CNB Community Bancorp, Inc. Reports Fourth Quarter 2020 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, 2020. Earnings during the fourth quarter of 2020 totaled $2.4 million, an increase of $309,000 from the $2.0 million earned during the three months ended December 31, 2019. Basic earnings per share increased to $1.11 during the three months ended December 31, 2020, up $0.13 from $0.98 during the fourth quarter of 2019. For the year ended December 31, 2020, CNB Community Bancorp, Inc. (the “Company”) reported net income of $10.1 million, an increase of $936,000, or 10.2%, from the $9.2 million earned during the year ended December 31, 2019. Basic earnings per share increased to $4.77 during the year ended December 31, 2020, up $0.40 from $4.37 during 2019.

The annualized return on average assets (ROA) increased to 1.13% for the three months ended December 31, 2020, up from 1.12% for the three months ended December 31, 2019. The annualized return on average equity (ROE) decreased to 13.3% for the current quarter, down from 13.7% for the fourth quarter of 2019. ROA decreased to 1.25% from the 1.31% for the year ended December 31, 2019. ROE decreased to 14.9% for 2020, down from 15.3% during the year ended December 31, 2019. Book value per share increased to $33.76 at December 31, 2020, up $3.65 from $30.11 at December 31, 2019.

John R. Waldron, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, remarked, “We ended 2020 with a perspective much different than that with which we started.  Our customers and employees have persevered through more than many thought possible.  Our Company was able to continue to perform very well because of those employees and customers.  I know that 2021 will have its challenges but we will face it with a better perspective and with an even stronger bank.” 

Financial Highlights

 Balance Sheet Review 

The Company’s assets totaled $937.9 million at December 31, 2020 compared to $737.4 million at December 31, 2019. The increase in assets was significantly related to the Payroll Protection Program (the “PPP”), a fully government supported loan program for small businesses.  This Small Business Association backed government program is resultant from the economic devastation of COVID-19, which includes business shutdowns, significant unemployment and a reduction in spending.  The Bank processed over 1,000 loans that totaled over $140 million in relief loans to the communities served with approximately $97.3 million remaining as of December 31, 2020.

Net loans increased $138.6 million, or 22.3%, from $622.6 million at December 31, 2019 to $761.2 million at December 31, 2020.

The loan portfolio at December 31, 2020 included: $345.3 million in commercial real estate loans, $168.5 million in commercial loans, $124.1 million in residential real estate loans, $97.3 million in PPP loans and $38.4 million in consumer loans.

Nonperforming assets (which are predominately comprised of nonperforming loans and other real estate owned (“OREO”)) at December 31, 2020 were $2.6 million compared to $3.2 million at December 31, 2019. Nonperforming assets as a percentage of total assets (exclusive of PPP loans) decreased to 0.31% at December 31, 2020 from 0.44% at December 31, 2019.  OREO and other non-performing assets decreased to zero at December 31, 2020 from $253,000 at December 31, 2019.

Nonperforming loans at December 31, 2020 were $2.6 million, a decrease of $391,000, or 13.1%, from the $3.0 million balance at December 31, 2019. Nonperforming loans as a percentage of total loans (exclusive of PPP loans) decreased to 0.38% at December 31, 2020, as compared to 0.47% at December 31, 2019.

During the quarter ended December 31, 2020 there was recorded a provision for loan losses of $1.2 million, which is an increase of $896,000 from a provision of $328,000 recorded during the quarter ended December 31, 2019. Net charge-offs totaled $125,000 during the three months ended December 31, 2020 compared to net charge-offs of $37,000 during the same period in 2019. For the twelve months ended December 31, 2020, the provision was $3.1 million compared to $629,000 for the twelve months ended December 31, 2019. Net charge-offs totaled $93,000 during the twelve months ended December 31, 2020 compared to net charge-offs of $208,000 during the same period in 2019.

