COMMERCIAL NATIONAL FINANCIAL CORPORATION 1998 ANNUAL REPORT
<PAGE>

(Front cover of the annual report. The corporate logo bearing the graphic of a 
bank facade appears centered at the top of the page. Directly under the logo,
Commercial National Financial Corporation appears horizontally. The rest of 
the page bears the number 1998 three times in large print and centered.)

<PAGE>

The inside front cover of the annual report is as follows.

Thanks
-----------------------------------------------------------------
With this issue of the Commercial National Financial Corporation
Annual Report, we salute the Charley family of Greensburg for its
tireless efforts on behalf of our subsidiary, Commercial National
Bank of Westmoreland County.

With the 1998 retirement of William M. Charley from our board of
directors, the Charley family concludes service that has extended
over the past 60 years.

For their legacies to their communities - and for all they've done
for us - we simply say "thank you."

<PAGE>

                     Our Commitment To Those We Serve

(At this point in the 1998 annual report, the following text is depicted in 
two column form with the first paragraph in the first column and the rest of
the text in the second column. The form has been modified for electronic 
filing purposes.)

  In detailing the elements of our mission, the significant
components must be equally ranked regardless of their order of
presentation since substantial progress can be achieved only as
these elements interact harmoniously to advance the mission of
the corporation.

  Our mission is to acquire, organize and manage the resources
required to offer personalized and professional financial
services in a manner that demonstrates our concern for
understanding and meeting the needs of the individuals, families,
businesses and other organizations in our marketplace.

  In fulfilling our mission, we give constant consideration to
the well-being of our employees not only in terms of economic
benefit, but also by guaranteeing a working environment that...

-  encourages personal and professional development,
-  fosters individual dignity and
-  demands the highest ethical standards

 ...so that each employee can experience a sense of satisfaction
in and personal identity with the accomplishments we achieve
together.

  Our responsibility to the areas we are privileged to serve
requires our involvement as a corporation, as well as a
commitment by our employees and directors, to respond to
community development and improvement needs with a continual
investment of both time and funds.

  All of our activities are carefully planned and professionally
conducted to provide our shareholders with a reasonable and
regular profit so that their ongoing investment will constantly
increase in value.


<PAGE>

(At this point in the 1998 annual report, page 2 is left intentionally blank.)

<PAGE>

(At this point and mostly throughout the rest of the annual report, the 
text will be in three column format. Also, a bank facade appears in the
upper left-hand corner of this page and every odd-number page throughout
the rest of the annual report.)

To Our Sharholders

The word "change" is becoming overused in business today, in some
cases blamed for a series of bad actions and in other cases credited
for it part in achieving a celebrated victory. While the uncertainty
of change indeed may cause anxiety in some business organizations, it
also allows a corporation to grow, and growth is precisely what your
company experience last year.

Early in 1998, the corporation's subsidiary, Commercial National Bank
of Westmoreland County, underwent extensive management realignment
detailed elsewhere in this report. The resulting reassignments placed
a renewed importance on providing unparalled service to our customers.

As the bank continued its quest to develop a full sales-and-service
culture (which actually began several years ago with an initial 
emphasis on quality customer service), we extended employee training
through the year and allocated significant resources to maintain this
process through 1999 and beyond.

Especially committed to leading the bank in this effort are four 
senior managers with responsibility for key divisions in our
service-delivery system. They include...
  
   Martin E. May
   Senior Vice President and
   Senior Banking Officer

   Philip S. Pettina
   Senior Vice President and
   Senior Manager, Retail Banking

   Michael L. Matthews
   Vice President and 
   Senior Manager,
   Asset Management and Trust

   Keith M.Visconti
   Vice President and
   Senior Lending Officer

Commercial National became a citizen of the World Wide Web during the
first quarter when the bank's Internet site went live at 
www.cnbthebank.com, enabling users anywhere to become familiar with
our locations, services and financial solutions. Site visitors also
can operate a loan calculator that determines monthly payments, 
amounts to be borrowed or potential terms of loans when certain 
elements are entered.

