Centric Financial Corporation Announces Second Quarter 2022 Earnings

Jul 29th, 2022 20:25 EST

HARRISBURG, Pa., July 29, 2022 /PRNewswire/ — Centric Financial Corporation (“Centric” or “the Company”) (OTC: CFCX), the parent company of Centric Bank (“the Bank”), reported net income of $2.9 million, or $0.34 per common share diluted, for the second quarter 2022. For the first six months of 2022, net income was $5.7 million, or $0.67 per common share diluted.   

Highlights of Performance:

  • Core loan growth, excluding the impact of PPP loans, increased $29 million over the first quarter, an annualized growth rate of 14% and $75 million over the second quarter 2021.
  • Organic deposit growth was $1.4 million over prior quarter and increased $44 million, or 5%, over second quarter 2021.
  • Net interest margin increased 16 basis points over the first quarter, ending at 4.06%, and up 12 basis points over same quarter prior year. 
  • Tangible book value per share of $11.72 increased $0.28 per share from the previous quarter and increased $0.93 per share, or 8.6%, over second quarter 2021.
  • Cost of deposits decreased one basis point from first quarter to 0.36%, a reduction from the 0.40% at second quarter 2021.
  • Return on Average Assets of 1.14% increased 5% over the prior quarter with a decline of 15 basis points from second quarter 2021 which was impacted by PPP deferred income of $3.3 million.  

Patricia A. Husic, President & CEO of Centric Financial Corporation and Centric Bank stated, “We again delivered a solid quarter of financial results. Organic loan growth for the quarter was $29 million, with the increase driven largely from commercial real estate and commercial loans. The annualized growth rate for the quarter was 14%. During the quarter, our return on average assets increased to 1.14% while our net interest margin expanded to 4.06%. Loans that repriced with rising rates and floors being exceeded contributed about 25%, while the volume of our loan growth drove the majority of those increases.

Our team continues to be intentional in their business development efforts and disciplined with the pricing of both loans and deposits. Non-interest bearing deposits remain consistent with the first quarter results, or 28% of total deposits. Our expansion in the greater Philadelphia region continues to drive in good momentum as we onboard full relationship customers in these markets. We are leveraging the Centric Way of Banking in those communities and our success is evidenced with our growth. Loans in that region comprise 54% of our total balance sheet and 29% of total non-interest bearing deposits. We have seized opportunities stemming from the impact of past M&A in the Philadelphia region, and there is more yet to capitalize upon.  Our company is well positioned for the future.”

Results of Operations – Second Quarter

Net income for the quarter ended June 30, 2022 was $2.9 million, or $0.34 per diluted share, an increase of 5% over first quarter 2021.  Compared to second quarter 2021, net income declined $650 thousand, or 18%, and $0.08 per diluted share. The decline from the same quarter a year ago was the result of less PPP deferred fee income of $1.1 million as the PPP segment of lending has reduced by $131 million from June 30, 2021 and is currently $11.4 million in balances outstanding.

Net interest income for the quarter was $9.8 million, an increase of $667 thousand over first quarter.  The increase in the federal funds rate drove other interest income up $112 thousand with a decline in average balances.  Organic loan growth of $29 million coupled with rising rates increased interest on loans by $525 thousand over first quarter.   The cost of deposits remained consistent with first quarter while balances on borrowings declined $15 million at the end of the first quarter, reducing interest expense on borrowing in the second quarter by 15%. 

Organic loan growth expanded $75 million, loan yields increased by 6 basis points, and PPP deferred fee income declined $1.1 million compared to the second quarter 2021, culminating in a decline of $938 thousand in interest on loans.  Interest expense decreased by $223 thousand due to reduced cost of funds and a shift in the mix of deposits and reduced borrowings from the second quarter 2021 contributed to the reduction of net interest income of $626 thousand, producing a net interest margin of 4.06%, which is an increase of 12 basis points over the same period 2021.

