Centric Financial Corporation Announces Third Quarter 2022 Earnings

HARRISBURG, Pa., Nov. 2, 2022 /PRNewswire/ -- Centric Financial Corporation ("Centric" or "the Company") (OTC: CFCX), the parent company of Centric Bank ("the Bank"), reported net income of $3.0 million, or $0.35 per diluted common share, for the third quarter 2022. For the first nine months of 2022, net income was $8.8 million, or $1.02 per common share diluted.   

Highlights of Performance:

• Centric's stock price increased to $13.60 at month end September, a 37% increase over the prior quarter due primarily to the pending merger with First Commonwealth Financial Corporation. The merger is subject to closing conditions, including regulatory and Centric shareholder approvals.
• At quarter end, tangible book value per share was $11.94, an increase of $0.22 per share from the previous quarter and $1.22 per share growth, or 11.4%, over third quarter 2021.
• Core loan growth increased $34 million over second quarter, and $90 million, or 11%, over third quarter 2021.
• Noninterest bearing deposits increased 8% over third quarter 2021. Total core deposits grew $68 million, or 8%, over the same period last year.
• Net interest margin increased 47 basis points over the prior quarter, ending at 4.53%, and up 46 basis points over same quarter prior year.

Patricia A. Husic, President & CEO of Centric Financial Corporation and Centric Bank stated, "The third quarter delivered solid financial performance which was primarily driven by our commercial loan growth of 13% annualized and fee income related to third party swap fees and other loan fees. Core deposit growth has been consistent from the prior quarter, with noninterest-bearing deposits remaining strong at 28% of total deposits.  

"The loan growth, accompanied with rising interest rates, have produced a robust net interest margin of 4.53%, an expansion of 47 basis points over the prior quarter. Those results further demonstrate that our teams have been intentional with the loan growth and laser focused on our strategic goals. To date, our loan portfolio is comprised of 53% from the greater Philadelphia region. Our teams in those markets continue to make strong inroads in those communities.  As interest rates continue to rise, we expect to see upward pressure on deposit costs going forward. Net income has increased each quarter in 2022, resulting in an ROA of 1.16% and 1.13%, for the third quarter and year to date, respectively."

Results of Operations – Third Quarter

Net income for the quarter ended September 30, 2022, was $3.0 million, or $0.35 per diluted share, consistent with the prior quarter.  Compared to third quarter 2021, net income increased $3.7 million due to the $6 million loan loss provision taken in September 2021.  Pre-tax pre-provision income excluding PPP servicing fees, resulted in core earnings of $5.0 million for third quarter, 28% above second quarter 2022 and 41% higher than third quarter 2021.    

Net interest income for the quarter was $11.2 million, an increase of $1.5 million, or 15%, over second quarter 2022, primarily driven by a 47 basis point increase to the net interest margin.  Rate increases during the period were the driving factor in interest income, contributing $1.3 million, as well as increases in CRE loan balances outstanding.  Cost of funds rose 10 basis points over the prior quarter primarily from money market account rates increasing 47 basis points, offset somewhat by a decline of 21 basis points in interest checking rates.  

Net interest income increased $831 thousand over third quarter 2021, resulting in a net interest margin of 4.53% for the quarter, up 46 basis points.  The increase in the Effective Federal Funds Rate of 300 basis points year over year increased interest income on Federal funds and bank balances by $278 thousand over the prior year.  Rate increases were the primary driver in the rise of interest on loans of $705 thousand, partially offset by a reduction of $1.5 million in PPP service fee income.  The cost of deposits increased 9 basis points over third quarter 2021, driving the $181 thousand increase in interest expense as average interest-bearing balances declined.  Money market deposits were the primary contributors to the increases in both rate and balances as interest rates on checking declined over the period.

Noninterest income totaled $1.0 million for the second and third quarters 2022 with a slight change in the composition of income components with mortgage loan income declining $63 thousand while gain on the sale of SBA loans increased $67 thousand. Compared to the third quarter 2021, noninterest income increased $129 thousand, or 15%, with a decrease in mortgage loan income of $169 thousand, offset by higher swap fee income of $269 thousand and a combined $45 thousand increase in deposit services fees. 

