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, 1998
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: (724) 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, 1998
Common Stock, $2 Par Value 1,800,000 Shares
<PAGE>
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>
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30 December 31
1998 1997
<S> <C> <C>
ASSETS
Cash and due from banks $ 9,017,213 $ 9,711,026
Interest bearing deposits with
other banks 182,023 130,937
--------------------------
Total cash and due from banks 9,199,236 9,841,963
Federal funds sold 125,000 -
Investment securities available for sale 54,196,363 54,267,314
Investment securities held to maturity
(Market value $55,708,575 in 1998 and
$68,021,006 in 1997) 55,319,951 64,114,775
Loans (all domestic) 185,216,479 183,639,085
Less unearned income (117,068) (157,928)
Less reserve for possible loan losses (1,840,046) (1,882,251)
---------------------------
Net loans 183,259,365 181,598,906
Premises and equipment 6,268,923 5,990,786
Other assets 3,999,623 3,928,212
Total Assets $312,368,461 $319,741,956
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (all domestic):
Non-interest bearing $ 40,116,770 $ 35,968,693
Interest bearing 219,816,349 224,721,064
---------------------------
Total deposits 259,933,119 260,689,757
Short-term borrowings 5,000,000 17,850,000
Long-term borrowings 5,000,000 -
Other liabilities 2,283,330 2,757,188
---------------------------
Total Liabilities 272,216,449 281,296,945
---------------------------
Shareholders' Equity:
Common stock, par value $2
Authorized shares 10,000,000; issued
and outstanding 1,800,000 shares 3,600,000 3,600,000
Retained earnings 36,212,627 34,604,120
Accumulated other comprehensive income 339,385 240,891
----------------------------
Total Shareholders' Equity 40,152,012 38,445,011
----------------------------
Total Liabilities and
Shareholders' Equity $312,368,461 $319,741,956
===========================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
Three Months Six Months
Ending June 30 Ending June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,219,041 $3,777,633 $8,416,030 $ 7,341,000
Interest and dividends on investments:
Taxable interest 1,191,126 1,228,865 2,448,099 2,417,849
Interest exempt from federal
income tax 479,159 416,694 949,159 789,459
Interest on federal funds sold 9,933 8,380 10,873 23,146
Interest on bank deposits 1,975 2,085 3,406 4,210
-------------------------------------------------
Total Interest Income 5,901,234 5,433,657 11,827,567 10,575,664
INTEREST EXPENSE
Interest on deposits 2,351,559 2,304,584 4,730,781 4,500,162
Interest on short-term borrowings 142,211 61,694 357,803 89,334
Interest on long-term borrowings 71,055 - 118,685 -
--------------------------------------------------
Total interest expense 2,564,825 2,366,278 5,207,269 4,589,496
NET INTEREST INCOME 3,336,409 3,067,379 6,620,298 5,986,168
PROVISION FOR POSSIBLE LOAN LOSSES 105,000 60,000 195,000 105,000
--------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,231,409 3,007,379 6,425,298 5,881,168
OTHER INCOME
Asset management and trust income 56,940 45,621 132,747 71,543
Service charges on deposit accounts 148,469 147,833 281,510 283,206
Other service charges and fees 122,564 110,799 276,644 213,210
Securities gains/(losses) - - 11,271 -
Other income 80,137 80,779 164,450 159,373
--------------------------------------------------
Total Other Income 408,110 385,032 866,622 727,332
OTHER EXPENSES
Salaries and employee benefits 1,216,727 1,123,979 2,423,633 2,306,477
Net occupancy expense 157,800 127,684 308,688 270,155
Furniture and equipment expense 162,618 168,649 304,733 327,885
Pennsylvania shares tax 77,930 70,257 150,744 137,676
Other expense 521,267 532,263 1,038,615 1,021,621
--------------------------------------------------
Total Other Expenses 2,136,342 2,022,832 4,226,413 4,063,814
INCOME BEFORE TAXES 1,503,177 1,369,579 3,065,507 2,544,686
Applicable income taxes 355,000 327,000 737,000 611,000
--------------------------------------------------
NET INCOME $1,148,177 $1,042,579 $2,328,507 $1,933,686
==================================================
Average Shares Outstanding 1,800,000 1,800,000 1,800,000 1,800,000
==================================================
EARNINGS PER SHARE $ .64 $ .58 $ 1.29 $ 1.07
==================================================
