CLEARFIELD – CNB Financial Corp. (“CNB”), the parent company of CNB Bank, has announced its earnings for the second quarter and first six months of 2012.
Highlights include the following:
- Net income of $4.3 million for the three months ended June 30, 2012, or $0.35 per share, an 11.4 percent increase in net income and a 9.4 percent increase in diluted earnings per share over the three months ended June 30, 2011.
- Net income of $8.7 million for the six months ended June 30, 2012, or $0.70 per share, a 21.1 percent increase in net income and a 20.7 percent increase in diluted earnings per share over the six months ended June 30, 2011.
- Annualized returns on average assets and equity of 1.03 percent and 12.70 percent, respectively, for the six months ended June 30, 2012 compared to returns on average assets and equity of 0.98 percent and 12.44 percent, respectively, for the six months ended June 30, 2011.
- Net interest income for the three months ended June 30, 2012 of $13.3 million, an increase of 4.7 percent over the $12.7 million for the quarter ended March 31, 2012 and an increase of 11.4 percent over the second quarter of 2011.
- Net interest income of $26.0 million for the six months ended June 30, 2012 was an 11.8 percent increase compared to the six months ended June 30, 2011.
- Total loans of $906.8 million at June 30, 2012, an increase of $46.8 million, or 5.4 percent, compared to March 31, 2012, and an increase of $85.0 million, or 10.3 percent, compared to June 30, 2011.
- Deposits of $1.46 billion at June 30, 2012, an increase of $206.3 million, or 16.5 percent, compared to June 30, 2011.
- Total non-performing assets of $18.5 million, or 1.08 percent of total assets as of June 30, 2012.
Joseph B. Bower Jr., President and CEO, commented, “The second quarter brought growth in our loan portfolio that we haven’t seen in some time. The increase in our customer base through the strategic initiative of growing core deposits is providing us with many more lending opportunities.”
Net Interest Income and Margin
During the six months ended June 30, 2012, net interest income increased $2.7 million, or 11.8 percent, compared to the six months ended June 30, 2011. Net interest margin on a fully tax equivalent basis was 3.47 percent for the six months ended June 30, 2012, compared to 3.55 percent for the six months ended June 30, 2011, and was also 3.47 percent in the first and second quarters of 2012, as CNB was able to attract and deploy low cost core deposits into loans within our markets.
Although the yield on earnings assets decreased from 4.86 percent during the six months ended June 30, 2011 to 4.48 percent during the six months ended June 30, 2012, CNB’s average earning assets increased from $1.36 billion to $1.59 billion, or 16.7 percent, resulting in an increase in interest income of $1.9 million, or 6.0 percent.
Due to growth in core deposits, interest-bearing liabilities have increased significantly during last twelve months. Interest-bearing deposits as of June 30, 2012 grew $191.2 million, or 17.4 percent, as compared to June 30, 2011. However, interest expense for the six months ended June 30, 2012 decreased by $820 thousand, or 9.2 percent, compared to the six months ended June 30, 2011, as a result of decreases in the cost of core deposits. CNB’s strong and growing deposit base and low cost of funds have, along with the increase in average earnings assets described above, offset the decline in yield on earning assets, resulting in the increase in net interest income.
Asset Quality
During the six months ended June 30, 2012, CNB recorded a provision for loan losses of $2.9 million, as compared to a provision for loan losses of $1.8 million for the six months ended June 30, 2011. During the quarter ended June 30, 2012, CNB recorded a provision for loan losses of $1.7 million, as compared to a provision for loan losses of $992,000 during the quarter ended June 30, 2011.
In May 2012, CNB management determined that one relationship comprising a commercial loan of $2.1 million and two consumer loans totaling $200,000 had become impaired. As of March 31, 2012, the loan relationship was not deemed to be a criticized or classified loan under applicable regulatory guidelines or CNB’s internal loan policies. CNB charged off the balances of the consumer loans and recorded a specific allocation of $1.1 million for the commercial loan based on CNB’s evaluation of the borrowers’ ability and willingness to repay the loan. As a result, the provision for loan losses during the quarter ended June 30, 2012 increased by $1.3 million. It is possible that further deterioration with respect to the loan relationship may occur in the future.
Non-Interest Income
Excluding the effects of the securities transactions described below, non-interest income was $5.2 million for the six months ended June 30, 2012, compared to $5.0 million for the six months ended June 30, 2011. Net realized gains on available-for-sale securities were $1.3 million during the six months ended June 30, 2012, compared to $74,000 during the six months ended June 30, 2011. Net realized and unrealized gains on securities for which fair value was elected were $180,000 and $97,000 during the six months ended June 30, 2012 and 2011, respectively. An other-than-temporary impairment charge of $398,000 was recorded in earnings on structured pooled trust preferred securities during the six months ended June 30, 2011.
Non-Interest Expenses
Total non-interest expenses increased $1.4 million, or 8.6 percent, during the six months ended June 30, 2012 compared to the six months ended June 30, 2011. Salaries and benefits expenses increased $904,000, or 10.7 percent, during the six months ended June 30, 2012 compared to the six months ended June 30, 2011, 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. In addition, other non-interest expenses increased from $5.0 million for the six months ended June 30, 2011 to $5.7 million for the six months ended June 30, 2012 as a result of CNB’s continued growth.
Total non-interest expenses on an annualized basis in relation to CNB’s average asset size declined from 2.24 percent for the six months ended June 30, 2011 to 2.12 percent for the six months ended June 30, 2012.