FFB Bancorp Earns Record $9.42 Million, or $2.97 per Diluted Share, for Second Quarter 2023

FRESNO, Calif., July 19, 2023 (GLOBE NEWSWIRE) -- FFB Bancorp, formerly Communities First Financial Corporation (the “Company”) (OTCQX: CFST), the parent company of FFB Bank (the “Bank”), today reported net income increased 52% to $9.42 million, or $2.97 per diluted share, for the second quarter of 2023, compared to $6.21 million, or $1.84 per diluted share, for the second quarter of 2022, and increased 22% compared to $7.70 million, or $1.98 per diluted share, for the first quarter of 2023. Second quarter 2023 results were highlighted by continued net interest margin expansion, which improved to 5.09% at June 30, 2023. For the first six months of 2023, net income increased 43% to $17.12 million, or $5.40 per diluted share, compared to $12.00 million, or $3.82 per diluted share, for the first six months of 2022. All results are unaudited.

Second Quarter 2023 Highlights: As of, or for the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022:

• Pre-tax, pre-provision income increased 59% to $13.81 million.
• Net income grew 52% to $9.42 million, or $2.97 per diluted share.
• Return on average equity (“ROAE”) increased 20% to 36.31%.
• Return on average assets (“ROAA”) increased 23% to 2.78%.
• Net interest margin expanded 103 basis points to 5.09% from 4.06% a year earlier.
• Gross revenue (net interest income, before the provision for credit losses, plus non-interest income) increased 64% to $24.51 million.
• Total assets grew 14% to $1.30 billion.
• Total portfolio loans grew 21% to $875.18 million.
• Total deposits increased 7% to $1.08 billion.
• Shareholder equity grew 34% to $109.56 million.
• Book value per common share was $34.56.
• The Company’s tangible common equity ratio was 8.40%, while the Bank’s regulatory leverage capital ratio was 12.16% and total risk-based capital ratio was 18.88%, at June 30, 2023.

"We generated record earnings for the second quarter of 2023, boosted by top line revenue growth, strong year-over-year growth in net interest income and noninterest income, an expanded net interest margin and in line operating expenses. Loan growth was robust, and we saw good momentum in our payments businesses reflecting strong execution of our business plan,” said Steve Miller, President and Chief Executive Officer. “Merchant services income was up 159% from a year ago and almost doubled from the linked quarter, adding significantly to our noninterest income. The progress we are making in advancing our digital offerings for deposit and borrowing customers is substantial and we are continuing to expand our payment services capabilities. The market is challenging and there are many unknowns, but our best-in-class deposit franchise, our earnings engine, and our ability to leverage technology give us the confidence to go on the offensive and continue our organic growth path.”

“Our total deposits increased 7% from a year ago, with a number of our existing and new customers moving to higher yielding accounts. As a result, certificates of deposits grew 126% from the second quarter a year earlier and increased 40% from the linked quarter. Like many of our peers, we continue to respond to customer demand for higher returns on their deposits. We were able to let several large deposits leave the bank due to extreme pricing demands, because we continue to add new relationships to the bank and expand existing relationships at a more balanced margin,” said Miller. “In addition, we had a large non-interest bearing deposit amounting to over $100 million that came in at the beginning of second quarter and left at quarter-end. The short-term deposit resulted in higher average deposit balances, lower borrowings and higher fed funds interest income from the interest earned on this deposit during the quarter.” Non-interest bearing deposits represented 67% of total deposits at June 30, 2023.

“Our credit quality remains solid with nonperforming assets to total assets at 0.47%, down from 0.49% on a linked quarter basis,” said Miller. “Due to strong loan growth, both year-over-year and from the preceding quarter, and taking into consideration a small charge-off we took during the current quarter, we provisioned $612,000 for credit losses replenishing our allowance for credit losses to $9.8 million at quarter end.”

“Together with our ample liquidity and strong capital levels, we believe we are well positioned to navigate these challenging economic headwinds and continue to grow our franchise. During the quarter, we changed the name of our holding company to FFB Bancorp to align with the renaming of FFB Bank during the first quarter. In addition, we will update the Company’s ticker symbol in the third quarter 2023 to reflect the name changes. The name changes are part of our Northern and Southern California expansion strategy and will better resonate with new customers in these markets, and eventually the greater U.S. In addition, we brought on a senior banker and several key business development staff to build out our Southern California expansion. They have already developed a strong pipeline for the 2^nd half of 2023,” said Miller.

Results of Operations

Operating revenue, consisting of net interest income and non-interest income, increased 64% to $24.51 million for the second quarter of 2023, compared to $14.95 million for the second quarter a year ago, and grew 27% from $19.34 million from the first quarter of 2023. For the first six months of 2023, operating revenue increased 53% to $43.85 million, compared to $28.75 million for the first six months of 2022.

Net interest income, before the provision for credit losses, increased 53% to $16.39 million for the second quarter of 2023, compared to $10.70 million for the second quarter a year ago, and increased 11% from $14.78 million for the first quarter of 2023. “The increase in net interest income in the second quarter was mainly due to higher yields from our investment and loan portfolios, partially offset by an increase in deposit and borrowing costs,” said Bhavneet Gill, EVP and Chief Financial Officer. For the first six months of 2023, net interest income before the provision for credit losses increased 47% to $31.17 million, compared to $21.25 million for the first six months of 2022.