Since Internet banking is fast becoming an accepted mode of transacting
business via personal computer, Commercial National is reviewing
options to improve its Web site to change its currently proprietary
home-banking PC package into an Internet-compatible format to become
available in 1999.

The corporation generated growth in a new area as the year drew to a close.
Since its inception in 1990, Commercial National Financial Corporation
has existed with only one owned company - Commercial National Bank of 
Westmoreland County.

In December, though, a second subsidiary was formed with the creation
of Commercial National Investment Corporation. This wholly owned
company, in turn, is a 50-percent owner of the newly formed Commercial
National Insurance Services, which will offer a full array of insurance
products and services to the consumer and commercial markets alike.

The new agency resulted from a year of discussion among several potential
partners with the Gooder Agency, Inc., of Ligonier emerging as the 
selected provider. Now with the insurance-service arm in place, 
Commercial National is ready to offer another important piece of the
financial mix that provides one-stop shopping for busy customers
looking for convenience in every transaction.

Also recognizing its responsibility to shareholders, the corporation 
engaged in two capital-management programs in 1998. The first element
increased the dividend twice during the year, once in the first 
quarter and again in the third, enabling us to reward shareholders
with additional earnings on their investments as a result of the 
company's strong growth.

Then in November, the corporation announced a two-for-one stock split
and the commencement of a stock buy-back program. The repurchase plan
allows the corporation to secure shares on the open market to afford
ongoing liquidity for shareholders, provide price support during 
volatile market conditions and accumulate shares for later corporate
purposes.

During 1998 the board of directors also experienced a transition. Two
directors, William M. Charley and Edwin P. Cover, announced their
retirements. In December, the board elected John T. Babilya of West
Newton and Joedda M. Sampson of Pittsburgh to fill the vacancies.

Even with such growth, achieved through these various initiatives and
the corporate reorganization, we were not distracted from our daily
operations. In the pages that follow, you'll see how Commercial
National produced record earnings for the third consecutive year with
net income improving by more than 13.5% to more than $4.6 million.

As a final challenge facing us in 1999, we like every company in the
world, are preparing to deal successfully with the "Year 2000 Problem."
For the past two years, a group of Commercial National employees have
expended significant time and energy (in addition to managing their 
day-to-day responsibilities) to inventory, review and test the
multitude of systems to ensure that your investment and our customers'
money will remain safe.

Michael J. Palko, our vice president and director of technology, is 
leading this monumental effort. He joined the bank in February 1998 
after more than 20 years with Allegheny Energy. Even before his 
employment here Mike worked 14 months on Year 2000 solutions as a
consultant, so his experience in dealing with the issue is of great
value to us.

We are pleased to report that all of our testing to date has confirmed
that we are well prepared for the arrival of the Year 2000. We do not
expect any "system surprises" and are confident that we can continue
to conduct "business as usual" come January 1.

Be assured that even beyond our own diligent efforts to avoid any 
disruption of service, our primary federal regulator, the Office 
of the Comptroller of the Currency, is reveiwing our progress as 
well as the work being done at all financial institutions in its
jurisdiction.

At Commercial National, the challenges of 1998 have provided opportunity
for growth. We appreciate your continued support and confidence as
we prepare to meet those of the future with similar dispatch.



               /s/ Louis T. Steiner
               Louis T. Steiner
               Vice Chairman,
               President and
               Chief Executive Officer

<PAGE>

Highlights of 1998

(At this point in the 1998 annual report, the following sentence appears in
large print at the top of the left column to start off the highlights of 1998.)

                          Maintaining focus
                            during a time
                           of rapid growth
                      is a difficult challenge
                           in any business...

