CNB Financial Corporation Reports Third Quarter Earnings for 2013
CLEARFIELD, Pa., Oct. 22, 2013 /PRNewswire/ -- CNB Financial Corporation ("CNB") (NASDAQ: CCNE), the parent company of CNB Bank, today announced its earnings for the third quarter and first nine months of 2013. Highlights include the following:
- Excluding the effects of realized gains on the sale of available-for-sale securities and merger costs, pre-tax income of $7.1 million for the three months ended September 30, 2013, compared to pre-tax income of $6.3 million in the third quarter of 2012.
- Excluding the effects of realized gains on the sale of available-for-sale securities and merger costs, pre-tax income of $17.3 million for the nine months ended September 30, 2013, compared to pre-tax income of $16.9 million for the nine months ended September 30, 2012.
- Net interest income of $14.6 million for the third quarter of 2013, an increase of 7.2% over the third quarter of 2012.
- Net interest income of $41.9 million for the nine months ended September 30, 2013, an increase of 5.8% over the nine months ended June 30, 2012.
- Annualized returns on average assets and equity of 0.88% and 11.42%, respectively, for the nine months ended September 30, 2013.
- Loans of $1,029.0 million at September 30, 2013, an increase of $118.8 million, or 13.0%, compared to September 30, 2012.
- Deposits of $1.55 billion at September 30, 2013, an increase of $72.0 million, or 4.9%, compared to September 30, 2012.
- Total non-performing assets of $14.5 million, or 0.79% of total assets as of September 30, 2013.
CNB Financial Corporation also successfully closed its previously announced acquisition of FC Banc Corp. ("FC") on October 11, 2013. Under the terms of the merger agreement, FC merged with and into CNB, with CNB being the surviving corporation of the merger. Additionally, Farmers Citizens Bank, the wholly owned subsidiary of FC, merged with and into CNB Bank, with CNB Bank continuing as the surviving entity.
Joseph B. Bower, Jr., President and CEO, commented, "We are pleased to report strong third quarter earnings to our shareholders. Excluding the effects of merger costs and securities transactions, CNB was able to increase earnings while also growing total assets. In addition, we are excited about the ability to expand our banking franchise to central Ohio following the acquisition of FC Banc Corp."
Net Interest Income and Margin
During the nine months ended September 30, 2013, net interest income increased $2.3 million, or 5.8%, compared to the nine months ended September 30, 2012. Net interest margin on a fully tax equivalent basis was 3.38% for both the three and nine months ended September 30, 2013, compared to 3.53% and 3.49% for the three and nine months ended September 30, 2012.
Although the yield on earnings assets decreased from 4.45% during the nine months ended September 30, 2012 to 4.08% during the nine months ended September 30, 2013, CNB's average earning assets increased from $1.61 billion to $1.72 billion, or 7.2%. Due to growth in core deposits, interest-bearing deposits have increased $51.5 million, or 3.9%, as compared to September 30, 2012. However, interest expense for the nine months ended September 30, 2013 decreased by $2.5 million, or 22.0%, compared to the nine months ended September 30, 2012, as a result of decreases in the cost of core deposits.
CNB's strong and growing deposit base and low cost of funds has offset the decline in yield on earning assets as the company has been prudent in managing its deposit rates, resulting in the increase in net interest income.
Asset Quality
During the nine months ended September 30, 2013, CNB recorded a provision for loan losses of $4.9 million, as compared to a provision for loan losses of $4.0 million for the nine months ended September 30, 2012.
A commercial mortgage loan with a carrying value of $3.3 million defaulted in the second quarter. Based on management's evaluation of the fair value of the associated collateral, no provision for loan losses was required to be recorded for this loan relationship as of June 30, 2013. During the third quarter of 2013, this loan was modified in a troubled debt restructuring, which will result in the Corporation receiving reduced monthly payments that will be applied entirely to the loan's principal balance. The Corporation also obtained an updated appraisal for the loan collateral in October 2013 and, as a result, recorded a provision for loan losses of $562 thousand for the quarter ended September 30, 2013.
