CNB Community Bancorp, Inc. Reports First Quarter 2020 Results

CNB Community Bancorp, Inc. (OTC: CNBB), the parent company of County National Bank, today announced earnings for the three months ended March 31, 2020. Earnings during the first quarter of 2020 totaled $2.3 million, consistent with the $2.3 million earned during the three months ended March 31, 2019. Basic earnings per share for CNB Community Bancorp, Inc. (the “Company”) increased to $1.11 during the three months ended March 31, 2020, up $0.03 from $1.08 during the first quarter of 2019.

The annualized return on average assets (ROA) decreased to 1.29% for the three months ended March 31, 2020, down from 1.36% for the three months ended March 31, 2019. The annualized return on average equity (ROE) decreased to 14.6% for the current quarter, down from 16.0% for the first quarter of 2019. Book value per share increased to $31.05 at March 31, 2020, up $3.24 from $27.81 at March 31, 2019.

John R. Waldron, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, remarked, “Our company and its employees performed well in the first quarter of 2020 despite the onset of a period so rare as to not have occurred in over 100 years. Personally, I have seen many instances in the last 45 days of the spirit that South Central Michigan is known for as employees, customers and members of the communities in which we serve have impacted their businesses, their personal interactions and, in some cases, their lives to ensure we get through this period in the quickest and least destructive way possible. The employees of County National Bank have truly met the definition of essential during this time.”

Financial Highlights

• Total assets increased $99.3 million, or 14.4%, to $791.1 million from March 31, 2019 and $53.6 million, or 7.3% from December 31, 2019.
• Net loans increased $58.2 million, or 10.2%, to $631.0 million at March 31, 2020 compared to $572.8 million at March 31, 2019 and increased $8.4 million, or 1.3%, from December 31, 2019.
• Total deposits increased $92.4 million, or 15.2%, to $699.4 million at March 31, 2020 from $607.0 million at March 31, 2019 and increased $47.4 million, or 7.3% from December 31, 2019.
• Book value per share increased $3.24, or 11.6%, to $31.05 at March 31, 2020, up from $27.81 at March 31, 2019 and up $0.94 from $30.11 at December 31, 2019.
• Total equity increased $7.4 million to $65.7 million from March 31, 2019.
• Net income increased $85,000, 3.8%, to $2.34 million in the first quarter of 2020 and basic EPS increased $0.03, or 2.8%, to $1.11 from $1.08 in the first quarter of 2020.
• Net interest income for the first quarter of 2020 increased $243,000 to $7.2 million.
• Pre-tax, pre-provision income increased $183,000 to $3.1 million in the first quarter of 2020, compared to $3.0 million in the first quarter of 2019.

Balance Sheet Review

The Company’s assets totaled $791.1 million at March 31, 2020 compared to $737.4 million at December 31, 2019, and $691.7 million at March 31, 2019. Net loans totaled $631.0 million at March 31, 2020, compared to $622.6 million at December 31, 2019 and $572.8 million at March 31, 2019.

The loan portfolio at March 31, 2020 included: $326.6 million in commercial real estate loans, $145.1 million in commercial loans, $126.0 in residential real estate loans and $40.9 million in consumer loans.

Nonperforming assets (which are predominately comprised of nonperforming loans and other real estate owned (“OREO”)) at March 31, 2020 were $3.7 million compared to $3.2 million at December 31, 2019 and $2.3 million at March 31, 2019. Nonperforming assets as a percentage of total assets increased to 0.46% at March 31, 2020 from 0.44% at December 31, 2019 and 0.33% at March 31, 2019.

Nonperforming loans at March 31, 2020 were $3.6 million, an increase of $600,000, or 5.0%, from the $3.0 million balance at December 31, 2019 and an increase of $1.4 million, or 63.6%, from the $2.2 million balance at March 31, 2019. Nonperforming loans as a percentage of total loans increased to 0.56% at March 31, 2020, as compared to 0.47% at December 31, 2019 and 0.39% at March 31, 2019.

During the first quarter of 2020, there was recorded a provision for loan losses of $195,000, which is a decrease of $133,000 from a provision of $328,000 recorded during the fourth quarter of 2019 and an increase of $94,000 from a provision of $101,000 recorded during the first quarter of 2019. Net recoveries totaled $43,000 during the first quarter of 2020 compared to net charge-offs of $37,000 in the fourth quarter of 2019 and net charge- offs of $149,000 in the first quarter of 2019.