 ... but it's a challenge that was met well as 1998 unfolded at Commercial
National Financial Corporation.
  The corporation achieved record earnings for the year, even in the
face of major developments that easily could have distracted managers
in other businesses.
  During 1998, the company...
-  re-crafted its senior management team
   with a significant realignment,
-  advanced its program of technology with
   an eye to the future, and
-  set the stage for further expanding its
   serive offerings,

WE CALLED UPON PEOPLE TO ASSUME
NEW AND GREATER RESPONSIBILITIES.
  Providing quality financial service to customers requires that
the best people provide the best service. At Commercial National,
we believe we have those people and we believe they are able to 
meet nearly any challenge as it arises. Throughout 1998, we had
opportunities to see that belief many times over.
  In April, Louis T. Steiner, who already held the posts of vice
chairman and  chief  executive  officer, assumed the  additional 
position and duties of president  of both entities when Edwim P.
Cover announced his retirement after serving more than 11 years.
  In conjunction with that occurrence,  several other changes were
made to subsequently assign new responsibilities to key managers
so that business continued as usual.
  -  Martin E. May, who had served for a time as vice president
     and senior lender, was promoted to senior vice president,
     and later in the year assumed additional responsibility
     as senior banking officer.
  -  Philip S. Pettina, senior vice president, moved into the 
     position of senior manager of retail banking during the 
     third quarter after most recently serving as director of
     support services. He brought to the post more than 20
     years of retail banking and administrative experience.
  Several other staff adjustments were made during the year to 
keep ahead of the constantly growing demand for service.
  -  Michael J. Palko
     joined the company as vice president and director of
     technology in February.
  -  William J. Johnston
     joined the company as assistant vice president and business
     development officer for the Murrysville market in June.
  -  Donna J. Daugherty
     business development officer, was appointed assistant vice
     president in July.
  -  Thomas E. Sylvester
     Ligonier community office manager, was appointed assistant
     vice president in July.
  -  Rebecca J. Weiner
     manager of Management Information Systems, was promoted to 
     assistant vice president in October.
  During 1998, a number of other employees were recognized with
awards for their specific efforts to improve our performance. At
our Employees' Annual Meeting in May, the company presented its 
1998 Chairman's Award to ...
  -  Michael L. Matthews
     Vice President
     Asset Management and Trust Division
 ... for generating substanitial new revenue in the division and 
for evaluating service providers for a new product offering.
  At the same meeting, the bank's President's Award was conferred
upon ...
  -  Thomas D. Watters
     Vice President, Chief Auditor
 ... for research into an accounting entry that resulted in 
substantial income to the company,
  -  Rebecca J. Weiner
     Assistant Vice President
     Management Information Systems
 ... for continued support to front-line staff which resulted in an
improved customer service, 
 ... and to
  -  the entire Management Information Systems staff
 ... for its efforts at maintaining information services during a 
major staff changeover in the department.
  Finally, our board of directors also experienced growth with the 
addition of two new members after the retirements of Edwin P. Cover
and William M. Charley. Mr. Cover's retiement from the board was
announced concurrently with his retirement as president from both
the corporation and the bank. Mr. Charley retired from the board
after nearly 30 years of service, having continued a family 
tradition that originated with his father and then was maintained
by both him and his brother.
  Named to fill the board vacancies beginning in 1999 were John T.
Babilya, president of Arc Weld Inc., a West Newton business, and
Joedda M. Sampson, president Allegheny City Restorations, a 
Pittsburgh-area development firm.

GROWTH OF THE BUSINESS MEANT
GOOD NEWS FOR SHAREHOLDERS.
  By carefully managing growth of the corporation over the year,
record levels of income were generated as a result of a number
of strategically implemented initiatives.
  Higher net interest income, control of net operating expense

(At this point in the 1998 annual report, there appears a bar graph occupying 
two-thirds space of the second column as set out in the following table.)

<TABLE>
<CAPTION>
              Annual Share Price Appreciation

<S>                   <C>
1994                  $ 8.92
1995                  $10.07
1996                  $18.00
1997                  $18.25
1998                  $19.88

</TABLE>

(At this point in the 1998 annual report, the following text runs along the 
left of the bar graph occupying the remaining third of the column that the 
graph did not use.)

and effective tax management all combined to yield record earnings
for the year, in spite of an increase required for the loan-loss
provision of the corporation. The year-end price of Commercial 
National stock apprecitated nearly 9 percent

(At this point, the text reverts back to using the full column width.)

in value from the $18.25 in 1997 to $19.88 at the end of 1998. The
per-share prices are based on 3.6 million shares outstanding after
a two-for-one stock split on 1.8 million shares that became effective

(At this point in the 1998 annual report, there appears two bar graphs
in succession occupying two-thirds space of the third column as set out 
in the folowing tables.)

