SOURCE: CNB Financial Corporation

CNB Financial Corporation

April 17, 2017 16:00 ET

CNB Financial Corporation Reports First Quarter Earnings for 2017, Highlighted By Strong Organic Loan Growth

CLEARFIELD, PA--(Marketwired - April 17, 2017) - CNB Financial Corporation ("CNB") (NASDAQ: CCNE), the parent company of CNB Bank, today announced its earnings for the first quarter of 2017. Highlights include the following:

  • Net income of $6.5 million for the quarter ended March 31, 2017, or $0.43 per share, compared to net income of $5.0 million for the quarter ended March 31, 2016, or $0.35 per share. CNB recorded realized gains on the sale of available-for-sale securities in the first quarter of 2017 totaling $1.4 million and non-recurring core processing conversion costs and merger costs totaling $109 thousand in the first quarter of 2016.
  • Annualized returns on average assets and equity of 1.00% and 11.39%, respectively, for the quarter ended March 31, 2017, compared to 0.87% and 9.65%, respectively, for the quarter ended March 31, 2016. The annualized return on average tangible equity was 13.93% and 11.24% during the quarters ended March 31, 2017 and 2016, respectively.
  • Net interest margin of 3.67% for the quarter ended March 31, 2017, unchanged from 3.67% for the quarter ended March 31, 2016.
  • Loans of $1.91 billion as of March 31, 2017, including loans acquired from Lake National Bank, which closed in July 2016, of $122.3 million, compared to loans of $1.61 billion as of March 31, 2016. Organic loan growth in the first quarter of 2017 was $35.4 million.
  • Deposits of $2.03 billion as of March 31, 2017, including deposits acquired from Lake National Bank of $139.8 million, compared to deposits of $1.89 billion as of March 31, 2016.
  • Book value per share of $15.31 as of March 31, 2017 increased 4.6% compared to book value per share of $14.64 as of December 31, 2016 and tangible book value per share of $12.61 as of March 31, 2017 increased 7.2% compared to tangible book value of $11.76 per share as of December 31, 2016, primarily as a result of CNB's common stock issuance described below.
  • Non-performing assets of $21.6 million, or 0.83% of total assets as of March 31, 2017, compared to $16.4 million, or 0.64% of total assets, as of December 31, 2016.

On February 15, 2017, CNB announced that it successfully completed an at-the-market common stock issuance. A total of 834,896 shares of CNB's common stock were sold at a weighted average price of approximately $23.96, representing gross proceeds to CNB of approximately $20.0 million. Net proceeds from the transaction, after the sales commission and other expenses, were approximately $19.3 million, which will be used for general corporate purposes, including loan growth, additional liquidity, and working capital.

Joseph B. Bower, Jr., President and CEO, stated, "First quarter results are in line with our expectations. We are encouraged by the strong loan pipeline across our entire footprint but especially the Buffalo market. Buffalo has given us a very warm welcome, and we couldn't be more excited to be there and help this area grow."

Net Interest Margin

Net interest margin on a fully tax equivalent basis was 3.67% for the quarter ended March 31, 2017, unchanged from 3.67% for the quarter ended March 31, 2016, despite the inclusion of $769 thousand in interest expense for the three months ended March 31, 2017 from CNB's $50 million issuance of subordinated debt to help support balance sheet growth.

Asset Quality

During the quarter ended March 31, 2017, CNB recorded a provision for loan losses of $1.0 million, as compared to a provision for loan losses of $1.2 million for the quarter ended March 31, 2016. Net chargeoffs in the first quarter of 2017 were $800 thousand, compared to net chargeoffs of $1.2 million in the first quarter of 2016. CNB Bank net chargeoffs totaled $111 thousand and $364 thousand during the quarters ended March 31, 2017 and 2016, or .02% and .09%, respectively, of average CNB Bank loans. Holiday Financial Services Corporation is CNB's consumer discount company and recorded net chargeoffs totaling $689 thousand and $831 thousand during the quarters ended March 31, 2017 and 2016, respectively.

In the first quarter of 2017, one commercial & industrial loan that was impaired at year end 2016 but still on accrual status was placed on nonaccrual status as a result of further deterioration in the financial condition of the borrower. The additional provision for loan losses recorded in the first quarter of 2017, related to this loan, was $553 thousand.

Non-Interest Income

Excluding the effects of securities transactions, non-interest income was $4.2 million for the quarter ended March 31, 2017, compared to $3.8 million for the quarter ended March 31, 2016. Net realized gains on available-for-sale securities were $1.4 million during the quarter ended March 31, 2017 and resulted from the sale of two structured pooled trust preferred securities with a total book value of $800 thousand. Other-than-temporary impairment charges had been recorded for these securities in prior years totaling $3.2 million. Net realized and unrealized gains on trading securities were $188 thousand during the quarter ended March 31, 2017, compared to net realized and unrealized losses of $34 thousand during the quarter ended March 31, 2016. As a result of CNB's continued focus on growing its Private Client Solutions division, wealth and asset management revenues increased 20.5% from $723 thousand in the first quarter of 2016 to $871 thousand in the first quarter of 2017.