The Company’s net interest margin (“NIM”), which excludes interest expense on the holding company’s sub-debt, improved by 103 basis points to 5.09% for the second quarter of 2023, compared to 4.06% for the second quarter of 2022, and expanded 12 basis points from 4.97% for the preceding quarter. “Our earning assets have repriced higher in the current higher interest rate environment and new loan production is at higher rates, but our interest-bearing deposit balances increased, and the cost of interest-bearing deposits increased 59 basis points in the second quarter,” said Gill.

The yield on earning assets was 5.75% for the second quarter of 2023, compared to 4.37% for the second quarter a year ago, and 5.59% on a linked quarter basis. The cost of funds increased to 0.62% for the second quarter of 2023, as customers continue to seek a higher yield in the current higher rate environment. The cost of funds was 0.25% for the second quarter a year earlier, and 0.58% for the first quarter of 2023. "Although we increased interest rates paid on interest-bearing deposits during the first half of 2023 to retain and grow deposit balances, non-interest bearing checking accounts represented 67% of total deposits at quarter end,” commented Gill. Uninsured deposit balances, excluding affiliate deposits (FFB Bank-owned funds) and collateralized deposits, totaled $512.71 million or 46.6% of total deposits as of June 30, 2023.

Total non-interest income was $8.12 million for the second quarter of 2023, compared to $4.24 million for the second quarter of 2022, and $4.56 million for the preceding quarter. The growth in non-interest income during the second quarter of 2023 was primarily due to the growth in merchant services revenue, both from a year ago and from the linked quarter, as a result of increases in ISO Partner sponsorship net revenue and organic FFB Payments gross revenue. Gross expenses related to organic FFB Payments lines of business are recognized in non-interest expense. Deposit fee income also increased year-over-year and from the preceding quarter. Partially offsetting the growth in non-interest income from the first quarter of 2023 and from the second quarter a year ago was the strategic decrease in gain on sale of loans and losses recognized on sale of investments.

Merchant services income more than doubled to $7.6 million for the second quarter of 2023 and increased 159% from the second quarter a year earlier. For the first six months of 2023, merchant services income grew 145% to $11.3 million, compared to the first six months of 2022. “We continue to see significant progress across our ISO partner sponsorships and from our own organic, FFB Payments, ISO business. Compared to the linked quarter, Organic ISO net revenue grew $1.8 million to $2.3 million, while ISO Partner Sponsorship revenue increased 14.0% to $2.24 million,” said Miller. “The overall payments ecosystem is changing rapidly, and we are excited about having a front row seat as a smaller bank. Many of our strategic initiatives for 2023 and beyond are focused on ensuring that the bank and our partners capitalize on current and future payment rails. In the meantime, the team continues to build a solid pipeline of payment related partners that will support further revenue expansion.”

Merchant ISO Processing Volumes ($ in thousands)
Source	Q1 2022		Q2 2022		Q3 2022		Q4 2022		Q1 2023		Q2 2023
ISO Partner Sponsorship	$	1,306,116	$	1,794,688	$	2,439,610	$	2,909,360	$	3,526,911	$	3,953,846
FFB Payments- Sub-ISO Merchants		-		-		964		3,701		19,683		13,665
FFB Payments - Direct Merchants		346		24,657		39,363		43,013		42,725		119,948
	$	1,306,462	$	1,819,345	$	2,479,937	$	2,956,074	$	3,589,319	$	4,087,459

Merchant ISO Processing Revenues ($ in thousands)
Source of Revenue	Q1 2022		Q2 2022		Q3 2022		Q4 2022		Q1 2023		Q2 2023
Net Revenue*:
ISO Partner Sponsorship	$	1,561	$	1,692	$	1,628	$	1,864	$	1,961	$	2,303
Gross Revenue:
FFB Payments- Sub-ISO Merchants		-		-		43		144		223		496
FFB Payments - Direct Merchants		118		1,231		1,331		1,431		1,513		4,761
		118		1,231		1,374		1,575		1,736		5,257
Gross Expense:
FFB Payments- Sub-ISO Merchants		-		-		22		80		149		321
FFB Payments - Direct Merchants		-		754		814		938		1,095		2,655
		-		754		836		1,018		1,244		2,976
Net Revenue:
FFB Payments- Sub-ISO Merchants		-		-		21		64		74		175
FFB Payments - Direct Merchants		118		477		517		493		418		2,106
FFB Payments Net Revenue		118		477		538		557		492		2,281
Net Merchant Services Income:	$	1,679	$	2,169	$	2,166	$	2,421	$	2,453	$	4,584
* ISO Partnership Sponsorship is recognized net of expense in Merchant Services Income. FFB Payments revenues are recognized gross in Merchant Services Income and Merchant Services expenses are recognized in Non-Interest Expense. Reclassifications have been made between Non-interest income and Non-interest expense in prior periods for the change.

