Community National Bank Announces Earnings for Third Quarter of 2012

  Community National Bank Announces Earnings for Third Quarter of 2012

Business Wire

GREAT NECK, N.Y. -- October 16, 2012

Community National Bank (SYMBOL: CBNY.OB) today announced third quarter
results for 2012. Highlights for the quarter include:

  *Net income of $960 thousand or $0.14 per share for the third quarter of
    2012 compared to net income of $611 thousand or $0.09 per share for the
    same period in 2011.
  *Net interest income increased 23% or $1.0 million to $5.3 million for the
    quarter ended September 30, 2012 compared to $4.3 million for the quarter
    ended September 30, 2011.
  *Net interest margin declined five basis points to 3.56% for the quarter
    ended September 30, 2012 from 3.61% for the same period in 2011.
  *Commercial loans grew $76.3 million or 34% to $299.6 million at September
    30, 2012 when compared to September 30, 2011.
  *Deposits increased 35% or $141.6 million to $542.3 million at September
    30, 2012 compared to $400.7 million at September 30, 2011.
  *Demand deposits increased $48.5 million or 55% from September 30, 2011 to
    $136.4 million at September 30, 2012.
  *Received regulatory approval to open our eleventh branch, which will be
    located in Hewlett, Long Island.
  *Continued strong asset quality with non-performing assets to total assets
    of 0.31%, which is well below peer group average.
  *Significant capital strength with Tier 1 leverage, Tier 1 risk-based and
    total risk-based capital ratios of 10.70%, 15.28% and 16.53%,
    respectively, at September 30, 2012.
  *Return on average assets and equity of 0.60% and 5.46%, respectively, for
    the quarter ended September 30, 2012.

Stuart Lubow, Chairman, President, and CEO of Community National Bank, stated,
“The Bank continues to execute its strategy of building commercial loan and
demand deposit relationships. Our commercial loan portfolio reached the $300
million plateau and core demand deposits were $136 million or 25% of total
deposits at September 30, 2012. We recently received regulatory approval to
open our eleventh branch location in Hewlett. This branch should open in the
second half of 2013. Our asset quality remains strong as evidenced by a
non-performing loan to total loan ratio of 0.31% at September 30, 2012. While
we are satisfied with our recent accomplishments, we believe the recent
announcement by the Federal Reserve Bank for unlimited quantitative easing and
guidance that they intend to keep interest rates low until 2015, coupled with
the uncertain political and economic climate could result in further yield
compression on interest earning assets and margins in the future.”

Earnings and Net Interest Income

Net income for the quarter ended September 30, 2012 was $960 thousand or $0.14
basic earnings per share compared to net income of $610 thousand or $0.10
basic earnings per share for the same period in 2011, an increase of $349
thousand or 57%. Net income for the nine months ended September 30, 2012 was
$2.2 million or $0.32 basic earnings per share compared to net income of $1.9
million or $0.28 basic earnings per share for the same period in 2011, an
increase of $290 thousand or 16%.

The increase in net income for both the quarter and nine months ended
September 30, 2012 was attributable to higher net interest income and lower
provisions for loan losses, which were partially offset by increased expenses
associated with branch expansion and the hiring of additional commercial
lenders.

On a linked quarter basis, net income for the third quarter of 2012 increased
$288 thousand or 42% when compared to the second quarter of 2012 due primarily
to an increase in net interest income and gains from the sale of SBA loans and
investments, which were partially offset by expenses associated with the
opening of our Manhattan branch location.

Net interest income for the quarter ended September 30, 2012 increased $1.0
million or 23% to $5.3 million compared to $4.3 million for the quarter ended
September 30, 2011. The net interest margin decreased by five basis points to
3.56% for the third quarter of 2012 compared to 3.61% for the same period in
2011. Net interest income for the nine months ended September 30, 2012
increased $2.9 million or 23% to $15.3 million compared to $12.4 million for
the nine months ended September 30, 2011. The net interest margin increased
during these corresponding periods by six basis points to 3.60% for the nine
months ended September 30, 2012 from 3.54% for the prior year period.

