CNB FINANCIAL CORP/PA [CCNE] Filings

10-Q 1 ccne-20230331.htm 10-Q ccne-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-39472

CNB FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Pennsylvania						25-1450605
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1 South Second Street

P.O. Box 42

Clearfield, Pennsylvania 16830

(Address of principal executive offices)

Registrant’s telephone number, including area code, (814) 765-9621

Securities registered pursuant to Section 12(b) of the Act:

Title of Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

CCNE

The NASDAQ Stock Market LLC

Depositary Shares (each representing a 1/40th interest in a share of 7.125% Series A Non-Cumulative, perpetual preferred stock)

CCNEP

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares outstanding of the issuer’s common stock as of May 2, 2023:

COMMON STOCK, NO PAR VALUE PER SHARE: 21,062,596 SHARES

Table of Contents

INDEX

PART I.

FINANCIAL INFORMATION


			Page Number

ITEM 1 – Financial Statements

Condensed Consolidated Balance Sheets March 31, 202 3 (unaudited) and December 31, 202 2 (audited)			1

Condensed Consolidated Statements of Income – Three months ended March 3 1 , 202 3 and 202 2 (unaudited)			2

Condensed Consolidated Statements of Comprehensive Income – Three months ended March 3 1 , 202 3 and 202 2 (unaudited)			3

Condensed Consolidated Statements of Changes in Shareholders' Equity – Three months ended March 3 1 , 202 3 and 202 2 (unaudited)			4

Condensed Consolidated Statements of Cash Flows – Three months ended March 3 1 , 202 3 and 202 2 (unaudited)			5

Notes to Condensed Consolidated Financial Statements			7

ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			43

ITEM 3 – Quantitative and Qualitative Disclosures about Market Risk			62

ITEM 4 – Controls and Procedures			63

PART II. OTHER INFORMATION

ITEM 1 – Legal Proceedings			64

ITEM 1A – Risk Factors			64

ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds			64

ITEM 3 – Defaults Upon Senior Securities			65

ITEM 4 – Mine Safety Disclosures			65

ITEM 5 – Other Information			65

ITEM 6 – Exhibits			66

Signatures			67

Table of Contents

Forward-Looking Statements and Factors that Could Affect Future Results

The information below 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 the financial condition, liquidity, results of operations, future performance and business of CNB Financial Corporation (“CNB”). 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.

Factors that could cause the actual results to differ materially from the statements, include, but are not limited to, (i) adverse changes or conditions in capital and financial markets, including actual or potential stresses in the banking industry; (ii) changes in interest rates; (iii) the duration and scope of a pandemic, including the lingering impacts of the COVID-19 pandemic, and the local, national and global impact of a pandemic; (iv) changes in general business, industry or economic conditions or competition; (v) 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; (vi) higher than expected costs or other difficulties related to integration of combined or merged businesses; (vii) the effects of business combinations and other acquisition transactions, including the inability to realize our loan and investment portfolios; (viii) changes in the quality or composition of our loan and investment portfolios; (ix) adequacy of loan loss reserves; (x) increased competition; (xi) loss of certain key officers; (xii) deposit attrition; (xiii) rapidly changing technology; (xiv) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xv) changes in the cost of funds, demand for loan products or demand for financial services; and (xvi) other economic, competitive, governmental or technological factors affecting our operations, markets, products, services and prices. Such developments could have an adverse impact on CNB's financial position and results of operations.

The forward-looking statements contained herein are based upon management’s beliefs and assumptions. Any forward-looking statement made herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. CNB undertakes no obligation to publicly update or revise any forward-looking statements included in this Quarterly Report on Form 10-Q, 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 might not occur and you should not put undue reliance on any forward-looking statements.

Table of Contents

Part I Financial Information

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share data


	(unaudited)
	March 31, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	51,206	$	58,884
Interest-bearing deposits with Federal Reserve	132,696		43,401
Interest-bearing deposits with other financial institutions	4,691		4,000
Total cash and cash equivalents	188,593		106,285
Debt securities available-for-sale, at fair value (amortized cost of $422,920 and $432,992, respectively)	368,607		371,409
Debt securities held-to-maturity, at amortized cost (fair value $371,735 and $367,388, respectively)	402,300		404,765
Equity securities	9,416		9,615
Loans held for sale	448		231
Loans receivable
PPP loans, net of deferred processing fees	144		159
Syndicated loans	148,085		156,649
Loans	4,153,068		4,118,370

Total loans receivable	4,301,297		4,275,178
Less: allowance for credit losses	(43,981)		(43,436)
Net loans receivable	4,257,316		4,231,742
FHLB and other restricted stock holdings and investments	31,194		30,715
Premises and equipment, net	70,572		68,535
Operating lease right-of-use assets	34,618		32,307
Bank owned life insurance	112,287		111,523
Mortgage servicing rights	1,738		1,804
Goodwill and other intangibles	43,874		43,749
Core deposit intangible, net	342		364
Accrued interest receivable and other assets	62,029		62,135
Total Assets	$	5,583,334	$	5,475,179
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing demand deposits	$	810,623	$	898,437
Interest-bearing demand deposits	958,756		1,007,202
Savings	2,442,903		2,270,337
Certificates of deposit	541,847		446,461
Total deposits	4,754,129		4,622,437
Short-term borrowings	102,083		132,396

