CNB Community Bancorp, Inc. Reports First Quarter 2022 Results

CNB Community Bancorp, Inc. (OTC: CNBB), the parent company of County National Bank, today announced earnings for the three months ended March 31, 2022. Earnings during the first quarter of 2022 totaled $2.2 million, a decrease of $800,000 over the $3.0 million earned during the three months ended March 31, 2021 predominately as a result of a reduction in noninterest income. Basic earnings per share for CNB Community Bancorp, Inc. (the “Company”) decreased to $1.03 during the three months ended March 31, 2022, down $0.38 from $1.41 during the first quarter of 2021.

As the asset size increased 14.2% year-over-year, the annualized return on average assets (ROA) decreased to 0.77% for the three months ended March 31, 2022, down from 1.40% for the three months ended March 31, 2021. The annualized return on average equity (ROE) decreased to 11.1% for the current quarter, down from 16.8% for the first quarter of 2021. Book value per share increased to $37.84 at March 31, 2022, up $3.10 from $34.74 at March 31, 2021.

John R. Waldron, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, remarked, “I have spent a lot of time over the last six months looking at industry-wide projections and have noted that the entire financial services industry is expecting a reduced profit scenario for 2022. We have seen that reduction thus far in 2022 in comparison to 2021 here at County National Bank. However, I am very excited for what 2022 has brought, and will continue to bring, to our bank, its employees and our customers. The Bank and its employees have been working diligently to bring in a large number of new customers in the last two years, and that growth is supporting a very strong Balance Sheet with increasingly strong Net Interest Income numbers. Combine these factors with our strong, hard-working customer base, and you can see why I am confident in CNB’s position for 2022 and beyond.”

Financial Highlights

• Total assets increased $147.8 million, or 14.2%, to $1.19 billion from March 31, 2021 and $39.9 million, or 3.5% from December 31, 2021.
• Net loans, exclusive of Paycheck Protection Program loans, increased $136.3 million, or 20.6%, to $797.2 million at March 31, 2022 compared to $660.9 million at March 31, 2021 and increased $30.2 million, or 3.9%, from December 31, 2021.
• Total deposits increased $143.8 million, or 15.3%, to $1.09 billion at March 31, 2022 from $941.3 million at March 31, 2021 and increased $40.1 million, or 3.8% from December 31, 2021.
• Book value per share increased $3.10, or 8.9%, to $37.84 at March 31, 2022, up from $34.74 at March 31, 2021 and up $0.21 from $37.63 at December 31, 2021.
• Total equity increased $7.2 million to $81.3 million from March 31, 2021. Shares outstanding were 2,180,181 as of March 31, 2022 and December 31, 2021.
• Net income decreased $800,000, 26.6%, to $2.2 million in the first quarter of 2022 and basic EPS decreased $0.38, or 26.9%, to $1.03 from $1.41 in the first quarter of 2022.
• Net interest income for the first quarter of 2022 increased $367,000 to $8.9 million.
• Pre-tax, pre-provision income decreased $1.5 million to $3.2 million in the first quarter of 2022, compared to $4.7 million in the first quarter of 2021.

Balance Sheet Review

The Company’s assets totaled $1.19 billion at March 31, 2022 compared to $1.15 billion at December 31, 2021, and $1.04 billion at March 31, 2021. The increase in assets was predominately related to the increase in cash from customer deposits, resultant from funds still held from 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 since the program began in the second quarter of 2020 and has already assisted approximately 98% of those loans to be forgiven as of March 31, 2022. Furthermore, CNB worked with 293 residential borrowers on over $27.3 million in forbearance agreements during 2020 and 2021; of which, all have been paid as agreed and over $26.7 million have reverted back to their original terms.

Net loans totaled $803.7 million at March 31, 2022, compared to $791.5 million at December 31, 2021 and $790.2 million at March 31, 2021.

The loan portfolio at March 31, 2022 included: $437.3 million in commercial real estate loans, $200.2 million in commercial loans, $133.3 million in residential real estate loans, $38.4 million in consumer loans and $6.5 million in Paycheck Protection Program loans.

Nonperforming assets (which are predominately comprised of nonperforming loans and other real estate owned (“OREO”)) at March 31, 2022 were $2.8 million compared to $2.2 million at December 31, 2021 and $2.5 million at March 31, 2021. Nonperforming assets as a percentage of total assets (exclusive of PPP loans) increased to 0.24% at March 31, 2022 from 0.19% at December 31, 2021 and decreased from 0.27% at March 31, 2021.

Nonperforming loans at March 31, 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 $300,000, or 12.0%, from the $2.5 million balance at March 31, 2021. Nonperforming loans as a percentage of total loans (exclusive of PPP loans) increased to 0.35% at March 31, 2022, as compared to 0.21% at December 31, 2021 and decreased from 0.36% at March 31, 2021. The increase in nonperforming loan balances in 2022 was related to a single commercial real estate loan that is well secured and in the process of collection in the amount of $1.3 million. Per current collateral evaluation, CNB does not project a loss related to the ultimate workout of this credit.