The increase in net interest income for both the quarter and nine months ended
September 30, 2012 was primarily due to (1) growth in our commercial and
residential loan portfolios; (2) higher non-interest bearing demand deposits;
and (3) a continued decline in overall cost of funds on deposits. The decrease
in net interest margin for the quarter ended September 30, 2012 when compared
to the prior year’s quarter primarily resulted from yields on loans and
mortgage backed securities being under pressure from increased prepayments,
loan refinancing activity and competition.

Non-Interest Income

Non-interest income increased approximately $244 thousand or 24% to $1.3
million for the quarter ended September 30, 2012 compared to $1.0 million for
the prior year’s quarter. Non-interest income for the nine months ended
September 30, 2012 decreased $0.9 million or 25% to $2.8 million compared to
$3.7 million for the same period in 2011. The increase in non-interest income
for the quarter was due primarily to higher income across all categories,
especially gains on the sale of SBA loans and investments. Despite the
increase for the quarter, non-interest income was down for the nine months
ended September 30, 2012 when compared to the corresponding period last year
due primarily from a decline in gains on the sale of SBA loans. The lower
gains from the sale of SBA loans were partially offset by higher non-interest
income in all other categories for the nine months ended September 30, 2012.

Non-Interest Expense

Non-interest expense increased $841 thousand or 22% to $4.6 million for the
quarter ended September 30, 2012 from $3.8 million for the same period in
2011. The increase was primarily attributable to higher compensation
associated with the opening of our Manhattan branch location, the hiring of
our New York City commercial lending team, support staff, and a Director of
Municipal Banking and higher occupancy costs associated with the opening of
the Melville and New York City branch locations.

Balance Sheet and Asset Quality

Total assets grew to $643.9 million at September 30, 2012, a 28% increase over
total assets of $502.2 million at September 30, 2011. Total loans increased
$86.3 million or 23% to $458.4 million at September 30, 2012 when compared to
September 30, 2011. The commercial loan portfolio increased $76.3 million or
34% when compared to September 30, 2011. The residential loan portfolio
increased $10 million or 6.7% when compared to September 30, 2011. The growth
in the loan portfolio was funded by deposits from our new branch locations and
municipal relationships as well as the continued development of core banking
relationships, which were evident by the $48 million or 55% increase in demand
deposits since September 30, 2011.

Our asset quality remains strong and a core focus during these challenging
economic times. Non-performing loans, including loans past due 90 days or
more, decreased $0.1 million or 7% to $1.5 million or 0.32% of total loans at
September 30, 2012 from $1.6 million or 0.42% of total loans at September 30,
2011.

The Bank had $475 thousand in provision for loan losses for the third quarter
of 2012, a decrease of $135 thousand or 22% when compared to the prior year
quarter. The allowance for loan losses was $5.9 million or 1.29% of total
loans at September 30, 2012, an increase of approximately $1.6 million or 36%
from $4.3 million or 1.16% of total loans at September 30, 2011. The increase
in the allowance for loan losses was due to general valuation reserves
associated with the significant loan growth throughout the period.

The Bank had one property classified as other real estate owned, which totaled
$0.5 million at September 30, 2012.

Deposits

Total deposits increased $141.7 million or 35% to $542.4 million at September
30, 2012 compared to $400.7 million at September 30, 2011. Demand deposits
grew $48.4 million or 55% to $136.4 million at September 30, 2012 when
compared to September 30, 2011.

Further information about the financial condition and performance of Community
National Bank is available from its Call Reports filed by the Bank with the
FDIC and available on the FDIC website at:
http://www2.fdic.gov/idasp/main_bankfind.asp. The Bank expects to file its
September 30, 2012 Call Report on or around October 30, 2012.

ABOUT COMMUNITY NATIONAL BANK

Community National Bank is a Long Island based independent commercial bank and
operates ten locations in Nassau, Suffolk, Queens and Manhattan County. We
offer a full range of modern financial services, backed by state-of-the-art
technology. In addition to commercial loans, commercial mortgages, small
business loans and lines of credit and residential mortgages, CNB also
provides a complete selection of traditional personal and commercial deposit
products such as no fee individual and business checking accounts, IRA
accounts and statement savings.