<TABLE>
<CAPTION>
                Dividends Paid Per Share

<S>                     <C>
1994                    $0.27
1995                    $0.28
1996                    $0.31
1997                    $0.35
1998                    $0.42

</TABLE>

<TABLE>
<CAPTION>
                        Deposit Base Growth

<S>                     <C>
1994                    $219,561
1995                    $230,736
1996                    $238,808
1997                    $260,690
1998                    $266,461

</TABLE>

(At this point in the 1998 annual report, the following text runs along
the left of the bar graph occupying the remaining third of the column
that the graph did not use.)

December 31.
  The dividend payout on shares owned by investors showed even greater
improvement, increasing by nearly 20 percent from $0.35 per share to
$0.42 per share in 1998, also adjusted for calculation on 3.6 million
shares.
  Deposits grew only slightly during the year from $260.7 million in
1997 to $266.4 million by the end of 1998.
  Principally responsible for the lack of growth in interest-bearing
deposit categories were a general decline in market interest rates
and obvious customer preferences for other, sometimes more risky,
investments with non-traditional finanicial-services providers.


<PAGE>

(At this point, the text reverts back to full column width.)

  Growth in both non-interest-bearing checking volumes and savings
accounts was better than anticipated, which helped offset the
shortfall experienced in most interest-bearing accounts.
  At year-end, plans were set for an aggressive service-training
program to be implemented as 1999 begins. The campaign will provide
all of our customer-service employees with additional skills that 
will enable them to uncover and satisfy the diverse customer needs
that are emerging in today's financial marketplace.
  The Commercial National loan portfolio grew in 1998 by nearly

(At this point in the 1998 annual report, there appears a bar graph 
occupying two-thirds space of the third column as set out in the following
table.)

<TABLE>
<CAPTION>
                     Loan Portfolio Growth

<S>                  <C>
1994                 $139,367
1995                 $144,523
1996                 $160,048
1997                 $183,639
1998                 $192,239

</TABLE>

(At this point in the 1998 annual report, the following text runs along the 
left of the bar graph occupying the remaining third of the column that the
bar graph did not use.)

5 percent to $192.2 million from $183.6 million a year ago. Accounting
for most of that improvement was the commercial-mortgage segment, 
which realized a 17 percent improvement from a year ago, increasing
by $7.8 million in spite of 


(At this point in the 1998 annual report, the text appears back to full
three-column format.)

very tight pricing that resulted from intense competition in the 
marketplace.
  Commercial loans grew by nearly 10 percent or $1.8 million, and
municipal loans grew by more than 12 percent or $0.4 million. 
Volumes in all other loan types - personal, residential mortgage 
and credit cards - stayed relatively even or became slightly smaller.
  Loan-loss provision costs stabilized in the second half of the 
year as the company de-emphasized activity in products prone to
high loss (such as credit cards and and dealer used-auto financing)
and re-emphasized more credit-worthy products such as commercial,
home-equity, tax-free municipal and residential mortgage loans.
  To overcome the general sluggishness in loan activity, the 
company conducted special mortgage-sales training and implemented
a more structured retail and commercial officer-calling program
to comprehensively canvas the market area for additional business
prospects.
  Total interest income for the year rose to $23.6 million from 
$21.8 million a year ago, an improvement of more than 8 percent.
At the same time, however, interest expense also increased by a
corresponding 7 percent, growing by $0.6 million from the year
before.
  Additional income was generated during the year through non-
interest sources such as ...
  -  service-charge income and fees, which


(At this point in the 1998 annual report, there appears a bar graph, 
occupying the full column width, as set in the following table.)


