CNB Community Bancorp, Inc. (OTCQX: CNBB), Reports First Quarter 2023 Results
CNB Community Bancorp, Inc. (OTCQX: CNBB), the parent company of County National Bank, today announced earnings for the three months ended March 31, 2023. Earnings during the first quarter of 2023 totaled $2.9 million, an increase of $687,000 over the $2.2 million earned during the three months ended March 31, 2022 predominately as a result of an increase in net interest margin. Basic earnings per share for CNB Community Bancorp, Inc. (the “Company”) increased to $1.34 during the three months ended March 31, 2023, up $0.31 from $1.03 during the first quarter of 2022.
The annualized return on average assets (“ROA”) increased to 1.00% for the three months ended March 31, 2023, up from 0.77% for the three months ended March 31,2022. The annualized return on average equity (“ROE”) increased to 13.2% for the current quarter, up from 11.1% for the first quarter of 2022. Book value per shareincreased to $41.99 at March 31, 2023, up $4.15 from $37.84 at March 31, 2022 while tangible book value per share increased to $40.79 at March 31, 2023, up$4.16 from $36.63 at March 31, 2022.
Joseph R. Williams, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, remarked, “As the economy digests the moves by the Federal Open Market Committee in significantly increasing the rate environment, CNB has maintained its commitment to developing our clients through consistent lending practices and deposit options. The rest of 2023 will have its challenges for the country as well as for our Company. However, we believe that our fundamental focus on developing our communities, maintaining a strong deposit base and being consistent in our leverage of capital will support CNB through any potential economic turmoil.”
Financial Highlights
- Total assets remained consistent at $1.19 billion compared to March 31, 2022 and increased $29.0 million, or 2.5% from December 31, 2022.
- Net loans (exclusive of PPP loans) increased $93.1 million, or 11.7%, to $890.3 million at March 31, 2023 compared to $797.2 million at March 31, 2022 and increased $10.3 million, or 1.2%, from December 31, 2022.
- Total deposits increased $26.9 million, or 2.5%, to $1.09 billion at March 31, 2023 from $1.09 billion at December 31, 2022 and increased $5.2 million, or 0.5% from March 31, 2022.
- Book value per share increased $4.15, or 11.0%, to $41.99 at March 31, 2023, up from $37.84 at March 31, 2022 and up $1.22 from $40.77 at December 31, 2022. Tangible book value per share increased $4.16, or 11.4%, to $40.79 at March 31, 2023, up from $36.63 at March 31, 2022 and up $1.21 from $39.58 at December 31, 2022.
- Total equity increased $9.5 million to $90.8 million from March 31, 2022. Accumulated other comprehensive income fluctuated along with the rate environment as the negative balance increased from $1.2 million to $2.6 million then decreased to $2.2 million from March 31, 2022, December 31, 2022 and March 31, 2023, respectively. Shares outstanding were 2,188,837 as of March 31, 2023, down from 2,189,581 at December 31, 2022 and up from 2,180,191 at March 31, 2022.
- Net income increased $687,000, 31.0%, to $2.9 million in the first quarter of 2023 and basic EPS increased $0.31, or 30.2%, to $1.34 from $1.03 in the first quarter of 2023.
- Net interest income for the first quarter of 2023 increased $1.2 million to $10.1 million.
- Pre-tax, pre-provision income increased $798,000 to $4.0 million in the first quarter of 2023, compared to $3.2 million in the first quarter of 2022.
Balance Sheet Review
The Company’s assets totaled $1.19 billion at March 31, 2023 compared to $1.17 billion at December 31, 2022, and $1.19 billion at March 31, 2022. The change in assets was predominately related to the fluctuation in investable assets as funding of the asset side of the balance sheet slowed and cash was repositioned to a combination of investments and loans.
Net loans totaled $890.4 million at March 31, 2023, compared to $880.1 million at December 31, 2022 and $803.7 million at March 31, 2022. The loan portfolio at March 31, 2023 included: $479.4 million in commercial real estate loans, $231.2 million in commercial loans (including PPP loans), $154.2 million in residential real estate loans, and $38.6 million in consumer loans.
Nonperforming assets (which are predominately comprised of nonperforming loans and other real estate owned (“OREO”)) at March 31, 2023 were $2.9 million compared to $2.7 million at December 31, 2022 and $2.8 million at March 31, 2022. Nonperforming assets as a percentage of total assets (exclusive of PPP loans) increased to 0.24% at March 31, 2023 from 0.23% at December 31, 2022 and remained flat to 0.24% at March 31, 2022.
Nonperforming loans at March 31, 2023 were $2.7 million, an increase of $195,000, or 7.8%, from the $2.5 million balance at December 31, 2022 and a decrease of $141,000, or 5.0%, from the $2.8 million balance at March 31, 2022. Nonperforming loans as a percentage of total loans (exclusive of PPP loans) increased to 0.30% at March 31, 2023, as compared to 0.28% at December 31, 2022 and decreased from 0.35% at March 31, 2022. The fluctuation in nonperforming loans and assets were minimal and not particular to any material credit relationships.