In July 2013, CNB recorded a loan loss recovery of $1.4 million related to an impaired commercial mortgage loan. A partial chargeoff had been recorded for this loan in a prior period. At the recovery date, the carrying amount of the loan was $5.2 million, which was satisfied in full by CNB's participation in the issuance of a loan at market terms to a new borrower who purchased the property securing the loan.
Non-Interest Income
Excluding the effects of securities transactions, non-interest income was $9.3 million for the nine months ended September 30, 2013, compared to $7.9 million for the nine months ended September 30, 2012. Net realized gains on available-for-sale securities were $0 and $328 thousand during the three and nine months ended September 30, 2013, compared to $103 thousand and $1.4 million during the three and nine months ended September 30, 2012. Net realized and unrealized gains on trading securities were $166 thousand and $497 thousand during the three and nine months ended September 30, 2013, compared to $275 thousand and $455 thousand during the three and nine months ended September 30, 2012.
Wealth and asset management fees increased from $1.3 million during the nine months ended September 30, 2012 to $1.7 million during the nine months ended September 30, 2013 due to increases in assets under management resulting from CNB's strategic focus to grow its Wealth and Asset Management Division. During the nine months ended September 30, 2013, CNB recorded $1.4 million in income from bank owned life insurance policies, including $576 thousand representing the excess of the face value of certain policies over their cash surrender values resulting from the maturity of the policies.
Non-Interest Expenses
Total non-interest expenses increased $3.8 million, or 13.9%, during the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012. Non-interest expenses for the three and nine months ended September 30, 2013 include merger related expenses of $398 thousand and $1.3 million, respectively.
Salaries and benefits expenses increased $1.6 million, or 11.6%, during the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012, in part due to routine merit increases, an increase in average full-time equivalent employees, 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 $438 thousand, or 12.9%, during the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012, as a result of anticipated increases in repair, maintenance, and utility expenses, as well as increases in depreciation expense for recently completed projects and asset purchases.
About CNB Financial Corporation
CNB Financial Corporation is a financial holding company with consolidated post-merger assets of approximately $2.2 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, and 29 full-service offices in Pennsylvania, including ERIEBANK, a division of CNB Bank, as well as 8 full-service offices in 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." Such known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements include, but are not limited to: changes in general business, industry or economic conditions or competition; changes in any applicable law, rule, regulation, policy, guideline or practice governing or affecting financial holding companies and their subsidiaries or with respect to tax or accounting principles or otherwise; adverse changes or conditions in capital and financial markets; changes in interest rates; higher than expected costs or other difficulties related to integration of combined or merged businesses; the inability to realize expected cost savings or achieve other anticipated benefits in connection with business combinations and other acquisitions, including the acquisition of FC Banc Corp.; changes in the quality or composition of CNB's loan and investment portfolios; adequacy of loan loss reserves; increased competition; loss of certain key officers; continued relationships with major customers; deposit attrition; rapidly changing technology; unanticipated regulatory or judicial proceedings and liabilities and other costs; changes in the cost of funds, demand for loan products or demand for financial services; and other economic, competitive, governmental or technological factors affecting CNB's operations, markets, products, services and prices. Some of these and other factors are discussed in CNB's annual and quarterly reports previously filed with the SEC. Such factors could cause actual results to differ materially from those in the forward-looking statements.
