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 SEPTEMBER 30, 1999
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 OCTOBER 31, 1999
Common Stock, $2 Par Value 3,567,933 Shares
<PAGE>
INDEX
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 15
<PAGE>
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30 December 31
1999 1998
<S> <C> <C>
ASSETS
Cash and due from banks $ 12,588,890 $ 7,655,963
Interest bearing deposits with
other banks 119,981 67,935
-------------------------------
Total cash and due from banks 12,708,871 7,723,898
Federal funds sold - -
Investment securities available for sale 124,925,041 119,103,480
Loans (all domestic) 198,406,483 192,239,249
Less unearned income ( 89,627) (124,089)
Less allowance for loan losses (1,942,588) (1,914,174)
-------------------------------
Net loans 196,374,268 190,200,986
Premises and equipment 6,475,384 6,027,496
Other assets 4,807,270 3,323,493
Total Assets $345,290,834 $326,379,353
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (all domestic):
Non-interest bearing $ 45,697,887 $ 44,518,765
Interest bearing 233,686,224 221,941,756
------------------------------
Total deposits 279,384,111 266,460,521
Short-term borrowings 6,975,000 3,775,000
Other liabilities 15,000,000 2,982,183
Long-term borrowings 2,060,788 10,000,000
------------------------------
Total Liabilities 303,419,899 283,217,704
------------------------------
Shareholders' Equity:
Common stock, par value $2; 10,000,000
Shares authorized; 3,600,000 issued and
3,571,783 outstanding in 1999; 3,600,000
issued and outstanding in 1998 7,200,000 7,200,000
Retained earnings 36,401,342 34,133,006
Accumulated other comprehensive income
net of deferred taxes of $(609,687)
in September 1999 and $942,028 in
December 1998 (1,183,511) 1,828,643
------------------------------
42,417,831 43,161,649
Treasury stock, 28,217 shares at cost (546,896) -
------------------------------
Total Shareholders' Equity 41,870,935 43,161,649
------------------------------
Total Liabilities and
Shareholders' Equity $345,290,834 $326,379,353
==============================
</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 Nine Months
Ending Sept 30 Ending Sept 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,187,617 $4,140,119 $12,451,036 $12,556,149
Interest and dividends on investments:
Taxable interest 1,439,433 1,185,543 4,000,611 3,633,642
Interest exempt from federal
income tax 459,135 475,088 1,481,543 1,424,247
Interest on federal funds sold 35,333 28,266 117,095 39,139
Interest on bank deposits 2,449 2,098 5,373 5,504
-------------------------------------------------------
Total interest income 6,123,967 5,831,114 18,055,658 17,658,681
INTEREST EXPENSE
Interest on deposits 2,210,105 2,390,395 6,482,050 7,121,176
Interest on short-term borrowings 83,287 89,625 277,029 447,428
Interest on long-term borrowings 203,958 71,836 559,990 190,521
-------------------------------------------------------
Total interest expense 2,497,350 2,551,856 7,319,069 7,759,125
NET INTEREST INCOME 3,626,617 3,279,258 10,736,589 9,899,556
PROVISION FOR LOAN LOSSES 165,000 120,000 405,000 315,000
-------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,461,617 3,159,258 10,331,589 9,584,556
OTHER INCOME
Asset management and trust income 88,598 55,265 227,999 188,012
Service charges on deposit accounts 180,292 151,677 513,981 433,187
Other service charges and fees 143,926 126,693 470,920 403,337
Securities gains/(losses) - (1,158) 49,067 10,113
Other income 115,927 100,641 297,287 265,091
-------------------------------------------------------
Total other income 528,743 433,118 1,559,254 1,299,740
OTHER EXPENSES
Salaries and employee benefits 1,269,607 1,198,630 3,817,106 3,622,263
Net occupancy expense 141,186 152,691 443,038 461,379
Furniture and equipment expense 192,830 157,713 499,507 462,446
Pennsylvania shares tax 87,715 77,929 256,619 228,673
Other expense 615,359 572,977 1,831,112 1,611,592
-------------------------------------------------------
Total other expenses 2,306,697 2,159,940 6,847,382 6,386,353
INCOME BEFORE INCOME TAXES 1,683,663 1,432,436 5,043,461 4,497,943
Income tax expense 420,500 336,000 1,234,400 1,073,000
-------------------------------------------------------
NET INCOME $1,263,163 $1,096,436 $3,809,061 $3,424,943
=======================================================
Average Shares Outstanding 3,573,879 3,600,000 3,585,389 3,600,000
=======================================================
