UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter ended JUNE 30, 1996
Commission file number 0-18676
COMMERCIAL NATIONAL FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1623213
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
900 LIGONIER STREET LATROBE, PA 15650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 539-3501
Indicate by checkmark 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.
CLASS OUTSTANDING AT JULY 31, 1996
Common Stock, $2 Par Value 1,800,000 Shares
<PAGE> 1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Included in Part I of this report:
Page
Commercial National Financial Corporation
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Changes in
Shareholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Other Information 14
Signatures 16
<PAGE> 2
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30 December 31
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,811,934 $ 7,550,942
Interest bearing deposits with
other banks 123,892 82,651
--------- ---------
Total cash and due from banks 6,935,826 7,633,593
Federal funds sold 850,000 5,425,000
Investment securities available for sale 42,934,326 58,232,862
Investment securities held to maturity
(Market value $62,920,355 in 1996 and
$46,427,423 in 1995) 63,195,398 45,247,754
Loans (all domestic) 148,696,321 144,523,375
Less unearned income (142,704) (235,373)
Less reserve for possible loan losses (2,088,061) (2,081,700)
------------ ------------
Net loans 146,465,556 142,206,302
Premises and equipment 4,363,958 3,825,878
Other assets 4,271,532 3,604,629
------------ ------------
Total Assets $269,016,596 $266,176,018
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (all domestic):
Non-interest bearing $ 35,540,761 $ 36,054,886
Interest bearing 197,601,961 194,681,425
------------ ------------
Total deposits 233,142,722 230,736,311
Other liabilities 1,936,377 2,403,237
------------ ------------
Total Liabilities 235,079,099 233,139,548
------------ ------------
Shareholders' Equity:
Common stock, par value $2
Authorized 1,800,000 shares, issued
and outstanding 1,800,000 shares 3,600,000 3,600,000
Retained earnings 30,536,687 29,143,045
Unrealized gain/(loss) on investment securities
available for sale net of taxes (199,190) 293,425
------------- ------------
Total Shareholders' Equity 33,937,497 33,036,470
------------- ------------
Total Liabilities and
Shareholders' Equity $269,016,596 $266,176,018
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 3
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
Three Months Six Months
Ending June 30 Ending June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $3,277,725 $3,188,436 $6,559,307 $6,342,348
Interest and dividends on investments:
Taxable interest 1,245,684 1,199,446 2,474,371 2,351,980
Interest exempt from federal
income tax 342,865 330,223 681,968 665,376
Interest on federal funds sold 27,062 60,193 73,772 114,140
Interest on bank deposits 1,387 548 2,644 802
---------- ---------- ---------- ----------
Total Interest Income 4,894,723 4,778,846 9,792,062 9,474,646
INTEREST EXPENSE 2,043,732 2,089,414 4,131,895 3,977,365
---------- ---------- ---------- ----------
NET INTEREST INCOME 2,850,991 2,689,432 5,660,167 5,497,281
PROVISION FOR POSSIBLE LOAN LOSSES 30,000 15,000 45,000 60,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,820,991 2,674,432 5,615,167 5,437,281
---------- ---------- ---------- ----------
OTHER INCOME
Asset management and trust income 22,294 6,806 31,806 9,578
Service charges on deposit accounts 121,795 128,648 241,910 244,318
Other service charges and fees 73,896 65,877 173,657 159,590
Securities gains/(losses) (1,173) 1,220 577 1,233
Other income 99,504 62,770 191,465 135,450
---------- ---------- ---------- ----------
Total Other Income 316,316 265,321 639,415 550,169
---------- ---------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits 975,105 963,464 2,040,456 1,961,531
Net occupancy expense 109,331 111,433 231,324 229,160
Furniture and equipment expense 128,977 103,618 263,219 203,831
FDIC insurance expense 500 123,043 1,000 244,078
Pennsylvania shares tax 60,000 55,500 120,000 111,000
Other expense 521,484 417,050 1,001,941 880,934
---------- ---------- ---------- ----------
Total Other Expenses 1,795,397 1,774,108 3,657,940 3,630,534
---------- ---------- ---------- ----------
INCOME BEFORE TAXES 1,341,910 1,165,645 2,596,642 2,356,916
Applicable income taxes 335,000 303,200 657,000 595,400
---------- ---------- ---------- ----------
NET INCOME $1,006,910 $ 862,445 $1,939,642 $1,761,516
========== ========== ========== ==========
Average Shares Outstanding 1,800,000 1,800,000 1,800,000 1,800,000
========== ========== ========== ==========
EARNINGS PER SHARE $ .56 $ .48 $ 1.08 $ .98