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) |
(unaudited) |
||||||||
| Three Months Ended |
Nine Months Ended |
||||||||
| September 30, |
September 30, |
||||||||
| (Dollars in thousands, except share and per share data) |
|||||||||
| 2013 |
2012 |
% |
2013 |
2012 |
% |
||||
| Income Statement |
|||||||||
| Interest income |
$ 17,465 |
$ 17,133 |
1.9% |
$ 50,927 |
$ 51,164 |
-0.5% |
|||
| Interest expense |
2,817 |
3,463 |
-18.7% |
9,002 |
11,543 |
-22.0% |
|||
| Net interest income |
14,648 |
13,670 |
7.2% |
41,925 |
39,621 |
5.8% |
|||
| Provision for loan losses |
846 |
1,188 |
-28.8% |
4,891 |
4,038 |
21.1% |
|||
| Net interest income after provision for loan losses |
13,802 |
12,482 |
10.6% |
37,034 |
35,583 |
4.1% |
|||
| Non-interest income |
|||||||||
| Wealth and asset management fees |
615 |
498 |
23.5% |
1,727 |
1,311 |
31.7% |
|||
| Service charges on deposit accounts |
1,102 |
1,049 |
5.1% |
3,063 |
3,020 |
1.4% |
|||
| Other service charges and fees |
607 |
467 |
30.0% |
1,561 |
1,367 |
14.2% |
|||
| Net realized gains on available-for-sale securities |
- |
103 |
n/a |
328 |
1,400 |
-76.6% |
|||
| Net realized and unrealized gains on trading securities |
166 |
275 |
-39.6% |
497 |
455 |
9.2% |
|||
| Mortgage banking |
107 |
225 |
-52.4% |
633 |
686 |
-7.7% |
|||
| Bank owned life insurance |
365 |
229 |
59.4% |
1,442 |
752 |
91.8% |
|||
| Other |
286 |
233 |
22.7% |
839 |
767 |
9.4% |
|||
| Total non-interest income |
3,248 |
3,079 |
5.5% |
10,090 |
9,758 |
3.4% |
|||
| Non-interest expenses |
|||||||||
| Salaries and benefits |
5,288 |
4,831 |
9.5% |
15,817 |
14,175 |
11.6% |
|||
| Net occupancy expense of premises |
1,234 |
1,138 |
8.4% |
3,832 |
3,394 |
12.9% |
|||
| FDIC insurance premiums |
332 |
283 |
17.3% |
930 |
816 |
14.0% |
|||
| Merger costs |
398 |
- |
n/a |
1,329 |
- |
n/a |
|||
| Other |
3,091 |
2,956 |
4.6% |
8,910 |
8,670 |
2.8% |
|||
| Total non-interest expenses |
10,343 |
9,208 |
12.3% |
30,818 |
27,055 |
13.9% |
|||
| Income before income taxes |
6,707 |
6,353 |
5.6% |
16,306 |
18,286 |
-10.8% |
|||
| Income tax expense |
2,004 |
1,790 |
12.0% |
4,355 |
5,040 |
-13.6% |
|||
| Net income |
$ 4,703 |
$ 4,563 |
3.1% |
$ 11,951 |
$ 13,246 |
-9.8% |
|||
| Average diluted shares outstanding |
12,463,867 |
12,411,449 |
12,454,285 |
12,391,178 |
|||||
| Diluted earnings per share |
$0.38 |
$0.37 |
2.7% |
$0.96 |
$1.06 |
-9.4% |
|||
| Cash dividends per share |
$0.165 |
$0.165 |
0.0% |
$0.495 |
$0.495 |
0.0% |
|||
| Payout ratio |
43% |
45% |
52% |
47% |
|||||
| Average Balances |
|||||||||
| Loans, net of unearned income |
$1,020,524 |
$ 910,214 |
$ 972,745 |
$ 884,946 |
|||||
| Total earning assets |
1,741,547 |
1,638,483 |
1,721,899 |
1,605,806 |
|||||
| Total assets |
1,831,937 |
1,735,532 |
1,814,857 |
1,700,846 |
|||||
| Total deposits |
1,554,816 |
1,468,485 |
1,537,688 |
1,434,085 |
|||||