Total deposit fee income increased 36% to $738,000 for the second quarter of 2023, compared to $541,000 for the second quarter of 2022, and grew 13% from $655,000 for the first quarter of 2023. Year-to-date, total deposit fee income increased 37% to $1.4 million, compared to $1.0 million for the first six months of 2022. There was a $133,000 gain on sale of loans during the second quarter, compared to a gain on sale of loans of $497,000 during the second quarter 2022, and a gain on sale of loans of $904,000 in the linked quarter. In addition, there was a $708,000 loss on sale of investment securities during the second quarter, compared to the $1.32 million loss in the preceding quarter related to the sale of one bank holding company subordinated debt security. “We monitor the sale of loans and investments and will strategically sell a portion of the loans and investments to expand capacity, generate liquidity, and manage concentrations. This strategy is expected to position the balance sheet for improved earnings in the long term,” added Miller.

Non-interest expense increased 70% to $10.70 million for the second quarter of 2023, compared to $6.29 million for the second quarter of 2022, and increased 22% from $8.75 million for the first quarter of 2023. Year-to-date operating expenses increased by 60% to $19.5 million from $12.2 million for the first six months of 2022. “The higher operating expenses incurred during the second quarter were primarily related to the increase in merchant operating expense, which is a result of higher merchant operating revenue,” said Miller. “Expenses were higher from a year ago as we invested in technology and hired additional key talent as we continued to expand into new markets and build out our risk management and back office. We expect to continue to invest in key positions, as well as technology and sales.”

Full-time employees increased to 119 at June 30, 2023, compared to 94 full-time employees a year earlier, and 107 full-time employees from the linked quarter. As a result of the increased headcount from a year ago, salaries and employee benefits increased 32% to $4.83 million at June 30, 2023, compared to $3.36 million at June 30, 2022, and increased 2% from $4.12 million at March 31, 2023. Occupancy and equipment expenses increased 39% from a year ago, representing 4% of non-interest expense, and increased 14% from the preceding quarter. Other operating expense increased 33% to $2.49 million from a year earlier and increased 3% from the preceding quarter. Increases in data processing expense, software licenses and subscriptions, consulting fees, and regulatory assessments were the primary drivers of the year-over-year increase. Merchant operating expense increased to $2.98 million for the second quarter of 2023, compared to $754,000 for the second quarter of 2022 and $1.24 million for the preceding quarter. The increase in merchant operating expense is attributed to an increase in volume and revenue for the FFB Payments lines of business. Merchant operating expenses include interchange fees, chargebacks, partnership fees, and other card brand fees.

The efficiency ratio was 42.45% for the second quarter of 2023, compared to 42.08% for the second quarter a year ago, and 42.35% for the first quarter of 2023.

Balance Sheet Review

Total assets increased 14% to $1.30 billion at June 30, 2023, compared to $1.14 billion at June 30, 2022, and increased 2% from $1.28 billion at March 31, 2023.

The total portfolio of loans increased 21%, or $152.55 million, to $875.18 million, compared to $722.63 million at June 30, 2022, and grew 2%, or $14.00 million, from $861.18 million on a linked quarter basis. The remaining SBA-PPP loans were down to $186,000 at June 30, 2023, representing a fraction of the total loan portfolio. “During the current quarter we recorded a $559,000 gain on sale of $10.5 million in SBA loans and a $513,000 loss on the sale of $20.5 million in multi-family loans,” said Gill.

Commercial real estate loans increased 25% year-over-year to $504.9 million, representing 58% of total loans at June 30, 2023. The CRE portfolio includes approximately $227.08 million in multi-family loans originated by the Southern California team that the Company may consider selling at some point in the future. The multi-family portfolio includes $103.26 million in short-term bridge loans for modest transitional projects of multi-family properties. The short-term bridge loans are conservatively underwritten with minimum DSCR and liquidity requirements. Approximately 31.5% of the bridge loan portfolio will come due during the second half of 2023 to roll off or get refinanced and sold. The remaining bridge loans will come due in 2024. Real estate construction and land development loans increased 52% from a year ago to $75.47 million, or 9% of total loans, while residential RE 1-4 family loans totaled $17.13 million, or 2% of loans, at June 30, 2023.

The commercial and industrial (C&I) portfolio increased 6% to $212.00 million, at June 30, 2023, compared to $184.62 million a year earlier, and increased 6% from $200.71 million at March 31, 2023. C&I loans represented 24% of total loans at June 30, 2023. Agriculture loans represented 7% of the loan portfolio at June 30, 2023, increasing 3% to $65.36 million from a year ago and grew 11% from $63.37 million at March 31, 2023. At June 30, 2023, the SBA, USDA, and other government agencies guaranteed loans totaled $58.17 million, or 6.7% of the loan portfolio.

The investment portfolio decreased 5% to $304.04 million at June 30, 2023, from $320.28 million at June 30, 2022, and declined 7% compared to $328.58 million at March 31, 2023. The investment portfolio consists of mortgage-backed and municipal securities, both tax exempt and taxable, treasury securities as well as other domestic debt. At June 30, 2023, the Company had a net unrealized loss position on its investment securities portfolio of $33.45 million, compared to a net unrealized loss of $31.71 million at March 31, 2023. Held to maturity securities totaled $3.27 million, or 0.96% of the portfolio, at June 30, 2023. The Company’s investment securities portfolio had an effective duration of 5.12 years at June 30, 2023, compared to 5.13 years at March 31, 2023. During the second quarter, the Company sold $27.66 million in securities to re-invest $11.69 million of the proceeds in the investment portfolio at higher yields and to generate liquidity.

