COMMUNITY FIRST BANCORPORATION ANNOUNCES SECOND QUARTER 2022 FINANCIAL RESULTS

WALHALLA, S.C., Aug. 8, 2022 /PRNewswire/ -- Community First Bancorporation, Inc. (OTC: CFOK, the "Company"), parent company of Community First Bank, Inc. (the "Bank"), announced its financial results for the second quarter of 2022. Highlights of the results include:

• The Company earned $2,939,000 for the second quarter, and $4,092,000 for the first six months of 2022. Earnings per common share were $0.53 ($0.52 diluted) for the second quarter of 2022, and $0.73 (basic and diluted) for the six months ended June 30, 2022.
• Total consolidated earnings for the second quarter increased 154.9% compared to the first quarter of 2022, and 421.1% from the comparable 2021 period.
• On May 31, 2022, the Company completed the sale of its mortgage subsidiary, SeaTrust Mortgage Company, Inc. ("SeaTrust") to Primis Bank, Glen Allen, Virginia, recognizing a pre-tax net gain on the sale of approximately $2,293,000 (approximately $1,743,000 net of tax.)
• Net interest income grew by 17.8% in the first six months of 2022 compared to the comparable 2021 period.
• Noninterest income increased 71.4% over the level reported for the first half of 2021.
• Deposits increased 5.3% during the first six months of 2022.
• Loans held for investment increased 2.1% during the six-month period.
• Nonperforming assets to total assets remained low at 0.06% on June 30, 2022.

Total consolidated earnings were $2,939,000 for the second quarter of 2022 compared to $564,000 for the second quarter of 2021, an increase of 421.1%. Earnings per common share totaled $0.53 ($0.52 diluted) for the second quarter of 2022 compared to $0.10 per share for the second quarter of 2021. Net income in the second quarter of 2022 was impacted by an increase in net interest income and a gain on the sale of SeaTrust of $1,743,000, after tax.

Net interest income grew by 14.6% year over year for the second quarter of 2022, driven by interest-earning asset growth and higher rates on federal funds sold, interest earning cash balances, and investments. Average balances of loans and investments were higher by 4.4% and 83.6%, respectively, for the second quarter of 2022 compared to the second quarter of 2021.  Noninterest income totaled $5,929,000 for the most recent quarter compared to $2,461,000 for the second quarter of 2021, primarily due the after-tax gain achieved on the sale of SeaTrust.

Noninterest expense increased 15.1% year over year for the second quarter, primarily related to an increase in the loss on mortgage loans held for sale commitments related to activities of SeaTrust. The expense was $492,000 in the second quarter of 2022 compared to $21,000 in the second quarter of 2021. Salaries and benefit costs increased $340,000, or 9.0%, in 2022 compared to the second quarter of 2021. Occupancy and equipment expenses increased $84,000 in the most recent quarter due to additional locations for most of the period. Professional fees, including accounting, legal, recruitment and consulting fees, increased $97,000, or 57.0%, in 2022 compared to the second quarter of 2021. Miscellaneous loan expense increased $66,000, or 26.2%, with a significant amount of the increase attributable to SeaTrust's operations. Communications related costs declined 75.3% in the second quarter of 2022 compared to the second quarter of 2021, and marketing expense declined 15.8%.

President and CEO Richard D. Burleson commented: "The sale of SeaTrust was bittersweet. When we launched SeaTrust in 2020, we had elevated expectations that this line of business would provide a significant positive impact on our financial statements. That was not the case. Therefore, as we entered the 4^th quarter of 2021, the management team, with the approval of the Board of Directors, moved quickly to market and secure a buyer for the mortgage subsidiary. Given the rapid acceleration in mortgage rates and the overall slowdown in the mortgage space, we believe this was the best business decision for our Bank.  The sale of SeaTrust will allow us to focus more specifically on customers in the communities served by our Bank's branch offices. Rather than originating and selling loans servicing-released across a much larger geographic area, we will strive to offer our customers in-house mortgage products and Freddie Mac mortgage loans. We will service these loans locally and pair that service with other banking products, thereby providing a full-relationship approach to our customers."