Noninterest expense of $7.1 million for the third quarter of 2022 increased over second quarter of 2022 by $523 thousand, or 8%.  Salaries and benefits increased $230 thousand due to performance-based bonus accruals, increased staffing, and the expansion of the lending teams in Devon.  Legal fees increased due to $252 thousand in merger related costs.  Data processing expense increased $146 thousand.  FDIC assessment expense increased $85 thousand, offset by reductions in loan and collection expenses and license and software expenses.  

Compared to third quarter 2021, noninterest expenses rose 17%.  Salary and benefits costs increased 11%, professional fees increased $311 thousand, largely the result of merger related legal expense, and data processing increased $146 thousand.  FDIC assessments decreased $45 thousand as peak deposits from PPP declined.  Loan and collection expenses declined $75 thousand. 

Results of Operations – Year to Date

Net income for the first nine months of 2022 ended at $8.8 million, or $1.02 per diluted share, an increase of $2.2 million, or 34%, over the prior year.  The decrease of $4.7 million in provision expense was offset by a reduction of $4.0 million in PPP deferred fee income year over year.  Pre-tax pre-provision income excluding PPP service fee income resulted in core earnings of $12.3 million for the nine months ended September 30, 2022, 20% above the same period last year.    

Net interest income decreased $1.0 million to $30.2 million over the nine months ended September 30, 2021.   Interest and fees on loans decreased $1.7 million, primarily due to the $4.0 million reduction of PPP deferred fee income.  Excluding the PPP fee income, interest and fees on loans would have increased by 8%.  Interest income on commercial real-estate loans increased $2.8 million, or 15%, over the same period last year driven by volume and rate increases.  The decline of $75.5 million in PPP loans held in the commercial loan portfolio decreased earnings by volume, offset slightly by rate increases.  The yield on total loans increased 15 basis points for the period.  Total interest expense declined $440 thousand, or 11%, from last year.  Reductions in rate and balances in certificates of deposit contributed $620 thousand to the decrease from last year, while money market deposits increased $668 thousand due to rate and volume increases.  Net interest margin for the nine-month period ending September 30, 2022, was 4.17%, a 17 basis point increase over the first nine months of 2021.

Noninterest income totaled $3.0 million for the first nine months of 2022, consistent with the same period 2021, with changes in revenue streams as discussed above.  Gains on sold loans declined $769 thousand, while swap referral fees increased $492 thousand and service fees on loans grew by $284 thousand. 

Noninterest expense totaled $19.9 million, an increase over the $18.7 million last year.  Salaries and benefits rose only 2%, professional fees increased $345 thousand and data processing services increased 27% due to the legal fees from the pending merger and a rise in other professional services.  Advertising and marketing expenses fell 30%, and FDIC assessment expenses declined $240 thousand connected to the release of wholesale funding at the end of 2021.  Other operating expenses increased $456 thousand, with increases in license fees and software maintenance, SBA mortgage servicing rights amortization and donations. 

Asset Quality

Provision expense for the first nine months of 2022 amounted to $2.3 million, compared to $7.0 million for the same period last year.  The coverage ratio for the allowance for loan and lease losses increased to 1.50%, compared to $1.28% last year.  The allowance for loan and lease losses amounted to $14.0 million and $11.8 million at September 30, 2022 and 2021, respectively.  Management believes the allowance for loan and lease losses at September 30, 2022 adequately reflects the inherent risk in the loan portfolio.

At September 30, 2022, nonperforming assets totaled $12.4 million, a slight decline from the second quarter of 2022 and an improvement of $1.4 million over September 30, 2021.  No loans remained in the 90+ days past due category at the end of the third quarter of 2022 as compared to $3.2 million in the same period last year.  SBA loans held in nonaccrual and 90+ days past due both declined over the same period last year as collections or guarantees were processed.  SBA loans that were considered nonperforming at September 30, 2022 totaled $740 thousand, a reduction of $2.5 million from the same period last year.  Nonperforming conventional loans increased $1.1 million from a year ago.  Total nonperforming assets were 1.20% of total assets at period end compared to 1.24% in the same period last year.