Total deposits increased $74.89 million, or 7%, to $1.08 billion at June 30, 2023, compared to $1.00 billion from a year earlier, and declined 2% from $1.10 billion at March 31, 2023. Noninterest-bearing demand deposits increased 4%, or $27,030, at June 30, 2023, compared to $695.98 million at June 30, 2022, and declined 5% from $759.42 million at March 31, 2023. Noninterest-bearing demand deposits represented 67% of total deposits at June 30, 2023. Included in noninterest-deposit deposits are $161.1 million from ISO partners for merchant reserves and $30.2 million in ISO partner operating accounts.

Total short-term borrowings were $22 million at June 30, 2023, compared to no borrowings at June 30, 2022, and decreased 66% from $65 million at March 31, 2023.

The following table summarizes the Company's primary and secondary sources of liquidity which were available at June 30, 2023

Liquidity Source ($ in thousands)	June 30, 2023
Cash and cash equivalents	$	76,328
Unpledged investment securities, fair value		92,329
FHLB advance capacity		230,252
Federal Reserve discount window capacity		198,065
Correspondent bank unsecured lines of credit		71,500
	$	668,474

The total primary and secondary liquidity of $668.47 million represents 130% of uninsured deposits as of June 30, 2023.

Shareholders’ equity increased 34% to $109.56 million at June 30, 2023, compared to $81.75 million from a year ago, and grew 8% from $100.99 million at March 31, 2023. Book value per common share increased to $34.56, at June 30, 2023, compared to $26.29 at June 30, 2022, and increased 8% from $31.87 at March 31, 2023.

“The tangible common equity ratio was 8.40% at June 30, 2023, compared to 7.14% a year earlier, and 7.90% at March 31, 2023,” stated Gill. “With the Federal Reserve aggressively raising interest rates, market rates have risen considerably. Consequently, our tangible common equity and tangible book value have been adversely impacted by the increase in rates and the related impact on our securities portfolio through marks on accumulated other comprehensive income (‘AOCI’).”

At the Bank level, unrealized losses and gains reflected in AOCI are not included in regulatory capital. As a result, Tier-1capital at the Bank for regulatory purposes was $168.33 million at quarter end excluding the unrealized loss. The regulatory leverage capital ratio was 12.16% for the current quarter, while the total risk-based capital ratio was 18.88%, exceeding regulatory minimums to be considered well-capitalized.

Asset Quality

Nonperforming assets declined to $6.10 million, or 0.47% of total assets, at June 30, 2023, compared to $6.32 million, or 0.49% of total assets, from the preceding quarter. Included in nonperforming assets was one loan totaling $725,000 restructured and performing under the terms of its agreements at June 30, 2023, compared to $740,000 in performing restructured loans at March 31, 2023, and $771,000 in performing restructured loans at June 30, 2022. Of the $6.32 million nonperforming loans, $4.04 million are covered by SBA guarantees.

Total delinquent loans declined to $6.51 million at June 30, 2023, compared to $7.53 million at March 31, 2023, and were primarily related to government guaranteed loans purchased by the Bank.

Past due loans 30-60 days were $2.85 million at June 30, 2023, compared to $2.63 million at June 30, 2022, and $148,000 at March 31, 2023. There were $2.29 million past due loans from 60-90 days at June 30, 2023, compared to $1.81 million at June 30, 2022, and $98,000 at March 31, 2023. Past due loans 90+ days at quarter end totaled $1.38 million at June 30, 2023, compared to $7.29 million three months earlier and $10.96 past due loans at June 30, 2022. Of the $6.51 million in past due loans, $3.36 million were purchased government guaranteed loans with an unconditional guarantee.

The Bank continues to hold approximately $24 million of the government guaranteed portion of Small Business Administration (“SBA”) and USDA loans originated by other banks. Many of these purchased loans were placed into a Direct Registration (“DR”) form by the SBA’s transfer agent, Colson Inc. Under the DR program, Colson was required to remit monthly payments to the investor holding the guaranteed balance, whether or not a payment had actually been received from the borrower. When Colson lost the contract in 2020 as the SBA’s fiscal transfer agent, they began transitioning servicing over to the new company called Guidehouse. By late 2021, Guidehouse, under their contract with the SBA, declined to continue the DR program. As a result, all payments under the DR, and several similar programs, were being held by Guidehouse until the DR program could be unwound and the DR holdings converted into normal SBA pass through certificates. Unfortunately, Colson started requesting investors, who had received payments in advance of the borrower, to return advanced funds before they would process the conversion of certificates, which caused further delays. A reconciliation between Guidehouse, Colson and the Bank has taken place, and all are in agreement. The Bank has submitted all paperwork and original certificates to Colson | Guidehouse for processing and is awaiting reissue of the certificates and payment. The Bank is fully guaranteed; however, until the unwind process is completed it will continue to carry these loans as past due. The balance of these past due loans decreased from $7.48 million at March 31, 2023 to $3.36 million at June 30, 2023.

