CNB Financial Corporation Reports 2013 Earnings

  CNB Financial Corporation Reports 2013 Earnings

Business Wire

CLEARFIELD, Pa. -- January 31, 2014

CNB Financial Corporation (“CNB”) (NASDAQ: CCNE), the parent company of CNB
Bank, today announced its earnings for the year ended December 31, 2013.
Highlights include the following:

  *Excluding the effects of realized gains on the sale of available-for-sale
    securities and merger costs, pre-tax income of $25.1 million for the year
    ended December 31, 2013, compared to pre-tax income of $22.2 million for
    the year ended December 31, 2012.
  *Net interest income of $59.2 million for the year ended December 31, 2013,
    an increase of 11.3% over the year ended December 31, 2012.
  *Returns on average assets and equity of 0.88% and 11.38%, respectively,
    for the year ended December 31, 2013, based on net income for the year
    ended December 31, 2013 of $16.7 million.
  *Loans of $1.30 billion at December 31, 2013, including loans acquired from
    FC Banc Corp. of $248 million, compared to loans of $928 million at
    December 31, 2012.
  *Deposits of $1.84 billion at December 31, 2013, including deposits
    acquired from FC Banc Corp. of $332 million, compared to deposits of $1.49
    billion at December 31, 2012.
  *Total non-performing assets of $12.9 million, or 0.61% of total assets, as
    of December 31, 2013, compared to $15.1 million, or 0.85% of total assets,
    as of December 31, 2012.

CNB Financial Corporation also successfully closed its previously announced
acquisition of FC Banc Corp. (“FC”) on October 11, 2013. Under the terms of
the merger agreement, FC merged with and into CNB, with CNB surviving the
merger. Additionally, Farmers Citizens Bank, the wholly owned subsidiary of
FC, merged with and into CNB Bank, with CNB Bank continuing as the surviving
entity. Consideration paid to FC shareholders was approximately $41.6 million,
comprised of approximately $8.0 million in cash and 1,873,879 shares of CNB
common stock valued at approximately $33.6 million based on the October 11,
2013 closing price of $17.91 per share. Goodwill of $16.2 million arising from
the transaction consisted largely of synergies and the cost savings resulting
from the combining of the operations of CNB and FC.

Joseph B. Bower, Jr., President and CEO, commented, “The year 2013 was
significant in the history of CNB. We completed our first multi-branch whole
bank acquisition, resulting in total assets in excess of $2 billion following
the merger. In spite of the merger costs that were incurred in 2013, CNB was
able to produce solid earnings for our shareholders. We expect that FCBank
will provide strong organic growth in 2014 and beyond.”

Net Interest Income and Margin

During the year ended December 31, 2013, net interest income increased $6.0
million, or 11.3%, compared to the year ended December 31, 2012. Net interest
margin on a fully tax equivalent basis was 3.46% for the year ended December
31, 2013, compared to 3.49% for the year ended December 31, 2012. The effect
on the 2013 net interest margin of the accretion of the fair value adjustment
on the loan portfolio and time deposits acquired from FC was less than one
basis point.

Although the yield on earning assets decreased from 4.42% during the year
ended December 31, 2012 to 4.15% during the year ended December 31, 2013,
CNB’s average earning assets increased from $1.62 billion to $1.79 billion, or
10.8%. During the year ended December 31, 2013, average deposits increased
$168.2 million, or 11.6%, as compared to December 31, 2012. However, total
interest expense for the year ended December 31, 2013 decreased by $2.7
million, or 18.2%, compared to the year ended December 31, 2012, as a result
of a decrease in the cost of funds from 1.08% in 2012 to 0.79% in 2013.

CNB’s strong and growing deposit base and low cost of funds has offset the
decline in yield on earning assets as the company has been prudent in managing
its deposit rates, resulting in the increase in net interest income.

Asset Quality

During the year ended December 31, 2013, CNB recorded a provision for loan
losses of $6.1 million, as compared to a provision for loan losses of $6.4
million for the year ended December 31, 2012. The provision for loan losses
was $1.2 million and $2.3 million during the three months ended December 31,
2013 and 2012, respectively. At December 31, 2013, the ratio of the allowance
for loan losses to loans was 1.25%, compared to 1.67% at September 30, 2013
and 1.52% at December 31, 2012. In connection with its acquisition of FC in
the fourth quarter of 2013, CNB recorded a fair value adjustment on the
acquired loan portfolio of $8.7 million and there was no carryover of the
allowance for loan losses that was previously recorded by FC, resulting in the
decrease in the ratio of the allowance for loan losses to total loans.