Noninterest income totaled $1.0 million for the second quarter, an increase of 11%, or $100 thousand, over the prior quarter, driven by a reduction in mortgage related income of $149 thousand which was more than offset by other loan fee income, increasing $235 thousand.  Compared to the second quarter 2021, noninterest income increased $105 thousand, primarily due to increased swap referral fee income, increased service charge on deposits, and second quarter 2021 having a loss on equity securities of $80 thousand offset somewhat by a reduction in other loan and servicing income of $83 thousand.   

Noninterest expense of $6.6 million for the second quarter increased over first quarter by $448 thousand, or 7%.  Salaries and benefits increased $196 thousand due to the expansion of the lending teams in the Philadelphia area and supporting credit personnel, as well as filling vacancies in the Cash Management team.  Increases of $264 thousand in other non-interest expense were across areas such as loan and collection expense, travel, and SBA mortgage servicing rights amortization expense, partially offset by a reduction in FDIC assessment expense by $149 thousand. 

Compared to second quarter 2021, noninterest expenses increased 4%.  Salary and benefits and occupancy and equipment were relatively flat.  FDIC assessments decreased $155 thousand as peak deposits from PPP efforts and wholesale funding which supported the PPP lending have declined.  Loan and collection expense increased $100 thousand due to core lending efforts, and software and licensing costs increased $63 thousand. 

Results of Operations – Year to Date

Net income for the first six months of 2022 ended at $5.7 million, or $0.67 per diluted share, a decrease of $1.5 million over the prior year, as the reduction in PPP deferred fees declined by $2.5 million year over year due to PPP loan forgiveness of $131 million.  Excluding PPP deferred fees for both years, core net income before tax increased by $620 thousand, or 11%.

Net interest income decreased $1.8 million to $18.9 million over the six months ended June 30, 2021.   Interest and fees on loans decreased $2.4 million, primarily due to the $2.5 million decline in PPP deferred fee income.   Interest income on commercial real-estate loans increased $1.3 million, or 10%, over the same period last year, largely driven by volume.  Total interest expense declined $550 thousand, or 19%, from last year.  Reduction in rate and balances in certificates of deposit contributed $530 thousand to the decrease from last year.  Increases in money market deposit balances and increased rates of 6 basis points somewhat offset the benefit by $259 thousand.  Net interest margin for the period ending June 30, 2022, was 3.98%, a two basis point increase over the first six months of 2021.

Noninterest income totaled $2.0 million for the first six months of 2022, consistent with the same period 2021 with changes in revenue streams.  Loan fees increased 50%, or $292 thousand, along with swap referral fees increasing $223 thousand.  Gain on loans held for sale decreased $452 thousand. 

Noninterest expense totaled $12.8 million, consistent with the $12.6 million last year.  Salaries and benefits declined 3% due to lower commission on mortgage activity, open positions during 2022 and health insurance expense reduction of $98 thousand.  Data processing services increased 18% from expanded utilization of products on the Bank’s core operating systems.  Advertising and marketing expenses were reduced by 33%.  FDIC assessments were reduced in 2022 by $195 thousand connected to the release of wholesale funding at the end of 2021.  Other operating expenses increased $230,000, with increases in license fees and software maintenance, travel and lodging, and SBA mortgage servicing rights amortization

Asset Quality

Provision expense of $850 thousand for the first six months of 2022 was consistent with last year’s $900 thousand.  The coverage ratio for the allowance for loan and lease loss increased to 1.46% compared to $1.15% last year, or 1.36%, excluding PPP loans which declined by $131 million.  The allowance for loan and lease losses amounted to $13.2 million and $11.1 million at June 30, 2022 and 2021, respectively.  Management believes the allowance for loan and lease losses at June 30, 2022 adequately reflects the inherent risk in the loan portfolio.