During the first quarter of 2023, there was recorded a provision for loan losses of $390,000, which is an increase of $160,000 from a provision of $230,000 recorded during the fourth quarter of 2022 and a decrease of $70,000 from a provision of $460,000 recorded during the first quarter of 2022. Net recoveries totaled $3,000 during the first quarter of 2023 compared to $5,000 in the fourth quarter of 2022 and net charge-offs of $10,000 in the first quarter of 2022.
Net charge-offs as a percentage of average loans was 0.00% for the first quarter of 2023, the fourth quarter of 2022 and the first quarter of 2022. The allowance for loan losses totaled $13.3 million at March 31, 2023 compared to $12.9 million at December 31, 2022 and $12.2 million at March 31, 2022. The allowance for loan losses as a percentage of total loans (exclusive of PPP loans) increased to 1.47% from the 1.44% at December 31, 2022 and decreased from 1.51% at March 31, 2022. The consistency in the required allowance for loan losses in 2023 is directly attributable to the increase in the loan portfolio and the remaining potential impact of deteriorating economic conditions due to several factors including overall interest rate environment 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 Company transitioned to the Current Expected Credit Loss methodology for the allowance for loan losses in the first quarter of 2023 without material impact to the required reserve. The allowance will continue to be adjusted based upon the current and potential issues inherent in the 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 $123.9 million at March 31, 2023, an increase of 0.6% from $123.1 million at December 31, 2022 and 59.9% from $77.4 million at March 31, 2022. This increase was largely a result of budgeted purchases combined with a significant investment in short-term US Treasuries in early 2022 as the Bank repositioned additional assets into higher yielding investments. These purchases were partially offset by maturities of municipals and certificate of deposits combined with amortization of purchase premiums and paydowns of mortgage-backed securities. While continued growth of the loan portfolio remains the primary focus for bank management, the Bank will continue to manage the securities 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 $43.7 million (16.0%) from $273.7 million at December 31, 2022 and $32.3 million (12.3%) from $262.3 million one year ago. Interest bearing deposits have increased from $789.6 million at December 31, 2022 and $822.8 million at March 31, 2022 to $860.2 million at March 31, 2023. The growth and shift in the make-up of deposits is resultant from multiple factors including the ongoing efforts by our employees, the rate environment and the needs of our clients. The expectation remains that competition and the rate environment will further impact the amount and type of deposits within the balance sheet.
Total shareholders’ equity increased $2.7 million from $88.1 million at December 31, 2022 to $90.8 million at March 31, 2023. The $2.7 million increase was mainly related to earnings during the first quarter of 2023 of $2.9 million and a decrease of $366,000 in the unrealized loss on available-for sale securities, which was partially offset by a $0.29 per share cash dividend totaling $635,000.
Net Interest Income and Net Interest Margin
Net interest income, on a nontax-equivalent basis, was $10.1 million for the quarter ended March 31, 2023, up $1.2 million, or 13.7%, from $8.9 million during the first quarter of 2022. Interest income increased $3.8 million, or 39.5%, from $9.6 million for the first quarter of 2022 to $13.4 million during the first quarter of 2023, due to increases across multiple assets including commercial loans, commercial real estate, and investment securities. Alongside the impact of growth on interest income was the significant increase in rates as the Federal Open Market Committee (“FOMC”) increased its rate by 475 basis points beginning in late March of 2022. Interest expense increased $2.6 million to $3.2 million for the first quarter of 2023 which was resultant from the FOMC rate increase as some deposits transitioned to interest-bearing accounts and the overall rates paid across deposit accounts increased. Net interest margin (“NIM”) is net interest income expressed as a percentage of average interest-earning assets. For the quarter ended March 31, 2023, the net interest margin on a fully taxable equivalent basis increased to 3.68% from 3.04% for the first quarter of 2022. The primary driver of the increase in NIM is that market rates on all interest-earning assets have increased since the first quarter of 2022.
Noninterest Income/Expense
During the three months ended March 31, 2023, noninterest income totaled $2.0 million, an increase of $208,000 from the three months ended March 31, 2022. Contributing to this increase, beyond the smaller increases in service charges and ATM fees, was the sale of a branch location that netted a gain on sale of assets of $212,000 that was included in other noninterest income. This increase was somewhat offset by the decrease in the gain on sale of loans of approximately $185,000 over the first quarter of 2023 predominately related to the increasing interest rate environment and decrease in the volume of home mortgage loans for purchase and refinance.
Noninterest expense totaled $8.1 million during the three months ended March 31, 2023, an increase of $628,000 from the first quarter of 2022. The largest component of the year-over-year increase in noninterest expense was an increase in salaries and employee benefits expense over the first quarter of 2023 of $394,000. The increase was driven by an increase in the number of employees as well as additional benefits expense from insurance and incentives.
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 Contacts: Craig S. Connor, Chairman of the Board; Joseph R. Williams, 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.
