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: ~~March~~June 3130, 2017

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

For the transition Period from To

Commission File Number 000-49966

COMMUNITY FIRST, INC.

(Exact Name of Registrant as Specified in its Charter)

Tennessee		04-3687717
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

501 South James M. Campbell Blvd. Columbia, Tennessee		38401
(Address of Principal Executive Offices)		(Zip Code)

(931) 380-2265

(Registrant’s Telephone Number, Including Area Code)

None

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

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 filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 comapny. See 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	☐ (Do not check if a smaller reporting company)	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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date. Common stock outstanding (no par value): 5,025,~~199~~884 shares of common stock, no par value per share, as of ~~May~~August 511, 2017.

COMMUNITY FIRST, INC.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets March 31, 2017 (Unaudited) and December 31, 2016	3
	Consolidated Balance Sheets June 30, 2017 (Unaudited) and December 31, 2016	3
	Consolidated Statements of Operations and Comprehensive Income Three Months Ended March 31, 2017 and 2016 (Unaudited)	4
	Consolidated Statements of Operations and Comprehensive Income Six Months and Three Months Ended June 30, 2017 and 2016 (Unaudited)	4
	Consolidated Statement of Changes in Shareholders’ Equity Three Months Ended March 31, 2017 (Unaudited)	6
	Consolidated Statement of Changes in Shareholders’ Equity Six Months Ended June 30, 2017 (Unaudited)	6
	Consolidated Statements of Cash Flows Three Months Ended March 31, 2017 and 2016 (Unaudited)	7
	Consolidated Statements of Cash Flows Six Months Ended June 30, 2017 and 2016 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3740
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5053
Item 4.	Controls and Procedures	5154
PART II.	OTHER INFORMATION	5255
Item 1.	Legal Proceedings	5255
Item 1A.	Risk Factors	5255
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5255
Item 3.	Defaults Upon Senior Securities	5255
Item 4.	Mine Safety Disclosures	5255
Item 5.	Other Information	5255
Item 6.	Exhibits	5356
SIGNATURES		5457
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

-2-

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

COMMUNITY FIRST, INC.

CONSOLIDATED BALANCE SHEETS

~~MARCH~~JUNE 3130, 2017 (UNAUDITED) AND DECEMBER 31, 2016

(Dollar amounts in thousands, except share and per share data)

	March 31, 2017			December 31, 2016
	June 30, 2017			December 31, 2016
ASSETS
Cash and due from financial institutions	$	3039,~~872~~161		$	24,934
Time deposits in other financial institutions		23,558			24,797
Securities available for sale, at fair value		7472,~~174~~726			69,207
Loans held for sale, at fair value		~~625~~84			561
Loans		~~310~~308,~~815~~195			315,483
Allowance for loan losses		(3,~~776~~708	)		(3,757	)
Net loans		~~307~~304,~~039~~487			311,726
Restricted equity securities, at cost		1,727			1,727
Premises and equipment, net		1110,~~251~~630			11,378
Accrued interest receivable		~~1,034~~974			1,122
Core deposit and customer relationship intangibles, net		~~768~~733			804
Other real estate owned, net		32,~~062~~788			4,697
Bank owned life insurance		10,~~454~~523			10,389
Other assets		1312,~~038~~246			13,169
Total Assets	$	~~477~~479,~~602~~637		$	474,511
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing	$	8180,~~073~~746		$	78,813
Interest-bearing		~~344~~345,~~699~~532			344,594
Total Deposits		~~425~~426,~~772~~278			423,407
Subordinated debentures		13,000			13,000
Other borrowed money		3,~~924~~841			4,000
Accrued interest payable		~~347~~395			451
Other liabilities		3,~~342~~516			3,409
Total Liabilities		~~446~~447,~~385~~030			444,267
Shareholders’ Equity
Common stock, no par value; 10,000,000 shares authorized; 5,024,514 shares issued and outstanding at March 31, 2017 and 4,998,788 shares issued and outstanding at December 31, 2016.		43,119			42,997
Common stock, no par value; 10,000,000 shares authorized; 5,025,199 shares issued and outstanding at June 30, 2017 and 4,998,788 shares issued and outstanding at December 31, 2016.		43,186			42,997
Accumulated deficit		(98,~~405~~678	)		(9,906	)
Accumulated other comprehensive loss, net		(21,~~497~~901	)		(2,847	)
Total Shareholders' Equity		3132,~~217~~607			30,244
Total Liabilities and Shareholders’ Equity	$	~~477~~479,~~602~~637		$	474,511

See accompanying notes to unaudited consolidated financial statements.

-3-

COMMUNITY FIRST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

SIX MONTHS AND THREE MONTHS ENDED ~~MARCH~~JUNE 3130, 2017 AND 2016

(UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

	Three Months Ended March 31,
	Six Months Ended June 30,					Three Months Ended June 30,
	2017		2016			2017		2016
Interest income
Loans, including fees	$	37,~~851~~630	$	37,~~499~~257		$	3,779	$	3,758
Taxable securities		~~429~~874		~~624~~1,120			445		496
Tax-exempt securities		24		915			2		6
Federal funds sold and other		~~143~~328		~~100~~204			185		104
Total interest income		48,~~425~~836		48,~~232~~596			4,411		4,364
Interest expense
Deposits		~~505~~1,027		~~499~~993			522		494
Subordinated debentures and other		~~152~~315		~~186~~373			163		187
Total interest expense		~~657~~1,342		~~685~~1,366			685		681
Net interest income		37,~~768~~494		37,~~547~~230			3,726		3,683
Provision (reversal of) for loan losses		20		(578	)
Provision for (reversal of) loan losses		55		(578	)		35		—
Net interest income after provision for loan losses		37,~~748~~439		47,~~125~~808			3,691		3,683
Noninterest income
Service charges on deposit accounts		~~437~~872		~~453~~926			435		473
Gain on sale of loans		50100		3592			50		57
Gain on sale of securities available for sale		0—		37206			—		169
Other noninterest income		~~110~~242		~~139~~284			132		145
Total noninterest income		~~597~~1,214		~~664~~1,508			617		844
Noninterest expense
Salaries and employee benefits		13,~~816~~532		13,~~906~~744			1,716		1,838
Regulatory and compliance		58137		96197			79		101
Occupancy		~~254~~512		~~255~~505			258		250
Furniture and equipment		96183		90174			87		84
Data processing fees		~~283~~558		~~313~~622			275		309
Advertising and public relations		5386		4887			33		39
Operational expense		~~127~~248		~~119~~226			121		107
Other real estate owned expense		~~259~~265		236			6		34
Other noninterest expense		~~635~~1,239		~~729~~1,474			604		745
Total noninterest expenses		36,~~581~~760		37,~~558~~065			3,179		3,507
Income before income tax expense		~~764~~1,893		12,~~231~~251			1,129		1,020

See accompanying notes to unaudited consolidated financial statements.

