud, and 7 other lending relationships for which losses were recorded which impacted the provision by $0.8 million.  $2.9 million of the impact of the single relationship is a specific allocation that we hope to be able to reduce in future quarters as more reliable information becomes available.  We are continuing collection efforts where prudent, for potential recoveries.


Three months ended


Nine months ended


Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,


Sep 30,

Sep 30,

 (in thousands)

2021

2021

2021

2020

2020


2021

2020

Charge offs

5,405

264

57

610


5,726

298

Recoveries

7

15

1

1


23

1

Net Charge offs

5,398

249

56

610

(1)


5,703

297

For the nine months ending September 30, 2021, total provision expense amounted to $7.0 million, an increase of $4.2 million, or 152%, from the $2.8 million taken in the first nine months of 2020.  The coverage ratio for the allowance for loan and lease loss is 1.28% of the total loan portfolio and 1.34% excluding PPP loans. The balance for allowance for loan and lease losses increased to $11.8 million from the $10.8 million on September 30, 2020, a 9% increase.  Management believes the allowance for loan and lease losses on September 30, 2021 adequately reflects the inherent risk in the loan portfolio.

On September 30, 2021, nonperforming assets totaled $13.8 million, a decrease of $1.2 million from the second quarter, due to a $1.4 million decrease in loans 90+ days past due.  From September 30, 2020, nonaccrual loans increased $1.8 million.  Total nonperforming assets were 1.24% of total assets at quarter end, an improvement of 0.11% from previous quarter and an increase of 0.13% from September 30, 2020.


At Period End


Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Asset Quality  (in thousands)

2021

2021

2021

2020

2020

Nonaccrual Loans

$    10,389

$    10,178

$   10,120

$    10,811

$      8,568

Restructured loans still accruing

187

188

134

460

Loans 90+ days past due & still accruing

3,249

4,692

1,937

1,423

2,969

OREO

Total Nonperforming Assets

$    13,825

$    15,057

$   12,057

$    12,369

$    11,997

Total Assets

1,111,518

1,110,872

1,122,986

1,118,012

1,074,756

Nonperforming assets/total assets

1.24%

1.36%

1.07%

1.11%

1.12%

SBA loans that were considered nonperforming on September 30, 2021 totaled $3.2 million.

Balance Sheet

Assets grew by $37 million year over year to $1.1 billion, despite the reduction of PPP loan balances by $204 million.  Cash and cash equivalents grew $57 million, coupled with a reduction in net loans of $27 million.  Investments in securities remained consistent with the prior quarter and increased $11 million over the same quarter prior year, with increases in tax free municipals of $13 million.

Total loans ended the period at $919 million, a decline of $41 million from prior quarter.  Excluding the $61 million in net PPP loan reductions from forgiveness, organic loan growth was $20 million.  Commercial loans increased $11 million and CRE loans increased $15 million over the prior quarter with PPP loan balances declining $204 million to $82 million as a result of SBA loan forgiveness during the 2021 year. Core loan growth increased $100 million, or 14%, year over year with $89 million attributed to CRE loan growth and $18 million in commercial loans. 

Total deposits ended the period at $937 million, down slightly from the prior quarter as higher rate certificates of deposits declined $54 million while other interest-bearing deposits increased $63 million.  The shift out of certificates of deposit was due to the reduction of wholesale funding of $23 million from the prior quarter.

Total deposits declined $8 million from prior quarter due to a reduction in municipal noninterest bearing accounts and increased $49 million from September 30, 2020 with an $82 million, or 50%, growth in core money market deposits and a $32 million decline in certificates of deposit.  Wholesale funding increased $12 million from the prior quarter and was reduced by $83 million from September 2020.  A 10% increase in noninterest bearing deposits over prior year brought the ratio of noninterest deposits to total deposits to 24% on September 30, 2021. 

Shareholders’ equity ended the period at $91 million. Year over year equity increased $10 million, or 12%.  At September 30, 2021, Centric held 313,264 shares of treasury stock with a balance of $2.2 million, repurchased under the Company’s stock repurchase plan during 2020.  No new treasury shares have been purchased in 2021.  Tangible book value of $10.72 remained consistent with second quarter and increased $1.08 per share, or 11%, over September 30, 2020, as a result of increased earnings and stock repurchases.  Centric Bank remains above bank regulatory “Well Capitalized” standards with total risk-based capital for the Bank of 12.81% on September 30, 2021. 

