Community National Bank Announces Earnings For Fourth Quarter Of 2012

GREAT NECK, N.Y., Jan. 23, 2013 /PRNewswire/ -- Community National Bank (SYMBOL: CBNY.OB) today announced fourth quarter and year-end results for 2012.  Highlights for the quarter and year include:

• Net income of $692 thousand or $0.10 per share for the fourth quarter of 2012 compared to net income of $447 thousand or $0.07 per share for the same period in 2011. 
• Net interest income increased 25% or $1.1 million to $5.6 million for the quarter ended December 31, 2012 compared to $4.5 million for the quarter ended December 31, 2011.
• Return on average assets and equity of 0.42% and 3.88%, respectively, for the quarter ended December 31, 2012 compared to 0.35% and 2.62%, respectively, for the quarter ended December 31, 2011.
• Commercial loans grew $101.1 million or 40% to $351.6 million at December 31, 2012 when compared to December 31, 2011.
• On a linked quarter basis, commercial loans increased $52 million or 17% when compared to $299.6 million at September 30, 2012.
• Deposits increased 32% or $138.1 million to $563.3 million at December 31, 2012 compared to $425.2 million at December 31, 2011.
• Demand deposits increased $61.3 million or 65% from December 31, 2011 to $155.9 million at December 31, 2012.
• Continued strong asset quality with non-performing assets to total assets of 0.22%, which is well below peer group average.
• Significant capital strength with Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios of 10.35%, 13.85% and 15.10%, respectively, at December 31, 2012.

Stuart Lubow, Chairman, President and Chief Executive Officer of Community National Bank, commented, "The Bank continued to make tremendous strides in 2012. The prior year's investments in talented lending and retail personnel, our branch network and operational infrastructure have given us strong momentum to meet our strategic goals of becoming Long Island's premier community bank.  This momentum resulted in commercial loan growth of $52 million for the fourth quarter and over $100 million for the year.  The remarkable growth resulted from our continued focus on building relationships with small and medium sized businesses.  These relationships helped increase demand deposits to $155.9 million at December 31, 2012, an increase of $61.3 million or 65% increase compared to prior year end.  In addition, the growth in commercial loans increased net interest income by $4 million and improved the net interest margin during the year.  These banking relationships have increased core non-interest income.  Core non-interest income net of loan and securities gains, increased $0.4 million or 30% to $1.8 million during 2012."

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Earnings and Net Interest Income

Net income for the quarter ended December 31, 2012 was $692 thousand or $0.10 basic earnings per share compared to net income of $447 thousand or $0.07 basic earnings per share for the same period in 2011, an increase of $245 thousand or 55%.  Net income for the twelve months ended December 31, 2012 was $2.9 million or $0.43 basic earnings per share compared to net income of $2.3 million or $0.35 basic earnings per share for the same period in 2011, an increase of $0.6 million or 23%.

The increase in net income for the three and twelve months ended December 31, 2012 was attributable to higher net interest income from commercial loan growth and lower provision for loan losses, which were partially offset by higher non-interest expenses associated with two new branch locations and increased personnel for lending, operations and compliance.

On a linked quarter basis, net income for the fourth quarter of 2012 decreased $267 thousand or 28% when compared to the third quarter of 2012.  While net interest income increased $0.3 million during the quarter, it was offset by higher provision for loan losses and lower gains from the sale of SBA loans and securities.  A significant portion of the commercial loans were originated at the end of the quarter. This resulted in less interest income to offset the general valuation reserves established on the new commercial loans.

Net interest income for the quarter ended December 31, 2012 increased $1.1 million or 25% to $5.6 million compared to $4.5 million for the quarter ended December 31, 2011.  The net interest margin decreased by ten basis points to 3.60% for the fourth quarter of 2012 compared to 3.70% for the same period in 2011.  Net interest income for the twelve months ended December 31, 2012 increased $4.0 million or 24% to $20.9 million compared to $16.9 million for the twelve months ended December 31, 2011.  The net interest margin increased by two basis points to 3.60% for the twelve months ended December 31, 2012 from 3.58% for the prior year period.

The increase in net interest income for both the quarter and twelve months ended December 31, 2012 was primarily due to (1) growth in our commercial loan portfolio; (2) higher non-interest bearing demand deposits; and (3) a continued decline in overall cost of funds on deposits.  The decrease in net interest margin for the quarter ended December 31, 2012 when compared to the prior year's quarter primarily resulted from lower yields on loans and mortgage backed securities from increased prepayments, loan refinancing, and competition.

Non-Interest Income

Non-interest income increased approximately $0.2 million or 26% to $0.9 million for the quarter ended December 31, 2012 compared to $0.7 million for the prior year quarter.  The increase in non-interest income for the quarter was due primarily to higher service charges, servicing income, prepayment fees and BOLI income, which were partially offset by lower gains on the sale of SBA loans.

Non-interest income for the twelve months ended December 31, 2012 decreased $0.7 million or 17% to $3.6 million compared to $4.3 million for the same period in 2011.  The decrease for the twelve months ended December 31, 2012 was primarily the result of a $1.3 million decline in gains on the sale of SBA loans.  The SBA loan volume decreased due to a change in the SBA guarantee percentage from 90% to 75%.  This was offset by higher non-interest income for service charges, servicing and other income as well as BOLI income for the twelve months ended December 31, 2012.

