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CNB COMMUNITY BANCORP, INC. REPORTS SECOND QUARTER 2022 RESULTS

/ Categories: Bank News

CNB Community Bancorp, Inc. (OTCQX: CNBB), the parent company of County National Bank, has announced earnings for the three and six months ended June 30, 2022. Earnings during the second quarter of 2022 totaled $2.9 million, a decrease of $369,000 or 11.2% compared to the $3.3 million earned during the three months ended June 30, 2021. Basic earnings per share for CNB Community Bancorp, Inc. (the “Company”) decreased to $1.36 during the three months ended June 30, 2022, down $0.19 from $1.55 for the second quarter of 2021. For the six months ended June 30, 2022, the Company reported net income of $5.1 million, a decrease of $1.2 million, or 19.0%, from the $6.3 million earned during the six months ended June 30, 2021. Basic earnings per share decreased to $2.39 during the six months ended June 30, 2022, down $0.57 from $2.96 for the first six months of 2021.

The annualized return on average assets (ROA) decreased to 1.02% for the three months ended June 30, 2022, down 37 basis points from 1.4% for the three months ended June 30, 2021. The annualized return on average equity (ROE) decreased to 14.4% for the current quarter, down from 17.6% for the second quarter of 2021. ROA decreased to 0.89% during the six months ended June 30, 2022, down 48 basis points from the 1.37% during the first six months of 2021. ROE was 12.7% during the first half of 2022, down from 17.2% during the six-month period ended June 30, 2021.  Book value per share increased to $38.52 at June 30, 2022, up $2.44 from $36.08 at June 30, 2021.

Craig S. Connor, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, remarked, “It is very rewarding to see the strong financial results for our community bank.  The efforts of our employees helped us to post increased earnings and robust growth compared to the first quarter of 2022.  Even though the current economic environment does contain challenges, our loan growth and increasing net interest margin bodes well for CNB.  Opening a new full-service branch in Jackson on Spring Arbor Rd. is another example of the commitment CNB has to community banking in our market footprint.  We continue our focus of working with our customers, both new and existing, in aiding their growth and prosperity during the rest of 2022 and beyond.”  

Financial Highlights

  • Total assets increased $64.9 million, or 6.2%, to $1.11 billion from June 30, 2021 and decreased $37.1 million, or 3.2% from December 31, 2021.
  • Net loans increased $80.6 million, or 10.5%, to $844.8 million at June 30, 2022 compared to $764.2 million at June 30, 2021 and increased $53.3 million, or 6.7%, from December 31, 2021.
  • Total deposits increased $70.2 million, or 7.4%, to $1.01 billion at June 30, 2022 from $945.1 million at June 30, 2021 and decreased $29.7 million, or 2.8% from December 31, 2021.
  • Book value per share increased $2.44, or 6.8%, to $38.52 at June 30, 2022, up from $36.08 at June 30, 2021 and up $0.89 from $37.63 at December 31, 2021.
  • Total equity increased $5.9 million to $82.8 million from June 30, 2021.
  • Net income decreased $369,000, 11.2%, to $2.9 million in the second quarter of 2022 and basic EPS decreased $0.19, or 12.3%, to $1.36 from $1.55 in the second quarter of 2021.
  • Net interest income for the second quarter of 2022 increased $768,000 to $9.6 million.
  • Pre-tax, pre-provision income decreased to $3.9 million in the second quarter of 2022 from $4.2
  • in the second quarter of 2021 or 7.1%.

 

Balance Sheet Review 

The Company’s assets totaled $1.11 billion at June 30, 2022 compared to $1.15 billion at December 31, 2021, and $1.05 billion at June 30, 2021.  The fluctuation in assets was predominately related to the decrease in cash from customer deposits, as well as a significant increase in loans exclusive of the payoffs related to the Paycheck Protection Program( the “PPP) loans.