	At Period End
	Sep 30,	Jun 30,	Mar 31,	Dec 31,	Sep 30,
Asset Quality  (in thousands)	2022	2022	2022	2021	2021
Nonaccrual Loans	$    12,263	$    12,382	$   12,137	$    12,674	$    10,389
Restructured loans still accruing	177	179	181	184	187
Loans 90+ days past due & still accruing	-	-	-	-	3,249
OREO	-	-	-	-	-
Total Nonperforming Assets	$    12,440	$    12,561	$   12,318	$    12,858	$    13,825
Total Assets	1,037,557	1,035,817	1,033,874	983,206	1,111,518
Nonperforming assets/total assets	1.20 %	1.21 %	1.19 %	1.31 %	1.24 %

Balance Sheet

At September 30, 2022, Centric's total assets remained consistent at $1.0 billion compared to June 30, 2022, and decreased $74 million from September 30, 2021.  Cash and cash equivalents were reduced by $28 million and $83 million over last quarter and the prior year quarter, respectively, coinciding with the increase in net loans and the decrease in deposits, respectively.  Investments in securities declined from the last year due to the sale of an equity security late in 2021. 

Total loans ended the period at $933 million, an increase of $29 million from prior quarter.  Organic loan growth was $34 million as PPP loans declined $5 million.  Commercial loans increased $15 million, or 6%, and CRE loans increased $18 million.  Compared to the same period last year, core loans grew $90 million, or 11%.  CRE grew $54 million, and core commercial loans increased 18%, or $41 million, excluding the reduction of $75.5 million in PPP loan balances.  Annualized core loan growth is 14.6% through September 30, 2022.    

Total deposits ended the period at $884 million, similar to the prior quarter in balances with a change in the mix between money market gains and certificates of deposit losses of around $22 million.  From September 30, 2021, total deposits declined $53 million in balances due to a reduction in wholesale funding of $122 million.  Money market and savings grew 24%, or $60 million, while noninterest bearing deposits increased by 8%.  Certificates of deposit and interest-bearing demand deposit balances declined $59 million and $72 million, respectively.

During the current quarter, $8 million in long-term borrowings matured and reduced balances to $47 million.  Long-term borrowings decreased by $24 million from the same period last year. 

Shareholders' equity increased $4 million over second quarter 2022 and ended the period at $104 million.  Year over year, equity increased $13 million, or 14%.  At September 30, 2022, Centric held 96,996 shares of treasury stock repurchased under the Company's stock repurchase plan during 2020.  Tangible book value increased $0.22 per share over second quarter and ended the period at $11.94.  Tangible book value increased $1.22 per share, or 11%, from September 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
	Sep 30,	Jun 30,	Sep 30,
(Dollars in thousands)	2022	2022	2021
Assets
Cash and cash equivalents	$           40,905	$           69,247	$         124,034
Other investments	40,250	40,916	43,102
Loans	933,267	904,203	919,116
Less: allowance for loan losses	(13,970)	(13,172)	(11,775)
Net loans	919,297	891,031	907,341
Premises and equipment	12,411	12,632	13,198
Accrued interest receivable	3,981	3,709	4,644
Mortgage servicing rights	663	747	1,026
Goodwill	492	492	492
Other assets	19,558	17,043	17,681
Total Assets	$      1,037,557	$      1,035,817	$      1,111,518
Liabilities
Noninterest-bearing deposits	245,301	247,258	226,801
Interest-bearing demand deposits	236,232	226,210	308,396
Money market and savings	303,682	281,547	244,078
Certificates of deposit	98,429	123,880	157,677
Total interest-bearing deposits	638,343	631,637	710,151
Total deposits	883,644	878,895	936,952
Short-term borrowings	-	-	10,000
Long-term debt & leases	46,723	54,723	70,480
Accrued interest payable	63	82	200
Other liabilities	2,873	1,923	2,501
Total Liabilities	933,303	935,623	1,020,133
Total Shareholders' Equity	104,254	100,194	91,385
Total Liabilities and Shareholders' Equity	$      1,037,557	$      1,035,817	$      1,111,518

 

