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Section 1: 10-Q (10-Q)

cfbi-10q_20190930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period

Commission File No. 001-38074

 

Community First Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

United States of America

 

82-1147778

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

3175 Highway 278

Covington, Georgia

 

30014

(Address of Principal Executive Offices)

 

(Zip Code)

 

(770) 786-7088

(Registrant’s Telephone Number, Including Area Code)

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share         CFBIThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.  YES     NO 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.   See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

 

Large accelerated filer

 

 

  

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES      NO  

 

 

 

 

 

 

 

 

 

 

 

As of November 12, 2019, 7,557,848 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding.

 

 

 

 

 


 

Community First Bancshares, Inc.

Form 10-Q

Table of Contents

 

 

 

 

 

Page

PART I.  FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

 

2

 

 

 

 

 

 

 

Consolidated Balance Sheets at September 30, 2019 (unaudited) and December 31, 2018 (unaudited)

 

2

 

 

 

 

 

 

 

Consolidated Statements of Income (Loss) for the Three Months and Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

3

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months and Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

5

 

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (unaudited)

 

6

 

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

7

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

32

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

32

 

 

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

33

 

 

 

 

 

Item 1A.

 

Risk Factors

 

33

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

33

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

33

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

33

 

 

 

 

 

Item 5.

 

Other Information

 

33

 

 

 

 

 

Item 6.

 

Exhibits

 

34

 

 

 

 

 

 

 

SIGNATURES

 

35

 

 

1


 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Balance Sheets

 

 

 

 

September 30, 2019 (unaudited)

 

 

December 31, 2018

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

Cash and due from banks, including reserve requirement of $2,032 and $1,834 at

September 30, 2019 and December 31, 2018, respectively

 

$

3,329

 

 

 

3,817

 

Interest-earning deposits in other depository institutions

 

 

34,672

 

 

 

33,212

 

Cash and cash equivalents

 

 

38,001

 

 

 

37,029

 

Investment securities held-to-maturity (estimated fair value of $993)

 

 

 

 

 

1,000

 

Investment securities available-for-sale

 

 

4,047

 

 

 

21,145

 

Federal Home Loan Bank stock

 

 

278

 

 

 

580

 

Loans, net

 

 

248,125

 

 

 

227,424

 

Other real estate owned

 

 

140

 

 

 

508

 

Premises and equipment, net

 

 

8,590

 

 

 

8,896

 

Bank owned life insurance

 

 

7,410

 

 

 

7,251

 

Accrued interest receivable and other assets

 

 

3,136

 

 

 

3,862

 

Total assets

 

$

309,727

 

 

 

307,695

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Savings accounts

 

$

23,539

 

 

 

24,511

 

Interest-bearing checking

 

 

49,687

 

 

 

53,752

 

Market rate checking

 

 

31,054

 

 

 

24,936

 

Non-interest bearing checking

 

 

30,409

 

 

 

28,472

 

Certificate of deposits

 

 

94,367

 

 

 

87,510

 

Total deposits

 

 

229,056

 

 

 

219,181

 

Federal Home Loan Bank advances

 

 

 

 

 

7,570

 

Accrued interest payable and other liabilities

 

 

4,124

 

 

 

4,546

 

Total liabilities

 

 

233,180

 

 

 

231,297

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock (par value $0.01 per share, 19,000,000 shares authorized, 7,671,224

   issued and 7,557,848 outstanding at September 30, 2019 and 7,538,250 issued and

   7,478,992 outstanding at December 31, 2018)

 

 

77

 

 

 

75

 

Preferred stock (1,000,000 shares authorized, no shares outstanding)

 

 

 

 

 

 

Additional paid in capital

 

 

33,251

 

 

 

33,078

 

Treasury stock, 113,376 shares at September 30, 2019, and 59,258 shares at

   December 31, 2018, at cost

 

 

(1,268

)

 

 

(668

)

Unearned ESOP shares

 

 

(2,600

)

 

 

(2,689

)

Retained earnings

 

 

47,082

 

 

 

47,043

 

Accumulated other comprehensive income (loss)

 

 

5

 

 

 

(441

)

Total stockholders' equity

 

 

76,547

 

 

 

76,398

 

Total liabilities and stockholders' equity

 

$

309,727

 

 

 

307,695

 

 

See accompanying notes to unaudited consolidated financial statements.

