Chronicle Journal: Finance

Commercial National Reports 21% Full-Year 2020 Earnings Growth

LATROBE, PA / ACCESSWIRE / January 25, 2021 / Commercial National Financial Corporation (OTCQX:CNAF)(Company), parent Company of Commercial Bank & Trust of PA, has reported results for the quarter ended December 31, 2020. The Company earned $2,512,000 (or $0.88 per average share outstanding) in the fourth quarter 2020 compared to earnings of $1,219,000 (or $0.43 per average share outstanding) in the fourth quarter of 2019. The Company earned $5,713,000 (or $2.00 per average share outstanding) for the twelve-month period ended December 31, 2020 and $4,736,000 (or $1.66 per average share outstanding) for the twelve-month period ended December 31, 2019. Fourth quarter earnings increased $1,293,000, or 106%, due primarily to the after-tax effect of a loan loss reserve release and twelve-month earnings increased $977,000, or 21%.

The Company's exceptional earnings performance for 2020 starkly contrasts with the national banking industry's numerous earnings declines. The superior profitability achieved by Commercial National Financial Corporation was primarily attributable to its traditionally atypical asset/liability management strategy in conjunction with its longstanding and highly disciplined loan underwriting practices.

The Company's annualized return on average assets for 2020 rose to 1.35%. Tax equivalent net interest margin improved to 4.14% and was indicative of continued successful administration of overall balance sheet optionality relative to evolving financial market conditions. Asset quality metrics remained favorable despite the economic impact of COVID-19. Overhead cost containment through significant reductions-in-workforce and branch consolidation continue to provide material operating efficiencies. Marginal funding reliance was essentially eliminated during 2020 and the Company's year-end liquidity position is exceedingly strong. The Company is well-positioned for a bear-steepening yield curve. Net unrealized AFS bond portfolio market value gains of $14,531,000 represented 12.23% of portfolio book value. Tier one risk-based, total risk-based, leverage and common equity tier one capital ratios for year-end 2020 were 22.55%, 23.33%, 14.19% and 22.55% respectively. The Company's capital adequacy remains appropriate in the context of ongoing banking industry COVID-19 uncertainties.

The Company's strong capital position in conjunction with underlying core earnings remain supportive of the regular $0.26 quarterly common stock cash dividend payments to shareholders. Providing an attractive and reliable cash dividend income stream to all shareholders through the safe and sound operation of the subsidiary bank is a long-standing top priority for the Company. Extreme COVID-19 induced economic and broader societal instability throughout 2020 precluded any responsible special extra cash dividend declarations for that unprecedentedly volatile year. As circumstances may permit, special extra cash dividends will continue to be periodically considered by the Board of Directors.

Direct and beneficial ownership by executive officers and directors of the Company's outstanding shares totaled 445,969 shares, or 15.59% on December 31, 2020.

As disclosed each year in the Annual Report to Shareholders, on December 31, 2020, the Company employed 80 people in full-time and part-time positions. Thirty (30) employees are represented by the United Auto Workers, Local 1799. Of that bargaining unit total, Twenty nine (29) employees are full-time and there is one (1) part-time employee. The Company has had unionized employees since 1972. In October 2018, the agreement between the Company and the bargaining unit was negotiated and subsequently ratified by the bargaining unit with an effective date of February 16, 2019. The labor agreement will expire in February 2024. The Commonwealth of Pennsylvania and the National Labor Relations Board both afford protection to the organized status of pre-existing collective bargaining units. The Company has been advised that bargaining unit status may limit the Company's strategic options relative to those of non-unionized insured depository institutions. The Company continues to consider this as a factor in its strategic and capital management decisions.

The Company operates eight community banking facilities in Greensburg, Hempfield Township, Latrobe, Ligonier, Unity Township and West Newton, Pennsylvania and also maintains a commercial business development sales force throughout its entire market area. The Company operates an asset management and trust division of Commercial Bank & Trust of PA headquartered in Greensburg, Pennsylvania. Commercial Bank & Trust of PA also serves its customer base through an online banking site ( with mobile banking features and an automated TouchTone Teller banking system.

