CNB Community Bancorp, Inc. Reports Fourth Quarter 2021 Results

CNB Community Bancorp, Inc. (OTC: CNBB), the parent company of County National Bank, today announced earnings for the three and twelve months ended December 31, 2021. Earnings during the fourth quarter of 2021 totaled $2.2 million, a decrease of $136,000 from the $2.4 million earned during the three months ended December 31, 2020. Basic earnings per share decreased to $1.04 during the three months ended December 31, 2021, down $0.07 from $1.11 during the fourth quarter of 2020. For the year ended December 31, 2021, CNB Community Bancorp, Inc. (the “Company”) reported net income of $11.4 million, an increase of $1.33 million, or 13.2%, from the $10.1 million earned during the year ended December 31, 2020. Basic earnings per share increased to $5.36 during the year ended December 31, 2021, up $0.59 from $4.77 during 2020.

The annualized return on average assets (ROA) decreased to 0.81% for the three months ended December 31, 2021, down from 1.13% for the three months ended December 31, 2020. The annualized return on average equity (ROE) decreased to 10.63% for the current quarter, down from 13.27% for the fourth quarter of 2020.  ROA decreased to 1.15% from the 1.25% for the year ended December 31, 2020. ROE decreased to 13.65% for 2021, down from 14.94% during the year ended December 31, 2020. Book value per share increased to $37.63 at December 31, 2021, up $3.87, or 11.5%, from $33.76 at December 31, 2020.

John R. Waldron, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, stated, “Although we are proud to have had a record year in 2021, we are also quite humbled by all that our employees and customers have overcome during the year.  There were significant hurdles related to the pandemic that impacted everyone’s daily life so the fact that our borrowers continued to use our bank for their credit needs and our depositors trusted our brand for the safety of their funds is a testament to our standing within the counties we serve.  We head into 2022 knowing that there are still significant uncertainties but I am confident that our Company is prepared for it.” 

Financial Highlights
● Total assets increased year-over-year $211.0 million, or 22.5%, to $1.15 billion.
● Net loans increased $30.3 million, or 4.0%, to $791.5 million at December 31, 2021 compared to $761.2 million at December 31, 2020.
● Total deposits increased approximately $204.8 million, or 24.4%, to $1.05 billion at December 31, 2021.
● As a result of the pandemic, modified 150 commercial loans totaling approximately $118 million, or 23.0% of the commercial loan portfolio, with approximately $115 million having reverted back to original terms as of December 31, 2021.
● Total equity increased $8.9 million to $80.8 million.
● Net income increased $1.33 million, 13.2%, to $11.4 million for 2021 and basic EPS increased $0.59, or 12.4%, to $5.36 from $4.77 for 2021.
● Net interest income for the fourth quarter of 2021 increased $575,000 to $9.5 million while for the twelve months ended December 31, 2021 net interest income increase $4.0 million or 12.6%.
● Pre-tax, pre-provision income decreased approximately $1.3 million to $2.9 million in the fourth quarter of 2021, compared to $4.2 million in the fourth quarter of 2020. For 2021, pre-tax, preprovision income was $15.6 million, compared to $15.8 million for 2020, a decrease of 1.0%.

Balance Sheet Review 

The Company’s assets totaled $1.15 billion at December 31, 2021 compared to $937.9 million at December 31, 2020. The increase in assets was predominately related to the increase in cash from customer deposits, partially as a result of the Paycheck Protection Program (the “PPP”), a fully government supported loan program for small businesses, as well as from government-initiated stimulus checks and new customers from our continued community outreach programs.  CNB has seen its growth continue as it has become the “Bank of Choice” in the counties in which it operates.  In fact, CNB funded over $210 million in PPP loans to over 1,800 existing and new customers and has already assisted over 90% of those loans to be forgiven as of December 31, 2021.  Furthermore, CNB worked with 284 residential borrowers on over $27 million in forbearance agreements during 2020 and 2021; of which, all have been paid as agreed and over $25 million have reverted back to original terms.

Net loans increased $30.3 million, or 4.0%, from $761.2 million at December 31, 2020 to $791.5 million at December 31, 2021.

The loan portfolio at December 31, 2021 included: $420.7 million in commercial real estate loans, $190.8 million in commercial loans, $130.1 million in residential real estate loans, $37.8 million in consumer loans and $24.5 million in PPP loans.

Nonperforming assets (which are predominately comprised of nonperforming loans and other real estate owned (“OREO”)) at December 31, 2021 were $2.2 million compared to $2.6 million at December 31, 2020. Nonperforming assets as a percentage of total assets (exclusive of PPP loans) decreased to 0.19% at December 31, 2021 from 0.31% at December 31, 2020.  OREO and other non-performing assets increased to $570,000 at December 31, 2021 from zero at December 31, 2020.

Nonperforming loans at December 31, 2021 were $1.6 million, a decrease of $1.0 million, or 38.5%, from the $2.6 million balance at December 31, 2020. Nonperforming loans as a percentage of total loans (exclusive of PPP loans) decreased to 0.21% at December 31, 2021, as compared to 0.38% at December 31, 2020.

During the quarter ended December 31, 2021, the Bank recorded a provision for loan losses of $105,000, which is a decrease of $1.1 million from a provision of $1.2 million recorded during the quarter ended December 31, 2020. Net charge-offs totaled $9,000 during the three months ended December 31, 2021 compared to net charge-offs of $125,000 during the same period in 2020. For the twelve months ended December 31, 2021, the provision was $1.3 million compared to $3.1 million for the twelve months ended December 31, 2020. Net recoveries totaled $5,000 during the twelve months ended December 31, 2021 compared to net charge-offs of $93,000 during the same period in 2020.

