CNB Financial Corporation Reports First Quarter Earnings for 2014

CLEARFIELD, Pa.--()--CNB Financial Corporation (“CNB”) (NASDAQ: CCNE), the parent company of CNB Bank, today announced its earnings for the first quarter of 2014. Highlights include the following:

  • Net income of $5.2 million, or $0.36 per share, compared to net income of $4.3 million, or $0.34 per share, in the first quarter of 2013.
  • Annualized returns on average assets and equity of 0.97% and 11.97%, respectively, for the three months ended March 31, 2014.
  • Including loans acquired from FC Banc Corp. with an acquisition date fair value of approximately $248 million, loans of $1.29 billion at March 31, 2014 compared to loans of $933 million at March 31, 2013.
  • Including deposits acquired from FC Banc Corp. with an acquisition date fair value of approximately $332 million, deposits of $1.83 billion at March 31, 2014 compared to deposits of $1.55 billion at March 31, 2013.
  • Total non-performing assets of $13.1 million, or 0.62% of total assets, as of March 31, 2014, compared to $16.9 million, or 0.93% of total assets, as of March 31, 2013.

Joseph B. Bower, Jr., President and CEO, commented, “We are pleased to report to our shareholders record quarterly earnings of $5.2 million which provides an increase in earnings per share of 5.9% over the first quarter of 2013. The integration of FCBank continues to add momentum for CNB following the acquisition of FC Banc Corp. in October 2013, and we anticipate that our CNB Bank and ERIEBANK market areas will generate organic growth throughout the remainder of 2014.”

Net Interest Income and Margin

Net interest margin on a fully tax equivalent basis was 3.79% for the three months ended March 31, 2014, compared to 3.41% for the three months ended March 31, 2013. Net accretion included in loan interest income in the first quarter of 2014 related to loans acquired in the fourth quarter of 2013 was $740 thousand, resulting in an increase in the net interest margin of 15 basis points. Changes in earning assets, interest-bearing liabilities, and resulting interest income and expense from the first quarter of 2013 to the first quarter of 2014 are primarily a result of the acquisition of FC Banc Corp. in the fourth quarter of 2013; please refer to the financial tables that follow the forward-looking statements.

Asset Quality

During the three months ended March 31, 2014, CNB recorded a provision for loan losses of $1.0 million, as compared to a provision for loan losses of $930 thousand for the three months ended March 31, 2013. CNB increased its reserve for two impaired commercial and industrial loans in the first quarter of 2014, resulting in an increase in the provision for loan losses of $421 thousand. Net chargeoffs in the first quarter of 2014 were $581 thousand, compared to net chargeoffs of $1.1 million in the first quarter of 2013.

Non-Interest Income

Non-interest income was $3.2 million for the three months ended March 31, 2014, compared to $3.1 million for the three months ended March 31, 2013. Non-interest income as a percentage of average assets declined from 0.69% during the first quarter of 2013 to 0.60% during the first quarter of 2014, primarily due to a decrease in service charges on deposit accounts in relation to total demand deposits and a decrease in net unrealized gains (losses) on trading securities of $328 thousand.

Non-Interest Expenses

Total non-interest expenses were $13.3 million and $9.7 million during the three months ended March 31, 2014 and 2013, respectively. Non-interest expenses for the three months ended March 31, 2014 include amortization of a core deposit intangible asset of $302 thousand associated with CNB’s acquisition of FC Banc Corp. in the fourth quarter of 2013. Non-interest expenses for the three months ended March 31, 2013 include merger-related expenses of $103 thousand.

Salaries and benefits expenses increased $1.6 million, or 31.5%, during the three months ended March 31, 2014 compared to the three months ended March 31, 2013, due to routine merit increases, an increase in average full-time equivalent employees resulting primarily from the acquisition of FC Banc Corp., and increases in certain employee benefit expenses, such as health insurance premiums, which continue to increase in line with market conditions. Net occupancy expenses increased $444 thousand, or 33.7%, during the three months ended March 31, 2014 compared to the three months ended March 31, 2013, as a result of anticipated increases in repair, maintenance, and utility expenses, increases in depreciation expense for recently completed projects and asset purchases, and the addition of eight branch locations from the acquisition of FC Banc Corp. Other non-interest expenses increased $1.2 million, or 44.4%, during the three months ended March 31, 2014 compared to the three months ended March 31, 2013, as a result of the acquisition of FC Banc Corp.