Net charge-offs as a percentage of average loans was 0.01% for the year ended December 31, 2020, which was a decrease from the 0.04% for the same period in 2019. The allowance for loan losses totaled $10.5 million at December 31, 2020 and $7.5 million at December 31, 2019. The allowance for loan losses as a percentage of total loans increased from 1.18% at December 31, 2019 to 1.55% (exclusive of PPP loans) at December 31, 2020.  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 these current and potential ramifications inherent in the portfolio.

Total investment securities aggregated to $30.0 million at December 31, 2020, down 9.9% from $33.3 million at December 31, 2019. The decrease from year-end 2019 was largely a result of maturities of municipals and certificate of deposits.  Furthermore, due to the significant decrease in the rate environment because of economic uncertainties that began in early 2020 there was a material increase in 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 $67.3 million from $162.1 million at December 31, 2019.  Interest bearing deposits have increased from $489.9 million at December 31, 2019 to $610.8 million at December 31, 2020.  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 continued economic uncertainties.

CNB Community Bancorp, Inc.’s outstanding note payable increased $2.3 million from $7.0 million at December 31, 2019 to $9.3 million at December 31, 2020 as the Company refinanced its debt at a lower rate as well as added $3.5 million in borrowings while down streaming additional capital to the bank level.  Furthermore, there was a maturity of a $3.0 million borrowing at the bank level in 2020.

Total shareholders’ equity increased $8.3 million from $63.7 million at December 31, 2019 to $72.0 million at December 31, 2020. The $8.3 million increase was mainly related to earnings during 2020 of $10.1 million, $479,000 of equity compensation and an increase in accumulated other comprehensive income of $377,000, which were partially offset by a $1.25 per share cash dividend totaling $2.7 million.

Net Interest Income and Net Interest Margin

Net interest income, on a nontax-equivalent basis, was $31.8 million for the year ended December 31, 2020, up $3.6 million, or 12.8%, from $28.2 million during 2019. Interest income increased $3.4 million, or 10.6%, from $32.2 million during 2019 to $35.6 million during the current year primarily due to PPP loan income of $3.2 million. Interest expense decreased $217,000 for the year ended December 31, 2020 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, 2020, the net interest margin on a fully taxable equivalent basis fell to 3.81% from 4.30% in 2019. The aforementioned FOMC rate cuts of 150 BPs materially impacted the interest rate market over the last three quarters of 2020, which was a significant factor in the decrease in the net interest margin for 2020. Furthermore, PPP loan yields with their stated 1% interest rate are also reducing yields on earning assets.

Net interest income, on a nontax-equivalent basis, for the three months ended December 31, 2020 was $8.9 million, an increase of $1.7 million from the $7.2 million earned during the same period in 2019. Similar to the twelve-month comparison, the largest component of the increase in net interest income was PPP loan income. Interest expense, which decreased from $1.1 million during the three months ended December 31, 2019 to $842,000 during the quarter ended December 31, 2020, was significantly impacted by decreases in the market for deposit rates.  Net interest margin on a fully taxable equivalent basis for the three months ended December 31, 2020 decreased to 3.64% from 4.17% during the fourth quarter of 2019.  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, 2020, noninterest income totaled $2.7 million, an increase of $656,000 (31.8%) from the three months ended December 31, 2019, and was $10.8 million, an increase of $3.3 million (44.0%), for the year ended December 31, 2020 from $7.5 million for the year ended December 31, 2019.   For both periods, the increase in noninterest income was predominately related to an increase in gain on sale of loans from $665,000 in the fourth quarter of 2019 to $1.3 million in 2020 and from $2.0 million for the year ended December 31, 2019 to $5.5 million in 2020.

Noninterest expense increased $3.3 million, or 14.0%, to $26.8 million during the twelve months ended December 31, 2020, up from $23.5 million during 2019. Noninterest expense totaled $7.4 million during the three months ended December 31, 2020 an increase of $1.1 million from the fourth quarter of 2019. The largest component of the year-over-year increase in noninterest expense was an increase in salary and benefit expense of $1.9 million.   Of this amount, approximately $1.4 million was expense for base wages including overtime and incentives that was due to increases in personnel, normal annual wage adjustments and increased production.  Further, the quarter-over-quarter increase was driven by salaries and benefit expense of $638,000.

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 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.