<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
--- Securities and Exchange Act of 1934
For the quarterly period ended June 30, 1997, or
Transition Report Pursuant to Section 13 or 15(d) of the
--- Securities Exchange Act of 1934
For the Transition Period from to
-------- ---------
Commission File No. 0-17000
COMMERCIAL NATIONAL FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-2799780
(State of Incorporation) (IRS Employer Identification No.)
101 North Pine River Street, Ithaca, Michigan 48847
(address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (517) 875-4144
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 1, 1997
-------------- -----------------------------
Common Stock 894,472
$1.00 Par Value
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page 1
<PAGE> 2
COMMERCIAL NATIONAL FINANCIAL CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 (Page 3)
Consolidated Statements of Income for the three months and six months ended June (Page 4)
30, 1997 and 1996
Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and (Page 5)
1996
Notes to Consolidated Financial Statements (Page 6)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of (Page 7-10)
Operations
SIGNATURES (Page 12)
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27-Selected financial data
b) Reports on Form 8-K
</TABLE>
page 2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
COMMERCIAL NATIONAL FINANCIAL CORPORTION
Consolidated Balance Sheets
<TABLE>
<CAPTION> June 30,1997 December 31,1996
------------ ----------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and due from banks $ 5,686,026 $ 6,550,844
Federal funds sold 2,200,000 6,600,000
------------ ------------
7,886,026 13,150,844
Securities available for sale (Carried at fair value) 1,991,302 -
Securities held to maturity (estimated market value
of $22,998,000 and $25,484,000) 22,889,619 25,531,759
Federal Home Loan Bank stock, at cost 1,262,400 1,262,000
Loans
Commercial and agricultural 74,299,441 72,012,139
Real estate 30,057,903 28,886,794
Consumer and other 21,446,324 21,426,391
------------ ------------
Total loans 125,803,668 122,325,324
Allowance for loan losses (1,946,153) (1,824,080)
Net loans ------------ ------------
123,857,515 120,501,244
Property and equipment, net 3,461,513 4,047,374
Other assets 2,158,084 1,697,128
Total assets ------------ ------------
$163,506,459 $166,190,349
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non interest bearing demand $ 14,004,456 $ 17,110,034
Interest bearing demand 36,042,151 36,009,919
Savings 21,695,735 21,379,089
Time 54,559,945 58,517,780
------------ ------------
Total deposits 126,302,287 133,016,822
Securities sold under agreements to repurchase 8,986,877 5,602,246
Demand notes issued to U.S. Treasury 1,102,339 941,968
Federal Home Loan Bank borrowings 10,000,000 10,000,000
Other liabilities 1,321,446 1,133,650
------------ ------------
Total liabilities 147,712,949 150,694,686
------------ ------------
Shareholders' equity
Common stock, par value $1.00, authorized
1,750,000, issued 890,268 and 872,982 shares 890,268 872,982
Additional paid-in capital 13,495,782 13,123,259
Unrealized (loss) on securities available for sale, net of tax effect (2,264) -
Retained earnings 1,409,724 1,499,422
------------ ------------
Total shareholders' equity 15,793,510 15,495,663
------------ ------------
Tolal liabilities and shareholders' equity $163,506,459 $166,190,349
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
page 3
<PAGE> 4
COMMERCIAL NATIONAL FINANCIAL CORPORATION
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
INTEREST INCOME
<S> <C> <C> <C> <C>
Interest and fees on loans $2,787,185 $2,513,481 $5,504,129 $4,978,673
Interest on securities
Taxable 162,355 269,833 330,205 534,232
Tax exempt 186,403 165,811 375,156 355,703
Interest on Federal funds sold 72,219 40,610 154,313 102,065
FHLB stock dividends 21,344 8,700 49,131 17,766
---------- ---------- ---------- ----------
Total interest income 3,229,506 2,998,435 6,412,934 5,988,439
INTEREST EXPENSE
Interest on deposits 1,145,206 1,147,860 2,303,042 2,325,705
Interest on repurchase agreements
and other short term borrowings 99,809 92,248 185,934 187,490
Interest on FHLB borrowing 149,997 38,144 292,120 54,492
---------- ---------- ---------- ----------
Total interest expense 1,395,012 1,278,252 2,781,096 2,567,687
---------- ---------- ---------- ----------
NET INTEREST INCOME 1,834,494 1,720,183 3,631,838 3,420,752
