CLEARFIELD – CNB Financial Corp., the parent company of CNB Bank, has 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 Sept. 30, 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 Sept. 30, compared to pre-tax income of $16.9 million for the nine months ended Sept. 30, 2012.
- Net interest income of $14.6 million for the third quarter of 2013, an increase of 7.2 percent over the third quarter of 2012.
- Net interest income of $41.9 million for the nine months ended Sept. 30, an increase of 5.8 percent over the nine months ended June 30, 2012.
- Annualized returns on average assets and equity of 0.88 percent and 11.42 percent, respectively, for the nine months ended Sept. 30.
- Loans of $1,029.0 million at Sept. 30, an increase of $118.8 million, or 13.0 percent, compared to Sept. 30, 2012.
- Deposits of $1.55 billion at Sept. 30, 2013, an increase of $72.0 million, or 4.9 percent, compared to Sept. 30, 2012.
- Total non-performing assets of $14.5 million, or 0.79 percent of total assets as of Sept. 30.
CNB Financial Corp. also successfully closed its previously announced acquisition of FC Banc Corp. on Oct. 11. 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 chief executive officer, 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 Sept. 30, net interest income increased $2.3 million, or 5.8 percent, compared to the nine months ended Sept. 30, 2012. Net interest margin on a fully tax equivalent basis was 3.38 percent for both the three and nine months ended Sept. 30, compared to 3.53 percent and 3.49 percent for the three and nine months ended Sept. 30, 2012.
Although the yield on earnings assets decreased from 4.45 percent during the nine months ended Sept. 30, 2012 to 4.08 percent during the nine months ended Sept. 30, CNB’s average earning assets increased from $1.61 billion to $1.72 billion, or 7.2 percent. Due to growth in core deposits, interest-bearing deposits have increased $51.5 million, or 3.9 percent, as compared to Sept. 30, 2012. However, interest expense for the nine months ended Sept. 30, decreased by $2.5 million, or 22.0 percent, compared to the nine months ended Sept. 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 Sept. 30, 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 Sept. 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. 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 and, as a result, recorded a provision for loan losses of $562,000 for the quarter ended Sept. 30.
In July, CNB recorded a loan loss recovery of $1.4 million related to an impaired commercial mortgage loan. A partial charge-off 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 Sept. 30, compared to $7.9 million for the nine months ended Sept. 30, 2012. Net realized gains on available-for-sale securities were $0 and $328,000 during the three and nine months ended Sept. 30, compared to $103,000 and $1.4 million during the three and nine months ended Sept. 30, 2012. Net realized and unrealized gains on trading securities were $166,000 and $497,000 during the three and nine months ended Sept. 30, compared to $275,000 and $455,000 during the three and nine months ended Sept. 30, 2012.
Wealth and asset management fees increased from $1.3 million during the nine months ended Sept. 30, 2012 to $1.7 million during the nine months ended Sept. 30, 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 Sept. 30, CNB recorded $1.4 million in income from bank owned life insurance policies, including $576,000 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 percent, during the nine months ended Sept. 30, compared to the nine months ended Sept. 30, 2012. Non-interest expenses for the three and nine months ended Sept. 30 include merger related expenses of $398,000 and $1.3 million, respectively.
Salaries and benefits expenses increased $1.6 million, or 11.6 percent, during the nine months ended Sept. 30, compared to the nine months ended Sept. 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 $438,000, or 12.9 percent, during the nine months ended Sept. 30, compared to the nine months ended Sept. 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.