========== ========== ========== ==========
CASH DIVIDENDS DECLARED PER SHARE $ .16 $ .14 $ .30 $ .27
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 4
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Unrealized
Gain/(Loss)
on Investment
Additional Securities Total
Common Paid-in Retained Available Shareholders
Stock Capital Earnings for Sale Equity
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 $1,200,000 $2,400,000 $26,457,852 $ (500,909) $29,556,943
Net Income - - 1,761,516 - 1,761,516
Cash dividends
declared ($.27 per share) - (492,000) - (492,000)
Net change in
unrealized gain/(loss)
on investment securities
AFS net of taxes - - - 676,260 676,260
---------- ---------- ------------ ----------- -----------
Balance at
June 30, 1995 $1,200,000 $2,400,000 $27,727,368 $ 175,351 $31,502,719
========== ========== ============ =========== ===========
Balance at
December 31, 1995 $3,600,000 $ - $29,143,045 $ 293,425 $33,036,470
Net Income - - 1,939,642 - 1,939,642
Cash dividends
declared ($.30 per share) - - (546,000) - (546,000)
Net change in
unrealized gain/(loss)
on investment securities
AFS net of taxes - - - (492,615) (492,615)
---------- ---------- ----------- ----------- -----------
Balance at
June 30, 1996 $3,600,000 $ - $30,536,687 $ (199,190) $33,937,497
========== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For Six Months
Ended June 30
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,939,642 $ 1,761,516
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation 239,364 212,100
Provision for credit losses 45,000 60,000
Net (accretion)/amortization of securities
and loan fees (14,124) (17,321)
(Increase) Decrease in interest receivable (199,485) 64,801
Increase (Decrease) in interest payable (43,633) 350,528
(Decrease) in taxes payable (94,360) (145,689)
(Decrease) in other liabilities (328,867) (292,704)
Decrease in other assets 59,273 6,444
Net securities gains (577) (1,233)
---------- ----------
Net cash provided by operating activities 1,602,233 1,998,442
--------- ----------
INVESTING ACTIVITIES
Net (increase) in deposits
with other banks (41,241) (38,678)
Net decrease in fed funds sold 4,575,000 1,200,000
Purchase of securities AFS (6,688,203) (6,350,000)
Purchase of securities HTM (21,816,622) (5,744,868)
Maturities and calls of securities AFS 4,604,411 5,335,711
Maturities and calls of securities HTM 3,849,060 4,063,733
Sale of securities AFS 16,641,321 0
Net increase in loans (4,547,934) (4,144,100)
Purchase of premises and equipment (777,444) (308,263)
----------- -----------
Net cash used in investing activities (4,201,652) (5,986,465)
----------- -----------
FINANCING ACTIVITIES
(Decrease) increase in non-interest deposits (514,125) (2,480,091)
Increase (decrease) in int. bearing deposits 2,920,536 5,291,245
Dividends paid (546,000) (492,000)
----------- ----------
Net cash provided by financing activities 1,860,411 2,319,154
----------- ----------
(Decrease) in cash and cash equivalents (739,008) (1,668,869)
Cash and cash equivalents at beginning of year 7,550,942 7,763,321
--------- ---------
Cash and cash equivalents at end of quarter $ 6,811,934 $ 6,094,452
============ ============
Supplemental disclosures of cash flow information:
Non-cash items during the year for:
Transfer from loans to O.R.E.O. $ 272,919 $ 0
========= ==========
Change in unrealized gain/(loss) AFS securities $(746,387) $1,024,636
Deferred taxes (253,772) 348,376
Net change in unrealized gain/(loss) on ---------- ----------
AFS securities $(492,615) $ 676,260
========== ==========
Cash paid during the year for:
Interest $ 4,175,528 $3,626,837
============ ==========
Income Taxes $616,000 $620,228
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
COMMERCIAL NATIONAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
Note 1 Management Representation
- ------ -------------------------
The accompanying unaudited consolidated interim financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. However, they do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the annual financial
statements of Commercial National Financial Corporation for the year ending
December 31, 1995, including the notes thereto. In the opinion of management,
the unaudited interim consolidated financial statements include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair statement
of financial position as of June 30, 1996 and the results of operations for the
three and six month periods ended June 30, 1996 and 1995, and the statements of
cash flows and changes in shareholders' equity for the six month periods ended
June 30, 1996 and 1995 The results of the six months ended June 30, 1996 are
not necessarily indicative of the results to be expected for the entire year.
