CNB Financial(CCNE) - 2024 Q4 - Annual Results

Financial and Operational Highlights CNB Financial Corporation reported strong Q4 2024 earnings, steady loan and deposit growth, maintained robust liquidity and capital, while noting an increase in nonperforming assets Earnings Performance CNB Financial Corporation reported strong fourth-quarter 2024 results with net income of $14.0 million ($0.66/share), an increase both quarter-over-quarter and year-over-year, driven by higher net interest income and lower expenses, though full-year 2024 earnings of $50.3 million ($2.39/share) were down from 2023 primarily due to increased deposit costs | Period | Net Income (Available to Common) | Diluted EPS | | :--- | :--- | :--- | | Q4 2024 | $14.0 million | $0.66 | | Q3 2024 | $12.9 million | $0.61 | | Q4 2023 | $12.9 million | $0.62 | | Full-Year 2024 | $50.3 million | $2.39 | | Full-Year 2023 | $53.7 million | $2.55 | - The increase in Q4 2024 earnings compared to Q3 2024 was attributed to a rise in net interest income combined with reduced non-interest expenses[4] - The year-over-year increase for the quarter was due to growth in both net interest and non-interest income, alongside lower non-interest expenses[4] - The decline in full-year 2024 earnings compared to 2023 was primarily caused by the significant rise in deposit costs year-over-year[4] Loan and Deposit Growth The Corporation achieved steady loan and deposit growth, with loans (excluding syndicated) reaching $4.5 billion (up 3.88% year-over-year) and total deposits growing to $5.4 billion (a 7.45% increase) as of December 31, 2024 | Metric (as of Dec 31, 2024) | Amount | YoY Change | | :--- | :--- | :--- | | Total Loans (ex-syndicated) | $4.5 billion | +3.88% | | Total Deposits | $5.4 billion | +7.45% | - Loan growth was primarily driven by commercial and residential real estate loans in expansion markets like Cleveland, OH, and Roanoke, VA, as well as in the Columbus, OH market and the Private Banking division[4] - The syndicated loan portfolio stood at $79.9 million (1.73% of total loans), a decrease of $28.8 million year-over-year due to paydowns, but an increase of $10.4 million from Q3 2024 as the Corporation identified opportunities with favorable yields[4] Liquidity and Capital Position The Corporation maintains a strong liquidity and capital position, with adjusted uninsured deposits at approximately 18.01% of total deposits and total liquidity sources covering these deposits by approximately 5.0 times, while all regulatory capital ratios exceed 'well-capitalized' levels - Adjusted estimated uninsured deposits were approximately $986.0 million, or 18.01% of total CNB Bank deposits as of December 31, 2024[5] - The Corporation had total on-hand and contingent liquidity sources of approximately $4.6 billion, which is about 5.0 times the estimated adjusted uninsured deposit balances[5] - Pre-tax net unrealized losses on securities totaled $74.8 million (12.25% of total shareholders' equity), however, regulatory capital ratios would still exceed 'well-capitalized' levels if these losses were fully recognized[5] - As of December 31, 2024, the Corporation had no outstanding short-term borrowings from the FHLB or the Federal Reserve's Discount Window[5] Asset Quality Asset quality metrics showed an increase in nonperforming assets (NPAs) during the fourth quarter, with NPAs rising to $59.5 million (0.96% of total assets) primarily due to a single commercial multifamily relationship, and net loan charge-offs also increased to $2.1 million for the quarter - Total nonperforming assets were $59.5 million (0.96% of total assets) at Q4 2024, up from $42.0 million at Q3 2024 and $31.8 million at Q4 2023[5] - The quarterly increase in NPAs was primarily driven by one commercial multifamily relationship of $20.4 million, for which a specific reserve of $885 thousand has been established[5] - Net loan charge-offs for Q4 2024 were $2.1 million, or 0.19% annualized, compared to $1.2 million (0.11% annualized) in Q3 2024[5] CEO Commentary and Outlook The CEO highlighted the favorable earnings trend over the last three quarters of 2024, attributing it to the successful implementation of core strategic initiatives, and expressed optimism about the planned acquisition of ESSA Bancorp, which is expected to expand the business model and create operational