CNB Financial Corp. Reports 2012 Earnings of $17.1M

CLEARFIELD – CNB Financial Corp., the parent company of CNB Bank, has announced its earnings for the year ended Dec. 31, 2012.  Highlights include the following:

  • Net income of $17.1 million for the year ended Dec. 31, 2012, or $1.38 per share, a 13 percent increase in net income and a 12 percent increase in diluted earnings per share over the year ended Dec. 31, 2011.
  • Loans of $927.8 million at Dec. 31, 2012, an increase of $77.9 million, or 9.2 percent, compared to Dec. 31, 2011.
  • Deposits of $1.49 billion at Dec. 31, 2012, an increase of $131.2 million, or 9.7 percent, compared to Dec. 31, 2011.
  • Returns on average assets and equity of 1.00 percent and 12.17 percent, respectively, for the year ended Dec. 31, 2012. 
  • Tangible book value per share of $10.77 per share as of Dec. 31, 2012, an increase of 10.1 percent over tangible book value per share of $9.78 at Dec. 31, 2011.
  • Cost of funds of 1.08 percent for the year ended Dec. 31, 2012, compared to 1.44 percent for the year ended Dec. 31, 2011.
  • Non-performing assets of $15.1 million, or 0.85 percent of total assets as of Dec. 31, 2012, compared to $17.5 million, or 1.09 percent of total assets, at Dec. 31, 2011.

Joseph B. Bower Jr., president and chief executive officer, said, “We continue to be pleased with the overall asset growth of the corporation of 11 percent, which has resulted in the 2012 net income growth of 13 percent.  The corporation’s enhanced credit quality in 2012 should also provide for continued earnings improvement in 2013.”

Net Interest Income and Margin

During the year ended Dec. 31, 2012, net interest income increased $5.1 million, or 10.5 percent, compared to the year ended Dec. 31, 2011.  Net interest margin on a fully tax equivalent basis was 3.49 percent for the year ended Dec. 31, 2012, compared to 3.59 percent for the year ended Dec. 31, 2011.  Net interest margin was 3.47 percent in the first and second quarters of 2012, 3.53 percent in the third quarter of 2012, and 3.49 percent in the fourth quarter 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 4.84 percent during the year ended Dec. 31, 2011 to 4.42 percent during the year ended Dec. 31, 2012, CNB’s average earning assets increased from $1.41 billion to $1.62 billion, or 14.9 percent, resulting in an increase in interest income of $2.4 million, or 3.7 percent.

Due to growth in core deposits, interest-bearing liabilities have increased significantly during the last 12 months. Interest-bearing deposits as of Dec. 31, 2012 grew $108.6 million, or 9.0 percent, as compared to Dec. 31, 2011.  However, CNB’s total interest expense for the year ended Dec. 31, 2012 decreased by $2.7 million, or 15.1 percent, compared to the year ended Dec. 31, 2011, primarily 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 year ended Dec. 31, 2012, CNB recorded a provision for loan losses of $6.4 million, as compared to a provision for loan losses of $4.9 million for the year ended Dec. 31, 2011.  The provision for loan losses was $2.3 million in both the three month periods ended Dec. 31, 2012 and 2011.

During the fourth quarter of 2012, an impaired commercial loan was partially repaid in October, resulting in an additional charge-off of $109,000 and a reduction in nonperforming assets of $1.8 million. In December 2012, one impaired commercial and industrial loan with a balance of $1.4 million was charged off. 

As of Sept. 30, 2012, a workout agreement with the borrower was probable, which would have resulted in no loss to CNB.  As a result, no specific reserve was recorded as of the end of the third quarter of 2012.  In December, CNB obtained new information from the borrower and determined that the likelihood of a workout agreement or any future payments from the borrower was remote.  Therefore, the loan was charged off and the provision for loan losses was increased by $1.4 million during the fourth quarter of 2012. In addition, the effect of increases in net charge-offs in 2012 and the increase in the loan portfolio in 2012 had a significant impact on the allowance and provision for loan losses required for homogeneous loan pools as of and for the year ended Dec. 31, 2012.  The allowance for loan loss balance attributable to loans collectively evaluated for impairment increased from $11.1 million at Dec. 31, 2011 to $12.2 million at Dec. 31, 2012.

Non-Interest Income

Excluding the effects of the securities transactions described below, non-interest income was $10.7 million for the year ended Dec. 31, 2012, compared to $10.4 million for the year ended Dec. 31, 2011.  Net realized gains on available-for-sale securities were $1.4 million during the year ended Dec. 31, 2012, compared to $614,000 during the year ended Dec. 31, 2011.  Net realized and unrealized gains on securities for which fair value was elected were $461,000 and $64,000 during the years ended Dec. 31, 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 year ended Dec. 31, 2011.

Non-Interest Expenses

Total non-interest expenses increased $2.7 million, or 8.0 percent, during the year ended Dec. 31, 2012 compared to the year ended Dec. 31, 2011.  Salaries and benefits expenses increased $1.6 million, or 9.3 percent, during the year ended Dec. 31, 2012 compared to the year ended Dec. 31, 2011, in part due to routine merit increases, an increase in full-time equivalent employees from 300 at Dec. 31, 2011 to 323 at Dec. 31, 2012, and increases in certain employee benefit expenses, such as health insurance costs, which continue to increase in line with market conditions.  In addition, other non-interest expenses increased from $10.3 million for year ended Dec. 31, 2011 to $11.3 million for the year ended Dec. 31, 2012 as a result of CNB’s continued growth. 

Total non-interest expenses in relation to CNB’s average asset size declined from 2.20 percent for the year ended Dec. 31, 2011 to 2.10 percent for the year ended Dec. 31, 2012.

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