CNB_AR_12_layout.qxd:CNB_AnnualReport08_v 3/4/13 8:03 AM Page 1 annual report 2012 CNB Financial Corporation 1 South Second Street P.O. Box 42 Clearfield, PA 16830 800-492-3221 www.bankcnb.com CNB_AR_12_layout.qxd:CNB_AnnualReport08_v 3/4/13 8:03 AM Page 3 TABLE OF CONTENTS Consolidated Financial Highlights Message to Shareholders Executive Management and Board of Directors Officers Shareholder Information 3 4 7 8 10 CNB FINANCIAL CORPORATION | 2012 ANNUAL REPORT HIGHLIGHTS 2 CNB_AR_12_layout.qxd:CNB_AnnualReport08_v 3/4/13 8:03 AM Page 5 consolidated financial highlights (in thousands, except per share data) MESSAGE TO THE SHAREHOLD ERS FOR THE YEAR 2012 2011 % Change To Our Shareholders, Customers, Employees & Friends: Interest Income Interest Expense Net Interest Income Non-interest Income Non-interest Expense Net Income Net Income Return on: Average Assets Average Equity AT YEAR END $68,129 14,920 53,209 12,561 35,945 17,136 1.00% 12.17% 65,712 17,579 48,133 10,719 33,282 15,104 1.00% 12.36% Assets Loans, net of unearned Deposits Shareholders’ Equity Trust Assets Under Management (at market value) $1,773,079 927,824 1,485,003 145,364 $1,602,207 849,883 1,353,851 131,889 387,446 336,285 PER SHARE DATA Net Income, diluted Dividends Book Value Market Value $1.38 0.66 11.65 16.38 $1.23 0.66 10.66 15.78 3.7% (15.1%) 10.5% 17.2% 8.0% 13.5% 10.7% 9.2% 9.7% 10.2% 15.2% 12.2% 0.0% 9.3% 3.8% Once again, CNB achieved double digit growth in earnings of 13%. This marks the fourth consecutive year and indicates the strength of the core earnings of CNB. This earnings growth has mainly resulted from the continued increase in earning assets, which grew 12% in 2012. In addition, for the first time in five years, the loan to deposit ratio did not decrease as it remained basically unchanged. The Corporation has realized improvement in the quality of its assets during 2012. The ratio of non-performing assets to total assets is at its lowest point in three years at 0.85%. This trend, coupled with a strong loan loss allowance of 1.52% of outstanding loans, complements a balance sheet that hasn’t been reduced in order to increase earnings. The mix of the loan portfolio between three major categories also portrays positive diversity. The portfolio consists of 28% Commercial and Industrial Loans, 28% Commercial Real Estate (including both owner occupied and non-owner occupied), and 44% Consumer related products. During 2012, ERIEBANK expanded its operations in Meadville by opening a second office. Also, ERIEBANK Investment Advisors (EBIA) began to operate. EBIA offers all financial planning and investment solutions for the ERIEBANK market area which includes Erie, Crawford, and Warren counties. Holiday Financial Services Corporation also increased its service area in the third quarter of 2012 by opening offices in DuBois and Ebensburg, Pennsylvania, and by purchasing a $1 million dollar loan portfolio from another consumer discount company. As many of you are aware, CNB’s geographic footprint is primarily in the Marcellus shale gas exploration region. Since 2007, our market area has been affected by these significant gas reserves. While many outside the region believe that the effects on the local economy from gas exploration could be significant, our experience has shown this to be a slow moving area for exploration of the gas. Much infrastructure needs to be built in order to transport the gas from our region to the markets. In addition, very low natural gas prices have positively impacted our market area in that slow and steady progress is much less disruptive than the rapid boom and bust of normal oil and gas cycles. 3 CNB FINANCIAL CORPORATION | 2012 ANNUAL REPORT HIGHLIGHTS 4 CNB_AR_12_layout.qxd:CNB_AnnualReport08_v 3/4/13 8:03 AM Page 7 ASSET GROWTH (in thousands) $ 850 $ 900 $ 950 $ 1,000 $ 1,050 $ 1,100 $ 1,150 $ 1,200 $ 1,250 $ 1,300 $ 1,350 $ 1,400 $ 1,450 $ 1,500 $ 1,550 $ 1,600 $ 1,650 $ 1,700 $ 1,750 $ 1,800 $1,016,518 $1,161,591 $1,413,511 $1,602,207 $1,773,079 DEPOSIT GROWTH (in thousands) $ 600 $ 650 $ 700 $ 750 $ 800 $ 850 $ 900 $ 950 $ 1000 $ 1050 $ 1100 $ 1150 $ 1200 $1250 $1300 $1350 $1400 $1450 $1500 $814,596 $956,858 $1,162,868 $1,353,851 $1,485,003 2008 2009 2010 2011 2012 NET INTEREST INCOME (in thousands) $ 35 $ 36 $ 37 $ 38 $ 39 $ 40 $ 41 $ 42 $ 43 $ 44 $ 45 $ 46 $ 47 $ 48 $ 49 $ 50 $ 51 $ 52 $ 53 $ 54 $36,600 $37,402 $42,091 $48,133 $53,209 MESSA GE TO THE SHAREHOLD ERS Message to Shareholders continued… Many