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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number: 0-17000
Commercial Bank Employee Savings and Stock Ownership Plan
Commercial National Financial Corporation
101 N. Pine River
Ithaca, Michigan 48847
(517) 875-4534
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REPORT OF INDEPENDENT AUDITORS
Plan Administrator of Commercial Bank
Employee Savings and Stock Ownership Plan
Ithaca, Michigan
We have audited the accompanying statements of net assets available for benefits
of the Commercial Bank Employee Savings and Stock Ownership Plan ("the Plan") as
of December 31, 1999 and 1998 and the related statement of changes in net assets
available for benefits for the year ended December 31, 1999. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the year ended December 31, 1999, in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes at end of year is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements as a whole.
Crowe, Chizek and Company LLP
South Bend, Indiana
May 25, 2000
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1.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1999 and 1998
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<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Investments, at fair value (Note 4)
Common stock $ 1,172,325 $ 1,064,646
Mutual funds 1,773,888 1,267,161
Loans to plan participants 984 2,277
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2,947,197 2,334,084
Receivables
Employer contribution 99,488 88,496
Participant contributions 4,075 --
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103,563 88,496
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NET ASSETS AVAILABLE FOR BENEFITS $ 3,050,760 $ 2,422,580
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</TABLE>
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See accompanying notes to financial statements.
2.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31, 1999
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<TABLE>
<S> <C>
ADDITIONS TO NET ASSETS ATTRIBUTABLE TO:
Investment income
Net appreciation in fair value of investments (Note 4) $ 470,481
Interest 81
Dividends - cash 78,002
Dividends - stock 60,721
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609,285
Contributions
Employer 99,488
Participants 179,679
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279,167
Total additions 888,452
DEDUCTIONS FROM NET ASSETS ATTRIBUTABLE TO:
Benefits paid to participants 260,272
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Total deductions 260,272
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NET INCREASE 628,180
Net assets available for benefits
Beginning of year 2,422,580
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End of year $ 3,050,760
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</TABLE>
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See accompanying notes to financial statements.
3.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
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NOTE 1 - DESCRIPTION OF PLAN
The following description of the Commercial Bank Employee Savings and Stock
Ownership Plan (the Plan) is provided for general information purposes only.
Participants should refer to the Plan agreement for a more complete description
of the Plan's provisions.
General: The Plan was established by the plan sponsor, Commercial Bank (the
Bank), effective January 1, 1997. The Bank acts as trustee for the Plan assets.
The Plan is a defined contribution plan which covers all employees who have
completed 90 days of employment and attained the age of 21. The Plan has a
contributory 401(k) portion based on elective contributions from participants in
the Plan. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
Contributions: Elective deferrals by participants under the 401(k) provisions
are based on a percentage of their compensation as defined in the Plan agreement
which are subject to certain limitations. Employees also may rollover account
balances from other plans into their account. The Bank may, at the sole
discretion of the Board of Directors, contribute to each participant's account a
matching contribution which is a percentage of the participant's elective
contribution for the year. For 1999, the Bank made matching contributions equal
to 100% of the first 6% of the compensation deferred by each 401(k) participant
subject to certain limitations as specified in the Plan agreement.
Participant Accounts: Each participant's account is credited with the
participant's contributions and allocation of (a) the Bank's contributions and
(b) Plan earnings. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is the
aggregate of the participants' deferrals and roll-overs and employer matching
contributions.
Investment options: Participants may direct, on a quarterly basis, the trustee
to invest their elective 401(k) contributions as well as employer matching
contributions to the Plan in any of the available investment options.
Participants can individually determine their investment options based on
desired level of risk and return for all contributions (employer and employee)
to the Plan. Each participant has a self-directed account in addition to the
investment options offered by the Plan. This gives participants the option to
invest their contributions (employer and employee) to purchase common stock of
Commercial National Financial Corporation, the parent company of the plan
sponsor.