| Shareholders' equity |
130,224 |
143,606 |
139,575 |
139,036 |
|||||
| Performance Ratios |
|||||||||
| Return on average assets |
1.03% |
1.05% |
0.88% |
1.04% |
|||||
| Return on average equity |
14.45% |
12.71% |
11.42% |
12.70% |
|||||
| Net interest margin (FTE) |
3.38% |
3.53% |
3.38% |
3.49% |
|||||
| Loan Charge-Offs |
|||||||||
| Net loan charge-offs (recoveries) |
$ (875) |
$ 1,228 |
$ 1,730 |
$ 3,004 |
|||||
| Net loan charge-offs / average loans |
-0.34% |
0.54% |
0.24% |
0.45% |
|||||
| 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 merger costs: |
|||||||||
| (unaudited) |
(unaudited) |
||||||||
| Three Months Ended |
Nine Months Ended |
||||||||
| September 30, |
September 30, |
||||||||
| (Dollars in thousands, except share and per share data) |
|||||||||
| 2013 |
2012 |
% |
2013 |
2012 |
% |
||||
| Pre-tax net income, GAAP basis |
$ 6,707 |
$ 6,353 |
5.6% |
$ 16,306 |
$ 18,286 |
-10.8% |
|||
| Net realized gains on available-for-sale securities |
- |
(103) |
n/a |
(328) |
(1,400) |
-76.6% |
|||
| Merger costs |
398 |
- |
n/a |
1,329 |
- |
n/a |
|||
| Pre-tax net income, non-GAAP |
$ 7,105 |
$ 6,250 |
13.7% |
$ 17,307 |
$ 16,886 |
2.5% |
|||
| (unaudited) September 30, |
(unaudited) June 30, |
December 31, |
(unaudited) September 30, |
% change |
|||
| 2013 |
2013 |
2012 |
2012 |
6/30/13 |
9/30/12 |
||
| (Dollars in thousands, except share and per share data) |
|||||||
| Ending Balance Sheet |
|||||||
| Loans, net of unearned income |
$ 1,028,971 |
$ 982,947 |
$ 927,824 |
$ 910,217 |
4.7% |
13.0% |
|
| Loans held for sale |
399 |
53 |
2,398 |
3,847 |
652.8% |
-89.6% |
|
| Investment securities |
704,889 |
729,027 |
741,770 |
722,904 |
-3.3% |
-2.5% |
|
| FHLB and other equity interests |
7,580 |
7,565 |
6,684 |
6,755 |
0.2% |
12.2% |
|
| Other earning assets |
4,375 |
4,298 |
3,536 |
4,050 |
1.8% |
8.0% |
|
| Total earning assets |
1,746,214 |
1,723,890 |
1,682,212 |
1,647,773 |
1.3% |
6.0% |
|
| Allowance for loan losses |
(17,221) |
(15,500) |
(14,060) |
(13,649) |
11.1% |
26.2% |
|
| Goodwill |
10,946 |
10,946 |
10,946 |
10,946 |
0.0% |
0.0% |
|
| Other assets |
97,480 |
90,109 |
93,981 |
96,127 |
8.2% |
1.4% |
|
| Total assets |
$ 1,837,419 |
$ 1,809,445 |
$ 1,773,079 |
$ 1,741,197 |
1.5% |
5.5% |
|
| Non interest-bearing deposits |
$ 189,362 |
$ 176,700 |
$ 175,239 |
$ 168,888 |
7.2% |
12.1% |
|
| Interest-bearing deposits |
1,362,919 |
1,369,846 |
1,309,764 |
1,311,382 |
-0.5% |
3.9% |
|
| Total deposits |
1,552,281 |
1,546,546 |
1,485,003 |
1,480,270 |
0.4% |
4.9% |
|
| Borrowings |
122,976 |
100,477 |
97,806 |
74,336 |
22.4% |
65.4% |
|
| Subordinated debt |
20,620 |
20,620 |
20,620 |
20,620 |
0.0% |
0.0% |
|
| Other liabilities |
10,776 |
10,822 |
24,286 |
22,280 |
-0.4% |
-51.6% |
|
| Common stock |
- |
- |
- |
- |
n/a |
n/a |
|
| Additional paid in capital |
44,065 |
43,950 |
44,223 |
44,150 |
0.3% |
-0.2% |