-4-

COMMUNITY FIRST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

SIX MONTHS AND THREE MONTHS ENDED ~~MARCH~~JUNE 3130, 2017 AND 2016

(UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

	Three Months Ended March 31,
	Six Months Ended June 30,					Three Months Ended June 30,
	2017		2016			2017		2016
Income tax expense		~~263~~665		~~481~~823			402		342
Net Income		~~501~~1,228		~~750~~1,428			727		678
Preferred stock dividends reversed, net		—		4,265			—		—
Net income available to common shareholders	$	~~501~~1,228	$	5,~~015~~693		$	727	$	678
Income per share available to common shareholders
Basic	$	0.1025	$	1.5275		$	0.15	$	0.21
Diluted	$	0.1025		1.5275		$	0.15		0.21
Weighted average common shares outstanding
Basic		54,~~019~~995,~~982~~755		3,~~292~~255,~~553~~151			4,998,480		3,257,979
Diluted		54,~~019~~995,~~982~~755		3,~~292~~255,~~553~~151			4,998,480		3,257,979
Comprehensive Income
Net income	$	~~501~~1,228	$	~~750~~1,428		$	727	$	678
Reclassification adjustment for realized gains included in net income, net of income taxes of $0 and $14 for the three months ended March 31, 2017 and March 31, 2016, respectively		—		(23	)
Reclassification adjustment for realized gains included in net income, net of income taxes of $0 for the six months and three months ended June 30, 2017, respectively and $79 and $65 for the six months and three months ended June 30, 2016		—		(127	)		—		(104	)
Unrealized gains on securities, net of income taxes of $216 and $311 for the three months ended March 31, 2017 and March 31, 2016, respectively		350		526
Unrealized gains on securities, net of income taxes of $587 and $371 for the six months and three months ended June 30, 2017, respectively, and $327 and $127 for the six months and three months ended June 30, 2016, respectively		946		856			596		330
Comprehensive income	$	~~851~~2,174	$	12,~~253~~157		$	1,323	$	904

See accompanying notes to unaudited consolidated financial statements.

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COMMUNITY FIRST, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

~~THREE~~SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2017

(UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

	Common Shares		Common Stock		Accumulated Deficit			Accumulated Other Comprehensive Loss, Net			Total Shareholders’ Equity
Balance at January 1, 2017		4,998,788	$	42,997	$	(9,906	)	$	(2,847	)	$	30,244
Sale of shares of common stock through employee stock purchase plan		~~619~~1,304		36		—			—			36
Shares of common stock issued in connection with employee stock grant		25,107		119		—			—			119
Net income		—		—		501			—			501
Vesting of common stock issued in connection with restricted employee stock grant		—		64		—			—			64
Net income		—		—		1,228			—			1,228
Reclassification adjustment for realized gains included in net income, net of income taxes of $0		—		—		—			—			—
Change in unrealized loss on securities available for sale, net of income taxes of $216		—		—		—			350			350
Change in unrealized loss on securities available for sale, net of income taxes of $587		—		—		—			946			946
Balance at March 31, 2017		5,024,514	$	43,119	$	(9,405	)	$	(2,497	)	$	31,217
Balance at June 30, 2017		5,025,199	$	43,186	$	(8,678	)	$	(1,901	)	$	32,607

See accompanying notes to unaudited consolidated financial statements.

-6-

COMMUNITY FIRST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~THREE~~SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2017 AND 2016

(UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

	Three Months Ended March 31,
	Six Months Ended June 30,
	2017			2016
Cash flows from operating activities
Net income	$	~~501~~1,228		$	~~750~~1,428
Adjustments to reconcile net income to net cash from operating activities
Depreciation		~~159~~317			~~157~~308
Amortization on securities, net		~~138~~289			~~219~~445
Core deposit intangible amortization		3671			3670
Provision for/(reversal of provision for) loan losses		2055			(578	)
Funding of mortgage loans held for sale		(24,~~275~~353	)		(~~881~~2,939	)
Proceeds from sales of loans held for sale		24,~~254~~917			12,~~069~~713
Gains on sales of loans held for sale		(50100	)		(3592	)
Decrease in accrued interest receivable		88148			27118
Decrease in accrued interest payable		(104	)		(152	)
(Decrease)/increase in accrued interest payable		(56	)		47
Increase in surrender value of bank owned life insurance		(65	)		(64	)
Net collected loan recoveries		—			27
Gain on sale of securities		—			(37	)
Increase in surrender value of bank owned life insurance		(134	)		(126	)
Net loss on other real estate owned		284			27
Gain on sale of securities		—			(206	)
Other, net		(27	)		267
Gain on sale of fixed assets		(13	)		—
Net cash provided from operating activities		959			805
Net loss on other real estate owned		282			108
Other, net		654			841
Net cash provided from operating activities		3,305			2,164
Cash flows from investing activities
Available for sale securities
Purchases:
Mortgage-backed securities		(4,728	)		—(1,410	)
Other		(2,145	)		—
Sales:
Mortgage-backed securities		—			1446,~~714~~476
Maturities, prepayments, and calls:
Mortgage-backed securities		24,~~335~~598			37,~~710~~840
Other		—			~~405~~1,010
Net decrease/(increase) in loans		47,~~579~~075			(2132,~~342~~690	)
Proceeds from sales of other real estate owned		1,~~439~~736			2,~~117~~663
Decrease in time deposits in other financial institutions		1,239			128
Proceeds from sale of premises and equipment		484			—
Purchase of premises and equipment		(32	)		(23	)
Decrease/(increase) in time deposits in other financial institutions		1,239			(619	)
Net cash provided from/(used in) investing activities		2,687			(291	)
Purchase of premises and equipment		(55	)		(45	)
Net cash provided from investing activities		8,204			23,225

-7-

COMMUNITY FIRST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~THREE~~SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2017 AND 2016

(UNAUDITED, CONTINUED)

(Dollar amounts in thousands, except share and per share data)

	Three Months Ended March 31,
	Six Months Ended June 30,
	2017			2016
Cash flows from financing activities
Net increase/(decrease) in deposits		2,365			(4,514	)
Net increase in deposits		2,871			4,497
Proceeds from issuance of common stock		36			815
Cash paid in repayment of other borrowed money		(76	)		—
Cash paid for preferred stock dividends		—			(97	)
Net cash provided from/(used in) financing activities		2,292			(4,433	)
Cash paid in repayment of other borrowed money		(159	)		—
Net increase/(decrease) in cash and cash equivalents		5,938			(3,919	)
Net cash provided from financing activities		2,718			4,405
Net increase in cash and cash equivalents		14,227			29,794
Cash and cash equivalents at beginning of period		24,934			19,387
Cash and cash equivalents at end of period	$	3039,~~872~~161		$	1549,~~468~~181
Supplemental disclosures of cash flow information
Cash paid during year for:
Interest	$	~~761~~1,398		$	~~837~~1,319
Income taxes paid		—55			—29
Loans transferred to other real estate owned		88109			—

See accompanying notes to unaudited consolidated financial statements.