Centric Financial Corporation




Consolidated Balance Sheet (Unaudited)





At Period End


Sep 30,

Jun 30,

Sep 30,

(Dollars in thousands)

2021

2021

2020

Assets




Cash and cash equivalents

$        124,034

$           78,309

$           67,143

Other investments

43,102

44,401

32,210

  Loans

919,116

960,193

946,466

  Less: allowance for loan losses

(11,775)

(11,082)

(10,771)

Net loans

907,341

949,111

935,695

Premises and equipment

15,954

16,341

17,515

Accrued interest receivable

4,644

5,624

5,836

Mortgage servicing rights

1,026

1,037

1,180

Goodwill

492

492

492

Other assets

14,925

15,557

14,685

Total Assets

$     1,111,518

$     1,110,872

$     1,074,756





Liabilities




   Noninterest-bearing deposits

226,801

244,342

206,594

      Interest-bearing demand deposits

308,396

266,014

328,977

      Money market and savings

244,078

223,246

162,304

      Certificates of deposit

157,677

211,537

189,660

   Interest-bearing deposits

710,151

700,797

680,941

Total deposits

936,952

945,139

887,535

Short-term borrowings

10,000

10,000

25,000

Long-term debt

70,480

60,687

78,866

Accrued interest payable

200

107

234

Other liabilities

2,501

2,961

1,331

Total Liabilities

1,020,133

1,018,894

992,966

Total Shareholders’ Equity

91,385

91,978

81,790

Total Liabilities and Shareholders’ Equity

$     1,111,518

$     1,110,872

$     1,074,756

 

Centric Financial Corporation








Consolidated Statement of Income (Unaudited)







Three months ended


Nine months ended


Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,


Sep 30,

Sep 30,

(Dollars in thousands)

2021

2021

2021

2020

2020


2021

2020

Interest income









Interest and dividends on securities

$         334

$          349

$          365

$          337

$          292


$      1,048

$          760

Interest and fees on loans

11,311

11,411

11,413

10,501

10,238


34,135

29,480

Other

32

15

16

20

36


63

218

   Total interest income

11,677

11,775

11,794

10,858

10,566


35,246

30,458

Interest expense









Interest on deposits

866

937

981

952

1,022


2,784

4,329

Interest on borrowings

400

424

501

561

578


1,325

1,694

   Total interest expense

1,266

1,361

1,482

1,513

1,600


4,109

6,023

Net interest income

10,411

10,414

10,312

9,345

8,966


31,137

24,435

Provision for loan losses

6,092

450

450

325

975


6,992

2,775

Net interest income after provision expense

4,319

9,964

9,862

9,020

7,991


24,145

21,660

Noninterest income









Gain on sale of SBA loans

116

147

26


263

105

Gain on sale of mortgage loans

157

313

319

305

251


789

533

Other non-interest income

606

462

693

877

630


1,761

1,764

   Noninterest income

879

922

1,012

1,182

907


2,813

2,402

Noninterest expense









Salaries and benefits

3,569

3,762

3,717

3,822

3,501


11,048

9,771

Occupancy and equipment

590

593

628

609

541


1,811

1,614

Professional fees

181

202

210

248

199


593

499

Data processing

327

294

280

280

291


901

844

Advertising and marketing

110

145

171

180

129


426

274

Other non-interest expense

1,329

1,349

1,285

1,529

1,129


3,963

3,166

   Noninterest expense

6,106

6,345

6,291

6,668

5,790


18,742

16,168

Income before taxes

(908)

4,541

4,583

3,534

3,108


8,216

7,894

Income tax expense

(197)

943

949

738

647


1,695

1,633

Net income available to common shareholders

$      (711)

$      3,598

$      3,634

$      2,796

$      2,461


$      6,521

$      6,261

 

Centric Financial Corporation







Per Share Data & Performance Ratios (Unaudited)















(Dollars in thousands except per share)

Three months ended


Nine months ended


Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,


Sep 30,

Sep 30,

Earnings and Per Share Data

2021

2021

2021

2020

2020


2021

2020

Net income

$     (711)

$    3,598

$      3,634

$      2,796

$      2,461


$    6,521

$    6,261

Basic earnings per common share

$    (0.08)

