CNB Community Bancorp, Inc. Reports First Quarter 2024 Earnings

CNB Community Bancorp, Inc. (OTCQX: CNBB), the parent company of County National Bank (the “Bank”), today announced earnings for the three months ended March 31, 2024. Earnings during the first quarter of 2024 totaled $2.7 million, a decrease of $156,000 from the $2.9 million earned during the three months ended March 31, 2023.  Basic earnings per share for CNB Community Bancorp, Inc. (the “Company”) decreased to $1.26 during the three months ended March 31, 2024, down $0.08 from $1.34 during the first quarter of 2023.

The annualized return on average assets (“ROA”) decreased to 0.88% for the three months ended March 31, 2024, down 12 basis points or 12.0% from 1.00% for the three months ended March 31, 2023. The annualized return on average equity (“ROE”) decreased to 11.43% for the current quarter, down from 13.20%  for the first quarter of 2023. Book value per share increased to $45.05 at March 31, 2024, up $3.06, or 7.3%, from $41.99 at March 31, 2023.

Joseph R. Williams, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, stated, “I have noted that since the turmoil ofSpring of 2023 that included the failure of multiple banks, our industry has done a remarkable job in recovering from the stigma of those times.  Because CNB has a different client base and strategy that focuses on our communities and keeping our deposits working in those communities, we have continued to maintain a strongpipeline for both credit and deposits.  However, this interest rate environment has been challenging, and earnings were less than the first quarter of 2023.  Furthermore,the market has continued to paint many smaller, essential community institutions with the same brush, which has weighed heavily on the market value of community banks in general.  At CNB, we value our shareholders as much as we value our clients and employees, so we have continued to dividend to our shareholders at levels at or above previous dividend levels.  I am confident in CNB’s ability to continue to build value in our communities and with our shareholders throughout 2024 and beyond.”

Financial Highlights

• Total assets increased year-over-year $54.1 million, or 4.5%, to  $1.25 billion compared to March 31, 2023 and increased $2.4 million, or 0.2% from December 31, 2023.
• Pre-tax, pre-provision income decreased $485,000 to $3.5 million in the first quarter of  2024, compared to $4.0 million in the first quarter of 2023.
• Net loans increased $84.4 million, or 9.5%, to $974.8 million at March 31, 2024 compared to $890.4 million at March 31, 2023 and increased $20.2 million, or 2.1%, from December 31, 2023.
• Total deposits decreased $3.6 million, or 0.3%, to $1.09 billion at March 31, 2024 compared to March 31, 2023 and increased $13.3 million, or 1.2% from December 31, 2023.
• Book value per share increased $3.06, or 7.3%, to $45.05 at March 31, 2024, up from $41.99 at March 31, 2023 and up $1.14, or 2.6%, from $43.91 at December 31, 2023.
• Total equity increased $7.3 million to $98.1 million from March 31, 2023.
• Net income decreased $156,000, or 5.4%, to $2.7 million for the three-month period ended March 31, 2024 and basic EPS decreased $0.08, or 6.0%, to $1.26 from $1.34 in the first quarter of 2024.
• Net interest income for the first quarter of 2024 increased $421,000 to $10.5 million from $10.1 million for the three months ended March 31, 2023.
   

Balance Sheet Review 

The Company’s assets totaled $1.25 billion at March 31, 2024 consistent with assets at December 31, 2023, and an increase from $1.19 billion at March 31, 2023. The change in assets was predominately related to the increase in investable assets partially funded through an increase in borrowings at the end of 2023.  The asset mix shift was a repositioning of cash to a combination of investments and loans.

Net loans totaled $974.8 million at March 31, 2024, compared to $954.6 million at December 31, 2023 and $890.4 million at March 31, 2023. The loan portfolio at March 31, 2024 included: $539.6 million in commercial real estate loans, $241.4 million in commercial loans, $166.8 million in residential real estate loans, and $40.1 million in consumer loans.

Nonperforming assets (which are comprised entirely of nonperforming loans) at March 31, 2024 were $6.6 million compared to $6.2 million at December 31, 2023 and $2.9 million at March 31, 2023. Nonperforming assets as a percentage of total assets increased to 0.53% at March 31, 2024 from 0.50% at December 31, 2023 and 0.24% at March 31, 2023.

Nonperforming loans at March 31, 2024 were $6.6 million, an increase of $350,000, or 5.6%, from the $6.2 million balance at December 31, 2023 and an increase of $3.9 million, or 144.2%, from the $2.7 million balance at March 31, 2023. Nonperforming loans as a percentage of total loans increased to 0.66% at March 31, 2024, as compared to 0.64% at December 31, 2023 and 0.30% at March 31, 2023. The increase in nonperforming loans and assets were not particular to a specific industry or geographic area but rather a few larger credit relationships that are being worked out and, as such, have been reclassified.

During the first quarter of 2024, the provision for credit losses was $125,000, which is an increase of $125,000 from no provision recorded during the fourth quarter of 2023 and a decrease of $265,000 from a provision of $390,000 recorded during the first quarter of 2023. Net recoveries totaled $210,000 during the first quarter of 2024 compared to net charge-offs of $119,000 in the fourth quarter of 2023 and net recoveries of $3,000 in the first quarter of 2023. 