About CNB Financial Corporation

CNB Financial Corporation is a financial holding company with consolidated assets of approximately $2.1 billion that conducts business primarily through CNB Bank, CNB’s principal subsidiary. CNB Bank is a full-service bank engaging in a full range of banking activities and services, including trust and wealth management services, for individual, business, governmental, and institutional customers. CNB Bank operations include a private banking division, a loan production office in Hollidaysburg, Pennsylvania, and 28 full-service offices in Pennsylvania, including ERIEBANK, a division of CNB Bank, as well as 8 full-service offices in central Ohio conducting business as FCBank, a division of CNB Bank. More information about CNB and CNB Bank may be found on the internet at www.bankcnb.com.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to CNB’s financial condition, liquidity, results of operations, future performance and business. These forward-looking statements are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that are not historical facts. Forward-looking statements include statements with respect to beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (some of which are beyond CNB’s control). Forward-looking statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would” and “could.” CNB’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. For more information about factors that could cause actual results to differ from those discussed in the forward-looking statements, please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of and forward-looking statement disclaimers in CNB’s annual and quarterly reports.

The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this press release. CNB undertakes no obligation to publicly update or revise any forward-looking statements included in this press release or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except to the extent required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release might not occur and you should not put undue reliance on any forward-looking statements.

Financial Tables

The following tables supplement the financial highlights described previously for CNB Financial Corporation.

      (unaudited)
Three Months Ended
March 31,
(Dollars in thousands, except share and per share data)    
2014 2013 % change

Income Statement

Interest income $ 21,437 $ 16,704 28.3%
Interest expense   3,157   3,253 -3.0%
Net interest income 18,280 13,451 35.9%
Provision for loan losses   1,019   930 9.6%
Net interest income after provision for loan losses   17,261   12,521 37.9%
 
Non-interest income
Wealth and asset management fees 672 574 17.1%
Service charges on deposit accounts 1,041 942 10.5%
Other service charges and fees 568 430 32.1%
Net realized gains on available-for-sale securities 66 76 -13.2%
Net realized and unrealized gains (losses) on trading securities (25) 303 NA
Mortgage banking 175 255 -31.4%
Bank owned life insurance 239 262 -8.8%
Other   468   229 104.4%
 
Total non-interest income   3,204   3,071 4.3%
 
Non-interest expenses
Salaries and benefits 6,835 5,197 31.5%
Net occupancy expense of premises 1,761 1,317 33.7%
FDIC insurance premiums 340 279 21.9%
Merger costs - 103 NA
Intangible amortization 302 - NA
Other   4,022   2,786 44.4%
Total non-interest expenses   13,260   9,682 37.0%
 
Income before income taxes 7,205 5,910 21.9%
Income tax expense   2,039   1,613 26.4%
Net income $ 5,166 $ 4,297 20.2%
 
Average diluted shares outstanding 14,394,265 12,445,148
 
Diluted earnings per share $ 0.36 $ 0.34 5.9%
Cash dividends per share $ 0.165 $ 0.165 0.0%
 
Payout ratio 46% 49%
 

Average Balances

Loans, net of unearned income $ 1,291,985 $ 932,553
Total earning assets 1,989,707 1,688,900
Total assets 2,126,225 1,789,472
Total deposits 1,818,335 1,520,502
Shareholders' equity 172,615 146,186
 

Performance Ratios (quarterly information annualized)

Return on average assets 0.97% 0.96%
Return on average equity 11.97% 11.76%
Net interest margin (FTE) 3.79% 3.41%
 

Loan Charge-Offs

Net loan charge-offs $ 581 $ 1,093
Net loan charge-offs / average loans 0.18% 0.47%
 
         
(unaudited) (unaudited)
March 31, December 31, March 31, % change versus
2014 2013 2013 12/31/13 3/31/13
(Dollars in thousands, except share and per share data)

Ending Balance Sheet

Loans, net of unearned income $ 1,294,096 $ 1,295,363 $ 932,696 -0.1% 38.7%
Loans held for sale 329 487 956 -32.4% -65.6%
Investment securities 691,935 690,118 766,011 0.3% -9.7%
FHLB and other equity interests 7,519 7,533 6,597 -0.2% 14.0%
Other earning assets   3,311   4,139   3,578 -20.0% -7.5%
Total earning assets 1,997,190 1,997,640 1,709,838 0.0% 16.8%
 
