Community National Bank Announces Earnings For Third Quarter Of 2014

MELVILLE, N.Y., Oct. 17, 2014 /PRNewswire/ -- Community National Bank (OTC: CBNY) today announced third quarter results for 2014.  Highlights for the quarter include:

• Net income of $1.3 million or $0.19 diluted earnings per share for the third quarter of 2014 compared to net income of $0.3 million or $0.04 diluted earnings per share for the same period in 2013. 
• Net income on a linked quarter basis grew 28% compared to the previous quarter
• Net interest income increased 16% or $1.1 million to $7.8 million for the quarter ended September 30, 2014 compared to $6.7 million for the quarter ended September 30, 2013.
• Return on average assets and equity of 0.56% and 6.86%, respectively, for the quarter ended September 30, 2014 compared to 0.13% and 1.42%, respectively, for the quarter ended September 30, 2013. 
• Loans grew $134.2 million or 22% to $749.8 million at September 30, 2014 when compared to September 30, 2013.
• Deposits increased $133.1 million or 19% to $826.1 million at September 30, 2014 compared to $693.0 million at September 30, 2013.
• Demand deposits grew $42.6 million or 23% to $224.3 million at September 30, 2014 compared to $181.7 million at September 30, 2013.

Net Income

Net income for the quarter ended September 30, 2014 was $1.3 million or $0.19 diluted earnings per share compared to net income of $0.3 million or $0.04 diluted earnings per share for the same period in 2013.  Net income for the nine months ended September 30, 2014 was $3.4 million or $0.51 diluted earnings per share compared to net income of $1.9 million or $0.30 diluted earnings per share for the same period in 2013, an increase of 72%. 

The increase in net income for both the quarter and nine months ended September 30, 2014 was due to higher net interest income associated with loan growth and lower provision for loan losses as well as increased fees from service charges and a rise in servicing and other income.  These increases were partially offset by higher non-interest expenses in all categories except advertising.

On a linked quarter basis, net income increased $0.3 million or 28% for the third quarter of 2014. The increase in net income on a linked quarter basis was due to higher net interest income attributable to loan growth and an increase in gains from the sale of SBA loans.  Non-interest expense increased slightly when compared to the linked quarter. 

Net Interest Income

For the quarter ended September 30, 2014, net interest income increased $1.1 million or 16% to $7.8 million compared to $6.7 million for the quarter ended September 30, 2013.  The net interest margin decreased by 19 basis points to 3.54% for the quarter ended September 30, 2014 from 3.73% for the quarter ended September 30, 2013.

For the nine months ended September 30, 2014, net interest income increased $3.4 million or 17% to $22.8 million compared to $19.4 million for the nine months ended September 30, 2013. The net interest margin decreased by 12 basis points to 3.66% for the nine months ended September 30, 2014 from 3.78% for the nine months ended September 30, 2013.

The increase in net interest income for the quarter and nine months ended September 30, 2014 was primarily due to continued growth in our commercial and residential loan portfolios and higher non-interest bearing demand deposits.

The decrease in the net interest margin from comparable periods in the prior year was due to: 1) new loan originations carrying lower yields and 2) the cost of average interest bearing liabilities increasing 2 basis points to 0.76% for the quarter ended September 30, 2014 from 0.74% for the quarter ended September 30, 2013. The increase in the cost of funds was mostly attributable to growth in longer duration certificates of deposit during the third quarter and the year. The Bank increased the duration on a portion of its certificates of deposits to hedge against higher interest rates. If interest rates continue to remain low, we expect to face a continued narrowing of our net interest margin as competition from other financial institutions put pressure on loan yields. 

Non-Interest Income

Non-interest income increased $0.1 million or 12% to $1.1 million for the quarter ended September 30, 2014 compared to $1.0 million for the prior year period. The increase in non-interest income was mostly attributable to increased fees from service charges and loan servicing and additional BOLI income. 

Non-interest income increased $0.2 million or 6.2% to $3.2 million for the nine months ended September 30, 2014 compared to $3.0 million for the nine months ended September 30, 2013. The increase was due to higher service charge fee income and servicing and other income, which were partially offset by lower gains from the sale of SBA loans and lower BOLI income.

Non-Interest Expense

Non-interest expense increased $0.7 million or 13% to $6.1 million for the quarter ended September 30, 2014 compared to $5.4 million for the same period in 2013. The increase was attributable to higher compensation and occupancy costs associated with (1) additional personnel in credit administration, operations and compliance; (2) additional branch personnel for our Hewlett branch, which opened in September 2013 and (3) higher depreciation expense related to our new corporate headquarters and branch location.  Other expenses increased approximately $0.1 million or 11% to $1.4 million for the three months ended September 30, 2014 from $1.3 million for the three months ended September 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 $945.0 million at September 30, 2014, an increase of $147.7 million or 19% when compared to total assets of $797.3 million at September 30, 2013. Total loans increased $134.2 million or 22% to $749.8 million at September 30, 2014 when compared to September 30, 2013. The commercial loan portfolio increased $95.8 million or 22% when compared to September 30, 2013 and the residential loan portfolio increased $38.4 million or 21% when compared to September 30, 2013. Loans were funded primarily by the growth in deposits.

Total deposits increased $133.1 million or 19% to $826.1 million at September 30, 2014 from $693.0 million at September 30, 2013. Demand deposits grew $42.6 million or 23% to $224.3 million at September 30, 2014 when compared to September 30, 2013.  The increase was due primarily to additional commercial business relationships. Demand deposits represented 27% of total deposits at September 30, 2014.  NOW, savings and money market deposits increased $43.0 million or 14% to $359.2 million at September 30, 2014 from $316.2 million at September 30, 2013. A significant portion of the money market deposit 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 $1.9 million or 0.26% of total loans at September 30, 2014 compared to $1.5 million or 0.25% of total loans at September 30, 2013. The Bank recorded $0.6 million in provision for loan losses during the third quarter of 2014 compared to $2.0 million for the third quarter of 2013.

The allowance for loan losses was $10.6 million or 1.42% of total loans at September 30, 2014, an increase of $1.7 million from $8.9 million or 1.45% of total loans at September 30, 2013.  The Bank had net charge-offs of $0.8 million during the third quarter of 2014 and did not have any charge-offs during the first two quarters of 2014.  A significant portion of the loans charged-off during the third quarter were SBA loans. 

The Bank did not own any foreclosed properties at September 30, 2014 and 2013, respectively.

The Bank continues to have significant capital strength with Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios of 8.42%, 11.15% and 12.40%, respectively, at September 30, 2014.

Further information about the financial condition and performance of Community National Bank is available from its Call Reports filed with the FDIC and available on the FDIC website at: http://www.fdic.gov/. The Bank expects to file its September 30, 2014 Call Report on or around October 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