Note 2 Reserve for Possible Loan Losses
- ------ --------------------------------
<TABLE>
Description of changes:
<CAPTION>
1996 1995
<S> <C> <C>
Reserve balance January 1 $ 2,081,700 $ 2,077,553
Additions:
Provision charged to operating expenses 45,000 60,000
Recoveries on previously charged off
loans 20,622 5,225
Deductions:
Loans charged off (59,261) (48,765)
------------ ------------
Reserve balance June 30 $ 2,088,061 $ 2,094,013
============ ============
</TABLE>
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
First Six Months of 1996 as compared to the First Six Months of 1995
- --------------------------------------------------------------------
Pre-tax net income for the first six months of 1996 was $2,596,642 compared to
$2,356,916 during the same period of 1995, representing a 10.17% increase.
Interest income was $9,792,062 an increase of 3.35%. The loan return rate
increased one (1) basis point to 8.96% and the securities return rate decreased
ten (10) basis points to 6.01%. As a result, the return rate on total average
earning assets decreased five (5) basis points to 7.71%. Average earning asset
volume rose $9,818,484, a 4.02% increase.
Interest expense was $4,131,895 an increase of 3.89%. The cost rate on average
interest bearing deposits was 4.19%, a three (3) basis point increase from a
year ago. Average interest bearing deposit volume rose $5,933,267 an increase
of 3.10%.
Net interest income rose 2.96% to $5,660,167 and represented 4.26% of average
total assets compared to 4.31% during the first six months of 1995.
The average reserve for loan losses decreased .37% to $2,083,474. By comparison,
total average loans grew 3.32% during the same period. The 1996 first six
months provision for loan losses was $45,000, compared to $60,000 for the first
six months of 1995, a decrease of 25%.
Net interest income after the application of the provision for possible loan
losses grew 3.27% to $5,615,167, representing a 4.23% return on total average
assets compared to 4.27% for the first six months of 1995.
Non-interest income increased 16.22% to $639,415. Asset management and trust
fees totaled $31,806. Service charges on deposit accounts declined .99% to
$241,910. Other service charges and fees rose 8.81% reaching $173,657. Other
income increased 41.35% to $191,465 due primarily to increased activity of the
credit card merchant program. Net securities gains of $577 were realized on
called investments and bonds sold.
Non-interest expense reached $3,657,940, an increase of .75%, or $27,406, while
total average assets grew 4.28%. Personnel costs rose 4.02%, a $78,925
increase. Net occupancy expense rose .94%, or $2,164. Furniture and equipment
expense rose 29.14%, representing a cost increase of $59,388. FDIC insurance
expense fell 99.59%, a $243,078 decrease. This was due to the assessment
adjustment made by the FDIC during the second half of 1995. Pennsylvania shares
tax expense was $120,000, an increase of 8.11%. Other expense rose 13.74%, an
increase of $121,007.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
- ---------------------------------
First Six Months of 1996 as compared to the First Six Months of 1995 (continued)
- --------------------------------------------------------------------------------
Federal income tax on total first six months earnings was $657,000 compared to
$595,400 a year ago. Net income after taxes rose $178,126 to $1,939,642, an
increase of 10.11%. The annualized return on average assets was 1.46% for the
first six months of 1996 compared to 1.38% for the six months ended June 30,
1995. The annualized return on average equity through June 30, 1996 was 11.57%
and had been 11.58% through the first six months of 1995.
Three Months Ended June 30, 1996 as Compared to the Three Months Ended June 1995
- --------------------------------------------------------------------------------
Pre-tax net income for the second quarter of 1996 rose 15.12% and was $1,341,910
compared to $1,165,645 during the same period of 1995.
Interest income was $4,894,723 an increase of 2.42%. The loan return rate
decreased four (4) basis points to 8.91%, the securities return rate increased
fourteen (14) basis points to 6.00% and the return rate on total average earning
assets decreased nine (9) basis points to 7.68%. Volume growth in total average
earning assets was $8,729,267.
