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Centric Financial Corporation Announces Record Breaking First Quarter 2021 Earnings

Harrisburg, Pennsylvania (May 7, 2021) – 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.

Table of Q1 2021 Asset Quality (in thousands)

SBA loans that were considered nonperforming at quarter end totaled $2.9 million, a reduction of $3.1 million from March 31, 2020.  The reduction of SBA nonperforming loans from the first quarter 2020 is the result of $2.3 million returned to performing with $156 thousand of the $2.3 million supported by SBA payment assistance.  $721 thousand received a deferral and the remainder were charged off and are waiting payment of guarantee from the SBA.

Balance Sheet

At March 31, 2021, Centric’s total assets were $1.1 billion compared to $843 million at for the same period last year, an increase of $280 million, or 33%. The growth, year over year, was due to the significant volume of SBA guaranteed PPP loans totaling $216 million at period end and increasing core lending of $89 million.  Centric is participating in the current round of PPP lending which generated $83 million in loans, net of deferred fees and costs, during the first quarter.
Total loans ended the quarter at $998 million.  PPP loan reductions from forgiveness totaled $63 million, PPP round two new generation amounted to $83 million, and core loan growth was $13 million.  Compared to a year-ago, total loans have increased $303 million, or 44%.    

Investments in securities increased $9 million over March 31, 2020 with increases in tax free municipals of $12 million, and taxable municipals of $4 million, offset by sales of CMOs and MBS of $7 million.  The changes were brought about by execution of a strategy to increase tax-free holdings.  

Total deposits ended the quarter at $948 million, an increase of $288 million year over year, or 44%. Core deposit growth, federal stimulus funding to individuals, as well as SBA PPP proceeds to businesses helped to fund deposit growth during the quarter, with the most significant increase in noninterest-bearing deposits of $142 million, or 124%.  Money market and savings accounts increased $61 million in core deposit growth.  Interest-bearing demand deposits increased $71 million including $20 million in low cost wholesale deposits. 

Short-term borrowings declined 50% to $10 million at March 31, 2021 from the prior quarter and declined $15 million from the same period last year.  Long-term borrowings totaled $71 million at quarter end, a decrease of $12 million from prior quarter as maturing borrowings were not replaced due to excess liquidity.  Long-term borrowings reduced $6 million from first quarter 2020. Centric participated in the PPPLF in December, borrowing $4.7 million. At March 31, 2021 this balance had declined to $543 thousand as the PPP loans securing the borrowing were granted forgiveness through the Small Business Administration.  

Shareholders’ equity increased $4 million over fourth quarter and ended the period at $88 million. Year over year equity increased $9 million, or 11%.  At March 31, 2021 Centric held 338,850 shares of treasury stock repurchased under the Company’s stock repurchase plan during 2020.  No new treasury shares have been purchased in 2021.  Tangible book value increased 4% and 16% per share to $10.38 over December 31, 2020 and March 31, 2020, respectively, as a result of increased earnings and stock repurchases during 2020.  Centric Bank remains above bank regulatory “Well Capitalized” standards.

Table of Q1 2021 Consolidated Balance Sheet (unaudited)

Table of Q1 2021 Consolidated Statement of Income (unaudited)

Table of Q1 2021 per share data and performance ratios (unaudited)

Table of Q1 2021 consolidated average balance sheets and average yield / cost (unaudited)

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 seven years, and twice 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  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 effects of the Covid-19 pandemic limitations on business and how it will impact 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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