CNB Community Bancorp, Inc. Reports 2024 Results

CNB Community Bancorp, Inc. (OTCQX: CNBB), the parent company of County National Bank, has announced earnings for the three months and twelve months ended December 31, 2024. Earnings during the fourth quarter of 2024 totaled $2.4 million, a decrease of $72,000 from the $2.5 million earned during the three months ended December 31, 2023. Due to the previously reported buyback of shares completed in September of this year, the basic earnings per share increased to $1.20 during the three months ended December 31, 2024, up $0.03 from $1.17 during the fourth quarter of 2023. For the year ended December 31, 2024, CNB Community Bancorp, Inc. (the “Company”) reported net income of $11.6 million, an increase of $971,000, or 9.1%, from the $10.6 million earned during the year ended December 31, 2023. Basic earnings per share increased to $5.42 during the year ended December 31, 2024, up $0.51 from $4.91 during 2023.

The annualized return on average assets (ROA) decreased to 0.78% for the three months ended December 31, 2024, down 5 basis points (“BPs”) or 6.0% from 0.83% for the three months ended December 31, 2023. The annualized return on average equity (ROE) decreased to 9.87% for the current quarter, down from 10.63% for the fourth quarter of 2023. ROA increased to 0.93% from the 0.89% for the year ended December 31, 2023. ROE increased to 11.74% for 2024, up from 11.55% during the year ended December 31, 2023. Book value per share increased to $48.65 at December 31, 2024, up $4.74, or 10.8%, from $43.91 at December 31, 2023.

“The results from the strategic steps we took over this past year exceeded the return on equity & net interest margin that we expected for 2024,” said Joseph R. Williams, President and CEO. “Furthermore, we continued to invest in talent and our banking teams generated a steady volume of attractive lending opportunities while maintaining our strong underwriting culture and overall credit quality.”

“Our entire team has continued to focus on relationship banking, which includes bringing more of our existing Clients’ deposit relationships into CNB while doing the same with new Clients,” Williams added. “We have successfully utilized our model to move into new markets and we expect to continue to grow in those communities as well as within our existing footprint in the next year and beyond.”

Financial Highlights

• Total assets increased year-over-year $34.3 million, or 2.8%, to $1.28 billion.
• Net loans increased $78.5 million, or 8.2%, to $1.03 billion at December 31, 2024 compared to $954.6 million at December 31, 2023.
• Total deposits increased approximately $23.7 million, or 2.2%, to $1.10 billion at December 31, 2024.
• Book value per share increased $4.74, or 10.8%, to $48.65 at December 31, 2024, up from $43.91 at December 31, 2023.
• The Company completed a tender offer to repurchase 145,000 shares in the third quarter of 2024 paying its shareholders $38.50 per share. Total shares outstanding are 2,078,157 as of December 31, 2024.
• Net income decreased $72,000, 2.9%, to $2.4 million for the three-month period ended December 31, 2024 but basic EPS increased $0.03, or 2.6%, to $1.20 from $1.17 in the fourth quarter of 2023.
• Net interest income for the fourth quarter of 2024 increased $1.1 million to $11.4 million while for the twelve months ended December 31, 2024 net interest income increased $3.9 million or 9.6%.
• Pre-tax, pre-provision income increased approximately $219,000 to $3.4 million in the fourth quarter of 2024, compared to $3.2 million in the fourth quarter of 2023. For 2024, pre-tax, pre- provision income was $15.4 million, compared to $13.8 million for 2023, and increase of 11.1%.

Balance Sheet Review

The Company’s assets totaled $1.28 billion at December 31, 2024 compared to $1.25 billion at December 31, 2023. The increase in assets was predominately related to the significant increase in loans being somewhat offset by a decrease in debt securities.

Net loans totaled $1.03 billion at December 31, 2024, compared to $954.6 million at December 31, 2023. The loan portfolio at December 31, 2024 included: $592.0 million in commercial real estate loans, $245.0 million in commercial loans, $170.6 million in residential real estate loans, and $38.4 million in consumer loans.

Nonperforming assets (which are comprised of solely of nonperforming loans) at December 31, 2024 were $6.8 million compared to $6.2 million at December 31, 2023. Nonperforming assets as a percentage of total assets increased to 0.53% at December 31, 2024 from 0.50% at December 31, 2023. There were no OREO properties at December 31, 2024 or at December 31, 2023.

Nonperforming loans at December 31, 2024 were $6.8 million, an increase of $585,000, or 9.4%, from the $6.2 million balance at December 31, 2023. Nonperforming loans as a percentage of total loans increased to 0.65% at December 31, 2024, as compared to 0.64% at December 31, 2023. The increase in nonperforming loans and assets were not particular to a specific industry or geographic area but rather a couple of larger credit relationships are being worked out and, as such, have been reclassified.

During the quarter ended December 31, 2024, the Bank recorded a provision for credit losses of $362,000, which is an increase of $362,000 from no provision recorded during the quarter ended December 31, 2023. Net charge-offs totaled $651,000 during the three months ended December 31, 2024 compared to net charge-offs of $119,000 during the same period in 2023. For the twelve months ended December 31, 2024, the provision was $962,000 compared to $600,000 for the twelve months ended December 31, 2023. Net charge-offs totaled $473,000 during the twelve months ended December 31, 2024 compared to net charge-offs of $238,000 during the same period in 2023. The increase in charge-offs was not related to a specific industry or geographic region but predominately involved a couple of one-off credit relationships that were written down to the value of the underlying collateral.