Allowance for loan losses (16,674) (16,234) (13,897) 2.7% 20.0%
Goodwill 27,194 27,194 10,946 0.0% 148.4%
Core deposit intangible 4,280 4,583 - -6.6% NA
Other assets   122,071   118,106   102,960 3.4% 18.6%
Total assets $ 2,134,061 $ 2,131,289 $ 1,809,847 0.1% 17.9%
 
Non interest-bearing deposits $ 221,831 $ 221,293 $ 163,646 0.2% 35.6%
Interest-bearing deposits   1,606,827   1,614,021   1,381,799 -0.4% 16.3%
Total deposits 1,828,658 1,835,314 1,545,445 -0.4% 18.3%
 
Borrowings 91,149 87,950 75,152 3.6% 21.3%
Subordinated debt 20,620 20,620 20,620 0.0% 0.0%
Other liabilities 21,353 22,494 22,525 -5.1% -5.2%
 
Common stock - - - NA NA
Additional paid in capital 77,641 77,923 43,840 -0.4% 77.1%
Retained earnings 99,845 97,066 91,193 2.9% 9.5%
Treasury stock (113) (633) (1,245) -82.1% -90.9%
Accumulated other comprehensive income (loss)   (5,092)   (9,445)   12,317 -46.1% 141.3%
Total shareholders' equity   172,281   164,911   146,105 4.5% 17.9%
 
Total liabilities and shareholders' equity $ 2,134,061 $ 2,131,289 $ 1,809,847 0.1% 17.9%
 
Ending shares outstanding 14,464,842 14,427,780 12,509,289
 
Book value per share $ 11.91 $ 11.43 $ 11.68
Tangible book value per share (*) $ 9.73 $ 9.23 $ 10.80
 

Capital Ratios

Tangible common equity / tangible assets (*) 6.70% 6.34% 7.51%
Leverage ratio 8.15% 7.96% 8.03%
Tier 1 risk based ratio 12.76% 12.51% 14.28%
Total risk based ratio 14.00% 13.72% 15.53%
 

Asset Quality

Non-accrual loans $ 11,644 $ 11,573 $ 16,187
Loans 90+ days past due and accruing   456   344   221
Total non-performing loans 12,100 11,917 16,408
Other real estate owned   1,047   986   376
Total non-performing assets $ 13,147 $ 12,903 $ 16,784
 
Loans modified in a troubled debt restructuring (TDR):
Performing TDR loans $ 7,893 $ 8,006 $ 8,817
Non-performing TDR loans **   4,060   4,130   1,065
Total TDR loans $ 11,953 $ 12,136 $ 9,882
 
Non-performing assets / Loans + OREO 1.02% 1.00% 1.80%
Non-performing assets / Total assets 0.62% 0.61% 0.93%
Allowance for loan losses / Loans 1.29% 1.25% 1.49%
 
* - Tangible common equity, tangible assets and tangible book value per share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of stockholders’ equity. Tangible assets is calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. CNB believes that these non-GAAP financial measures provide information to investors that is useful in understanding its financial condition. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).
 
** - Nonperforming TDR loans are also included in the balance of non-accrual loans in the previous table.
 
(Dollars in thousands, except share and per share data)
(unaudited) (unaudited)
March 31, December 31, March 31,
2014 2013 2013
 
Shareholders' equity $ 172,281 $ 164,911 $ 146,105
Less goodwill 27,194 27,194 10,946
Less core deposit intangible   4,280   4,583   -
Tangible common equity $ 140,807 $ 133,134 $ 135,159
 
Total assets $ 2,134,061 $ 2,131,289 $ 1,809,847
Less goodwill 27,194 27,194 10,946
Less core deposit intangible   4,280   4,583   -
Tangible assets $ 2,102,587 $ 2,099,512 $ 1,798,901
 
Ending shares outstanding 14,464,842 14,427,780 12,509,289
 
Tangible book value per share $ 9.73 $ 9.23 $ 10.80
Tangible common equity/Tangible assets 6.70% 6.34% 7.51%

Contacts

CNB Financial Corporation
Brian W. Wingard, Treasurer, 814-765-9621

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Contacts

CNB Financial Corporation
Brian W. Wingard, Treasurer, 814-765-9621