Provision for loan losses 155,000 60,000 215,000 110,000
---------- ---------- ---------- ----------
Net income after provision for loan losses 1,679,494 1,660,183 3,416,838 3,310,752
---------- ---------- ---------- ----------
OTHER INCOME
Service charges on deposit accounts 115,921 77,617 189,306 144,862
Other 121,209 99,765 231,622 209,739
---------- ---------- ---------- ----------
Total other income 237,130 177,382 420,928 354,601
OTHER EXPENSES
Personnel expense 679,534 744,002 1,369,685 1,468,745
Occupancy expense 67,024 76,770 136,161 154,687
Furniture and equipment expense 181,974 148,474 351,425 278,135
Branch closing costs 546,614 - 546,614 -
Other operating expenses 450,157 500,448 899,913 942,499
---------- ---------- ---------- ----------
Total other expenses 1,925,303 1,469,694 3,303,798 2,844,066
Income before Federal income taxes (8,679) 367,871 533,968 821,287
Federal income tax expense (58,903) 59,806 65,474 136,144
---------- ---------- ---------- ----------
Net income $ 50,224 $ 308,065 $ 468,494 $ 685,143
========== ========== ========== ==========
Net income per common share $ 0.06 $ 0.35 $ 0.53 $ 0.79
========== ========== ========== ==========
Dividends per common share $ 0.33 $ 0.29 $ 0.63 $ 0.55
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
page 4
<PAGE> 5
COMMERCIAL NATIONAL FINANCIAL CORPORATION
Consolidated Statements of Cash flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
CASH FLOW FROM OPERATING ACTIVITIES 1997 1996
---- ----
<S> <C> <C>
Net income $468,494 $685,143
Adjustments to reconcile net income to
net cash from operating activities:
Provision for loan losses 215,000 110,000
Depreciation and amortization 244,523 202,631
Write-off of assets associated with branch closing 486,614
Net amortization and accretion on investment securities 29,306 55,396
Amortization of goodwill and premium
associated with acquisitions 28,296 28,296
Gain on sale of mortgage loans (43,259) -
Proceeds from mortgage loan sales 3,241,652 -
Mortgage loans originated for sale (3,213,393)
Increase/(decrease) in other assets (464,890) 112,068
Increase in other liabilities 187,796 265,222
----------- ---------
Net cash from operating activities 1,180,139 1,458,756
----------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of securities
Held to maturity (2,497,978) (5,182,214)
Available for sale (1,994,375)
Proceeds from maturities of securities
Held to maturity 5,110,055 5,130,000
Available for sale -
Net increase in loans (3,579,467) (3,906,501)
Property and equipment expenditures (145,276) (838,963)
----------- ---------
Net cash from investing activities (3,107,041) (4,797,678)
----------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Net decrease in deposits (6,714,535) (6,555,305)
Net increase in short-term borrowings 3,545,002 1,996,030
Proceeds FHLB borrowings 2,000,000 5,000,000
Maturities of FHLB borrowings (2,000,000) -
Proceeds from issuance of common stock 389,809 239,025
Dividends paid and fractional shares (558,192) (468,753)
----------- ---------
Net cash from financing activities (3,337,916) 210,997
----------- ---------
NET CHANGE IN CASH
AND CASH EQUIVALENTS (5,264,818) (3,127,925)
Cash and cash equivalents,
at beginning of year 13,150,844 8,575,357
----------- ---------
Cash and cash equivalents,
at end of period $7,886,026 $5,447,432
=========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest $2,941,638 $2,554,118
Federal Income taxes $ 52,216 $ 127,288
</TABLE>
See accompanying notes to consolidated financial statements
page 5
<PAGE> 6
COMMERCIAL NATIONAL FINANCIAL CORPORATION
Notes to Consolidated Financial Statements(Unaudited)
Note 1-Summary of Significant Accounting Policies
Basic Presentation
The accompanying unaudited condensed consolidated financial statements were
prepared in accordance with Rule 10-01 of regulation S-X and the instructions
for Form 10-Q and, therefore, do not include all disclosures required by
generally accepted accounting principles for complete presentation of financial
statements. In the opinion of management, the condensed consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial condition of Commercial National
Financial Corporation as of June 30, 1997 and December 31, 1996, and the
results of its operations for the three months and six months ending June 30,
1997 and June 30, 1996. The results for the three months ended June 30, 1997
are not necessarily indicative of the results expected for the full year.