Net charge-offs as a percentage of average loans was 0.05% for the year ended December 31, 2024 compared to 0.03% at December 31, 2023. The allowance for credit losses totaled $13.2 million at December 31, 2024 and $13.0 million at December 31, 2023. The allowance for credit losses as a percentage of total loans decreased from 1.34% at December 31, 2023 to 1.26% at December 31, 2024. The decrease in the required allowance for credit losses is a byproduct of improving risk factors across the entire portfolio along with strong collateral positions on credits evaluated individually for impairment and charge-offs for those whose collateral were less than the outstanding loan balances. 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 $127.1 million at December 31, 2024, down 27.3% from $174.8 million at December 31, 2023. This decrease was largely a result of a significant investment in securities that are predominately supported by the US government that were purchased at the end of 2023 offset by maturities of securities. These maturities were of municipals and US Treasury securities, 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 as of December 31, 2024 have decreased by $6.0 million from $224.5 million at December 31, 2023. Interest bearing deposits have increased from $848.8 million at December 31, 2023 to $878.6 million at December 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. There has been a reallocation of deposits that manifests in a reduction in noninterest bearing deposits, which has been somewhat mitigated by ongoing efforts of our employees in retaining existing customers as well as expanding relationships within the communities that the Bank serves.

The Company’s outstanding borrowings increased by $16.9 million to $72.1 million at December 31, 2024 compared to $55.2 million at December 31, 2023. The increase from year-end 2023 was driven by short-term funding of CNB’s strong loan growth in 2024 and a $6 million borrowing at the holding company done in conjunction with the previously mentioned stock repurchase.

Total shareholders’ equity increased by $4.1 million (4.2%) from $95.6 million at December 31, 2023. The $4.1 million increase was primarily resultant from 2024 earnings of $11.6 million, an increase in common stock from grants of restricted shares and stock grants of approximately $653,000, and a decrease in unrealized comprehensive loss (“OCI”) on securities from temporary market value adjustments to the securities portfolio as well as fair value adjustments from a cash flow hedge of $454,000. The offset was predominately related to a tender offer completed in September of 2024 in which the Company purchased 145,000 shares of its stock at $38.50 per share for a total reduction of capital of approximately $5.7 million. Additionally, the Company paid dividends of $1.37 per share totaling $2.9 million in 2024.

Net Interest Income and Net Interest Margin

Net interest income was $11.4 million for the quarter ended December 31, 2024, up approximately $1.1 million, or 10.4%, from $10.3 million during the fourth quarter of 2023 and, for the year ended December 31, 2024, net interest income increased $3.9 million (9.6%) to $44.5 million from $40.6 million for the year ended December 31, 2023. Interest income for the fourth quarter of 2024 increased $2.0 million (13.1%) to $17.3 million from $15.3 million for the fourth quarter of 2023 and, for the year ended December 31, 2024, interest income increased $9.9 million (17.3%) to $67.2 million from $57.3 million for the year ended December 31, 2023. The increase in interest income was partially due to increases in balances across multiple loan categories including commercial loans, commercial real estate, and residential real estate. Also, yields on assets improved with loans improving 50 BPs over 2023 and, overall, interest-earning assets improving 55 BPs. Interest expense for the fourth quarter of 2024 increased $927,000 (18.7%) to $5.9 million from $4.9 million for the fourth quarter of 2023 and for the year ended December 31, 2024, increased $6.0 million (36.1%) to $22.7 million from $16.7 million for the year ended December 31, 2023, which was predominately related to increases in the cost of funding the balance sheet as the costs of funds rose 51 BPs in 2024. However, interest-bearing deposits did grow in balance as well with the average balance increasing approximately $70 million in 2024 compared to 2023.

Net interest margin is net interest income expressed as a percentage of average interest-earning assets. For the quarter ended December 31, 2024, the net interest margin on a fully taxable equivalent basis increased to 3.86% from 3.68% for the quarter ended December 31, 2023 and for the year ended December 31, 2024 increased to 3.76% from 3.62% for the year ended December 31, 2023. 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 2023; however, recent FOMC decreases have yet to be beneficial to the cost of interest-bearing liabilities while the yield on interest- earning assets whose pricing is variable and based upon short-term rates have begun to decline.

Noninterest Income/Expense

During the three months ended December 31, 2024, noninterest income totaled $2.1 million, an increase of $274,000 (14.9%) from the three months ended December 31, 2023, and was $8.2 million, an increase of $435,000 (5.6%), for the year ended December 31, 2024 from $7.7 million for the year ended December 31, 2023. Both quarter-over-quarter and year-over-year variances were due to immaterial fluctuations across multiple noninterest related income with the exception of Wealth Management as income increased $84,000 (16.2%) and $382,000 (19.7%), respectively, quarter-over-quarter and year-over-year.

Noninterest expense totaled $10.1 million during the three months ended December 31, 2024 an increase of $1.1 million (12.6%) from the fourth quarter of 2023 and an increase of $2.8 million (8.1%) from $34.5 million for the year ended December 31, 2023 to $37.3 million for the same period in 2024. The largest component of the quarter-over-quarter and year-over-year increase was an increase in salaries and benefit expense of $542,000 and $1.3 million, respectively, from additional personnel costs related to growth and performance. On a year-over-year basis, Data Communications increased $695,000 due to the outsourcing of a significant portion of the Company’s Information Technology function in late 2023.

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.