CNB Financial - A Small Bank With 37% Growth

| About: CNB Financial (CCNE)

Summary

CNB Holding Co. is a small, but ever expanding stock.

With acquisitions occurring in undervalued markets, there is ripe potential at cheap prices.

These acquisitions are beginning to show in revenue/balance sheet growth. Further expansion into Buffalo could yield even further happiness.

New dogs on the block

CNB Financial (NASDAQ:CCNE) is a small bank out of central Pennsylvania. It's by no means an enormous operation. Yet. The stock recently found its way out of the Russell 2000 and into the big leagues of the Nasdaq. It's been a big year for CNB and it shows in the stock price. Thus far this year the stock has given a 37% gain to shareholders. A large chunk of that gain was from the run up following ringing the bell at the Nasdaq. The other part is in relation to the banks growing business through acquisitions.

stock chart

One could call CNB a sleeper. It's small but has been quietly building revenue in both interest/non-interest areas of income for the last 5 years. This growth has really paid off to long term shareholders with a nice dividend (it was really nice prior to their recent stock run), and a growing eps. On the shorter term, CNB had some dissapointing early quarters in 2016. $0.35 and $0.28 respectively were well below year over year comparisons. It's important to note that this had more to do with the expenses than a slowdown. Revenues actually increased during those quarters year over year.

Expanding Business

Some of these expenses are likely due to the string of purchases made by CNB in their strategy to expand through the eastern Ohio/West New York area. The acquisitions started back in 2013 with FC Banc Corp. The more recent acquisition of Lakeland National Bank and growth in Erie, have followed the banks stratagem of consolidating smaller banking operations into their business. As CNB's subsidiary ErieBank has a much larger lending ability than some of the Ohio banks they've purchased. They have room to grow within that market.

Even more recently, the bank is diving into New York. Bank on Buffalo, a newly formed division beneath CNB is starting up in Buffalo, New York. The bank's first branch will be at full speed December 1st. Two more are planned to open eventually. While this is essentially a startup attempt in a market controlled by M&T (NYSE:MTB), the area is becoming more appealing as banks vie for pieces of the pie as the hold loosens on the customer base.

The Financials show this is a steady pick

These acquisitions combined with general growth have done wonders for revenues. If one were to make a complaint of the bank, it would have to do with the dividend. It hasn't moved much at all. This wasn't a big deal when the price was boggled down in the Russell 2000. Shareholders were looking at almost 4% yields. Now however, the bank's pricing has made the returns in dividends far less appealing. It seems likely that the bank will focus less on dividends going forward as interest has shifted to stock growth. If you can, snatching up some shares on a pullback is not a bad bet. If you can get anything around $20 where you back to the 3% dividend range, you should buy it and hold. If history is any indicator, this stock offers upside for the patient.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.