challenges remain for the financial services industry, the most significant of which is regulation. While most of the regulation is well intended, implementation of the regulations has caused credit to be more expensive, or in some cases, not available. CNB is working diligently to minimize these effects on consumers by still offering residential mortgage products at all of our 29 locations. It is our intention to maintain “old time” customer service by enhancing the efficiency of our operations. A second challenge is the continued low interest rate cycle. As rates remain low, assets continue to reprice at much lower rates, which causes the net interest margin to contract. This contraction has been ongoing for several years and has made growth in earnings increasingly difficult. We expect this trend will continue in 2013. Due to our continued growth, CNB proudly announced in 2012 the expansion of our main office facility. We expect the new facility to open in the fourth quarter of 2013. Our existing main office will then undergo remodeling in order to better utilize the space and create a more enjoyable work environment for our staff. As always, we thank you for your continued ownership in CNB. We are proud to report the Corporation’s 2012 results and look forward to another positive year in 2013. EARNINGS PER SHARE (fully diluted) $ 0.65 $ 0.70 $ 0.75 $ 0.80 $ 0.85 $ 0.90 $ 0.95 $ 1.00 $ 1.05 $ 1.10 $ 1.15 $ 1.20 $ 1.25 $ 1.30 $ 1.35 $ 1.40 Joseph B. Bower, Jr. President and Chief Executive Officer 2008 $0.61 2009 2010 2011 2012 $0.98 $1.06 $1.23 $1.38 CNB FINANCIAL CORPORATION | 2012 ANNUAL REPORT HIGHLIGHTS 6 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 5 CNB_AR_12_layout.qxd:CNB_AnnualReport08_v 3/4/13 8:03 AM Page 9 EXECUTIVE MANAGEMENT & BOARD OF DIRECTORS Corporate Officers, CNB Financial Corporation Joseph B. Bower, Jr. President & Chief Executive Officer Brian W. Wingard Treasurer & Principal Financial Officer Richard L. Greslick, Jr. Secretary Vincent C. Turiano Assistant Secretary Executive Officers, CNB Bank Joseph B. Bower, Jr. President & Chief Executive Officer Mark D. Breakey Executive Vice President & Chief Credit Officer Richard L. Greslick, Jr. Executive Vice President & Chief Operating Officer Brian W. Wingard Senior Vice President & Chief Financial Officer Richard L. Sloppy Executive Vice President & Chief Lending Officer Vincent C. Turiano Senior Vice President/ Operations Board of Directors CNB Financial Corporation and CNB Bank Dennis L. Merrey Chairman of the Board Retired, Formerly President, Clearfield Powdered Metals, Inc. (Manufacturer) Joseph B. Bower, Jr. President and Chief Executive Officer, CNB Financial Corporation; President and Chief Executive Officer, CNB Bank William F. Falger Retired, Formerly President and Chief Executive Officer, CNB Financial Corporation, CNB Bank Richard L. Greslick, Jr. Secretary, CNB Financial Corporation; Executive Vice President & Chief Operating Officer, CNB Bank Robert W. Montler President & Chief Executive Officer, Lee Industries and Keystone Process Equipment (Manufacturers) Joel E. Peterson President, Clearfield Wholesale Paper (Wholesaler) Deborah Dick Pontzer Economic Development and Workforce Specialist, Office of Congressman Glenn Thompson Jeffrey S. Powell President, J.J. Powell, Inc. (Petroleum Distributor) Charles H. Reams President, C.H. Reams & Associates, Inc. (Insurance) James B. Ryan Retired, Formerly Vice President of Sales, Marketing, Windfall Products, Inc. (Manufacturer) Richard B. Seager President and Chief Executive Officer, Beacon Light Behavioral Health Systems (Health Services) Peter F. Smith Attorney at Law DIRECTOR EMERITUS L. E. Soult, Jr. Administrative Services Timothy Bracken, Vice President, Controller Mary Ann Conaway Vice President, Human Resources Leanne D. Kassab Vice President, Marketing Thomas J. Ammerman, Jr. Assistant Vice President, Security Donna J. Collins Assistant Vice President, Compliance Carolyn B. Smeal Assistant Vice President, Operations Edward H. Proud Vice President, Information Systems Carol J. Cossick Assistant Controller Susan M. Warrick Vice President, Operations Thomas W. Grice Network Administration Officer OFFICERS Shannon L. Irwin Human Resources Officer Susan B. Kurtz Customer Service Officer Dennis J. Sloppy Information Systems Officer BJ Sterndale Training Officer Brenda L. Terry Banking Officer Branch Division Ruth Anne Ryan-Catalano Vice President, Regional Branch Administration, Industrial