CASH DIVIDENDS DECLARED PER SHARE $ .20 $ .18 $ .40 $ .34
==================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Retained Comprehensive Comprehensive Shareholders'
Stock Earnings Income Income Equity
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 $3,600,000 $31,777,511 $ - $ 10,743 $35,388,254
Comprehensive income:
Net income - 1,933,686 1,933,686 - 1,933,686
Other comprehensive income,
net of taxes
Unrealized gains/(losses) on
investment securities AFS,
net of reclassification adj - - (42,792) (42,792) (42,792)
Total comprehensive income 1,890,894
Cash dividends
declared ($.34 per share) - (612,000) - (612,000)
------------------------------------------------------------------------
Balance at
June 30, 1997 $3,600,000 $33,099,197 $ (32,049) $36,667,148
========================================================================
Balance at
December 31, 1997 $3,600,000 $34,604,120 $ - $ 240,891 $38,445,011
Comprehensive income
Net Income - 2,328,507 2,328,507 - 2,328,507
Other comprehensive income
net of taxes
Unrealized gains/(losses) on
investment securities AFS,
net of reclassification adj - - 98,494 98,494 98,494
Total comprehensive income 2,427,001
Cash dividends
declared ($.40 per share) - (720,000) - (720,000)
------------------------------------------------------------------------
Balance at
June 30, 1998 $3,600,000 $36,212,627 $ 339,385 $40,152,012
========================================================================
</TABLE>
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Disclosure of reclassification amount:
Unrealized holding gains/(losses) arising during period $98,494 $(42,792)
Less: reclassification adjustment for gains included in
net income, net of taxes of 2,755 in 1998. 8,516 -
---------------------
Net unrealized gains/(losses) on securities $89,978 $(42,792)
=====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For Six Months
Ended June 30
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $2,328,507 $1,933,686
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 297,740 317,309
Provision for possible loan losses 195,000 105,000
Net(accretion)/amortization of securities
and loan fees 6,517 25,571
(Increase)decrease in interest receivable 170,871 (246,622)
Increase(decrease) in interest payable (85,201) 34,473
Increase(decrease)in taxes payable (212,657) 8,442
Decrease in other liabilities (385,064) (347,474)
(Increase)decrease in other assets (83,957) 373,323
Net securities gains (11,271) -
--------------------------
Net cash provided by operating activities 2,220,485 2,203,708
--------------------------
INVESTING ACTIVITIES
Net(increase)decrease in deposits
with other banks (51,086) 49,871
Net increase in fed funds sold (125,000) -
Purchase of securities AFS (2,735,950) (13,058,220)
Purchase of securities HTM (1,966,778) (6,622,774)
Maturities and calls of securities AFS 1,781,964 8,204,989
Maturities and calls of securities HTM 11,875,000 4,245,000
Sale of securities AFS - -
Net increase in loans (1,789,933) (8,994,330)
Purchase of premises and equipment (575,877) (439,138)
--------------------------
Net cash used in investing activities 6,412,340 (16,614,602)
--------------------------
FINANCING ACTIVITIES
Net increase(decrease)in deposits (756,638) 12,550,301
Net increase(decrease)in short-term borrowings (12,850,000) 2,200,000
Net increase in long-term borrowings 5,000,000 -
Dividends paid (720,000) (612,000)
--------------------------
Net cash provided by financing activities (9,326,638) 14,138,301
--------------------------
(693,813) (272,593)
Cash and cash equivalents at beginning of year 9,711,026 8,839,707
--------------------------
Cash and cash equivalents at end of quarter $ 9,017,213 $ 8,567,114
==========================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,292,470 $ 4,555,203
==========================
Income Taxes $ 793,400 $ 454,000
==========================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
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, 1997, 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, 1998 and the
results of operations for the three and six month periods ended
June 30, 1998 and 1997, and the statements of cash flows and
changes in shareholders' equity for the six month periods ended
June 30, 1998 and 1997. The results of the six months ended June
30, 1998 are not necessarily indicative of the results to be
expected for the entire year.
