Community National Bank Announces Earnings for Third Quarter of 2012

Community National Bank Announces Earnings for Third Quarter of 2012

GREAT NECK, N.Y.--(BUSINESS WIRE)-- Community National Bank (SYMBOL: CBNY.OB) today announced third quarter results for 2012. Highlights for the quarter include:

  • Net income of $960 thousand or $0.14 per share for the third quarter of 2012 compared to net income of $611 thousand or $0.09 per share for the same period in 2011.

  • Net interest income increased 23% or $1.0 million to $5.3 million for the quarter ended September 30, 2012 compared to $4.3 million for the quarter ended September 30, 2011.

  • Net interest margin declined five basis points to 3.56% for the quarter ended September 30, 2012 from 3.61% for the same period in 2011.

  • Commercial loans grew $76.3 million or 34% to $299.6 million at September 30, 2012 when compared to September 30, 2011.

  • Deposits increased 35% or $141.6 million to $542.3 million at September 30, 2012 compared to $400.7 million at September 30, 2011.

  • Demand deposits increased $48.5 million or 55% from September 30, 2011 to $136.4 million at September 30, 2012.

  • Received regulatory approval to open our eleventh branch, which will be located in Hewlett, Long Island.

  • Continued strong asset quality with non-performing assets to total assets of 0.31%, 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 10.70%, 15.28% and 16.53%, respectively, at September 30, 2012.

  • Return on average assets and equity of 0.60% and 5.46%, respectively, for the quarter ended September 30, 2012.

Stuart Lubow, Chairman, President, and CEO of Community National Bank, stated, "The Bank continues to execute its strategy of building commercial loan and demand deposit relationships. Our commercial loan portfolio reached the $300 million plateau and core demand deposits were $136 million or 25% of total deposits at September 30, 2012. We recently received regulatory approval to open our eleventh branch location in Hewlett. This branch should open in the second half of 2013. Our asset quality remains strong as evidenced by a non-performing loan to total loan ratio of 0.31% at September 30, 2012. While we are satisfied with our recent accomplishments, we believe the recent announcement by the Federal Reserve Bank for unlimited quantitative easing and guidance that they intend to keep interest rates low until 2015, coupled with the uncertain political and economic climate could result in further yield compression on interest earning assets and margins in the future."


Earnings and Net Interest Income

Net income for the quarter ended September 30, 2012 was $960 thousand or $0.14 basic earnings per share compared to net income of $610 thousand or $0.10 basic earnings per share for the same period in 2011, an increase of $349 thousand or 57%. Net income for the nine months ended September 30, 2012 was $2.2 million or $0.32 basic earnings per share compared to net income of $1.9 million or $0.28 basic earnings per share for the same period in 2011, an increase of $290 thousand or 16%.

The increase in net income for both the quarter and nine months ended September 30, 2012 was attributable to higher net interest income and lower provisions for loan losses, which were partially offset by increased expenses associated with branch expansion and the hiring of additional commercial lenders.

On a linked quarter basis, net income for the third quarter of 2012 increased $288 thousand or 42% when compared to the second quarter of 2012 due primarily to an increase in net interest income and gains from the sale of SBA loans and investments, which were partially offset by expenses associated with the opening of our Manhattan branch location.

Net interest income for the quarter ended September 30, 2012 increased $1.0 million or 23% to $5.3 million compared to $4.3 million for the quarter ended September 30, 2011. The net interest margin decreased by five basis points to 3.56% for the third quarter of 2012 compared to 3.61% for the same period in 2011. Net interest income for the nine months ended September 30, 2012 increased $2.9 million or 23% to $15.3 million compared to $12.4 million for the nine months ended September 30, 2011. The net interest margin increased during these corresponding periods by six basis points to 3.60% for the nine months ended September 30, 2012 from 3.54% for the prior year period.

The increase in net interest income for both the quarter and nine months ended September 30, 2012 was primarily due to (1) growth in our commercial and residential loan portfolios; (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 September 30, 2012 when compared to the prior year's quarter primarily resulted from yields on loans and mortgage backed securities being under pressure from increased prepayments, loan refinancing activity and competition.

Non-Interest Income

Non-interest income increased approximately $244 thousand or 24% to $1.3 million for the quarter ended September 30, 2012 compared to $1.0 million for the prior year's quarter. Non-interest income for the nine months ended September 30, 2012 decreased $0.9 million or 25% to $2.8 million compared to $3.7 million for the same period in 2011. The increase in non-interest income for the quarter was due primarily to higher income across all categories, especially gains on the sale of SBA loans and investments. Despite the increase for the quarter, non-interest income was down for the nine months ended September 30, 2012 when compared to the corresponding period last year due primarily from a decline in gains on the sale of SBA loans. The lower gains from the sale of SBA loans were partially offset by higher non-interest income in all other categories for the nine months ended September 30, 2012.

Non-Interest Expense

Non-interest expense increased $841 thousand or 22% to $4.6 million for the quarter ended September 30, 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, the hiring of our New York City commercial lending team, support staff, and a Director of Municipal Banking and higher occupancy costs associated with the opening of the Melville and New York City branch locations.

Balance Sheet and Asset Quality

Total assets grew to $643.9 million at September 30, 2012, a 28% increase over total assets of $502.2 million at September 30, 2011. Total loans increased $86.3 million or 23% to $458.4 million at September 30, 2012 when compared to September 30, 2011. The commercial loan portfolio increased $76.3 million or 34% when compared to September 30, 2011. The residential loan portfolio increased $10 million or 6.7% when compared to September 30, 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 $48 million or 55% increase in demand deposits since September 30, 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, decreased $0.1 million or 7% to $1.5 million or 0.32% of total loans at September 30, 2012 from $1.6 million or 0.42% of total loans at September 30, 2011.

