CNB Financial Q3 Earnings Call Highlights

Key Points

• CNB Financial reported solid earnings momentum: Third-quarter diluted EPS was $0.91, while record first-nine-month EPS reached $2.69. Performance was supported by net interest margin, loan growth, organic deposits and higher wealth-management income.
• Loan demand remained strong despite a planned deposit reduction: Originated loans grew by more than $76 million in the third quarter, with a pipeline near $1 billion. Deposits declined overall because CNB exited $76.1 million of costly corporate deposits, but underlying deposits increased approximately $43.5 million.
• Margins and credit quality remained stable: Fully tax-equivalent net interest margin held at 3.89%, while nonperforming assets were 0.68% of total assets and year-to-date annualized net charge-offs were 0.10%. Management expects stable margins and is considering redeeming the remaining $35 million of subordinated debt by June 2027.

CNB Financial NASDAQ: CCNE reported third-quarter diluted earnings per share of $0.91, matching its second-quarter result and bringing earnings for the first nine months of 2026 to a record $2.69 per diluted share, President and Chief Executive Officer Michael Peduzzi said during the company’s earnings call.

Peduzzi said the year-to-date performance was supported by a favorable net interest margin, loan growth across commercial and consumer categories, organic deposit growth and increased wealth-management income. The company has also continued expanding its private banking structure and transitioning to a new retail investment platform, he said.

The company discussed a recast of certain 2025 comparative financial figures following its adoption of Accounting Standards Update 2025-08 after the July 2025 ESSA acquisition. Chief Financial Officer Tito Lima said the accounting change eliminated recognition of a previously reported day-one allowance for loan loss provision expense on acquired loans.

Lima said the change affected the timing of credit-loss expense recognition but did not affect the economics or cash flows of the acquired assets. The recast was not an error correction or restatement, and it had no impact on full-year 2025 results because third- and fourth-quarter effects offset each other by year-end, according to Peduzzi.

Loan Growth and Deposit Trends

Chief Operating Officer Michael Noah said originated loans, excluding purchased syndicated credits, increased by more than $76 million during the third quarter from second-quarter ending levels, representing a 4.7% annualized growth rate. Commercial and industrial lending led growth during the first half of the year, while commercial real estate, consumer residential mortgages and home equity loans contributed more significantly during the third quarter.

Loan activity during the quarter was led by the company’s Ridge View Bank market in Virginia, the ERIEBANK division spanning Erie, Pennsylvania, and the Greater Cleveland area, and the BankOnBuffalo market in western New York. Noah noted that Ridge View Bank marked its fifth anniversary and has grown to more than $500 million in earning assets.

Management said the company entered the fourth quarter with a healthy loan pipeline. Noah told analysts that the pipeline had remained near $1 billion for roughly two quarters, with growth broadly distributed across the company’s four-state footprint and six banking divisions.

Total deposits declined by $32.6 million from June 30, but management attributed that result to the planned exit of approximately $76.1 million of higher-cost corporate deposits carrying an average interest cost of 3.69%. Excluding that exit, deposits rose about $43.5 million, or 2.4% on an annualized basis, from the second quarter.

Noninterest-bearing deposits increased $13.5 million during the quarter, or 4.7% annualized, aided by expanded treasury-management customer relationships. Noah said the company is emphasizing checking, savings and core customer relationships, while using certificates of deposit as needed to maintain balances.

Management also pointed to deposit growth at FCBank in the Columbus, Ohio, market and at ESSA during the quarter. Peduzzi said CNB has placed larger and longer-term customer relationships into indexed deposit products, helping retain customers as market interest rates move.

Margin, Funding and Credit Quality

CNB’s fully tax-equivalent net interest margin was 3.89% in the third quarter, unchanged from the second quarter and up from 3.84% in the first quarter. Lima said core margin, excluding purchase accounting, increased to 3.75% during the quarter.

The company expects maintaining a stable margin through the fourth quarter and into 2027 would represent a positive outcome, Lima said. Management expects higher yields from new loan production and the investment portfolio to help offset competitive funding pressures. The company reported a loan yield above 6.3% in the third quarter and a loan-to-deposit ratio of 93.9%.

The cost of interest-bearing deposits declined two basis points from the second quarter to 2.40%, and was down 35 basis points from 2.75% in the third quarter of 2025. Lima said management expects its interest-bearing deposit beta to be in the range of 40%, although deposit pricing remains highly competitive.

If additional funding is needed to support loan growth, Lima said CNB would likely favor borrowings over brokered deposits because borrowings currently carry a lower funding cost. The company has approximately $2 billion of borrowing capacity at the Federal Home Loan Bank, he said.

Credit metrics remained stable, according to management. Nonperforming assets represented 0.68% of total assets as of Sept. 30, while annualized net charge-offs for the first nine months of the year were 0.10%. Available liquidity stood at 4.7 times adjusted uninsured deposits.

Capital, Technology and Outlook

The company’s tangible common equity-to-tangible assets ratio increased to 8.91% at the end of the third quarter from 8.81% at the end of the second quarter. Return on tangible common equity was 14.4%, while return on average assets was 1.33%, Lima said.

Peduzzi said CNB’s near-term capital priority is to redeem the remaining $35 million of subordinated debt after the company previously redeemed $50 million of an $85 million issuance. He said that, if performance continues as projected, the company expects to evaluate redeeming the remaining subordinated debt by June 2027. Management also cited potential future dividend increases, subject to board approval, and existing share repurchase authorization as capital-management options.

On expenses, Lima said fourth-quarter costs could increase modestly due in part to incentive compensation tied to earnings per share and efficiency performance. Management expects a reasonable increase in expenses during 2027, including technology investments.

Peduzzi said CNB has already made investments intended to support a company above $10 billion in assets, including audit, internal audit, liquidity, capital stress-testing and lending software capabilities. The company also has an internal task force evaluating artificial intelligence.

One current internal use case is an AI-based training tool called Harmony, which gives employees access to company policies, procedures and disclosure protocols. Peduzzi said the company is evaluating additional uses cautiously, prioritizing security and privacy while using test environments and automation tools to assess potential applications.

About CNB Financial (NASDAQ:CCNE)

CNB Financial Corporation is a bank holding company headquartered in Clearfield, Pennsylvania. Through its principal banking operations, the company provides community banking services to individuals, families, businesses and organizations.

Its products and services generally include checking and savings accounts, certificates of deposit, residential mortgages, consumer loans, commercial real estate financing and business loans. The company also offers electronic and mobile banking, cash-management services, investment and wealth-management solutions, and other financial services designed for personal and commercial customers.

CNB Financial serves communities primarily in Pennsylvania, Ohio and New York through a network of banking offices and digital channels.

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