Net loans totaled $844.8 million at June 30, 2022, compared to $791.5 million at December 31, 2021 and $764.2  million at June 30, 2021. The impact of PPP loans on the overall balances in loans has significantly declined as outstanding PPP balances have decreased to $425,000 at June 30, 2022 from $24.5 million at December 31, 2021 and $84.7 million at June 30, 2021.  Net loan balances exclusive of PPP loans have increased to $844.4 million at June 30, 2022 from $767.0 million at December 31, 2021 and $679.5 million at June 30, 2021.

The gross loan portfolio at June 30, 2022 included: $460.5 million in commercial real estate loans, $219.3 million in commercial loans, $136.8 in residential real estate loans, $39.8 million in consumer loans, and $425,000 in PPP loans. 

Nonperforming assets (which are comprised entirely of nonperforming loans) at June 30, 2022 were $2.8 million compared to $2.2 million at December 31, 2021 and $2.3 million at June 30, 2021. Nonperforming assets as a percentage of total assets increased to 0.25% at June 30, 2022 from 0.19% at December 31, 2021 and from 0.22% at June 30, 2021. 

Nonperforming loans at June 30, 2022 were $2.8 million, an increase of $1.2 million, or 75.0%, from the $1.6 million balance at December 31, 2021 and an increase of $441,000, or 19.2%, from the $2.3 million balance at June 30, 2021. Nonperforming loans as a percentage of total loans (excluding PPP loans) increased to 0.32% at June 30, 2022, compared to 0.21% at December 31, 2021 and decreased from 0.34% at June 30, 2021.

During the second quarter of 2022, there was recorded a provision for loan losses of $220,000, which is an increase of $115,000 from a provision of $105,000 recorded during the fourth quarter of 2021 and the second quarter of 2021. Net charge-offs totaled $3,000 during the second quarter of 2022 compared to net charge-offs of $9,000 in the fourth quarter of 2021 and net recoveries of $19,000 in the second quarter of 2021. 

Net recoveries as a percentage of average loans was 0.00% for second quarter of 2022, which was consistent with the 0.00% for the fourth quarter of 2021 and for the second quarter of 2021. The allowance for loan losses totaled $12.4 million at June 30, 2022 compared to $11.8 million at December 31, 2021 and $11.6 million at June 30, 2021. The allowance for loan losses as a percentage of total loans (exclusive of PPP loans) decreased from 1.51% at December 31, 2021 and from 1.67% at June 30, 2021 to 1.45% at June 30, 2022.  The decrease in the required allowance for loan losses as a percentage of loans is directly attributable to significant increase in the loan portfolio exclusive of PPP loans.  Furthermore, there has been a lessening of the impact to the regional economy due to the worldwide pandemic.  Continued economic disruption from the COVID-19 virus is significantly less likely to directly impact the portfolio in the future.  The allowance will continue to be adjusted based upon these current and potential risks inherent in the loan portfolio.

Total investment securities, exclusive of the Federal Home Loan Bank of Indianapolis, Federal Reserve Bank and other stock without readily determined fair value, aggregated to $123.8 million at June 30, 2022, an increase of 84.8% from $67.0 million at December 31, 2021 and 229.3% from $37.6 million at June 30, 2021. This increase was largely a result of budgeted purchases made late in 2021 and early 2022 combined with a significant investment in short-term US Treasuries in early 2022 as the Bank repositioned additional assets into higher yielding investments.  The purchases were partially offset by maturities of municipals and certificate of deposits combined with an increase in 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, regardless of the rate environment.

Noninterest bearing deposits have increased by $8.0 million (3.0%) from $267.0 million at December 31, 2021 and $651,000 (0.2%) from $274.4 million one year ago.  Interest bearing deposits have increased from $778.0 million at December 31, 2021 and $670.7 million at June 30, 2021 to $740.3 million at June 30, 2022.  The growth in deposits is still a result of ongoing efforts by our employees in retaining existing customers as well as expanding relationships within the communities that the Bank serves; however, deposit balances face increasing pressure from higher yielding non-depository investment vehicles as the rate environment changes. 