Subordinated debentures	20,620		20,620
Subordinated notes, net of unamortized issuance costs	84,040		83,964
Operating lease liabilities	36,114		33,726
Accrued interest payable and other liabilities	39,921		51,274
Total liabilities	5,036,907		4,944,417
Commitments and contingent liabilities
Preferred stock, Series A non-cumulative perpetual, $0 par value; $1,000 liquidation preference; shares authorized 60,375; Shares issued 60,375 at March 31, 2023 and December 31, 2022	57,785		57,785
Common stock, no par value; 50,000,000 shares authorized; Shares issued 21,235,503 at March 31, 2023 and 21,235,503 at December 31, 2022	—		—
Additional paid in capital	219,561		221,553
Retained earnings	318,629		306,911
Treasury stock, at cost (118,575 shares at March 31, 2023 and 114,157 shares December 31, 2022)	(2,867)		(2,967)
Accumulated other comprehensive loss	(46,681)		(52,520)
Total shareholders’ equity	546,427		530,762
Total Liabilities and Shareholders’ Equity	$	5,583,334	$	5,475,179

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Dollars in thousands, except per share data


	Three Months Ended March 31,
	2023		2022
INTEREST AND DIVIDEND INCOME:
Loans receivable including fees
Interest and fees on loans receivable	$	62,327	$	41,150
Processing fees on PPP loans	1		1,237
Securities:
Taxable	4,030		3,614
Tax-exempt	197		219
Dividends	85		34
Total interest and dividend income	66,640		46,254
INTEREST EXPENSE:
Deposits	16,699		2,706
Borrowed funds and finance lease liabilities	1,263		5
Subordinated notes and debentures (includes $(45) and $67 accumulated other comprehensive income reclassification for change in fair value of interest rate swap agreements, respectively)	1,039		926
Total interest expense	19,001		3,637
NET INTEREST INCOME	47,639		42,617
PROVISION FOR CREDIT LOSS EXPENSE	1,290		1,643
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSS EXPENSE	46,349		40,974
NON-INTEREST INCOME:
Service charges on deposit accounts	1,795		1,757
Other service charges and fees	631		655
Wealth and asset management fees	1,817		1,783
Net realized gains on available-for-sale securities (includes $22 and $651 accumulated other comprehensive income reclassifications for net realized gains on available-for-sale securities, respectively)	22		651
Net realized and unrealized losses on equity securities	(286)		(394)
Mortgage banking	168		475
Bank owned life insurance	764		694
Card processing and interchange income	2,059		1,809
Other non-interest income	1,072		2,224
Total non-interest income	8,042		9,654
NON-INTEREST EXPENSES:
Compensation and benefits	17,045		16,988
Net occupancy expense	3,566		3,230

Technology expense	4,258		3,372
State and local taxes	1,050		1,048
Legal, professional, and examination fees	845		837
Advertising	544		620
FDIC insurance premiums	873		723
Dues and subscriptions	506		600
Card processing and interchange expenses	1,490		1,029

Other non-interest expenses	3,813		3,445
Total non-interest expenses	33,990		31,892
INCOME BEFORE INCOME TAXES	20,401		18,736
INCOME TAX EXPENSE (includes $14 and $124 income tax expense from reclassification items, respectively)	3,912		3,491
NET INCOME	16,489		15,245
PREFERRED STOCK DIVIDENDS	1,075		1,075
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	15,414	$	14,170
AVERAGE COMMON SHARES OUTSTANDING:
Basic	21,042,579		16,810,725
Diluted	21,077,531		16,844,106
PER COMMON SHARE DATA:
Basic Earnings Per Common Share	$	0.73	$	0.84
Diluted Earnings Per Common Share	$	0.73	$	0.84

Cash Dividends Declared	$	0.175	$	0.175

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

Dollars in thousands


	Three Months Ended March 31,
	2023		2022
NET INCOME	$	16,489	$	15,245
Other comprehensive income (loss), net of tax:
Net change in fair value of derivative instruments:
Unrealized gain (loss) on interest rate swaps, net of tax $0 and $(42), respectively	(1)		158
Reclassification adjustment for (gains) losses recognized in earnings, net of tax $9 and $(13), respectively	(36)		54
	(37)		212
Net change in debt securities:
Unrealized holding gains (losses) on available-for-sale securities arising during the period, net of tax of $(1,531) and $7,070, respectively	5,760		(26,600)
Amortization of unrealized (gains) losses from held-to-maturity securities, net of tax of $(35) and $14, respectively	133		(51)
Reclassification adjustment for realized losses included in net income, net of tax of $5 and $137, respectively	(17)		(514)
	5,876		(27,165)