<TABLE>
<CAPTION>
                 Interest: Income, Expense & Net

<S>               <C>            <C>           <C>
1994              $17,384        $ 6,445       $10,939
1995              $19,222        $ 8,252       $10,970
1996              $19,947        $ 8,445       $11,502
1997              $21,882        $ 9,677       $12,205
1998              $23,667        $10,318       $13,349

</TABLE>

(At this point, the text reverts back to full-column width.)

     grew by $160,000, and
  -  trust and asset-management revenues,
     which improved by more than $75,000.
  In 1999, we believe that even more income can be generated through
an affiliation developed between the Gooder Agency, Inc., of Ligonier
and a new subsidiary, Commercial National Investment Corporation, 
together which formed Commercial National Insurance Services. The 
extension of insurance service to our customer base is a logical
move that will provide our clients with even more comprehensive 
"one-stop" financial service.
  Efforts to contain non-interest expenses included the elimination
of a number of large, unproductive operating expenditures, a move
that limited the increase in that category to just under 6 percent.

(At this point in the 1998 annual report, there appears a bar graph occupying
two-thirds space of the middle column as set out in the following table.)

<TABLE>
<CAPTION>
                 Post Tax Return On Average Assets

<S>                   <C>
1994                  1.42%
1995                  1.43%
1996                  1.39%
1997                  1.39%
1998                  1.46%

</TABLE>

(At this point in 1998 annual report, the following text runs along the left
of the bar graph occupying the remaining third of the column that the graph 
did not use.)

  With earnings for the year reaching a record level, the post-tax return
on average assets grew to 1.46 percent from the 1.39 percent return
posted for both of the preceeding two years. Total assets of the 
corporation grew to $326 million at the end of 1998 from $319 million
in the year 

(At this point in the 1998 annual report, the text goes back to full-column
width.)

prior, marking a 2 percent improvement.

WE TOOK STEPS TO BE SURE OUR SERVICE
KEPT UP WITH THE PACE OF TECHNOLOGY

  After establishing a presence on the World Wide Web at 
www.cnbthebank.com in February, Commercial National took a major
step toward the future to prepare for true Internet banking.
As 1999 develops, we expect to complete that process so that our
current proprietary PC-based banking program will become available
in an improved version on the Web, enabling customers to access
their banking information from any Internet-connected computer
anywhere.
  Sometimes just keeping up with technology is a challenge, too, 
as experienced by so many businesses working toward "Year 2000"
compliance. For more than a year, Commercial National has been
at work adjusting and testing systems to be sure that its service
will be delivered as efficiently on January 1, 2000, as it is on
December 31, 1999, Our "Year 2000 Committee" includes key
employees who have the knowledge and ability and have committed
the time to make it happen.
  In addition to its own preparedness for the "Year 2000" event,
the corporation took steps to be sure its customers and community
members were prepared as well. Special videotape educational 
packages were distributed to commercial-loan customers, and the
company coordinated a workshop hosted by the Latrobe Area 
Chamber of Commerce to address the issue with local businesses.

AS THE CORPORATION GREW, SO
GREW THE COMMUNITIES WE SERVE
  Commercial National long has recognized the value of its corporate
participation in communities where it does business. During 1998, we
worked hard to be sure those communities were better places to live,
too.
  Recognizing the reliance many of us have on non-profit agencies
in the area, Commercial National in September distributed to more
than 90 civic and charitable groups nearly $100,000 in contributions
and pledges for in-kind service. Representatives from agencies in
Greensburg, Hempfield Township, Latrobe, Ligonier, Ligonier Township,
Unity Township, Murrysville and West Newton received the contributions
as the company's investment in the future vitality of those places
where we live and work.
  In the face of so many bank mergers and acquisitions - many of them
"community banks" with which we competed for years - we continue
to believe that our independence as a locally owned and locally 
operated company provides a distinct advantage not found at many
other financial institutions. When larger, far-away companies acquire
them, the ties those institutions have in the communities they 
serve are diminished.
  As the future unfolds at Commercial National, we expect to renew our
efforts to use the best people to provide the best service on the
best products available in the marketplace.