Non-Interest Expenses

Total non-interest expenses were $17.0 million and $14.8 million during the quarters ended March 31, 2017 and 2016, respectively. Included in non-interest expenses in the first quarter of 2016 were $109 thousand of non-recurring items, with merger related expenses of $42 thousand and costs associated with our core processing system upgrade of $67 thousand.

Salaries and benefits expense increased $1.5 million, or 20.2%, during the quarter ended March 31, 2017 compared to the quarter ended March 31, 2016. As of March 31, 2017, CNB had 487 full-time equivalent staff, compared to 441 full-time equivalent staff as of March 31, 2016. The staff added during this period included both customer-facing personnel such as business development and wealth management officers, as well as support department personnel. In addition, CNB retained 20 employees in connection with its acquisition of Lake National Bank in the third quarter of 2016. Occupancy expenses increased $701 thousand, or 38.1%, during the quarter ended March 31, 2017 compared to the quarter ended March 31, 2016. Holiday Financial Services Corporation incurred non-recurring occupancy expenses totaling $141 thousand in the first quarter of 2017 as a result of the closure of two of its offices. The remainder of the increase in occupancy expenses is attributable to the two locations acquired from Lake National Bank in Mentor, Ohio, as well as locations in Worthington, Ohio; Ashtabula, Ohio; Blair County, Pennsylvania; and Buffalo, New York that have been opened since the end of the first quarter of 2016.

The ratio of non-interest expenses to average assets was 2.63% and 2.58% during the quarters ended March 31, 2017 and 2016, respectively.

About CNB Financial Corporation

CNB Financial Corporation is a financial holding company with consolidated assets of approximately $2.6 billion that conducts business primarily through CNB Bank, CNB Financial Corporation'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, one loan production office, 33 full-service offices in Pennsylvania and northeast Ohio, including ERIEBANK, a division of CNB Bank, 9 full-service offices in central Ohio conducting business as FCBank, a division of CNB Bank, and a full-service office in Buffalo, New York conducting business as Bank on Buffalo, a division of CNB Bank. More information about CNB and CNB Bank may be found on the Internet at www.cnbbank.bank.

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 the 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)             
              
   2017   2016   % change  
Income Statement               
Interest income  $25,104   $22,066   13.8 %
Interest expense   3,902    3,124   24.9 %
 Net interest income   21,202    18,942   11.9 %
Provision for loan losses   1,016    1,196   -15.1 %
 Net interest income after provision for loan losses   20,186    17,746   13.7 %
                
Non-interest income               
 Service charges on deposit accounts   1,090    981   11.1 %
 Other service charges and fees   529    560   -5.5 %
 Wealth and asset management fees   871    723   20.5 %
 Net realized gains on available-for-sale securities   1,383    -   NA  
 Net realized and unrealized gains (losses) on trading securities   188    (34 ) NA  
 Mortgage banking   184    171   7.6 %
 Bank owned life insurance   352    263   33.8 %
 Card processing and interchange income   878    835   5.1 %
 Other   298    278   7.2 %
                
  Total non-interest income   5,773    3,777   52.8 %
                
Non-interest expenses               
 Salaries and benefits   9,005    7,491   20.2 %
 Net occupancy expense of premises   2,540    1,839   38.1 %
 FDIC insurance premiums   204    322   -36.6 %
 Core Deposit Intangible amortization   331    215   54.0 %
 Core processing conversion costs   -    67   NA  
 Merger costs   -    42   NA  
 Card processing and interchange expenses   422    634   -33.4 %
 Other   4,532    4,204   7.8 %
  Total non-interest expenses   17,034    14,814   15.0 %
                
Income before income taxes   8,925    6,709   33.0 %
Income tax expense   2,445    1,690   44.7 %
Net income  $6,480   $5,019   29.1 %
                
Average diluted shares outstanding   14,893,514    14,356,734      
                
Diluted earnings per share  $0.43   $0.35   22.9 %
Cash dividends per share  $0.165   $0.165   0.0 %
                
Payout ratio   38 %  47 %    
                
Average Balances               
Loans, net of unearned income  $1,908,783   $1,595,782      
Total earning assets   2,398,522    2,158,903      
Total assets   2,591,694    2,299,860      
Total deposits   1,998,046    1,855,334      
Shareholders' equity   227,542    208,098      
Tangible shareholders' equity (*)   186,072    178,624      
                
Performance Ratios (quarterly information annualized)               
Return on average assets   1.00 %  0.87 %    
Return on average equity   11.39 %  9.65 %    
Return on average tangible equity (*)   13.93 %  11.24 %    
Net interest margin (FTE)   3.67 %  3.67 %    
                
Loan Charge-Offs               
Net loan charge-offs  $800   $1,195      
Net loan charge-offs / average loans   0.17 %  0.30 %    
            

          
The following is a non-GAAP disclosure of pre-tax net income excluding the effects of net realized gains on the sale of available for sale securities and one-time expenses including prepayment penalties on long-term borrowings, core processing conversion costs, and merger costs:
 
   (unaudited)
   Three Months Ended
   December 31,
   (Dollars in thousands)
          