efficiencies - CEO Michael Peduzzi noted that Q4 2024 performance continued a favorable trend of increased earnings for the third consecutive quarter[6] - Key strategic initiatives include deepening customer relationships, disciplined underwriting, risk-based pricing, and solid risk management[6] - The company is excited about the planned acquisition of ESSA Bancorp, Inc., which is expected to add over $2 billion in assets and enhance business development and operational scale[6] Balance Sheet Analysis The Corporation's book value and tangible book value per common share increased year-over-year, supported by retained earnings and share repurchases Shareholders' Equity and Book Value Book value and tangible book value per common share both increased year-over-year, reaching $26.34 and $24.24 respectively as of December 31, 2024, driven by a $35.4 million rise in retained earnings and share repurchases, which offset the negative impact of unrealized losses on the investment portfolio | Metric per Common Share | Dec 31, 2024 | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Book Value | $26.34 | $26.13 | $24.57 | | Tangible Book Value (Non-GAAP) | $24.24 | $24.03 | $22.46 | - The year-over-year increase in book value was primarily due to a $35.4 million increase in retained earnings and the repurchase of 23,988 common shares in Q2 2024[9] Loan Portfolio Analysis The Corporation monitors its commercial real estate exposure, with no nonaccrual loans in office or hospitality, but an increase in multifamily nonaccruals Commercial Real Estate (CRE) Concentrations The Corporation actively monitors its exposure to key commercial real estate sectors, with no nonaccrual or past due loans in the office and hospitality portfolios, while the multifamily portfolio had $20.7 million in nonaccrual loans (representing 5.62% of the total multifamily loan balance) primarily from one relationship, and no loans in these categories were classified as high volatility commercial real estate (HVCRE) | CRE Portfolio (as of Dec 31, 2024) | Total Balance | % of Total Loans | Nonaccrual Loans | Past Due Loans | | :--- | :--- | :--- | :--- | :--- | | Commercial Office | $113.7 million | 2.47% | $0 | $0 | | Commercial Hospitality | $321.6 million | 6.98% | $0 | $0 | | Commercial Multifamily | $367.6 million | 7.98% | $20.7 million | $21.1 million | - The Corporation had no loans considered by regulators to be high volatility commercial real estate (HVCRE) in its office, hospitality, or multifamily portfolios[12] Performance Analysis Profitability and efficiency improved in Q4 2024, driven by increased net interest income and reduced expenses, though full-year returns were lower than the prior year Profitability and Efficiency Ratios Profitability metrics improved in Q4 2024 compared to Q3 2024, with annualized return on average tangible common equity (ROATCE) at 10.90%, though full-year returns were lower than in 2023, and the efficiency ratio showed significant improvement in Q4 2024, falling to 63.68% from 66.34% in the prior quarter, driven by higher net interest income and lower non-interest expenses | Performance Ratio (Annualized) | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Return on Average Equity | 9.79% | 9.28% | 9.97% | | Return on Average Tangible Common Equity (Non-GAAP) | 10.90% | 10.33% | 11.27% | | Efficiency Ratio | 63.68% | 66.34% | 67.66% | - The full-year 2024 return on average equity was 9.21%, down from 10.54% in 2023[14] - The full-year efficiency ratio was 66.20%, up from 65.13% in 2023[14] Revenue Analysis Total revenue for Q4 2024 was $59.4 million, an increase from both the prior quarter and the same quarter last year, supported by a rise in net interest income, while for the full year, total revenue increased slightly to $226.6 million, as higher non-interest income offset a small decline in net interest income | Revenue Component ($ millions) | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $49.0 | $47.5 | $47.7 | | Non-Interest Income | $10.3 | $11.0 | $9.1 | | Total Revenue | $59.4 | $58.5 | $56.8 | | Revenue Component ($ millions) | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | | Net Interest Income | $187.5 | $189.8 | | Non-Interest Income | $39.1 | $33.3 | | Total Revenue | $226.6 | $223.2 | Net Interest Income and Margin - Q4 2024 net interest income increased by $1.6 million (13.05% annualized) from Q3 2024, primarily due to targeted decreases in interest-bearing deposit rates following Federal Reserve rate cuts[15] - Full-year 2024 net interest income decreased by $2.4 million from 2023, as the increase in interest expense on deposits outpaced the growth in interest income from loans and other earning assets[18] | Net Interest Margin | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Net Interest Margin (GAAP) | 3.44% | 3.43% | 3.54% | | Cost of Interest-Bearing Liabilities | 3.03% | 3.21% | 2.89% | Non-Interest Income - Q4 2024 non-interest income was $10.3 million, down from $11.0 million in Q3 2024 due to increased net losses on equity securities, however, it was up from $9.1 million in Q4 2023, driven by higher wealth management fees and SBIC income[18] - Full-year 2024 non-interest income increased to $39.1 million from $33.3 million in 2023, primarily due to higher pass-through income from SBICs, increased gains on equity securities, and growth in wealth and asset management fees[18] Non-Interest Expense Total non-interest expense decreased in Q4 2024 to $37.8 million, down 2.52% from the prior quarter, mainly due to lower salaries and benefits from reduced incentive compensation accruals, while for the full year, expenses rose 3.21% to $150.0 million, driven by higher personnel costs from expansion and increased technology investments | Period | Total Non-Interest Expense ($ millions) | Change | | :--- | :--- | :--- | | Q4 2024 | $37.8 | -2.52% vs Q3 2024 | | Q3 2024 | $38.8 | | | Q4 2023 | $38.5 | | | Full-Year 2024 | $150.0 | +3.21% vs FY 2023 | | Full-Year 2023 | $145.3 | | - The quarterly decrease in expenses was primarily due to a reduction in salaries and benefits, related to lower incentive compensation accruals and the departure of an executive[17] - The annual increase in expenses was driven by higher personnel costs from merit increases and staffing in new markets (Cleveland, OH and Roanoke, VA), and increased technology and licensing costs[19] Income Taxes The effective tax rate remained relatively stable, with Q4 2024 at 19.14% (slightly lower than Q3 2024's 19.31%) and the full-year 2024 rate at 18.98% compared to 19.22% for 2023 | Period | Income Tax Expense ($ millions) | Effective Tax Rate | | :--- | :--- | :--- | | Q4 2024 | $3.6 | 19.14% | | Q3 2024 | $3.3 | 19.31% | | Q4 2023 | $3.2 | 18.45% | | Full-Year 2024 | $12.8 | 18.98% | | Full-Year 2023 | $13.8 | 19.22% | Asset Quality Asset quality metrics weakened in Q4 2024 due to increased nonperforming assets and higher net loan charge-offs, despite a stable allowance for credit losses ratio Asset Quality Metrics Asset quality weakened in Q4 2024, with nonperforming assets (NPAs) increasing to $59.5 million (0.96% of total assets) due to a large commercial real estate relationship moving to nonaccrual status, while the allowance for credit losses (ACL) as a percentage of total loans remained stable at 1.03%, but the coverage of nonaccrual loans decreased significantly to 84.08% due to the higher nonaccrual balance, and provision for credit losses increased to $2.9 million for the quarter to account for loan growth and higher charge-offs | Asset Quality Metric | Dec 31, 2024 | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Nonperforming Assets (NPAs) | $59.5 M | $42.0 M | $31.8 M | | NPAs / Total Assets | 0.96% | 0.70% | 0.55% | | ACL / Total Loans | 1.03% | 1.02% | 1.03% | | ACL / Nonaccrual Loans | 84.08% | 117.03% | 154.63% | | Credit Loss Metric ($ millions) | Q4 2024 | Q3 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses | $2.9 | $2.4 | $1.2 | | Net Loan Charge-offs | $2.1 | $1.2 | $1.2 | - Full-year 2024 net loan charge-offs were $7.5 million (0.17% of average loans), compared to $3.4 million (0.08%) for the full-year 2023[23] Capital Position The Corporation maintains a strong capital position with all regulatory ratios exceeding 'well-capitalized' levels, supported by a year-over-year increase in total shareholders' equity Capital Ratios The Corporation's capital position remains strong, with all regulatory capital ratios continuing to exceed 'well-capitalized' levels, and total shareholders' equity increased by $39.4 million year-over-year to $610.7 million, driven by retained earnings, with the tangible common equity to tangible assets ratio standing at 8.28% as of