<PAGE>


Commercial National Financial Corporation and Subsidiaries
Consolidated Balance Sheets
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                             December 31,
                                                      -------------------------
                                                       1998              1997
<S>                                               <C>               <C> 
ASSETS
-------------------------------------------------------------------------------
  Cash and due from banks on demand               $  7,655,963      $ 9,711,026
  Interest bearing deposits with banks                  67,935          130,937
  Securities available for sale                    119,103,480       54,267,314
  Securities held to maturity, market value of
   $65,691,241                                            -          64,114,775

 Loans                                             192,239,249      183,639,085
     Unearned income                                  (124,089)        (157,928)
     Allowance for loan losses                      (1,914,174)      (1,882,251)
                                                   ----------------------------
 Net loans                                         190,200,986      181,598,906
                                                   ----------------------------
 Premises and equipment                              6,027,496        5,990,786
 Accrued interest receivable                         2,210,909        2,445,164
 Other assets                                        1,112,584        1,483,048
-------------------------------------------------------------------------------
      Total Assets                               $ 326,379,353    $ 319,741,956
                                                  ============     ============
LIABILITIES
-------------------------------------------------------------------------------
  Deposits
   Non-interest-bearing                          $  44,518,765    $  35,968,693
   Interest-bearing                                221,941,756      224,721,064
                                                   ----------------------------
      Total deposits                               266,460,521      260,689,757

  Short-term borrowings                              3,775,000       17,850,000
  Other liabilities                                  2,982,183        2,757,188
  Long-term borrowings                               10,000,000             -
------------------------------------------------------------------------------- 
      Total liabilities                            283,217,704      281,296,945
                                                   ----------------------------
Shareholders' Equity
-------------------------------------------------------------------------------
  Common stock, par value $2; 10,000,000 shares authorized;
   3,600,000 issued and outstanding in 1998;
   1,800,000 issued and outstanding in 1997          7,200,000        3,600,000
  
  Retained earnings                                 34,133,006       34,604,120
  Accumulated other comprehensive income -
   net of deferred taxes $942,028 and
   $124,096 in 1998 and 1997                         1,828,643          240,891
                                                  -----------------------------
      Total shareholders' equity                    43,161,649       38,445,011
-------------------------------------------------------------------------------
   Total Liabilities and Shareholders' Equity    $ 326,379,353    $ 319,741,956
                                                  ============     ============
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<PAGE>

Commercial National Financial Corporation and Subsidiaries
Consolidated Statements of Income
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                             Years Ended December 31,
                                          -----------------------------------
                                            1998         1997         1996
<S>                                     <C>          <C>          <C> 
Interest Income
-----------------------------------------------------------------------------
 Interest and fees on loans             $16,755,493  $15,312,410  $13,549,080
 Interest and dividends on securities:
   Taxable                                4,967,679    4,827,530    4,914,451
   Exempt from federal income taxes       1,894,515    1,694,422    1,391,106
 Interest on deposits with banks              7,858        7,167        6,252
   Interest on federal funds sold            41,547       40,363       86,678
-----------------------------------------------------------------------------
      Total interest income              23,667,092   21,881,892   19,947,567

Interest Expense                         10,318,581    9,677,138    8,445,126
-----------------------------------------------------------------------------
Net Interest Income                      13,348,511   12,204,754   11,502,441

Provision for Loan Losses                   435,000      270,000      105,000
-----------------------------------------------------------------------------
      Net interest income after provision
      for loan losses                    12,913,511   11,934,754   11,397,441

Other Operating Income
-----------------------------------------------------------------------------
 Service charges on deposit accounts        584,783      572,124      511,418
 Other service charges and fees             530,530      382,332      287,694
 Net security gains                          10,113       11,561          577
 Trust department income                    240,418      164,430       89,274
 Other income                               367,246      358,622      367,227
-----------------------------------------------------------------------------
      Total other operating income        1,733,090    1,489,069    1,256,190
                                          -----------------------------------
Other Operating Expenses
-----------------------------------------------------------------------------
 Salaries and employee benefits           4,883,607    4,664,107    4,231,494
 Net occupancy expense                      604,730      543,407      492,414
 Furniture and equipment expense            601,934      617,402      616,663
 Pennsylvania shares tax                    306,602      278,192      255,161
 Other expenses                           2,143,771    1,960,329    2,048,844
-----------------------------------------------------------------------------
      Total other operating expenses      8,540,644    8,063,437    7,644,576
                                          -----------------------------------
Income Before Income Taxes                6,105,957    5,360,386    5,009,055
                                          ----------------------------------- 
Income Tax Expense                        1,465,071    1,273,777    1,252,589
-----------------------------------------------------------------------------
      Net Income                        $ 4,640,886  $ 4,086,609  $ 3,756,466
                                        ===========  ===========  ===========
      Net Income Per Common Share       $      1.29  $      1.14  $      1.04
                                        ===========  ===========  ===========
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<PAGE>