Safe Harbor Statement

Forward-looking statements (statements which are not historical facts) in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "to," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements are based on information currently available to the Company, and the Company assumes no obligation to update these statements as circumstances change. Investors are cautioned that all forward-looking statements involve risk and uncertainties, including changes in general economic and financial market conditions, unforeseen credit problems, and the Company's ability to execute its business plans. The actual results of future events could differ materially from those stated in any forward-looking statements herein.

(Dollars in thousands)

  December 31  December 31 
  2020  2019 
Cash and due from banks on demand $3,744  $4,510 
Interest bearing deposits with banks  24,596   47 
Total cash and cash equivalents  28,340   4,557 
Securities available for sale  133,317   150,838 
Restricted investments in bank stock  148   899 
Loans  241,080   238,407 
Allowance for loan losses  (1,991)  (1,374)
Net loans  239,089   237,033 
Premises and equipment  2,805   2,618 
Investment in Life Insurance  19,070   20,310 
Other assets  2,662   3,319 
Total assets $425,431  $419,574 
Non-interest bearing $148,399  $133,362 
Interest bearing  203,001   198,986 
Total deposits  351,400   332,348 
Short-term borrowings  -   20,200 
Other liabilities  4,604   4,102 
Total liabilities  356,004   356,650 
Shareholders' equity:        
Common stock, par value $2 per share;        
10,000,000 shares authorized; 3,600,000 shares        
issued; 2,860,953 shares        
outstanding in 2020 and 2019.  7,200   7,200 
Retained earnings  63,292   60,554 
Accumulated other comprehensive income  11,479   7,714 
Less treasury stock, at cost,        
739,047 shares in 2020 and 2019  (12,544)  (12,544)
Total shareholders' equity  69,427   62,924 
Total liabilities and shareholders' equity $425,431  $419,574 

(Dollars in thousands, except per share data)

   Three Months    Twelve Months 
   Ended December 31    Ended December 31 
   2020    2019    2020    2019 
INTEREST INCOME:                   
Interest and fees on loans    2,584      2,690    10,663    10,520 
Interest and dividends on securities:                               
Taxable    985      1,041      4,036      4,183 
Exempt from federal income taxes    254      429      1,303      1,997 
Other    7      25      46      116 
Total Interest income    3,830      4,185      16,048      16,816 
INTEREST EXPENSE:                               
Interest on deposits    63      179      403      749 
Interest on short-term borrowings    2      149      147      837 
Total Interest expense    65      328      550      1,586 
NET INTEREST INCOME    3,765      3,857      15,498      15,230 
PROVISION(CREDIT) FOR LOAN LOSSES    (1,700)    -      400      - 
NET INTEREST INCOME AFTER                               
PROVISION(CREDIT) FOR LOAN LOSSES    5,465      3,857      15,098      15,230 
OTHER OPERATING INCOME:                               
Asset management and trust income    380      337      1,396      1,429 
Service charges on deposit accounts    166      184      635      724 
Net Security gains/losses    55      75      558      68 
Gain on sale of OREO    -      -      -      4 
Income from investment in life insurance    117      130      462      510 
Life Insurance proceeds    -      -      730      - 
Other income    27      31      160      163 
Total other operating income    745      757      3,941      2,898 
OTHER OPERATING EXPENSES                               
Salaries and employee benefits    1,809      1,911      7,435      7,552 
Net occupancy expense    206      179      800      799 
Furniture and equipment    120      104      438      413 
Pennsylvania shares tax    155      143      581      569 
Legal and professional    113      121      446      396 
FDIC Insurance expense    30      -      65      56 
Other expenses    697      759      2,705      3,044 
Total other operating expenses    3,130      3,217      12,470      12,829 
INCOME BEFORE INCOME TAXES    3,080      1,397      6,569      5,299 
Income tax (benefit) expense    568      178      856      563 
Net income  2,512    1,219    5,713    4,736 
Average Shares Outstanding    2,860,953      2,860,953      2,860,953      2,860,953 
Earnings Per Share    0.88      0.43      2.00      1.66 

Contact Information:
Wendy S. Piper
First Senior Vice President

SOURCE: Commercial National Financial Corporation

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