At June 30, 2022, nonperforming assets totaled $12.6 million, relatively flat from the first quarter and an improvement of $2.5 million over June 30, 2021.  Compared to last year, loans 90+ days past due were reduced by $4.7 million with $1.3 million moving into nonaccrual.  Other changes to nonaccrual loans consisted of SBA loans being processed for collection and reimbursement of the guarantee, while other relationships moved into nonaccrual status due to the hardships encountered during 2021.  SBA loans that were considered nonperforming at June 30, 2022 totaled $2.9 million, a decrease of $559 thousand from a year ago.  Nonperforming conventional loans also declined by $1.9 million from a year ago.  Total nonperforming assets were 1.21% of total assets at quarter end, a reduction of 11%, from June 30, 2021.

At Period End

 

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Asset Quality  (in thousands)

2022

2022

2021

2021

2021

Nonaccrual Loans

$     12,382

$     12,137

$   12,674

$     10,389

$     10,178

Restructured loans still accruing

179

181

184

187

188

Loans 90+ days past due & still accruing

3,249

4,692

OREO

Total Nonperforming Assets

$     12,561

$     12,318

$   12,858

$     13,825

$     15,057

Total Assets

1,035,817

1,033,874

983,206

1,111,518

1,110,872

Nonperforming assets/total assets

1.21 %

1.19 %

1.31 %

1.24 %

1.36 %

Balance Sheet

At June 30, 2022, Centric’s total assets were $1.0 billion compared to $1.1 billion at June 30, 2021, a decrease of $75 million and consistent with March 31, 2022.  Cash and cash equivalents were reduced by $9 million coinciding with the reduction in borrowings of $16 million.  Total loans outstanding decreased $56 million as a result of PPP loan forgiveness. 

Total loans ended the period at $904 million, an increase of $18 million from prior quarter.  Organic loan growth was $29 million.  Commercial loans increased $4 million and CRE loans increased $25 million.  Compared to the same period last year, PPP loan balances forgiven amounted to $131 million, resulting in core loan growth of $75 million, or 9%.  CRE grew $51 million and commercial loans increased 17%, or $38 million.  Remaining PPP loan balances outstanding were $11 million at period end.  Annualized core loan growth is 14% through June 30, 2022.    

Investments in securities declined from the prior quarter due to principal payments on mortgage-backed securities as well as a called debt security, and also decreased over last year by $3 million primarily due to the sale of an equity security late in 2021. 

Total deposits ended the period at $879 million, similar to the prior quarter in balances and mix.   From June 30, 2021, money market and savings grew 26%, or $58 million, while noninterest bearing deposits remained consistent.  Certificates of deposit and interest-bearing demand deposit balances declined $88 million and $40 million, respectively, largely due to a reduction in wholesale funding of $110 million at the end of 2021.

Short-term borrowings of $10 million matured in the fourth quarter 2021 and were not replaced as liquidity remained strong.  Long-term borrowings totaled $55 million at quarter end, consistent with the prior quarter and decreased $6 million from the same period last year. 

Shareholders’ equity increased $2.5 million over first quarter 2022 and ended the period at $100 million.  Year over year, equity increased $8 million, or 9%.  At June 30, 2022, Centric held 275,497 shares of treasury stock repurchased under the Company’s stock repurchase plan during 2020.  No new treasury shares have been purchased in 2022.  Tangible book value increased $0.28 per share over first quarter and ended the period at $11.72.  Tangible book value increased $0.93 per share, or 9%, from June 30, 2021, as a result of increased earnings over the period.  Centric Bank remains above bank regulatory “Well Capitalized” standards.