Net charge-offs (annualized) as a percentage of average loans was (0.02)% for the first quarter of 2024, 0.01% for the fourth quarter of 2023 and 0.00% for the first quarter of 2023. The allowance for credit losses totaled $13.3 million at March 31, 2024 compared to $13.0 million at December 31, 2023 and $13.3 million at March 31, 2023. The allowance for credit losses as a percentage of total loans remained overall consistent at 1.35% at March 31, 2024 and 1.34% at December 31, 2023, respectively, and decreased from 1.47% at March 31, 2023.   The consistency in the required allowance for credit losses year-over-year is directly attributable to the increase in the loan portfolio, offset by the improving economic conditions.  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 $173.4 million at March 31, 2024, which is relatively flat as compared to the $174.8 million at December 31, 2023 and a 40.0% increase from $123.9 million at March 31, 2023.  The significant increase from the end of the first quarter of 2023 to the end of the first quarter of 2024 was related to the purchase of $50 million in securities that were predominately government backed securitized mortgage obligations completed in the later portion of 2023.  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 $2.3 million (1.0%) from $224.5 million at December 31, 2023 and $7.8 million (3.4%) from $230.0 million one year ago. Interest bearing deposits have increased from $848.9 million at December 31, 2023 and $860.3 million at March 31, 2023 to $864.5 million at March 31, 2024. Deposits are being impacted by the changing rate environment as the competition from higher yielding non-depository investment vehicles continues within the markets for consumer, commercial, and public fund deposits.  The results have been a reallocation of deposits that manifests in a reduction in noninterest bearing deposits somewhat mitigated by ongoing efforts of our employees in retaining existing clients as well as expanding relationships within the communities that the Bank serves.

The Company’s outstanding borrowings decreased by $359,000 to $54.9 million at March 31, 2024 compared to $55.2 million at December 31, 2023 and increased by $48.6 million from $6.3 million at March 31, 2023. The decrease from year-end 2023 was due to normal paydown of senior debt at the holding company while the increase from March 31, 2023 was the result of new borrowings from the Federal Home Loan Bank of Indianapolis of $50 million completed by the Bank in the fourth quarter of 2023 partially reduced by normal paydowns of the aforementioned senior debt.

Total shareholders’ equity increased $2.5 million (2.6%) from $95.6 million at December 31, 2023 and $7.3 million (8.0%) from $90.8 million a year ago.  The $2.5 million increase was mainly related to earnings during the first quarter of 2024 of $2.7 million and a decrease of $368,000 in the unrealized loss on available-for sale securities and the fair value impact of the cash flow hedge, which was partially offset by a $0.29 per share cash dividend totaling $639,000.  On a year-over-year basis, the increase of $7.3 million in equity was predominately related to income of $10.5 million and an increase in common stock from vesting of restricted shares of $548,000, partially offset by $3.0 million in dividends paid as well as a $715,000 reduction in OCI from temporary market value adjustments to the securities portfolio and the fair value impact of the cash flow hedge.

Net Interest Income and Net Interest Margin

Net interest income, on a non-fully tax equivalent basis, was $10.5 million for the quarter ended March 31, 2024, up $421,000, or 4.2%, from $10.1 million during the first quarter of 2023. Interest income for the first quarter of 2024 increased $2.8 million, or 20.9%, from $13.4 million for the first quarter of 2023 to $16.2 million during the first quarter of 2024, due to increases across assets including commercial real estate and investment securities. Interest expense increased $2.5 million to $5.7 million for the first quarter of 2024 which was resultant from deposits that transitioned to interest-bearing accounts from noninterest bearing accounts and the increase in overall rates paid across deposit accounts.

Net interest margin (“NIM”) is net interest income expressed as a percentage of average interest-earning assets. For the quarter ended March 31, 2024, the net interest margin on a fully taxable equivalent basis decreased to 3.57% from 3.68% for the first quarter of 2023. Much of the change in margin has been a product of the market rates having continued to increase since the end of 2022; however, even as the FOMC paused their rate increases after July of 2023, there continues to be pressure on the funding costs for these assets that is more impactful than the benefit to the yield on interest-earning assets.

Noninterest Income/Expense

During the three months ended March 31, 2024, noninterest income totaled $2.0 million, consistent with the three months ended March 31, 2023. Although noninterest income was similar year-over-year, within Other noninterest income there was a reduction in the gain on sale of other assets of $78,000 as the Company sold branch/former branch locations in both 2022 and 2023; along with a $57,000 reduction in the valuation of a Bank partnership.  These decreases were somewhat offset by increases in gain on sale of loans of $39,000 and Wealth Management income of $90,000. 

Noninterest expense totaled $9.0 million during the three months ended March 31, 2024, an increase of $881,000 from the first quarter of 2023. The largest components of the year-over-year increase in noninterest expense were an increase in data communications of $365,000 and in salaries and employee benefits of $340,000. The increase in data communications expense was due to the transition to outsourcing of a significant portion of the Company’s information technology in 2023.  The increase in employee related expense was driven by an increase in the number of employees as well as additional benefits expense for insurance. 

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 Southern 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.