CNB Financial Corporation Reports Second Quarter Earnings

CLEARFIELD, PA --(Marketwired - July 21, 2016) - CNB Financial Corporation ("CNB") ( NASDAQ : CCNE ), the parent company of CNB Bank, today announced its earnings for the second quarter and first six months of 2016. Highlights include the following:

• Net income of $4.1 million, or $0.28 per share, in the second quarter of 2016, compared to net income of $5.6 million, or $0.39 per share, in the second quarter of 2015.
• Net income of $9.1 million, or $0.63 per share, for the six months ended June 30, 2016, compared to net income of $11.2 million, or $0.77 per share, for the six months ended June 30, 2015.
• Excluding the effects of realized gains on the sale of available-for-sale securities and certain one-time costs as described in the financial tables, pre-tax income of $7.4 million for the three months ended June 30, 2016, compared to pre-tax income of $7.2 million for the three months ended June 30, 2015.
• Excluding the effects of realized gains on the sale of available-for-sale securities and certain one-time costs as described in the financial tables, pre-tax income of $14.2 million for the six months ended June 30, 2016, compared to pre-tax income of $14.8 million for the six months ended June 30, 2015.
• Total deposits of $1.9 billion at June 30, 2016, an increase of $75.5 million, or 4.2%, as compared to December 31, 2015, and an increase of $27.8 million, or 1.5%, as compared to June, 2015. CNB's loan to deposit ratio increased from 77.9% at June 30, 2015 to 87.6% at June 30, 2016.
• Total loans of $1.7 billion at June 30, 2016, an increase of $204.4 million, or 14.1%, as compared to June 30, 2015 and an increase of $78.0 million, or 4.9%, as compared to December 31, 2015. All of CNB's loan growth during the 12 months ended June 30, 2016 was organic.
• Net interest margin of 3.70% for the six months ended June 30, 2016, compared to 3.72% for the six months ended June 30, 2015. Included in net interest income in 2016 was $348 thousand of net accretion related to acquired loans, which was down from $1.3 million included in 2015. Excluding the impact of the net accretion, net interest income increased by $2.7 million for 2016 as compared to 2015.
• Tangible book value per share of $12.57 as of June 30, 2016, an increase of 11.3% over tangible book value per share of $11.29 at June 30, 2015.
• Non-performing assets of $12.7 million, or 0.54% of total assets as of June 30, 2016, compared to $13.1 million, or 0.58% of total assets, at June 30, 2015.

CNB also successfully closed its previously announced acquisition of Lake National Bank ("LNB") on July 15, 2016. Under the terms of the merger agreement, LNB merged with and into CNB Bank, with CNB Bank being the surviving corporation of the merger.

Joseph B. Bower, Jr., President and CEO, commented, "CNB has a recent history of rapid growth and great earnings. In recognizing how fast we have grown over the past five years, we made a conscious decision to evaluate our entire infrastructure. We decided it was time to add additional resources and change our core processor. In doing this, we know that in the short term, earnings will be impacted, but the changes will positively enhance our market position and earnings capabilities. As we are organized today, we are ready to realize the potential of our newer markets in Columbus, Cleveland, and Buffalo."

Net Interest Margin

Net interest margin on a fully tax equivalent basis was 3.70% for the six months ended June 30, 2016, compared to 3.72% for the six months ended June 30, 2015. Net accretion included in loan interest income in the first six months of 2016 related to acquired loans was $348 thousand, resulting in an increase in the net interest margin of 4 basis points. Net accretion included in loan interest income in the first six months of 2015 related to acquired loans was $1.3 million, resulting in an increase in the net interest margin of 13 basis points.

During 2015 and the first six months of 2016, CNB experienced continued pressure on its net interest margin as a result of loans repricing downward and new loans with market yields significantly below historical averages, which is consistent with the trends across the financial services industry in this historically low interest rate environment. Throughout the current interest rate cycle, CNB has been able to gradually lower its cost of funds, primarily through disciplined deposit pricing. The cost of interest-bearing liabilities was 68 basis points during the first six months of 2016, compared to 71 basis points during the first six months of 2015.

Asset Quality

During the three and six months ended June 30, 2016, CNB recorded a provision for loan losses of $220 thousand and $1.4 million, as compared to a provision for loan losses of $486 thousand and $1.4 million for the three and six months ended June 30, 2015. Net chargeoffs during the three and six months ended June 30, 2016 were $970 thousand and $2.2 million, as compared to $664 thousand and $1.3 million for the three and six months ended June 30, 2015.

The increase in chargeoffs was primarily attributable to consumer loans held in CNB's consumer discount company, Holiday Financial Services Corporation. There were no new impaired commercial loan relationships that required a significant loss reserve in the first six months of 2016. The overall decrease in the provision for loan losses in the second quarter of 2016 compared to the second quarter of 2015 primarily reflects lower historical loss rates in the commercial & industrial, commercial real estate, and residential real estate portfolio segments.

Non-Interest Income

Non-interest income was $4.4 million and $7.5 million for the three and six months ended June 30, 2016, compared to $4.1 million and $7.2 million for the three and six months ended June 30, 2015. In the second quarter of 2016, CNB realized gains on the sale of available-for-sale securities in the amount of $1.0 million, including $922 thousand on the sale of two structured pooled trust preferred securities that had no carrying value due to other-than-temporary impairment charges recorded in previous periods.

Non-Interest Expenses

Total non-interest expenses were $18.3 million and $32.5 million during the three and six months ended June 30, 2016, compared to $14.1 million and $27.2 million during the three and six months ended June 30, 2015. Throughout 2015 and the first six months of 2016, CNB made numerous infrastructure, personnel, and other investments to facilitate its continued growth. In order to better serve our customers and to achieve operational efficiencies, CNB completed a core processing system upgrade in May 2016. Included in non-interest expenses in 2016 were $3.3 million of non-recurring items, with merger related expenses of $227, costs associated with our core processing system upgrade of $1.6 million, and a prepayment penalty associated with the early payoff of long-term borrowings of $1.5 million. The borrowings totaled $40 million and carried interest rates ranging from 3.97% to 4.60%, and the resulting interest expense savings are projected at $870 thousand for 2016 and $1.0 million for 2017.

Salaries and benefits expenses increased $1.3 million, or 8.9%, during the six months ended June 30, 2016 compared to the six months ended June 30, 2015. As of June 30, 2016, CNB had 453 full-time equivalent staff, compared to 430 full-time equivalent staff as of June 30, 2015. The staff added during this period included both customer-facing personnel such as business development and wealth management officers, as well as support department personnel.

About CNB Financial Corporation

CNB Financial Corporation is a financial holding company with consolidated assets of approximately $2.3 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, three loan production offices, 31 full-service offices in Pennsylvania and northeast Ohio, including ERIEBANK, a division of CNB Bank, and 9 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.cnbbank.bank .

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E 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." CNB's actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. For more information about factors that could cause actual results to differ from those discussed in the forward-looking statements, please refer to the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of and the forward-looking statement disclaimers in CNB's annual and quarterly reports.

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.

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 expenses including prepayment penalties on long-term borrowings, core processing conversion costs, and merger costs:

* - 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.