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(Continued)
4.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
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NOTE 1 - DESCRIPTION OF PLAN (Continued)
Retirement, Death and Disability: A participant is entitled to 100% of his or
her account balance upon retirement, death or disability while employed.
Vesting: Participants are immediately vested in their elective contributions
plus actual earnings thereon, and employer matching contributions.
Payment of Benefits: A participant or his or her beneficiary receives the vested
portion in the participant's account in a lump-sum. A participant may receive
the portion of his or her account invested in Commercial National Financial
Corporation common stock in stock or cash.
Loan Provisions: The Plan provides that participants can borrow funds against
their account balances up to 50% of their vested account balance, or $50,000,
whichever is less.
Expenses: Substantially all administrative expenses are paid by the Plan
sponsor.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Valuation and Income Recognition: Investments are stated at fair
value. Mutual fund shares are traded on national exchanges and are valued at the
last sales price on the date of valuation. Commercial National Financial
Corporation common stock is traded over-the-counter and is valued at the last
sales price on the date of valuation. Purchases and sales of securities are
recorded on a trade-date basis. Interest income is recorded on the accrual
basis. Dividends are recorded on the ex-dividend date.
Net Appreciation (Depreciation) in Fair Value of Investments: In accordance with
the policy of stating investments at fair value, net unrealized appreciation
(depreciation) for the year along with gains and losses on sales of investments
are reflected in the Statement of Changes in Net Assets Available for Benefits
as net appreciation (depreciation) in fair value of investments. Unrealized
appreciation (depreciation) for investments held as of the end of the current
fiscal year is the difference between the current value of those investments and
the value of those investments as of the end of the prior fiscal year or the
purchase date for investments purchased during the year. The gain or loss on
securities sold is the difference between the proceeds received and the fair
value of the security at the end of the prior fiscal year or the purchase date
for securities purchased during the year.
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(Continued)
5.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make estimates
and assumptions that affect certain reported amounts and disclosures, and actual
results may differ from these estimates. It is at least reasonably possible that
a significant change may occur in the near term for the estimates of investment
valuation.
Concentration of Credit Risk: At December 31, 1999 and 1998, 38.4% and 43.9% of
the Plan's assets were invested in Commercial National Financial Corporation
common stock.
New Accounting Standard: During 1999, the Plan adopted the requirements of the
American Institute of Certified Public Accountants Statement of Position 99-3,
Accounting and Reporting of Certain Defined Contribution Plan Investments and
Other Disclosure Matters.
NOTE 3 - PLAN TERMINATION
Although it has not expressed any intent to do so, the Bank has the right under
the Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA and its related regulations.
NOTE 4 - INVESTMENTS
The following presents investments that represent 5% or more of the Plan's net
assets as of December 31.
<TABLE>
<CAPTION>
1999
----
Number of Fair
Shares Value
------ -----
<S> <C> <C>
INVESTMENTS, AS DETERMINED BY
QUOTED MARKET PRICE
George Putnam Fund of Boston 13,103 $ 213,541
Putnam Fund for Growth and Income 20,862 393,984
Putnam Investors Fund 21,452 408,792
Putnam OTC & Emerging Growth Fund 10,610 394,783
Putnam International Growth Fund 6,300 186,667
Commercial National Financial Corporation common stock 89,904 1,172,325
</TABLE>
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(Continued)
6.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
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NOTE 4 - INVESTMENTS (Continued)
<TABLE>
<CAPTION>
1998
----
Number of Fair
Shares Value
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<S> <C> <C>
INVESTMENTS, AS DETERMINED BY
QUOTED MARKET PRICE
Scudder Growth & Income Fund 7,897 $ 207,779
Frank Russell Investment Company Diversified Bond Fund 7,533 177,260
Baron Asset Fund 4,853 245,262
Harbor International Fund 3,952 145,129
Harbor Capital Appreciation Fund 12,195 463,287
Commercial National Financial Corporation common stock 89,422 1,064,646
</TABLE>
All of the Plan's investments are uninsured.