-8-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

The consolidated financial statements include Community First, Inc. and its wholly-owned subsidiary, Community First Bank & Trust. The Company’s second subsidiary, Community First TRUPS Holding Company (“TRUPS HC”), was newly formed in 2016 to purchase and hold securities associated with the Company’s subordinated debentures. The sole subsidiary of Community First Bank & Trust is Community First Properties, Inc. (“Properties”), which was originally established as a Real Estate Investment Trust (“REIT”) but which terminated its REIT election in the first quarter of 2012. Community First Bank & Trust together with its subsidiary is referred to herein as the “Bank.” Intercompany transactions and balances are eliminated in consolidation. Community First, Inc., together with the Bank, is referred to herein as the “Company.”

The Bank conducts substantially all of its banking activities in Maury, Williamson, and Hickman Counties in Tennessee. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flows from operations of businesses. The significant loan concentrations that exceed 10% of total loans are as follows: commercial real estate loans, 1-4 family residential loans, and construction loans. The customers’ ability to repay these types of loans is dependent on the real estate and general economic conditions in the Company’s market areas. Other financial instruments, which potentially represent concentrations of credit risk, include deposit accounts in other financial institutions and federal funds sold.

The unaudited consolidated financial statements as of ~~March~~June 3130, 2017 and for the six-month and three-month periods ended ~~March~~June 3130, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the information. They do not include all the information and footnotes required by GAAP for complete financial statements. Operating results for interim periods are not necessarily indicative of the results that may be expected for the entire year. For further information, refer to the 2016 consolidated audited financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 3, 2017 (File No. 000-49966) (the “2016 Form 10-K”).

Critical Accounting Policies:

The consolidated financial statements in this report are prepared in conformity with GAAP and with general practices in the banking industry. As such, we are required to make certain estimates, judgments, and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. A summary of our significant accounting policies is described in our 2016 Form 10-K. The significant accounting policies and estimates which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Allowance for Loan Losses: Credit risk is inherent in the business of extending loans to borrowers. This credit risk is addressed through a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired.

A loan is identified as impaired when, based on current information and events, it is probable that the scheduled payments of principal or interest will not be collected when due according to the contractual terms of the loan agreement. However, some loans are considered impaired because of doubt regarding collectability of interest and principal according to the contractual terms, even though such loans are both fully secured by collateral and current in their interest and principal payments. Additionally, loans are considered troubled debt restructurings and classified as impaired if their terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties.

-9-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION (Continued)

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

All loans over $250 that are unlikely to be collected under existing terms are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.

The general component of the allowance covers loans collectively evaluated for impairment and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent four years. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include, but are not limited to, consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following loan portfolio segments have been identified with a discussion of the risk characteristics of these portfolio segments:

Real Estate Construction loans consist of loans made for both residential and commercial construction and land development. Residential real estate construction loans are loans secured by real estate to build 1-4 family dwellings. These are loans made to borrowers obtaining loans in their personal name for the personal construction of their own dwellings or loans to builders for the purpose of constructing homes for resale. These loans to builders can be for speculative homes for which there is no specific homeowner for which the home is being built, as well as loans to builders that have a pre-sale contract to another party.

Commercial Construction loans are loans extended to borrowers secured by and to build commercial structures such as churches, retail strip centers, industrial warehouses or office buildings. Land development loans are granted to commercial borrowers to finance the improvement of real estate by adding infrastructure so that ensuing construction can take place. Construction and land development loans are generally short term in maturity to match the expected completion of a particular project. These loan types are generally more vulnerable to changes in economic conditions in that they project there will be a demand for the product. They require monitoring to ensure the project is progressing in a timely manner within the expected budgeted amount. This monitoring is accomplished via periodic physical inspections by an outside third party.

1-4 Family Residential loans consist of both open end and closed end loans secured by first or junior liens on 1-4 family improved residential dwellings. Open end loans are home equity lines of credit that allow the borrower to use equity in the real estate to borrow and repay as the need arises. First and junior lien residential real estate loans are closed end loans with a specific maturity that generally does not exceed seven years. Economic conditions can affect the borrower’s ability to repay the loans, and the value of the real estate securing the loans can change over the life of the loan.

Commercial Real Estate loans consist of loans secured by farmland or by improved commercial property. Farmland includes all land known to be used or usable for agricultural purposes, such as crop and livestock production, grazing, or pasture land. Improved commercial property can be owner occupied or non-owner occupied property secured by commercial structures such as churches, retail strip centers, hotels, industrial warehouses or office buildings. The repayment of these loans tends to depend upon the operation and management of a business or lease income from a business, and therefore adverse economic conditions can affect the borrower’s ability to repay.

-10-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION (Continued)

Other Real Estate Secured loans consist of loans secured by five or more multi-family dwelling units. These loans are typically exemplified by apartment buildings or complexes. The ability to manage and rent units affects the income that usually provides repayment for this type of loan.

Commercial, Financial, and Agricultural loans consist of loans extended for the operation of a business or a farm. They are not secured by real estate. Commercial loans are used to provide working capital, acquire inventory, finance the carrying of receivables, purchase equipment or vehicles, or purchase other capital assets. Agricultural loans are typically for purposes such as planting crops, acquiring livestock, or purchasing farm equipment. The repayment of these loans comes from the cash flow of a business or farm and is generated by sales of inventory or providing of services. The collateral tends to depreciate over time and is difficult to monitor. Frequent statements are required from the borrower pertaining to inventory levels or receivables aging.

Consumer loans consist largely of loans extended to individuals for purposes such as to purchase a vehicle or other consumer goods. These loans are not secured by real estate but are frequently collateralized by the consumer items being acquired with the loan proceeds. This type of collateral tends to depreciate, and therefore the term of the loan is tailored to fit the expected value of the collateral as it depreciates, along with specific underwriting policies and guidelines.