Net charge-offs as a percentage of average loans was (0.01)% for first quarter of 2020, which was a decrease from the 0.04% from the fourth quarter of 2019 and the 0.03% from the first quarter of 2019. The allowance for loan losses totaled $7.7 million at March 31, 2020 compared to $7.5 million at December 31, 2019 and $7.0 million at March 31, 2019. The allowance for loan losses as a percentage of total loans increased from 1.18% at December 31, 2019 but decreased from 1.21% at March 31, 2019 to 1.20% at March 31, 2020. The fluctuation in the required allowance for loan losses is directly attributable to stable regional economic conditions as we have experienced growth of high-quality credits and a decline in specific impairments through the first two months of 2020. Recent economic disruption from the Covid-19 virus has the potential to impact the portfolio in 2020 and beyond. The allowance will continue to be adjusted based upon these current and potential ramifications to the portfolio.

Total investment securities that exclude Federal Home Loan Bank of Indianapolis, United Bankers Bank and Federal Reserve Bank stock aggregated to $34.0 million at March 31, 2020, an increase of 2.2% from $33.3 million at December 31, 2019 and 21.8% from $27.9 million at March 31, 2019. This increase was largely a result of budgeted purchases made late in 2019 and early 2020 that were partially offset by maturities of municipals and certificate of deposits combined with normal amortization of purchase premiums and paydowns. The Bank continues to focus on growing the portfolio through prudent investment in securities that align with the Bank’s investment criteria.

Noninterest bearing deposits have increased by $16.4 million (10.1%) from $162.1 million at December 31, 2019 and $34.0 million (23.6%) from $144.5 million one year ago. Interest bearing deposits have increased from $489.9 million at December 31, 2019 and $462.5 million at March 31, 2019 to $520.9 million at March 31, 2020. The growth in deposits is a result of ongoing efforts by our employees with significant credit given to our Treasury Management team.

Total shareholders’ equity increased $2.0 million from $63.7 million at December 31, 2019 to $65.7 million at March 31, 2020. The $2.0 million increase was mainly related to earnings during 2020 of $2.3 million and a change in other comprehensive income of $204,000, which were partially offset by a $0.26 per share cash dividend totaling $558,000.

Net Interest Income and Net Interest Margin

Net interest income, on a nontax-equivalent basis, was $7.2 million for the quarter ended March 31, 2020, up $200,000, or 3.5%, from $6.9 million during the first quarter of 2019. Interest income increased $400,000, or 5.4%, from $7.8 million for the first quarter of 2019 to $8.2 million during the first quarter of 2020, primarily due to an increase in average loan balances booked at market rates. Interest expense increased $177,000 to $1.1 million for the first quarter of 2020 primarily related to the increase overall deposits slightly offset by declining rates on all accounts. Net interest margin is net interest income expressed as a percentage of average interest- earning assets. For the quarter ended March 31, 2020, the net interest margin on a fully taxable equivalent basis fell to 4.07% from 4.45% for the first quarter of 2019. The first of the three Federal Open Market Committee rate cuts in 2019 of 25 BPs was on July 31, 2019. These cuts impacted the interest rate market over the last five months of 2019. Furthermore, in the first quarter of 2020, due to economic impact from the pandemic caused by Covid-19 there were two additional cuts that lowered the rate another 150 BPs thus totaling 225BPs reduction of the Prime rate in under eight months (3rd largest BP drop in 8 months over the last 30 years). These reductions were the significant factor in the net interest margin declining in 2019 and over the first quarter of 2020.

Noninterest Income/Expense

During the three months ended March 31, 2020, noninterest income totaled $2.1 million, an increase of $424,000 from the three months ended March 31, 2019. Increases in the gain on sale of loans of approximately $447,000 drove the year-over-year increase. This increase was predominately related to the lower interest rate environment in 2020 for mortgages.

Noninterest expense totaled $6.1 million during the three months ended March 31, 2020 an increase of $484,000 from the first quarter of 2019. The largest component of the year-over-year increase in noninterest expense was an increase in salary and benefit expense of $162,000. Of that, approximately $367,000 was expense for base wages including overtime and incentives due to normal annual wage adjustments and increased production. This amount was partially offset by a reduction of expenses from accretion of loan origination fees of $130,000.

About CNB Community Bancorp Inc.

CNB Community Bancorp, Inc. (OTC:CNBB) is a one-bank holding company formed in 2005. Its subsidiary bank, County National Bank, is a nationally chartered full-service bank, which has served its local communities since its founding in 1934. CNB Community Bancorp, Inc. is headquartered in Hillsdale, Michigan and through its subsidiary bank offers  banking  products  along  with  investment  management  and trust services to communities located throughout South Central Michigan.

Investor Contact: Erik A. Lawson, CFO, erik.lawson@cnbb.bank, 517-439-6115

Media Contacts: Craig S. Connor, Chairman of the Board, and John R. Waldron, President & CEO

Safe Harbor Statement: This news release and other releases and reports issued by the Company may contain "forward-looking statements." The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company is including this statement for purposes of taking advantage of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.