CNB Community Bancorp, Inc. Reports Second Quarter 2023 Results
CNB Community Bancorp, Inc. (OTCQX: CNBB), the parent company of County National Bank, today announced earnings for the three and six months ended June 30, 2023. Earnings during the second quarter of 2023 totaled $2.5 million, a decrease of $385,000 or 13.3% compared to the $2.9 million earned during the three months ended June 30, 2022 predominately as a result of an increase in noninterest expense associated with employee and fixed asset costs. Basic earnings per share for CNB Community Bancorp, Inc. (the “Company”) decreased to $1.18 during the three months ended June 30, 2023, down $0.18 from $1.36 for the second quarter of 2022. For the six months ended June 30, 2023, the Company reported net income of $5.4 million, an increase of $302,000, or 5.9%, from the $5.1 million earned during the six months ended June 30, 2022 primarily as a result of the increase in net interest margin. Basic earnings per share increased to $2.52 during the six months ended June 30, 2023, up $0.13 from $2.39 for the first six months of 2022.
The annualized return on average assets (ROA) decreased to 0.87% for the three months ended June 30, 2023, down 15 basis points from 1.02% for the three months ended June 30, 2022. The annualized return on average equity (ROE) decreased to 11.18% for the current quarter, down from 14.37% for the second quarter of 2022. ROA increased to 0.93% during the six months ended June 30, 2023, up 4 basis points from the 0.89% during the first six months of 2022. ROE was 12.17% during the first half of 2023, down from 12.73% during the six-month period ended June 30, 2022. Book value per share increased to $42.70 at June 30, 2023, up $4.18 from $38.52 at June 30, 2022.
Joseph R. Williams, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, remarked, “Recent economic reports have shown that the significant increases in interest rates over the last fifteen months are slowing growth across the country. The impact of these changes, certainly, are potential headwinds for the country and our communities over the rest of 2023. However, CNB’s loan growth and our ability to maintain a strong client deposit base exemplify the strength of our bank even in turbulent times. We continue our focus of working with our clients, both new and existing, while investing in every community we serve.”
Financial Highlights
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Total assets increased $60.6 million, or 5.4%, to $1.17 billion from June 30, 2022 and increased slightly by $7.1 million, or 0.6% from December 31, 2022.
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Net loans increased $61.8 million, or 7.3%, to $906.7 million at June 30, 2023 compared to $844.8 million at June 30, 2022 and increased $26.6 million, or 3.0%, from December 31, 2022.
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Total deposits increased $51.6 million, or 5.1%, to $1.07 billion at June 30, 2023 from $1.01 billion at June 30, 2022 and increased $3.6 million, or 0.3% from December 31, 2022.
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Book value per share increased $4.18, or 10.9%, to $42.70 at June 30, 2023, up from $38.52 at June 30, 2022 and up $1.93 from $40.77 at December 31, 2022.
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Total equity increased $9.5 million to $92.3 million from June 30, 2022.
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Net income decreased $385,000, 13.3%, to $2.5 million in the second quarter of 2023 and basic EPS decreased $0.18, or 13.4%, to $1.18 from $1.36 in the second quarter of 2022.
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Net interest income for the second quarter of 2023 increased $350,000 to $10.0 million from the second quarter of 2022.
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Pre-tax, pre-provision income decreased to $3.4 million in the second quarter of 2023 from $3.9 in the second quarter of 2022 or 12.8%.
Balance Sheet Review
The Company’s assets totaled $1.17 billion at June 30, 2023 and December 31, 2022, compared to $1.11 billion at June 30, 2022. The change in composition of assets was predominately related to the fluctuation in investable assets as funding of the asset side of the balance sheet has varied and cash was repositioned to loans.
Net loans totaled $906.7 million at June 30, 2023, compared to $880.1 million at December 31, 2022 and $844.8 million at June 30, 2022. The loan portfolio at June 30, 2023 included: $482.2 million in commercial real estate loans, $240.8 million in commercial loans, $157.4 in residential real estate loans, and $39.4 million in consumer loans.
Nonperforming assets (which are comprised entirely of nonperforming loans) at June 30, 2023 were $2.9 million compared to $2.7 million at December 31, 2022 and $2.8 million at June 30, 2022. Nonperforming assets as a percentage of total assets were 0.24% at June 30, 2023, 0.23% at December 31, 2022 and 0.25% at June 30, 2022.
Nonperforming loans at June 30, 2023 were $2.9 million, an increase of $371,000, or 14.9%, from the $2.5 million balance at December 31, 2022 and an increase of $85,000, or 3.1%, from the $2.8 million balance at June 30, 2022. Nonperforming loans as a percentage of total loans increased to 0.31% at June 30, 2023, compared to 0.28% at December 31, 2022 and decreased from 0.32% at June 30, 2022. The fluctuation in nonperforming loans and assets were minimal and not particular to any material credit relationships.
During the second quarter of 2023, there was recorded a provision for loan losses of $175,000, which is a decrease of $55,000 from a provision of $230,000 recorded during the fourth quarter of 2022 and a decrease of $45,000 from a provision of $220,000 recorded during the second quarter of 2022. Net recoveries totaled $25,000 during the second quarter of 2023 compared to net recoveries of $5,000 in the fourth quarter of 2022 and net charge-offs of $3,000 in the second quarter of 2022.
