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CNB Financial Corporation Reports Third Quarter Earnings for 2015

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CLEARFIELD, Pa.--(BUSINESS WIRE)--

CNB Financial Corporation ("CNB") (NASDAQ: CCNE), the parent company of CNB Bank, today announced its earnings for the third quarter of 2015. Highlights include the following:

  • Net income in both the third quarters of 2015 and 2014 was $5.5 million. Earnings per share in the third quarter of 2015 was $0.38 per share, compared to $0.39 in the third quarter of 2014.
  • Net income for the nine months ended September 30, 2015 was $16.7 million, an increase of 2.2% from $16.3 million for the nine months ended September 30, 2014. Earnings per share for the nine months ended September 30, 2015 was $1.16, compared to $1.13 for the nine months ended September 30, 2014.
  • Loans of $1.52 billion at September 30, 2015, was an increase of $190 million, or 14.3%, as compared to September 30, 2014, and an increase of $65 million, or 4.5%, from the prior quarter ended June 30, 2015.
  • Annualized returns on average assets and equity were 1.00% and 11.34%, respectively, for the nine months ended September 30, 2015.
  • Total deposits of $1.85 billion at September 30, 2015 included an increase of 10.1% in non-interest bearing deposits offset by a decline in interest bearing deposits of 2.7% resulting in a decline in total deposits of 1.00% compared to September 30, 2014.
  • Tangible book value per share of $11.80 per share as of September 30, 2015 was an increase of 12.5% over tangible book value per share of $10.49 at September 30, 2014.
  • Non-performing assets were $12.9 million, or 0.57% of total assets as of September 30, 2015, compared to $11.9 million, or 0.55% of total assets, at September 30, 2014.

Joseph B. Bower, Jr., President and CEO commented, "CNB's loan growth of $190 million since September 30, 2014 has been spread over all of our markets. We have seen strong activity from our legacy markets in Pennsylvania, our ERIEBANK market, and our newest FCBank market in Columbus, Ohio. This growth has helped offset the reduction in net interest margin that has occurred in 2015 as a result of the repricing of our existing loan portfolio."

Net Interest Margin

Net interest margin on a fully tax equivalent basis was 3.73% for the nine months ended September 30, 2015, compared to 3.78% for the nine months ended September 30, 2014. Net accretion included in loan interest income in the first nine months of 2015 related to acquired loans was $1.9 million, resulting in an increase in the net interest margin of 12 basis points. Net accretion included in loan interest income in the first nine months of 2014 related to acquired loans was $1.7 million, resulting in an increase in the net interest margin of 11 basis points. During the first nine months of 2015, CNB experienced net interest margin compression as a result of loans repricing and new loans with market yields significantly below historical averages, which is consistent with the trends across the financial services industry in this historically low interest rate environment. The cost of interest-bearing deposits was 53 basis points during the nine months ended September 30, 2015, compared to 51 basis points during the nine months ended September 30, 2014.

Asset Quality

During the three and nine months ended September 30, 2015, CNB recorded a provision for loan losses of $463 thousand and $1.9 million, respectively, as compared to a provision for loan losses of $1.0 million and $3.6 million for the three and nine months ended September 30, 2014. Net chargeoffs during the three and nine months ended September 30, 2015 were $730 thousand and $2.0 million, respectively, as compared to $610 thousand and $1.9 million for the three and nine months ended September 30, 2014. One impaired commercial & industrial loan required an additional loan loss reserve of $301 thousand in the third quarter of 2015, which was offset by a decrease in the reserve required for an impaired commercial real estate loan of $260 thousand. In addition, the overall decrease in the provision for loan losses in the first nine months of 2015 compared to the first nine months of 2014 primarily reflects lower historical loss rates in the commercial & industrial and commercial real estate portfolio segments.

Non-Interest Income

Non-interest income was $3.4 million and $10.7 million for the three and nine months ended September 30, 2015, respectively, as compared to $3.5 million and $10.2 million for the three and nine months ended September 30, 2014. Non-interest income as a percentage of average assets increased from 0.63% during the first nine months of 2014 to 0.64% during the first nine months of 2015.

Non-Interest Expenses

Total non-interest expenses were $14.4 million and $41.6 million during the three and nine months ended September 30, 2015, respectively, as compared to $13.2 million and $39.0 million for the three and nine months ended September 30, 2014. The ratio of non-interest expenses to average assets was 2.50% and 2.42% during the nine months ended September 30, 2015 and 2014, respectively. Salaries and benefits expenses increased $1.9 million, or 9.4%, during the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. During the first nine months of 2015, CNB hired 30 additional full-time equivalent staff to facilitate the company's continued growth.

