Commercial National Financial Corp. (Pennsylvania) :CNAF-US: Earnings Analysis: 2016 By the Numbers : February 2, 2017

Commercial National Financial Corp. (Pennsylvania) reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Commercial National Financial Corp. (Pennsylvania) – S&T Bancorp, Inc., Republic First Bancorp, Inc., Univest Corporation of Pennsylvania, Citizens & Northern Corporation, Orrstown Financial Services, Inc., TriState Capital Holdings, Inc., Bryn Mawr Bank Corporation and Penns Woods Bancorp, Inc. (STBA-US, FRBK-US, UVSP-US, CZNC-US, ORRF-US, TSC-US, BMTC-US and PWOD-US) that have also reported for this period.

Highlights

  • Net interest income margins widened from 68.10% to 76.55% compared to the same period last year.
  • Net loan assets changed 10.60% compared to same period last year and 10.60% from previous period, total deposits changed -3.22% compared to same period last year and -3.22% from previous period.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 17.51 20.6 17.5 16.73 20.38
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 4.04 5.69 6.21 5.39 7.27
Earnings Growth (YOY) -29.06 -8.41 15.17 -25.78 8.19
Net Margin 23.05 27.62 35.49 32.23 35.65
EPS N/A 1.99 2.17 1.88 2.54
Return on Equity 7.33 10.03 11.89 10.9 13.8
Return on Assets 1.05 1.44 1.58 1.4 1.87

Access our Ratings and Scores for Commercial National Financial Corp. (Pennsylvania)

Earnings Growth Analysis

The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 68.10% to 76.55% and net interest income after provisions margins improved from 68.10% to 76.55% over this period. In addition, loan loss provisions as a percentage of net interest income were 0% this period , and 0% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s improvement in net interest income margins was influenced by the relative increase in the level of net loan assets. In addition, total deposits as a percentage of equity went from 5.80% to 5.63%. On an absolute basis, net loan assets changed 10.60% compared to the same period last year and 10.60% from the previous period, while total deposits changed -3.22% compared to the same period last year and -3.22% from the previous period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 40.24% to 27.31% and (2) One-time items that contributed to a decrease in pretax margins from 40.24% to 27.31%

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Commercial National Financial Corp. (Pennsylvania)

Company Profile

Commercial National Financial Corp. is a bank holding company. Its subsidiary offers banking services including extending credit, providing deposit services, marketing non-deposit investments and offering financial counseling. The bank provides personal loans, automobile loans, home-equity term loans, residential & commercial mortgages and personal lines of credit. It offers traditional banking and related financial services to individual, business and government customers. It also offers a full array of commercial and retail financial services, including the taking of time, savings and demand deposits, the making of commercial, consumer and mortgage loans and providing other financial services. The company was founded on July 1, 1990 and is headquartered in Latrobe, PA.

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