“As detailed in the chart below, most of the delinquencies are purchased government guaranteed loans, which are guaranteed by the SBA for the full payment of the principal plus interest,” commented Miller. “The SBA continues to deal with backlogs and consequently we continue to incur delays in payments. We are assured that full payment can be expected in the coming quarters.” The chart below breaks out the government guaranteed portion compared to organic delinquencies.

Delinquent Loan Summary	Organic		Purchased Govt. Guaranteed		Total
($ in thousands)
Delinquent accruing loans 30-59 days	$	862	$	1,984	$	2,846
Delinquent accruing loans 60-90 days	$	2,288	$	0	$	2,288
Delinquent accruing loans 90+ days	$	0	$	1,379	$	1,379
Total delinquent accruing loans	$	3,150	$	3,363	$	6,513
Non Accrual Loan Summary	Organic		Purchased Govt. Guaranteed		Total
($ in thousands)
Loans on non accrual	$	6,108	$	0	$	6,108
Non accrual loans with SBA guarantees		4,040		0		4,040
Net Bank exposure to non accrual loans	$	2,068	$	0	$	2,068

There was a $612,000 provision for credit losses in the second quarter of 2023, compared to zero provision for loan losses in the second quarter a year ago, and a $217,000 provision for credit losses booked in the first quarter of 2023.

“We incurred net charge offs of $593,000 during the current quarter, compared to $36,000 net charge offs in the second quarter a year ago, and $409,000 in net charge offs in the immediate prior quarter,” said Miller. “Our loan portfolio increased 21% from a year ago with commercial real estate (“CRE”) loans representing 58% of the total loan portfolio. Within the CRE portfolio, there are $39.71 million in loans for CRE office as shown in the table below. Since the majority of our CRE office exposure is concentrated in the Central Valley, we feel the volatility that the city center markets are experiencing in regard to “return to work” dynamics is not as pronounced in our local area. Our credit metrics remain strong as we continue to maintain conservative underwriting standards.”

CRE Office Exposure as of 6/30/2023
Region	Owner-Occupied		Non-Owner Occupied		Total
Central Valley	$	15,177	$	16,260	$	31,436
Southern California		1,190		362		1,553
Other California		1,909		4,257		6,166
Total California		18,276		20,879		39,155
Out of California		-		550		550
Total CRE Office	$	18,276	$	21,429	$	39,705

The ratio of allowance for credit losses to total loans was 1.12% at June 30, 2023, compared to 1.35% a year earlier and 1.08% at March 31, 2023.

“The SBA portfolio is a segment we watch very closely as rates continue to rise,” added Miller. “A substantial portion of the portfolio consists of loans guaranteed by the U.S. Government. This group of loans consists of fully guaranteed loans the Company has purchased, as well as organic SBA and USDA loans the Bank has originated. When the effect of these guarantees is considered relative to the loan portfolio, the ratio of allowance for credit losses to the total, non-guaranteed, loan portfolio was 1.20%, as of June 30, 2023, and our total unguaranteed exposure on these SBA loans is $28.21 million spread over 187 loans.”

About FFB Bancorp
FFB Bancorp, formerly Communities First Financial Corporation, a bank holding company established in 2014, is the parent company of FFB Bank, founded in 2005 in Fresno, California. FFB Bank’s primary focus is on serving the needs of businesses, professionals, and successful individuals. As a leading SBA Lender in California’s Central Valley and one of the few direct acquiring banks in the United States, FFB offers clients a range of personal and business checking accounts, payment processes, and loan programs. Among the Bank’s awards and accomplishments, it was ranked #4 on American Banker’s list of the Top 200 Publicly Traded Banks under $2 Billion in Assets for 2022. For 2022, the Bank was also ranked by S&P Global as the #18 best performing community bank under $3 billion in assets. The Company has also received recognition as part of the OTCQX Best 50 Companies for both 2019 and 2023 and as one of the top performing OTCQX companies in the country for 2018. For additional information, you can visit the Company’s website at www.ffb.bank or by contacting a representative at 559-439-0200.

Forward Looking Statements

This earnings release may contain forward-looking statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. The forward-looking statements are based on managements’ expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, the Company’s ability to effectively execute its business plans; changes in general economic and financial market conditions; changes in interest rates; and, in particular, actions taken by the Federal Reserve to try and control inflation; changes in the competitive environment; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; losses, customer bankruptcy, claims and assessments; changes in banking regulations or other regulatory or legislative requirements affecting the Company’s business; international developments; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. The Company undertakes no obligation to release publicly the results of any revisions to the forward-looking statements included herein to reflect events or circumstances after today, or to reflect the occurrence of unanticipated events. The Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Member FDIC