Park Road Office, Clearfield Vickie L. Baker Assistant Vice President, Regional Branch Administration, Bradford Main Street Office Mary A. Baker Assistant Vice President, Northern Cambria Office Deborah M. Young Assistant Vice President, Washington Street Office, St. Marys Lending Division Lori Curtis Community Office Manager, Plaza Office, Philipsburg Denise J. Greene Community Office Manager, DuBois Office Lynette Hebel Community Office Manager, Karthaus and Kylertown Offices Caroline Henry Community Office Manager, Presqueisle Street Office, Philipsburg Francine M. Papa Community Office Manager, Ridgway Office Larry A. Putt Banking Officer, Clearfield Mary Ann Roney Banking Officer, Bradford Douglas M. Shaffer Community Office Manager, Punxsutawney Office Lori D. Shimel Community Office Manager, Houtzdale and Madera Offices Susan J. Shimmel Community Office Manager, Old Town Road Office, Clearfield Gregory R. Williams Banking Officer, Clearfield Jeffrey W. Alabran Senior Vice President, Commercial Lending, Indiana Jeffrey A. Herr Vice President, Commercial Banking, Philipsburg C. Brett Stewart Assistant Vice President, Commercial Lending, Indiana James M. Baker Vice President, Commercial Banking, DuBois Gregory M. Dixon Vice President, Commercial Banking, Clearfield Michael E. Haines Vice President, Commercial Banking, St. Marys Robin L. Hay Vice President, Commercial Banking, Clearfield Joseph H. Yaros Vice President, Commercial Banking Bradford David W. Ogden Vice President, Credit Administration Christopher L. Stott Vice President, Retail Lending Michael C. Sutika Vice President, Commercial Banking Wealth & Asset Management Services Todd M. Abrams Senior Vice President, Managing Director, Wealth & Asset Management Craig C. Ball Vice President, Wealth & Asset Management Glenn R. Pentz Vice President, Wealth & Asset Management Andrew Roman Vice President, Wealth & Asset Management Calvin R. Thomas, Jr. Vice President, Wealth & Asset Management Eric A. Johnson Assistant Vice President, Wealth & Asset Management Eileen F. Ryan Assistant Vice President, Mortgage Lending Russell Daniels Assistant Commercial Lending Officer, St. Marys James C. Davidson Mortgage Lending Officer Cory Johnston Credit Administration Officer Paul A. McDermott Collections Officer Shawn Amblod Assistant Vice President, Wealth & Asset Management R. Michael Love Assistant Vice President, Wealth & Asset Management 7 CNB FINANCIAL CORPORATION | 2012 ANNUAL REPORT HIGHLIGHTS 8 CNB_AR_12_layout.qxd:CNB_AnnualReport08_v 3/4/13 8:03 AM Page 11 OFFICERS & AFFILIATES ERIEBANK, a Division of CNB Bank David J. Zimmer President Donald W. Damon Senior Vice President Scott Bailey Senior Vice President, ERIEBANK Investment Advisors Steven M. Cappellino Senior Vice President, Meadville Office William L. DeLuca, Jr. Senior Vice President Betsy Bort Vice President Scott O. Calhoun Vice President James Miale Vice President John M. Schulze Vice President Larry Morton Vice President, ERIEBANK Investment Advisors William J. Vitron, Jr. Vice President, Wealth Management Carla M. LaBoda Assistant Vice President, Regional Retail Administrator, Asbury Office Gregory Noon Assistant Vice President, Commercial Banking, Warren Paul D. Sallie Assistant Vice President, Private Banking Kelly S. Buck Private Banking, Main Office Andrea G. Carr Community Office Manager, Downtown Office Katie J. Jones Community Office Manager, Harborcreek Office Debra Masone Community Office Manager, Vernon Township Office Theresa L. Swanson Community Office Manager, Warren Office Mary J. Taormina Community Office Manager, Meadville Office Abby L. Williams Community Office Manager, Main Office Timothy Roberts Commercial Lending Officer Julie L. Martin Operations Officer Allison Hodas Cash Management Officer ERIEBANK Regional Board of Directors Joseph B. Bower, Jr. President and Chief Executive Officer, CNB Financial Corporation, CNB Bank James E. Gehrlein Chief Financial Officer, Sisters of St. Joseph of NW PA (Finance) Charles H. Reams President, C. H. Reams & Associates, Inc. (Insurance) Mark D. Breakey Executive Vice President & Chief Credit Officer Richard L. Greslick, Jr. Executive Vice President & Chief Operating Officer, CNB Bank James E. Spoden Esquire, MacDonald Illig Jones & Britton, LLP (Law office) Gary L. Clark Vice President, Chief Financial Officer and Chief Administrative Officer, Snap-tite, Inc. (Manufacturing) Charles Hagerty President, Hamot Health Foundation (Health