Total shareholders’ equity increased by $1.9 million (2.4%) from $80.8 million at December 31, 2021 and $5.9 million (7.7%) from $76.9 million one year ago. The $1.9 million increase was mainly related to earnings year-to-date during 2022 of $5.2 million, partially offset by two $0.27 per share cash dividends totaling $1.2 million and a $2.0 million reduction in other comprehensive income from temporary market value adjustments to the securities portfolio. On a year-over-year basis, the increase of $5.9 million in equity was predominately related to income of $10.3 million and an increase in common stock from vesting of restricted shares of $576,000, partially offset by $2.8 million in dividends paid as well as a $2.2 million reduction in OCI from temporary market value adjustments to the securities portfolio.

Net Interest Income and Net Interest Margin

Net interest income was $9.6 million for the quarter ended June 30, 2022, up $768,000, or 8.6%, from $8.9 million during the second quarter of 2021, and for the six months ended June 30, 2022, net interest income increased $1.1 million (6.3%) to $18.5 million from $17.4 million for the six months ended June 30, 2021.  Interest income for the second quarter of 2022 increased $578,000 (6.0%) to $10.2 million from $9.7 million for the second quarter of 2021 and for the six months ended June 30, 2022, interest income increased $803,000 (4.2%) to $19.8 million from $19.0 million for the six months ended June 30, 2021.

Interest expense for the second quarter of 2022 decreased $190,000 (23.7%) to $612,000 from $802,000 for the second quarter of 2021 and, for the six months ended June 30, 2022, decreased $332,000 (20.7%) to $1.3 million from $1.6 million for the six months ended June 30, 2021.

Net interest margin is net interest income expressed as a percentage of average interest-earning assets (exclusive of PPP income and average loans). For the quarter ended June 30, 2022, the net interest margin on a fully taxable equivalent basis increased to 3.50% from 3.25% and for the six months ended June 30, 2022 decreased to 3.27% from 3.33% for the six months ended June 30, 2021.  Much of the change in margin has been a product of the 150-basis point drop in rates at the end of the first quarter of 2021 that has begun to reverse with the 150-basis point increase thus far in 2022.  

Noninterest Income/Expense

During the three months ended June 30, 2022, noninterest income totaled $1.8 million, a decrease of $576,000 (24.0%) from the three months ended June 30, 2021 and was $3.6 million, a decrease of $2.0 million (35.7%), for the six months ended June 30, 2022 from the six months ended June 30, 2021.  From a quarter-over-quarter comparison, the decrease of $576,000 was predominately caused by the reduction in gain on sale of loans of $730,000 that was partially offset by increases of $41,000 in service charges on deposit accounts and $42,000 in Wealth Management fees.  On a year-over-year basis, the decrease in noninterest income was predominately related to a decrease in gain on sale of loans of $2.4 million partially offset by an increase in service charges on deposit accounts of $80,000, Wealth Management fees of $76,000 and ATM service charges of $20,000.

Noninterest expense totaled $7.6 million during the three months ended June 30, 2022 an increase of $578,000 (8.2%) from the second quarter of 2021 and $1.0 million (7.1%) from $14.0 million for the six months ended June 30, 2021 to $15.0 million for the same period in 2022. The largest component of the increase  in quarter-over-quarter noninterest expense was an increase occupancy and equipment of $199,000 related to updates to technology and new branch locations while salaries and employee benefits increased $143,000 from the second quarter of 2021 to the second quarter of 2022.  For the first half of 2022, occupancy and equipment expense increased $409,000 and salaries and employee benefits increased $182,000 from the first half of 2021.  These increases were primarily due to the aforementioned technology and occupancy explanation and increases in the number of employees, increasing salaries and related benefits.      

About CNB Community Bancorp Inc.
CNB Community Bancorp, Inc. (OTCQX: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 Contact: Craig S. Connor, Chairman of the Board, 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.

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