During 1999, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$470,481 as follows:
<TABLE>
<S> <C>
Mutual funds $ 433,951
Common stock 36,530
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$ 470,481
</TABLE>
NOTE 5 - PARTY-IN-INTEREST TRANSACTIONS
Parties-in-interest are defined under Department of Labor (DOL) regulations as
any fiduciary of the Plan, any party rendering service to the Plan, the
employer, and certain others. Professional fees for the administration and audit
of the Plan are paid by the Bank.
As of December 31, the Plan held the following party-in-interest investments (at
fair value):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Baird Money Market $ 63,826 $ --
Commercial National Financial Corporation
common stock, 89,904 and 89,422 shares 1,172,325 1,064,646
</TABLE>
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7.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
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NOTE 5 - PARTY-IN-INTEREST TRANSACTIONS (Continued)
The 89,904 and 89,422 shares of Commercial National Financial Corporation common
stock held by the Plan as of December 31, 1999 and 1998 represent 2.82% and
2.85% of the Corporation's outstanding shares as of December 31, 1999 and 1998.
During 1999, cash dividends of $37,286 were paid to the Plan by the Corporation.
During 1999, the Plan, under employee direction, purchased 4,188 shares of
Commercial National Financial Corporation common stock for a total purchase
price of $87,714 and sold 3,977 shares of Commercial National Financial
Corporation common stock for $82,341. In addition, the Corporation issued a
three for one stock split and a 5% stock dividend which resulted in 56,968 and
4,337 additional shares in 1999. The number of shares outstanding at December
31, 1998 has been restated to reflect the 1999 stock split and stock dividend.
NOTE 6 - TAX STATUS
The Internal Revenue Service has determined and informed Commercial National
Financial Corporation by letter dated August 1, 1997, that the Plan and related
trusts are designed in accordance with the applicable sections of the Internal
Revenue Code (IRC) for tax exempt status. While the Plan has been amended
subsequent to this date, the Plan administrator believes that the Plan continues
to be designed and operating in accordance with the IRC.
NOTE 7 - TERMINATED PARTICIPANTS
Included in net assets available for benefits are amounts allocated to
individuals who have elected to withdraw from the Plan, but who have not yet
been paid. Plan assets allocated to these participants were $87,551 at December
31, 1999.
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8.
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COMMERCIAL BANK EMPLOYEE SAVINGS
AND STOCK OWNERSHIP PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
December 31, 1999
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Attachment to Form 5500, Schedule H, Part IV, Line 4i
Name of plan sponsor: Commercial Bank
Employer identification number: 38-2799780
Three-digit plan number: 003
<TABLE>
<CAPTION>
(B)
Identity of Issuer, (E)
Borrower, Lessor, (C) (D) Current
(A) or Similar Party Shares/Units Cost Value
--- ---------------- ------------ ---- -----
<S> <C> <C> <C> <C>
George Putnam Fund of Boston 13,103 $ 213,541
Putnam Growth & Income Fund 20,862 393,984
Putnam Income Fund 18,288 112,294
Putnam International Growth Fund 6,300 186,667
Putnam Investors Fund 21,452 408,793
Putnam OTC & Emerging Growth
Fund 10,610 394,783
* Baird Money Market 63,826 63,826
* Commercial National Financial
Corporation common stock 89,904 1,172,325
Loans to plan participants 984
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$ 2,947,197
============
</TABLE>
* Party in interest
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9.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Commercial Bank Employee Savings and Stock
Ownership Plan
Date: June 28, 2000 /s/ Jeffrey Barker
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Jeffrey Barker, Trustee
Date: June 28, 2000 /s/ Patrick Duffy
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Patrick Duffy, Trustee
<PAGE> 12
Exhibit Index
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Exhibit No. Description
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23 Consent of Independent Public Accountants