$      0.43

$         0.43

$         0.33

$         0.28


$       0.78

$       0.72

Diluted earnings per common share

$    (0.08)

$      0.42

$         0.43

$         0.33

$         0.28


$       0.77

$       0.72

Book value  (at period end)

$    10.78

$    10.85

$      10.43

$      10.00

$         9.69




Tangible book value (at period end)

$    10.72

$    10.79

$      10.38

$         9.94

$         9.64




Close price (at period end)

$      9.50

$      9.75

$         9.40

$         8.58

$         7.50




Common shares outstanding

8,477,518

8,475,143

8,452,057

8,448,903

8,436,407




Weighted average shares – basic

8,419,882

8,408,969

8,402,984

8,411,759

8,670,112


8,410,674

8,726,012

Weighted average shares – diluted

8,525,573

8,511,644

8,490,150

8,434,558

8,683,524


8,509,252

8,746,034










Performance Ratios (period to date)









Return on average assets

-0.26%

1.29%

1.33%

1.05%

0.94%


0.79%

0.89%

Return on average equity

-3.04%

15.99%

16.80%

13.44%

11.89%


9.65%

10.34%

Efficiency ratio

54.09%

55.63%

55.53%

62.94%

58.82%


55.09%

60.37%










Yield on loans

4.80%

4.65%

4.76%

4.38%

4.39%


4.73%

4.75%

Yield on average earning assets

4.57%

4.45%

4.55%

4.23%

4.20%


4.52%

4.55%

Cost of deposits

0.38%

0.40%

0.44%

0.43%

0.47%


0.40%

0.76%

Cost of funds

0.51%

0.54%

0.59%

0.61%

0.66%


0.54%

0.94%

Net interest margin

4.07%

3.94%

3.98%

3.64%

3.56%


4.00%

3.65%










Capital Ratios (at period end)









Shareholders’ equity / asset ratio

8.22%

8.28%

7.85%

7.56%

7.61%




Tangible common equity / tangible assets

8.18%

8.24%

7.81%

7.52%

7.57%




Tier I leverage ratio (bank)

9.79%

9.62%

9.39%

9.31%

9.17%




Common tier 1 capital/risk-based capital (bank)

11.56%

11.66%

11.59%

11.48%

11.53%




Tier 1 risk-based capital (bank)

11.56%

11.66%

11.59%

11.48%

11.53%




Total risk-based capital (bank)

12.81%

12.89%

12.83%

12.72%

12.78%













Asset Quality Ratios









Net charge-offs/average loans (period to date)

2.31%

0.10%

0.02%

0.26%

0.00%


0.70%

0.05%

Nonperforming assets / total assets (at period end)

1.24%

1.36%

1.07%

1.11%

1.12%




Allowance for loan losses / total loans

1.28%

1.15%

1.09%

1.09%

1.14%




Allowance for loan losses / nonaccrual loans

113.35%

108.89%

107.52%

97.00%

125.71%




 

 

Centric Financial Corporation








Consolidated Average Balance Sheets and Average Yield / Cost (Unaudited)






Three Months Ended


September 30, 2021


September 30, 2020


 Average 




 Average 




 Balance

 Interest 

 Rate


 Balance

 Interest 

 Rate

Interest Earning Assets








Fed funds & bank balances

$       31,723

$         32

0.40


$       36,348

$         36

0.40

Restricted stock

2,948

33

4.38


3,830

59

6.16

Total securities

43,410

302

2.78


32,693

232

2.84

Total loans

935,813

11,311

4.80


928,339

10,238

4.39

Total Earning Assets

1,013,895

11,677

4.57


1,001,210

10,566

4.20









Allowance for loan losses

(11,795)




(10,345)



Non-earning assets

85,746




55,230



Total Average Assets

$  1,087,846




$  1,046,095



















Interest-Bearing Liabilities








Checking, money market, savings

497,672

539

0.43


447,731

346

0.31

Certificates of deposit

171,009

326

0.76


200,936

676

1.34

Total interest-bearing deposits

668,681

866

0.51


648,667

1,022

0.63

Noninterest-bearing deposits

243,541




208,468



Total deposits

912,222

866

0.38


857,135

1,022

0.47

Total borrowings

79,084

400

2.00


103,989

578

2.20

Total Interest-Bearing Liabilities

747,765

1,266

0.67


752,656

1,600

0.84

      Cost of funds



0.51




0.66

Other liabilities

2,964




2,174



Total Average Liabilities

994,270




963,298



Total Shareholders’ Equity

93,576




82,797



Total Avg. Liabilities and Shareholders’ Equity

$  1,087,846




$  1,046,095



Interest Rate Spread



3.90




3.36

Net Interest Income


$ 10,411




$   8,966


Interest Rate Margin



4.07




3.56

 