SELECT FINANCIAL INFORMATION AND RATIOS (unaudited)		For the Quarter Ended:										Percentage Change From:					Year to Date as of:
		June 30, 2023			Mar. 31, 2023			June 30, 2022				Mar. 31, 2023		June 30, 2022			June 30, 2023			June 30, 2022			Percent Change
BALANCE SHEET DATA - PERIOD END BALANCES:
	Total assets	$	1,303,909		$	1,278,514		$	1,144,334			2	%	14	%
	Total portfolio loans		875,180			861,181			722,632			2	%	21	%
	Investment securities		304,043			328,575			320,279			-7	%	-5	%
	Total deposits		1,079,039			1,099,311			1,004,152			-2	%	7	%
	Shareholders equity, net	$	109,556		$	100,986		$	81,752			8	%	34	%
SELECT INCOME STATEMENT DATA:
	Gross revenue	$	24,509		$	19,337		$	14,946			27	%	64	%		$	43,846		$	28,747		53	%
	Operating expense		10,704			8,748			6,290			22	%	70	%			19,452			12,170		60	%
	Pre-tax, pre-provision income		13,805			10,589			8,656			30	%	59	%			24,394			16,577		47	%
	Net income after tax	$	9,423		$	7,698		$	6,208			22	%	52	%		$	17,121		$	11,997		43	%
SHARE DATA:
	Basic earnings per share	$	2.97		$	2.43		$	2.00			22	%	49	%		$	5.40		$	3.86		40	%
	Fully diluted earnings per share	$	2.97		$	2.43		$	1.98			22	%	50	%		$	5.40		$	3.82		41	%
	Book value per common share	$	34.56		$	31.87		$	26.29			8	%	31	%
	Common shares outstanding		3,169,974			3,169,148			3,109,755			0	%	2	%
	Fully diluted shares		3,172,082			3,171,228			3,139,747			0	%	1	%
	CFST - Stock price	$	60.90		$	62.90		$	55.20			-3	%	10	%
RATIOS:
	Return on average assets		2.78	%		2.47	%		2.25	%		12	%	23	%			2.63	%		2.20	%	20	%
	Return on average equity		36.31	%		32.49	%		30.25	%		12	%	20	%			34.49	%		28.31	%	22	%
	Efficiency ratio		42.45	%		42.35	%		42.08	%		0	%	1	%			42.41	%		42.33	%	0	%
	Yield on earning assets		5.75	%		5.59	%		4.37	%		3	%	31	%			5.68	%		4.36	%	30	%
	Yield on investment securities		4.43	%		4.38	%		3.18	%		1	%	39	%			4.43	%		3.00	%	48	%
	Yield on portfolio loans		6.30	%		6.12	%		5.10	%		3	%	24	%			6.21	%		5.13	%	21	%
	Cost to fund earning assets		0.62	%		0.58	%		0.25	%		6	%	148	%			0.60	%		0.25	%	138	%
	Cost of interest-bearing deposits		1.73	%		1.14	%		0.24	%		52	%	605	%			1.44	%		0.24	%	492	%
	Net Interest Margin		5.09	%		4.97	%		4.06	%		3	%	25	%			5.04	%		4.04	%	25	%
	Equity to assets		8.40	%		7.90	%		7.14	%		6	%	18	%
	Loan to deposits ratio		81.11	%		78.34	%		71.96	%		4	%	13	%
	Full time equivalent employees		119			107			93.5			11	%	27	%
BALANCE SHEET DATA - AVERAGES:
	Total assets	$	1,264,171		$	1,264,171		$	1,097,173			1	%	15	%
	Total loans		845,659			845,659			725,136			4	%	17	%
	Investment securities		335,662			335,662			297,048			-2	%	13	%
	Deposits		1,088,664			1,088,664			953,547			-0	%	14	%
	Shareholders equity, net	$	96,081		$	96,081		$	88,627			11	%	8	%
ASSET QUALITY:
	Total delinquent accruing loans	$	7,534		$	7,534		$	24,495			-41	%	-69	%
	Nonperforming assets	$	6,323		$	6,323		$	2,899			-1	%	118	%
	Non Accrual / Total Loans	.73%			.73%			.42%				-3	%	76	%
	Nonperforming assets to total assets	.49%			.49%			.26%				0	%	88	%
	ACL / Total loans		1.08	%		1.08	%		1.41	%		-8	%	-24	%

