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, 2000
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, 2000
Common Stock, $2 Par Value 3,492,585 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
2000 1999
<S> <C> <C>
ASSETS
Cash and due from banks $ 9,715,498 $ 8,654,617
Interest bearing deposits with
other banks 276,222 558,781
-----------------------------
Total cash and due from banks 9,991,720 9,213,398
Federal funds sold - 5,750,000
Investment securities available for sale 118,935,475 124,743,186
Loans (all domestic) 213,045,058 204,959,798
Less unearned income ( 62,578) (120,463)
Less allowance for loan losses (2,735,993) (1,919,453)
-----------------------------
Net loans 210,246,487 202,919,882
Premises and equipment 6,198,417 6,304,454
Other assets 4,900,722 6,367,070
-----------------------------
Total Assets $350,272,821 $355,297,990
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (all domestic):
Non-interest bearing $ 48,691,791 $ 41,534,998
Interest bearing 227,305,962 231,412,405
-----------------------------
Total deposits 275,997,753 272,947,403
Short-term borrowings 5,575,000 15,000,000
Other liabilities 2,019,152 2,946,694
Long-term borrowings 25,000,000 25,000,000
-----------------------------
Total Liabilities 308,591,905 315,894,097
-----------------------------
Shareholders' Equity:
Common stock, par value $2; 10,000,000
shares authorized; 3,600,000 issued,
3,493,985 and 3,571,783 shares outstanding
in 2000 and 1999 7,200,000 7,200,000
Retained earnings 36,663,482 35,190,986
Accumulated other comprehensive income
net of deferred taxes of $(118,134)
in September 2000 and $(931,219) in
December 1999 (229,319) (1,807,660)
Treasury stock, 45,658 and 60,357 shares
at cost in 2000 and 1999 (1,953,247) (1,179,433)
----------------------------
Total Shareholders' Equity 41,680,916 39,403,893
----------------------------
Total Liabilities and
Shareholders' Equity $350,272,821 $355,297,990
============================
</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
2000 1999 2000 1999
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,502,444 $4,187,617 $13,083,759 $12,451,036
Interest and dividends on investments:
Taxable interest 1,946,902 1,439,433 5,152,344 4,000,611
Interest exempt from federal
income tax 301,730 459,135 1,272,855 1,481,543
Interest on federal funds sold 972 35,333 95,112 117,095
Interest on bank deposits 4,101 2,449 14,179 5,373
----------------------------------------------------
Total interest income 6,756,149 6,123,967 19,618,249 18,055,658
INTEREST EXPENSE
Interest on deposits 2,374,478 2,210,105 6,961,962 6,482,050
Interest on short-term borrowings 309,488 83,287 709,230 277,029
Interest on long-term borrowings 397,410 203,958 1,054,157 559,990
----------------------------------------------------
Total interest expense 3,081,376 2,497,350 8,725,349 7,319,069
NET INTEREST INCOME 3,674,773 3,626,617 10,892,900 10,736,589
PROVISION FOR LOAN LOSSES 510,000 165,000 1,140,000 405,000
----------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,164,773 3,461,617 9,752,900 10,331,589
OTHER INCOME
Asset management and trust income 106,697 88,598 347,659 227,999
Service charges on deposit accounts 179,435 180,292 527,757 513,981
Other service charges and fees 166,993 143,926 518,086 470,920
Securities gains/(losses) (49,638) - (912,482) 49,067
Other income 174,274 115,927 1,129,809 297,287
----------------------------------------------------
Total other income 577,761 528,743 1,610,829 1,559,254
OTHER EXPENSES
Salaries and employee benefits 1,226,069 1,269,607 3,882,794 3,817,106
Net occupancy expense 148,432 141,186 437,892 443,038
Furniture and equipment expense 236,371 192,830 649,336 499,507
Pennsylvania shares tax 97,006 87,715 284,823 256,619
Other expense 679,508 615,359 1,881,680 1,831,112
----------------------------------------------------
Total other expenses 2,387,386 2,306,697 7,136,525 6,847,382
INCOME BEFORE INCOME TAXES 1,355,148 1,683,663 4,227,204 5,043,461
Income tax expense 345,900 420,500 959,100 1,234,400