Principals of Consolidation
The accompanying consolidated financial statements include the accounts of
Commercial National Financial Corporation (CNFC) and its wholly owned
subsidiary, Commercial Bank (Bank). All material intercompany accounts and
transactions have been eliminated in consolidation.
Investment in Debt and Equity Securities
Securities are classified into held to maturity, available for sale and trading
categories. Held to maturity securities are those which the Corporation has
the positive intent and ability to hold to maturity. These securities are
reported at amortized cost. Available for sale securities are those which the
Corporation may decide to sell if needed for liquidity, asset-liability
management, tax planning or other reasons. Available for sale securities are
reported at fair value, with unrealized gains or losses included as a separate
component of equity net of tax. Trading securities are bought principally for
sale in the near term, and are reported at fair value with unrealized gains or
losses included in earnings. The Corporation did not classify securities for
trading at any time during 1997 or 1996.
Income Taxes
Income tax for the three and six months ended June, 1997 and 1996 are based
upon the liability method, according to SFAS No. 109, "Accounting for Income
Taxes." Certain income tax and expense items are reported in different time
periods for tax purposes. Deferred or prepaid taxes are recorded in Other
Assets in the balance sheet.
Earnings Per Share
Earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding and common equivalent shares with a
dilutive effect. Common equivalent shares are shares which may be issuable to
employees upon exercise of outstanding stock options. The average number of
shares during the first six months of 1997 and 1996 were 883,438 and 861,784.
The average number of shares outstanding during the quarters ending June 30,
1997 and June 30, 1996 were 888,733 and 864,719 respectively.
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<PAGE> 7
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Average assets for the quarter ending June 30, 1997 increased to $163,635,000
from the $161,220,000 at the quarter ending December 31, 1996. The Bank
continues to benefit from strong loan demand and a healthy loan portfolio.
Identifying appropriate funding sources continues to be a primary challenge
facing management.
Total loans averaged $123,348,000 during the quarter ending June 30, 1997.
This is a $4,045,000 or 3.4% increase over the quarter ending December 31, 1996
balance of $119,303,000. Business loans contributed $2,739,000 of the growth.
Loans to consumers contributed an additional $956,000 of the growth while
mortgage loan balances remained flat. We anticipate continued healthy demand
for business related loans over the next several quarters. During the first
quarter of 1997, management reduced the emphasis on the indirect automobile
market. Management accomplished this by reducing the reserve paid to dealers.
This change has adversely affect the growth rate in consumer loans.
<TABLE>
<CAPTION>
Average Loan Balances
Three Months Ending
June 30, 1997 March 31, 1997 December 31,
1996
<S> <C> <C> <C>
Mortgage $ 29,156,000 $ 28,836,000 $ 28,806,000
Commercial and commercial real estate 72,715,000 71,628,000 69,976,000
Consumer and other 21,477,000 21,536,000 20,521,000
------------- ------------- ------------
Total average loans $ 123,348,000 $ 122,000,000 $119,303,000
============= ============= ============
</TABLE>
Total investment securities averaged $26,221,000 during the quarter ending June
30, 1997. This is $2,352,000 less than the quarter ending December 31, 1996.
We anticipate increasing the balance in securities to accommodate requests for
repurchase agreements and for future short term liquidity needs. During the
quarter ending June 30, 1997, management began classifying securities purchased
as available for sale. Management will continue to classify the majority of
future security purchases as available for sale.
Average deposits for the quarter ending June 30, 1997 totaled $128,788,000. The
balances dropped slightly compared to the quarter ending December 31, 1996.
This drop is partially due to seasonal cash requirements of agricultural
deposit customers. Generally, farmers are required to make payments to
supplies during the second quarter. The drop in deposits also reflects
increased competition for deposits in our market place.