About CNB Financial Corporation

CNB Financial Corporation is a financial holding company with consolidated assets of approximately $2.3 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, loan production offices in Hollidaysburg, Pennsylvania and Ashtabula, Ohio, and 29 full-service offices in Pennsylvania, including ERIEBANK, a division of CNB Bank, as well as 9 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 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) (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands, except share and per share data)        

2015

2014

%
change

2015

2014

%
change

Income Statement

Interest income $ 22,237 $ 21,532 3.3 % $ 65,184 $ 64,387 1.2 %
Interest expense   3,199     3,092   3.5 %   9,405     9,224   2.0 %
Net interest income 19,038 18,440 3.2 % 55,779 55,163 1.1 %
Provision for loan losses   463     1,038   -55.4 %   1,892     3,558   -46.8 %
Net interest income after provision for loan losses   18,575     17,402   6.7 %   53,887     51,605   4.4 %
 
Non-interest income
Wealth and asset management fees 711 710 0.1 % 2,228 2,135 4.4 %
Service charges on deposit accounts 1,171 1,198 -2.3 % 3,282 3,384 -3.0 %
Other service charges and fees 838 762 10.0 % 2,223 2,000 11.2 %
Net realized gains on available-for-sale securities 73 41 78.0 % 564 245 130.2 %
Net realized and unrealized gains (losses) on trading securities (260 ) (59 ) N/A (321 ) 15 N/A
Mortgage banking 164 144 13.9 % 484 502 -3.6 %
Bank owned life insurance 288 222 29.7 % 853 701 21.7 %
Other   430     478   -10.0 %   1,340     1,233   8.7 %
 
Total non-interest income   3,415     3,496   -2.3 %   10,653     10,215   4.3 %
 
Non-interest expenses
Salaries and benefits 7,572 6,562 15.4 % 21,710 19,840 9.4 %
Net occupancy expense of premises 1,764 1,695 4.1 % 5,357 5,216 2.7 %
FDIC insurance premiums 338 342 -1.2 % 957 1,026 -6.7 %
Core Deposit Intangible amortization 259 302 -14.2 % 777 906 -14.2 %
Other   4,494     4,249   5.8 %   12,840     12,031   6.7 %
Total non-interest expenses   14,427     13,150   9.7 %   41,641     39,019   6.7 %
 
Income before income taxes 7,563 7,748 -2.4 % 22,899 22,801 0.4 %
Income tax expense   2,041     2,200   -7.2 %   6,210     6,470   -4.0 %
Net income $ 5,522   $ 5,548   -0.5 % $ 16,689   $ 16,331   2.2 %
 
Average diluted shares outstanding 14,334,888 14,315,821 14,336,180 14,336,771
 
Diluted earnings per share $ 0.38 $ 0.39 -2.6 % $ 1.16 $ 1.13 2.7 %
Cash dividends per share $ 0.165 $ 0.165 0.0 % $ 0.495 $ 0.495 0.0 %
 
Payout ratio 43 % 42 % 43 % 44 %
 

Average Balances

Loans, net of unearned income $ 1,500,716 $ 1,322,149 $ 1,428,890 $ 1,306,357
Total earning assets 2,115,811 2,065,806 2,081,666 2,013,226
Total assets 2,253,337 2,172,538 2,219,653 2,150,869
Total deposits 1,868,824 1,861,504 1,856,366 1,839,547
Shareholders' equity 199,328 183,354 196,207 178,200

 

Performance Ratios (quarterly information annualized)

Return on average assets 0.98 % 1.02 % 1.00 % 1.01 %
Return on average equity 11.08 % 12.10 % 11.34 % 12.22 %
Net interest margin (FTE) 3.75 % 3.76 % 3.73 % 3.78 %
 

Loan Charge-Offs

Net loan charge-offs $ 719 $ 610 $ 2,029 $ 1,949
Net loan charge-offs / average loans 0.19 % 0.18 % 0.19 % 0.20 %
 
  (unaudited)     (unaudited)  
September 30, December 31, September 30, % change versus

2015

2014

2014

12/31/14

 

9/30/14

(Dollars in thousands, except share and per share data)