Note 2 Reserve for Possible Loan Losses
- -----------------------------------------
Description of changes:
1998 1997
Reserve balance January 1 $ 1,882,251 $2,035,819
Additions:
Provision charged to operating expenses 195,000 105,000
Recoveries on previously charged off
loans 5,030 11,829
Deductions:
Loans charged off (242,235) (234,737)
-------------------------
Reserve balance June 30 $ 1,840,046 $ 1,917,911
=========================
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
First Six Months of 1998 as compared to the First Six Months of
1997
- -----------------------------------------------------------------
Pre-tax net income for the first six months of 1998 was
$3,065,508 compared to $2,544,686 during the same period of 1997,
representing a 20.47% increase.
Interest income was $11,827,567, an increase of 11.84%. The loan
return rate increased eight (8) basis points to 9.09% and the
securities return rate increased two (2) basis points to 5.96%.
As a result, the return rate on total average earning assets
increased eleven (11) basis points to 7.89%. Average earning
asset volume rose 27,868,080, a 10.25% increase.
Interest expense was $5,207,269, an increase of 13.46%. The cost
rate on average interest-bearing liabilities was 4.39%, a ten
(10) basis point increase from a year ago. Average interest-
bearing liability volume rose $23,328,902 an increase of 10.91%.
Net interest income rose 10 59% to $6,620,298 and represented
4.20% of average total assets compared to 4.20% during the first
six months of 1997.
The average reserve for loan losses decreased 6.40% to
$1,866,128. By comparison, total average loans grew 13.65% during
the same period. The 1998 first six months provision for loan
losses was $195,000, compared to $105,000 for the first six
months of 1997, an increase of 85.71%.
Net interest income after the application of the provision for
possible loan losses grew 9.25% to $6,425,298, representing a
4.08% return on total average assets compared to 4.13% for the
first six months of 1997.
Non-interest income increased 19.15% to $866,622. Asset
management and trust fees totaled $132,747. Service charges on
deposit accounts decreased .60% to $281,510. Other service
charges and fees rose 29.75% reaching $276,644. Other income
increased 3.19% to $164,450. Securities gains of $11,271 were
realized on called investments.
Non-interest expense reached $4,226,413, an increase of 4.00%, or
$162,599, while total average assets grew 10.63%. Personnel costs
rose 5.08%, a $117,156 increase. Net occupancy expense rose
14.26%, or $38,533. Furniture and equipment expense declined
7.06%, representing a cost decrease of $23,152. Pennsylvania
shares tax expense was $150,744, an increase of 9.49%. Other
expense rose 1.66%, an increase of $16,994.
Federal income tax on total first six months earnings was
$737,000 compared to $611,000 a year ago. Net income after taxes
increased $394,821 to $2,328,507, an increase of 20.42%. The
annualized return on average assets was 1.48% for the first six
months of 1998 compared to 1.36% for the six months ended June
30, 1997. The annualized return on average equity through June
30, 1998 was 11.86% and had been 10.76% through the first six
months of 1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
- ---------------------------------
Three Months Ended June 30, 1998 as Compared to the Three Months
Ended June 30, 1997
- ----------------------------------------------------------------
Pre-tax net income for the second quarter of 1998 rose 9.75% and
was $1,503,177 compared to $1,369,579 during the same period of
1997.
Interest income was $5,901,234 an increase of 8.61%. The loan
return rate decreased seven (7) basis points to 9.10%, the
securities return rate increased two (2) basis points to 5.96%
and the return rate on total average earning assets increased six
(6) basis points to 7.92%. Volume growth in total average earning
assets was $21,818,592.
Interest expense was $2,564,825 an increase of 8.39%. The volume
increase in average interest-bearing liabilities was $17,087,259.
Cost rate rose to 4.38%, a three (3) basis point increase from a
year ago.
The average reserve for loan losses decreased 4.69% to
$1,861,968, while total average loans grew 12.43%. The 1998
second quarter provision for loan losses was $105,000, compared
to $60,000 for the second quarter of 1997, a 75.00% increase.
Net interest income after the application of the provision for
possible loan losses grew 7.45% to $3,231,409 representing a
4.12% return on total average assets compared to 4.15% for the
second quarter of 1997.
