 WEST POINT, Va., July 23, 2020 GLOBE NEWSWIRE -- CF Financial Corporation the Corporation NASDAQ:CFFI, the one-bank holding company for CF Bank, today reported consolidated net income of 3.7 million, or 1.03 per share, for the second quarter of 2020, compared to 5.8 million, or 1.69 per share, for the second quarter of 2019. The Corporation reported consolidated net income of 7.4 million for the first six months of 2020, or 2.01 per share, compared with 9.6 million, or 2.77 per share, for the first six months of 2019. Consolidated net income for the second quarter and first six months of 2020 included provision for loan losses of approximately 3.5 million and 5.5 million, respectively, related to the effects of the COVID-19 pandemic and resulting economic disruption. Annualized returns on average equity ROE for the second quarter and first six months of 2020 were 8.41 percent and 8.34 percent, respectively, compared to 15.07 percent and 12.54 percent in the same periods in 2019. Annualized returns on average assets ROA for the second quarter and first six months of 2020 were 0.77 percent and 0.78 percent, respectively, compared to 1.51 percent and 1.26 percent in the same periods in 2019. Consolidated net income for the second quarter and first six months of 2020 was affected by certain items that management does not expect to have an ongoing impact on consolidated net income, including merger related expenses incurred in connection with the Corporations acquisition of Peoples Bankshares, Incorporated Peoples, which was completed on January 1, 2020, impairment charges related to branch consolidation, and a change in income tax law related to the carryback of net operating losses. Excluding the effects of these items, adjusted net income for the second quarter and first six months of 2020 was 4.0 million, or 1.11 per share and 8.4 million, or 2.30 per share, respectively. Adjusted ROE and adjusted ROA, on an annualized basis were 9.00 percent and 0.82 percent, respectively, for the second quarter of 2020 and 9.53 percent and 0.89 percent, respectively, for the first six months of 2020. For more information about these financial measures, which are not calculated in accordance with generally accepted accounting principles GAAP, please see Use of Certain Non-GAAP Financial Measures and Reconciliation of Certain Non-GAAP Financial Measures, below. There were no adjustments to these measures for the second quarter or first six months of 2019.Key highlights for the second quarter and first six months of 2020 are as follows. Comparisons are to the corresponding periods in the prior year unless otherwise stated. Average loans outstanding at the community banking segment previously referred to as the retail banking segment increased 29.6 percent for the second quarter and 24.3 percent for the first six months, primarily due to the addition of loans acquired from Peoples and loans originated under the Paycheck Protection Program, while average loan yields declined; Community banking segment interest expense was higher due to deposit growth; Community banking segment operating expense was higher following the acquisition of Peoples; Mortgage banking segment gains on sales of loans increased 55.8 percent for the second quarter and 62.7 percent for the first six months as originations of mortgage loans reached record highs; The consumer finance segments annualized net charge-off ratio fell to 1.99 percent for the first six months of 2020 from 3.15 percent; The consumer finance segments average loan yield declined due to growth in higher quality, lower-yielding loans, including marine and recreational vehicle loans; Consumer finance segment interest expense decreased due to lower average rates on borrowings; and Consolidated provision for loan losses included approximately 3.5 million and 5.5 million for the second quarter and first six months of 2020, respectively, related to the economic effects of the COVID-19 pandemic.Tom Cherry, President and Chief Executive Officer of CF Financial Corporation, commented, While the COVID-19 pandemic presents financial challenges and economic uncertainty, we have continued to provide excellent service to our customers, including working with customers who are affected by the pandemic. This economic uncertainty resulted in additional provision for loan losses during the first half of 2020 and will likely lead to further provision for loan losses in the second half of the year. We believe we are well positioned with substantial capital and liquidity to continue to support the needs of our customers that may arise during these uncertain times.Community Banking Segment. CF Bank, which comprises the community banking segment, reported net income of 68,000 for the second quarter of 2020, compared to net income of 3.1 million for the second quarter of 2019. For the first six months of 2020, CF Bank reported net income of 638,000, compared to 5.4 million for the first six months of 2019. Prior to the second quarter of 2020, the community banking segment was referred to as the retail banking segment. There have been no changes to the composition of the community banking segment.Community banking segment net income included the effects of the following items which management does not expect to have an ongoing impact on segment income: 1 merger related expenses of 439,000 347,000 after income taxes and 1.3 million 1.0 million after income taxes for the second quarter and first six months of 2020, respectively; 2 a write-down of assets of 281,000 222,000 after income taxes for the second quarter and first six months of 2020 related to the planned consolidation of CF Banks main office into a nearby branch and donation of real estate to the Town of West Point, VA; and 3 income tax benefits of 303,000 in the second quarter and first six months of 2020 arising from a change in tax law enacted in response to the COVID-19 pandemic which changed the tax rate applied to certain net operating losses of Peoples.In addition to the effects of these items that are not expected to have an ongoing impact on segment earnings, community banking segment net income decreased for the second quarter and first six months of 2020 compared to the same periods in 2019 primarily as a result of 1 higher provision for loan losses, as the COVID-19 pandemic continues to have a disruptive economic impact in the markets that CF Bank serves, even as many businesses have reopened, 2 higher operating expenses, including assuming certain operating costs of Peoples and investing in technology infrastructure to support continued growth; 3 lower yields on loans, securities, and interest-earning deposits with other banks; 4 higher average balances on interest-bearing deposit accounts; and 5 lower service charges on deposit accounts. These factors were partially offset by higher average loans outstanding, which contributed to higher interest income for the first six months of 2020 compared to the same period in 2019, and higher non-interest income from debit card interchange fees and interest rate swaps offered to commercial loan customers.Average loans increased 228.5 million or 29.6 percent for the second quarter of 2020 and 187.7 million or 24.3 percent for the first six months of 2020, compared to the same periods in 2019. These increases included 102.8 million and 110.7 million for the second quarter and first six months of 2020, respectively, of average balances of loans acquired in the acquisition of Peoples, and 67.8 million and 33.9 million, respectively, of average balances of loans originated under the Paycheck Protection Program of the Small Business Administration PPP. The increase in average loans outstanding for the second quarter and first six months of 2020 compared to the same periods in 2019 excluding the acquisition of Peoples and the PPP was due primarily to growth in the commercial real estate and commercial business lending segments of the loan portfolio. Average loan yields were lower for the second quarter and first six months of 2020 compared to the same periods in 2019 due to repricing of variable rate loans, lower average yields on new lending, including PPP loans, and lower interest income on purchased credit impaired PCI loans. The recognition of interest income on PCI loans is based on managements expectation of future payments of principal and interest. Earlier than expected repayments of certain PCI loans resulted in the recognition of additional interest income in the first six months of 2020 and 2019. Interest income recognized on PCI loans was 729,000 and 1.7 million for the second quarter and first six months of 2020, respectively, compared to 1.3 million and 1.8 million for the second quarter and first six months of 2019, respectively.CF Banks total nonperforming assets were 2.8 million at June 30, 2020, compared to 2.6 million at December 31, 2019. Nonperforming assets at June 30, 2020 included 1.7 million in nonaccrual loans, compared to 1.5 million at December 31, 2019 and included 1.1 million in other real estate owned at both June 30, 2020 and December 31, 2019. Nonaccrual loans were comprised primarily of residential mortgages and equity lines at June 30, 2020 and December 31, 2019. The community banking segment recorded provision for loan losses of 1.4 million and 2.4 million in the second quarter and first six months of 2020, respectively, due primarily to the COVID-19 pandemic, and we anticipate that additional increases in the allowance for loan losses may be required in future periods. 