Ending Balance Sheet

Loans, net of unearned income $ 1,516,121 $ 1,355,289 $ 1,326,375 11.9 % 14.3 %
Loans held for sale 551 887 1,290 -37.9 % -57.3 %
Investment securities 591,822 690,225 703,806 -14.3 % -15.9 %
FHLB and other equity interests 13,438 6,695 8,491 100.7 % 58.3 %
Other earning assets   4,589     3,633     3,553   26.3 % 29.2 %
Total earning assets 2,126,521 2,056,729 2,043,515 3.4 % 4.1 %
 
Allowance for loan losses (17,236 ) (17,373 ) (17,843 ) -0.8 % -3.4 %
Goodwill 27,194 27,194 27,194 0.0 % 0.0 %
Core deposit intangible 2,626 3,403 3,677 -22.8 % -28.6 %
Other assets   120,617     119,260     116,431   1.1 % 3.6 %
Total assets $ 2,259,722   $ 2,189,213   $ 2,172,974   3.2 % 4.0 %
 
Non interest-bearing deposits $ 270,816 $ 244,743 $ 245,914 10.7 % 10.1 %
Interest-bearing deposits   1,576,876     1,602,336     1,620,950   -1.6 % -2.7 %
Total deposits 1,847,692 1,847,079 1,866,864 0.0 % -1.0 %
 
Borrowings 166,030 111,695 83,877 48.6 % 97.9 %
Subordinated debt 20,620 20,620 20,620 0.0 % 0.0 %
Other liabilities 25,529 21,271 19,996 20.0 % 27.7 %
 
Common stock - - - NA NA
Additional paid in capital 77,677 78,022 77,892 -0.4 % -0.3 %
Retained earnings 120,170 110,619 106,252 8.6 % 13.1 %
Treasury stock (1,146 ) (1,152 ) (1,742 ) -0.5 % -34.2 %
Accumulated other comprehensive income (loss)   3,150     1,059     (785 ) NA -501.3 %
Total shareholders' equity   199,851     188,548     181,617   6.0 % 10.0 %
 
Total liabilities and shareholders' equity $ 2,259,722   $ 2,189,213   $ 2,172,974   3.2 % 4.0 %
 
Ending shares outstanding 14,406,481 14,404,416 14,368,413
 
Book value per share $ 13.87 $ 13.09 $ 12.64
Tangible book value per share (*) $ 11.80 $ 10.97 $ 10.49
 

Capital Ratios

Tangible common equity / tangible assets (*) 7.63 % 7.32 % 7.04 %
Tier 1 leverage ratio 8.64 % 8.39 % 8.22 %
Common equity tier 1 ratio 11.17 % NA NA
Tier 1 risk based ratio 12.46 % 13.06 % 12.99 %
Total risk based ratio 13.58 % 14.30 % 14.24 %
 

Asset Quality

Non-accrual loans $ 12,161 $ 9,190 $ 10,412
Loans 90+ days past due and accruing   193     213     350  
Total non-performing loans 12,354 9,403 10,762
Other real estate owned   563     806     1,101  
Total non-performing assets $ 12,917   $ 10,209   $ 11,863  
 
Loans modified in a troubled debt restructuring (TDR):
Performing TDR loans $ 8,108 $ 14,771 $ 7,705
Non-performing TDR loans **   5,833     3,887     3,957  
Total TDR loans $ 13,941   $ 18,658   $ 11,662  
 
Non-performing assets / Loans + OREO 0.85 % 0.75 % 0.89 %
Non-performing assets / Total assets 0.57 % 0.47 % 0.55 %
Allowance for loan losses / Loans 1.14 % 1.28 % 1.35 %
 
* - 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)
September 30, December 31, September 30,

2015

2014

2014

 
Shareholders' equity $ 199,851 $ 188,548 $ 181,617
Less goodwill 27,194 27,194 27,194
Less core deposit intangible   2,626     3,403     3,677  
Tangible common equity $ 170,031   $ 157,951   $ 150,746  
 
Total assets $ 2,259,722 $ 2,189,213 $ 2,172,974
Less goodwill 27,194 27,194 27,194
Less core deposit intangible   2,626     3,403     3,677  
Tangible assets $ 2,229,902   $ 2,158,616   $ 2,142,103  
 
Ending shares outstanding 14,406,481 14,404,416 14,368,413
 
Tangible book value per share $ 11.80 $ 10.97 $ 10.49
Tangible common equity/Tangible assets 7.63 % 7.32 % 7.04 %

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

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