CNB Community Bancorp, Inc. Reports First Quarter 2021 Results

CNB Community Bancorp, Inc. (OTC: CNBB), the parent company of County National Bank, today announced earnings for the three months ended March 31, 2021. Earnings during the first quarter of 2021 totaled $3.0 million, an increase of $700,000 over the $2.3 million earned during the three months ended March 31, 2020. Basic earnings per share for CNB Community Bancorp, Inc. (the “Company”) increased to $1.41 during the three months ended March 31, 2021, up $0.30 from $1.11 during the first quarter of 2020.

The annualized return on average assets (ROA) increased to 1.40% for the three months ended March 31, 2021, up from 1.29% for the three months ended March 31, 2020. The annualized return on average equity (ROE) increased to 16.8% for the current quarter, up from 14.6% for the first quarter of 2020. Book value per share increased to $34.74 at March 31, 2021, up $3.69 from $31.05 at March 31, 2020.

John R. Waldron, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, remarked, “Through the first quarter of 2021, our employees continued their tremendous efforts in serving our customers while our customers persevered, with the outcome being a significant quarter in our Bank’s history.  Growth and profit aside, the communities served by CNB have proven that the first step in overcoming this historical adversity is continuing to meet each day’s challenges as they come.”

Financial Highlights

• Total assets increased $249.9 million, or 31.6%, to $1,041.0 million from March 31, 2020 and $103.1 million, or 11.0% from December 31, 2020.
• Net loans increased $159.2 million, or 25.2%, to $790.2 million at March 31, 2021 compared to $631.0 million at March 31, 2020 and increased $29.0 million, or 3.8%, from December 31, 2020.
• Total deposits increased $241.9 million, or 34.6%, to $941.3 million at March 31, 2021 from $699.4 million at March 31, 2020 and increased $101.1 million, or 12.0% from December 31, 2020.
• Book value per share increased $3.69, or 11.9%, to $34.74 at March 31, 2021, up from $31.05 at March 31, 2020 and up $0.98 from $33.76 at December 31, 2020.
• Total equity increased $8.4 million to $74.1 million from March 31, 2020.
• Net income increased $700,000, 28.7%, to $3.0 million in the first quarter of 2021 and basic EPS increased $0.30, or 27.0%, to $1.41 from $1.11 in the first quarter of 2021.
• Net interest income for the first quarter of 2021 increased $1.3 million to $8.5 million.
• Pre-tax, pre-provision income increased $1.6 million to $4.7 million in the first quarter of 2021, compared to $3.1 million in the first quarter of 2020.

Balance Sheet Review 

The Company’s assets totaled $1,041.0 million at March 31, 2021 compared to $937.9 million at December 31, 2020, and $791.1 million at March 31, 2020.

Net loans totaled $790.2 million at March 31, 2021, compared to $761.2 million at December 31, 2020 and $631.0 million at March 31, 2020.

The loan portfolio at March 31, 2021 included: $352.1 million in commercial real estate loans, $161.1 million in commercial loans, $129.3 million in Paycheck Protection Program loans, $124.9 million in residential real estate loans and $38.0 million in consumer loans. 

Nonperforming assets (which are predominately comprised of nonperforming loans and other real estate owned (“OREO”)) at March 31, 2021 were $2.5 million compared to $2.6 million at December 31, 2020 and $3.7 million at March 31, 2020. Nonperforming assets as a percentage of total assets decreased to 0.24% at March 31, 2021 from 0.28% at December 31, 2020 and 0.46% at March 31, 2020. 

Nonperforming loans at March 31, 2021 were $2.5 million, a decrease of $100,000, or 3.8%, from the $2.6 million balance at December 31, 2020 and a decrease of $1.1 million, or 30.6%, from the $3.6 million balance at March 31, 2020. Nonperforming loans as a percentage of total loans decreased to 0.36% at March 31, 2021, as compared to 0.38% at December 31, 2020 and 0.56% at March 31, 2020.

During the first quarter of 2021, there was recorded a provision for loan losses of $940,000, which is a decrease of $284,000 from a provision of $1.2 million recorded during the fourth quarter of 2020 and an increase of $745,000 from a provision of $195,000 recorded during the first quarter of 2020. Net charge-offs totaled $13,000 during the first quarter of 2021 compared to net charge-offs of $125,000 in the fourth quarter of 2020 and net recoveries of $43,000 in the first quarter of 2020.

