CNB Financial Q2 2026 Earnings Call Transcript

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August 6, 2026

Key Takeaways

  • Positive Sentiment: Second-quarter EPS rose to $0.91, up from $0.88 in the first quarter and 49% year over year, marking the fourth consecutive quarter of adjusted EPS growth. Operating revenue increased 43% year over year to more than $87 million, while the efficiency ratio improved to approximately 56%.
  • Positive Sentiment: The fully tax-equivalent net interest margin expanded to 3.89% from 3.84%, supporting a 15.2% return on tangible common equity and 12.7% annualized growth in tangible book value per share.
  • Positive Sentiment: Originated loans grew at a 4.1% annualized rate in the quarter, led by an 18.2% increase in commercial and industrial loans. Excluding the planned runoff of high-cost deposits, deposits grew 4% annualized, while non-interest-bearing deposits increased 8.1% due largely to treasury management growth.
  • Negative Sentiment: Credit metrics remained generally stable but weakened modestly, with non-performing assets rising to 69 basis points of total assets from 58 basis points and net charge-offs increasing to 9 basis points from 6 basis points. Management attributed the NPA increase primarily to a one-off credit issue.
  • Positive Sentiment: Management said the ESSA acquisition is performing ahead of expectations, with an anticipated earn-back period of less than 18 months versus the originally modeled three years. CNB remains open to additional acquisitions and selective loan production offices, particularly within its existing four-state footprint, while remaining mindful of the $10 billion regulatory threshold.
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Earnings Conference Call
CNB Financial Q2 2026
00:00 / 00:00

Transcript Sections

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Operator

I would now like to turn the conference over to Michael Peduzzi, the President and Chief Executive Officer of CNB Financial Corporation and its main operating entity, CNB Bank. Please go ahead.

Michael Peduzzi
President and CEO at CNB Financial Corporation

Good afternoon. I'm Michael Peduzzi, the President and Chief Executive Officer 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 30th, 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 in to today's presentation. I will begin by reviewing the key highlights of our performance and 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.

Michael Peduzzi
President and CEO at CNB Financial Corporation

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 and 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.

Michael Peduzzi
President and CEO at CNB Financial Corporation

It was also a fourth consecutive quarter of EPS growth, exclusive of one-time 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.

Michael Peduzzi
President and CEO at CNB Financial Corporation

As Tito Lima 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. 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 in the five other banking divisions under CNB 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.

Michael Peduzzi
President and CEO at CNB Financial Corporation

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 of 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 then Farmers Citizens Bank, we now operate as FCBank. In the Southern Virginia market, headquartered in Roanoke, Virginia, and extending to neighboring states, we operate as Ridge View Bank.

Michael Peduzzi
President and CEO at CNB Financial Corporation

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 that gives 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
Tito Lima
Senior EVP, CFO, and Treasurer at CNB Financial Corporation

Thank you, Mike. Good afternoon, everyone. Our second quarter of this year continued to demonstrate the strength of CNB's financial performance, credit quality, and capital build. I will 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 the 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.

Tito Lima
Tito Lima
Senior EVP, CFO, and Treasurer at CNB Financial Corporation

As it relates to capital, as a result of a 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 our dividend yield of approximately 2%, provides an attractive total return for our shareholders. Slide five, 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.

Tito Lima
Tito Lima
Senior EVP, CFO, and Treasurer at CNB Financial Corporation

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 non-interest-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.

Tito Lima
Tito Lima
Senior EVP, CFO, and Treasurer at CNB Financial Corporation

Mike, last but certainly not least, our overall credit quality profile remains strong and stable. This concludes my remarks.

Michael Peduzzi
President and CEO at CNB Financial Corporation

Tito, thank you so much for this detail. 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 non-performing 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.

Michael Peduzzi
President and CEO at CNB Financial Corporation

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. 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

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. Once again, that's star then one if you have a question. As a reminder, ladies and gentlemen, if you do have a question, please press star then one at this time. Our first question today comes from Daniel Cardenas with Brean Capital. Please go ahead.

Daniel Cardenas
Daniel Cardenas
Analyst at Brean Capital

Hey, good afternoon, guys.

Michael Peduzzi
President and CEO at CNB Financial Corporation

Hey, Daniel. Good to hear from you.

Daniel Cardenas
Daniel Cardenas
Analyst at Brean Capital

Thanks. Same. 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, 12-18 months.

Michael Peduzzi
President and CEO at CNB Financial Corporation

Thank 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. 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. That's going very well. We still think 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.

Michael Peduzzi
President and CEO at CNB Financial Corporation

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. We believe we're going to grow very well, both organically and both on interest income and non-interest income to support that change when it happens. I would suggest that as opportunities come, probably focus mostly within gaps in our four-state current area. We will take advantage of that.

Michael Peduzzi
President and CEO at CNB Financial Corporation

I would expect for the rest of this year, the key focus right now is continuing to maximize the benefit of this ESSA merger. As far as LPOs go and things like that, Daniel, that's a really great question because that's been a good philosophy for us. Although 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. 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.

Michael Peduzzi
President and CEO at CNB Financial Corporation

I think when we think about our core legacy division, we, for years, were right here near State College and mostly used 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. 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 an ESSA, we have five great cities to work with Allentown, Bethlehem, East Stroudsburg, Wilkes-Barre, Scranton. That's a great opportunity. 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.

Daniel Cardenas
Daniel Cardenas
Analyst at Brean Capital

Great. Thanks. I'll step back for right now.

Operator

Thank you. That does conclude our question and answer session. I'd like to turn the conference back over to Michael Peduzzi for any closing remarks. Sir?

Michael Peduzzi
President and CEO at CNB Financial Corporation

Thank you. We greatly appreciate the confidence so many of you have in CNB Financial Corporation, noted by your sustained 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 welcome 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 this short period since he started with us.

Michael Peduzzi
President and CEO at CNB Financial Corporation

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 Bank extended over 40 years, including several as the President and CEO and a board member of ESSA Bank up to the time of the merger with CNB. ESSA's incredible golden rule culture that aligns so well with that here at CNB and the highly qualitative banking franchise that now serves as our ESSA Bank division is a testament to Gary's dedication and the strength and soundness of his leadership for decades.

Michael Peduzzi
President and CEO at CNB Financial Corporation

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, We thank him for his board support for CNB this past year. Thank you.

Operator

Thank you, sir. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.

Executives
    • Tito Lima
      Tito Lima
      Senior EVP, CFO, and Treasurer
Analysts
    • Michael Peduzzi
      President and CEO at CNB Financial Corporation
    • Daniel Cardenas
      Analyst at Brean Capital
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