Non-interest income increased 23,078 or 5.99%, to $408,110.
Service charges on deposit accounts increased .43% to $148,469.
Other service charges and fees grew 10.62% to $122,564. Other
income decreased .79% to $80,137. Asset management and trust
income was $56,940.
Non-interest expense rose $113,510, a 5.61% increase, compared to
total average asset growth of 8.44%. Personnel costs rose
$92,748, a 8.25% increase. Net occupancy expense rose $30,116 a
23.59% increase. Furniture and equipment expense fell $6,031 a
3.58% decrease. Pennsylvania shares tax expense was $77,930, an
increase of 10.92%. Other expense fell $10,996, a 2.07% decrease.
Federal income tax on total second quarter earnings was $355,000
compared to $327,000 a year ago. Net income after taxes grew
$105,598 to $1,148,177, a 10.13% increase. The annualized return
on average assets was 1.46% for the three months ended June 30,
1998 compared to 1.44% for the second quarter of 1997. The
annualized return on average equity for the second quarter of
1998 was 11.58% compared to 11.49% for the second quarter of
1997.
<PAGE>
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 debt
investment securities available for sale which amounted to
$53,267,450 on June 30, 1998.
During the first six months of 1998, average interest-bearing
liabilities increased $23,328,902 over the same period in 1997.
Investments maturing within one year were 3.35% of total assets
on June 30, 1998 and 5.48% on June 30, 1997.
Average loans grew by $22,253,683 and the average securities
portfolio including federal funds sold increased $5,614,397.
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>
INTEREST
SENSITIVITY (In thousands)
- --------------------------
The following table presents this information as of June 30, 1998 and
December 31, 1997:
<TABLE>
<CAPTION>
June 30, 1998
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 $ 47,203 $ 4,853 $ 11,054 $ 24,613 $ 114,588 $ 90,078
Interest sensitive
liabilities $ 9,954 $ 20,094 $ 25,606 $ 49,326 $ 107,740 $ 17,096
Interest sensitivity ---------------------------------------------------------------------
gap $ 37,249 $(15,241) $ (14,552) $ (24,713) $ 6,848 $ 72,982
=====================================================================
Cumulative gap $ 22,008 $ 7,456 $ (17,257) $ (10,409) $ 62,573
Ratio of cumulative gap ==========================================================
to earning assets 7.46% 2.53% (5.85%) (3.53%) 21.21%
==========================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
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 $ 50,363 $ 6,582 $ 11,657 $ 17,290 $ 123,613 $ 90,953
Interest sensitive
liabilities $ 19,944 $ 29,790 $ 26,938 $ 35,667 $ 112,426 $ 17,806
Interest sensitivity ----------------------------------------------------------------------
gap $ 30,419 $(23,208) $ (15,281) $ (18,377) $ 11,187 $ 73,147
======================================================================
Cumulative gap $ 7,211 $ (8,070) $ (26,447) $ (15,260) $ 57,887
Ratio of cumulative gap ===========================================================
to earning assets 2.39% (2.67%) (8.75%) (5.05%) 19.09%
===========================================================
</TABLE>
<PAGE>
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,
1998 with that of June 30, 1997. 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, 1998 the corporation
had no other real estate owned and no in-substance foreclosures.
At June 30,
1998 1997
Non-performing Loans:
Loans on non-accrual basis $ 28,074 $ 23,172
Past due loans 423,870 127,790
Renegotiated loans 911,943 985,948
----------------------------
Total Non-performing Loans $ 1,363,887 $ 1,136,910
Other real estate owned $ - $ -
----------------------------
Total Non-performing Assets $ 1,363,887 $ 1,136,910
============================
Loans outstanding at end of period $ 185,099,411 $ 168,726,447
Average loans outstanding (year-to-date) $ 185,263,429 $ 163,009,746
Non-performing loans as percent of total
loans .74% .67%
Provision for possible loan losses $ 195,000 $ 105,000
Net charge-offs $ 237,205 $ 222,908
Net charge-offs as percent of average
loans .13% .14%
Provision for possible loan losses as
percent of net charge-offs 82.21% 47.10%
Reserve for possible loan losses as
percent of average loans outstanding .99% 1.25%
CAPITAL RESOURCES
- -----------------
Shareholders' equity for the first six months of 1998 averaged $39,279,736
which represented an increase of $3,324,640 over the average capital
of $35,955,096 recorded in the same period of 1997. These capital
levels represented a capital ratio of 12.46% in 1998 and 12.62 in
1997. When the loan loss reserve is included, the 1998 capital ratio
becomes 13.05%.