EARNINGS PER SHARE $ .35 $ .31 $ 1.06 $ .95
=======================================================
CASH DIVIDENDS DECLARED PER SHARE $ .15 $ .11 $ .43 $ .31
=======================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Accumulated
Other Total
Common Retained Treasury Comprehensive Shareholders'
Stock Earnings Stock Income Equity
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $3,600,000 $34,604,120 - $ 240,891 $38,445,011
Comprehensive Income
Net income - 3,424,943 - - 3,424,943
Other comprehensive income, net of tax:
Unrealized gains on securities
of $1,673,072, net of reclassification
adjustment for gains included in net
income of $(6,675) - - - 1,666,397 1,666,397
Total Comprehensive Income 5,091,341
Cash dividends declared
$.31 per share - (1,116,000) - - (1,116,000)
-------------------------------------------------------------------
Balance at September 30, 1998 $3,600,000 $36,913,063 - $1,907,288 $42,420,351
===================================================================
Balance at December 31, 1998 $7,200,000 $34,133,006 - $1,828,643 $43,161,649
Comprehensive Income
Net income - 3,809,061 - - 3,809,061
Other comprehensive income, net of tax:
Unrealized loss on securities
of $(2,979,770), net of reclassification
adjustment for gains included in net
income of $(32,384) - - - (3,012,154) (3,012,154)
Total Comprehensive Income 796,907
Cash dividends declared
$.43 per share - (1,540,725) - - (1,540,725)
Purchase of treasury stock - - (546,896) - (546,896)
-------------------------------------------------------------------
Balance at September 30, 1999 $7,200,000 $36,401,342 $(546,896) $ (1,183,511) $41,870,935
===================================================================
</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 Nine Months
Ended September 30
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income $3,809,061 $3,424,943
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 499,172 454,329
Provision for loan losses 405,000 315,000
Net amortization of securities
and loan fees 60,493 64,309
(Increase) decrease in interest receivable (54,057) 67,732
Decrease in interest payable (255,531) (156,765)
Increase (decrease) in taxes payable 8,785 (67,329)
Decrease in other liabilities (395,026) (394,530)
Increase in other assets (129,554) (87,401)
Net securities gains (49,067) (10,113
--------------------------
Net cash provided by operating activities 3,899,276 3,610,175
--------------------------
INVESTING ACTIVITIES
Net increase in deposits
with other banks (52,046) (34,978)
Net decrease in fed funds sold - -
Purchase of securities AFS (55,104,952) (24,990,039)
Purchase of securities HTM - (1,966,778)
Maturities and calls of securities AFS 22,385,108 2,904,504
Maturities and calls of securities HTM - 12,175,000
Sale of securities AFS 22,284,141 8,996,484
Net increase in loans (6,567,509) (4,943,072)
Purchase of premises and equipment (947,060) (614,084)
---------------------------
Net cash used in investing activities (18,002,318) (8,472,963)
---------------------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 12,923,590 (2,932,265)
Net increase in short-term borrowings 3,200,000 2,600,000
Net increase in long-term borrowings 5,000,000 5,000,000
Dividends paid (1,540,725) (1,116,000)
Purchase of treasury stock (546,896) -
---------------------------
Net cash provided by financing activities 19,035,969 3,551,735
---------------------------
4,932,927 (1,311,053)
---------------------------
Cash and cash equivalents at beginning of year 7,655,963 9,711,026
Cash and cash equivalents at end of quarter $12,588,890 $ 8,399,973
===========================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 7,574,600 $ 7,915,890
===========================
Income taxes $ 1,138,000 $ 1,062,000
===========================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
COMMERCIAL NATIONAL FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
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, 1998, 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 September
30, 1999 and the results of operations for the three and
nine month periods ended September 30, 1999 and 1998, and
the statements of cash flows and changes in shareholders'
equity for the nine month periods ended September 30, 1999
and 1998. The results of the nine months ended September
30, 1999 are not necessarily indicative of the results to
be expected for the entire year.
