CNB Financial Corporation (“CNB”) (NASDAQ: CCNE), the parent company of CNB Bank, today announced its earnings for the first quarter of 2016. Highlights include the following:
Total deposits of $1.9 billion at March 31, 2016, an increase of $75.2 million, or 4.1%, as compared to December 31, 2015, and an increase of $22.8 million, or 1.2%, as compared to March 31, 2015. CNB’s loan to deposit ratio increased from 72.6% at March 31, 2015 to 85.0% at March 31, 2016.
Total loans of $1.6 billion at March 31, 2016, an increase of $250.2 million, or 18.4%, as compared to March 31, 2015 and an increase of $28.5 million, or 1.8%, as compared to December 31, 2015. All of CNB’s loan growth during the 12 months ended March 31, 2016 was organic.
Net interest margin of 3.67% for the quarter ended March 31, 2016, compared to 3.82% for the quarter ended March 31, 2015. Included in net interest income in 2016 was $133 thousand of net accretion related to acquired loans, which was down from $1.1 million included in 2015. Excluding the impact of the net accretion, net interest income increased by $1.3 million for 2016 as compared to 2015.
Net income of $5.0 million for the quarter ended March 31, 2016, or $0.35 per share, compared to net income of $5.6 million for the quarter ended March 31, 2015, or $0.39 per share. Impacting these results in 2016 were merger costs related to our pending acquisition of Lake National Bank and one-time costs associated with our core processing system upgrade totaling $109 thousand.
Annualized returns on average assets and equity of 0.87% and 9.65%, respectively, for the quarter ended March 31, 2016 compared to 1.02% and 11.47%, respectively, for the quarter ended March 31, 2015.
Tangible book value per share of $12.36 as of March 31, 2016, an increase of 7.6% over tangible book value per share of $11.49 at March 31, 2015.
Non-performing assets of $13.1 million, or 0.57% of total assets as of March 31, 2016, compared to $10.2 million, or 0.47% of total assets, at March 31, 2015.
In December 2015, CNB announced the acquisition of Lake National Bank, headquartered in Mentor, Ohio, which is expected to close in the third quarter of 2016, subject to receipt of certain regulatory approvals and the approval of Lake National Bank’s shareholders.
Joseph B. Bower, Jr., President and CEO commented, “CNB is pleased to see a turnaround in deposit growth so far in 2016 after a lull in 2015. While funding is not currently an issue, increasing deposits is core to our fundamental business. Some concern continues to surround the narrowing of our net interest margin. The margin contraction of 15 basis points on a year over year basis is significant. We expect to maintain the current margin throughout the rest of 2016.”
Net Interest Margin
Net interest margin on a fully tax equivalent basis was 3.67% for the quarter ended March 31, 2016, compared to 3.82% for the quarter ended March 31, 2015. Net accretion included in loan interest income in the first quarter of 2016 was $133 thousand, resulting in an increase in the net interest margin of 3 basis points. Net accretion included in loan interest income in the first quarter of 2015 was $1.1 million, resulting in an increase in the net interest margin of 21 basis points.
During 2015 and the first quarter of 2016, CNB experienced net interest margin compression as a result of loans repricing downward and new loans with market yields significantly below historical averages, which is consistent with the trends across the financial services industry in this historically low interest rate environment. The cost of interest-bearing liabilities was 69 basis points during the first quarter of 2016, compared to 71 basis points during the first quarter of 2015.
During the quarter ended March 31, 2016, CNB recorded a provision for loan losses of $1.2 million, as compared to a provision for loan losses of $943 thousand for the quarter ended March 31, 2015. Net chargeoffs in the first quarter of 2016 were $1.2 million, compared to net chargeoffs of $634 thousand in the first quarter of 2015. The increase in chargeoffs was primarily attributable to consumer loans held in CNB’s consumer discount company, Holiday Financial Services Corporation. There were no new impaired commercial loan relationships that required a significant loss reserve in the first quarter of 2016.
Non-interest income was $3.1 million for both the quarter ended March 31, 2016 and the quarter ended March 31, 2015. Other non-interest income increased in the first quarter of 2016 compared to the first quarter of 2015 primarily due to an increase in debit card interchange fees as a result of CNB’s increasing customer base and an increase in the gains realized on the sale of mortgage and Small Business Administration loans on the secondary market.
Throughout 2015 and the first three months of 2016, CNB made numerous infrastructure, personnel, and other investments to facilitate its continued growth. Additionally, in order to better serve our customers and to achieve operational efficiencies, CNB is undertaking a core processing system upgrade with completion scheduled for the second quarter of 2016. Total non-interest expenses were $14.2 million and $13.1 million during the quarters ended March 31, 2016 and 2015, respectively. Included in non-interest expenses in the first quarter of 2016 were $109 thousand of non-recurring items, with merger related expenses of $42 thousand and costs associated with our core processing system upgrade of $67 thousand. We expect an additional $450 thousand in one-time costs related to the core processing system upgrade in the second quarter of 2016.
Salaries and benefits expenses increased $866 thousand, or 13.1%, during the quarter ended March 31, 2016 compared to the quarter ended March 31, 2015. As of March 31, 2016, CNB had 441 full-time equivalent staff, compared to 419 full-time equivalent staff as of March 31, 2015. The staff added during this period included both customer-facing personnel such as business development and wealth management officers, as well as support department personnel.
The ratio of non-interest expenses to average assets was 2.47% and 2.41% during the quarters ended March 31, 2016 and 2015, respectively.
About CNB Financial Corporation
CNB Financial Corporation is a financial holding company with consolidated assets of approximately $2.3 billion that conducts business primarily through CNB Bank, CNB’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, three loan production offices, 29 full-service offices in Pennsylvania, including ERIEBANK, a division of CNB Bank, and 9 full-service offices in central Ohio conducting business as FCBank, a division of CNB Bank.
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.