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)	2022		2022		2022		2021		2021		2022	2021
Interest income
Interest and dividends on securities	$        294		$         288		$         307		$      289		$         334		$          889	$      1,048
Interest and fees on loans	12,015		10,473		9,948		11,935		11,311		32,436	34,135
Other	309		149		37		20		32		495	63
Total interest income	12,618		10,910		10,292		12,244		11,677		33,820	35,246
Interest expense
Interest on deposits	1,047		796		788		820		866		2,631	2,784
Interest on borrowings	329		326		383		402		400		1,038	1,325
Total interest expense	1,376		1,122		1,171		1,222		1,266		3,669	4,109
Net interest income	11,242		9,788		9,121		11,022		10,411		30,151	31,137
Provision for loan losses	1,440		450		400		604		6,092		2,290	6,992
Net interest income after provision expense	9,802		9,338		8,721		10,418		4,319		27,861	24,145
Noninterest income
Gain on sale of SBA loans	67		-		-		164		116		67	263
Gain on sale of mortgage loans	37		100		79		153		157		216	789
Other non-interest income	904		927		848		485		606		2,679	1,761
Noninterest income	1,008		1,027		927		802		879		2,962	2,813
Noninterest expense
Salaries and benefits	3,969		3,739		3,543		3,397		3,569		11,251	11,048
Occupancy and equipment	615		589		627		615		590		1,831	1,811
Professional fees	492		227		219		212		181		938	593
Data processing	473		343		332		312		327		1,148	901
Advertising and marketing	89		109		102		55		110		300	426
Other non-interest expense	1,489		1,597		1,333		1,810		1,329		4,419	3,963
Noninterest expense	7,127		6,604		6,156		6,401		6,106		19,887	18,742
Income before taxes	3,683		3,761		3,492		4,819		(908)		10,936	8,216
Income tax expense	661		813		693		991		(197)		2,167	1,695
Net income available to common shareholders	$      3,022		$      2,948		$      2,799		$      3,828		$      (711)		$      8,769	$      6,521

 

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	2022	2022	2022	2021	2021		2022	2021
Net income	$    3,022	$     2,948	$     2,799	$     3,828	$        (711)		$     8,769	$     6,521
Basic earnings per common share	$      0.35	$       0.35	$       0.33	$       0.45	$       (0.08)		$       1.03	$       0.78
Diluted earnings per common share	$      0.35	$       0.34	$       0.33	$       0.45	$       (0.08)		$       1.02	$       0.77
Book value  (at period end)	$    12.00	$     11.77	$     11.49	$     11.23	$      10.78
Tangible book value (at period end)	$    11.94	$     11.72	$     11.43	$     11.17	$      10.72
Close price (at period end)	$    13.60	$       9.92	$       9.95	$       9.70	$        9.50
Common shares outstanding	8,688,963	8,510,462	8,503,283	8,481,197	8,477,518
Weighted average shares - basic	8,549,061	8,466,897	8,450,699	8,425,194	8,419,882		8,489,246	8,410,674
Weighted average shares - diluted	8,645,027	8,564,001	8,552,790	8,533,882	8,525,573		8,587,633	8,509,252
Performance Ratios (period to date)
Return on average assets	1.16 %	1.14 %	1.09 %	1.50 %	-0.26 %		1.13 %	0.79 %
Return on average equity	11.76 %	11.88 %	11.57 %	16.45 %	-3.04 %		11.73 %	9.65 %
Efficiency ratio	57.70 %	60.13 %	61.46 %	53.61 %	54.09 %		59.63 %	55.09 %
Yield on loans	5.24 %	4.72 %	4.66 %	5.27 %	4.80 %		4.88 %	4.73 %
Yield on average earning assets	5.09 %	4.53 %	4.40 %	4.97 %	4.57 %		4.68 %	4.52 %
Cost of deposits	0.47 %	0.36 %	0.37 %	0.38 %	0.38 %		0.40 %	0.40 %
Cost of funds	0.58 %	0.48 %	0.51 %	0.52 %	0.51 %		0.52 %	0.54 %
Net interest margin	4.53 %	4.06 %	3.90 %	4.47 %	4.07 %		4.17 %	4.00 %
Capital Ratios (at period end)
Shareholders' equity / asset ratio	10.05 %	9.67 %	9.45 %	9.68 %	8.22 %
Tangible common equity / tangible assets	10.01 %	9.63 %	9.41 %	9.64 %	8.18 %
Tier I leverage ratio (bank)	11.47 %	11.26 %	11.10 %	10.83 %	9.79 %
Common tier 1 capital/risk-based capital (bank)	12.11 %	12.13 %	12.25 %	12.28 %	11.56 %
Tier 1 risk-based capital (bank)	12.11 %	12.13 %	12.25 %	12.28 %	11.56 %
Total risk-based capital (bank)	13.36 %	13.38 %	13.50 %	13.53 %	12.81 %
Asset Quality Ratios
Net charge-offs/average loans (period to date)	0.28 %	0.04 %	0.00 %	-0.01 %	2.31 %		0.11 %	0.79 %
Nonperforming assets / total assets (at period end)	1.20 %	1.21 %	1.19 %	1.31 %	1.24 %
Allowance for loan losses / total loans	1.50 %	1.46 %	1.45 %	1.42 %	1.28 %
Allowance for loan losses / nonaccrual loans	113.92 %	106.38 %	105.53 %	97.89 %	113.35 %