Commercial National Financial Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
------------------------------------------------------------------------------
<TABLE>
<CAPTION>                         
                                
                                                                   Accumulated
                                                                      Other              Total
                                          Common     Retained     Comprehensive       Shareholders'
                                           Stock     Earnings        Income              Equity
------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>               <C>              <C>
Balance - January 1, 1996               $ 3,600,000  $ 29,143,045      $ 293,425        $33,036,470

COMPREHENSIVE INCOME

Net income                                     -        3,756,466           -             3,756,466

Other comprehensive income, net
of tax:
  Unrealized losses on securities
  of ($282,301), net of reclassification
  adjustment for gains included in net 
  income of ($381)                             -             -          (282,682)          (282,682) 
                                                                                          ----------
TOTAL COMPREHENSIVE INCOME                                                                3,473,784
                                                                                          

Cash dividends declared
  $.31 per share                               -       (1,122,000)          -            (1,122,000)
------------------------------------------------------------------------------------------------------
Balance - December 31, 1996               3,600,000    31,777,511         10,743         35,388,254

COMPREHENSIVE INCOME

Net income                                     -        4,086,609           -              4,086,609

Other comprehensive income, net
of tax:
  Unrealized gains on securities
  of $237,778, net of reclassification
  adjustment for gains included in net
  income of ($7,630)                           -             -           230,148             230,148
                                                                                          -----------
TOTAL COMPREHENSIVE INCOME                                                                 4,316,757
                                                                                          
Cash dividends declared
  $.35 per share                               -       (1,260,000)          -             (1,260,000)
------------------------------------------------------------------------------------------------------
Balance - December 31, 1997               3,600,000    34,604,120        240,891          38,445,011

COMPREHENSIVE INCOME

Net income                                     -        4,640,886           -              4,640,886

Other comprehensive income, net
of tax:
  Unrealized gains on securities
  of $1,594,427, net of reclassification
  adjustment for gains included in net
  income of ($6,675)                           -             -         1,587,752           1,587,752
                                                                                           ----------
TOTAL COMPREHENSIVE INCOME                                                                 6,228,638
                                                                                           

Stock split in the form of a dividend     3,600,000    (3,600,000)          -                   -
                                                                                           
Cash dividends declared
  $.42 per share                               -       (1,512,000)          -             (1,512,000)
------------------------------------------------------------------------------------------------------

Balance - December 31, 1998              $7,200,000   $34,133,006     $1,828,643         $43,161,649
                                         ===========  ============    ===========        ============