During the quarter ended December 31, 2013, two impaired commercial real
estate loans with a recorded balance totaling $3.1 million at September 30,
2013 were repaid, resulting in an aggregate chargeoff of $390 thousand. In
addition, a chargeoff of $500 thousand was recorded in the fourth quarter for
one impaired commercial & industrial loan which had a recorded balance of $955
thousand at September 30, 2013. No additional loan loss provision was required
in the fourth quarter for these three loans.

Unsecured consumer loans to two related borrowers totaling $498 thousand were
charged off in the fourth quarter due to a rapid deterioration in the
borrowers’ ability to repay the loans. An associated loan loss provision of
$498 thousand was recorded in the fourth quarter.

Finally, foreclosure proceedings were completed on a commercial real estate
loan in the fourth quarter, resulting in an additional loan loss provision of
$152 thousand, a chargeoff of $197 thousand, and a transfer of the associated
remaining loan balance to other real estate owned of $800 thousand.

Regulatory Capital Ratios

At December 31, 2013, CNB had Tier 1 and Total risk-based regulatory capital
ratios of 12.51% and 13.72%, respectively, compared to 13.71% and 14.96% at
September 30, 2013 and 14.03% and 15.28% at December 31, 2012. At December 31,
2013, CNB had a tangible book value of $9.23 per share and a ratio of tangible
common equity to tangible assets of 6.34%, compared to $9.57 per share and
6.56% at September 30, 2013 and $10.77 per share and 7.63% at December 31,
2012. During the fourth quarter of 2013, CNB issued 1,873,879 shares of common
stock at a fair value of $17.91 per share in connection with its acquisition
of FC. In addition, CNB recorded goodwill of $16.2 million and a core deposit
intangible asset of $4.8 million. The decrease in tangible book value per
share and the ratio of tangible common equity to tangible assets from December
31, 2012 to September 30, 2013 and December 31, 2013 is primarily attributable
to the decline in fair value of CNB’s available-for-sale securities in
relation to book value as a result of the increase in intermediate and
long-term interest rates. The decrease in the Tier 1 and Total risk-based
regulatory capital ratios from December 31, 2012 and September 30, 2013 to
December 31, 2013 resulted from CNB’s addition of a significant portfolio of
commercial real estate loans in the fourth quarter of 2013 in conjunction with
its merger with FC Banc Corp.

Non-Interest Income

Excluding the effects of securities transactions, non-interest income was
$12.7 million for the year ended December 31, 2013, compared to $10.7 million
for the year ended December 31, 2012. Net realized gains on available-for-sale
securities were $355 thousand during the year ended December 31, 2013,
compared to $1.4 million during the year ended December 31, 2012. Net realized
and unrealized gains on trading securities were $728 thousand during the year
ended December 31, 2013, compared to $564 thousand during the year ended
December 31, 2012.

Wealth and asset management fees increased from $1.8 million during the year
ended December 31, 2012 to $2.4 million during the year ended December 31,
2013 due to increases in assets under management resulting from CNB’s
strategic focus to grow its Wealth and Asset Management Division. During the
year ended December 31, 2013, CNB recorded $1.6 million in income from bank
owned life insurance policies, including $576 thousand representing the excess
of the face value of certain policies over their cash surrender values
resulting from the maturity of the policies.

Non-Interest Expenses

Total non-interest expenses increased $7.9 million, or 21.9%, during the year
ended December 31, 2013 compared to the year ended December 31, 2012.
Non-interest expenses for the year ended December 31, 2013 includes merger
related expenses of $2.4 million and amortization of a core deposit intangible
asset of $251 thousand. CNB recorded a core deposit intangible asset in
connection with its acquisition of FC of $4.8 million, which is being
amortized using an accelerated method over a 7 year period.

Salaries and benefits expenses increased $2.8 million, or 14.9%, during the
year ended December 31, 2013 compared to the year ended December 31, 2012, due
to routine merit increases, an increase in average full-time equivalent
employees, and increases in certain employee benefit expenses, such as health
insurance premiums, which continue to increase in line with market conditions.
Net occupancy expenses increased $855 thousand, or 18.4%, during the year
ended December 31, 2013 compared to the year ended December 31, 2012, as a
result of anticipated increases in repair, maintenance, and utility expenses,
as well as increases in depreciation expense for recently completed projects
and asset purchases.

