Commercial National Reports September 30, 2020 Earnings

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*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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