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

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CLEARFIELD, Pa., Oct. 19, 2017 (GLOBE NEWSWIRE) -- CNB Financial Corporation ("CNB") CCNE, the parent company of CNB Bank, today announced its earnings for the third quarter and first nine months of 2017.  Highlights include the following:

  • Net income of $7.2 million, or $0.47 per share, in the third quarter of 2017, compared to net income of $6.4 million, or $0.44 per share, in the third quarter of 2016.  The third quarter of 2016 included core processing conversion expenses and merger expenses totaling $308 thousand.
  • Net income of $20.4 million, or $1.34 per share, during the nine months ended September 30, 2017, compared to net income of $15.5 million, or $1.07 per share, during the nine months ended September 30, 2016.  CNB recorded realized gains on the sale of available-for-sale securities of $1.5 million and $1.0 million during the nine months ended September 30, 2017 and 2016, respectively.  CNB recorded a gain on the sale of a branch of $536 thousand during the nine months ended September 30, 2017, and during the nine months ended September 30, 2016, CNB recorded prepayment penalties on long-term borrowings, core processing conversion expenses, and merger expenses totaling $3.6 million.
  • Annualized returns on average assets and equity of 1.02% and 11.48%, respectively, for the nine months ended September 30, 2017, compared to 0.87% and 9.78%, respectively, for the nine months ended September 30, 2016.  The annualized return on average tangible equity was 13.90% and 11.72% during the nine months ended September 30, 2017 and 2016, respectively.
  • Net interest margin of 3.80% and 3.76% for the nine months ended September 30, 2017 and 2016, respectively
  • Loans of $2.10 billion as of September 30, 2017 compared to loans of $1.80 billion as of September 30, 2016.  Organic loan growth in the first nine months of 2017 was $225.0 million.
  • Deposits of $2.06 billion as of September 30, 2017, compared to deposits of $2.02 billion as of September 30, 2016. 
  • Book value per share of $15.99 as of September 30, 2017 increased 9.2% compared to book value per share of $14.64 as of December 31, 2016 and tangible book value per share of $13.34 as of September 30, 2017 increased 13.4% compared to tangible book value of $11.76 per share as of December 31, 2016, as a result of both CNB's retained earnings and its common stock issuance in the first quarter of 2017.
  • Non-performing assets of $20.6 million, or 0.75% of total assets as of September 30, 2017, compared to $16.4 million, or 0.64% of total assets, as of December 31, 2016.

Joseph B. Bower, Jr., President and CEO, stated, "The third quarter shows the positive trend in earnings from the almost two year shift in the balance sheet from investments to loans.  We will continue to focus on organic customer growth across all brands to further enhance future earnings."

Net Interest Margin

Net interest margin on a fully tax equivalent basis was 3.80% and 3.76% for the nine months ended September 30, 2017 and 2016, respectively. The yield on earning assets increased 17 basis points from 4.31% for the nine months ended September 30, 2016 to 4.48% for the nine months ended September 30, 2017. Total interest and dividend income increased from $69.5 million for the nine months ended September 30, 2016 to $80.2 million for the nine months ended September 30, 2017. In addition, CNB recorded $2.3 million in interest expense for the nine months ended September 30, 2017 resulting from the issuance of $50 million in subordinated debt on September 29, 2016 to help support balance sheet growth.

Asset Quality

During the three and nine months ended September 30, 2017, CNB recorded a provision for loan losses of $1.4 million and $3.6 million, as compared to a provision for loan losses of $622 thousand and $2.0 million for the three and nine months ended September 30, 2016.  Net chargeoffs during the three and nine months ended September 30, 2017 were $819 thousand and $2.0 million, compared to net chargeoffs of $907 thousand and $3.1 million for the three and nine months ended September 30, 2016.  CNB Bank net chargeoffs totaled $392 thousand and $1.0 million during the nine months ended September 30, 2017 and 2016, or .03% and .08%, respectively, of average CNB Bank loans.  Holiday Financial Services Corporation, CNB's consumer discount company, recorded net chargeoffs totaling $1.6 million and $2.0 million during the nine months ended September 30, 2017 and 2016, respectively. 