Net charge-offs as a percentage of average loans was 0.00% for first quarter of 2021, which was a decrease from the 0.01% from the fourth quarter of 2020 and an increase from the (0.01)% from the first quarter of 2020. The allowance for loan losses totaled $11.4 million at March 31, 2021 compared to $10.5 million at December 31, 2020 and $7.7 million at March 31, 2020. The allowance for loan losses as a percentage of total loans increased from 1.55% at December 31, 2020 and from 1.20% at March 31, 2020 to 1.69% at March 31, 2021.  The increase in the required allowance for loan losses is directly attributable to the potential impact of deteriorating economic conditions in the region due to COVID-19.  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 the current and potential ramifications inherent in the portfolio. 

Total investment securities that exclude stock without a readily determinable fair value aggregated to $37.6 million at March 31, 2021, an increase of 25.3% from $30.0 million at December 31, 2020 and 10.6% from $34.0 million at March 31, 2020.  Due to the significant decrease in the rate environment because of economic uncertainties surrounding the COVID-19 pandemic, there was a material increase in amortization of purchase premiums and paydowns.  However, these changes combined with increases in deposits from customers significantly increased cash at the Bank.  As such, management budgeted for increases in purchases of investments over the next twelve months.  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 $51.1 million (22.3%) from $229.4 million at December 31, 2020 and $101.9 million (57.1%) from $178.6 million one year ago.  Interest bearing deposits have increased from $610.8 million at December 31, 2020 and $520.9 million at March 31, 2020 to $660.8 million at March 31, 2021.  The growth in deposits is still a result of ongoing efforts by our employees; however, customers continue to maintain high levels of deposit balances due to economic uncertainties from the pandemic.

Total shareholders’ equity increased $2.1 million from $72.0 million at December 31, 2020 to $74.1 million at March 31, 2021. The $2.1 million increase was mainly related to earnings during the first quarter of 2021 of $3.0 million, which was partially offset by a $0.27 per share cash dividend totaling $584,000 and a reduction in other comprehensive income of $349,000.

Net Interest Income and Net Interest Margin

Net interest income, on a nontax-equivalent basis, was $8.5 million for the quarter ended March 31, 2021, up $1.3 million, or 18.1%, from $7.2 million during the first quarter of 2020. Interest income increased $1.1 million, or 13.4%, from $8.2 million for the first quarter of 2020 to $9.3 million during the first quarter of 2021, primarily due to PPP loan income of $1.6 million partially offset by the lower rate environment.  Interest expense decreased $235,000 to $815,000 for the first quarter of 2021 primarily related to declining rates on all deposit accounts that was slightly offset by the increase in overall deposits. Net interest margin is net interest income expressed as a percentage of average interest-earning assets. For the quarter ended March 31, 2021, the net interest margin on a fully taxable equivalent basis fell to 3.42% from 4.07% for the first quarter of 2020.  The primary driver of the decrease in NIM is that market rates on all interest-earning assets have dropped significantly since the FOMC lowering its rate by 150 BPs in March of 2020 alongside increased competition for higher yielding assets. 

Noninterest Income/Expense

During the three months ended March 31, 2021, noninterest income totaled $3.2 million, an increase of $1.1 million from the three months ended March 31, 2020.  Increases in the gain on sale of loans of approximately $1.2 million over the first quarter of 2020 drove the year-over-year increase. This increase was predominately related to the lower interest rate environment for both home mortgage loans for purchases and refinances.

Noninterest expense totaled $7.0 million during the three months ended March 31, 2021, an increase of $903,000 from the first quarter of 2020. The largest component of the year-over-year increase in noninterest expense was an increase in salary and benefit expense over the first quarter of 2020 of $588,000.   Of that, approximately $280,000 was expense for employee benefits and taxes that related to increases in cost of employee insurance as well as tax expense from incentive paid out in early 2021.  Furthermore, commissions and bonuses increased by $229,000 in comparison to the first quarter of 2020 as the volume of mortgage production continued to be high alongside increases in accruals for other annual incentives.

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 Contact: 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.