About CNB Financial Corporation

CNB Financial Corporation is a financial holding company with consolidated
post-merger assets of approximately $2.1 billion that conducts business
primarily through CNB Bank, CNB’s principal subsidiary. CNB Bank is a
full-service bank engaging in a full range of banking activities and services,
including trust and wealth management services, for individual, business,
governmental, and institutional customers. CNB Bank operations include a
private banking division, a loan production office, and 29 full-service
offices in Pennsylvania, including ERIEBANK, a division of CNB Bank, as well
as 8 full-service offices in central Ohio conducting business as FCBank, a
division of CNB Bank. More information about CNB and CNB Bank may be found on
the internet at www.bankcnb.com.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of
Section27A of the Securities Act of 1933, as amended, and Section21E of the
Securities Exchange Act of 1934, as amended, with respect to CNB’s financial
condition, liquidity, results of operations, future performance and business.
These forward-looking statements are intended to be covered by the safe harbor
for “forward-looking statements” provided by the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are those that are not
historical facts. Forward-looking statements include statements with respect
to beliefs, plans, objectives, goals, expectations, anticipations, estimates
and intentions that are subject to significant risks and uncertainties and are
subject to change based on various factors (some of which are beyond CNB’s
control). Forward-looking statements often include the words “believes,”
“expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,”
“targets,” “potentially,” “probably,” “projects,” “outlook” or similar
expressions or future conditional verbs such as “may,” “will,” “should,”
“would” and “could.” Such known and unknown risks, uncertainties and other
factors that could cause the actual results to differ materially from the
statements include, but are not limited to:changes in general business,
industry or economic conditions or competition; changes in any applicable law,
rule, regulation, policy, guideline or practice governing or affecting
financial holding companies and their subsidiaries or with respect to tax or
accounting principles or otherwise; adverse changes or conditions in capital
and financial markets; changes in interest rates; higher than expected costs
or other difficulties related to integration of combined or merged businesses;
the inability to realize expected cost savings or achieve other anticipated
benefits in connection with business combinations and other acquisitions;
changes in the quality or composition of CNB’s loan and investment portfolios;
adequacy of loan loss reserves; increased competition; loss of certain key
officers; continued relationships with major customers; deposit attrition;
rapidly changing technology; unanticipated regulatory or judicial proceedings
and liabilities and other costs; changes in the cost of funds, demand for loan
products or demand for financial services; and other economic, competitive,
governmental or technological factors affecting CNB’s operations, markets,
products, services and prices. Some of these and other factors are discussed
in CNB’s annual and quarterly reports previously filed with the SEC. Such
factors could cause actual results to differ materially from those in the
forward-looking statements.

The forward-looking statements are based upon management’s beliefs and
assumptions and are made as of the date of this press release. CNB undertakes
no obligation to publicly update or revise any forward-looking statements
included in this press release or to update the reasons why actual results
could differ from those contained in such statements, whether as a result of
new information, future events or otherwise, except to the extent required by
law. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this press release might not occur and you
should not put undue reliance on any forward-looking statements.

Financial Tables

The following tables supplement the financial highlights described previously
for CNB Financial Corporation.

                    (unaudited)                                
                       Three Months Ended                            Twelve Months Ended
                       December 31,                                  December 31,
                       (Dollars in thousands, except share and per share data)
                                                                   (unaudited)                    
                       2013             2012             %           2013             2012             %
                                                         change                                        change
Income Statement
Interest income        $ 20,489         $ 16,965         20.8  %     $ 71,416         $ 68,129         4.8   %
Interest expense        3,210          3,377         -4.9  %      12,212         14,920        -18.2 %
  Net interest           17,279           13,588         27.2  %       59,204           53,209         11.3  %
  income
Provision for loan      1,247          2,343         -46.8 %      6,138          6,381         -3.8  %
losses
  Net interest
  income after          16,032         11,245        42.6  %      53,066         46,828        13.3  %
  provision for loan
  losses
                                                                                                       
Non-interest income
  Wealth and asset       699              508            37.6  %       2,426            1,819          33.4  %
  management fees
  Service charges on     1,209            1,086          11.3  %       4,272            4,106          4.0   %
  deposit accounts
  Other service          618              501            23.4  %       2,179            1,868          16.6  %
  charges and fees
  Net realized gains
  (losses) on            27               (21        )   NA            355              1,379          -74.3 %
  available-for-sale
  securities
  Net realized and
  unrealized gains       231              109            111.9 %       728              564            29.1  %
  on trading
  securities
  Mortgage banking       307              304            1.0   %       940              990            -5.1  %
  Bank owned life        110              221            -50.2 %       1,552            973            59.5  %
  insurance
  Other                 475            198           139.9 %      1,314          965           36.2  %
                                                                                                       
       Total
       non-interest     3,676          2,906         26.5  %      13,766         12,664        8.7   %
       income
                                                                                                       