Centric Financial Corporation








Consolidated Average Balance Sheets and Average Yield / Cost (Unaudited)






Nine Months Ended


September 30, 2021


September 30, 2020


 Average 




 Average 




 Balance

 Interest 

 Rate


 Balance

 Interest 

 Rate

Interest Earning Assets








Fed funds & bank balances

$       31,318

$         63

0.26


$       29,019

$      218

1.01

Restricted stock

3,073

132

5.76


3,456

139

5.39

Total securities

43,095

916

2.83


32,069

620

2.58

Total loans

963,931

34,135

4.73


829,564

29,480

4.75

Total Earning Assets

1,041,417

35,246

4.52


894,107

30,458

4.55









Allowance for loan losses

(11,207)




(9,444)



Non-earning assets

68,539




52,186



Total Average Assets

$  1,098,750




$     936,849



















Interest-Bearing Liabilities








Checking, money market, savings

472,604

1,527

0.43


362,945

1,425

0.52

Certificates of deposit

209,822

1,257

0.80


218,270

2,904

1.78

Total interest-bearing deposits

682,426

2,784

0.55


581,215

4,329

0.99

Noninterest-bearing deposits

237,808




179,165



Total deposits

920,234

2,784

0.40


760,381

4,329

0.76

Total borrowings

85,058

1,325

2.07


93,471

1,694

2.40

Total Interest-Bearing Liabilities

767,485

4,109

0.71


674,686

6,023

1.19

      Cost of funds



0.54




0.94

Other liabilities

3,400




2,278



Total Average Liabilities

1,008,693




856,130



Total Shareholders’ Equity

90,057




80,719



Total Avg. Liabilities and Shareholders’ Equity

$  1,098,750




$     936,849



Interest Rate Spread



3.81




3.36

Net Interest Income


$ 31,137




$ 24,435


Interest Rate Margin



4.00




3.65

About the Company

Founded in 2007, Centric Financial Corporation, and its subsidiary, Centric Bank, is headquartered in south central Pennsylvania with assets of $1.1 billion and remains a leader in organic loan growth.  A locally owned, locally loaned community bank, Centric Bank provides competitive and pro-growth financial services to businesses, professionals, individuals, families, and the health care industry.  An American Banker 2020, 2019 and 2018 Best Banks to Work For, three-time Best Places to Work, Top 50 Fastest-Growing Companies for eight years, and three times ranked a Top 200 Publicly Traded Community Bank by American Banker for financial performance.    

Centric Bank has financial centers located in Harrisburg, Hershey, Mechanicsburg, Camp Hill, Doylestown, Devon, and Lancaster, loan production offices in Lancaster and Devon, and an Operations and Executive Office campus in Hampden Township, Cumberland County. To learn more about Centric Bank, call 717.657.7727, or visit CentricBank.com.  Connect with them on Twitter, Facebook, LinkedIn, and Instagram.

Centric Financial Corporation is traded over the counter (OTC-Pink) with the ticker symbol CFCX.

Cautionary Note Regarding Forward-looking Statements:

This news release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts.  Actual results and trends could differ materially from those set forth in such statements and there can be no assurances that we will be able to continue to successfully execute on our strategic plan.  Factors that could cause actual results to differ from those expressed or implied by the forward looking statements include, but are not limited to, the following:  changes in current or future market conditions; the residual effects of the Covid-19 pandemic on business and impact to the economy, the effects of competition, development of competing financial products and services; changes in laws and regulations, the interest rate environment; changes in credit quality; inability to raise capital, if necessary, under favorable conditions; volatilities in the securities markets;  other deteriorating economic conditions; and other risks and uncertainties.

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Contact:

Patricia A. Husic


President & CEO


717.909.8309

 

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SOURCE Centric Financial Corporation