<TABLE>
<CAPTION>
Average Deposit Balances
Three Months Ending
June 30, 1997 March 31, 1997 December 31, 1996
<S> <C> <C> <C>
Non-interest bearing demand $ 14,525,000 $ 14,752,000 $ 14,766,000
Interest-bearing demand 38,417,000 37,795,000 35,277,000
Savings 21,885,000 21,720,000 22,863,000
Time 53,961,000 56,211,000 56,526,000
------------ ------------ ------------
Total deposits $128,788,000 $130,478,000 $129,432,000
============ ============ ============
</TABLE>
Average Federal Home Loan Bank (FHLB) advances outstanding remained unchanged
at $10,000,000 compared to average advances outstanding during the quarter
ending December 31, 1996. As of June 30, 1997, the Bank has the ability to
access an additional $5,000,000 in borrowings from the FHLB in
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<PAGE> 8
Indianapolis. Depending on the interest rate environment, type of assets to be
funded, and availability of liquidity through other sources, the Bank may
increase FHLB borrowings in the future.
LIQUIDITY AND RATE SENSITIVITY
Loan growth continues to outpace deposit growth. The loan to deposit ratio
based on ending balances increased to 99.60% at June 30, 1997 from 91.96% at
December 31, 1996.
Maturities of investment securities have been used to partially fund loan
growth. However, the Bank's portfolio of Treasuries and Agencies are needed to
pledge for repurchase agreements and other collateral requirements. The Bank
is investigating other funding sources including additional FHLB advances. As
previously discussed, the Bank has available an additional $5,000,000 in FHLB
advances to fund loan growth.
The Bank has previously elected to classify all securities as held to maturity.
Accordingly these securities are not available to fund short term liquidity
needs except as they mature. During the remaining six months of 1997,
$4,462,000 of investments will mature. Management anticipates classifying all
securities purchased to replace maturities as available-for-sale.
Federal funds sold averaged $5,275,000 during the quarter compared to
$4,510,000 during the fourth quarter of 1996. The goal of the Bank is to
maintain Federal funds sold at least equal to 2% of total assets. The
percentage of total Federal funds sold to total assets at June 30, 1997 was
1.3%.
ASSET QUALITY AND THE ALLOWANCE FOR LOAN LOSS
The allowance for loan losses was 1.55% of total loans at June 30, 1997
compared to 1.49% at December 31, 1996. Total non-performing loans were
$162,000 or .13% of total loans. Loan quality remains at very acceptable
levels compared to long term historical trends.
Net charge-offs totaled $90,000 for the quarter ending June 30, 1997. The Bank
elected to charge off $102,000 primarily related to indirect auto paper. As
previously mentioned, the Bank has significantly reduced it's participation in
the indirect paper market. To maintain the allowance at 1.55% of total loans,
the Bank elected to increase the quarterly provision to $155,000.
In future periods, the management will establish a reserve balance commensurate
with the performance of the loan portfolio, general market conditions and other
relevant factors. We anticipate that the provision needed to fund the reserve
will be significantly lower than the amount recorded in the second quarter.
CAPITAL RESOURCES
Total shareholder's equity at June 30, 1997 was $15,794,000. CNFC's capital
ratios continue to exceed regulatory guidelines for well capitalized by a wide
margin. A summary of CNFC's capital ratios follows:
<TABLE>
<CAPTION>
June 30, 1997 March 31, 1997 December 31, 1996 Well Capitalized
<S> <C> <C> <C> <C>
Total capital to risk 14.4% 13.5% 14.3% 8.0%
weighted assets
Tier 1 capital to risk 13.2% 12.2% 13.0% 4.0%
weighted assets
Tier 1 capital to 9.5% 8.7% 9.4% 4.0%
average assets
</TABLE>
RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 1997 was $50,000, a decrease of
$258,000 over the same period in 1996. Several non-recurring charges negatively
impacted quarterly results. First, management elected to close two supermarket
branches. These branches had not demonstrated the ability to achieve
acceptable
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<PAGE> 9
loan and deposit growth. Closing these branches will allow management to
reduce overhead costs to more acceptable levels compared to industry standards.
The charge to close these branches totaled $547,000. Second, management
elected to increase the quarterly provision for loan losses to $115,000.
Third, expenses related to the severance arrangements for several members of
management also negatively impacted earnings.