Burleson continued "Over the last couple of years there has been a wave of digital lending offerings by numerous tech companies. We have positioned ourselves appropriately to meet the resulting challenges in service delivery via technology. Today, we originate consumer real estate loans via online applications through our website. Additionally, in early August we will launch our dynamic application for consumer non-real estate loans and commercial loans. This technology provides a significant improvement in turn times on loans and origination efficiencies and allows customers to provide their financial information in a safe, secure and encrypted format at their convenience."

Net income for the first half of 2022 was $4,092,000 compared to $923,000 for the first half of 2021. The comparison was impacted by the sale of SeaTrust in 2022 and by the Company's acquisition of Security Federal Bancorp in 2021.  Earnings per share for the first six months of 2022 totaled $0.73 per basic and diluted common share, compared to $0.15 for the first six months of 2021. Net interest income increased 17.8% in 2022, due to an increase in earning assets and interest rates. Average earning assets were $642,399,000 for the first six months of 2022 and $562,088,000 for the first six months of 2021. Increases in rates also impacted interest income, especially related to average rates earned on interest-earning cash balances, federal funds sold, and investment securities available for sale. Approximately 19% of the Company's loan portfolio is tied to adjustable rates.

The Company reported noninterest income of $9,368,000 for the first half of 2022, an increase of 71.4% over the $5,467,000 reported for the first half of 2021, including mortgage banking income of $4,892,000, gains of $653,000 on sales of SBA loans, and the gain of $2,293,000 ($1,743,000, net of tax) on the sale of SeaTrust. Noninterest income in the first half of 2021 included mortgage banking income of $3,759,000 and gains on sales of SBA loans of $175,000.

Noninterest expenses in the first six months of 2022 totaled $14,681,000 compared to $13,054,000 for the first six months of 2021, an increase of $1,627,000, or 12.5%. An increase of $1,085,000 in salaries and benefits was the primary driver of the increase. SeaTrust accounted for $476,000, or 43.9%, of the increase in salaries and benefits. The remainder of the increase was attributable to continuing employees of Security Federal Bank, which was acquired part way through the period in 2021, and to salary increases that became necessary due to changes in overall average wage levels in our markets. Other noninterest expenses increased 9.4% in 2022 compared to 2021 levels. Included in other noninterest expense is the loss on mortgage loans held for sale commitments related to SeaTrust, which increased $265,000 in the first six months of 2022 compared to the first six months of 2021. Professional fees, miscellaneous loan costs, and occupancy expenses also increased in the first six months of 2022 compared to 2021. Each of these increases were impacted by both the acquisition of Security Federal in 2021 and by increases in expenses of SeaTrust.

On June 30, 2022, total gross loans held for investment were $468,227,000, an increase of 2.3% compared to $457,501,000 on March 31, 2022, and an increase of 2.1% over the $458,752,000 reported on December 31, 2021. Average loans, including loans held for sale, increased 7.8% year over year from $442,431,000 for the first half of 2021 to $476,759,000 for the same period of 2022, allowing the Company to increase interest income earned from loans in 2022 over the amount earned in the comparable period of 2021.

Total deposits on June 30, 2022, were $593,427,000, a slight decrease compared to $595,421,000 on March 31, 2022, and an increase of 5.3% compared to the $563,511,000 total on December 31, 2021. The average rate paid on deposits for the first half of 2022 was the primary driver of lower interest expense on deposits in the first half of 2022 compared to the first half of 2021. However, increases in market rates in 2022 may impact funding costs for the remainder of the year.

Mr. Burleson commented: "The Company continues to have excellent asset quality. Nonperforming assets, comprising nonperforming loans and foreclosed assets, decreased to $414,000 as of June 30, 2022, compared to $1,308,000 on March 31, 2022, and $971,000 on December 31, 2021. As of June 30, 2022, we had two loans with combined outstanding balances of $66,000 in our foreclosure pipeline and our past due percentages remained well below our peers at .06% of total loans.  On June 30, 2022, our Allowance for Loan and Lease Losses ("ALLL") totaled $5,484,000, or 1.17% of total loan outstanding, despite no provision expense in the first half of 2022. We experienced a net recovery to the ALLL during the first half of 2022."