Note 2 Allowance for Loan Losses
Description of changes:
1999 1998
Allowance balance January 1 $ 1,914,174 $ 1,882,251
Additions:
Provision charged to operating expenses 405,000 315,000
Recoveries on previously charged off
loans 20,452 6,614
Deductions:
Loans charged off (397,038) (311,492)
---------------------------
Allowance balance September 30 $ 1,942,588 $ 1,892,373
===========================
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- --------------------
First Nine Months of 1999 as compared to the First Nine Months of 1998
- ----------------------------------------------------------------------
Pre-tax net income for the first nine months of 1999 was $5,043,461
compared to $4,497,943 during the same period of 1998, representing
a 12.13% increase.
Interest income was $18,055,658, an increase of 2.25%. The loan
return rate decreased thirty-nine basis points to 8.64% and the
securities return rate increased five (5) basis points to 6.03%. As
a result, the return rate on total average earning assets decreased
twenty-five (25) basis points to 7.62%. Average earning asset volume
rose $16,897,426, representing a 5.65% increase.
Interest expense was $7,319,069, a decrease of 5.67%. The cost rate
on average interest bearing liabilities was 3.96%, a forty-three
(43) basis point decrease from a year ago. Average interest bearing
liability volume rose $10,559,119, an increase of 4.48%.
Net interest income increased 8.46% to $10,736,589, and represented
4.30% of average total assets compared to 4.19% during the first
nine months of 1998.
The average allowance for loan losses increased 2.59% to $1,915,873.
By comparison, total average loans grew 3.61% during the same
period. The 1999 first nine months provision for loan losses was
$405,000, compared to $315,000 for the first nine months of 1998,
representing a 28.57% increase.
Net interest income after the application of the provision for loan
losses grew 7.79% to $10,331,589 representing a 4.14% return on
total average assets compared to 4.06% for the first nine months of
1998.
Non-interest income increased 19.97% to $1,559,254. Service charges
on deposit accounts grew 18.65% to $513,981. Other service charges
and fees rose 16.76%, reaching $470,920. Other income increased
12.15% to $297,287. Asset management and trust fees totaled
$227,999, an increase of 21.27%. Gains on securities called and sold
amounted to $49,067.
Non-interest expense was $6,847,382, an increase of 7.22%, or
$461,029, while total average assets grew 5.76%. Personnel costs
rose 5.38%, a $194,843 increase. Net occupancy expense declined
3.98%, or $18,341. Furniture and equipment expense rose by 8.01%,
representing a cost increase of $37,061. Pennsylvania shares tax
expense was $256,619, an increase of 12.22%. Other expense rose
13.62%, an increase of $219,520.
Federal income tax on total first nine months earnings was
$1,234,400 compared to $1,073,000 a year ago. Net income after taxes
rose 11.22% to $3,809,061, an increase of $384,118. The annualized
return on average assets was 1.53% for the first nine months of 1999
compared to 1.45% for the nine months ended September 30, 1998. The
annualized return on average equity through September 30, 1999 was
11.82% and had been 11.51% through the first nine months of 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
- ---------------------------------
Three Months Ended Sep 30, 1999 as compared to the Three Months Ended
Sep 1998
- ---------------------------------------------------------------------
Pre-tax net income for the third quarter of 1999 was $1,683,663
compared to $1,432,436 during the same period of 1998.
Interest income was $6,123,967, an increase of 5.02%. The loan
return rate decreased twenty-eight(28) basis points to 8.63%, the
securities return rate increased six (6) basis points to 6.08% and
the return rate on total average earning assets decreased twenty
(20) basis points to 7.62%. Volume growth in total average earning
assets was $23,278,966.
Interest expense was $2,497,350, a decrease of 2.14%. The volume
increase on average interest-bearing liabilities was $17,577,205.
The cost rate fell to 3.99%, a forty (40) basis point decrease from
a year ago.
The average allowance for loan losses increased 2.42% to $1,915,403,
while total average loans grew 4.45%. The 1999 third quarter
provision for loan losses was $165,000, compared to $120,000 for the
third quarter of 1998, representing a 37.50% increase.
Net interest income after the application of the provision for loan
losses grew 9.57% to $3,461,617 representing a 4.11% return on total
average assets compared to 4.02% for the third quarter of 1998.
Non-interest income increased 22.08%, or $95,625, to $528,743.
Service charges on deposit accounts increased 18.87% to $180,292.
Other service charges and fees increased 13.60% to $143,926. Other
income increased 15.19% to $115,927. Asset management and trust fees
totaled $88,598, representing a 60.31% increase.