Interest expense was $2,043,732 a decrease of 2.19%. The volume increase in
average interest bearing deposits was $5,496,998. Cost rate declined to 4.13%,
a twenty-two (22) basis point decline from a year ago.
The average reserve for loan losses decreased .22% to $2,086,697, while total
average loans grew 3.22%. The 1996 second quarter provision for loan losses was
$30,000, compared to $15,000 for the second quarter of 1995, a 100.00% increase.
Net interest income after the application of the provision for possible loan
losses grew 5.48% to $2,820,991 representing a 4.24% return on total average
assets compared to 4.16% for the second quarter of 1995.
Non-interest income increased 19.22%, or $50,995, to $316,316. Service charges
on deposit accounts declined 5.33% to $121,795. Other service charges and fees
grew 12.17% to $73,896. Other income increased 58.52% to $99,504. Asset
management and trust income was $22,294. Net securities losses of $1,173 were
realized on called investments and bonds sold.
Non-interest expense rose $21,289, a 1.20% decrease, compared to total average
asset growth of 3.67%. Personnel costs rose $11,641, a 1.21% increase. Net
occupancy expense declined $2,102 a 1.89% decrease. Furniture and equipment
expense rose $25,359 a 24.47% increase. FDIC insurance expense fell 99.59%, a
$122,543 decrease. Pennsylvania shares tax expense was $60,000, an increase of
8.11%. Other expense rose $ 104,434, a 25.04% increase.
Federal income tax on total second quarter earnings was $335,000 compared to
$303,200 a year ago. Net income after taxes grew $144,465 to $1,006,910 a
16.75% increase. The annualized return on average assets was 1.51% for the
three months ended June 30, 1996 compared to 1.34% for the second quarter of
1995. The annualized return on average equity for the second quarter of 1996
was 11.96% compared to 11.15% for the second quarter of 1995.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
- ---------------------------------
LIQUIDITY
- ---------
Liquidity, the measure of the Corporation's ability to meet the normal cash flow
needs of depositors and borrowers in an efficient manner, is generated primarily
from the acquisition of deposit funds and the maturity of loans and securities.
Additional liquidity can be provided by the sale of investment securities
available for sale which amounted to $42,302,929 on June 30, 1996.
During the first six months of 1996, average deposits increased $7,294,003 over
the same period in 1995. Investments maturing within one year were 7.10% of
total assets on June 30, 1996 and 6.24% on June 30, 1995.
Average loans grew by $4,708,472 and the average securities portfolio including
federal funds sold increased $5,706,165.
INTEREST SENSITIVITY
- --------------------
Interest rate management seeks to maintain a balance between consistent income
growth and the risk that is created by variations in ability to reprice deposit
and investment categories. The effort to determine the effect of potential
interest rate changes normally involves measuring the so called "gap" between
assets (loans and securities) subject to rate fluctuation and liabilities
(interest bearing deposits) subject to rate fluctuation as related to earning
assets over different time periods and calculating the ratio of interest
sensitive assets to interest sensitive liabilities.
Repricing periods for the loans, securities, interest bearing deposits, non-
interest bearing assets and non-interest bearing liabilities are based on
contractual maturities, where applicable, as well as the corporation's
historical experience regarding the impact of interest rate fluctuations on the
prepayment and withdrawal patterns of certain assets and liabilities. Regular
savings, NOW and other similar interest bearing demand deposit accounts are
subject to immediate withdrawal and therefore are presented as beginning to
reprice in the earliest period presented in the "gap" table.
