LATROBE, PA / ACCESSWIRE / January 29, 2024 / Commercial National Financial Corporation (OTCQX:CNAF)(Company), parent Company of Commercial Bank & Trust of PA, has reported results for the quarter ended December 31, 2023. The Company earned $479,000 (or $0.17 per average share outstanding) in the fourth quarter 2023 compared to $1,325,000 (or $0.46 per average share outstanding) in the fourth quarter of 2022. The Company earned $3,047,000 (or $1.07 per average share outstanding) for the twelve-month period ended December 31, 2023 and $3,907,000 (or $1.37 per average share outstanding) for the twelve-month period ended December 31, 2022.
The Company's full-year 2023 return on average assets was 0.76% while return on average equity was 9.60%. Tax equivalent net interest margin for 2023 was 3.72%. The full-year 2023 effective tax rate was only 5.29%.Fully insured well diversified core deposits comprised 85.3% of total deposits. Asset quality continues to remain exceptionally strong across the board. Tier one risk-based, total risk-based, leverage and common equity tier one capital ratios at December 31, 2023 were 24.35%, 24.84%, 13.50% and 24.35% respectively. Tier one capital was $57,575,000 and total risk-based capital was $58,737,000 while book capital reflected a temporary after-tax accumulated other comprehensive loss stemming from net unrealized securities available-for-sale market value depreciation. As with many other insured depository institutions nationwide, the Company's securities portfolio has been adversely impacted by rising interest rates. Nevertheless, the Company's capital strength greatly exceeds prevailing standards for the nationwide banking industry.
Earnings results for 2023 were materially influenced by the Federal Reserve's unprecedentedly rapid and extensive 525 basis points of interest rate hikes between March 2022 and July 2023. These monetary policy tightenings prompted immediate corresponding increases in the Company's marginal funding cost which adversely impacted net interest income generation and overall earnings. This impact was successfully weathered throughout the first 300 basis points of Federal Reserve policy tightening, however the Company's profitability was meaningfully influenced by the final 225 basis points of these rate hikes.
In December 2023, the Federal Reserve signaled an end to its 2022-2023 tightening campaign and telegraphed an intention to implement at least 75 basis points of policy rate cuts during 2024 which, contingent on the timing and extent of any such monetary policy reversals, would positively influence the Company's expected financial performance. To assist in this influence, a new 2024 sales team focus will target profitable deposit growth with renewed emphasis while securities portfolio sales of opportunity will be undertaken to optimize the anticipated benefits to the Company of the Federal Reserve's monetary policy pivot.
Undistributed earnings at year-end 2023 amounted to $1,003,000 which, subject to regional Federal Reserve Bank non-objection, provides substantial as needed carryover capacity to supplement anticipated 2024 earnings in support of the Company's traditional quarterly dividend declarations. The Company's exceedingly strong capital position along with underlying core earnings and prior years' undistributed earnings currently provide ability to support the regular $0.26 per share quarterly common stock cash dividend payments to shareholders in 2024.
Direct and beneficial ownership by executive officers and directors of the Company's outstanding shares totaled 467,957 shares, or 16.36% on December 31, 2023.
As disclosed each year in the Annual Report to Shareholders, on December 31, 2023, the Company employed 85 people in full-time and part-time positions. Thirty five (35) employees are represented by the United Auto Workers, Local 1799. Of that bargaining unit total, twenty nine (29) employees are full-time and there are three (3) part-time employees and three (3) seasonal employees. The Company has had unionized employees since 1972. In November 2023, the agreement between the Company and the bargaining unit was negotiated and subsequently ratified by the bargaining unit with an effective date of February 15, 2024. The labor agreement will expire in February 2029. 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 limits 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 seven community banking facilities in 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 from an Internet banking site (www.cnbthebankonline.com) 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)