|
| Retained earnings |
94,718 |
92,080 |
88,960 |
87,128 |
2.9% |
8.7% |
|
| Treasury stock |
(1,179) |
(1,222) |
(1,743) |
(1,828) |
-3.5% |
-35.5% |
|
| Accumulated other comprehensive income (loss) |
(6,838) |
(3,828) |
13,924 |
14,241 |
78.6% |
n/a |
|
| Total shareholders' equity |
130,766 |
130,980 |
145,364 |
143,691 |
-0.2% |
-9.0% |
|
| Total liabilities and shareholders' equity |
$ 1,837,419 |
$ 1,809,445 |
$ 1,773,079 |
$ 1,741,197 |
1.5% |
5.5% |
|
| Ending shares outstanding |
12,514,138 |
12,511,095 |
12,475,904 |
12,470,371 |
|||
| Book value per share |
$ 10.45 |
$ 10.47 |
$ 11.65 |
$ 11.52 |
|||
| Tangible book value per share (*) |
$ 9.57 |
$ 9.59 |
$ 10.77 |
$ 10.64 |
|||
| Capital Ratios |
|||||||
| Tangible common equity / tangible assets (*) |
6.56% |
6.67% |
7.63% |
7.67% |
|||
| Leverage ratio |
8.05% |
7.94% |
8.06% |
8.03% |
|||
| Tier 1 risk based ratio |
13.71% |
13.86% |
14.03% |
14.10% |
|||
| Total risk based ratio |
14.96% |
15.11% |
15.28% |
15.36% |
|||
| Asset Quality |
|||||||
| Non-accrual loans |
$ 14,188 |
$ 19,582 |
$ 14,445 |
$ 18,557 |
|||
| Loans 90+ days past due and accruing |
123 |
212 |
357 |
454 |
|||
| Total non-performing loans |
14,311 |
19,794 |
14,802 |
19,011 |
|||
| Other real estate owned |
176 |
174 |
325 |
491 |
|||
| Total non-performing assets |
$ 14,487 |
$ 19,968 |
$ 15,127 |
$ 19,502 |
|||
| Loans modified in a troubled debt restructuring (TDR): |
|||||||
| Performing TDR loans |
$ 7,985 |
$ 8,102 |
$ 9,961 |
$ 8,726 |
|||
| Non-accrual TDR loans ** |
5,271 |
2,128 |
1,660 |
1,657 |
|||
| Total TDR loans |
$ 13,256 |
$ 10,230 |
$ 11,621 |
$ 10,383 |
|||
| Non-performing assets / Loans + OREO |
1.41% |
2.03% |
1.63% |
2.14% |
|||
| Non-performing assets / Total assets |
0.79% |
1.10% |
0.85% |
1.12% |
|||
| Allowance for loan losses / Loans |
1.67% |
1.58% |
1.52% |
1.50% |
|||
| * 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). |
|||||||
| ** Non-accrual 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) |
(unaudited) |
|||||
| September 30, |
June 30, |
December 31, |
September 30, |
||||
| 2013 |
2013 |
2012 |
2012 |
||||
| Shareholders' equity |
$ 130,766 |
$ 130,980 |
$ 145,364 |
$ 143,691 |
|||
| Less goodwill |
10,946 |
10,946 |
10,946 |
10,946 |
|||
| Tangible common equity |
$ 119,820 |
$ 120,034 |
$ 134,418 |
$ 132,745 |
|||
| Total assets |
$ 1,837,419 |
$ 1,809,445 |
$ 1,773,079 |
$ 1,741,197 |
|||
| Less goodwill |
10,946 |
10,946 |
10,946 |
10,946 |
|||
| Tangible assets |
$ 1,826,473 |
$ 1,798,499 |
$ 1,762,133 |
$ 1,730,251 |
|||
| Ending shares outstanding |
12,514,138 |
12,511,095 |
12,475,904 |
12,470,371 |
|||
| Tangible book value per share |
$ 9.57 |
$ 9.59 |
$ 10.77 |
$ 10.64 |
|||
| Tangible common equity/Tangible assets |
6.56% |
6.67% |
7.63% |
7.67% |
|||
SOURCE CNB Financial Corporation
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