The increase in the provision for loan losses recorded in the nine months ended September 30, 2017 compared to the same period of 2016 is primarily attributable to stronger organic loan growth experienced 2017 compared to 2016.

Non-Interest Income

Net realized gains on available-for-sale securities for the nine months ended September 30, 2017 were $1.5 million, including $1.4 million on the sale of two structured pooled trust preferred securities.  Net realized gains on available-for-sale securities for the nine months ended September 30, 2016 were $1.0 million, including $922 thousand on the sale of two structured pooled trust preferred securities. 

As a result of CNB's continued focus on growing its Private Client Solutions division, wealth and asset management revenues were $2.8 million in the first nine months of 2017, an increase of 20.8% from $2.3 million in the first nine months of 2016.  During the quarter ended September 30, 2017, CNB recorded $592 thousand in income from bank owned life insurance policies, including $301 thousand representing the death proceeds on life insurance policies in excess of the cash surrender value.

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Non-Interest Expenses

Total non-interest expenses were $17.6 million and $52.4 million during the three and nine months ended September 30, 2017, compared to $17.1 million and $50.7 million during the three and nine months ended September 30, 2016. Included in non-interest expenses during the nine months ended September 30, 2016 were $3.6 million of non-recurring items, which included merger related expenses of $481 thousand, costs associated with our core processing system upgrade of $1.6 million, and a prepayment penalty associated with the early payoff of long-term borrowings of $1.5 million.

Salaries and benefits expense increased $3.1 million, or 13.0%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.  As of September 30, 2017, CNB had 490 full-time equivalent staff, compared to 471 full-time equivalent staff as of September 30, 2016.  The staff added during this period included 17 employees for CNB's newest division, BankOnBuffalo.  Occupancy expenses increased $1.1 million, or 18.3%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, resulting primarily from two locations acquired from Lake National Bank in Mentor, Ohio in July 2016, 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 third quarter of 2016.

About CNB Financial Corporation

CNB Financial Corporation is a financial holding company with consolidated assets of approximately $2.75 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) (unaudited)
   Three Months Ended Nine Months Ended
   September 30, September 30,
(Dollars in thousands, except share and per share data)       
          
    2017  2016 % change  2017  2016 % change
Income Statement       
Interest income$28,069 $24,958 12.5% $80,176 $69,497 15.4%
Interest expense 4,552  3,025 50.5%  12,468  9,219 35.2%
 Net interest income 23,517  21,933 7.2%  67,708  60,278 12.3%
Provision for loan losses 1,400  622 125.1%  3,550  2,038 74.2%
 Net interest income after provision for loan losses 22,117  21,311 3.8%  64,158  58,240 10.2%
                    
Non-interest income       
 Service charges on deposit accounts 1,244  1,162 7.1%  3,499  3,149 11.1%
 Other service charges and fees 587  653 -10.1%  1,675  1,837 -8.8%
 Wealth and asset management fees 952  795 19.7%  2,775  2,298 20.8%
 Net realized gains on available-for-sale securities 5  - NA  1,543  1,005 53.5%
 Net realized and unrealized gains on trading securities 160  235 -31.9%  475  265 79.2%
 Mortgage banking 237  388 -38.9%  668  706 -5.4%
 Bank owned life insurance 592  281 110.7%  1,308  807 62.1%
 Card processing and interchange income 942  876 7.5%  2,790  2,499 11.6%
 Gain on sale of branch -  - NA  536  - NA
 Other 313  81 286.4%  625  501 24.8%
                    