Tax Exempt loans consist of loans that are extended to entities such as municipalities. These loans tend to be dependent on the ability of the borrowing entity to continue to collect taxes to repay the indebtedness.

Other loans consist of those loans which are not elsewhere classified in these categories and are not secured by real estate.

Impact of Recently-Issued Accounting Standards ~~Newly Adopted~~Updates:

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU 2016-15 is intended to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows, including (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions and (8) separately identifiable cash flows and application of the predominance principle. For public companies, this amendment becomes effective for interim and annual periods beginning after December 15, 2017. The ASU impacts the presentation of specific items within the Statement of Cash Flows and is not expected to have a material impact to the Company.

On June 16, 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The update will significantly change the way entities recognize impairment on many financial assets by requiring immediate recognition of estimated credit losses expected to occur over the asset's remaining life. FASB describes this impairment recognition model as the current expected credit loss (“CECL”) model and believes the CECL model will result in more timely recognition of credit losses since the CECL model incorporates expected credit losses versus incurred credit losses. The scope of FASB’s CECL model would include loans, held-to-maturity debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value. For public companies, this update becomes effective for interim and annual periods beginning after December 15, 2019. Management is currently evaluating the impact this ASU will have on the Company’s consolidated financial statements and will continue to monitor FASB’s progress on this topic.

-11-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION (Continued)

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 is intended to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions, including (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes. The amendments of ASU 2016-09 are effective for interim and annual periods beginning after December 15, 2016. Adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements for the quarterly period ended ~~March~~June 3130, 2017.

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 amends the accounting model and disclosure requirements for leases. The current accounting model for leases distinguishes between capital leases, which are recognized on-balance sheet, and operating leases, which are not. Under the new standard, the lease classifications are defined as finance leases, which are similar to capital leases under current GAAP, and operating leases. Further, a lessee will recognize a lease liability and a right-of-use asset for all leases with a term greater than 12 months on its balance sheet regardless of the lease’s classification, which may significantly increase reported assets and liabilities. The accounting model and disclosure requirements for lessors remains substantially unchanged from current GAAP. ASU 2016-02 is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Management is currently evaluating the impact ASU 2016-02 will have on the Company's financial position and results of operations as well as its consolidated financial statements.

NOTE 2 - SECURITIES AVAILABLE FOR SALE

The following table summarizes the amortized cost and fair value of the available for sale securities portfolio at ~~March~~June 3130, 2017 and December 31, 2016 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss), net of applicable income taxes:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2017
June 30, 2017
Mortgage-backed - residential	$	7269,~~197~~796	$	20116	$	(~~1,500~~657	)	$	7069,~~717~~255
State and municipal		1,~~309~~308		525		—			1,~~314~~333
Other debt securities		2,~~142~~129		19		—			2,~~143~~138
Total	$	7573,~~648~~233	$	26150	$	(~~1,500~~657	)	$	7472,~~174~~726
December 31, 2016
Mortgage-backed - residential	$	69,938	$	21	$	(2,060	)	$	67,899
State and municipal		1,309		3		(4	)		1,308
Total	$	71,247	$	24	$	(2,064	)	$	69,207

The proceeds from sales of securities and the associated gains and losses are listed below:

	Three Months Ended March 31,
	Six Months Ended June 30,					Three Months Ended June 30,
	2017		2016			2017		2016
Proceeds	$	—	$	1446,~~714~~476		$	—	$	31,762
Gross gains		—		47237			—		190
Gross losses		—		(1031	)		—		(21	)

-12-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 2 - SECURITIES AVAILABLE FOR SALE (Continued)

The amortized cost and fair value of the securities portfolio are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage backed securities are presented separately due to varying maturity dates as a result of prepayments.

	March 31, 2017
	June 30, 2017
	Amortized Cost		Fair Value
Due in one year or less	$	—101	$	—103
Due after one through five years		~~504~~403		~~507~~410
Due after five through ten years		2,~~947~~933		2,~~950~~958
Mortgage backed - residential		7269,~~197~~796		7069,~~717~~255
Total	$	7573,~~648~~233	$	7472,~~174~~726

At ~~March~~June 3130, 2017 and December 31, 2016, respectively, securities totaling $4847,~~560~~501 and $47,707 were pledged to secure public deposits.

The Company did not hold securities of any one issuer with a face amount greater than 10% of shareholders’ equity as of ~~March~~June 3130, 2017 or December 31, 2016.

The following table summarizes securities with unrealized losses at ~~March~~June 3130, 2017 and December 31, 2016 aggregated by major security type and length of time in a continuous unrealized loss position:

March 31, 2017	Less than 12 Months					12 Months or More					Total
June 30, 2017	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss			Value		Loss
Mortgage-backed - residential	$	6933,~~737~~278	$	(~~1,500~~632	)	$	—1,106	$	—(25	)	$	6934,~~737~~384	$	(~~1,500~~657	)
Total temporarily impaired	$	6933,~~737~~278	$	(~~1,500~~632	)	$	—1,106	$	—(25	)	$	6934,~~737~~384	$	(~~1,500~~657	)

December 31, 2016	Less than 12 Months					12 Months or More				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss		Value		Loss
Mortgage-backed - residential	$	67,475	$	(2,060	)	$	—	$	—	$	67,475	$	(2,060	)
State and municipals		1,079		(4	)		—		—		1,079		(4	)
Total temporarily impaired	$	68,554	$	(2,064	)	$	—	$	—	$	68,554	$	(2,064	)

Other-Than-Temporary Impairment

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments – securities in a loss position for less than 12 months and securities in a loss position for 12 months or more – and applying the appropriate OTTI model. Securities classified as available for sale are generally evaluated for OTTI under the provisions of ASC 320-10, Investments - Debt and Equity Securities. In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

-13-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 2 - SECURITIES AVAILABLE FOR SALE (Continued)

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in accumulated other comprehensive income becomes the new amortized cost basis of the investment.

As of ~~March~~June 3130, 2017, the Company’s securities portfolio consisted of 45 securities, 3618 of which were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company did not have at ~~March~~June 3130, 2017 the intent to sell these securities and at that date it was likely that it would not be required to sell the securities before their anticipated recovery, the Company did not consider these securities to be other-than-temporarily impaired at ~~March~~June 3130, 2017.