Non-interest
expenses
  Salaries and           5,900            4,718          25.1  %       21,717           18,893         14.9  %
  benefits
  Net occupancy
  expense of             1,674            1,257          33.2  %       5,506            4,651          18.4  %
  premises
  FDIC insurance         336              299            12.4  %       1,266            1,115          13.5  %
  premiums
  Merger costs           1,067            -              NA            2,396            -              NA
  Intangible             251              -              NA            251              -              NA
  amortization
  Other                 3,767          2,616         44.0  %      12,677         11,286        12.3  %
       Total
       non-interest     12,995         8,890         46.2  %      43,813         35,945        21.9  %
       expenses
                                                                                                       
Income before income     6,713            5,261          27.6  %       23,019           23,547         -2.2  %
taxes
Income tax expense      1,985          1,371         44.8  %      6,340          6,411         -1.1  %
Net income             $ 4,728         $ 3,890         21.5  %     $ 16,679        $ 17,136        -2.7  %
                                                                                                       
Average diluted          14,146,379       12,438,228                   12,880,636       12,403,110
shares outstanding
                                                                                                       
Diluted earnings per   $ 0.33           $ 0.31           6.5   %     $ 1.29           $ 1.38           -6.5  %
share
Cash dividends per     $ 0.165          $ 0.165          0.0   %     $ 0.660          $ 0.660          0.0   %
share
                                                                                                       
Payout ratio             50         %     53         %                 51         %     48         %
                                                                                                       
Average Balances
Loans, net of          $ 1,291,482      $ 916,796                    $ 1,052,429      $ 892,908
unearned income
Total earning assets     1,997,675        1,652,019                    1,792,773        1,617,359
Total assets             2,134,875        1,754,164                    1,894,861        1,714,175
Total deposits           1,842,866        1,480,775                    1,613,982        1,445,758
Shareholders' equity     167,529          146,297                      146,563          140,851
                                                                                                       
Performance Ratios
(quarterly
information
annualized)
Return on average        0.89       %     0.89       %                 0.88       %     1.00       %
assets
Return on average        11.29      %     10.64      %                 11.38      %     12.17      %
equity
Net interest margin      3.70       %     3.49       %                 3.47       %     3.49       %
(FTE)
                                                                                                       
Loan Charge-Offs
Net loan charge-offs   $ 2,230          $ 1,932                      $ 3,960          $ 4,936
Net loan charge-offs     0.69       %     0.84       %                 0.38       %     0.55       %
/ average loans
                                                                                                       
The following is a non-GAAP disclosure of pre-tax net income excluding the effects of net realized gains on
the sale of available for sale securities and one-time merger costs:

                       (unaudited)                                   (unaudited)
                       Three Months Ended                            Twelve Months Ended
                       December 31,                                  December 31,
                       (Dollars in thousands)
                       2013             2012             %           2013             2012             %
                                                         change                                        change
                                                                                                       
Pre-tax net income,    $ 6,713          $ 5,261          27.6  %     $ 23,019         $ 23,547         -2.2  %
GAAP basis
Net realized (gains)
losses on                (27        )     21             n/a           (355       )     (1,379     )   -74.3 %
available-for-sale
securities
Merger costs            1,067          -             n/a          2,396          -             n/a
Pre-tax net income,    $ 7,753         $ 5,282         46.8  %     $ 25,060        $ 22,168        13.0  %
non-GAAP
                                                                                                             

                  (unaudited)     (unaudited)                             
                   December 31,     September 30,    December 31,     % change versus
                   2013             2013             2012             9/30/13   12/31/12
                   (Dollars in thousands, except share and per
                   share data)
Ending Balance
Sheet
Loans, net of      $ 1,295,363      $ 1,028,971      $ 927,824        25.9  %   39.6   %
unearned income
Loans held for       487              399              2,398          22.1  %   -79.7  %
sale
Investment           690,118          704,889          741,770        -2.1  %   -7.0   %
securities
FHLB and other       7,533            7,580            6,684          -0.6  %   12.7   %
equity interests
Other earning       4,139          4,375          3,536         -5.4  %   17.1   %
assets
Total earning        1,997,640        1,746,214        1,682,212      14.4  %   18.8   %
assets
                                                                                
Allowance for        (16,234    )     (17,221    )     (14,060    )   -5.7  %   15.5   %
loan losses
Goodwill             27,194           10,946           10,946         148.4 %   148.4  %
Core deposit         4,583            -                -              NA        NA
intangible
Other assets        118,106        97,480         93,981        21.2  %   25.7   %
Total assets       $ 2,131,289     $ 1,837,419     $ 1,773,079     16.0  %   20.2   %
                                                                                