2


 

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Statements of Income (Loss)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

3,671

 

 

 

3,695

 

 

$

10,464

 

 

 

10,197

 

Investment securities, including dividends

 

 

63

 

 

 

142

 

 

 

332

 

 

 

446

 

Interest-earning deposits

 

 

148

 

 

 

156

 

 

 

448

 

 

 

321

 

Total interest income

 

 

3,882

 

 

 

3,993

 

 

 

11,244

 

 

 

10,964

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

579

 

 

 

423

 

 

 

1,635

 

 

 

1,104

 

Borrowings

 

 

 

 

 

38

 

 

 

26

 

 

 

112

 

Total interest expense

 

 

579

 

 

 

461

 

 

 

1,661

 

 

 

1,216

 

Net interest income before provision for loan losses

 

 

3,303

 

 

 

3,532

 

 

 

9,583

 

 

 

9,748

 

Provision for loan losses

 

 

 

 

 

200

 

 

 

 

 

 

500

 

Net interest income after provision for loan losses

 

 

3,303

 

 

 

3,332

 

 

 

9,583

 

 

 

9,248

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

260

 

 

 

230

 

 

 

620

 

 

 

572

 

Small Business Administration (SBA) loan fees

 

 

1

 

 

 

(69

)

 

 

8

 

 

 

585

 

Other

 

 

274

 

 

 

207

 

 

 

602

 

 

 

427

 

Total non-interest income

 

 

535

 

 

 

368

 

 

 

1,230

 

 

 

1,584

 

Non-interest expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

1,861

 

 

 

1,417

 

 

 

5,519

 

 

 

4,798

 

Deferred compensation

 

 

67

 

 

 

56

 

 

 

171

 

 

 

159

 

Occupancy

 

 

465

 

 

 

458

 

 

 

1,421

 

 

 

1,299

 

Advertising

 

 

37

 

 

 

49

 

 

 

104

 

 

 

132

 

Data processing

 

 

748

 

 

 

233

 

 

 

1,360

 

 

 

684

 

Other real estate owned

 

 

2

 

 

 

39

 

 

 

19

 

 

 

100

 

Net gain on sale of other real estate owned

 

 

(8

)

 

 

(35

)

 

 

(104

)

 

 

(59

)

Legal and accounting

 

 

505

 

 

 

385

 

 

 

1,037

 

 

 

872

 

Organizational dues and subscriptions

 

 

60

 

 

 

81

 

 

 

213

 

 

 

236

 

Director compensation

 

 

49

 

 

 

63

 

 

 

145

 

 

 

171

 

Federal deposit insurance premiums

 

 

16

 

 

 

16

 

 

 

48

 

 

 

48

 

Other

 

 

319

 

 

 

344

 

 

 

935

 

 

 

824

 

Total non-interest expenses

 

 

4,121

 

 

 

3,106

 

 

 

10,868

 

 

 

9,264

 

Income (loss) before income taxes

 

 

(283

)

 

 

594

 

 

 

(55

)

 

 

1,568

 

Income tax expense (benefit)

 

 

(87

)

 

 

135

 

 

 

(94

)

 

 

158

 

Net income (loss)

 

$

(196

)

 

 

459

 

 

$

39

 

 

 

1,410

 

Basic and diluted earnings (loss) per share

 

$

(0.03

)

 

$

0.06

 

 

$

0.01

 

 

$

0.19

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

3


 

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(196

)

 

$

459

 

 

$

39

 

 

$

1,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gain (loss) on available for sale securities, net of taxes of $(13),  $(56), $195 and $(192)

 

 

(36

)

 

 

(160

)

 

 

555

 

 

 

(543

)

Reclassification adjustment for gain included in net income (loss), net of taxes of $(38)

 

 

(109

)

 

 

 

 

 

(109

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

(145

)

 

 

(160

)

 

 

446

 

 

 

(543

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

(341

)

 

$

299

 

 

$

485

 

 

$

867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

4


 

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

 

 

 

Three and Nine Months Ended September 30, 2018 and September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common

 

 

Paid In

 

 

Treasury

 

 

Unearned

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

 

Stock

 

 

Capital

 

 

Stock

 