The Bank had $475 thousand in provision for loan losses for the third quarter of 2012, a decrease of $135 thousand or 22% when compared to the prior year quarter. The allowance for loan losses was $5.9 million or 1.29% of total loans at September 30, 2012, an increase of approximately $1.6 million or 36% from $4.3 million or 1.16% of total loans at September 30, 2011. The increase in the allowance for loan losses was due to general valuation reserves associated with the significant loan growth throughout the period.

The Bank had one property classified as other real estate owned, which totaled $0.5 million at September 30, 2012.

Deposits

Total deposits increased $141.7 million or 35% to $542.4 million at September 30, 2012 compared to $400.7 million at September 30, 2011. Demand deposits grew $48.4 million or 55% to $136.4 million at September 30, 2012 when compared to September 30, 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 September 30, 2012 Call Report on or around October 30, 2012.

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.

COMMUNITY NATIONAL BANK
STATEMENTS OF INCOME
Unaudited

For The Three Months Ended

For The Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2012

2011

2012

2011

Interest Income:

Commercial Loans

$4,198,087

$3,224,839

$11,923,062

$9,148,301

Residential and Consumer Loans

1,631,210

1,766,392

4,900,144

5,055,137

Securities

587,751

576,097

1,799,226

1,947,580

Money Market Investments

11,183

18,762

28,478

24,522

Total Interest Income

6,428,231

5,586,090

18,650,910

16,175,540

Interest Expense:

NOW, Savings & Money Market

234,914

146,285

673,883

422,976

Certificates of Deposit

707,539

933,213

2,272,297

2,851,475

Borrowed Funds

138,624

159,332

444,347

543,646

Total Interest Expense

1,081,077

1,238,830

3,390,527

3,818,097

Net Interest Income

5,347,154

4,347,260

15,260,383

12,357,443

Provision For Loan Losses

475,000

610,000

1,393,000

1,843,000

Net Interest Income After Provision for Loan Losses

4,872,154

3,737,260

13,867,383

10,514,443

Non-Interest Income:

Service Charges

140,704

112,896

441,160

351,823

Loan Fees & Servicing Income

136,067

70,620

309,030

251,815

Gain on Sale of Investments

141,217

99,447

273,793

130,829

Gain on Sale of Loans

656,256

565,406

1,219,189

2,502,973

BOLI Income

177,812

159,713

525,108

451,930

Total Non-Interest Income

1,252,056

1,008,082

2,768,280

3,689,370

Non-Interest Expense:

Compensation and Benefits

2,355,625

1,821,239

6,772,330

5,473,629

Occupancy and Equipment

1,168,866

984,176

3,379,179

2,870,420

Advertising

59,409

35,222

158,794

124,766

Other Expenses

1,039,594

941,942

2,978,496

2,793,756

Total Non-Interest Expense

4,623,494

3,782,579

13,288,799

11,262,571

Income Before Income Taxes

1,500,716

962,763

3,346,864

2,941,242

Provision For Income Taxes

541,050

351,800

1,188,004

1,072,600

Net Income

$959,666

$610,963

$2,158,860

$1,868,642

Earnings Per Share:

Basic

$0.14

$0.09

$0.32

$0.28

Diluted

$0.14

$0.09

$0.32

$0.28

Weighted Average Shares Outstanding - Basic

6,673,181

6,673,181

6,673,181

6,673,181

Weighted Average Shares Outstanding - Diluted

6,697,675

6,709,187

6,693,592

6,698,389

COMMUNITY NATIONAL BANK
STATEMENTS OF INCOME
Unaudited

For the Three Months Ended

September 30,

June 30,

December, 31

September 30,

2012

2012

2011

2011

Interest Income:

Commercial Loans

$4,198,087

$3,984,291

$3,444,917

$3,224,839

Residential and Consumer Loans

1,631,210

1,640,173

1,674,388

1,766,392

Securities

587,751

626,625

563,730

576,097

Money Market Investments

11,183

10,216

9,258

18,762

Total Interest Income

6,428,231

6,261,305

5,692,293

5,586,090

Interest Expense:

NOW, Savings & Money Market

234,914

235,288

176,588

146,285

Certificates of Deposit

707,539

754,517

865,295

933,213

Borrowed Funds

138,624

149,253

154,795

159,332

Total Interest Expense

1,081,077

1,139,058

1,196,678

1,238,830

Net Interest Income

5,347,154

5,122,247

4,495,615

4,347,260

Provision For Loan Losses

475,000

475,000

785,000

610,000

Net Interest Income After Provision for Loan Losses

4,872,154

4,647,247

3,710,615

3,737,260

Non-Interest Income:

Service Charges

140,704

158,438

116,268

112,896

Loan Fees & Servicing Income

136,067

79,510

84,421

70,620

Gain on Sale of Investments

141,217

-

-

99,447

Gain on Sale of Loans

656,256

442,252

329,743

565,406

BOLI Income

177,812

186,034

160,155

159,713

Total Non-Interest Income

1,252,056

866,234

690,587

1,008,082

Non-Interest Expense:

Compensation and Benefits

2,355,625

2,258,229

1,933,852

1,821,239

Occupancy and Equipment

1,168,866

1,139,060

1,029,566

984,176

Advertising

59,409

52,360

62,139

35,222

Other Expenses

1,039,594

1,018,972

772,346

941,942

Total Non-Interest Expense

4,623,494

4,468,621

3,797,903

3,782,579

Income Before Income Taxes

1,500,716

1,044,860

603,299

962,763

Provision For Income Taxes

541,050

372,754

156,000

351,800

Net Income

$959,666

$672,106

$447,299

$610,963

Earnings Per Share:

Basic

$0.14

$0.10

$0.07