Commercial National Financial Corp, Latrobe, PA (CNAF)

A Case of Sweet Pickings in Mister Rogers' Neighborhood


Here's one bank stock ripe for cherry picking investors! CNA Financial offers just about everything one could hope for in a bank stock—it's cheap, performing well, managed well, pays a huge dividend, enjoys substantial insider ownership, and offers acquisitive neighbors a sweet prospect. What else would one expect from the town that produced Arnold Palmer, Mister Rogers, and the banana split?

Disclosure: As of this posting, I own shares of CNAF and may subsequently either dispose of them or purchase more.

Prospective Buyers
CNAF is the most trusted community bank in three Westmoreland County, PA cities — Latrobe, Pleasant Unity, and Ligonier, in which these fine banks also do business:
First Commonwealth Financial, Indiana, PA (FCF)
F.N.B. Corp, Pittsburg, PA (FNB)
S&T Bancorp, Indiana, PA (STBA)
Financial Snapshot
(as of 09/30/2014)

Total assets:
$397M
Tangible book value per share:
$19.76
NPAs to assets:
0.02%
Price to book:
109%
Market cap:
$61.8M
Dividend yield:
4.8%
Trailing 12-month return on assets:
1.6%
Trailing 12-month return on equity:
12.5%
TARP:
$0

Luminaries
George V. Welty, Chairman
Gregg E. Hunter, Vice Chairman, President and CEO
Thomas D. Watters, Executive VP and CFO
Gold Stars
As far as community bank stocks go, CNAF is mostly sweet as a banana split.

  • Trustworthy people. The managers at CNA Financial sure seem like the modest Mister Rogers sort that you'd want to be your neighbor. Seasoned bankers, they pay themselves well below industry average and exhibit an attitude of "right relationship" with shareholders, probably because they themselves hold over a quarter of outstanding shares and will only reap what they sow.
  • Consistent performance. Commercial National has been making money since 1934. Even during the Great Recession, its NPAs never got to 1%, and the bank never needed TARP. If my research is accurate, only six other publicly traded banks pay a higher dividend.
  • Solid, fee-based income stream. Commercial Bank & Trust earns nearly a million dollars a year from its $150M trust business. Prospective acquirers that reach into stronger markets will no doubt appreciate the significant excess capital this makes available for lending.

Like the best cherry or "Arnold Palmer," there's just enough of a sour note here to make this stock pick tasty.

  • Low growth market. The population of Westmoreland County, PA has declined every year since it peaked at nearly 400,000 in 1980, which likely explains why CNA Financial both holds more in securities than in loans and is priced for picking. 

Sources