----------------------------------------------------
NET INCOME $1,009,248 $1,263,163 $3,268,104 $3,809,061
====================================================
Average Shares Outstanding 3,522,741 3,573,879 3,522,741 3,585,389
====================================================
EARNINGS PER SHARE $ .29 $ .35 $ .93 $ 1.06
====================================================
CASH DIVIDENDS DECLARED PER SHARE $ .17 $ .15 $ .51 $ .43
====================================================
</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, 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 gains 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
=====================================================================
Balance at December 31, 1999 $7,200,000 $35,190,986 $(1,179,433) $(1,807,660) $39,403,893
Comprehensive Income
Net income - 3,268,104 - - 3,268,104
Other comprehensive income, net of tax:
Unrealized loss on securities
of $(2,979,770), net of reclassification
adjustment for losses included in net
income of $(602,238) - - - 1,578,341 1,578,341
Total Comprehensive Income 4,846,445
Cash dividends declared
$.51 per share - (1,795,608) - - (1,795,608)
Purchase of treasury stock - - (773,814) - (773,814)
----------------------------------------------------------------------
Balance at September 30, 2000 $7,200,000 $36,663,482 $(1,953,247) $ (229,319) $41,680,916
======================================================================
</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
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net income $3,268,104 $3,809,061
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 593,352 499,172
Provision for loan losses 1,140,000 405,000
Net (accretion) amortization of securities
and loan fees (227,168) 60,493
Increase in interest receivable (35,448) (54,057)
Decrease in interest payable (353,265) (255,531)
Increase (decrease) in taxes payable 763,704 8,785
Decrease in other liabilities (574,277) (395,026)
Increase in other assets (74,992) (129,554)
Net securities (gains) losses 912,482 (49,067)
---------------------------
Net cash provided by operating activities 5,412,492 3,899,276
---------------------------
INVESTING ACTIVITIES
Net (increase) decrease in deposits
with other banks 282,559 (52,046)
Net decrease in fed funds sold 5,750,000 -
Purchase of securities AFS (58,056,193) (55,104,952)
Maturities and calls of securities AFS 13,554,753 22,385,108
Sale of securities AFS 51,954,886 22,284,141
Net increase in loans (8,406,229) (6,567,509)
Purchase of premises and equipment (487,315) (947,060)
---------------------------
Net cash used in investing activities 4,592,461 (18,002,318)
---------------------------
FINANCING ACTIVITIES
Net increase in deposits 3,050,350 12,923,590
Net (decrease) increase in short-term debt (9,425,000) 3,200,000
Net increase in long-term borrowings - 5,000,000
Dividends paid (1,795,608) (1,540,725)
Purchase of treasury stock (773,814) (546,896)
---------------------------
Net cash provided by financing activities (8,944,072) 19,035,969
---------------------------
1,060,881 4,932,927
Cash and cash equivalents at beginning of year 8,654,617 7,655,963
---------------------------
Cash and cash equivalents at end of quarter $ 9,715,498 $12,588,890
===========================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 9,078,614 $ 7,574,600
===========================
Income taxes $ 910,000 $ 1,138,000
===========================
</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, 2000
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, 1999, 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, 2000 and the results of operations for the three and
nine month periods ended September 30, 2000 and 1999, and
the statements of cash flows and changes in shareholders'
equity for the nine month periods ended September 30, 2000
and 1999. The results of the nine months ended September
30, 2000 are not necessarily indicative of the results to
be expected for the entire year.
