Community National Bank Announces Earnings For Second Quarter Of 2014

MELVILLE, N.Y., July 18, 2014 /PRNewswire/ -- Community National Bank (OTC: CBNY) today announced second quarter results for 2014.  Highlights for the quarter include:

• Net income of $1.1 million or $0.15 per share for the second quarter of 2014 compared to net income of $0.8 million or $0.12 per share for the same period in 2013. 
• Net interest income increased 13% or $0.9 million to $7.4 million for the quarter ended June 30, 2014 compared to $6.5 million for the quarter ended June 30, 2013.
• Return on average assets and equity of 0.48% and 5.51%, respectively, for the quarter ended June 30, 2014 compared to 0.44% and 4.36%, respectively, for the quarter ended June 30, 2013. 
• Commercial loans grew $137.0 million or 37% to $509.2 million at June 30, 2014 when compared to June 30, 2013.
• Deposits increased $205.1 million or 35% to $790.3 million at June 30, 2014 compared to $585.2 million at June 30, 2013.
• Demand deposits grew $50.7 million or 30% to $220.6 million at June 30, 2014 compared to $169.9 million at June 30, 2013.

Net Income

Net income for the quarter ended June 30, 2014 was $1.1 million or $0.15 diluted earnings per share compared to net income of $0.8 million or $0.12 diluted earnings per share for the same period in 2013, an increase of 29%. Net income for the six months ended June 30, 2014 was $2.1 million or $0.31 diluted earnings per share compared to net income of $1.7 million or $0.26 diluted earnings per share for the same period in 2013, an increase of 22%. 

The increase in net income for both the quarter and six months ended June 30, 2014 was due to higher net interest income associated with loan growth, lower provision for loan losses and increased fees from service charges and loan servicing income.  The increases were partially offset by lower gains from the sale of SBA loans and higher non-interest expenses associated with our new branch located in Hewlett, New York and our new corporate headquarters in Melville, New York.  These two facilities opened during the third quarter of 2013.

On a linked quarter basis, net income for the second quarter of 2014 declined slightly.  Net income for the second quarter of 2014 did not include $385 thousand in loan prepayment penalties that were received from borrowers and recorded during the first quarter of 2014. In addition, gains on the sale of SBA loans decreased by $552 thousand. These items were partially offset by declines of $435 thousand in the provision for loan losses and $128 thousand in non-interest expenses. 

Net Interest Income

For the quarter ended June 30, 2014, net interest income increased $0.9 million or 13% to $7.4 million compared to $6.5 million for the quarter ended June 30, 2013. The net interest margin decreased by 24 basis points to 3.60% for the quarter ended June 30, 2014 from 3.81% for the quarter ended June 30, 2013.

For the six months ended June 30, 2014, net interest income increased $2.3 million or 18% to $15.0 million compared to $12.7 million for the six months ended June 30, 2013. The net interest margin decreased by 9 basis points to 3.72% for the six months ended June 30, 2014 from 3.81% for the six months ended June 30, 2013.

The increase in net interest income for the quarter and six months ended June 30, 2014 was primarily due to (1) continued growth in our commercial and residential loan portfolios; (2) higher non-interest bearing demand deposits; and (3) a decline in the cost of average interest bearing deposits.

The decrease in the net interest margin from comparable periods in the prior year was due to new loan originations carrying lower yields and re-pricing downward at a faster pace than average interest bearing liabilities. If interest rates continue to remain low, we expect to face a continued narrowing of our net interest margin as the cost of funds on deposits reaches a floor and competition from other financial institutions continue to put pressure on loan yields. 

Non-Interest Income

Non-interest income decreased $0.3 million or 29% to $0.8 million for the quarter ended June 30, 2014 compared to $1.1 million for the prior year period. The decrease in non-interest income was attributable to lower gains from the sale of SBA loans, which was partially offset by increased fees from service charges and loan servicing income. 

Non-Interest Expense

Non-interest expense increased $0.6 million or 12% to $5.9 million for the quarter ended June 30, 2014 compared to $5.3 million for the same period in 2013. The increase was attributable to higher compensation and occupancy costs associated with (1)  our Hewlett branch location; (2) the addition of a new Senior Credit Officer and other personnel in loan administration and bank operations; and (3) increased depreciation expense for our new corporate headquarters and branch location.  Other expenses increased approximately $100 thousand or 10% to $1.4 million for the three months ended June 30, 2014 from $1.3 million for the three months ended June 30, 2013.  The increase was mostly attributable to higher data and item processing costs, compliance costs and FDIC assessments. 

Balance Sheet

Total assets grew to $908.8 million at June 30, 2014, an increase of $190.8 million or 27% when compared to total assets of $718.0 million at June 30, 2013. Total loans increased $175.2 million or 32% to $723.5 million at June 30, 2014 when compared to June 30, 2013. The commercial loan portfolio increased $137.0 million or 37% when compared to June 30, 2013 and the residential loan portfolio increased $38.3 million or 22% when compared to June 30, 2013. Loans were funded primarily by the growth in deposits.

Total deposits increased $205.1 million or 35% to $790.3 million at June 30, 2014 from $585.2 million at June 30, 2013. Demand deposits grew $50.7 million or 30% to $220.6 million at June 30, 2014 when compared to June 30, 2013.  The increase was due primarily to additional commercial business relationships. Demand deposits represented 28% of total deposits at June 30, 2014.  NOW, savings and money market deposits increased $100.6 million or 44% to $331.3 million at June 30, 2014 from $230.7 million at June 30, 2013. A significant portion of the money market growth was from new and existing municipal banking relationships.

Asset Quality & Capital

Non-performing loans, which consist of loans past due 90 days or more, were $2.7 million or 0.37% of total loans at June 30, 2014 compared to $2.1 million or 0.39% of total loans at June 30, 2013. The Bank recorded $0.5 million in provision for loan losses during the second quarter of 2014 compared to $1.0 million for the second quarter of 2013. The Bank did not own any foreclosed properties at June 30, 2014 and 2013, respectively.

The allowance for loan losses was $10.9 million or 1.51% of total loans at June 30, 2014, an increase of $2.7 million from $8.2 million or 1.50% of total loans at June 30, 2013. 

The Bank continues to have significant capital strength with Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios of 8.94%, 11.42% and 12.68%, respectively, at June 30, 2014.

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://www.fdic.gov/. The Bank expects to file its June 30, 2014 Call Report on or around July 30, 2014.

ABOUT COMMUNITY NATIONAL BANK
Community National Bank is a Long Island based independent commercial bank and operates eleven locations in Nassau, Suffolk, Queens and Manhattan Counties. 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