 

Centric Financial Corporation
Consolidated Average Balance Sheets and Average Yield / Cost (Unaudited)
	Three Months Ended
	September 30, 2022				September 30, 2021
	Average				Average
	Balance	Interest	Rate		Balance	Interest	Rate
Interest Earning Assets
Fed funds & bank balances	$       30,190	$      309	4.06		$       31,723	$         32	0.40
Restricted stock	2,009	25	4.97		2,948	33	4.38
Total securities	40,938	269	2.63		43,410	302	2.78
Total loans	910,451	12,015	5.24		935,813	11,311	4.80
Total Earning Assets	983,589	12,618	5.09		1,013,895	11,677	4.57
Allowance for loan losses	(13,712)				(11,795)
Non-earning assets	73,663				85,746
Total Average Assets	$  1,043,539				$  1,087,846
Interest-Bearing Liabilities
Checking, money market, savings	511,778	811	0.63		497,672	539	0.43
Certificates of deposit	120,149	236	0.78		171,009	326	0.76
Total interest-bearing deposits	631,928	1,047	0.66		668,681	866	0.51
Noninterest-bearing deposits	253,258				243,541
Total deposits	885,185	1,047	0.47		912,222	866	0.38
Total borrowings	53,996	329	2.41		79,084	400	2.00
Total Interest-Bearing Liabilities	685,924	1,376	0.80		747,765	1,266	0.67
Cost of funds			0.58				0.51
Other liabilities	1,579				2,964
Total Average Liabilities	940,760				994,270
Total Shareholders' Equity	102,779				93,576
Total Avg. Liabilities and Shareholders' Equity	$  1,043,539				$  1,087,846
Interest Rate Spread			4.30				3.90
Net Interest Income		$ 11,242				$ 10,411
Interest Rate Margin			4.53				4.07

 

Centric Financial Corporation
Consolidated Average Balance Sheets and Average Yield / Cost (Unaudited)
	Nine Months Ended
	September 30, 2022				September 30, 2021
	Average				Average
	Balance	Interest	Rate		Balance	Interest	Rate
Interest Earning Assets
Fed funds & bank balances	$       33,445	$      495	1.97		$       31,318	$         63	0.26
Restricted stock	2,095	84	5.36		3,073	132	5.76
Total securities	41,849	805	2.56		43,095	916	2.83
Total loans	888,692	32,436	4.88		963,931	34,135	4.73
Total Earning Assets	966,082	33,820	4.68		1,041,417	35,246	4.52
Allowance for loan losses	(13,137)				(11,207)
Non-earning assets	82,261				68,539
Total Average Assets	$  1,035,207				$  1,098,750
Interest-Bearing Liabilities
Checking, money market, savings	508,380	1,995	0.53		472,604	1,527	0.43
Certificates of deposit	120,088	637	0.71		209,822	1,257	0.80
Total interest-bearing deposits	628,468	2,631	0.56		682,426	2,784	0.55
Noninterest-bearing deposits	245,291				237,808
Total deposits	873,759	2,631	0.40		920,234	2,784	0.40
Total borrowings	59,241	1,038	2.32		85,058	1,325	2.07
Total Interest-Bearing Liabilities	687,708	3,669	0.71		767,485	4,109	0.71
Cost of funds			0.52				0.54
Other liabilities	2,559				3,400
Total Average Liabilities	935,559				1,008,693
Total Shareholders' Equity	99,648				90,057
Total Avg. Liabilities and Shareholders' Equity	$  1,035,207				$  1,098,750
Interest Rate Spread			3.97				3.81
Net Interest Income		$ 30,151				$ 31,137
Interest Rate Margin			4.17				4.00

 

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 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.  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:  the pending merger is not approved by regulators or shareholders, 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. Husic
President & CEO
717.909.8309

 

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SOURCE Centric Financial Corporation