CNB Community Bancorp, Inc. Reports Third Quarter 2020 Results

CNB Community Bancorp, Inc. (OTC: CNBB), the parent company of County National Bank, today announced earnings for the three and nine months ended September 30, 2020. Earnings during the third quarter of 2020 totaled $2.6 million, an increase of $104,000 or 4.2% compared to the $2.5 million earned during the three months ended September 30, 2019. Basic earnings per share for CNB Community Bancorp, Inc. (the “Company”) increased to $1.22 during the three months ended September 30, 2020, up $0.04 from $1.18 during the third quarter of 2019. For the nine months ended September 30, 2020, the Company reported net income of $7.7 million, an increase of $627,000, or 8.8%, from the $7.1 million earned during the nine months ended September 30, 2019. Basic earnings per share increased to $3.66 during the nine months ended September 30, 2020, up $0.26 from $3.40 during the first nine months of 2019.

The annualized return on average assets (ROA) decreased to 1.37% for the three months ended September 30, 2020, slightly down from 1.39% for the three months ended September 30, 2019. The annualized return on average equity (ROE) decreased to 14.8% for the current quarter, down from 16.2% for the third quarter of 2019. ROA decreased to 1.29% during the nine months ended September 30, 2020, down eight basis points from the 1.37% during the first nine months of 2019. ROE was 15.5% during the first nine months of 2020, down from 16.1% during the nine-month period ended September 30, 2019. Book value per share increased to $33.14 at September 30, 2020, up $3.50 from $29.64 at September 30, 2019.

John R. Waldron, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, remarked, “The first nine months of this year has not been about elections, pandemics or recessionary concerns. 2020 has been about our employees and our communities overcoming and persevering. Of course, CNB takes pride in the consistent earnings and record numbers so far in 2020 but I am equally impressed by the efforts of our employees and the communities in continuing to live their lives, showing strength just in going to work every day. With that in mind, there are two financial markers that I would point out as they are indicative of how CNB has had to have a dual focus in 2020. The Bank is on pace to significantly surpass last year’s record level of donations but, also, CNB has been preparing for many possible futures by adding nearly $1.9 million to our allowance for loan loss in the first nine months of the year.”

Financial Highlights

• Total assets increased $216.2 million, or 29.9%, to $938.9 million from September 30, 2019 and $201.4 million, or 27.3% from December 31, 2019.
• Net loans increased $190.1 million, or 31.9%, to $786.5 million at September 30, 2020 compared to $596.3 million at September 30, 2019 and increased $163.8 million, or 26.3%, from December 31, 2019.
• Total deposits increased $204.2 million, or 32.0%, to $842.7 million at September 30, 2020 from $638.5 million at September 30, 2019 and increased $190.7 million, or 29.2% from December 31, 2019.
• Book value per share increased $3.50, or 11.8%, to $33.14 at September 30, 2020, up from $29.64 at September 30, 2019 and up $3.03 from $30.11 at December 31, 2019.
• Total equity increased $8.0 million to $70.1 million from September 30, 2019.
• Net income increased $104,000, 4.2%, to $2.6 million in the third quarter of 2020 and basic EPS increased $0.04, or 3.4%, to $1.22 from $1.18 in the third quarter of 2019.
• Net interest income for the third quarter of 2020 increased $897,000 to $8.0 million compared to the third quarter.
• Pre-tax, pre-provision income increased $974,000 to $4.2 million in the third quarter of 2020, compared to $3.3 million in the third quarter of 2019.

Balance Sheet Review
The Company’s assets totaled $938.9 million at September 30, 2020 compared to $737.4 million at December 31, 2019, and $722.6 million at September 30, 2019. The increase in assets was predominately 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 has processed over 1,000 loans that total over $140 million in relief loans to the communities served.

Net loans totaled $786.5 million at September 30, 2020, compared to $622.6 million at December 31, 2019 and $596.3 million at September 30, 2019.
The loan portfolio at September 30, 2020 included: $339.1 million in commercial real estate loans, $167.0 million in commercial loans, $132.9 in PPP loans, $119.7 in residential real estate loans and $40.3 million in consumer loans.

Nonperforming assets (which are predominately comprised of nonperforming loans and other real estate owned (“OREO”)) at September 30, 2020 were $3.0 million compared to $3.2 million at December 31, 2019 and $3.1 million at September 30, 2019. Nonperforming assets as a percentage of total assets decreased to 0.37% at September 30, 2020 from 0.44% at December 31, 2019 and 0.43% at September 30, 2019.

Nonperforming loans at September 30, 2020 were $3.0 million, remaining flat from the $3.0 million balance at December 31, 2019 and a decrease of $100,000, or 3.2%, from the $3.1 million balance at September 30, 2019. Nonperforming loans as a percentage of total loans decreased to 0.45% at September 30, 2020, as compared to
0.47% at December 31, 2019 and 0.52% at September 30, 2019.