STATEMENT OF INCOME ($ in thousands)		For the Quarter Ended:									Percentage Change From:					For the Year Ended
(unaudited)		June 30, 2023			Mar. 31, 2023			June 30, 2022			Mar. 31, 2023		June 30, 2022			June 30, 2023			June 30, 2022		Percent Change
Interest Income
	Loan interest income	$	13,861		$	12,729		$	8,949		9	%	55	%		$	26,590		$	18,177	46	%
	Investment income		3,526			3,484			2,208		1	%	60	%			7,010			4,169	68	%
	Int. on fed funds & CDs in other banks		981			228			108		330	%	808	%			1,209			128	845	%
	Dividends from non-marketable equity		9			75			93		-88	%	-90	%			84			100	-16	%
	Interest income		18,377			16,516			11,358		11	%	62	%			34,893			22,574	55	%
	Int. on deposits		1,471			957			189		54	%	678	%			2,428			397	512	%
	Int. on short-term borrowings		50			313			2		-84	%	2400	%			363			3	12000	%
	Int. on long-term debt		464			464			464		0	%	0	%			928			929	-0	%
	Interest expense		1,985			1,734			655		14	%	203	%			3,719			1,329	180	%
	Net interest income		16,392			14,782			10,703		11	%	53	%			31,174			21,245	47	%
	Provision for credit losses		612			217			-		182	%	0	%			829			-	0	%
	Net interest income after provision		15,780			14,565			10,703		8	%	47	%			30,345			21,245	43	%
Non-Interest Income:
	Total deposit fee income		738			655			541		13	%	36	%			1,393			1,016	37	%
	Debit / credit card interchange income		152			141			141		8	%	8	%			293			268	9	%
	Merchant services income		7,560			3,697			2,922		104	%	159	%			11,257			4,601	145	%
	Gain on sale of loans		133			904			497		-85	%	-73	%			1,037			1,300	-20	%
	Loss on sale of investments		(708	)		(1,320	)		-		-46	%	0	%			(2,028	)		-	0	%
	Other operating income		242			478			142		-49	%	70	%			720			317	127	%
	Non-interest income		8,117			4,555			4,243		78	%	91	%			12,672			7,502	69	%
Non-Interest Expense:
	Salaries & employee benefits		4,826			4,716			3,361		2	%	44	%			9,542			7,209	32	%
	Occupancy expense		412			362			296		14	%	39	%			774			532	45	%
	Merchant operating expense		2,976			1,244			754		139	%	295	%			4,220			754	460	%
	Other operating expense		2,490			2,426			1,879		3	%	33	%			4,916			3,675	34	%
	Non-interest expense		10,704			8,748			6,290		22	%	70	%			19,452			12,170	60	%
	Net income before tax		13,193			10,372			8,656		27	%	52	%			23,565			16,577	42	%
	Tax provision		3,770			2,674			2,448		41	%	54	%			6,444			4,580	41	%
	Net income after tax	$	9,423		$	7,698		$	6,208		22	%	52	%		$	17,121		$	11,997	43	%

BALANCE SHEET ($ in thousands )		End of Period:										Percentage Change From:
(unaudited)		June 30, 2023			Mar. 31, 2023			June 30, 2022				Mar. 31, 2023		June 30, 2022
ASSETS
	Cash and due from banks	$	32,433		$	27,696		$	19,763			17	%	64	%
	Fed funds sold and deposits in banks		43,895			22,972			38,294			91	%	15	%
	CDs in other banks		2,873			2,877			1,490			-0	%	93	%
	Investment securities		304,043			328,575			320,279			-7	%	-5	%
	Loans held for sale		-			-			6,062			0	%	-100	%
	Portfolio loans outstanding:
	RE constr & land development		75,471			72,090			49,543			5	%	52	%
	Residential RE 1-4 Family		17,129			15,783			16,018			9	%	7	%
	Commercial Real Estate		504,901			513,613			404,971			-2	%	25	%
	Agriculture		65,364			58,735			63,366			11	%	3	%
	Commercial and Industrial		212,000			200,705			184,618			6	%	15	%
	SBA PPP Loans		186			204			3,934			-9	%	-95	%
	Consumer and Other		129			51			182			153	%	-29	%
	Total Portfolio Loans		875,180			861,181			722,632			2	%	21	%
	Deferred fees & discounts		(3,393	)		(3,220	)		(2,422	)		5	%	40	%
	Allowance for credit losses		(9,767	)		(9,271	)		(9,755	)		5	%	0	%
	Loans, net		862,020			848,690			710,455			2	%	21	%
	Non-marketable equity investments		5,597			5,592			5,203			0	%	8	%
	Cash value of life insurance		11,845			8,641			8,495			37	%	39	%
	Accrued interest and other assets		41,203			33,471			34,293			23	%	20	%
	Total assets	$	1,303,909		$	1,278,514		$	1,144,334			2	%	14	%
LIABILITIES AND EQUITY
	Non-interest bearing deposits	$	723,007		$	759,417		$	695,977			-5	%	4	%
	Interest checking		38,603			32,637			33,521			18	%	15	%
	Savings		54,718			71,542			82,438			-24	%	-34	%
	Money market		162,630			163,995			148,022			-1	%	10	%
	Certificates of deposits		100,081			71,720			44,194			40	%	126	%
	Total deposits		1,079,039			1,099,311			1,004,152			-2	%	7	%
	Short-term borrowings		55,000			22,000			-			150	%	0	%
	Long-term debt		39,520			39,481			39,362			0	%	0	%
	Other liabilities		20,794			16,736			19,068			24	%	9	%
	Total liabilities		1,194,353			1,177,528			1,062,582			1	%	12	%
	Common stock & paid in capital		35,452			35,073			33,479			1	%	6	%
	Retained earnings		97,554			88,167			65,945			11	%	48	%
	Total equity		133,006			123,240			99,424			8	%	34	%
	Accumulated other comprehensive loss		(23,450	)		(22,254	)		(17,672	)		5	%	33	%
	Shareholders equity, net		109,556			100,986			81,752			8	%	34	%
	Total Liabilities and shareholders' equity	$	1,303,909		$	1,278,514		$	1,144,334			2	%	14	%