Other comprehensive income (loss)	5,839		(26,953)
COMPREHENSIVE INCOME (LOSS)	$	22,328	$	(11,708)

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Dollars in thousands, except share and per share data


	Preferred Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Share- holders’ Equity
Balance, January 1, 2023	$	57,785	$	221,553	$	306,911	$	(2,967)	$	(52,520)	$	530,762
Net income					16,489						16,489
Other comprehensive loss									5,839		5,839
Forfeiture of restricted stock award grants (2,061 shares)			50				(50)				—
Restricted stock award grants (97,859 shares)			(2,547)				2,547				—
Performance based restricted stock award grants (4,118 shares)			(111)				111				—
Stock-based compensation expense			616								616



Purchase of treasury stock (100,000 shares)							(2,405)				(2,405)
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (3,750 shares)							(89)				(89)
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (584 shares)							(14)				(14)


Preferred cash dividend declared					(1,075)						(1,075)
Cash dividends declared ($0.175 per common share)					(3,696)						(3,696)
Balance, March 31, 2023	$	57,785	$	219,561	$	318,629	$	(2,867)	$	(46,681)	$	546,427

Balance, January 1, 2022	$	57,785	$	127,351	$	260,582	$	(2,477)	$	(394)	$	442,847
Net income					15,245						15,245
Other comprehensive loss									(26,953)		(26,953)

Restricted stock award grants (56,159 shares)			(976)				976				—
Performance based restricted stock award grants (11,895 shares)			(173)				173				—
Stock-based compensation expense			501								501



Purchase of treasury stock (50,166 shares)							(1,342)				(1,342)
Purchase of treasury stock for the purpose of tax withholding related to restricted stock award vesting (7,546 shares)							(202)				(202)
Purchase of treasury stock for the purpose of tax withholding related to performance based restricted stock award vesting (4,706 shares)							(126)				(126)
Preferred cash dividend declared					(1,075)						(1,075)
Cash dividends declared ($0.175 per common share)					(2,960)						(2,960)
Balance, March 31, 2022	$	57,785	$	126,703	$	271,792	$	(2,998)	$	(27,347)	$	425,935

See Notes to Condensed Consolidated Financial Statements

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Dollars in thousands



	Three Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	16,489	$	15,245
Adjustments to reconcile net income to net cash provided by operations:
Provision for credit loss expense	1,290		1,643
Depreciation and amortization of premises and equipment, operating leases assets, core deposit intangible, and mortgage servicing rights	1,923		1,758
Accretion of securities, deferred loan fees and costs, net yield and credit mark on acquired loans, and unearned income	(1,334)		(985)
Net amortization of deferred costs on borrowings	76		75
Accretion of deferred PPP processing fees	(1)		(1,237)
Net realized gains on sales of available-for-sale securities	(22)		(651)
Net realized and unrealized losses on equity securities	286		394
Gain on sale of loans held for sale	(92)		(724)

Proceeds from sale of loans receivable	2,856		9,731
Origination of loans held for sale	(3,381)		(15,645)
Income on bank owned life insurance	(764)		(694)

Restricted stock compensation expense	616		501

Increase in accrued interest receivable and other assets	277		(3,102)
Increase in accrued interest payable, lease liabilities, and other liabilities	(13,405)		(2,521)
NET CASH PROVIDED BY OPERATING ACTIVITIES	4,814		3,788
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, prepayments and calls of available-for-sale securities	10,820		30,475
Proceeds from sales of available-for-sale securities	9,659		22,164
Purchase of available-for-sale securities	(10,603)		(30,181)
Proceeds from maturities, prepayments and calls of held-to-maturity securities	2,698		7,220
Purchases of held-to-maturity securities	—

CNB FINANCIAL CORP/PA [CCNE] Filings
10-Q	[2023-05-03]
10-K	[2023-03-03]
10-Q	[2022-11-02]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-03-03]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-03-04]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-03-05]
10-Q	[2019-11-06]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-07]
10-Q	[2018-11-08]
10-Q	[2018-08-09]
10-Q	[2018-05-03]
10-K	[2018-03-08]
10-Q	[2017-11-09]
10-Q	[2017-08-04]
10-Q	[2017-05-04]
10-K	[2017-03-10]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-05]
10-K	[2016-03-04]
10-Q	[2015-11-05]
10-Q	[2015-08-06]
10-Q	[2015-05-07]
10-K	[2015-03-06]
10-Q	[2014-11-06]
10-Q	[2014-08-07]
10-Q	[2014-05-08]
10-K	[2014-03-07]
10-Q	[2013-11-07]
10-Q	[2013-08-08]
10-Q	[2013-05-09]
10-K	[2013-03-08]
10-Q	[2012-11-08]
10-Q	[2012-08-09]
10-Q	[2012-05-04]
10-K	[2012-03-09]