Non-interest expense grew 6.79%, a $146,757 increase, compared to
total average asset growth of 7.29%. Personnel costs rose 5.92%, a
$70,977 increase. Net occupancy expense declined 7.53%, a $11,505
decrease. Furniture and equipment expense rose 22.27%, a $35,117
increase. Pennsylvania shares tax expense was 87,715, an increase of
12.56%. Other expense rose 7.40%, a $42,382 increase.
Federal income tax on total third quarter earnings was $420,500
compared to $336,000 a year ago. Net income after taxes was
$1,263,163. The annualized return on average assets was 1.50% for
the three months ended September 1999 compared to 1.40% for the
third quarter of 1998. The annualized return on average equity for
the third quarter of 1999 was 12.02% compared to 10.84% for the
third quarter of 1998.
<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 investment securities available for sale
which amounted to $123,822,278 on September 30, 1999.
During the first nine months of 1999, average interest-bearing
liabilities increased $10,559,119 over the same period in 1998.
Investments maturing within one year were 4.01% of total assets on
September 30, 1999 and 6.21% on September 30, 1998.
Average loans grew by $6,703,376 and the average securities
portfolio, including federal funds sold, increased $10,194,050.
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, were 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 September 30, 1999 and
December 31, 1998:
<TABLE>
<CAPTION>
September 30, 1999
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 $ 45,128 $ 6,509 $ 8,628 $ 19,162 $ 127,139 $115,454
Interest sensitive
liabilities $ 21,568 $ 26,599 $ 43,002 $ 31,858 $ 79,984 $ 53,259
Interest sensitivity -----------------------------------------------------------------------
gap $ 23,560 $(20,090) $ (34,374) $ (12,696) $ 47,155 $ 62,195
=======================================================================
Cumulative gap $ 3,470 $ (30,904) $ (43,600) $ 3,555 $ 65,750
Ratio of cumulative gap ============================================================
to earning assets 1.07% (9.56%) (13.49%) 1.10% 20.35%
============================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 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 $ 45,494 $ 6,527 $ 13,272 $ 22,556 $ 109,898 $108,364
Interest sensitive
liabilities $ 11,186 $ 34,038 $ 25,084 $ 38,757 $ 109,293 $ 17,359
Interest sensitivity ------------------------------------------------------------------------
gap $ 34,308 $(27,511) $ (11,812) $ (16,201) $ 605 $ 91,005
========================================================================
Cumulative gap $ 6,797 $ (5,015) $ (21,216) $ (20,611) $ 70,394
Ratio of cumulative gap ============================================================
to earning assets 2.18% (1.61%) (6.82%) (6.62%) 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
September 30, 1999 with that of September 30, 1998. 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 September 30, 1999 the corporation had $28,074 in other real
estate owned and no in substance foreclosures. Other real estate
owned expense was $1,500.
At Sept 30,
1999 1998
Non-performing Loans:
Loans on non-accrual basis $ 290,731 $ 83,527
Past due loans 458,350 144,880
Renegotiated loans 513,203 893,024
------------------------------
Total non-performing loans $ 1,262,284 $ 1,121,431
Other real estate owned $ 28,074 $ -
------------------------------
Total non-performing assets $ 1,290,358 $ 1,121,431
==============================
Loans outstanding at end of period $ 198,316,856 $ 188,166,659
Average loans outstanding (year-to-date) $ 192,177,222 $ 185,473,846
Non-performing loans as percent of total
loans .65% .60%
Provision for loan losses $ 405,000 $ 315,000
Net charge-offs $ 376,586 $ 304,878
Net charge-offs as percent of average
loans .20% .16%
Provision for loan losses as
percent of net charge-offs 107.55% 103.32%
Allowance for loan losses as
percent of average loans outstanding 1.08% 1.02%
CAPITAL RESOURCES
- -----------------
Shareholders' equity for the first nine months of 1999 averaged
$42,963,795 which represented an increase of $3,292,858 over the
average capital of $39,670,937 recorded in the same period of 1998.
These capital levels represented a capital ratio of 12.90% in 1999
and 12.60% in 1998. When the loan loss allowance is included, the
1999 capital ratio becomes 13.48%.
The Federal Reserve Board has issued risk-based capital adequacy
guidelines which went into effect in stages through 1992. The risk-
based capital standard is 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 not specifically defined, but
is generally expected to be 4-5 percent for all but the most highly
rated banks, as determined by a regulatory rating system. As of
September 30, 1999, the corporation, under these guidelines, had a
Tier I and total equity capital to risk adjusted assets ratio of
21.89% and 22.88% respectively. The leverage ratio was 12.75%.