Without the effect of these one time charges, net income would have been
$522,000 for the three months ending June 30, 1997. This represents a $214,000
or 69.5% increase compared to $308,000 for the three months ending June 30,
1996. Earnings for the six months ending June 30, 1997 and 1996 would have been
$940,000. This would have represented a 37.2% or $255,000 increase over the
$685,000 earned in the six months ending June 30, 1996.
Return on average shareholders' equity for the three months ended June 30, 1997
and 1996 were 1.24% and 8.25%. For the six months ending June 30, 1997 and
1996, return on average shareholders' equity was 5.90% and 9.26% respectively.
Without the one time charges, return on average equity for the three and six
months ended June 30, 1997 would have been 12.91% and 11.84% respectively.
Return on average assets was also negatively impacted by the one time charges.
Return on average assets for the three months ending June 30, 1997 and 1996 was
.12% and .81% respectively. For the six months ending June 30, 1997 and 1996,
return on average assets was .58% and .89%. Without the effect of the one time
charges discussed above, return on average assets for the three and six months
ended June 30, 1997 would have been 1.28% and 1.16%, respectively.
Net Interest Income
The following table illustrates the effect that changes in rates and volumes of
earning assets and interest-bearing liabilities had on net interest income for
the three months ending June 30, 1997 and 1996 and the six months ending June
30, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ending June 30, Six Months Ending June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest Income(tax equivalent) $3,353,000 $3,123,000 $6,649,000 $6,253,000
Interest Expense 1,395,000 1,278,000 2,781,000 2,568,000
---------- ---------- ---------- ----------
Net Interest Income $1,958,000 $1,845,000 $3,868,000 $3,685,000
========== ========== ========== ==========
Average Volume
Interest-earning Assets $154,777,000 $145,915,000 $155,053,000 $145,345,000
Interest-bearing Liabilities 131,520,000 123,492,000 131,942,000 123,768,000
------------ ------------ ------------ ------------
Net differential $ 23,257,000 $ 22,423,000 $23,111,000 $ 21,577,000
============ ============ ============ ============
Average Yields/Rates
Yield on Earning Assets 8.69% 8.61% 8.65% 8.65%
Rate Paid on Liabilities 4.25% 4.16% 4.25% 4.17%
----- ----- ----- -----
Interest Spread 4.44% 4.45% 4.40% 4.48%
===== ===== ===== =====
Net Interest Margin 5.07% 5.08% 5.03% 5.10%
===== ===== ===== =====
</TABLE>
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<PAGE> 10
The change in net interest income is attributable to the following:
<TABLE>
<CAPTION>
Three Months Ending June 30, 1997 Six Months Ending June 30, 1997
Volume Rate Inc/(Dec) Volume Rate Inc/(Dec)
<S> <C> <C> <C> <C> <C> <C>
Interest Earning $903,000 $(673,000) $230,000 $973,000 $(577,000) $396,000
Assets
Interest Bearing 432,000 (315,000) 117,000 467,000 (254,000) 213,000
Liabilities -------- --------- -------- -------- --------- --------
Net Interest $471,000 $(358,000) $113,000 $506,000 $(323,000) $183,000
Income ======== ========= ======== ======== ========= ========
</TABLE>
The increase in net interest income is primarily due to an increase in earning
assets and interest bearing liabilities. Net interest margin for the three
months ending June 30, 1997 decreased slightly to 5.07% compared to 5.08% for
the three months ending June 30, 1996.
Non-interest Income
Non-interest income for the three months ending June 30, 1997 was $237,000.
This represents a $60,000 or 33.9% increase over the same period in 1996.
Non-interest income for the six months ending June 30, 1997 was $421,000
compared to $355,000 for the same period in 1996. This represents a $66,000 or
18.6% increase.
The major changes that contributed to this increase were: an increase in NSF
charges introduced at end of the first quarter of 1997, introduction of new
service charge fees assessed against low balance, high volume corporate deposit
customers, improved pricing on mortgage loans sold on the secondary market, and
an ATM surcharge assessed against non-customers using Bank owned ATMs.
Offsetting these increases was a reduction in demand account service charges
related to the Bank's introduction of check imaging in the second quarter of
1996. Check imaging was offered without charge to customers previously
assessed fees for not participating in check truncation.