 

ESOP Shares

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Beginning balance December 31, 2017

 

$

75

 

 

$

33,063

 

 

$

 

 

$

(2,807

)

 

$

45,485

 

 

$

(152

)

 

$

75,664

 

ESOP loan payment and

   release of ESOP shares

 

 

 

 

 

4

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

33

 

Change in unrealized loss

   on investment securities

   available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(381

)

 

 

(381

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

333

 

 

 

 

 

 

333

 

Ending balance March 31, 2018

 

$

75

 

 

$

33,067

 

 

$

 

 

$

(2,778

)

 

$

45,818

 

 

$

(533

)

 

$

75,649

 

ESOP loan payment and

   release of ESOP shares

 

 

 

 

 

3

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

33

 

Change in unrealized loss

   on investment securities

   available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

618

 

 

 

 

 

 

618

 

Ending balance June 30, 2018

 

$

75

 

 

$

33,070

 

 

$

 

 

$

(2,748

)

 

$

46,436

 

 

$

(535

)

 

$

76,298

 

ESOP loan payment and

   release of ESOP shares

 

 

 

 

 

5

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

34

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

(248

)

 

 

 

 

 

 

 

 

 

 

 

(248

)

Change in unrealized loss

   on investment securities

   available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(160

)

 

 

(160

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

459

 

 

 

 

 

 

459

 

Ending balance September 30, 2018

 

$

75

 

 

$

33,075

 

 

$

(248

)

 

$

(2,719

)

 

$

46,895

 

 

$

(695

)

 

$

76,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance December 31, 2018

 

$

75

 

 

$

33,078

 

 

$

(668

)

 

$

(2,689

)

 

$

47,043

 

 

$

(441

)

 

$

76,398

 

ESOP loan payment and

   release of ESOP shares

 

 

 

 

 

1

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

31

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

(600

)

 

 

 

 

 

 

 

 

 

 

 

(600

)

Change in unrealized gain

   on investment securities

   available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

373

 

 

 

373

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

117

 

 

 

 

 

 

117

 

Ending balance March 31, 2019

 

$

75

 

 

$

33,079

 

 

$

(1,268

)

 

$

(2,659

)

 

$

47,160

 

 

$

(68

)

 

$

76,319

 

ESOP loan payment and

   release of ESOP shares

 

 

 

 

 

2

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

31

 

Issuance of restricted stock

   awards

 

 

2

 

 

 

43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

Stock based compensation

   expense

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

Change in unrealized gain

   on investment securities

   available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

218

 

 

 

218

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

118

 

 

 

 

 

 

118

 

Ending balance June 30, 2019

 

$

77

 

 

$

33,148

 

 

$

(1,268

)

 

$

(2,630

)

 

$

47,278

 

 

$

150

 

 

$

76,755

 

ESOP loan payment and

   release of ESOP shares

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

Stock based compensation

   expense

 

 

 

 

 

103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

103

 

Change in unrealized loss

   on investment securities

   available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(145

)

 

 

(145

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(196

)

 

 

 

 

 

(196

)

Ending balance September 30, 2019

 

$

77

 

 

$

33,251

 

 

$

(1,268

)

 

$

(2,600

)

 

$

47,082

 

 

$

5

 

 

$

76,547

 

 

See accompanying notes to unaudited consolidated financial statements.

5


 

COMMUNITY FIRST BANCSHARES, INC.

Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

39

 

 

 

1,410

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

 

 

 

500

 

Depreciation and amortization

 

 

689

 

 

 

694

 

Stock-based compensation expense

 

 

173

 

 

 

 

Deferred income tax

 

 

(17

)

 

 

446

 

ESOP expense

 

 

91

 

 

 

100

 

Net gain on sale of investment securities available-for-sale

 

 

(147

)

 

 

 

Net gain on sale of other real estate owned

 

 

(104

)

 

 

(59

)

Increase in cash surrender value of life insurance

 

 

(159

)

 

 

(177

)

Change in:

 

 

 

 

 

 

 

 

Accrued interest receivable and other assets

 

 

586

 

 

 

114

 

Accrued interest payable and other liabilities

 

 

(422

)

 

 

91

 

Net cash provided by operating activities

 

 

729

 

 

 

3,119

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of premises and equipment