22.10.2013 16:11:00

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

%
change


2013

2012

%
change

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

%
change


2013

2012

%
change











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
versus


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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