The annualized return on average assets (ROA) increased to 1.10% for the three months ended December 31, 2022, up from 0.81% for the three months ended December 31, 2021. The annualized return on average equity (ROE) increased to 14.31% for the current quarter, up from 10.63% for the fourth quarter of 2021. ROA decreased to 1.06% from the 1.15% for the year ended December 31, 2021. ROE increased to 14.63% for 2022, up from 13.65% during the year ended December 31, 2021. Book value per share increased to $40.77 at December 31, 2022, up $3.14, or 8.3%, from $37.63 at December 31, 2021.
Joseph R. Williams, President and Chief Executive Officer of CNB Community Bancorp, Inc. and County National Bank, stated, “2022 resulted in record earnings for CNB mostly due to rising interest rates. Our model of “banking that stays in the community” has not wavered and the results have supported that focus. We begin 2023 with the full understanding that there are still significant uncertainties but I am confident that our people and our communities will work together for our mutual success.”
Financial Highlights
● Total assets increased year-over-year $16.4 million, or 1.4%, to $1.17 billion.
● Net loans increased $88.6 million, or 11.2%, to $880.1 million at December 31, 2022 compared to $791.5 million at December 31, 2021.
● Total deposits increased approximately $18.3 million, or 1.8%, to $1.06 billion at December 31, 2022.
● Book value per share increased $3.14, or 8.3%, to $40.77 at December 31, 2022, up from $37.63 at December 31, 2021.
● Total equity increased $7.3 million to $88.1 million.
● Net income increased $901,000, 40.6%, to $3.1 million for the three-month period ended December 31, 2022 and basic EPS increased $0.41, or 39.7%, to $1.45 from $1.04 in the fourth quarter of 2021.
● Net interest income for the fourth quarter of 2022 increased $1.1 million to $10.5 million while for the twelve months ended December 31, 2022 net interest income increased $4.0 million or 11.2%.
● Pre-tax, pre-provision income increased approximately $1.2 million to $4.1 million in the fourth quarter of 2022, compared to $2.9 million in the fourth quarter of 2021. For 2022, pre-tax, preprovision income was $16.4 million, compared to $15.6 million for 2021, an increase of 4.8%.
Balance Sheet Review
The Company’s assets totaled $1.17 billion at December 31, 2022 compared to $1.15 billion at December 31, 2021. Total assets remained relatively flat due to the significant increase in loans (approximately $113 million, exclusive of PPP loans) being offset by a decrease in cash held at the bank as customers leveraged their monies by placing them into higher yielding, mostly non-depository accounts. Net loans increased $88.6 million, or 11.2%, from $791.5 million at December 31, 2021 to $880.1 million at December 31, 2022. The loan portfolio at December 31, 2022 included: $473.4 million in commercial real estate loans, $229.5 million in commercial loans, $150.4 million in residential real estate loans, and $39.3 million in consumer loans.
Nonperforming assets (which are predominately comprised of nonperforming loans and other real estate owned (“OREO”)) at December 31, 2022 were $2.7 million compared to $2.2 million at December 31, 2021. Nonperforming assets as a percentage of total assets (exclusive of PPP loans) increased to 0.23% at December 31, 2022 from 0.19% at December 31, 2021. OREO decreased to $166,000 at December 31, 2022 from $570,000 at December 31, 2021.
Nonperforming loans at December 31, 2022 were $2.5 million, an increase of $878,000, or 54.2%, from the $1.6 million balance at December 31, 2021. Nonperforming loans as a percentage of total loans increased to 0.28% at December 31, 2022, as compared to 0.20% at December 31, 2021.
During the quarter ended December 31, 2022, the Bank recorded a provision for loan losses of $230,000, which is an increase of $125,000 from a provision of $105,000 recorded during the quarter ended December 31, 2021. Net recoveries totaled $5,000 during the three months ended December 31, 2022 compared to net charge-offs of $9,000 during the same period in 2021. For the twelve months ended December 31, 2022, the provision was $1.1 million compared to $1.3 million for the twelve months ended December 31, 2021. Net charge-offs totaled $20,000 during the twelve months ended December 31, 2022 compared to net recoveries of $5,000 during the same period in 2021.