ASSET QUALITY ($ in thousands)	Period Ended:
(unaudited)	June 30, 2023			Mar. 31, 2023			June 30, 2022
Delinquent accruing loans 30-60 days	$	2,846		$	148		$	2,627
Delinquent accruing loans 60-90 days	$	2,288		$	98		$	1,813
Delinquent accruing loans 90+ days	$	1,379		$	7,288		$	10,955
Total delinquent accruing loans	$	6,513		$	7,534		$	15,395
Loans on non accrual	$	6,108		$	6,323		$	2,747
Other real estate owned		-			-			-
Nonperforming assets	$	6,108		$	6,323		$	2,747
Performing restructured loans	$	725		$	740		$	771
Delq 30-60 / Total Loans		.33	%		.02	%		.36	%
Delq 60-90 / Total Loans		.26	%		.01	%		.25	%
Delq 90+ / Total Loans		.16	%		.85	%		1.52	%
Delinquent Loans / Total Loans		.74	%		.87	%		2.13	%
Non Accrual / Total Loans		.70	%		.73	%		.38	%
Nonperforming assets to total assets		.47	%		.49	%		.24	%
Year-to-date charge-off activity
Charge-offs	$	593		$	409		$	36
Recoveries	$	58		$	3		$	6
Net charge-offs	$	535		$	406		$	30
Annualized net loan losses to average loans		0.12	%		0.19	%		0.01	%
CREDIT LOSS RESERVE RATIOS:
Allowance for credit losses	$	9,767		$	9,271		$	9,755
Total loans	$	875,180		$	861,181		$	722,632
Purchased govt. guaranteed loans	$	24,222		$	28,224		$	32,120
Originated govt. guaranteed loans	$	33,951		$	34,090		$	42,292
ACL / Total loans		1.12	%		1.08	%		1.35	%
ACL / Loans less 100% govt. gte. loans (PPP and purchased)		1.15	%		1.11	%		1.42	%
ACL / Loans less all govt. guaranteed loans		1.20	%		1.16	%		1.50	%
ACL / Total assets		.75	%		.73	%		.85	%

SELECT FINANCIAL TREND INFORMATION (unaudited)		For the Quarter Ended:
		June 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sept. 30, 2022			June 30, 2022
BALANCE SHEET DATA - PERIOD END BALANCES:
	Total assets	$	1,303,909		$	1,278,514		$	1,294,464		$	1,188,441		$	1,144,334
	Loans held for sale		-			-			11,063			-			6,062
	Loans held for investment		875,180			861,181			845,463			776,190			722,632
	Investment securities		304,043			328,575			343,843			339,523			320,279
	Non-interest bearing deposits		723,007			759,417			737,078			724,425			695,977
	Interest bearing deposits		356,032			339,894			344,150			320,308			308,175
	Total deposits		1,079,039			1,099,311			1,081,228			1,044,733			1,004,152
	Short-term borrowings		55,000			22,000			65,000			-			-
	Long-term debt		39,520			39,481			39,441			39,402			39,362
	Total equity		133,006			123,240			114,838			106,788			99,424
	Accumulated other comprehensive income		(23,450	)		(22,254	)		(22,480	)		(25,368	)		(17,672	)
	Shareholders equity, net	$	109,556		$	100,986		$	92,358		$	81,420		$	81,752
INCOME STATEMENT - QUARTERLY VALUES:
	Interest income	$	18,377		$	16,516		$	15,360		$	13,210		$	11,358
	Int. on dep. & short-term borrowings		1,521			1,270			587			213			191
	Int. on long-term debt		464			464			464			464			464
	Interest expense		1,985			1,734			1,051			677			655
	Net interest income		16,392			14,782			14,309			12,533			10,703
	Non-interest income		8,117			4,555			3,915			4,528			4,243
	Gross revenue		24,509			19,337			18,224			17,061			14,946
	Provision for credit losses		612			217			300			-			-
	Non-interest expense		10,704			8,748			7,846			7,650			6,290
	Net income before tax		13,193			10,372			10,078			9,411			8,656
	Tax provision		3,770			2,674			2,460			2,506			2,448
	Net income after tax	$	9,423		$	7,698		$	7,618		$	6,905		$	6,208
BALANCE SHEET DATA - QUARTERLY AVERAGES:
	Total assets	$	1,361,187		$	1,264,171		$	1,255,212		$	1,190,568		$	1,105,754
	Loans held for sale		59			1,132			1,971			3,112			12,728
	Loans held for investment		885,590			845,659			810,811			732,753			693,985
	Investment securities		325,002			335,662			342,132			338,641			304,428
	Non-interest bearing deposits		853,044			748,111			754,832			732,946			654,968
	Interest bearing deposits		341,269			340,553			336,486			316,443			309,742
	Total deposits		1,194,313			1,088,664			1,091,317			1,049,388			964,710
	Short-term borrowings		4,231			25,384			14,060			-			2,330
	Long-term debt		39,502			39,462			39,423			39,383			39,344
	Total equity		126,870			117,881			113,080			98,372			95,137
	Accumulated other comprehensive loss		(22,787	)		(21,800	)		(26,393	)		(17,089	)		(12,834	)
	Shareholders equity, net	$	104,083		$	96,081		$	86,687		$	81,283		$	82,304

Contact:		Steve Miller – President & CEO
		Bhavneet Gill – Executive Vice President & CFO
		[phone]