CNB Financial Corporation (CCNE) Earnings Call Transcript & Summary
August 6, 2026
Earnings Call Speaker Segments
Operator
operatorGood afternoon, and welcome to the CNB Financial Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Michael Peduzzi, the President and CEO of CNB Financial Corporation and its main operating entity, CNB Bank. Please go ahead.
Michael Peduzzi
executiveGood afternoon. I'm Michael Peduzzi, the President and CEO of CNB Financial Corporation and its main operating entity, CNB Bank. I'm pleased to welcome you to this quarterly call to review our financial position and performance for the period ending June 30, 2026. Joining me today is our Chief Financial Officer, Tito Lima; our Chief Operating Officer, Michael Noah; and our Chief Credit Officer, Greg Dixon. Following the overview and presentation of our financial highlights, we will have time available for questions from those calling into today's presentation. I will begin by reviewing the key highlights of our performance and we will provide a quick refresher on our franchise and operating model. I will then turn over the discussion to Tito Lima to address some of the more notable specific measures. An underlying theme of our presentation will be the win-win results we have seen, including both the favorable realization of the projected benefits since our acquisition of ESSA in July 2025 and the parallel performance over that same period from the continued growth success in the core CNB Bank franchise in our legacy markets. Key goals of our franchise for both recent periods and as we look forward is to both realize the benefits of the scale from adding such a qualitative franchise that is now our ESSA division and promoting the sustainability of our earnings, revenues and expense control. Evidencing this, our second quarter 2026 earnings per share on a fully diluted basis of $0.91 reflected a continued growth over $0.88 for the first quarter of 2026. It was also a fourth consecutive quarter of EPS growth, exclusive of onetime merger-related and GAAP adoption cost since the second quarter of 2025 when we earned $0.61 per share, which was the last full quarter before our merger with ESSA in July 2025. Year-over-year, the second quarter of 2026 represents a very favorable 49% EPS improvement over the second quarter of 2025. Operating revenues increased from over $61 million for the second quarter of 2025 to over $87 million for the second quarter of 2026, reflecting a 43% increase year-over-year. Our efficiency ratio on a fully tax equivalent basis favorably decreased from just under 65% for the second quarter of 2025 to approximately 56% for the second quarter of 2026. As Tito Limo will discuss shortly, the year-over-year positive operating revenue, earnings accretion and improved expense management with our greater scale aligns with what we projected when modeling the merger, but we have performed even better than we modeled for the post-merger period because we have not only positively realized the expected accretion and efficiencies from the ESSA acquisition, in parallel, we have experienced sound growth in our core franchise and the five other banking divisions under CMB Bank. This gives us an opportunity to note, especially for our newest investors that although our banking entity is operated under one charter as CNB Bank, in markets outside of our original Central Pennsylvania region, we operate with divisions doing business under more regionally focused or market legacy brands. As of now, the corporation has six different branded operating divisions. The legacy CNB Bank operates in West Central Pennsylvania, headquartered in Clearfield and extending as far north as Bradford at the Pennsylvania, New York border, Eastward to State College and south to both Altoona and Westmoreland County in Pennsylvania. The other divisions of CNB Bank include a region in Northwestern Pennsylvania and ERIE extending across Northeast Ohio into the Greater Cleveland market, where we successfully operate in that region as ERIEBANK. In Western New York, extending from Buffalo to Rochester, we operate as BankOnBuffalo. In the Greater Columbus, Ohio market, where we entered more than 10 years back with the acquisition of the Farmers Citizens Bank, we now operate as FCBank. In the Southern Virginia market, headquartered in Roanoke, Virginia and extending the neighboring states, we operate as Ridge View Bank. And of course, with our 2025 acquisition, we operate in Northeastern Pennsylvania as ESSA Bank, which covers not only ESSA's legacy market in East Stroudsburg, Pennsylvania, but also with meaningful retail and commercial presence in the Allentown, Bethlehem, Easton, and Wilkes-Barre Scranton corridors. Tito, I think will give our investors a quick summary of the key indicators of our current positive performance and an updated profile of our franchise and where we are able to generate our operating success. So now I'll ask you to share even greater details and insight into our critical financial measures.