During the third quarter of 2020, there was recorded a provision for loan losses of $990,000, which is an increase of $890,000 from a provision of $100,000 recorded during the third quarter of 2019. Net charge-offs totaled $1,000 during the third quarter of 2020 compared to net charge-offs of $37,000 in the fourth quarter of 2019 and net charge-offs of $20,000 in the third quarter of 2019.

Net charge-offs as a percentage of average loans was 0.00% for third quarter of 2020, which was a decrease from the 0.04% from the fourth quarter of 2019 and the 0.03% from the third quarter of 2019. The allowance for loan losses totaled $9.4 million at September 30, 2020 compared to $7.5 million at December 31, 2019 and $7.2 million at September 30, 2019. The allowance for loan losses as a percentage of total loans increased from 1.18% at December 31, 2019 and at September 30, 2019 to 1.38% at September 30, 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 that exclude Federal Home Loan Bank of Indianapolis, United Bankers Bank and Federal Reserve Bank stock aggregated to $29.8 million at September 30, 2020, a decrease of 10.5% from $33.3 million at December 31, 2019 and an increase of 8.7% from $27.4 million at September 30, 2019. The decrease from year-end 2019 was largely a result of maturities of municipals and certificate of deposits combined with a material increase in amortization of purchase premiums and paydowns as well as economic uncertainties that began in early 2020. 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 $81.3 million (50.4%) from $161.5 million at December 31, 2019 and $87.9 million (56.7%) from $155.0 million one year ago. Interest bearing deposits have increased from $490.5 million at December 31, 2019 and $483.5 million at September 30, 2019 to $599.8 million at September 30, 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.

Total shareholders’ equity increased by $6.4 million (10.1%) from $63.7 million at December 31, 2019 and $8.0 million (12.9%) from $62.2 million one year ago. The increase from year end 2019 of $6.4 million was mainly related to earnings during 2020 of $7.7 million and an increase in other comprehensive income of $359,000, which were partially offset by three $0.26 per share cash dividends totaling $1.7 million.

Net Interest Income and Net Interest Margin
Net interest income was $8.0 million for the quarter ended September 30, 2020, up $897,000, or 12.7%, from $7.1 million during the third quarter of 2019, and for the nine months ended September 30, 2020, net interest income increased $1.8 million (8.7%) to $22.9 million from $21.1 million for the nine months ended September 30, 2019. Interest income for the third quarter of 2020 increased $809,000 (10.0%) to $8.9 million from $8.1 million for the third quarter of 2019 and for the nine months ended September 30, 2020, interest income increased $1.9 million (7.9%) to $25.9 million from $24.0 million for the nine months ended September 30, 2019.

Interest expense for the third quarter of 2020 decreased $88,000 (8.3%) to $971,000 from $1.1 million for the third quarter of 2019 and for the nine months ended September 30, 2020, slightly increased $51,000 (1.7%) to $3.0 million from $2.9 million for the nine months ended September 30, 2019. Net interest margin is net interest income expressed as a percentage of average interest-earning assets. For the quarter ended September 30, 2020, the net interest margin on a fully taxable equivalent basis fell to 3.64% from 4.25% and for the nine months ended September 30, 2020 decreased to 3.90% from 4.35% for the nine months ended September 30, 2019. Much of the decrease in margin is a product of the 150-basis point drop in rates at the end of the first quarter of 2020. Furthermore, PPP loan yields with their stated 1% interest rate are also reducing yields on earning assets.

Noninterest Income/Expense
During the three months ended September 30, 2020, noninterest income totaled $3.3 million, an increase of $1.3 million (62.3%) from the three months ended September 30, 2019 and was $8.1 million, an increase of $2.6 million (47.4%), for the nine months ended September 30, 2020 from $5.5 million in the first nine months
of 2019. For both periods, the increase in noninterest income was predominately related to an increase in gain on sale of loans from $618,000 in the third quarter of 2019 to $1.9 million in 2020 and from $1.4 million in the first nine months of 2019 to $4.2 million in 2020.

Noninterest expense totaled $7.0 million during the three months ended September 30, 2020 an increase of $1.2 million from the third quarter of 2019 and increased $2.2 million (12.8%) from $17.2 million for the nine months ended September 30, 2019 to $19.4 million for the same period in 2020. The largest component of the
increase is due to an increase in salary and employee benefit expense of $771,000 (21.6%) from the third quarter of 2019 to 2020 and $1.2 million from the first nine months of 2019 to the first nine months of 2020, primarily due to credit related incentives and additions to the overall number of employees.

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.