CNB Financial Corp. Reports Third Quarter Earnings for 2018

10/19/2018
 

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 2018. Highlights include the following:
 
• Net income of $9.2 million, or $0.60 per share, in the third quarter of 2018, compared to net income of $7.2 million, or $0.47 per share, in the third quarter of 2017. Pre-tax income in the third quarter of 2018 was $10.9 million compared to $9.5 million in the third quarter of 2017, an increase of 14.6%.
• Net income of $24.8 million, or $1.62 per share, during the nine months ended September 30, 2018, compared to net income of $20.4 million, or $1.34 per share, during the nine months ended September 30, 2017.  Pre-tax income for the nine months ended September 30, 2018 was $29.1 million compared to $27.6 million for the same period in 2017, an increase of 5.5%. Pre-tax income for the nine months ended September 30, 2017 includes securities gains of $1.5 million and a gain on sale of a branch of $536 thousand.
• Annualized returns on average assets and equity of 1.12% and 13.28%, respectively, for the nine months ended September 30, 2018, compared to 1.02% and 11.48%, respectively, for the nine months ended September 30, 2017. The annualized return on average tangible equity was 15.83% and 13.90% during the nine months September 30, 2018 and 2017, respectively.
• Net interest margin on a fully tax-equivalent basis of 3.75% and 3.80% for the nine months ended September 30, 2018 and 2017, respectively.  Net interest margin on a fully tax-equivalent basis was 3.79% for the third quarter of 2018, compared to 3.74% for the second quarter of 2018.
• Loans of $2.39 billion as of September 30, 2018, compared to loans of $2.10 billion as of September 30, 2017, representing organic loan growth of 13.7%.
• Deposits of $2.52 billion as of September 30, 2018, compared to deposits of $2.06 billion as of September 30, 2017, representing organic deposit growth of 22.4%.
• Book value per share of $16.64 as of September 30, 2018 increased 4.1% compared to book value per share of $15.99 as of September 30, 2017, and tangible book value per share of $14.05 as of September 30, 2018 increased 5.3% compared to tangible book value per share of $13.34 as of September 30, 2017.
• Non-performing assets of $20.4 million, or 0.65% of total assets as of September 30, 2018, compared to $20.4 million, or 0.74% of total assets, as of December 31, 2017, and $21.1 million, or 0.77% of total assets, as of September 30, 2017.
 
Joseph B. Bower, Jr., President and CEO, stated, "We continue to be excited and encouraged by the business opportunities we are finding, particularly in our newer markets.  BankOnBuffalo has grown to $274 million in deposits and $222 million in loans in just two years.  Businesses and consumers continue to choose CNB for their financial services needs as our brand and customer service presence continue to grow and expand."
 
Net Interest Margin
Net interest margin on a fully tax equivalent basis was 3.75% and 3.80% for the nine months ended September 30, 2018 and 2017, respectively. The yield on earning assets increased 17 basis points to 4.65% for the nine months ended September 30, 2018 from 4.48% for the nine months ended September 30, 2017. The cost of interest-bearing liabilities increased 27 basis points to 1.06% for the nine months ended September 30, 2018 from 0.79% for the nine months ended September 30, 2017.
 
Total interest and dividend income increased by 19.1% to $95.5 million for the nine months ended September 30, 2018 from $80.2 million for the nine months ended September 30, 2017. Net interest income increased by 13.4% to $76.8 million for the nine months ended September 30, 2018 from $67.7 million for the nine months ended September 30, 2017.
 
Asset Quality
During the three and nine months ended September 30, 2018, CNB recorded a provision for loan losses of $1.1 million and $4.6 million, as compared to a provision for loan losses of $1.4 million and $3.6 million for the three and nine months ended September 30, 2017. Net chargeoffs during the three and nine months ended September 30, 2018 were $707 thousand and $1.8 million, compared to net chargeoffs of $820 thousand and $2.0 million for the three and nine months ended September 30, 2017. CNB Bank net chargeoffs totaled $436 thousand and $392 thousand during the nine months ended September 30, 2018 and 2017, or 0.02% and 0.03%, respectively, of average CNB Bank loans. Holiday Financial Services Corporation, CNB’s consumer discount company, recorded net chargeoffs totaling $1.4 million and $1.6 million during the nine months ended September 30, 2018 and 2017, respectively.
 
In the second quarter of 2018, CNB identified a commercial and industrial relationship that, while performing in accordance with its contractual terms and current with scheduled principal and interest payments, filed for bankruptcy. As a result, CNB recorded a specific loan loss reserve for this impaired loan of $758 thousand as of June 30, 2018.  During the quarter ended September 30, 2018, the customer sold its business and CNB received full repayment of the outstanding principal balance of $5.5 million along with previously outstanding interest and fees totaling $127 thousand.
 
Non-Interest Income
 
Net realized gains on available-for-sale securities were $1.5 million during the nine months ended September 30, 2017. In addition, CNB realized a gain on the sale of a branch in the second quarter of 2017 of $536 thousand. Excluding the effects of these gains associated with the branch sale and the sale of available for sale securities in 2017, non-interest income for the nine months ended September 30, 2018 and 2017 was $16.3 million and $13.8 million, respectively.
 
As a result of CNB’s continued focus on growing its Private Client Solutions division, wealth and asset management revenues were $3.2 million for the first nine months of 2018, an increase of 13.5% from $2.8 million in the first nine months of 2017. In addition, as a result of its continued organic growth, CNB experienced an increase in service charges in deposit accounts of $603 thousand, or 17.2%, in the first nine months of 2018 compared to the first nine months of 2017. Similarly, other service charges and fees increased $398 thousand, or 23.8%, in the first nine months of 2018 compared to the first nine months of 2017. Net income (loss) attributable to investments in Small Business Investment Companies was $612 thousand in the first nine months of 2018 compared to $(37) thousand in the first nine months of 2017, which is reported as a component of other non-interest income.
 
Non-Interest Expenses
 
Total non-interest expenses were $20.8 million and $59.3 million during the three and nine months ended September 30, 2018, compared to $17.6 million and $52.4 million during the three and nine months ended September 30, 2017. Salaries and benefits expense increased $4.1 million, or 15.1%, during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. As of September 30, 2018, CNB had 534 full-time equivalent staff, compared to 490 full-time equivalent staff as of September 30, 2017, an increase of 9.0%. The remainder of the increase in non-interest expenses was primarily a result CNB’s continued growth and the servicing of a larger customer base. Total households serviced at September 30, 2018 were 63,619, compared to 59,026 households at September 30, 2017, an organic increase of 7.8%.
 
Income Tax Expense
 
As a result of the enactment of the Tax Cuts and Jobs Act in the fourth quarter of 2017, income tax expense decreased $2.8 million, or 39.5%, during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. CNB’s effective tax rate was 14.9% in the first nine months of 2018 compared to 26.1% in the first nine months of 2017.
 
About CNB Financial Corporation
CNB Financial Corporation is a financial holding company with consolidated assets of approximately $3.1 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 and 42 full-service offices in Pennsylvania, Ohio, and New York. CNB Bank’s divisions include ERIEBANK, based in Erie, Pennsylvania with offices in northwest Pennsylvania and northeast Ohio; FCBank, based in Worthington, Ohio with offices in central Ohio; and BankOnBuffalo, based in Buffalo, New York with offices in northwest New York. CNB Bank is headquartered in Clearfield, Pennsylvania with offices in central and north central Pennsylvania. 
 
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 Highlights