Cautionary Statement about Forward-Looking Statements

This release contains certain “forward looking statements” about CNB which, to
the extent applicable, are intended to be covered by the safe harbor for
forward looking statements provided under the Federal securities laws and,
regardless of such coverage, you are cautioned about. Examples of
forward-looking statements include but are not limited to, CNB’s financial
condition, capital ratios, results of operations and outlook. Forward-looking
statements are not historical facts. Such statements may be identified by the
use of such words as “may,” “believe,” “expect,” “anticipate,” “plan,”
“continue,” or similar terminology. These statements relate to future events
or our future financial performance and involve risks and uncertainties that
may cause our actual results, levels of activity, performance or achievements
to differ materially from those expressed or implied by these forward-looking
statements. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we caution you not to place undue
reliance on these forward-looking statements. Factors which may cause our
forward looking statements to be materially inaccurate include, but are not
limited to, a unexpected deterioration in our loan portfolio, unexpected
increases in our expenses, greater than anticipated growth, unanticipated
regulatory action, unexpected changes in interest rates, a loss of key
personnel, an unanticipated loss of existing customers, competition from other
institutions causing us unanticipated changes in our deposit or loan rates,
increases in FDIC insurance costs and unanticipated adverse changes in our
customers’ economic conditions or economic conditions in our local area
generally. Forward-looking statements speak only as of the date of this press
release We do not undertake any obligation to update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise.

COMMUNITY NATIONAL BANK
STATEMENTS OF INCOME
Unaudited
                                             
                  For The Three Months Ended    For The Nine Months Ended
                  September     September       September      September
                  30,             30,             30,              30,
                  2012          2011          2012           2011
Interest
Income:
Commercial        $4,198,087      $3,224,839      $11,923,062      $9,148,301
Loans
Residential
and Consumer      1,631,210       1,766,392       4,900,144        5,055,137
Loans
Securities        587,751         576,097         1,799,226        1,947,580
Money Market      11,183        18,762        28,478         24,522
Investments
Total
Interest          6,428,231     5,586,090     18,650,910     16,175,540
Income
                                                                   
Interest
Expense:
NOW, Savings
& Money           234,914         146,285         673,883          422,976
Market
Certificates      707,539         933,213         2,272,297        2,851,475
of Deposit
Borrowed          138,624       159,332       444,347        543,646
Funds
Total
Interest          1,081,077     1,238,830     3,390,527      3,818,097
Expense
Net Interest      5,347,154       4,347,260       15,260,383       12,357,443
Income
Provision For     475,000       610,000       1,393,000      1,843,000
Loan Losses
Net Interest
Income After      4,872,154     3,737,260     13,867,383     10,514,443
Provision for
Loan Losses
                                                                   
Non-Interest
Income:
Service           140,704         112,896         441,160          351,823
Charges
Loan Fees &
Servicing         136,067         70,620          309,030          251,815
Income
Gain on Sale
of                141,217         99,447          273,793          130,829
Investments
Gain on Sale      656,256         565,406         1,219,189        2,502,973
of Loans
BOLI Income       177,812       159,713       525,108        451,930
Total
Non-Interest      1,252,056     1,008,082     2,768,280      3,689,370
Income
                                                                   
Non-Interest
Expense:
Compensation      2,355,625       1,821,239       6,772,330        5,473,629
and Benefits
Occupancy and     1,168,866       984,176         3,379,179        2,870,420
Equipment
Advertising       59,409          35,222          158,794          124,766
Other             1,039,594     941,942       2,978,496      2,793,756
Expenses
Total
Non-Interest      4,623,494     3,782,579     13,288,799     11,262,571
Expense
Income Before     1,500,716       962,763         3,346,864        2,941,242
Income Taxes
Provision For     541,050       351,800       1,188,004      1,072,600
Income Taxes
Net Income        $959,666      $610,963      $2,158,860     $1,868,642
                                                                   
Earnings Per
Share:
Basic             $0.14           $0.09           $0.32            $0.28
Diluted           $0.14           $0.09           $0.32            $0.28
Weighted
Average
Shares            6,673,181       6,673,181       6,673,181        6,673,181
Outstanding –
Basic
Weighted
Average
Shares            6,697,675       6,709,187       6,693,592        6,698,389
Outstanding –
Diluted

