Business context and reporting period
CNB Financial Corporation is a Pennsylvania-based financial holding company whose principal subsidiary, CNB Bank, provides commercial and consumer banking, lending, and wealth-management services across Pennsylvania, Ohio, New York, and Virginia. This Form 10-K covers the fiscal year ended December 31, 2023; comparisons are primarily with 2022. CNB launched Impressia Bank, a division focused on women business owners and leaders, in 2023.
Financial results and position
| Metric | 2023 | 2022 |
|---|---|---|
| Total assets, year-end | $5.753 billion | $5.475 billion |
| Total loans, year-end | $4.468 billion | $4.275 billion |
| Total deposits, year-end | $4.999 billion | $4.622 billion |
| Net interest income | $189.8 million | $189.7 million |
| Net income | $58.0 million | $63.2 million |
| Net income available to common shareholders | $53.7 million | $58.9 million |
| Diluted earnings per common share | $2.55 | $3.26 |
| Operating cash flow | $47.0 million | $64.1 million |
| Year-end cash and cash equivalents | $222.0 million | $106.3 million |
- Revenue and margins: Net interest income plus non-interest income was $223.2 million, down from $224.4 million. GAAP net interest margin was 3.63%, versus 3.83%; the fully tax-equivalent margin was 3.61%, versus 3.82%.
- Costs and returns: Non-interest expense rose 5.6% to $145.3 million. The efficiency ratio increased to 65.13% from 61.32%; return on average equity fell to 10.54% from 13.86%.
- Credit quality: Provision for credit losses was $6.0 million, down from $8.6 million, while net loan charge-offs increased to $3.4 million from $2.1 million. Nonperforming assets rose to $31.8 million (0.55% of assets) from $23.5 million (0.43%). The allowance for loan losses was $45.8 million, or 1.03% of loans.
- Liquidity and funding: Deposits increased 8.1%; the mix shifted toward savings and certificates of deposit, while noninterest-bearing and interest-bearing demand deposits declined. Estimated uninsured deposits were $1.439 billion, or 28.2% of Bank deposits; excluding affiliate and pledged-collateralized balances, management reported $937.1 million, or 18.37%. Total available liquidity and borrowing capacity was approximately $3.572 billion, about 4.0 times that adjusted uninsured-deposit amount.
- Debt and capital: Short-term FHLB borrowings were zero at year-end, down from $132.4 million. Subordinated debentures and notes totaled approximately $104.9 million. Consolidated CET1, total risk-based capital, and leverage ratios were 11.49%, 15.99%, and 10.54%, respectively; the Bank was classified as well capitalized.
- Securities: AFS securities had $53.9 million of gross unrealized losses and HTM securities had $28.4 million at year-end, attributed primarily to higher interest rates; management recorded no credit-loss allowance on these securities. Shareholders’ equity increased 7.6% to $571.2 million, partly as accumulated other comprehensive losses improved.
Material changes versus 2022
- Common earnings declined 8.8%, and diluted EPS fell 21.8%. Management cited higher deposit costs and dilution from the September 2022 common-stock offering, which issued over 4.2 million shares.
- Asset yields rose, but funding costs rose faster: average interest-bearing deposit cost increased to 2.42% from 0.52%. Net interest income was nearly flat despite loan growth.
- Loans grew approximately 5.9% on management’s adjusted measure, with growth in Cleveland, Roanoke, Buffalo, Columbus, and Private Banking. Syndicated loans declined to $108.7 million from $156.6 million.
- Cash and cash equivalents more than doubled, while total deposits grew; CNB attributed deposit growth partly to treasury-management relationships and deposit-insurance-sharing programs. Brokered deposits increased to $208.3 million from $24.1 million, and reciprocal deposits to $739.3 million from $4.6 million.
- Nonperforming assets increased, including new nonaccrual commercial and industrial and commercial real estate relationships. The allowance-to-nonaccrual-loan coverage ratio decreased to 154.63% from 206.98%.
- Operating cash flow declined; investing cash outflow narrowed substantially as net loan growth and securities activity were lower than in 2022.
Outlook, risks, contingencies, and unusual items
- The filing provides no specific earnings, revenue, loan-growth, or margin guidance. Management expects existing cash, deposits, loan and securities cash flows, and wholesale funding access to meet obligations and commitments; it reports no known event or regulatory recommendation expected to materially impair liquidity or capital.
- Management identifies deposit pricing and retention, interest-rate volatility, credit deterioration, regional economic conditions, and commercial real estate as key risks. Office loans totaled $114.7 million (2.57% of loans); one customer relationship, $508 thousand, was on nonaccrual.
- At year-end, modeled 12-month net interest income sensitivity ranged from +2.6% for a +300-basis-point rate shock to -12.8% for a -300-basis-point shock. The filing notes that these simulations rely on assumptions and assume no balance-sheet growth.
- Other material risks include securities valuation and liquidity, uninsured-deposit flows, cybersecurity and third-party vendor disruption, regulatory change, and competition. The FDIC announced a special assessment, with collections beginning in 2024; the filing does not provide a clear amount for CNB’s assessment.
- 2023 included approximately $1.4 million of one-time interest income, primarily from syndicated-loan payoffs. Non-interest income declined, including lower mortgage banking and SBIC pass-through income; technology and occupancy costs increased.
- The company declared common dividends of $0.70 per share for 2023. Future dividends and repurchases remain subject to Board discretion, regulatory limits, capital needs, and the Bank’s ability to upstream funds.
- No material pending legal proceedings were reported. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; the allowance for credit losses and goodwill impairment assessment were identified as critical audit matters. No goodwill impairment was recorded.
Important facts for investors to verify
- Whether deposit growth is durable and what higher deposit pricing, brokered and reciprocal funding, and uninsured-deposit exposure mean for funding costs and liquidity.
- Whether the rise in nonperforming loans and assets continues, especially in commercial and industrial, commercial real estate, and office exposures, and whether reserves remain adequate.
- How net interest margin and earnings respond to rate changes as deposits reprice and variable-rate loans reset; compare actual results with the filing’s sensitivity scenarios.
- How securities fair values and accumulated unrealized losses evolve, and whether liquidity needs could require securities sales before recovery.
- Whether loan growth, expense investment, and new-market initiatives translate into sustainable profitability and improved efficiency.
- The eventual FDIC special-assessment cost, as well as any effect on 2024 expenses and capital returns.