CLEARFIELD – CNB Financial Corp., the parent company of CNB Bank, has announced its earnings for the first quarter of 2013. Highlights include the following:
- Announced the acquisition of FC Banc Corp. and its subsidiary, The Farmers Citizens Bank, headquartered in Bucyrus, OH, expected to close in the fourth quarter of 2013.
- Net income of $4.3 million, or $0.34 per share, compared to net income of $4.3 million, or $0.35 per share, in the first quarter of 2012.
- Excluding the effect of securities transactions described under non-interest income, pre-tax earnings for the first quarter of 2013 was $5.5 million, an increase of 8.7 percent over the equivalent pre-tax earnings of $5.1 million for the first quarter of 2012.
- Annualized returns on average assets and equity of 0.96 percent and 11.76 percent, respectively, for the three months ended March 31.
- Loans of $932.7 million at March 31, an increase of $72.7 million, or 8.5 percent, compared to March 31, 2012.
- Deposits of $1.55 billion at March 31, an increase of $108.5 million, or 7.5 percent, compared to March 31, 2012.
- Tangible book value per share of $10.80 per share as of March 31, an increase of 9.8 percent over tangible book value per share of $9.84 at March 31, 2012.
- Total non-performing assets of $16.9 million, or 0.93 percent of total assets as of March 31.
Joseph B. Bower Jr., president and chief executive officer, said, “We continue to be pleased with the growth in earning assets that occurred in the first quarter. This growth has helped to offset the effect of the contracting net interest margin. Also, increases in assets under management have resulted in improved non-interest income.”
Net Interest Income and Margin
During the three months ended March 31, net interest income increased $774,000, or 9.1 percent, compared to the three months ended March 31, 2012. Net interest margin on a fully tax equivalent basis was 3.41 percent for the three months ended March 31, compared to 3.47 percent for the three months ended March 31, 2012.
The yield on earnings assets decreased from 4.55 percent during the three months ended March 31, 2012 to 4.18 percent during the three months ended March 31 and CNB’s average earning assets increased from $1.55 billion to $1.69 billion, or 9.0 percent, resulting in a decrease in interest income of $120,000, or 0.7 percent. Due to growth in core deposits, interest-bearing liabilities have grown significantly during last twelve months. Interest-bearing deposits during the three months ended March 31, grew $110.6 million, or 8.7 percent, as compared to March 31, 2012. However, interest expense for the three months ended March 31, decreased by $894,000, or 21.6 percent, compared to the three months ended March 31, 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 three months ended March 31, CNB recorded a provision for loan losses of $930,000, as compared to a provision for loan losses of $1.1 million for the three months ended March 31, 2012.
A commercial mortgage loan that was impaired at Dec. 31, 2012 was placed on nonaccrual status during the three months ended March 31, resulting in an increase in nonperforming assets of $2.9 million. No loan loss reserve was required for this loan as of March 31 or Dec. 31, 2012. A loan modified in a troubled debt restructuring that was nonperforming at Dec. 31, 2012 was partially charged off in the first quarter of 2013, resulting in a decrease in nonperforming assets of $595,000. An additional provision for loan losses of $135,000 was recorded for this loan during the three months ended March 31.
Non-Interest Income
Excluding the effects of the securities transactions described below, non-interest income was $2.7 million for the three months ended March 31, compared to $2.5 million for the three months ended March 31, 2012. Net realized gains on available-for-sale securities were $76,000 during the three months ended March 31, compared to $566,000 during the three months ended March 31, 2012. Net realized and unrealized gains on securities for which fair value was elected were $303,000 and $320,000 during the three months ended March 31, 2013 and 2012, respectively.
Wealth and asset management fees increased from $387,000 during the three months ended March 31, 2012 to $574,000 during the three months ended March 31 due to increases in assets under management resulting from CNB’s strategic focus to grow its Wealth and Asset Management Division.
Non-Interest Expenses
Total non-interest expenses increased $668,000, or 7.4 percent, during the three months ended March 31 compared to the three months ended March 31, 2012. Salaries and benefits expenses increased $472,000, or 10.0 percent, during the three months ended March 31, compared to the three months ended March 31, 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.
Total non-interest expenses on an annualized basis in relation to CNB’s average asset size declined from 2.19 percent for the three months ended March 31, 2012 to 2.16 percent for the three months ended March 31.