Centric Financial Corporation

Consolidated Balance Sheet (Unaudited)

At Period End

Jun 30,

Mar 31,

Jun 30,

(Dollars in thousands)

2022

2022

2021

Assets

Cash and cash equivalents

$           69,247

$           82,481

$           78,309

Other investments

40,916

43,333

44,401

  Loans

904,203

885,820

960,193

  Less: allowance for loan losses

(13,172)

(12,808)

(11,082)

Net loans

891,031

873,012

949,111

Premises and equipment

12,632

12,800

13,425

Accrued interest receivable

3,709

3,938

5,624

Mortgage servicing rights

747

867

1,037

Goodwill

492

492

492

Other assets

17,043

16,951

18,473

Total Assets

$      1,035,817

$      1,033,874

$      1,110,872

Liabilities

   Noninterest-bearing deposits

247,258

246,908

244,342

      Interest-bearing demand deposits

226,210

222,657

266,014

      Money market and savings

281,547

289,980

223,246

      Certificates of deposit

123,880

117,932

211,537

   Total interest-bearing deposits

631,637

630,569

700,797

Total deposits

878,895

877,477

945,139

Short-term borrowings

10,000

Long-term debt & leases

54,723

54,913

60,687

Accrued interest payable

82

87

107

Other liabilities

1,923

3,678

2,961

Total Liabilities

935,623

936,155

1,018,894

Total Shareholders’ Equity

100,194

97,719

91,978

Total Liabilities and Shareholders’ Equity

$      1,035,817

$      1,033,874

$      1,110,872

Centric Financial Corporation

Consolidated Statement of Income 

(Unaudited)

Three months ended

Six months ended

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

(Dollars in thousands)

2022

2022

2021

2021

2021

2022

2021

Interest income

Interest and dividends on securities

$         288

$         307

$           289

$         334

$           349

$           595

$         714

Interest and fees on loans

10,473

9,948

11,935

11,311

11,411

20,421

22,824

Other

149

37

20

32

15

186

31

   Total interest income

10,910

10,292

12,244

11,677

11,775

21,202

23,569

Interest expense

Interest on deposits

796

788

820

866

937

1,584

1,918

Interest on borrowings

326

383

402

400

424

709

925

   Total interest expense

1,122

1,171

1,222

1,266

1,361

2,293

2,843

Net interest income

9,788

9,121

11,022

10,411

10,414

18,909

20,726

Provision for loan losses

450

400

604

6,092

450

850

900

Net interest income after provision expense

9,338

8,721

10,418

4,319

9,964

18,059

19,826

Noninterest income

Gain on sale of SBA loans

164

116

147

147

Gain on sale of mortgage loans

100

79

153

157

313

179

632

Other non-interest income

927

848

485

606

462

1,775

1,155

   Noninterest income

1,027

927

802

879

922

1,954

1,934

Noninterest expense

Salaries and benefits

3,739

3,543

3,397

3,569

3,762

7,282

7,479

Occupancy and equipment

589

627

615

590

593

1,216

1,221

Professional fees

227

219

212

181

202

446

412

Data processing

343

332

312

327

294

675

574

Advertising and marketing

109

102

55

110

145

211

316

Other non-interest expense

1,597

1,333

1,810

1,329

1,349

2,930

2,634

   Noninterest expense

6,604

6,156

6,401

6,106

6,345

12,760

12,636

Income before taxes

3,761

3,492

4,819

(908)

4,541

7,253

9,124

Income tax expense

813

693

991

(197)

943

1,506

1,892

Net income available to common shareholders

$     2,948

$     2,799

$       3,828

$      (711)

$       3,598

$       5,747

$     7,232

Centric Financial Corporation

Per Share Data & Performance Ratios (Unaudited)

(Dollars in thousands except per share)

Three months ended

Six months ended

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Jun 30,

Jun 30,

Earnings and Per Share Data

2022

2022

2021

2021

2021

2022

2021

Net income

$    2,948

$    2,799

$      3,828

$      (711)

$       3,598

$     5,747

$     7,232

Basic earnings per common share

$      0.35

$      0.33

$        0.45

$     (0.08)

$         0.43

$       0.68

$       0.86

Diluted earnings per common share

$      0.34

$      0.33

$        0.45

$     (0.08)

$         0.42

$       0.67

$       0.85

Book value  (at period end)