  Total non-interest income 5,032  4,471 12.5%  15,894  13,067 21.6%
                    
Non-interest expenses                 
 Salaries and benefits 9,101  8,506 7.0%  27,008  23,905 13.0%
 Net occupancy expense of premises 2,219  2,212 0.3%  7,016  5,932 18.3%
 FDIC insurance premiums 295  387 -23.8%  869  1,049 -17.2%
 Core Deposit Intangible amortization 305  347 -12.1%  967  779 24.1%
 Prepayment penalties - long-term borrowings -  - NA  -  1,506 NA
 Core processing conversion costs -  42 NA  -  1,597 NA
 Merger costs -  266 NA  -  481 NA
 Card processing and interchange expenses 541  587 -7.8%  1,577  1,670 -5.6%
 Other 5,157  4,749 8.6%  15,012  13,744 9.2%
  Total non-interest expenses 17,618  17,096 3.1%  52,449  50,663 3.5%
                    
Income before income taxes 9,531  8,686 9.7%  27,603  20,644 33.7%
Income tax expense 2,285  2,270 0.7%  7,194  5,144 39.9%
Net income$7,246 $6,416 12.9% $20,409 $15,500 31.7%
                    
Average diluted shares outstanding 15,207,589  14,381,888    15,103,629  14,368,013  
          
Diluted earnings per share$0.47 $0.44 6.8% $1.34 $1.07 25.2%
Cash dividends per share$0.165 $0.165 0.0% $0.495 $0.495 0.0%
          
Payout ratio 35% 38%   37% 46% 
          
Average Balances       
Loans, net of unearned income$2,075,147 $1,801,675   $1,992,406 $1,677,554  
Total earning assets 2,544,418  2,343,221    2,485,045  2,226,469  
Total assets 2,723,206  2,533,904    2,658,220  2,386,184  
Total deposits 2,067,576  2,031,639    2,040,929  1,928,603  
Shareholders' equity 243,931  215,342    236,940  211,363  
Tangible shareholders' equity (*) 203,117  169,156    195,801  176,352  
          
Performance Ratios (quarterly information annualized)       
Return on average assets 1.06% 1.01%   1.02% 0.87% 
Return on average equity 11.88% 11.92%   11.48% 9.78% 
Return on average tangible equity (*) 14.27% 15.17%   13.90% 11.72% 
Net interest margin (FTE) 3.82% 3.88%   3.80% 3.76% 
          
Loan Charge-Offs       
Net loan charge-offs$819 $907   $2,031 $3,072  
Net loan charge-offs / average loans 0.16% 0.20%   0.14% 0.24% 
          
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) (unaudited)
   Three Months Ended Nine Months Ended
   September 30, September 30,
   (Dollars in thousands)
       (unaudited)  
    2017  2016 % change  2017  2016 % change
          
Pre-tax net income, GAAP basis$9,531 $8,686 9.7% $27,603 $20,644 33.7%
Net realized gains on available-for-sale securities (5) - NA  (1,543) (1,005)53.5%
Gain on sale of branch -  - NA  (536) - NA
Prepayment penalties - long-term borrowings -  - NA  -  1,506 NA
Core processing conversion costs -  42 NA  -  1,597 NA
Merger costs -  266 NA  -  481 NA
Pre-tax net income, non-GAAP$9,526 $8,994 5.9% $25,524 $23,223 9.9%


 (unaudited)
September 30,
 December 31
(unaudited)
September 30,
  % change
versus

 
  2017  2016  2016  12/31/169/30/16 
 (Dollars in thousands, except share and per share data)    
Ending Balance Sheet       
Loans, net of unearned income$2,098,574 $1,873,536 $1,800,858  12.0%16.5% 
Loans held for sale 1,672  7,528  2,814  -77.8%-40.6% 
Investment securities 430,742  500,693  511,388  -14.0%-15.8% 
FHLB and other equity interests 26,145  19,186  18,334  36.3%42.6% 
Other earning assets 2,806  2,246  2,117  24.9%32.5% 
  Total earning assets 2,559,939  2,403,189  2,335,511  6.5%9.6% 
        