Note 2 Allowance for Loan Losses
<TABLE>
<CAPTION>
Description of changes:
2000 1999
<S> <C> <C>
Allowance balance January 1 $ 1,919,453 $ 1,914,174
Additions:
Provision charged to operating expenses 1,140,000 405,000
Recoveries on previously charged off
loans 30,519 20,452
Deductions:
Loans charged off (353,979) (397,038)
---------------------------
Allowance balance September 30 $ 2,735,993 $ 1,942,588
===========================
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
First Nine Months of 2000 as compared to the First Nine Months of 1999
----------------------------------------------------------------------
Pre-tax net income for the first nine months of 2000 was $4,227,204
compared to $5,043,461 during the same period of 1999, representing
a 16.18% decrease. This decrease is attributable to an extra
$735,000 that was added to the corporation's loan loss provision.
After continuing the evaluation of the loan portfolio through the
third quarter, management decided to reserve additional money to the
loan loss provision in an effort to keep the pace with loan growth,
maintain our credit-quality standards and bring the reserve in-line
with our peers.
Interest income was $19,618,249, an increase of 8.65%. The loan
return rate decreased nineteen (19) basis points to 8.45% and the
securities return rate increased forty-nine (49) basis points to
6.52%. As a result, the return rate on total average earning assets
increased seven (7) basis points to 7.61%. Average earning asset
volume rose $24,041,617, representing a 7.61% increase.
Interest expense was $8,725,349, an increase of 19.21%. This
increase was due to the higher cost of retaining deposits and
funding asset growth through external funding sources. The cost rate
on average interest bearing liabilities was 4.36%, a forty (40)
basis point increase from a year ago. Average interest bearing
liability volume rose $24,041,617, an increase of 8.47%.
Net interest income increased 1.46% to $10,892,900, and represented
4.11% of average total assets compared to 4.30% during the first
nine months of 1999.
The average allowance for loan losses increased 11.18% to
$2,130,015. By comparison, total average loans grew 7.48% during the
same period. The 2000 first nine months provision for loan losses
was $1,140,000, compared to $405,000 for the first nine months of
1999, representing a 181.48% increase.
Net interest income after the application of the provision for loan
losses fell 5.60% to $9,752,900 representing a 3.68% return on total
average assets compared to 4.14% for the first nine months of 1999.
Non-interest income increased 3.31% to $1,610,829. Service charges
on deposit accounts grew 2.68% to $527,757. Other service charges
and fees rose 10.02%, reaching $518,086. Other income increased
280.04% to $1,129,809. This increase reflects an $822,875 premium
that the bank received in selling its' credit card portfolio. Asset
management and trust fees totaled $347,659, an increase of 52.48%.
Losses on securities called and sold amounted to $912,482. The bank
repositioned the investment portfolio to take advantage of higher
yields that were available in the bond market. Also contributing to
this loss was the selling of securities to paydown on short-term
borrowings that were costing the bank more than it was earning on
the investments.
Non-interest expense was $7,136,525, an increase of 4.22%, or
$289,143, while total average assets grew 6.22%. Personnel costs
rose 1.72%, a $65,688 increase. Net occupancy expense declined
1.16%, or $5,146. Furniture and equipment expense rose by 30.00%,
representing a cost increase of $149,829. This cost increase is
mostly associated with the upgrade of a computer operating system
that was installed throughout the bank in 1999. Pennsylvania shares
tax expense was $284,823, an increase of 10.99%. Other expense rose
2.76%, an increase of $50,568.
Federal income tax on total first nine months earnings was $959,100
compared to $1,234,400 a year ago. Net income after taxes fell
14.20% to $3,268,104, an decrease of $540,957. The annualized return
on average assets was 1.23% for the first nine months of 2000
compared to 1.53% for the nine months ended September 30, 1999. The
annualized return on average equity through September 30, 2000 was
10.63% and had been 11.82% through the first nine months of 1999.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
---------------------------------
Three Months Ended Sep 30, 2000 as compared to the Three Months
Ended Sep 1999
--------------------------------------------------------------------
Pre-tax net income for the third quarter of 2000 was $1,355,148
compared to $1,683,663 during the same period of 1999.