$    11.77

$    11.49

$      11.23

$     10.78

$       10.85

Tangible book value (at period end)

$    11.72

$    11.43

$      11.17

$     10.72

$       10.79

Close price (at period end)

$      9.92

$      9.95

$        9.70

$       9.50

$         9.75

Common shares outstanding

8,510,462

8,503,283

8,481,197

8,477,518

8,475,143

Weighted average shares – basic

8,466,897

8,450,699

8,425,194

8,419,882

8,408,969

8,458,843

8,405,994

Weighted average shares – diluted

8,564,001

8,552,790

8,533,882

8,525,573

8,511,644

8,558,440

8,500,956

Performance Ratios (period to date)

Return on average assets

1.14 %

1.09 %

1.50 %

-0.26 %

1.29 %

1.11 %

1.31 %

Return on average equity

11.88 %

11.57 %

16.45 %

-3.04 %

15.99 %

11.72 %

16.39 %

Efficiency ratio

60.13 %

61.46 %

53.61 %

54.09 %

55.63 %

60.77 %

55.58 %

Yield on loans

4.72 %

4.66 %

5.27 %

4.80 %

4.65 %

4.69 %

4.70 %

Yield on average earning assets

4.53 %

4.40 %

4.97 %

4.57 %

4.45 %

4.47 %

4.50 %

Cost of deposits

0.36 %

0.37 %

0.38 %

0.38 %

0.40 %

0.37 %

0.42 %

Cost of funds

0.48 %

0.51 %

0.52 %

0.51 %

0.54 %

0.50 %

0.56 %

Net interest margin

4.06 %

3.90 %

4.47 %

4.07 %

3.94 %

3.98 %

3.96 %

Capital Ratios (at period end)

Shareholders’ equity / asset ratio

9.67 %

9.45 %

9.68 %

8.22 %

8.28 %

Tangible common equity / tangible assets

9.63 %

9.41 %

9.64 %

8.18 %

8.24 %

Tier I leverage ratio (bank)

11.26 %

11.10 %

10.83 %

9.79 %

9.62 %

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

12.13 %

12.25 %

12.28 %

11.56 %

11.66 %

Tier 1 risk-based capital (bank)

12.13 %

12.25 %

12.28 %

11.56 %

11.66 %

Total risk-based capital (bank)

13.38 %

13.50 %

13.53 %

12.81 %

12.89 %

Asset Quality Ratios

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

0.04 %

0.00 %

-0.01 %

2.31 %

0.10 %

0.02 %

0.06 %

Nonperforming assets / total assets (at period end)

1.21 %

1.19 %

1.31 %

1.24 %

1.36 %

Allowance for loan losses / total loans

1.46 %

1.45 %

1.42 %

1.28 %

1.15 %

Allowance for loan losses / nonaccrual loans

106.38 %

105.53 %

92.45 %

113.35 %

108.89 %

Centric Financial Corporation

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

Three Months Ended

June 30, 2022

June 30, 2021

 Average 

 Average 

 Balance

 Interest 

 Rate

 Balance

 Interest 

 Rate

Interest Earning Assets

Fed funds & bank balances

$       33,221

$      149

1.81

$       31,197

$         15

0.20

Restricted stock

1,870

28

5.94

2,786

47

6.77

Total securities

41,797

260

2.49

43,454

302

2.78

Total loans

889,729

10,473

4.72

983,644

11,411

4.65

Total Earning Assets

966,617

10,910

4.53

1,061,081

11,775

4.45

Allowance for loan losses

(13,039)

(11,118)