Non-Interest Expense

Non-interest expense increased $0.8 million or 22% to $4.6 million for the quarter ended December 31, 2012 from $3.8 million for the same period in 2011.  The increase was primarily attributable to higher compensation associated with the opening of our Manhattan branch location and the addition of senior personnel for operations and human resources, the hiring of a municipal banker and higher occupancy costs associated with the opening of the Manhattan branch.

Balance Sheet and Asset Quality

Total assets grew to $665.8 million at December 31, 2012, a 25% increase over total assets of $531.8 million at December 31, 2011.  Total loans increased $115.9 million or 29% to $511.6 million at December 31, 2012 when compared to December 31, 2011.  The commercial loan portfolio increased $101.1 million or 40% when compared to December 31, 2011.  The residential loan portfolio increased $14.7 million or 10% when compared to December 31, 2011.  The growth in the loan portfolio was funded by deposits from our new branch locations and municipal relationships as well as the continued development of core banking relationships, which were evident by the $61.3 million or 65% increase in demand deposits since December 31, 2011.

Our asset quality remains strong and a core focus during these challenging economic times.  Non-performing loans, including loans past due 90 days or more, increased by $0.2 million or 14% to $1.5 million or 0.28% of total loans at December 31, 2012 from $1.3 million or 0.32% of total loans at December 31, 2011.  Despite the slight increase in non-performing loans in dollars, the percentage of non-performing loans to total loans declined and remains at a low level compared to our peers.

The Bank had $0.8 million in provision for loan losses for the fourth quarter of 2012, an increase of $15 thousand or 1.9% when compared to the prior year quarter.  The allowance for loan losses was $6.6 million or 1.29% of total loans at December 31, 2012, an increase of approximately $1.8 million or 39% from $4.8 million or 1.20% of total loans at December 31, 2011.  The increase in the allowance for loan losses was due to general valuation reserves associated with the significant commercial loan growth throughout the period.  The Bank sold its one foreclosed commercial property at a price that approximated the carrying value of $0.5 million during the fourth quarter.

"While our commercial loan pipeline remains robust, we remain cognizant of the many challenges that our industry faces. The duration of this historical low interest rate environment and unprecedented quantitative easing by the Federal Reserve Bank has reduced yields on interest earning assets.  Over the past several years, the industry compensated for these lower asset yields by decreasing rates on customer accounts.  If the Federal Reserve Bank continues its current policy, the ability for banks to maintain margins will become increasingly more difficult.  In addition, the continued uncertainty with regard to debt and deficit reductions and the local impact from Hurricane Sandy are concerns management evaluates on a daily basis.  We have very strict underwriting standards; our loan portfolio is mostly adjustable in nature; and our investment portfolio is comprised of short-term U.S agency mortgage backed securities.  We constantly monitor the balance sheet mix for an eventual rise in interest rates." commented Mr. Lubow.

Deposits

Total deposits increased $138.1 million or 32% to $563.3 million at December 31, 2012 compared to $425.2 million at December 31, 2011.  Demand deposits grew $61.3 million or 65% to $155.9 million at December 31, 2012 when compared to December 31, 2011.

Further information about the financial condition and performance of Community National Bank is available from its Call Reports filed by the Bank with the FDIC and available on the FDIC website at: http://www2.fdic.gov/idasp/main_bankfind.asp. The Bank expects to file its December 31, 2012 Call Report on or around January 30, 2013.

ABOUT COMMUNITY NATIONAL BANK
Community National Bank is a Long Island based independent commercial bank and operates ten locations in Nassau, Suffolk, Queens and Manhattan County. We offer a full range of modern financial services, backed by state-of-the-art technology. In addition to commercial loans, commercial mortgages, small business loans and lines of credit and residential mortgages, CNB also provides a complete selection of traditional personal and commercial deposit products such as no fee individual and business checking accounts, IRA accounts and statement savings.

Cautionary Statement about Forward-Looking Statements

This release contains certain "forward looking statements" about CNB which, to the extent applicable, are intended to be covered by the safe harbor for forward looking statements provided under the Federal securities laws and, regardless of such coverage, you are cautioned about. Examples of forward-looking statements include but are not limited to, CNB's financial condition, capital ratios, results of operations and outlook. Forward-looking statements are not historical facts. Such statements may be identified by the use of such words as "may," "believe," "expect," "anticipate," "plan," "continue," or similar terminology. These statements relate to future events or our future financial performance and involve risks and uncertainties that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we caution you not to place undue reliance on these forward-looking statements. Factors which may cause our forward looking statements to be materially inaccurate include, but are not limited to, a unexpected deterioration in our loan portfolio, unexpected increases in our expenses, greater than anticipated growth, unanticipated regulatory action, unexpected changes in interest rates, a loss of key personnel, an unanticipated loss of existing customers, competition from other institutions causing us unanticipated changes in our deposit or loan rates, increases in FDIC insurance costs and unanticipated adverse changes in our customers' economic conditions or economic conditions in our local area generally. Forward-looking statements speak only as of the date of this press release We do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Community National Bank