-14-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 - LOANS

Loans outstanding by category at ~~March~~June 3130, 2017 and December 31, 2016 were as follows:

	March 31, 2017		December 31, 2016
	June 30, 2017		December 31, 2016
Real estate construction:
Residential construction	$	1612,~~959~~014	$	18,834
Other construction		1619,~~318~~488		13,056
1-4 family residential:
Revolving, open ended		1110,~~105~~026		11,908
First liens		~~102~~103,~~536~~597		106,074
Junior liens		1,~~932~~856		1,909
Commercial real estate:
Farmland		67,~~874~~091		6,642
Owner occupied		65,~~502~~337		63,313
Non-owner occupied		5554,~~818~~960		58,259
Other real estate secured loans		8,~~136~~223		9,427
Commercial, financial and agricultural:
Agricultural		1,~~391~~479		1,132
Commercial and industrial		17,~~560~~516		18,103
Consumer		6,~~623~~551		6,681
Tax exempt		—		—
Other		57		145
Other		61		145
	$	308,195	$	315,483
	$	310,815	$	315,483

-15-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

The following tables present activity in the allowance for loan losses for the ~~three~~six-month and three-month periods ended ~~March~~June 3130, 2017 and ~~March~~June 3130, 2016 and the outstanding loan balance by portfolio segment as of ~~March~~June 3130, 2017 and December 31, 2016 and are based on impairment methods as of ~~March~~June 3130, 2017, ~~March~~June 3130, 2016 and December 31, 2016. The balances for “recorded investment” in the following tables related to credit quality do not include approximately $~~780~~712, $~~814~~807 and $898 in accrued interest receivable at ~~March~~June 3130, 2017, ~~March~~June 3130, 2016 and December 31, 2016, respectively. Accrued interest receivable is a component of the Company’s recorded investment in loans.

	Real Estate Construction			1-4 Family Residential			Commercial Real Estate			Other Real Estate Secured Loans			Commercial, Financial and Agricultural			Consumer			Other Loans			Unallocated			Total
Three months ended March 31, 2017
Six months ended June 30, 2017
Activity in the allowance for loan losses:
Beginning balance	$	861		$	1,809		$	607		$	5		$	460		$	15		$	—		$	—		$	3,757
Charge-offs		—(2	)		(1078	)		—			—			(3	)		—			(752	)		—			(20135	)
Recoveries		—			59			36			—			12			67			47			—			1931
(Reversal of provision)/provision		(11	)		43			47			7			(63	)		(6	)		3			—			20
Provision/(reversal of provision)		(81	)		72			39			7			(61	)		(7	)		45			41			55
Total ending allowance balance	$	~~850~~778		$	1,~~847~~812		$	~~657~~652		$	12		$	~~395~~398		$	15		$	—		$	—41		$	3,~~776~~708
Three months ended March 31, 2016
Six months ended June 30, 2016
Activity in the allowance for loan losses:
Beginning balance	$	873		$	1,679		$	720		$	12		$	588		$	17		$	—		$	386		$	4,275
Charge-offs		—			(5	)		—			—			—			—			(312	)		—			(817	)
Recoveries		—3			919			26			—			12			1			413			—			1744
(Reversal of provision)		(293	)		(129	)		(53	)		(12	)		(11	)		(3	)		(1	)		(76	)		(578	)
Provision/(reversal of provision)		(154	)		(201	)		(85	)		(12	)		2			(3	)		(1	)		(124	)		(578	)
Total ending allowance balance	$	~~580~~722		$	1,~~554~~492		$	~~669~~641		$	—		$	~~578~~592		$	15		$	—		$	~~310~~262		$	3,~~706~~724

-16-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

	Real Estate Construction			1-4 Family Residential			Commercial Real Estate			Other Real Estate Secured Loans		Commercial, Financial and Agricultural		Consumer			Other Loans			Unallocated			Total
Ending allowance balance attributable to loans at March 31, 2017:
Three months ended June 30, 2017
Individually evaluated for impairment	$	—		$	20		$	59		$	—	$	—	$	—		$	—		$	—		$	79
Activity in the allowance for loan losses:
Collectively evaluated for Impairment		850			1,827			598			12		395		15			—			—			3,697
Beginning balance	$	850		$	1,847		$	657		$	12	$	395	$	15		$	—		$	—		$	3,776
Total ending allowance balance	$	850		$	1,847		$	657		$	12	$	395	$	15		$	—		$	—		$	3,776
Charge-offs		(2	)		(68	)		—			—		—		—			(45	)		—			(115	)
Ending allowance balance attributable to loans at December 31, 2016:
Recoveries		—			4			3			—		1		1			3			—			12
Individually evaluated for impairment	$	—		$	18		$	55		$	—	$	—	$	—		$	—		$	—		$	73
Provision/(reversal of provision)		(70	)		29			(8	)		—		2		(1	)		42			41			35
Collectively evaluated for Impairment		861			1,791			552			5		460		15			—			—			3,684
Total ending allowance balance	$	778		$	1,812		$	652		$	12	$	398	$	15		$	—		$	41		$	3,708
Total ending allowance balance	$	861		$	1,809		$	607		$	5	$	460	$	15		$	—		$	—		$	3,757
Three months ended June 30, 2016
Loans at March 31, 2017:
Activity in the allowance for loan losses:
Individually evaluated for impairment	$	2		$	554		$	758		$	—	$	1,186	$	9		$	—					$	2,509
Beginning balance	$	580		$	1,554		$	669		$	—	$	578	$	15		$	—		$	310		$	3,706
Collectively evaluated for impairment		33,275			115,019			127,436			8,136		17,765		6,614			61						308,306
Charge-offs		—			—			—			—		—		—			(8	)		—			(8	)
Total loans balance	$	33,277		$	115,573		$	128,194		$	8,136	$	18,951	$	6,623		$	61					$	310,815
Recoveries		3			10			4			—		1		—			8			—			26
Loans at December 31, 2016:
Provision/(reversal of provision)		139			(72	)		(32	)		—		13		—			—			(48	)		-
Individually evaluated for impairment	$	2		$	554		$	761		$	—	$	7	$	10		$	—					$	1,334
Total ending allowance balance	$	722		$	1,492		$	641		$	—	$	592	$	15		$	—		$	262		$	3,724
Collectively evaluated for impairment		31,888			119,337			127,453			9,427		19,228		6,671			145						314,149
Total loans balance	$	31,890		$	119,891		$	128,214		$	9,427	$	19,235	$	6,681		$	145					$	315,483

-17-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Loans individually evaluated for impairment by class of loans as of and for the three months ended March 31, 2017:

	Real Estate Construction		1-4 Family Residential		Commercial Real Estate		Other Real Estate Secured Loans		Commercial, Financial and Agricultural		Consumer		Other Loans		Unallocated		Total
Ending allowance balance attributable to loans at June 30, 2017:
Individually evaluated for impairment	$	—	$	14	$	57	$	—	$	—	$	—	$	—	$	—	$	71
Collectively evaluated for Impairment		778		1,798		595		12		398		15		—		41		3,637
Total ending allowance balance	$	778	$	1,812	$	652	$	12	$	398	$	15	$	—	$	41	$	3,708
Ending allowance balance attributable to loans at December 31, 2016:
Individually evaluated for impairment	$	—	$	18	$	55	$	—	$	—	$	—	$	—	$	—	$	73
Collectively evaluated for Impairment		861		1,791		552		5		460		15		—		—		3,684
Total ending allowance balance	$	861	$	1,809	$	607	$	5	$	460	$	15	$	—	$	—	$	3,757
Loans at June 30, 2017:
Individually evaluated for impairment	$	—	$	482	$	749	$	—	$	1,185	$	8	$	—			$	2,424
Collectively evaluated for impairment		31,502		114,997		126,639		8,223		17,810		6,543		57				305,771
Total loans balance	$	31,502	$	115,479	$	127,388	$	8,223	$	18,995	$	6,551	$	57			$	308,195
Loans at December 31, 2016:
Individually evaluated for impairment	$	2	$	554	$	761	$	—	$	7	$	10	$	—			$	1,334
Collectively evaluated for impairment		31,888		119,337		127,453		9,427		19,228		6,671		145				314,149
Total loans balance	$	31,890	$	119,891	$	128,214	$	9,427	$	19,235	$	6,681	$	145			$	315,483

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Income Recognized		Cash Basis Income Recognized
With no related allowance recorded:
Real estate construction:
Other construction	$	2	$	2	$	—	$	2	$	—	$	—
1-4 family residential:
Revolving, open ended		33		33		—		34		1		1
First liens		398		398		—		398		2		2
Junior liens		20		20		—		20		—		—
Commercial real estate:
Farmland		118		117		—		119		2		2
Non-owner occupied		29		29		—		30		1		1
Commercial, financial and agricultural
Commercial and industrial		1,188		1,186		—		596		15		9
Total with no related allowance recorded		1,788		1,785		—		1,199		21		15
With an allowance recorded:
1-4 family residential:
Revolving, open ended		33		33		14		33		1		1
First liens		70		70		6		71		—		—
Commercial real estate:
Owner occupied		612		612		59		611		4		3
Commercial, financial and agricultural
Commercial and industrial		—		—		—		—		—		—
Consumer		9		9		—		10		—		—
Total with an allocated allowance recorded		724		724		79		725		5		4
Total	$	2,512	$	2,509	$	79	$	1,924	$	26	$	19

-18-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Loans individually evaluated for impairment by class of loans as of and for the ~~three~~six months ended ~~March~~June 3130, ~~2016~~2017:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Income Recognized			Cash Basis Income Recognized
With no related allowance recorded:
Real estate construction:
Other construction	$	—	$	—	$	—	$	231	$	—		$	—
1-4 family residential:
Revolving, open ended		32		32		—		4433		1			1
First liens		~~410~~395		~~410~~395		—		~~396~~397		(63	)		23
Junior liens		2019		2019		—		1020		—1			—1
Commercial real estate:
Farmland		~~127~~115		~~127~~115		—		~~105~~118		34			34
Owner occupied		1,178		1,178		—		1,182		14			14
Non-owner occupied		28		28		—		29		1			1
Non-owner occupied		31		31		—		32		1			1
Commercial, financial and agricultural
Commercial and industrial		121,187		91,185		—		9792		—30			—31
Consumer		2		2		—		3		—			—
Total with no related allowance recorded		1,776		1,774		—		1,390		40			41
Total with no related allowance recorded		1,812		1,809		—		1,804		13			21
With an allowance recorded:
Real estate construction:
Other construction		4		4		—		4		—			—
1-4 family residential:
Revolving, open ended		33		3334		2914		33		1			1
First liens		~~1,567~~2		~~1,567~~2		48—		~~1,637~~48		20—			18—
Commercial real estate:
Owner occupied		~~3,046~~606		~~3,047~~606		~~101~~57		~~3,071~~609		379			519
Non-owner occupied		1,094		1,094		25		1,096		15			17
Consumer		8		8		—		9		—			—
Commercial, financial and agricultural
Total with an allocated allowance recorded		649		650		71		699		10			10
Commercial and industrial		224		224		120		224		5			9
Total	$	2,425	$	2,424	$	71	$	2,089	$	50		$	51
Consumer		11		11		1		11		—			—
Total with an allocated allowance recorded		5,979		5,980		324		6,076		78			96
Total	$	7,791	$	7,789	$	324	$	7,880	$	91		$	117

-19-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Loans individually evaluated for impairment by class of loans as of and for the three months ended June 30, 2017:

	Average Recorded Investment		Income Recognized		Cash Basis Income Recognized
With no related allowance recorded:
Real estate construction:
Other construction	$	1	$	—	$	—
1-4 family residential:
Revolving, open ended		33		1		1
First liens		397		1		1
Junior liens		20		—		—
Commercial real estate:
Farmland		117		2		2
Non-owner occupied		29		—		—
Commercial, financial and agricultural
Commercial and industrial		1,185		15		22
Total with no related allowance recorded		1,782		19		26
With an allowance recorded:
1-4 family residential:
Revolving, open ended		33		—		—
First liens		36		—		—
Commercial real estate:
Owner occupied		609		5		6
Consumer		9		—		—
Total with an allocated allowance recorded		687		5		6
Total	$	2,469	$	24	$	32

-20-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Loans individually evaluated for impairment by class of loans as of and for the six months ended June 30, 2016:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Income Recognized		Cash Basis Income Recognized
With no related allowance recorded:
Real estate construction:
Other construction	$	4	$	4	$	—	$	16	$	—	$	—
1-4 family residential:
Revolving, open ended		35		35		—		41		1		1
First liens		402		402		—		398		9		17
Junior liens		20		20		—		13		1		1
Commercial real estate:
Farmland		125		125		—		111		6		6
Owner occupied		1,172		1,172		—		1,179		26		26
Non-owner occupied		31		31		—		31		1		1
Commercial, financial and agricultural
Commercial and industrial		12		8		—		9		—		—
Consumer		—		—		—		2		—		—
Total with no related allowance recorded		1,801		1,797		—		1,800		44		52
With an allowance recorded:
Real estate construction:
Other construction		—		—		—		3		—		—
1-4 family residential:
Revolving, open ended		33		33		29		33		1		1
First liens		1,506		1,506		44		1,593		40		39
Commercial real estate:
Owner occupied		3,023		3,023		97		3,055		69		85
Non-owner occupied		1,089		1,089		24		1,093		30		32
Commercial, financial and agricultural
Commercial and industrial		224		224		121		224		7		11
Consumer		12		12		1		11		—		—
Total with an allocated allowance recorded		5,887		5,887		316		6,012		147		168
Total	$	7,688	$	7,684	$	316	$	7,812	$	191	$	220