<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
September 30, 1999 (Dollar amounts in thousands)
Percent
of Adjusted
Amount Assets
----------------------------
Tier I Capital $ 43,054 21.89
Risk-Based Requirement 7,867 4.00
Total Equity Capital $ 44,997 22.88
Risk-Based Requirement 15,734 8.00
Leverage Capital $ 43,054 12.75
Minimum Leverage Requirement 13,508 4.00
<PAGE>
Year 2000
In 1997, the corporation's year 2000 committee was formed and
began an analysis of year 2000 issues that may affect the day to
day operations of the corporation and the bank. The year 2000
issue is a result of computer programs being written using two
digits rather than four to define the applicable year. Any
systems that have time sensitive software may recognize a date
using "00" as the year 1900 rather than 2000 and, in turn, may
result in miscalculations and/or system failures.
The corporation has completed the assessment phase and testing of
all software regarding the year 2000 issue confirmed that we are
well prepared for the century date rollover. The corporation is
primarily dependent upon systems that have been developed by
third parties and, therefore, is dependent upon vendor
compliance.
The corporation has developed contingency plans for all mission
critical systems. These plans involve automated as well as manual
actions and may require additional staffing requirements and will
detail procedures to be followed in the unlikely event of any
disruptions.
Based on our assessment of the vendors and testing that was
completed, the corporation estimates the costs associated with
addressing the issue will be approximately $500,000 with items
being expensed as incurred or capitalized, whenever appropriate.
These costs or any additional costs associated with the year 2000
issue are not expected to have a material impact on the
corporation's financial position. The corporation has and will
continue to devote the necessary time and resources to resolve
the year 2000 issue in a timely manner.
The corporation continues to evaluate the effect of the year 2000
issue on its commercial customers. Failure of a commercial
customer to prepare for year 2000 could adversely affect the
customer's operations and, in turn, affect the corporation's
ability to collect outstanding loans and retain deposit balances.
The corporation mailed questionnaires to its commercial customers
regarding the potential effect that the year 2000 could have on
their businesses. Those customers deemed mission critical by
senior management will be placed on a year 2000 watch list and
will be contacted on an ongoing basis regarding their 2000
readiness.
<PAGE>
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
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: November 10, 1999 /s/ Louis T. Steiner
--------------------------------
Louis T. Steiner
President and Chief Executive Officer
Dated: November 10, 1999 /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
Office Locations
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
In addition to full-service MAC machines located at all
Commercial National offices listed below (except Latrobe and
Courthouse Square) additional 24-hour ATMs are available for your
convenience.
Greensburg Kirk Nevin Arena Latrobe Area Hospital
New Alexandria Qwik Mart Norvelt Open Pantry
Saint Vincent College Westmoreland County Airport
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
INSURANCE
Commercial National Insurance Services Commercial National Insurance
232 North Market Street Services is a partnership of
Ligonier, PA 15658 Gooder & Mary, Inc., and
(724) 238-4617 Commercial National Investment
(877) 205-4617 (toll free) Corporation, a wholly owned
(724) 238-0160 (fax) subsidiary of Commercial National
[email protected] Financial Corporation.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 12,588,890
<INT-BEARING-DEPOSITS> 119,981
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 124,925,041
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<LOANS> 198,316,856
<ALLOWANCE> (1,942,588)
<TOTAL-ASSETS> 345,290,834
<DEPOSITS> 279,384,111
<SHORT-TERM> 6,975,000
<LIABILITIES-OTHER> 2,060,788
<LONG-TERM> 15,000,000
0
0
<COMMON> 7,200,000
<OTHER-SE> 34,670,935
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<INTEREST-INVEST> 5,599,249
<INTEREST-OTHER> 5,373
<INTEREST-TOTAL> 18,055,658
<INTEREST-DEPOSIT> 6,482,050
<INTEREST-EXPENSE> 7,319,069
<INTEREST-INCOME-NET> 10,736,589
<LOAN-LOSSES> 405,000
<SECURITIES-GAINS> 49,067
<EXPENSE-OTHER> 6,847,382
<INCOME-PRETAX> 5,043,461
<INCOME-PRE-EXTRAORDINARY> 5,043,461
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,043,461
<EPS-BASIC> 1.06
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