Centric Financial Corporation (“Centric” or “the Company”) (OTC: CFCX), the parent company of Centric Bank (“the Bank”), announced earnings and financial results for the first quarter 2021.
Net income for the quarter ending March 31, 2021 totaled $3.6 million, or $0.43, per basic and diluted share, a record high level of quarterly earnings.
Highlights of Performance:
– Net income increased $2.1 million, or 136%, over first quarter 2020, an increase of $0.26 per basic and diluted share due to reduced funding costs and recognition of $1.9 million in deferred fees.
– Return on Average Assets of 1.33% for first quarter 2021 increasing 73% over the same quarter 2020 due to a strong net interest margin and growth in non-interest income.
– First quarter Return on Average Equity of 16.80% increasing 115% over first quarter 2020.
– Tangible book value per share of $10.38 increased $1.39 per share, or 16% over the first quarter 2020.
– Net interest margin increased 16 basis points over first quarter 2020, ending at 3.98%.
– Cost of deposits decreased to 0.44%, a reduction of 82 basis points from the first quarter 2020
– Loans outstanding increased $305 million from the same period end last year including $216 million from Paycheck Protection
-Program (PPP) lending net of deferred fees. Core loan growth increased 13% over first quarter 2020, growing by $89 million.
– Participating in the second round of PPP lending, with $83 million generated in the first quarter.
– Total deposits grew 44%, or $288 million over the first quarter 2020, with noninterest bearing deposits reaching 27% of total deposits.
Patricia A. Husic, President & CEO of Centric Financial Corporation and Centric Bank stated, “Our strong first quarter results reflected expansion of our net interest margin as a result of significant recognition of deferred Paycheck Protection Program fees, impactful growth of non-interest bearing deposits, and further reduction in our overall cost of deposits.”
“Our team had an equally strong quarter for loan originations and growing our pipeline; however, loan originations were offset by paydowns and payoffs due to sales of commercial real estate buildings and businesses. We are continuing to see momentum in all of the markets that we serve as the economy is showing strong signs of a rebound as businesses are more fully opening and demand for lending is increasing.”
“We have been disciplined in our pricing as evidenced by our net interest margin. Although our net interest margin remains healthy and surpasses our peers in the banking industry, we are focused on growing our non-interest income. We are building the pipeline of non-interest income sources, to include sales of residential mortgages, third party swap fees, momentum in the SBA loan pipeline and growth of cash management fees.
In the first quarter, we upgraded our digital banking suite to Banno. The new online banking and mobile app delivered innovative features, enhanced security and a consistent experience on any device, and has been well received by our customers.
During the past year, we have seen more than 25% of our customers move to our online banking technology and change the manner in which they conduct their banking business. We have selected Splunk Cloud, a technology that will enhance our data security and compliance and provide enterprise infrastructure monitoring for our Company.
This technology will also provide us with the ability to obtain data intelligence about our customers and transactions and goes beyond the surface of the information provided by core banking software. A key strategic initiative is our focus on relevance to current and future customers while improving efficiency.
“Our Company is well positioned to take advantage of the growth opportunities related to merger disruption in the greater Philadelphia region and with the economic turnaround and increasing loan demand as businesses move to open more fully in our markets.”
Results of Operations – First Quarter
Net income for the quarter ended March 31, 2021 was $3.6 million, or $0.43 per share, basic and diluted, an increase of $838 thousand, or 30%, and $0.10 per share, basic and diluted, over fourth quarter 2020. Compared to first quarter 2020, net income increased $2.1 million, or 136%, and $0.26 per share, basic and diluted.
Net interest income for the quarter was $10.3 million, an increase of $3.1 million, or 44%, over first quarter 2020.
Factors included $55.3 million of PPP loans that received forgiveness by the SBA and contributed $1.9 million of income through recognition of net unamortized deferred fees during the quarter, an increase in net core lending of $89 million, reduced funding expense of $1.1 million, and reduced yield on earning assets of 64 basis points due to $216 million in outstanding PPP loans.
Combined, these items contributed to a 16 basis point increase in the net interest margin for the first quarter of 2021.
Noninterest income totaled $1.0 million for the first quarter 2021, an increase of $240 thousand, or 31%, over the same quarter last year. Mortgage banking income of $387 thousand increased 141%, growing $226 thousand over first quarter 2020.
Cash management fee income is improving as we continue with our intentional efforts to onboard new relationships brought in by PPP generation, increasing 211% over first quarter of 2020. Realized gain on equity securities increased $76 thousand.
Noninterest expense for the first quarter was $6.3 million, a decline of $377 thousand from fourth quarter 2020. A decline of $105 thousand was related to salaries and benefits due to reduced mortgage commission accruals. In the fourth quarter of 2020, a $189 thousand prepayment penalty expense was recognized to retire a long-term borrowing.
Compared to the first quarter of 2020, noninterest expenses increased by $1.1 million, primarily due to increased salary and benefits of $611 thousand as a result of increased employees, performance based compensation related to mortgage commissions, annual increases in salaries and payroll taxes, and an increase in health insurance premiums. FDIC assessments increased $113 thousand as a result of growth related to PPP new business customers and other core banking activities.
Loan and collection expense increased $129 thousand, and license and software expense rose $57 thousand due in part to upgrading the mobile banking application and support for the PPP loan application processing.
Asset Quality
Provision expense normalized to $450 thousand in the first quarter 2021, a declined $375 thousand from first quarter 2020 due to uncertainties this time last year related to the COVID-19 pandemic, its effects on the economy and our customer base.
Business operating capacities, particularly for restaurants, have elevated during early 2021. The coverage ratio for the allowance for loan and lease loss is 1.09% of the total loan portfolio and 1.39% excluding PPP loans.
The allowance for loan and lease losses was $10.9 million at March 31, 2021; management believes the allowance for loan and lease losses adequately reflects the inherent risk in the loan portfolio.
The CARES Act and joint regulatory agency statements made provisions to assist borrowers with short-term modifications which are not treated as troubled debt restructurings. As of March 31, 2021, qualifying loan deferral balances totaled $7.3 million, or less than 1% of total loans, a reduction of $13.8 million from December 31, 2020.
At March 31, 2021, nonperforming assets of $12.1 million were consistent compared to last quarter. Loans 90+ days past due increased $514 thousand and nonaccrual loans declined $692 thousand. Total nonperforming assets improved 0.04% from the previous quarter and 0.27% from March 31, 2020.
Centric Bank offers a level of attention that sets us apart as the Community Bank of Choice in Pennsylvania.