Burleson continued: "In 2008 and 2009 community banks experienced what we in the industry call the "days of the greater fool". During those times, the large banks began de-leveraging in certain loan types with non-renewals or demands for payoffs. Many of those customers went to community banks and those "problem loans" eventually had a negative impact on community banks across the country. We are again in the days of the "greater fool" as many large banks have begun exiting lending segments in anticipation of a recession. Here at Community First Bank, we are aware of the tightening of credit by some larger institutions, and we continue to be conservative in our lending approach.

We will continue to expand our market share in the communities we serve that have demonstrated the ability to provide for measured growth in a safe and sound manner. In markets that are not preforming as expected we may look to exit those markets. On July 29, 2022, we closed our Kingsport, TN loan production office. Loans and relationships from that market will be serviced in our Elizabethton, Tennessee office."

The Bank's Tier 1 Leverage Capital Ratio was 9.13% on June 30, 2022, and liquidity levels remain satisfactory.

Community First Bank has twelve full-service financial centers in North Carolina, South Carolina and Tennessee, with two each in Seneca and Anderson and single locations in Greenville, Williamston, Walhalla and Westminster, South Carolina, in Dallas and Charlotte, North Carolina; and two locations in Elizabethton, Tennessee. The Company operates a loan production office in Waynesville, North Carolina.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This News Release contains forward-looking statements, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "plan," "seek," "expect," "will," "may" and words of similar meaning. These forward-looking statements include, but are not limited to statements of our goals, intentions and expectations; statements regarding our business and strategic plans, prospects, growth and operating strategies; statements regarding the asset quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The Company is under no duty to and do not undertake any obligation to update any forward-looking statements after the date of this News Release.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

• The ultimate impact of the current pandemic is unknown and may impact the Company in various areas including but not limited to credit risk, liquidity risk, and risk to earnings.
• We may not be able to implement aspects of our growth strategy.
• Future expansion involves risks.
• New bank office facilities and other facilities may not be profitable.
• Acquisition of assets and assumption of liabilities may expose us to intangible asset risk, which could impact our results of operations and financial condition.
• The success of our growth strategy depends on our ability to identify and retain individuals with experience and relationships in the markets in which we intend to expand.
• We may need additional access to capital, which we may be unable to obtain on attractive terms or at all.
• Our estimate for losses in our loan portfolio may be inadequate, which would cause our results of operations and financial condition to be adversely affected.
• Our commercial real estate loans generally carry greater credit risk than one-to-four family residential mortgage loans.
• Construction financing may expose us to a greater risk of loss and hurt our earnings and profitability.
• Repayment of our commercial business loans is primarily dependent on the cash flows of the borrowers, which may be unpredictable, and the collateral securing these loans may fluctuate in value.
• We continue to hold other real estate, which has led to operating expenses and vulnerability to additional declines in real property values.
• A sizable portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business.
• Future changes in interest rates could reduce our profits.
• Strong competition within our market areas may limit our growth and profitability.
• Our stock-based incentive compensation plan will increase our costs, which will reduce our income.
• The implementation of our stock-based incentive compensation plan may dilute shareholder ownership interest.
• We are subject to extensive regulation and oversight, and, depending upon the findings and determinations of our regulatory authorities, we may be required to make adjustments to our business, operations or financial position and could become subject to formal or informal regulatory action.
• We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or constrain us from paying dividends or repurchasing shares.
• We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.
• The value of our deferred tax asset could be impacted if corporate tax rates in the U.S. decline or as a result of other changes in the U.S. corporate tax system.
• We may not be able to utilize all of our deferred tax asset.
• The fair value of our investments could decline.
• Liquidity risk could impair our ability to fund operations and jeopardize our financial condition, results of operations and cash flows.
• Changes in accounting standards could affect reported earnings.
• A failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers or other third parties, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.
• Our stock price may be volatile, which could result in losses to our shareholders and litigation against us.
• The trading volume in our common stock is lower than that of other larger companies; future sales of our stock by our shareholders or the perception that those sales could occur may cause our stock price to decline.
• There may be future sales of additional common stock or preferred stock or other dilution of our equity, which may adversely affect the market price of our common stock.
• We may issue additional debt and equity securities or securities convertible into equity securities, any of which may be senior to our common stock as to distributions and in the event of liquidation, which could negatively affect the value of our common stock.
• Negative public opinion surrounding our Company and the financial institutions industry generally could damage our reputation and adversely impact our earnings.

SOURCE Community First Bank