<PAGE> 10
INTEREST
SENSITIVITY (In thousands)
- --------------------------
The following table presents this information as of June 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
June 30, 1996
0-30 DAYS 31-90 DAYS 91-180 DAYS 181-365 DAYS 1 - 5 YEARS OVER 5 YRS
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest sensitive
assets $ 43,260 $ 7,316 $ 8,102 $ 22,473 $ 115,378 $ 58,210
Interest sensitive
liabilities $ 7,924 $ 18,911 $ 22,368 $ 34,962 $ 113,029 $ 638
Interest sensitivity --------------------------------------------------------------------
gap $ 35,336 $(11,595) $ (14,266) $ (12,489) $ 2,349 $ 57,572
====================================================================
Cumulative gap $ 23,741 $ 9,475 $ (3,014) $ (665) $ 56,907
Ratio of cumulative gap ========================================================
to earning assets 9.30% 3.71% (1.18%) (.26%) 22.28%
========================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
0-30 DAYS 31-90 DAYS 91-180 DAYS 181-365 DAYS 1 - 5 YEARS OVER 5 YRS
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest sensitive
assets $ 42,312 $ 5,474 $ 7,934 $ 19,533 $ 109,224 $ 68,355
Interest sensitive
liabilities $ 11,295 $ 18,446 $ 22,607 $ 30,069 $ 111,589 $ 675
Interest sensitivity --------------------------------------------------------------------
gap $ 31,017 $(12,972) $ (14,673) $ (10,536) $ (2,365) $ 67,680
====================================================================
Cumulative gap $ 18,045 $ 3,372 $ (7,164) $ (9,529) $ 58,151
Ratio of cumulative gap ========================================================
to earning assets 7.14% 1.33% (2.83%) (3.77%) 23.00%
========================================================
</TABLE>
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CREDIT QUALITY RISK
- -------------------
The following table presents a comparison of loan performance as of June 30,
1996 with that of June 30, 1995 Non-accrual loans are those for which interest
income is recorded only when received and past due loans are those which are
contractually past due 90 days or more in respect to interest or principal
payments. As of June 30, 1996 the Corporation had $272,919 in other real estate
owned and no in substance foreclosures.
<TABLE>
<CAPTION>
At June 30,
1996 1995
<S> <C> <C>
Non-performing Loans:
Loans on non-accrual basis $ 235,545 $ 578,992
Past due loans 27,493 4,978
------- -------
Total Non-performing Loans $ 263,038 $ 583,970
------- -------
Other real estate owned $ 272,919 $ -
Total Non-performing Assets $ 535,957 $ 583,970
======= =======
Loans outstanding at end of period $ 148,553,617 $ 143,196,109
Average loans outstanding (year-to-date) $ 146,380,912 $ 141,672,440
Non-performing loans as percent of total
loans .36% .41%
Provision for possible loan losses $ 45,000 $ 60,000
Net charge-offs $ 38,639 $ 43,540
Net charge-offs as percent of average
loans .03% .03%
Provision for possible loan losses as
percent of net charge-offs 116.46% 137.80%
Reserve for possible loan losses as
percent of average loans outstanding 1.43% 1.48%
</TABLE>
CAPITAL RESOURCES
- -----------------
Shareholders' equity for the first six months of 1996 averaged $33,528,898 which
represented an increase of $3,102,349 over the average capital of $30,426,549
recorded in the same period of 1995. These capital levels represented a capital
ratio of 12.62% in 1996 and 11.94% in 1995. When the loan loss reserve is
included, the 1996 capital ratio becomes 13.40%.
The Federal Reserve Board's risk-based capital adequacy guidelines are designed
principally as a measure of credit risk. These guidelines require that: (1) at
least 50% of a banking organization's total capital be common and certain other
"core" equity capital ("Tier I Capital"); (2) assets and off-balance sheet items
must be weighted according to risk; and (3) the total capital to risk-weighted
assets ratio be at least 8%; and (4) a minimum 4.00% leverage ratio of Tier I
capital to average total assets. The minimum leverage ratio is to be 4-5
percent for all but the most highly rated banks, as determined by a
regulatory rating system. As of June 30, 1996, the Corporation, under these
guidelines, had a Tier I and total equity capital to risk adjusted assets ratio
of 22.85% and 24.10% respectively. The leverage ratio was 12.81%.
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
<TABLE>
CAPITAL RESOURCES (continued)
- -----------------------------
The table below presents the Corporation's capital position at June 30, 1996
(Dollar amounts in thousands)
<CAPTION>
Percent
of Adjusted
Amount Assets
<S> <C> <C>
Tier I Capital $ 34,137 22.85
Tier I Requirement 5,976 4.00
Total Equity Capital $ 36,007 24.10
Total Equity Capital Requirement 11,951 8.00
- ------------------------------------------------------------------------------
Leverage Capital $ 34,137 12.81
Leverage Requirement 10,659 4.00
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
Not applicable.
ITEM 2. CHANGES IN SECURITIES
---------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable.