During the first quarter of 2022, there was recorded a provision for loan losses of $460,000, which is an increase of $355,000 from a provision of $105,000 recorded during the fourth quarter of 2021 and a decrease of $480,000 from a provision of $940,000 recorded during the first quarter of 2021. Net charge-offs totaled $10,000 during the first quarter of 2022 compared to net charge-offs of $9,000 in the fourth quarter of 2021 and net charge- offs of $13,000 in the first quarter of 2021.

Net charge-offs as a percentage of average loans was 0.00% for the first quarter of 2022, the fourth quarter of 2021 and the first quarter of 2021. The allowance for loan losses totaled $12.2 million at March 31, 2022 compared to $11.8 million at December 31, 2021 and $11.4 million at March 31, 2021. The allowance for loan losses as a percentage of total loans (exclusive of PPP loans) remained consistent with the 1.51% at December 31, 2021 and decreased from 1.69% at March 31, 2021. The consistency in the required allowance for loan losses in 2022 is directly attributable to the increase in the loan portfolio exclusive of PPP loans and the remaining potential impact of deteriorating economic conditions due to several factors including supply chain issues and international strife. The decrease year-over-year is indicative of the decline in COVID-19 related economic disruptions as significant disruptions have dissipated over the last twelve months. The allowance will continue to be adjusted based upon the current and potential issues inherent in the portfolio.

Total investment securities that exclude stock without a readily determinable fair value aggregated to $77.4 million at March 31, 2022, an increase of 15.6% from $67.0 million at December 31, 2021 and 106.0% from $37.6 million at March 31, 2021. Due to government spending associated with the global pandemic and CNB building its customer base, the Company has seen increases in deposits from customers that significantly increased cash at the Bank. As such, management budgeted for increases in purchases of investments. While continued growth of the loan portfolio remains the primary focus for bank management, the Bank will continue to grow the portfolio through prudent investment in securities that align with the Bank’s investment criteria when excess cash is available.

Noninterest bearing deposits have decreased by $4.6 million (1.7%) from $267.0 million at December 31, 2021 and $18.1 million (6.5%) from $280.5 million one year ago. Interest bearing deposits have increased from $778.0 million at December 31, 2021 and $660.8 million at March 31, 2021 to $822.8 million at March 31, 2022. The growth in deposits is still a result of ongoing efforts by our employees; however, customers continue to maintain high levels of deposit balances primarily due to economic uncertainties from the pandemic.

Total shareholders’ equity increased $448,000 from $80.8 million at December 31, 2021 to $81.3 million at March 31, 2022. The $448,000 increase was mainly related to earnings during the first quarter of 2022 of $2.2 million. This was partially offset by a $0.27 per share cash dividend totaling $589,000 and a reduction in other comprehensive income of $1.2 million due to the decrease in market value impacting investment securities, which is likely temporary and fluctuates with market trends.

Net Interest Income and Net Interest Margin

Net interest income, on a nontax-equivalent basis, was $8.9 million for the quarter ended March 31, 2022, up $367,000, or 4.3%, from $8.5 million during the first quarter of 2021. Interest income increased $225,000, or 2.4%, from $9.3 million for the first quarter of 2021 to $9.6 million during the first quarter of 2022, primarily due to an increase in income from cash and securities of $240,000; as the reduction in PPP loan income of $900,000 was significantly offset by increases in commercial and commercial real estate interest income. Interest expense decreased $142,000 to $673,000 for the first quarter of 2022 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, 2022, the net interest margin on a fully taxable equivalent basis fell to 3.04% from 3.42% for the first quarter of 2021. The primary driver of the decrease in NIM is that market rates on all interest-earning assets have dropped significantly since the net lowering of the FOMC rate by 125 BPs since March of 2020 alongside increased competition for higher yielding assets.

Noninterest Income/Expense

During the three months ended March 31, 2022, noninterest income totaled $1.8 million, a decrease of $1.4 million from the three months ended March 31, 2021. Decreases in the gain on sale of loans of approximately $1.7 million over the first quarter of 2022 drove the year-over-year decrease. This decrease was predominately related to the increasing interest rate environment and decrease in the volume of home mortgage loans for purchase and refinance.

Noninterest expense totaled $7.5 million during the three months ended March 31, 2022, an increase of $451,000 from the first quarter of 2021. The largest component of the year-over-year increase in noninterest expense was an increase in occupancy and equipment expense over the first quarter of 2022 of $210,000. During 2021, CNB opened a new branch in Tecumseh, MI, renovated new leased office space in Jackson, MI and upgraded several of CNB’s existing software systems.

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.