Net charge-offs as a percentage of average loans was zero for the years ended December 31, 2022 and 2021. The allowance for loan losses totaled $12.9 million at December 31, 2022 and $11.8 million at December 31, 2021. The allowance for loan losses as a percentage of total loans decreased from 1.51% at December 31, 2021 to 1.44% (exclusive of PPP loans) at December 31, 2022. The decrease in the required allowance for loan losses is a byproduct of improving risk factors across the entire portfolio along with strong collateral positions on credits evaluated individually for impairment. The allowance will continue to be adjusted based upon all perceived risks 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 $123.1 million at December 31, 2022, up 83.7% from $67.0 million at December 31, 2021. This increase was largely a result of budgeted purchases combined with a significant investment in short-term US Treasuries in early 2022 as the Bank repositioned additional assets into higher yielding investments. These purchases were partially offset by maturities of municipals and certificate of deposits combined with amortization of purchase premiums and paydowns of mortgage-backed securities. 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 $6.7 million from $267.0 million at December 31, 2021. Interest bearing deposits have increased from $778.0 million at December 31, 2021 to $789.6 million at December 31, 2022. Deposit balances are being impacted by the changing rate environment as the competition from higher yielding non-depository investment vehicles has significantly increased within the markets for consumer, commercial, and public fund deposits. The results have been a fluctuating level of deposits as decreases in deposits are partially being offset by the ongoing efforts of our employees in retaining existing customers as well as expanding relationships within the communities that the Bank serves. CNB Community Bancorp, Inc.’s outstanding borrowings decreased $10.4 million from $17.0 million at December 31, 2021 to $6.6 million at December 31, 2022 as the Company continued to pay down its senior debt at the holding company along with borrowings at the Bank being reduced to zero.
Total shareholders’ equity increased $7.3 million from $80.8 million at December 31, 2021 to $88.1 million at December 31, 2022. The $7.3 million increase was mainly related to earnings during 2022 of $12.2 million and $483,000 of equity compensation which were partially offset by a decrease in accumulated other comprehensive income of $2.5 million and a $1.31 per share cash dividend totaling $2.9 million. Total shares outstanding at December 31, 2022 were 2,189,581.
Net Interest Income and Net Interest Margin
Net interest income was $39.8 million for the year ended December 31, 2022, up $4.0 million, or 11.2%, from $35.8 million during 2021. Interest income increased $4.7 million, or 12.3%, from $38.8 million during 2021 to $43.5 million during the current year primarily due to the rate environment and the overall growth of the loan portfolio. Interest expense increased $739,000 for the year ended December 31, 2022 primarily due to a shift in the deposit rate environment. The change in the overall rate environment was, in a large part, due to increases in its rates by the Federal Open Market Committee (FOMC) that began in March of 2022 and totaled 425 basis points. Net interest margin is net interest income expressed as a percentage of average interest-earning assets. For the year ended December 31, 2022, the net interest margin on a fully taxable equivalent basis increased to 3.60% from 3.21% in 2021. The aforementioned FOMC rate hikes of 4.25% materially impacted the interest rate market, which was a significant factor in the increase in the net interest margin.
Net interest income for the three months ended December 31, 2022 was $10.5 million, an increase of $1.1 million from the $9.4 million earned during the same period in 2021. Interest income increased across multiple areas including commercial loans, commercial real estate, Federal Reserve Bank deposits and investment securities as the Bank grew its assets and transferred a portion of assets into higher yielding accounts. Interest expense, which increased from $644,000 during the three months ended December 31, 2021 to $1.6 million during the quarter ended December 31, 2022, was significantly impacted by increases in the market rates across all interest bearing deposits. Net interest margin on a fully taxable equivalent basis for the three months ended
December 31, 2022 increased to 3.93% from 3.12% during the fourth quarter of 2021. The increase for the quarter follows the same rationale as the annual increase in Net Interest Margin.
Noninterest Income/Expense
During the three months ended December 31, 2022, noninterest income totaled $1.9 million, a decrease of $688,000 (26.6%) from the three months ended December 31, 2021, and was $7.9 million, a decrease of $2.8 million (25.7%), for the year ended December 31, 2022 from $10.7 million for the year ended December 31, 2021. For both periods, the decrease in noninterest income was predominately related to a decrease in gain on sale of loans from $908,000 in the fourth quarter of 2021 to $139,000 in 2022 and from $4.9 million for the year ended December 31, 2021 to $1.0 million in 2022.
Noninterest expense increased $509,000, or 1.6%, to $31.4 million during the twelve months ended December 31, 2022, up from $30.8 million during 2021. Noninterest expense totaled $8.3 million during the three months ended December 31, 2022, a decrease of $840,000 from the fourth quarter of 2021. The largest component of the year-over-year increase in noninterest expense was an increase in occupancy and equipment expense of $625,000. Of this amount, approximately $201,000 was related to increased depreciation on Information Technology assets determined to be nearing the end of their useful life. Further, the quarter-over-quarter decrease was driven by a decrease in salaries and benefit expense of $1 million partially offset by an increase
of $82,000 related to the aforementioned Information Technology assets. The decrease in salary and benefit expense was a direct result of funding in 2021 of approximately $854,000 of deferred compensation plans not repeated in 2022.
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
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.