Services) David J. Zimmer President, ERIEBANK David K. Galey Treasurer, Chief Financial Officer, Greenleaf Corporation (Manufacturing) Holiday Financial Services Corporation, a Subsidiary of CNB Financial Corporation Thomas Kennedy President, Professional Development Associates, Inc. (Real estate developer) Board of Directors Joseph B. Bower, Jr. Chairman Richard L. Greslick, Jr. Secretary Christopher L. Stott Director Brian W. Wingard Director Corporate Officers Christopher L. Stott Chairman Joseph P. Strouse President CNB Securities Corporation, a Subsidiary of CNB Financial Corporation, Wilmington, DE Jonathan L. Holler Vice President Brian W. Wingard Secretary & Treasurer Board of Directors Brian W. Wingard Director Glenn R. Pentz Director Donald R. McLamb, Jr. Wilmington Trust SP Services, Inc. 9 Corporate Officers Richard L. Greslick, Jr. President Donald R. McLamb, Jr. Treasurer, Wilmington Trust SP Services, Inc. Elizabeth F. Bothner Secretary, Wilmington Trust SP Services, Inc Annual Meeting The Annual Meeting of the Shareholders of CNB Financial Corporation will be held Tuesday, April 16, 2013 at 2:00 p.m. at the Corporation’s Headquarters in Clearfield, PA. Corporate Address CNB Financial Corporation 1 S. Second Street P.O. Box 42 Clearfield, PA 16830 (814) 765-9621 Stock Transfer Agent & Registrar Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 (908) 497-2300 Form 10-K Shareholders may obtain a copy of the Annual Report to the Securities and Exchange Commission on Form 10-K by writing to: CNB Financial Corporation 1 S. Second Street P.O. Box 42 Clearfield, PA 16830 ATTN: Shareholder Relations Quarterly Share Data For information regarding the Corporation’s quarterly share data, please refer to Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in the 2012 Form 10-K. Market Makers The following firms have chosen to make a market in the stock of the Corporation. Inquiries concerning their services should be directed to: Boenning & Scattergood, Inc. 1700 Market Street, Ste 1420 Philadelphia, PA 19103 (800) 842-8928 RBC Capital Markets Three World Financial Center 200 Vesey Street, 9th Floor New York, NY 10281 (212) 428-6200 SHAREHOLDER INFORMATION Corporate Profile CNB Financial Corporation is a leader in providing integrated financial solutions which create value for both consumers and businesses. These solutions encompass checking, savings, time and deposit accounts, Private Banking, loans and lines of credit (real estate, commercial, industrial, residential and consumer), credit cards, cash management, online banking, mobile banking, electronic check deposit, merchant credit card processing, remote deposit and accounts receivable handling. In addition, the Corporation provides wealth and asset management services, retirement plans and other employee benefit plans. CNB Bank A subsidiary of CNB Financial Corporation, CNB is a regional independent community bank in North Central Pennsylvania with approximately 338 employees who make customer service more responsive and reliable. For over 145 years, the Bank has strived to be more customer-driven than its competitors and to build long-term customer relationships by being reliable and competitively priced. CNB continually seeks innovative ways to execute a personal, quality-driven customer service strategy and prides itself for being first-to-market many of these innovations. To satisfy customers’ financial needs and expectations, it offers a variety of delivery channels, which includes 22 full-service offices, 19 ATMs, telephone banking (1-866-224-7314), Internet banking (www.bankcnb.com), mobile banking and a centralized customer service center (1-800-492-3221). ERIEBANK Headquartered in Erie, Pennsylvania, ERIEBANK is a division of CNB Bank. Presently, there are seven full service locations which house its commercial, retail and Private Banking divisions. In addition, ERIEBANK Investment Advisors provides wealth and asset management services, retirement plans and other employee benefit plans. Holiday Financial Services Another subsidiary of CNB Financial Corporation, Holiday Financial Services, a consumer loan company, currently has ten conveniently located offices in Bellefonte, Bradford, Clearfield, DuBois, Duncansville, Ebensburg, Erie, Johnstown, Northern Cambria, and Ridgway, Pennsylvania. The common stock of the Corporation trades on the NASDAQ National Market under the symbol CCNE. CNB FINANCIAL CORPORATION | 2012 ANNUAL REPORT HIGHLIGHTS 10