   2017  2016  % change
          
Pre-tax net income, GAAP basis  $ 8,925  $ 6,709  33.0%
Net realized gains on available-for-sale securities  (1,383)  -  NA
Core processing conversion costs  -  67  NA
Merger costs  -  42  NA
Pre-tax net income, non-GAAP  $ 7,542  $ 6,818  10.6%
       
              
   (unaudited)       (unaudited)       
   March 31   December 31   March 31   % change versus
   2017   2016   2016   12/31/16  3/31/16
   (Dollars in thousands, except share and per share data)       
Ending Balance Sheet                     
Loans, net of unearned income  $1,908,951   $1,873,536   $1,606,308   1.9%  18.8%
Loans held for sale   9,156    7,528    544   21.6%  1583.1%
Investment securities   480,659    500,693    543,413   -4.0%  -11.5%
FHLB and other equity interests   20,185    19,186    13,675   5.2%  47.6%
Other earning assets   1,730    2,246    2,762   -23.0%  -37.4%
 Total earning assets   2,420,681    2,403,189    2,166,702   0.7%  11.7%
                      
Allowance for loan losses   (16,546 )  (16,330 )  (16,738 ) 1.3%  -1.1%
Goodwill   38,730    38,730    27,194   0.0%  42.4%
Core deposit intangible   2,523    2,854    2,180   -11.6%  15.7%
Other assets   146,919    145,378    121,663   1.1%  20.8%
 Total assets  $2,592,307   $2,573,821   $2,301,001   0.7%  12.7%
                      
Non interest-bearing deposits  $291,579   $289,922   $262,480   0.6%  11.1%
Interest-bearing deposits   1,733,900    1,727,600    1,627,731   0.4%  6.5%
 Total deposits   2,025,479    2,017,522    1,890,211   0.4%  7.2%
                      
Borrowings   229,079    237,004    156,150   -3.3%  46.7%
Subordinated debt   70,620    70,620    20,620   0.0%  242.5%
Deposits held for sale   6,513    6,456    -   0.9%  NA
Other liabilities   26,398    30,435    25,864   -13.3%  2.1%
                      
Common stock   -    -    -   NA  NA
Additional paid in capital   95,297    77,737    77,188   22.6%  23.5%
Retained earnings   138,250    134,295    125,935   2.9%  9.8%
Treasury stock   699    (127 )  (274 ) -650.4%  -355.1%
Accumulated other comprehensive income (loss)   (28 )  (121 )  5,307   -76.9%  NA
 Total shareholders' equity   234,218    211,784    208,156   10.6%  12.5%
                      
 Total liabilities and shareholders' equity  $2,592,307   $2,573,821   $2,301,001   0.7%  12.7%
                      
Ending shares outstanding   15,297,360    14,467,815    14,457,955       
                      
Book value per share  $15.31   $14.64   $14.40       
Tangible book value per share (*)  $12.61   $11.76   $12.37       
                      
Capital Ratios                     
Tangible common equity / tangible assets (*)   7.56 %  6.72 %  7.87 %     
Tier 1 leverage ratio   8.50 %  7.87 %  8.73 %     
Common equity tier 1 ratio   10.51 %  9.28 %  10.76 %     
Tier 1 risk based ratio   11.58 %  10.33 %  11.97 %     
Total risk based ratio   15.12 %  13.83 %  12.98 %     
                      
Asset Quality                     
Non-accrual loans  $19,962   $15,329   $12,297       
Loans 90+ days past due and accruing   698    10    52       
 Total non-performing loans   20,660    15,339    12,349       
Other real estate owned   939    1,057    782       
 Total non-performing assets  $21,599   $16,396   $13,131       
                      
Loans modified in a troubled debt restructuring (TDR):                     
 Performing TDR loans  $8,579   $8,710   $9,158       
 Non-performing TDR loans **   3,017    3,121    5,446       
  Total TDR loans  $11,596   $11,831   $14,604       
                      
Non-performing assets / Loans + OREO   1.13 %  0.87 %  0.82 %     
Non-performing assets / Total assets   0.83 %  0.64 %  0.57 %     
Allowance for loan losses / Loans   0.87 %  0.87 %  1.04 %     
                      
* - 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. Return on average tangible equity is calculated by dividing annualized net income by average tangible 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  
   2017   2016   2016  
                 
Shareholders' equity  $234,218   $211,784   $208,156  
 Less goodwill   38,730    38,730    27,194  
 Less core deposit intangible   2,523    2,854    2,180  
Tangible common equity  $192,965   $170,200   $178,782  
                 
Total assets  $2,592,307   $2,573,821   $2,301,001  
 Less goodwill   38,730    38,730    27,194  
 Less core deposit intangible   2,523    2,854    2,180  
Tangible assets  $2,551,054   $2,532,237   $2,271,627  
                 
Ending shares outstanding   15,297,360    14,467,815    14,457,955  
                 
Tangible book value per share  $12.61   $11.76   $12.37  
Tangible common equity/Tangible assets   7.56 %  6.72 %  7.87 %
             

Contact Information

  • Contact:
    Brian W. Wingard
    Treasurer
    (814) 765-9621