Net charge-offs as a percentage of average loans was zero for the year ended December 31, 2021, which was a decrease from the 0.01% for the same period in 2020. The allowance for loan losses totaled $11.8 million at December 31, 2021 and $10.5 million at December 31, 2020. The allowance for loan losses as a percentage of total loans decreased from 1.55% at December 31, 2020 to 1.51% (exclusive of PPP loans) at December 31, 2021.  The increase in the required allowance for loan losses is directly attributable to the impact on the regional economy from the worldwide pandemic and the significant growth of non-PPP loans within the loan portfolio.  In addition, the continued economic disruption from the COVID-19 virus has the potential to impact the portfolio for the immediate future.  The allowance will continue to be adjusted based upon all these perceived risks inherent in the portfolio.

Total investment securities aggregated to $67.0 million at December 31, 2021, up 123.3% from $30.0 million at December 31, 2020. The increase from year-end 2020 was largely a result of continued focus on effectively deploying the cash on the balance sheet partially offset by maturities of municipals and certificate of deposits combined with continued amortization of purchase premiums and paydowns.  Overall, the Bank continues to plan for growth in the portfolio through prudent investment in securities that align with the Bank’s investment criteria regardless of the rate environment.

Noninterest bearing deposits have increased by $37.6 million from $229.4 million at December 31, 2020.  Interest bearing deposits have increased from $610.8 million at December 31, 2020 to $778.0 million at December 31, 2021.  The growth in deposits is a result of ongoing efforts by our employees as well as customers continuing to maintain high levels of deposit balances due to continued economic uncertainties.

CNB Community Bancorp, Inc.’s outstanding note payable decreased $4.3 million from $21.3 million at December 31, 2020 to $17.0 million at December 31, 2021 as the Company continued to pay down its senior debt at the holding company with borrowings at the Bank remaining flat at $9 million.  

Total shareholders’ equity increased $8.8 million from $72.0 million at December 31, 2020 to $80.8 million at December 31, 2021. The $8.8 million increase was mainly related to earnings during 2021 of $11.4 million and $581,000 of equity compensation which were partially offset by a decrease in accumulated other comprehensive income of $373,000 and a $1.28 per share cash dividend totaling $2.8 million.  Total shares outstanding at December 31, 2021 were 2,180,191.

Net Interest Income and Net Interest Margin

Net interest income, on a nontax-equivalent basis, was $35.8 million for the year ended December 31, 2021, up $4.0 million, or 12.6%, from $31.8 million during 2020. Interest income increased $3.2 million, or 8.9%, from $35.6 million during 2020 to $38.8 million during the current year primarily due to PPP loan income of $5.9 million and the overall growth of the loan portfolio. Interest expense decreased $851,000 for the year ended December 31, 2021 primarily related to the reduction in the deposit rate environment commensurate with the cuts from the Federal Open Market Committee (FOMC) in March of 2020. Net interest margin is net interest income expressed as a percentage of average interest-earning assets. For the year ended December 31, 2021, the net interest margin on a fully taxable equivalent basis fell to 3.21% from 3.81% in 2020. The aforementioned FOMC rate cuts of 1.50% materially impacted the interest rate market, which was a significant factor in the decrease in the net interest margin over the last twenty-one months. Furthermore, PPP loan yields with their stated 1% interest rate also reduced yields on earning assets.

Net interest income, on a nontax-equivalent basis, for the three months ended December 31, 2021 was $9.4 million, an increase of $575,000 from the $8.9 million earned during the same period in 2020.   Interest income increased across multiple areas including commercial loans, commercial real estate, Federal Reserve Bank deposits and securities as the Bank grew its assets and transferred a portion of assets into higher yielding accounts. Interest expense, which decreased from $842,000 during the three months ended December 31, 2020 to $644,000 during the quarter ended December 31, 2021, was significantly impacted by decreases in the deposit market rates primarily within certificate of deposit expense as it dropped by $164,000 from the quarter ended December 31, 2020 to the quarter ended December 31, 2021.  Net interest margin on a fully taxable equivalent basis for the three months ended December 31, 2021 decreased to 3.12% from 3.71% during the fourth quarter of 2020.  The reduction for the quarter follows the same rationale as the annual reduction in Net Interest Margin.

Noninterest Income/Expense

During the three months ended December 31, 2021, noninterest income totaled $2.6 million, a decrease of $140,000 (5.1%) from the three months ended December 31, 2020, and was $10.7 million, a decrease of $107,000 (1.0%), for the year ended December 31, 2021 from $10.8 million for the year ended December 31, 2020.   For both periods, the decrease in noninterest income was predominately related to a decrease in gain on sale of loans from $1.3 million in the fourth quarter of 2020 to $908,000 in 2021 and from $5.5 million for the year ended December 31, 2020 to $4.9 million in 2021.

Noninterest expense increased $4.0 million, or 15.2%, to $30.8 million during the twelve months ended December 31, 2021, up from $26.8 million during 2020. Noninterest expense totaled $9.1 million during the three months ended December 31, 2021, an increase of $1.7 million from the fourth quarter of 2020. The largest component of the year-over-year increase in noninterest expense was an increase in salary and benefit expense of $2.1 million.   Of this amount, approximately $1.5 million was expense for base wages including overtime, deferred compensation and incentives as well as increases in personnel, normal annual wage adjustments and increased production.  Further, the quarter-over-quarter increase was driven by an increase in salaries and benefit expense of $774,000.

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; 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.