December 31, 2024 - Total shareholders' equity was $610.7 million at December 31, 2024, an increase of 6.91% from December 31, 2023, resulting from increased retained earnings and a decrease in accumulated other comprehensive loss[24] - Regulatory capital ratios for the Corporation continue to exceed regulatory 'well-capitalized' levels as of December 31, 2024[24] | Capital Ratio | Dec 31, 2024 | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Tangible Common Equity / Tangible Assets (Non-GAAP) | 8.28% | 8.45% | 8.22% | | Tier 1 Leverage Ratio | 10.43% | 10.59% | 10.54% | | Common Equity Tier 1 Ratio | 11.76% | 11.64% | 11.49% | | Total Risk-Based Ratio | 16.16% | 16.06% | 15.99% | Recent Events CNB Financial Corporation announced a definitive all-stock merger agreement with ESSA Bancorp, Inc., expected to close in Q3 2025 pending approvals Merger with ESSA Bancorp, Inc. On January 10, 2025, CNB Financial Corporation announced a definitive merger agreement with ESSA Bancorp, Inc. in an all-stock transaction, expected to close in the third quarter of 2025, pending regulatory and shareholder approvals - The Corporation entered into a definitive merger agreement with ESSA Bancorp, Inc. in an all-stock transaction[27] - Under the agreement, each share of ESSA Bancorp common stock will be converted into 0.8547 shares of CNB's common stock[27] - The transaction is expected to close in Q3 2025, subject to customary closing conditions, including regulatory and shareholder approvals[27] Consolidated Financial Statements The consolidated financial statements provide a detailed overview of the Corporation's financial performance and position, including income, balance sheet, and non-GAAP reconciliations Consolidated Income Statement The consolidated income statement details the components of the Corporation's earnings, showing Q4 2024 net interest income of $49.0 million and non-interest income of $10.3 million, leading to net income available to common shareholders of $14.0 million, while for the full year 2024, net interest income was $187.5 million and non-interest income was $39.1 million, resulting in net income available to common shareholders of $50.3 million | Income Statement ($ thousands) | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | 49,044 | 47,694 | 187,469 | 189,829 | | Provision for Credit Losses | 2,930 | 1,242 | 9,222 | 5,993 | | Total Non-Interest Income | 10,321 | 9,137 | 39,114 | 33,335 | | Total Non-Interest Expenses | 37,805 | 38,450 | 150,002 | 145,342 | | Net Income | 15,064 | 13,977 | 54,575 | 58,020 | | Net Income Available to Common | 13,988 | 12,901 | 50,273 | 53,718 | | Diluted EPS | $0.66 | $0.62 | $2.39 | $2.55 | Consolidated Balance Sheet The consolidated balance sheet shows total assets grew to $6.19 billion at year-end 2024, up from $5.75 billion at year-end 2023, funded by a significant increase in total deposits, which rose to $5.37 billion from $5.00 billion, and net loans receivable also increased to $4.56 billion | Balance Sheet ($ thousands) | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Cash and Cash Equivalents | 443,035 | 222,046 | | Net Loans Receivable | 4,561,599 | 4,422,644 | | Total Assets | 6,192,010 | 5,752,957 | | Total Deposits | 5,371,364 | 4,998,750 | | Total Liabilities | 5,581,315 | 5,181,710 | | Total Shareholders' Equity | 610,695 | 571,247 | Reconciliation of Non-GAAP Measures This section provides detailed reconciliations for non-GAAP financial measures used in the report, such as Tangible Book Value per Common Share, Pre-Provision Net Revenue (PPNR), fully tax-equivalent Net Interest Margin, and Return on Average Tangible Common Equity, which bridge the gap between reported GAAP figures and the adjusted metrics management uses to assess ongoing operational performance PPNR Reconciliation ($ thousands) | | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | 49,044 | 47,694 | 187,469 | 189,829 | | Add: Non-interest income | 10,321 | 9,137 | 39,114 | 33,335 | | Less: Non-interest expense | 37,805 | 38,450 | 150,002 | 145,342 | | PPNR (non-GAAP) | 21,560 | 18,381 | 76,581 | 77,822 | Tangible Book Value Reconciliation ($ thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Common Shareholders' Equity | 552,910 | 513,462 | | Less: Goodwill & Intangibles | 44,080 | 44,154 | | Tangible Common Equity (non-GAAP) | 508,830 | 469,308 |