Allowance for loan losses (17,849) (16,330) (15,703) 9.3%13.7% 
Goodwill 38,730  38,730  38,967  0.0%-0.6% 
Core deposit intangible 1,888  2,854  3,200  -33.8%-41.0% 
Other assets 162,361  145,378  177,969  11.7%-8.8% 
  Total assets$  2,745,069  $  2,573,821  $  2,539,944   6.7%8.1% 
              
Non interest-bearing deposits$313,543 $289,922 $293,049  8.1%7.0% 
Interest-bearing deposits 1,747,067  1,727,600  1,730,732  1.1%0.9% 
  Total deposits 2,060,610  2,017,522  2,023,781  2.1%1.8% 
        
Borrowings 342,158  237,004  205,202  44.4%66.7% 
Subordinated debt 70,620  70,620  70,620  0.0%0.0% 
Deposits held for sale -  6,456  -  NANA 
Other liabilities 27,233  30,435  24,852  -10.5%9.6% 
        
Common stock -  -  -  NANA 
Additional paid in capital 96,697  77,737  77,543  24.4%24.7% 
Retained earnings 147,132  134,295  131,643  9.6%11.8% 
Treasury stock (544) (127) (163) 328.3%233.7% 
Accumulated other comprehensive income (loss) 1,163  (121) 6,466  NA-82.0% 
  Total shareholders' equity 244,448  211,784  215,489  15.4%13.4% 
              
  Total liabilities and shareholders' equity$  2,745,069  $  2,573,821  $  2,539,944   6.7%8.1% 
              
Ending shares outstanding 15,285,236  14,467,815  14,464,210     
        
Book value per share$15.99 $14.64 $14.90     
Tangible book value per share (*)$13.34 $11.76 $11.98     
        
Capital Ratios       
Tangible common equity / tangible assets (*) 7.54% 6.72% 6.94%    
Tier 1 leverage ratio 8.44% 7.87% 7.70%    
Common equity tier 1 ratio 10.14% 9.28% 9.56%    
Tier 1 risk based ratio 11.12% 10.33% 10.67%    
Total risk based ratio 14.45% 13.83% 14.32%    
        
Asset Quality       
Non-accrual loans$19,231 $15,329 $15,325     
Loans 90+ days past due and accruing 592  10  70     
  Total non-performing loans 19,823  15,339  15,395     
Other real estate owned 760  1,015  1,147     
  Total non-performing assets$20,583 $16,354 $16,542     
              
Loans modified in a troubled debt restructuring (TDR):       
  Performing TDR loans$8,655 $8,710 $8,870     
  Non-performing TDR loans ** 8,853  3,121  3,202     
     Total TDR loans$17,508 $11,831 $12,072     
              
Non-performing assets / Loans + OREO 0.98% 0.87% 0.92%    
Non-performing assets / Total assets 0.75% 0.64% 0.65%    
Allowance for loan losses / Loans 0.85% 0.87% 0.87%    
        
* - 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)    
 September 30,December 31September 30,    
  2017  2016  2016     
        
Shareholders' equity$  244,448 $  211,784 $  215,489     
  Less goodwill   38,730    38,730    38,967     
  Less core deposit intangible   1,888    2,854    3,200     
Tangible common equity$  203,830 $  170,200 $  173,322     
              
Total assets$  2,745,069 $  2,573,821 $  2,539,944     
  Less goodwill   38,730    38,730    38,967     
  Less core deposit intangible   1,888    2,854    3,200     
Tangible assets$  2,704,451 $  2,532,237 $  2,497,777     
              
Ending shares outstanding   15,285,236    14,467,815    14,464,210     
        
Tangible book value per share$  13.34 $  11.76 $  11.98     
Tangible common equity/Tangible assets 7.54% 6.72% 6.94%    


Contact:

Brian W. Wingard
Treasurer  
(814) 765-9621  

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