| December 31 | December 31 | |||||||
| 2023 | 2022 | |||||||
ASSETS | ||||||||
Cash and due from banks on demand | $ | 4,274 | $ | 5,177 | ||||
Interest bearing deposits with banks | 1,172 | 1,158 | ||||||
Total cash and cash equivalents | 5,446 | 6,335 | ||||||
Securities available for sale | 161,832 | 170,268 | ||||||
Restricted investments in bank stock | 1,244 | 630 | ||||||
Loans | 192,812 | 201,424 | ||||||
Allowance for loan losses | (1,162 | ) | (1,535 | ) | ||||
Net loans | 191,650 | 199,889 | ||||||
Premises and equipment | 2,866 | 2,517 | ||||||
Accrued Interest receivable | 2,199 | 2,203 | ||||||
Investment in Life Insurance | 18,534 | 17,987 | ||||||
Other assets | 6,848 | 8,545 | ||||||
Total assets | $ | 390,619 | $ | 408,374 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Liabilities: | ||||||||
Deposits: | ||||||||
Non-interest bearing | $ | 156,767 | $ | 165,545 | ||||
Interest bearing | 170,508 | 201,920 | ||||||
Total deposits | 327,275 | 367,465 | ||||||
Short -Term borrowings | 25,317 | 6,715 | ||||||
Other liabilities | 1,891 | 1,736 | ||||||
Total liabilities | 354,483 | 375,916 | ||||||
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 2023 and 2022. | 7,200 | 7,200 | ||||||
Retained earnings | 63,145 | 63,073 | ||||||
Accumulated other comprehensive income | (21,665 | ) | (25,271 | ) | ||||
Less treasury stock, at cost, | ||||||||
739,047 shares in 2023 and 2022 | (12,544 | ) | (12,544 | ) | ||||
Total shareholders' equity | 36,136 | 32,458 | ||||||
Total liabilities and shareholders' equity | $ | 390,619 | $ | 408,374 | ||||
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
| Three Months | Twelve Months | |||||||||||||||
| Ended December 31 | Ended December 31 | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
INTEREST INCOME: | ||||||||||||||||
Interest and fees on loans | 2,062 | 2,033 | $ | 8,215 | $ | 8,329 | ||||||||||
Interest and dividends on securities: | ||||||||||||||||
Taxable | 1,136 | 1,172 | 4,601 | 4,694 | ||||||||||||
Exempt from federal income taxes | 482 | 519 | 2,023 | 2,069 | ||||||||||||
Other | 50 | 28 | 162 | 67 | ||||||||||||
Total Interest income | 3,730 | 3,752 | 15,001 | 15,159 | ||||||||||||
INTEREST EXPENSE: | ||||||||||||||||
Interest on deposits | 79 | 39 | 188 | 186 | ||||||||||||
Interest on short-term borrowings | 414 | 112 | 1,273 | 207 | ||||||||||||
Total Interest expense | 493 | 151 | 1,461 | 393 | ||||||||||||
NET INTEREST INCOME | 3,237 | 3,601 | 13,540 | 14,766 | ||||||||||||
PROVISION(CREDIT) FOR LOAN LOSSES | - | - | (372 | ) | (561 | ) | ||||||||||
NET INTEREST INCOME AFTER | ||||||||||||||||
PROVISION(CREDIT) FOR LOAN LOSSES | 3,237 | 3,601 | 13,912 | 15,327 | ||||||||||||
OTHER OPERATING INCOME: | ||||||||||||||||
Asset management and trust income | 332 | 323 | 1,346 | 1,400 | ||||||||||||
Service charges on deposit accounts | 167 | 151 | 652 | 642 | ||||||||||||
Net Security gains(losses) | (6 | ) | - | (6 | ) | (11 | ) | |||||||||
Gain (Loss) on sale of other real estate | - | 102 | - | (1,060 | ) | |||||||||||
Income from investment in life insurance | 136 | 426 | 514 | 799 | ||||||||||||
Other income | 20 | 24 | 110 | 173 | ||||||||||||
Total other operating income | 649 | 1,026 | 2,616 | 1,943 | ||||||||||||
OTHER OPERATING EXPENSES | ||||||||||||||||
Salaries and employee benefits | 1,993 | 1,776 | 7,747 | 7,238 | ||||||||||||
Net occupancy expense | 185 | 191 | 766 | 733 | ||||||||||||
Furniture and equipment | 139 | 132 | 534 | 490 | ||||||||||||
Pennsylvania shares tax | 73 | 147 | 293 | 602 | ||||||||||||
Legal and professional | 156 | 138 | 583 | 555 | ||||||||||||
FDIC Insurance expense | 46 | 31 | 186 | 120 | ||||||||||||
Other real estate expenses | - | 3 | - | 197 | ||||||||||||
Other expenses | 837 | 789 | 3,202 | 3,168 | ||||||||||||
Total other operating expenses | 3,429 | 3,207 | 13,311 | 13,103 | ||||||||||||
INCOME BEFORE INCOME TAXES | 457 | 1,420 | 3,217 | 4,167 | ||||||||||||
Income tax expense | (22 | ) | 95 | 170 | 260 | |||||||||||
Net income | $ | 479 | $ | 1,325 | $ | 3,047 | $ | 3,907 | ||||||||
Average Shares Outstanding | 2,860,953 | 2,860,953 | 2,860,953 | 2,860,953 | ||||||||||||
Earnings Per Share | 0.17 | 0.46 | 1.07 | 1.37 | ||||||||||||
SOURCE: Commercial National Financial Corporation