Commercial National Reports September 30, 2020 Earnings

Rhea-AI Summary

Commercial National Financial Corporation (CNAF) reported a third-quarter 2020 loss of $67,000 ($0.02 per share), a significant decline from a profit of $1,277,000 ($0.45 per share) in Q3 2019. The nine-month earnings fell to $3,201,000 ($1.12 per share) compared to $3,517,000 ($1.23) in the same period last year. A COVID-19 driven loan loss reserve build of $1,700,000 impacted results. Despite this, the net interest margin improved to 4.21%. Capital ratios remain robust, supporting a consistent quarterly dividend of $0.26.

Positive

• Strengthened tax equivalent net interest margin to 4.21%.
• Robust capital ratios: Tier one risk-based capital at 20.61%.
• Consistent $0.26 quarterly dividend maintained for shareholders.

Negative

• Third-quarter loss of $67,000 vs. $1,277,000 profit in Q3 2019.
• COVID-19 reserve build of $1,700,000 adversely affected earnings.
• 174.31% increase in reserve for loan losses compared to year-end 2019.

LATROBE, PA / ACCESSWIRE / October 27, 2020 / Commercial National Financial Corporation (OTCQX:CNAF)(Company), parent Company of Commercial Bank & Trust of PA, has reported results for the quarter ended September 30, 2020. The Company recorded a $67,000 (or $0.02 per average share outstanding) loss in the third quarter 2020 compared to earnings of $1,277,000 (or $0.45 per average share outstanding) in the third quarter of 2019. The Company earned $3,201,000 (or $1.12 per average share outstanding) for the nine-month period ended September 30, 2020 and $3,517,000 (or $1.23 per average share outstanding) for the nine-month period ended September 30, 2019.

The Company's third quarter and nine-month 2020 earnings results were influenced by a COVID-19 driven loan loss reserve build of $1,700,000. A portion of the Company's far greater than banking industry standard net unrealized AFS bond portfolio securities gains was not utilized via sales to offset the earnings impact of this COVID-19 reserve build in order to optimize ongoing net interest margin which is a primary driver of future core earnings generation in the present lower-for-longer interest rate environment.

At third quarter end 2020 the Company's reserve for loan losses was $3,769,000, which represented a $2,395,000, or 174.31%, increase over the $1,374,000 year-end 2019 reserve for loan losses. The reserve build in 2020 consisted of $295,000 in recoveries along with $2,100,000 in COVID-19 induced loan loss provisions. No charge-offs were recorded during the first nine months of 2020.

Third quarter and nine-month 2020 tax equivalent net interest margin strengthened to 4.21% and 4.18% respectively. Overhead cost containment through significant reductions-in-workforce and branch consolidation continue to provide material efficiencies. Net unrealized AFS bond portfolio market value gains of $14,865,000 represented 11.50% of book value. Tier one risk-based, total risk-based, leverage and common equity tier one capital ratios for September 30, 2020 were 20.61%, 21.86%, 13.66% and 20.61% respectively. Capital adequacy remains appropriate relative to 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 our shareholders through the safe and sound operation of the subsidiary bank is a long-standing top priority for the Company.

Direct and beneficial ownership by executive officers and directors of the Company's outstanding shares totaled 434,727 shares, or 15.20% on September 30, 2020.

As disclosed each year in the Annual Report to Shareholders, on September 30, 2020, the Company employed 81 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) active 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 (www.cbthebank.com) 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.

COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(Dollars in thousands, except per share data)

		September 30,				December 31,				September 30,
		2020				2019				2019
ASSETS
Cash and due from banks on demand		$	7,214			$	4,510			$	9,083
Interest bearing deposits with banks			50				47				45
Total cash and cash equivalents			7,264				4,557				9,128
Securities available for sale			140,865				150,838				158,796
Restricted investments in bank stock			422				899				1,319
Loans			254,034				238,407				237,717
Allowance for loan losses			(3,769	)			(1,374	)			(1,374	)
Net loans			250,265				237,033				236,343
Premises and equipment			2,887				2,618				2,674
Investment in Life Insurance			18,944				20,310				20,172
Other assets			3,618				3,319				3,322
Total assets		$	424,265			$	419,574			$	431,754
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing		$	156,343			$	133,362			$	134,091
Interest bearing			191,231				198,986				192,094
Total deposits			347,574				332,348				326,185
Short-term borrowings			5,166				20,200				33,551
Other liabilities			3,869				4,102				6,569
Total liabilities			356,609				356,650				366,305
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				7,200
Retained earnings			61,524				60,554				61,510
Accumulated other comprehensive income			11,476				7,714				9,283
Less treasury stock, at cost, 739,047 shares in 2020 and 2019			(12,544	)			(12,544	)			(12,544	)
Total shareholders' equity			67,656				62,924				65,449
Total liabilities and shareholders' equity		$	424,265			$	419,574			$	431,754

COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)

		Three Months								Nine Months
		Ended September 30								Ended September 30
		2020				2019				2020				2019
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
INTEREST INCOME:
Interest and fees on loans		$	2,719			$	2,657			$	8,079			$	7,830
Interest and dividends on securities:
Taxable			986				1,044				3,051				3,142
Exempt from federal income taxes			309				471				1,049				1,568
Other			5				28				39				91
Total interest income			4,019				4,200				12,218				12,631
INTEREST EXPENSE:
Interest on deposits			67				193				340				570
Interest on short-term borrowings			6				179				145				688
Total interest expense			73				372				485				1,258
NET INTEREST INCOME			3,946				3,828				11,733				11,373
PROVISION FOR LOAN LOSSES			1,700				-				2,100				-
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES			2,246				3,828				9,633				11,373
OTHER OPERATING INCOME:
Asset management and trust			338				421				1,016				1,092
Service charges on deposit accounts			166				186				469				540
Net Security gains/(losses)			(2	)			-				503				(7	)
Gain on sale of OREO			-				-				-				4
Income from investment in life insurance			117				130				345				380
Life insurance proceeds			-				-				730				-
Other income			33				32				133				132
Total other operating income			652				769				3,196				2,141
OTHER OPERATING EXPENSES:
Salaries and employee benefits			1,798				1,868				5,626				5,641
Net occupancy			193				200				594				620
Furniture and equipment			110				95				318				309
Pennsylvania shares tax			142				142				426				426
Legal and professional			123				100				333				275
FDIC insurance			23				-				35				56
Other expenses			708				742				2,008				2,285
Total other operating expenses			3,097				3,147				9,340				9,612
INCOME (LOSS) BEFORE INCOME TAXES			(199	)			1,450				3,489				3,902
Income tax (benefit) expense			(132	)			173				288				385
Net income (loss)		$	(67	)		$	1,277			$	3,201			$	3,517
Average Shares Outstanding			2,860,953				2,860,953				2,860,953				2,860,953
Earnings (Loss) Per Share		$	(0.02	)		$	0.45			$	1.12			$	1.23

Contact Information:
Wendy S. Piper
First Senior Vice President
Secretary/Treasurer
wpiper@cbthebank.com
724-537-9923

SOURCE: Commercial National Financial Corporation

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FAQ

What were Commercial National Financial Corporation's earnings for Q3 2020?

CNAF reported a loss of $67,000 for Q3 2020, down from a profit of $1,277,000 in Q3 2019.

How did COVID-19 impact CNAF's financial results?

CNAF's earnings were negatively impacted by a $1,700,000 loan loss reserve build due to COVID-19.

What is CNAF's dividend policy?

CNAF maintains a quarterly dividend of $0.26, supported by strong capital ratios.

What was the net interest margin for CNAF in Q3 2020?

CNAF's tax equivalent net interest margin strengthened to 4.21% in Q3 2020.

How did CNAF's loan loss reserves change in 2020?

CNAF's reserve for loan losses increased by 174.31% to $3,769,000 as of September 30, 2020.