Non-earning assets

84,621

61,386

Total Average Assets

$  1,038,199

$  1,111,349

Interest-Bearing Liabilities

Checking, money market, savings

514,687

608

0.48

484,832

526

0.43

Certificates of deposit

115,388

188

0.65

208,892

411

0.79

Total interest-bearing deposits

630,075

796

0.51

693,724

937

0.54

Noninterest-bearing deposits

250,949

247,169

Total deposits

881,024

796

0.36

940,893

937

0.40

Total borrowings

54,841

326

2.37

77,002

424

2.19

Total Interest-Bearing Liabilities

684,916

1,122

0.66

770,726

1,361

0.71

      Cost of funds

0.48

0.54

Other liabilities

3,030

3,439

Total Average Liabilities

938,895

1,021,334

Total Shareholders’ Equity

99,303

90,015

Total Avg. Liabilities and Shareholders’ Equity

$  1,038,199

$  1,111,349

Interest Rate Spread

3.87

3.74

Net Interest Income

$   9,788

$ 10,414

Interest Rate Margin

4.06

3.94

Centric Financial Corporation

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

Six Months Ended

June 30, 2022

June 30, 2021

 Average 

 Average 

 Balance

 Interest 

 Rate

 Balance

 Interest 

 Rate

Interest Earning Assets

Fed funds & bank balances

$       35,100

$      186

1.07

$       31,112

$         31

0.20

Restricted stock

2,139

59

5.55

3,136

100

6.42

Total securities

42,313

536

2.53

42,935

614

2.86

Total loans

877,633

20,421

4.69

978,222

22,824

4.70

Total Earning Assets

957,184

21,202

4.47

1,055,406

23,569

4.50

Allowance for loan losses

(12,844)

(10,908)

Non-earning assets

86,632

59,794

Total Average Assets

$  1,030,972

$  1,104,292

Interest-Bearing Liabilities

Checking, money market, savings

506,653

1,184

0.47

459,862

988

0.44

Certificates of deposit

120,056

400

0.67

229,551

930

0.82

Total interest-bearing deposits

626,709

1,584

0.51

689,413

1,918

0.56

Noninterest-bearing deposits

241,242

234,894

Total deposits

867,951

1,584

0.37

924,307

1,918

0.42

Total borrowings

61,907

709

2.29

88,095

925

2.10

Total Interest-Bearing Liabilities

688,615

2,293

0.67

777,508

2,843

0.73

      Cost of funds

0.50

0.56

Other liabilities

3,057

3,621

Total Average Liabilities

932,915

1,016,024

Total Shareholders’ Equity

98,057

88,268

Total Avg. Liabilities and Shareholders’ Equity

$  1,030,972

$  1,104,292

Interest Rate Spread

3.80

3.77

Net Interest Income

$ 18,909

$ 20,726

Interest Rate Margin

3.98

3.96

About the Company

An American Banker 2021, 2020, 2019, and 2018 Best Banks to Work For, four-time American Banker Most Powerful Women in Banking Top Team, three-time Best Places to Work, and Top 50 Fastest-Growing Companies for eight years, Centric Bank is headquartered in south central Pennsylvania with assets of $1.0 billion and remains a leader in organic loan growth. A locally owned, locally loaned community bank, Centric Bank provides highly competitive and pro-growth financial services to businesses, professionals, individuals, families, and to the health care and dental industries with the Doctor Centric Bank Division. Centric Bank was named one of the Top 200 Community Banks in the U.S. in 2022, 2021, 2020, and 2019. 

Founded in 2007, Pennsylvania-based Centric Bank has financial centers located in Harrisburg, Hershey, Mechanicsburg, Camp Hill, Doylestown, Devon, and Lancaster, as well as commercial loan offices in Devon, Doylestown, Lancaster, and an Operations and Executive Office campus in Hampden Township, Cumberland County. To learn more about Centric Bank, call 888.274.2033 or visit CentricBank.com. Connect with them on TwitterFacebookLinkedIn, 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; changes in key personnel; the effects of terrorism, natural disasters and pandemics and their impact on the economy; cybersecurity risks; the effects of competition and 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.

Contact:  Patricia A. HusicPresident & CEO717.909.8309

SOURCE Centric Financial Corporation

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