Non
interest-bearing   $ 221,293        $ 189,362        $ 175,239        16.9  %   26.3   %
deposits
Interest-bearing    1,614,021      1,362,919      1,309,764     18.4  %   23.2   %
deposits
Total deposits       1,835,314        1,552,281        1,485,003      18.2  %   23.6   %
                                                                                
Borrowings           87,950           122,976          97,806         -28.5 %   -10.1  %
Subordinated         20,620           20,620           20,620         0.0   %   0.0    %
debt
Other                22,494           10,776           24,286         108.7 %   -7.4   %
liabilities
                                                                                
Common stock         -                -                -              NA        NA
Additional paid      77,923           44,065           44,223         76.8  %   76.2   %
in capital
Retained             97,066           94,718           88,960         2.5   %   9.1    %
earnings
Treasury stock       (633       )     (1,179     )     (1,743     )   -46.3 %   -63.7  %
Accumulated
other               (9,445     )    (6,838     )    13,924        38.1  %   -167.8 %
comprehensive
income (loss)
Total
shareholders'       164,911        130,766        145,364       26.1  %   13.4   %
equity
                                                                                
Total
liabilities and    $ 2,131,289     $ 1,837,419     $ 1,773,079     16.0  %   20.2   %
shareholders'
equity
                                                                                
Ending shares        14,427,780       12,514,138       12,475,904
outstanding
                                                                                
Book value per     $ 11.43          $ 10.45          $ 11.65
share
Tangible book
value per share    $ 9.23           $ 9.57           $ 10.77
(*)
                                                                                
Capital Ratios
Tangible common
equity /             6.34       %     6.56       %     7.63       %
tangible assets
(*)
Leverage ratio       7.96       %     8.05       %     8.06       %
Tier 1 risk          12.51      %     13.71      %     14.03      %
based ratio
Total risk based     13.72      %     14.96      %     15.28      %
ratio
                                                                                
Asset Quality
Non-accrual        $ 11,573         $ 14,188         $ 14,445
loans
Loans 90+ days
past due and        344            123            357        
accruing
Total
non-performing       11,917           14,311           14,802
loans
Other real          986            176            325        
estate owned
Total
non-performing     $ 12,903        $ 14,487        $ 15,127     
assets
                                                                                
Loans modified
in a troubled
debt
restructuring
(TDR):
Performing TDR     $ 8,006          $ 7,985          $ 9,961
loans
Non-performing      4,130          5,271          1,660      
TDR loans **
Total TDR loans    $ 12,136        $ 13,256        $ 11,621     
                                                                                
Non-performing
assets / Loans +     1.00       %     1.41       %     1.63       %
OREO
Non-performing
assets / Total       0.61       %     0.79       %     0.85       %
assets
Allowance for
loan losses /        1.25       %     1.67       %     1.52       %
Loans
                                                                                
* - Tangible common equity, tangible assets and tangible book value per share are
non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is
calculated by excluding the balance of goodwill and other intangible assets from the
calculation of stockholders’ equity. Tangible assets is calculated by excluding the
balance of goodwill and other intangible assets from the calculation of total assets.
Tangible book value per share is calculated by dividing tangible common equity by the
number of shares outstanding. CNB believes that these non-GAAP financial measures
provide information to investors that is useful in understanding its financial
condition. Because not all companies use the same calculation of tangible common equity
and tangible assets, this presentation may not be comparable to other similarly titled
measures calculated by other companies. A reconciliation of these non-GAAP financial
measures is provided below (dollars in thousands, except per share data).
** - Nonperforming TDR loans are also included in the balance of non-accrual loans in
the previous table.
                                                                                
                   (Dollars in thousands, except share and per
                   share data)
                   (unaudited)      (unaudited)
                   December 31,     September 30,    December 31,
                   2013             2013             2012
                                                                                
Shareholders'      $ 164,911        $ 130,766        $ 145,364
equity
Less goodwill        27,194           10,946           10,946
Less core
deposit             4,583          -              -          
intangible
Tangible common    $ 133,134       $ 119,820       $ 134,418    
equity
                                                                                
Total assets       $ 2,131,289      $ 1,837,419      $ 1,773,079
Less goodwill        27,194           10,946           10,946
Less core
deposit             4,583          -              -          
intangible
Tangible assets    $ 2,099,512     $ 1,826,473     $ 1,762,133  
                                                                                
Ending shares        14,427,780       12,514,138       12,475,904
outstanding
                                                                                
Tangible book      $ 9.23           $ 9.57           $ 10.77
value per share
Tangible common
equity/Tangible      6.34       %     6.56       %     7.63       %
assets

Contact:

CNB Financial Corporation
Brian W. Wingard, Treasurer, 814-765-9621
 
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