Tito Lima
executiveThank you, Mike. Good afternoon, everyone. Our second quarter this year continued to demonstrate the strength of CNB's financial performance, credit quality and capital build. I'll start my remarks on Slide four of the earnings supplement deck. Our earnings per common share of $0.91 for the second quarter of this year reflected an impressive increase of 13.7% on an annualized basis from last quarter, driven primarily by our net interest margin. Our return on tangible common equity for the second quarter of this year remained strong at 15.2% and exceeded our prior quarter level of 14.9%. In the meantime, our fully tax equivalent net interest margin of 3.89% for the second quarter compared to 3.84% in our last quarter. As it relates to capital, as a result of our continued strong level of earnings and profitability, CNB's tangible book value per common share increased at an annualized rate of 12.7% during the second quarter compared to the prior quarter. This level of growth, coupled with a dividend yield of approximately 2%, provides an attractive total return for our shareholders. Slide 5, please. As it relates to growth, our originated loans, which excludes syndicated loans, grew at an annualized rate of 4.1% during the second quarter compared to our prior quarter. Even more impressively, the primary driver of originated loan growth was our commercial and industrial loan portfolio, which grew at an annualized rate of 18.2% in the second quarter compared to the prior quarter as a result of our team's relentless focus on this highly profitable portion of our loan portfolio. In relation to funding of our growth, deposits, including deposits held for sale, declined at an annualized rate of 3.8% from our last quarter, driven solely by our net interest margin strategy, aimed at deploying excess liquidity towards exiting higher interest cost, single thread deposit relationships. Excluding the impact of this corporate strategy, our deposits, including deposits held for sale increased at an annualized rate of 4% in the second quarter compared to the last quarter. Even more impressively, our noninterest-bearing deposits grew at an annualized rate of 8.1% during the second quarter compared to the last quarter, driven primarily by growth in our Treasury Management Business, which continues to deliver impressive levels of growth and profitability. As it relates to liquidity, our available liquidity continues to be strong at 4.8x the level of adjusted uninsured deposits. Last but certainly not least, our overall credit quality profile remains strong and stable. This concludes my remarks.
Michael Peduzzi
executiveTito, thank you so much for this detail. And yes, as fundamental to our strength in capital and liquidity management is our historical commitment and track record of sound credit quality. Just to review some key metrics related to this. Our ACL to loans was 1.04%, both in the second quarter and first quarter. Net charge-offs were 9 basis points in Q2 and 6 basis points in Q1. Delinquency is relatively stable at 81 basis points for the second quarter and 80 basis points for the first quarter with a very diligent collections team continuing to see opportunities for workouts and seeking to even further reduce these levels. Our nonperforming assets to total assets was 69 basis points in the second quarter versus 58 points in the first quarter. The increase was more of a one-off credit than an industry or policy settings matter. So like any bank, we always seek minimal issues with our portfolio, and we believe these measures are not out of alignment with the general conservative risk profile of our underwriting practices. We remain very fortunate to have someone of Greg Dixon's caliber and experience as our Chief Credit Officer. Much like we are fortunate to have an executive and financial manager of your caliber as our CFO, Tito, and we appreciate the quality and transparency you continue to provide the management, Board and current and prospective investors of CNB. At this time, we will now turn to the Q&A segment of this call.
Operator
operator[Operator Instructions] Our first question today comes from Daniel Cardenas with Brean Capital.
Daniel Cardenas
analystSo, with ESSA now, you're one year into the transaction. Maybe if you could provide us some color as to your thoughts on additional M&A transactions and then perhaps your thoughts on organic growth via loan production offices over the next, say, 12 to 18 months?