COMMUNITY NATIONAL BANK
STATEMENTS OF INCOME
Unaudited
                  
                    For the Three Months Ended
                    September     June 30,     December,     September
                    30,                            31              30,
                    2012          2012         2011          2011
Interest
Income:
Commercial          $4,198,087      $3,984,291     $3,444,917      $3,224,839
Loans
Residential and     1,631,210       1,640,173      1,674,388       1,766,392
Consumer Loans
Securities          587,751         626,625        563,730         576,097
Money Market        11,183        10,216       9,258         18,762
Investments
Total Interest      6,428,231     6,261,305    5,692,293     5,586,090
Income
                                                                   
Interest
Expense:
NOW, Savings &      234,914         235,288        176,588         146,285
Money Market
Certificates of     707,539         754,517        865,295         933,213
Deposit
Borrowed Funds      138,624       149,253      154,795       159,332
Total Interest      1,081,077     1,139,058    1,196,678     1,238,830
Expense
Net Interest        5,347,154       5,122,247      4,495,615       4,347,260
Income
Provision For       475,000       475,000      785,000       610,000
Loan Losses
Net Interest
Income After        4,872,154     4,647,247    3,710,615     3,737,260
Provision for
Loan Losses
                                                                   
Non-Interest
Income:
Service Charges     140,704         158,438        116,268         112,896
Loan Fees &
Servicing           136,067         79,510         84,421          70,620
Income
Gain on Sale of     141,217         -              -               99,447
Investments
Gain on Sale of     656,256         442,252        329,743         565,406
Loans
BOLI Income         177,812       186,034      160,155       159,713
Total
Non-Interest        1,252,056     866,234      690,587       1,008,082
Income
                                                                   
Non-Interest
Expense:
Compensation        2,355,625       2,258,229      1,933,852       1,821,239
and Benefits
Occupancy and       1,168,866       1,139,060      1,029,566       984,176
Equipment
Advertising         59,409          52,360         62,139          35,222
Other Expenses      1,039,594     1,018,972    772,346       941,942
Total
Non-Interest        4,623,494     4,468,621    3,797,903     3,782,579
Expense
Income Before       1,500,716       1,044,860      603,299         962,763
Income Taxes
Provision For       541,050       372,754      156,000       351,800
Income Taxes
Net Income          $959,666      $672,106     $447,299      $610,963
                                                                   
Earnings Per
Share:
Basic               $0.14           $0.10          $0.07           $0.09
Diluted             $0.14           $0.10          $0.07           $0.09
Weighted
Average Shares      6,673,181       6,673,181      6,673,181       6,673,181
Outstanding –
Basic
Weighted
Average Shares      6,697,675       6,700,265      6,686,691       6,709,187
Outstanding –
Diluted

COMMUNITY NATIONAL BANK
STATEMENTS OF CONDITION
Unaudited
                                                     
                                                          
                                                       
                        September      June 30,         December, 31   September
                        30,                                                30,
                        2012           2012           2011           2011
Assets:
Cash and Due From       $7,666,354       $7,980,739       $6,758,552       $4,754,537
Banks
Money Market            31,922,204       11,756,613       6,703,973        8,067,065
Investments
                                                                           
Securities -            109,974,255      116,969,332      90,516,272       85,004,338
Available-for-Sale
Restricted Stock        3,922,650      4,080,250      4,279,500      4,028,000
Total Securities        113,896,905    121,049,582    94,795,772     89,032,338
                                                                           
Loans Held-For-Sale     500,000          400,000          -                510,000
                                                                           
Commercial Loans        299,607,536      290,558,824      250,444,848      223,355,521
Residential &           158,791,493    154,910,682    145,310,058    148,764,403
Consumer Loans
Gross Loans             458,399,029      445,469,506      395,754,906      372,119,924
Held-For-Investment
Less: Allowance For     (5,904,167)    (5,396,607)    (4,759,124)    (4,329,596)
Loans Losses
Net Loans               452,494,862      440,072,899      390,995,782      367,790,328
Held-For-Investment
                                                                           