Interest income was $6,756,149, an increase of 10.32%. The loan
return rate decreased thirteen (13) basis points to 8.50%, the
securities return rate increased seventy (70) basis points to 6.78%
and the return rate on total average earning assets increased twenty-
two (22) basis points to 7.84%. Volume growth in total average
earning assets was $23,365,655.
Interest expense was $3,081,376, an increase of 23.39%. The volume
increase on average interest-bearing liabilities was $19,957,233.
The cost rate rose to 4.56%, a fifty-seven (57) basis point increase
from a year ago.
The average allowance for loan losses increased 29.34% to
$2,477,337, while total average loans grew 9.15%. The 2000 third
quarter provision for loan losses was $510,000, compared to $165,000
for the third quarter of 1999, representing a 209.09% increase.
Net interest income after the application of the provision for loan
losses fell 8.58% to $3,164,773 representing a 3.52% return on total
average assets compared to 4.11% for the third quarter of 1999.
Non-interest income increased 9.27%, or $49,018, to $577,761.
Service charges on deposit accounts decreased .48% to $179,435.
Other service charges and fees increased 16.03% to $166,993. Other
income increased 50.33% to $174,274. Asset management and trust fees
totaled $106,697, representing a 20.43% increase. Securities sold
during the third quarter resulted in a loss of $49,638.
Non-interest expense grew 3.50%, an $80,689 increase, compared to
total average asset growth of 6.84%. Personnel costs declined 3.43%,
a $43,538 decrease. Net occupancy expense rose 5.13%, a $7,246
increase. Furniture and equipment expense rose 22.58%, a $43,541
increase. Pennsylvania shares tax expense was 97,006, an increase of
10.59%. Other expense rose 10.42%, a $64,149 increase.
Federal income tax on total third quarter earnings was $345,900
compared to $420,500 a year ago. Net income after taxes was
$1,009,248. The annualized return on average assets was 1.12% for
the three months ended September 2000 compared to 1.50% for the
third quarter of 1999. The annualized return on average equity for
the third quarter of 2000 was 9.70% compared to 12.02% for the third
quarter of 1999.
<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 $115,904,256 on September 30, 2000.
During the first nine months of 2000, average interest-bearing
liabilities increased $20,851,209 over the same period in 1999.
Investments maturing within one year were .85% of total assets on
September 30, 2000 and 4.01% on September 30, 1999.
Average loans grew by $14,374,613 and the average securities
portfolio, including federal funds sold, increased $9,667,004.
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
liabilities, 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.
INTEREST
SENSITIVITY (In thousands)
--------------------------
The following table presents this information as of September 30, 2000 and
December 31, 1999:
<TABLE>
<CAPTION>
September 30, 2000
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 $ 36,133 $ 4,476 $ 7,971 $ 19,256 $ 133,798 $127,108
Interest sensitive
liabilities $ 12,449 $ 25,777 $ 34,649 $ 36,360 $ 92,568 $ 56,079
Interest sensitivity ------------------------------------------------------------------------
gap $ 23,684 $(21,301) $ (26,678) $ (17,104) $ 41,230 $ 71,029
========================================================================
Cumulative gap $ 2,383 $ (24,295) $ (41,399) $ (169) $ 70,860
Ratio of cumulative gap ============================================================
to earning assets .72% (7.32%) (12.48%) (.05%) 21.36%
============================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 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 $ 47,052 $ 5,652 $ 10,254 $ 19,052 $ 134,734 $117,867
Interest sensitive
liabilities $ 32,528 $ 35,983 $ 24,841 $ 29,907 $ 91,278 $ 56,875
Interest sensitivity -------------------------------------------------------------------------
gap $ 14,524 $(30,331) $ (14,587) $ (10,855) $ 43,456 $ 60,992
=========================================================================
Cumulative gap $(15,807) $ (30,394) $ (41,249) $ 2,207 $ 63,199
Ratio of cumulative gap ============================================================
to earning assets (4.68%) (9.00%) (12.20%) 0.65% 18.70%
============================================================
</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, 2000 with that of September 30, 1999. 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, 2000 the corporation had $98,154 in
other real estate owned and no in substance foreclosures. Other
real estate owned expense was $7,210.