-21-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Loans individually evaluated for impairment by class of loans as of and for the three months ended June 30, 2016:

	Average Recorded Investment		Income Recognized		Cash Basis Income Recognized
With no related allowance recorded:
Real estate construction:
Other construction	$	2	$	—	$	—
1-4 family residential:
Revolving, open ended		34		—		—
First liens		406		15		15
Junior liens		20		1		1
Commercial real estate:
Farmland		126		3		3
Owner occupied		1,176		12		12
Non-owner occupied		31		—		—
Commercial, financial and agricultural
Commercial and industrial		9		—		—
Consumer		1		—		—
Total with no related allowance recorded		1,805		31		31
With an allowance recorded:
Real estate construction:
Other construction		2		—		—
1-4 family residential:
Revolving, open ended		33		—		—
First liens		1,536		20		21
Commercial real estate:
Owner occupied		3,036		32		34
Non-owner occupied		1,092		15		15
Commercial, financial and agricultural
Commercial and industrial		224		2		2
Consumer		11		—		—
Total with an allocated allowance recorded		5,934		69		72
Total	$	7,739	$	100	$	103

-22-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

June 30, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2016:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated			Average Recorded Investment		Income Recognized		Cash Basis Income Recognized
With no related allowance recorded:
Real estate construction:
Other construction	$	2	$	2	$	—		$	11	$	—	$	—
1-4 family residential:
Revolving, open ended		34		34		—			38		2		2
First liens		397		397		—			398		13		21
Junior liens		20		20		—			16		1		1
Commercial real estate:
Farmland		120		120		—			115		10		10
Owner occupied		—		—		—			707		—		—
Non-owner occupied		30		30		—			31		2		2
Commercial, financial and agricultural:
Commercial and industrial		10		7		—			8		1		1
Consumer		—		—		—			1		—		—
Other Loans		—		—		—			—		—		—
Total with no related allowance recorded		613		610		—			1,325		29		37
With an allowance recorded:
Real estate construction:
Other construction		—		—		—			2		—		—
1-4 family residential:
Revolving, open ended		33		33		12			33		2		2
First liens		71		70		6			984		2		3
Commercial real estate:
Owner occupied		611		611		56			2,079		32		46
Non-owner occupied		—		—		—			656		—		—
Commercial, financial and agricultural:
Commercial and industrial		—		—		(1	)		134		—		—
Consumer		10		10		—			11		1		1
Total with an allocated allowance recorded		725		724		73			3,899		37		52
Total	$	1,338	$	1,334	$	73		$	5,224	$	66	$	89

Troubled Debt Restructurings

The Company had $12,~~297~~390 of loans with allocated specific reserves of $6557 to customers whose loan terms have been modified in troubled debt restructurings as of ~~March~~June 3130, 2017 compared to $1,302 of loans with allocated specific reserves of $62 at December 31, 2016. The Company lost $2 and $5 of interest income in the six months and $1 and $32 of interest income in the three months ended ~~March~~June 3130, 2017 and 2016, respectively, that would have been recorded in interest income if the specific loans had not been restructured. Troubled debt restructurings still accruing interest totaled $~~725~~1,887 and $737 at ~~March~~June 3130, 2017 and December 31, 2016, respectively. The Bank had no commitments to lend additional funds to loans classified as troubled debt restructurings at ~~March~~June 3130, 2017 or December 31, 2016.

Modifications involving a reduction of the stated interest rate and extension of the maturity date of the loan were for periods ranging from six months to two years.

-2023-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Loans classified as troubled debt restructurings are included in impaired loans.

Changes in the Company’s restructured loans are set forth in the table below:

	Number of Loans			Recorded Investment
Totals at January 1, 2017		19		$	1,302
Additional loans with concessions		—2			—1,178
Reductions due to:
Reclassified as nonperforming		—			—
Paid in full		—(1	)		—(10	)
Charge-offs		—(2	)		—(61	)
Transfer to other real estate owned		—			—
Principal paydowns		—			(519	)
Lapse of concession period		—			—
TDR reclassified as performing loan		—			—
Totals at March 31, 2017		19		$	1,297
Totals at June 30, 2017		18		$	2,390

~~No loans were modified as troubled debt restructurings during the first three months of 2017.~~ The following table presents loans by class modified as troubled debt restructurings that occurred during the first ~~three~~six months of 2017 and 2016:

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
March 31, 2016
June 30, 2017
Commercial, financial and agricultural
Commercial and industrial		2	$	1,178	$	1,178
Total		2	$	1,178	$	1,178
June 30, 2016
1-4 family residential:
First liens		1	$	26	$	26
Total		1	$	26	$	26

The pre-modificaiton and post-modification recorded investment amount represents the recorded investment on the date of the loan modification. Since the modifications on this loan were an interest rate concession and payment term extension, not principal reductions, the pre-modification and post-modification recorded investment is the same.

Troubled debt restructurings described in the table above had an outstanding balance of $1,178 at June 30, 2017. There was no increase for the allowance for loan losses and no specific reserve recorded during the first ~~three~~six months of 2017 ~~for~~or ~~troubled debt restructurings since there were no new troubled debt restructurings occurring in 2017~~2016.

A loan is considered to be in payment default once it is more than 90 days contractually past due under the modified terms. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the first ~~three~~six months of 2017 or 2016.