Non-interest Expense
Non-interest expense for the three months ending June 30, 1997 totaled
$1,925,000. This represents a $455,000 increase over the same period in 1996.
Without the effect of the charge to close the two supermarket branches and the
effect of severance related expenses, non-interest expense would have been
$1,286,000. This represents a $184,000 or 12.5% reduction compared to the same
period in 1996.
Salary and benefit expense for the three months ending June 30, 1997 totaled
$680,000 compared to $744,000. This reduction of $64,000 occurred despite
expenses associated with severance packages. For the six months ending June
30, 1997 and 1996 salary and benefit expense totaled $1,370,000 and $1,469,000.
This represents a $99,000 reduction in salary and benefit expense. Salary and
benefit expense were impacted primarily by three events: reduced supermarket
branch staffing in anticipation of the branch closings, costs associated with
severance packages, and a general reduction in staff levels in other
departments. Management is emphasizing the control of overhead costs. This is
reflected in our total full time equivalents. Full time equivalents (FTE's) at
June 30, 1997 totaled 77 compared to 90 FTE's at June 30, 1996 and 95 FTE's at
December 31,1996.
Equipment expense continues to increase as the Bank maintains the investment in
computers, imaging technology and local area networks made during 1995 and
1996. Equipment costs for the three months ending June 30, 1997 increased
$34,000 to $182,000 or 23.0%. For the six months ending June 30, 1997 and
1996, equipment expense totaled $351,000 and $278,000 respectively. This
represents a $73,000 or 26.3% increase.
In general, all other overhead expenses were lower as management continues to
emphasize overhead management. CNFC's ratio of non-interest expense to average
assets for the quarter ending June 30, 1997 increased to 4.72% from 3.80% for
the quarter ending June 30, 1996. The ratio of non-interest expense to average
assets for the six months ending June 30, 1997 also increased to 4.07% from
3.77%. Without the effect of the adjustments, the ratio of non-interest expense
to average assets for the three and six months ending June 30, 1997 would have
been 3.15% and 3.28% respectively.
page 10
<PAGE> 11
COMMERCIAL FINANCIAL CORPORATION
Item 6 (b) Reports on Form 8-K
A Form 8-K was filed July 25, 1997, the form acknowledges the Board of
Directors acceptance of the resignation from the Board of Directors of CNFC and
of Commercial Bank of Mr. Milligan. Mr. Milligan also served as Chief
Executive Officer and President of CNFC and Commercial Bank.
page 11
<PAGE> 12
COMMERCIAL NATIONAL FINANCIAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Commercial National Financial Corporation
(Registrant)
Date: August 13, 1997
/s/ Jeffrey S. Barker
---------------------
Jeffrey S. Barker
Acting President and Chief Executive Officer
/s/ Patrick G. Duffy
--------------------
Patrick G. Duffy
Vice President and Chief Financial Officer
page 12
<PAGE> 13
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Finanical Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,686
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,262
<INVESTMENTS-CARRYING> 26,147
<INVESTMENTS-MARKET> 26,252
<LOANS> 125,804
<ALLOWANCE> (1,946)
<TOTAL-ASSETS> 163,506
<DEPOSITS> 126,302
<SHORT-TERM> 10,089
<LIABILITIES-OTHER> 1,321
<LONG-TERM> 10,000
0
0
<COMMON> 890
<OTHER-SE> 14,904
<TOTAL-LIABILITIES-AND-EQUITY> 163,506
<INTEREST-LOAN> 5,504
<INTEREST-INVEST> 754
<INTEREST-OTHER> 154
<INTEREST-TOTAL> 6,412
<INTEREST-DEPOSIT> 2,303
<INTEREST-EXPENSE> 478
<INTEREST-INCOME-NET> 3,632
<LOAN-LOSSES> 215
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,304
<INCOME-PRETAX> 534
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 468
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 8.65
<LOANS-NON> 0
<LOANS-PAST> 857
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,824
<CHARGE-OFFS> 162
<RECOVERIES> 69
<ALLOWANCE-CLOSE> 1,946
<ALLOWANCE-DOMESTIC> 1,205
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 741
</TABLE>