Michael Peduzzi
executiveThank you, Daniel, for your question. This is Mike. I'll handle the question regarding the M&A. We're really pleased with how well ESSA has worked out. Really, I think it was a great effort on our team for due diligence and everything. And why I say that is, as we just passed the 12-month anniversary, we're really realizing all the expected benefits. We're accreting even more than we expected from the ESSA side of the deal. And in parallel, because our core divisions have done so well, we're looking at an earn-back period of probably less than 18 months versus what we originally modeled as three years. So that's going very well. We still think that with the merger having happened in July 2025 and the conversion in November 2025, we're making sure that everything in this post six-, seven-month period since the system conversion is all working smoothly. It has so far. We believe we have the scale to continue to add on, and we will look for those opportunities. I will tell you, Daniel, that it's probably focused as much on not only qualitative growth, which is what we're always going to do, but also looking forward toward the $10 billion threshold that we don't want to just acquire and crawl right up to that line. As you know, the Durbin Amendment impact and everything would be significant. And we believe we're going to grow very well, both organically in both interest income and noninterest income to support that change when it happens. But I would suggest that as opportunities come, probably focused mostly within gaps in our four-state current area, we will take advantage of that. But I would expect for the rest of this year, the key focus right now is continuing to maximize the benefit of this ESSA merger. And then as far as LPOs go and things like that, Dan, that's a really great question because that's been a good philosophy for us. Although we're early on with ERIEBANK and some of our other de novos, we kind of went headfirst in with say multiple branches in one state. When we think about Roanoke, which was our last de novo, we started with an LPO and now it's three branches and looking to be four. So, as we identify markets that have great C&I particular opportunities because then that pairs with that treasury management, we will most definitely look towards that. I think when we think about our core legacy division, we, for years, were right here near State College and mostly use that as an LPO. After kind of making that an LPO on steroids, I'll call it, we now have a full branch presence there and probably looking to even further expand our state college presence. So, we'll look at areas that are contiguous to CNB. If you think about Ohio and we're in Columbus and Cleveland, there's areas like Dayton and Akron that provide us those kind of opportunities. Certainly, being in ESSA, we have 5 great cities to work with Allentown, Bethlehem, East Stroudsburg, Wilkes-Barre, and Scranton. That's a great opportunity. So, I don't know that we'll do any LPOs up there, but that is a good strategy that we'll continue to deploy to fill in the gaps, Daniel. Thanks again for your question.
Operator
operatorAnd that does conclude our question-and-answer session. I would like to turn the conference back over to Michael Peduzzi for any closing remarks. Sir?
Michael Peduzzi
executiveThank you. We greatly appreciate the confidence so many of you have in CNB Financial Corporation, notifying sustain and in some cases, increasing investment positions in our company stock. We also recognize the importance of your time. We hope we're able to provide you some valuable insights into our performance and financial condition through the second quarter of 2026. In closing, I want to provide two recognitions of key changes to our management and Board. In the second quarter, we welcomed George Leugers as the President of our FCBank division in the Greater Columbus, Ohio market. George replaces Jenny Saunders. Jenny retired from the same position this past April, and George now brings to us an extensive commercial banking background and tremendous market knowledge and experience. He's really been impactful and fully engaged in the short period since he started with us. We look forward to George providing the leadership for continued growth and market penetration in our FCBank division. Also of note, Board member, Gary Olson, resigned from his Board position that he had held since the ESSA acquisition in July 2025. Although Gary's service as a Board member was relatively short with CNB, his service with ESSA Bancorp extended over 40 years, including several as the President and CEO and a Board member of ESSA Bancorp to the time of the merger with CNB. ESSA's incredible Golden Rule culture aligns so well with that here at CNB and the highly qualitative banking franchise that now serves as our ESSA Bancorp division is a testament to Gary's dedication and the strength and soundness of his leadership for decades. We thank him for all he has done for ESSA prior to the merger, thank him for his collaborative efforts and guidance through the due diligence and merger integration processes, and we thank him for his Board support for CNB this past year. Thank you.
Operator
operatorThank you, sir, and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful evening.
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