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, 1998, the corporation,
under these guidelines, had a Tier I and total equity capital to risk
adjusted assets ratio of 21.35% and 22.33% respectively. The leverage
ratio was 12.70%.
<PAGE>
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CAPITAL RESOURCES (continued)
- -----------------------------
The table below presents the corporation's capital position at June 30, 1998
(Dollar amounts in thousands)
Percent
of Adjusted
Amount Assets
------ -----------
Tier I Capital $ 39,813 21.35
Tier I Requirement 7,461 4.00
Total Equity Capital $ 41,653 22.33
Total Equity Capital Requirement 14,921 8.00
- -------------------------------------------------------------------------
Leverage Capital $ 39,813 12.70
Leverage Requirement 12,539 4.00
<PAGE>
YEAR 2000 ISSUES
In 1997, Commercial National Financial Corporation began
an assessment of analyzing any Year 2000 issues that may
affect the day to day business operations of the
corporation or the bank. The Year 2000 issue is the
result of computer programs being written using two
digits rather than four to define the applicable year.
Based on management's assessment, the corporation
believes the costs associated with addressing the
problem are not expected to have a material adverse
impact on the corporation's financial position. The
corporation has been and will continue to devote the
necessary time and resources to resolve the Year 2000
issue in a timely manner.
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>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. April 16, 1998 Annual Meeting of Shareholders
b.c. Directors elected at the meeting and results of voting:
Director For Against Withheld Abstentions
George A. Conti, Jr. 1,561,841 425
Edwin P. Cover 1,141,159 421,107
Frank E. Jobe 1,561,841 425
Roy M. Landers 1,561,841 425
C. Edward Wible 1,561,841 425
Continuing directors:
William M. Charley Joseph A. Mosso
Richmond H. Ferguson Debra L. Spatola
Dorothy S. Hunter Louis A. Steiner
Gregg E. Hunter Louis T. Steiner
John C. McClatchey George V. Welty
Ratification of the appointment of Stokes Kelly and Hinds, LLC,
as independent auditors:
For Against Withheld Abstained
1,566,021 6,245
d. N/A
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable
<PAGE>
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, 1998 /s/ LOUIS T. STEINER
---------------------
Louis T. Steiner
President and Chief Executive Officer
Dated: August 7, 1998 /s/ WENDY S. SCHMUCKER
-----------------------
Wendy S. Schmucker
Secretary/Treasurer
<PAGE>
Commercial National Financial Corporation
900 Ligonier Street
Latrobe, Pennsylvania 15650
Telephone (724) 539-3501
Banking Subsidiary:
Commercial National Bank of Westmoreland County
Banking Offices
Latrobe Area
900 Ligonier Street (724) 539-3501
1900 Lincoln Avenue (724) 537-9980
11 Terry Way * (724) 539-9774
Pleasant Unity
Church Street * (724) 423-5222
Ligonier
201 Main Street * (724) 238-9538
West Newton
109 East Main Street * (724) 872-5100
Greensburg Area
Georges Station Road * (724) 836-7600
19 North Main Street (724) 836-7699
Asset Management and (724) 836-7670
Trust Division
19 North Main Street
Drive-up Facility
Latrobe
Lincoln Road at
Josephine Street * (724) 537-9927
Murrysville
4785 Old William Penn Highway (724) 733-4888
* Automatic Teller Facilities
Automatic Teller Facilities also located at
Latrobe Area Hospital, Westmoreland County Airport,
and Saint Vincent College
Touchtone Teller 24-hour banking service: Website Address:
(724)537-9977 www.cnbthebank.com
Free from Blairsville, Derry,
Greensburg, Kecksburg, Latrobe,
Ligonier and New Alexandria.
1-800-803-BANK
Free from all other locations.
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