Premises and            8,869,722        9,087,941        8,722,455        8,280,874
Equipment, net
Bank Owned Life         19,297,199       19,119,387       15,872,091       15,711,935
Insurance (“BOLI”)
Other Assets            9,280,117      9,281,539      7,959,080      8,017,628
Total Assets            $643,927,363   $618,748,700   $531,807,705   $502,164,705
                                                                           
Liabilities and
Stockholders'
Equity:
Deposits:
Demand                  $136,410,679     $120,182,668     $94,531,309      $87,948,946
NOW, Savings &          224,776,773      202,311,136      134,268,269      117,004,236
Money Market
Certificates of         181,175,999    189,446,881    196,452,756    195,792,324
Deposit
Total Deposits          542,363,451    511,940,685    425,252,334    400,745,506
                                                                           
FHLB Advances           25,475,945       33,978,085       34,973,678       30,467,164
Accrued Expenses
and Other               4,983,042      2,917,289      3,198,516      3,207,408
Liabilities
Total Liabilities       572,822,438    548,836,059    463,424,528    434,420,078
                                                                           
Stockholders’
Equity:
Common Stock, par
value $5.00;
authorized
10,000,000 shares;
issued 6,673,181        33,365,905       33,365,905       33,365,905       33,365,905
shares
Additional Paid in      34,037,538       33,968,660       33,872,063       33,823,722
Capital
Retained Earnings       2,762,891        1,803,225        604,031          156,732
Unrealized Gain on      938,591        774,851        541,178        398,268
Securities
Total Stockholders'     71,104,925     69,912,641     68,383,177     67,744,627
Equity
Total Liabilities
and Stockholders'       $643,927,363   $618,748,700   $531,807,705   $502,164,705
Equity

COMMUNITY NATIONAL BANK
SELECTED FINANCIAL DATA & BALANCE SHEET COMPONENTS
Unaudited
                                                
                                                     
                                                     
                      For The Three Months Ended   For The Nine Months Ended
                      September     September      September     September
                      30,             30,            30,            30,
                      2012          2011         2012         2011
Per Share:
Net Income-Basic      $0.14           $0.09          $0.32          $0.28
Average Shares
Outstanding –         6,673,181       6,673,181      6,673,181      6,673,181
Basic
Net Income –          $0.14           $0.09          $0.32          $0.28
Diluted
Average Shares
Outstanding –         6,697,675       6,709,187      6,693,592      6,698,389
Diluted
Book Value            $10.66          $10.15         $10.66         $10.15
                                                                    
Performance:
Return on Average     0.60%           0.48%          0.48%          0.50%
Assets
Return on Average     5.46%           3.65%          4.16%          3.79%
Equity
Efficiency Ratio      70.06%          70.63%         73.71%         70.19%
                                                                    
Yield on Average      4.28%           4.64%          4.40%          4.63%
Earning Assets
Cost on Average
Interest Bearing      1.00%           1.42%          1.10%          1.47%
Liabilities
Cost of Deposits      0.70%           1.05%          0.79%          1.13%
Net Interest          3.28%           3.22%          3.30%          3.16%
Spread
Net Interest          3.56%           3.61%          3.60%          3.54%
Margin
                                                           
                      September       June 30,       December 31,   September
                      30,                                           30,
                      2012          2012         2011           2011
Risk Based
Capital:
Leverage Ratio        10.70%          11.00%         12.75%         12.79%
Tier 1                15.28%          15.53 %        17.50%         18.68%
Total Risk Based      16.53%          16.78%         18.75%         19.92%
                                                                    
Asset Quality:
Allowance for
Loan Losses to        1.29%           1.21%          1.20%          1.16%
Total Loans
Allowance for
Loan Losses to        406%            732%           374%           276%
Non-Performing
Loans
Non-Performing
Loans to Total        0.32%           0.17%          0.32%          0.42%
Loans
Non-Performing
Assets to Total       0.31%           0.21%          0.36%          0.31%
Assets
Annualized
Quarterly Net         -0.03%          0.26%          0.37%          1.16%
Charge offs to
Avg. Loans

Contact:

Community National Bank
Jay McConie, 516-498-9111 Ext 139
Senior Vice President
Chief Financial Officer