At Sept 30,
2000 1999
Non-performing Loans:
Loans on non-accrual basis $ 196,826 $ 290,731
Past due loans $ 116,710 $ 458,350
Renegotiated loans $ 427,272 $ 513,203
-------------------------
Total non-performing loans $ 740,808 $ 1,262,284
Other real estate owned $ 98,154 $ 28,074
-------------------------
Total non-performing assets $ 838,962 $ 1,290,358
=========================
Loans outstanding at end of period $ 212,982,479 $ 198,316,856
Average loans outstanding (year-to-date) $ 206,551,835 $ 192,177,222
Non-performing loans as percent of total
loans .39% .65%
Provision for loan losses $ 1,140,000 $ 405,000
Net charge-offs $ 323,460 $ 376,586
Net charge-offs as percent of average
loans .16% .20%
Provision for loan losses as
percent of net charge-offs 352.44% 107.55%
Allowance for loan losses as
percent of average loans outstanding 1.32% 1.08%
CAPITAL RESOURCES
-----------------
Shareholders' equity for the first nine months of 2000 averaged
$40,992,924, which represented a decrease of $1,970,871 over the
average capital of $42,963,795 recorded in the same period of
1999. These capital levels represented a capital ratio of 11.59%
in 2000 and 12.90% in 1999. When the loan loss allowance is
included, the 2000 capital ratio becomes 12.19%.
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, 2000, the
corporation, under these guidelines, had a Tier I and total
equity capital to risk adjusted assets ratio of 20.38% and 21.71%
respectively. The leverage ratio was 11.61%.
<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, 2000 (Dollar amounts in thousands)
Percent
of Adjusted
Amount Assets
Tier I Capital $ 41,910 20.38
Risk-Based Requirement 8,224 4.00
Total Equity Capital $ 44,646 21.71
Risk-Based Requirement 16,448 8.00
Leverage Capital $ 41,910 11.61
Minimum Leverage Requirement 14,435 4.00
Year 2000
---------
During 1999 and years prior, the corporation completed the
process of preparing for the year 2000 date change. This
process involved reviewing, modifying and replacing
existing hardware and software, as necessary. The
corporation also assessed the preparedness of our third
party vendors, whom we are heavily dependent upon, along
with our major commercial loan customers. Contingency plans
for the year 2000 were developed and maintained throughout
the pre-event period in order to be prepared for any year
2000 glitches that may occur.
To date, the corporation has not encountered any materially
significant problems associated with our mission critical
systems or vendors. Occurrences related to the year 2000
issue could still occur and may have a material impact on
the operations and the financial condition of the
corporation and its customers. In the event that the
customers' financial positions are weakened due to the year
2000 issue, credit quality could be affected. The
corporation will continue to monitor the year 2000 issue
throughout 2000 and act accordingly should any problem
arise.
<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
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 13, 2000 /s/ Gregg E. Hunter
-------------------------------------
Gregg E. Hunter
Vice Chairman and Chief Financial Officer
Dated: November 13, 2000 /s/ Ryan M. Glista
--------------------------------------
Ryan M. Glista
Vice President and Controller
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Commercial National Financial Corporation
900 Ligonier Street
Latrobe, Pennsylvania 15650
Telephone (724) 539-3501
Banking Subsidiary:
Commercial National Bank of Pennsylvania
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 above (except Latrobe and
Courthouse Square) additional 24-hour ATMs are available for your
convenience at Arnold Palmer Regional Airport, Greensburg Kirk S.
Nevin Arena, Latrobe Area Hospital, New Alexandria Qwik Mart,
Norvelt Open Pantry and Saint Vincent College. All are linked to
the national Cirrus, Honor and Plus networks and also accept
MasterCard, Visa, Discover and American Express for cash
advances.
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.
www.cnbinsurance.com
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