-2124-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. This evaluation is performed in accordance with the Company’s internal loan policy. Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still accruing by class of loans as of ~~March~~June 3130, 2017 and December 31, 2016:

	March 31, 2017				December 31, 2016
	June 30, 2017				December 31, 2016
	Nonaccrual		Loans past due over 90 days still accruing		Nonaccrual		Loans past due over 90 days still accruing
Real estate construction:
Residential construction	$	135	$	—	$	135	$	—
Other construction		—		—		14		—
1-4 family residential:
Revolving, open ended		6333		—		33		—
First liens		~~746~~895		—		761		—
Commercial real estate:
Farmland		—		—		—		—
Owner occupied		225				221
Non-owner occupied		—		—		419		—
Commercial, financial and agricultural:
Commercial and industrial		63118		—		12		—
Consumer		5131		—		—		—
Other loans		—		—		—		—
Total	$	1,~~283~~437	$	—	$	1,595	$	—

-2225-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

The following table presents the aging of the recorded investment in past due loans, including nonaccrual loans, as of ~~March~~June 3130, 2017 and December 31, 2016 by class of loans:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
March 31, 2017
June 30, 2017
Real estate construction:
Residential construction	$	~~174~~35	$	—	$	—135	$	~~174~~170	$	1611,~~785~~844	$	1612,~~959~~014
Other construction		—		19—		—		19—		1619,~~299~~488		1619,~~318~~488
1-4 family residential:
Revolving, open ended		5733		—		37—		9433		119,~~011~~993		1110,~~105~~026
First liens		~~286~~439		—		~~576~~561		~~862~~1,000		~~101~~102,~~674~~597		~~102~~103,~~536~~597
Junior liens		~~129~~5		—50		—		~~129~~55		1,~~803~~801		1,~~932~~856
Commercial real estate:
Farmland		—		—		—		—		67,~~874~~091		67,~~874~~091
Owner occupied		~~762~~—		—176		—225		~~762~~401		64,~~740~~936		65,~~502~~337
Non-owner occupied		74—		~~766~~—		~~350~~—		~~1,190~~—		54,~~628~~960		5554,~~818~~960
Other real estate secured loans		—		—		—		—		8,~~136~~223		8,~~136~~223
Commercial, financial and agricultural:
Agricultural		7—		—		—		7—		1,~~384~~479		1,~~391~~479
Commercial and industrial		40		—		~~400~~118		~~440~~158		17,~~120~~358		17,~~560~~516
Consumer		2618		—		517		3135		6,~~592~~516		6,~~623~~551
Tax exempt		—		—		—		—		—		—
Other loans		—		—		—		—		6157		6157
Total	$	~~1,555~~570	$	~~785~~226	$	1,~~368~~056	$	31,~~708~~852	$	~~307~~306,~~107~~343	$	~~310~~308,~~815~~195

-2326-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2016
Real estate construction:
Residential construction	$	175	$	—	$	—	$	175	$	18,659	$	18,834
Other construction		—		—		—		—		13,056		13,056
1-4 family residential:
Revolving, open ended		28		—		—		28		11,880		11,908
First liens		1,113		412		—		1,525		104,549		106,074
Junior liens		—		—		—		—		1,909		1,909
Commercial real estate:
Farmland		—		—		—		—		6,642		6,642
Owner occupied		—		177		—		177		63,136		63,313
Non-owner occupied		—		—		—		—		58,259		58,259
Other real estate secured loans		—		—		—		—		9,427		9,427
Commercial, financial and agricultural:
Agricultural		—		—		—		—		1,132		1,132
Commercial and industrial		—		—		—		—		18,103		18,103
Consumer		50		10		—		60		6,621		6,681
Tax exempt		—		—		—		—		—		—
Other loans		—		—		—		—		145		145
Total	$	1,366	$	599	$	—	$	1,965	$	313,518	$	315,483

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. The Company assigns an initial credit risk rating on every loan. All loan relationships with aggregate debt greater than $250 are reviewed at least annually or more frequently if performance of the loan or other factors warrants review. Smaller balance loans are reviewed and evaluated based on changes in loan performance, such as becoming past due or upon notifying the Bank of a change in the borrower’s financial status. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

Watch. Loans characterized by borrowers who have marginal cash flow, marginal profitability, or have experienced operating losses and declining financial condition. The borrower has satisfactorily handled debts with the Bank in the past, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, the borrower’s margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information and weakness of financial statement and repayment capacity, but with collateral that appears to limit the Bank’s exposure. This classification includes loans to established borrowers that are reasonably margined by collateral, but where potential for improvement in financial capacity is limited.

Special Mention. Loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deteriorating prospects for the repayment source or in the Bank’s credit position in the future.

Substandard. Loans inadequately protected by the payment capacity of the borrower or the pledged collateral.

-2427-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Doubtful. Loans with the same characteristics as substandard loans with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions, and values. These are poor quality loans in which neither the collateral nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time or evidence of permanent impairment in the collateral securing the loan.

-2528-

COMMUNITY FIRST, INC.

Notes to Consolidated Financial Statements

~~March~~June 3130, 2017

(Unaudited)

(Dollar amounts in thousands, except share and per share data)

NOTE 3 – LOANS (Continued)

Impaired loans are evaluated separately from other loans in the Bank’s portfolio. Credit quality information related to impaired loans was presented above and is excluded from the tables below.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of ~~March~~June 3130, 2017 and December 31, 2016, and based on the most recent analysis performed, the risk categories of loans by class of loans are as follows:

	Pass		Watch		Special Mention		Substandard		Doubtful
March 31, 2017
June 30, 2017
Real estate construction:
Residential construction	$	1611,~~824~~844	$	—35	$	—	$	135	$	—
Other construction		1519,~~887~~069		~~415~~406		—		1413		—
1-4 family residential:
Revolving, open ended		109,~~785~~922		~~186~~—		28—		4039		—
First liens		9295,~~871~~124		87,~~567~~301		—		~~629~~773		—
Junior liens		1,~~857~~775		5611		—50		—		—
Commercial real estate:
Farmland		5,~~633~~859		—		—		1,~~124~~116		—
Owner occupied		63,~~103~~160		1,~~573~~345		—		~~214~~227		—
Non-owner occupied		5453,~~421~~576		1,~~368~~356		—		—		—
Other real estate loans		8,~~136~~223		—		—		—		—
Commercial, financial and agricultural:
Agricultural		1,~~381~~479		9—		—		—		—
Commercial and industrial		14,~~665~~845		1,~~647~~370		—		63118		—
Consumer		6,~~550~~454		466		18—		4223		—
Other loans		6157		—		—		—		—
Total	$	~~292~~291,~~174~~387	$	1311,~~825~~890	$	4650	$	2,~~261~~444	$	—

	Pass		Watch		Special Mention		Substandard		Doubtful
December 31, 2016
Real estate construction:
Residential construction	$	18,524	$	175	$	—	$	135	$	—
Other construction		12,615		68		6		365		—
1-4 family residential:
Revolving, open ended		11,642		189		—		11		—
First liens		95,795		8,749

Filing Compare · COMMUNITY FIRST INC