Net recoveries (annualized) as a percentage of average loans was 0.01% for second quarter of 2023, which was similar to the 0.00% for the fourth quarter of 2022 and for the second quarter of 2022. The allowance for loan losses totaled $13.5 million at June 30, 2023 compared to $12.9 million at December 31, 2022 and $12.4 million at June 30, 2022. The allowance for loan losses as a percentage of total loans was relatively flat at 1.44% as of December 31, 2022 and 1.45% at June 30, 2022 and 1.47% at June 30, 2023. The consistency in the required allowance for loan losses in 2023 is directly attributable to the increase in the loan portfolio and overall impact of economic conditions with consideration of factors that include the overall interest rate environment and international strife. The increase year-over-year is indicative of the Company transitioning to the Current Expected Credit Loss methodology for the allowance for loan losses in the first quarter of 2023. The allowance will continue to be adjusted based upon the current and forward-looking issues identified for 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 $125.8 million at June 30, 2023, an increase of 2.2% from $123.1 million at December 31, 2022 and 1.6% from $123.8 million at June 30, 2022. 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 $23.6 million (8.6%) from $273.7 million at December 31, 2022 and $24.9 million (9.1%) from $275.0 million one year ago. Interest bearing deposits have increased from $789.6 million at December 31, 2022 and $740.3 million at June 30, 2022 to $816.8 million at June 30, 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 by $4.2 million (4.7%) from $88.1 million at December 31, 2022 and $9.5 million (11.5%) from $82.8 million one year ago. The $4.2 million increase was mainly related to earnings year- to-date during 2023 of $5.4 million, partially offset by two $0.29 per share cash dividends totaling approximately $1.3 million and an immaterial fluctuation in comprehensive income from temporary market value adjustments to the securities portfolio. On a year-over-year basis, the increase of $9.5 million in equity was predominately related to income of $12.5 million and an increase in common stock from vesting of restricted shares of $483,000, partially offset by $3.0 million in dividends paid as well as a $484,000 decrease in OCI from temporary market value adjustments to the securities portfolio.
Net Interest Income and Net Interest Margin
Net interest income was $10.0 million for the quarter ended June 30, 2023, up $350,000, or 3.6%, from $9.6 million during the second quarter of 2022, and for the six months ended June 30, 2023, net interest income increased $1.6 million (8.6%) to $20.1 million from $18.5 million for the six months ended June 30, 2022. Interest income for the second quarter of 2023 increased $3.7 million (36.3%) to $13.9 million from $10.2 million for the second quarter of 2022 and for the six months ended June 30, 2023, interest income increased $7.4 million (37.4%) to $27.2 million from $19.8 million for the six months ended June 30, 2022, due to increases across multiple assets including commercial loans, commercial real estate, residential real estate and cash. 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 500 basis points beginning in late March of 2022. Interest expense for the second quarter of 2023 increased $3.3 million (539.2%) to $3.9 million from $612,000 for the second quarter of 2022 and, for the six months ended June 30, 2023, increased $5.8 million (46.1%) to $7.1 million from $1.3 million for the six months ended June 30, 2022, which was resultant from the FOMC rate increases as some deposits transitioned to interest-bearing accounts and the overall rates paid across deposit accounts increased.
Net interest margin is net interest income expressed as a percentage of average interest-earning assets. For the quarter ended June 30, 2023, the net interest margin on a fully taxable equivalent basis increased to 3.60% from 3.50% and for the six months ended June 30, 2023 increased to 3.64% from 3.27% for the six months ended June 30, 2022. Much of the change in margin has been a product of the market rates on all interest-earning assets having increased since the end of the first quarter of 2022; however, recent FOMC increases have caused more pressure on the funding for these assets than benefit to yields on the assets.
Noninterest Income/Expense
During the three months ended June 30, 2023, noninterest income totaled $1.9 million, an increase of $82,000 (4.5%) from the three months ended June 30, 2022 and was $3.9 million, an increase of $290,000 (8.0%), for the six months ended June 30, 2023 from the six months ended June 30, 2022. From a quarter-over-quarter comparison, the increase of $82,000 was predominately driven by increases of $31,000 in service charges on deposit accounts, $40,000 in Wealth Management fees, and a Gain on sale of OREO of $25,000. On a year- over-year basis beyond the smaller increases in service charges, Wealth Management Fees, 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.
Noninterest expense totaled $8.6 million during the three months ended June 30, 2023 an increase of $945,000 (12.4%) from the second quarter of 2022 and $1.6 million (10.7%) from $15.0 million for the six months ended June 30, 2022 to $16.6 million for the same period in 2023. The largest component of the increase in quarter- over-quarter noninterest expense was an increase salaries and employee benefits of $594,000 related to an increase in the number of employees as well as additional benefits expense from insurance and incentives while occupancy and equipment increased $108,000 from the second quarter of 2022 to the second quarter of 2023 due to updates to technology and new branch locations. For the first half of 2023, salaries and employee benefits increased $988,000 while occupancy and equipment expense increased $142,000 from the first half of 2022. These increases were primarily due to the aforementioned increases in the number of employees, increasing salaries and benefits as well as technology and occupancy related activity.
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, and 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.