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
a. April 16, 1996 Annual Meeting of Shareholders
b.c. Directors elected at the meeting and results of voting:
Director For Against Withheld Abstentions
- -------- ------- ------- -------- -----------
Richmond H. Ferguson 526,511
Dorothy S. Hunter 526,511
John C. McClatchey 526,511
Joseph A. Mosso 526,511
Louis T. Steiner 526,511
Continuing directors:
Edwin P. Cover James A. Charley
William M. Charley Gregg E. Hunter
Frank E. Jobe Roy M. Landers
Ronald H. Lynch Louis A. Steiner
William W. Washnock C. Edward Wible
Ratification of the appointment of Jarrett Stokes & Kelly as independent
auditors:
For Against Withheld Abstained
------- ------- -------- ---------
526,136 375
d. N/A
ITEM 5. OTHER INFORMATION
-----------------
Effective June 3, 1996, Commercial National Financial Corporation became
listed on the NASDAQ National Market System under the trading symbol
"CNAF" with an additional descriptive newspaper listing of "Comm Ntn."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Not applicable
<PAGE> 15
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)
Dated: August 7, 1996 /s/ Louis A. Steiner
Louis A. Steiner
Chairman of the Board
Dated: August 7, 1996 /s/ Sandra L. Neiderhiser
Sandra L. Neiderhiser
Secretary/Treasurer
<PAGE> 16
Commercial National Financial Corporation
900 Ligonier Street
Latrobe, Pennsylvania 15650
Telephone (412) 539-3501
Banking Subsidiary:
Commercial National Bank of Westmoreland County
Banking Offices
Latrobe Area
900 Ligonier Street (412) 539-3501
1900 Lincoln Avenue (412) 537-9980
11 Terry Way * (412) 539-9774
Pleasant Unity
Church Street * (412) 423-5222
Ligonier
201 Main Street * (412) 238-9538
West Newton
109 East Main Street * (412) 872-5100
Greensburg Area
Georges Station Road * (412) 836-7600
19 North Main Street (412) 836-7699
Asset Management and (412) 836-7670
Trust Division
19 North Main Street
Drive-up Facility
Latrobe
Lincoln Road at
Josephine Street * (412) 537-9927
Murrysville (to open mid-1996)
4785 Old William Penn Highway (412) 733-4888
* Automatic Teller Facilities
Automatic Teller Facilities also located at
Latrobe Area Hospital, Westmoreland County Airport,
and Saint Vincent College
<PAGE> 17
</TABLE>
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] JUN-30-1996
[CASH] 6,811,934
[INT-BEARING-DEPOSITS] 123,892
[FED-FUNDS-SOLD] 850,000
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 42,934,326
[INVESTMENTS-CARRYING] 63,195,398
[INVESTMENTS-MARKET] 62,920,355
[LOANS] 148,553,617
[ALLOWANCE] 2,088,061
[TOTAL-ASSETS] 269,016,596
[DEPOSITS] 233,142,722
[SHORT-TERM] 0
[LIABILITIES-OTHER] 1,936,377
[LONG-TERM] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 3,600,000
[OTHER-SE] 30,337,497
[TOTAL-LIABILITIES-AND-EQUITY] 269,016,596
[INTEREST-LOAN] 6,559,307
[INTEREST-INVEST] 3,156,339
[INTEREST-OTHER] 76,416
[INTEREST-TOTAL] 9,792,062
[INTEREST-DEPOSIT] 4,126,806
[INTEREST-EXPENSE] 4,131,895
[INTEREST-INCOME-NET] 5,660,167
[LOAN-LOSSES] 45,000
[SECURITIES-GAINS] 577
[EXPENSE-OTHER] 3,657,940
[INCOME-PRETAX] 2,596,642
[INCOME-PRE-EXTRAORDINARY] 1,939,642
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 1,939,642
[EPS-PRIMARY] 1.08
[EPS-DILUTED] 1.08
[YIELD-ACTUAL] 7.71
[LOANS-NON] 235,545
[LOANS-PAST] 27,493
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 2,081,700
[CHARGE-OFFS] 59,261
[RECOVERIES] 20,622
[ALLOWANCE-CLOSE] 2,088,061
[ALLOWANCE-DOMESTIC] 2,088,061
[ALLOWANCE-FOREIGN] 0
</TABLE>