</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<PAGE>


Commercial National Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                               Years ended December 31,
                                                    ------------------------------------------
                                                        1998           1997            1996
----------------------------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>
Operating Activities
 Net income                                        $  4,640,886   $  4,086,609   $   3,756,466
 Adjustments to reconcile net income
  to net cash provided by operating activities
 Depreciation and amortization                          604,772        593,862         591,288
 Loss on sale of other real estate                         -             6,446            -
 Provision for loan losses                              435,000        270,000         105,000
 Net amortization of securities 
  and loan fees                                         202,283        153,615         158,210
 Net security gains                                     (10,113)       (11,561)           (577)
 (Increase) decrease in interest receivable             234,255       (300,441)          5,482
 Increase in interest payable                            52,939        198,258          63,088
 Increase in taxes payable                               23,409          3,591            -
 Increase (decrease) in taxes receivable                   -            98,177         (90,286)
 Deferred tax expense                                    17,176        115,735          52,019
 Increase (decrease) in other liabilities              (130,976)        41,140          47,875
 Increase in other assets                              (185,021)      (174,276)       (167,122)
-----------------------------------------------------------------------------------------------
 Net cash provided by operating activities            5,884,610      5,081,155       4,521,443
-----------------------------------------------------------------------------------------------
Investing Activities
 Net (increase) decrease in deposits with other banks    63,002         22,730         (71,016)
 Decrease in federal funds sold                            -              -          5,425,000
 Purchases of securities available for sale         (25,334,138)   (34,966,171)    (10,768,047)
 Purchases of securities held to maturity            (1,966,778)   (11,702,873)    (25,142,595)
 Maturities and calls of securities
  available for sale                                  7,654,065     12,311,659      14,094,084
 Proceeds from sales of securities
  available for sale                                  8,996,484      6,488,260      16,651,647
 Maturities and calls of securities
  held to maturity                                   12,175,000     12,095,000       5,809,060
 Net increase in loans                               (9,069,590)   (24,014,417)    (16,177,469)
 Proceeds from the sale of other real estate               -           266,473            -
 Purchases of premises and equipment                   (641,482)    (1,782,183)     (1,403,102)
-----------------------------------------------------------------------------------------------
 Net cash used by investing activities               (8,123,437)   (41,281,522)    (11,582,438)
-----------------------------------------------------------------------------------------------
Financing Activities
  Net increase in deposits                            5,770,764     21,881,686       8,071,760
  Net increase (decrease) in short-term borrowings  (14,075,000)    16,450,000       1,400,000 
  Proceeds from long-term borrowings                 10,000,000           -               -
  Dividends paid                                     (1,512,000)    (1,260,000)     (1,122,000)
-----------------------------------------------------------------------------------------------
  Net cash provided by financing activities             183,764     37,071,686       8,349,760
-----------------------------------------------------------------------------------------------
  Increase (decrease) in cash and cash equivalents   (2,055,063)       871,319       1,288,765
  Cash and cash equivalents at beginning of year      9,711,026      8,839,707       7,550,942
-----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year           $  7,655,963   $  9,711,026    $  8,839,707
                                                   ============   ============    =============

Supplemental disclosures of cash flow information:
  Cash paid during the year for:
      Interest                                     $ 10,371,521   $  9,478,881    $  8,382,038
                                                   ============   ============    ============
      Taxes                                        $  1,423,900   $  1,172,800    $  1,294,000
                                                   ============   ============    ============
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

<PAGE>

Commercial National Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Years Ended December 31, 1998, 1997, and 1996
-----------------------------------------------------------
1. Summary of Significant Accounting Policies

General

The accompanying consolidated financial statements include the
accounts  of  Commercial  National  Financial  Corporation   (the
corporation)   and  its  wholly-owned  subsidiaries,   Commercial
National  Bank of  Westmoreland County (the bank)  and Commercial
National Investment Corporation.  All material intercompany 
transactions have been eliminated.

The following summary of accounting and reporting policies  is
presented  to  aid the reader in obtaining a better understanding
of  the  financial statements and related financial data  of  the
corporation and its subsidiaries contained in this report.  Such 
policies conform to generally accepted accounting principles(GAAP)  
and to general practice within the banking industry. In preparing
financial  statements  in  conformity with  GAAP,  management  is
required  to  make  estimates  and assumptions  that  affect  the
reported amounts  of assets  and liabilities,  the disclosure  of
contingent  assets and liabilities at the date of  the  financial
statements  and income and expenses during the reporting  period.
Actual results could differ from those estimates.

Certain items of the consolidated financial statements for the
years ended December 31, 1997 and 1996, have been reclassified to
conform  with the December 31, 1998 presentation.  None of  these
reclassifications affected net income.


Securities

Debt  securities that the corporation has the positive  intent
and ability to hold to maturity are classified as securities held
to  maturity and are reported at amortized cost.  Debt and equity
securities  not classified  as  held to maturity  securities  are
classified as securities available for  sale and are reported  at
fair value, with unrealized gains and losses excluded from earnings
and reported as a separate  component  of shareholders' equity.

Net gain or loss on the sale of  securities is determined using
the specific identification method.

Loans

Loans are stated at the principal amount outstanding. When a loan
becomes past due and doubt exists as to the ultimate collection
of principal and interest, the accrual of income is discontinued
and is only recognized at the time payment is received.

The corporation considers a loan to be impaired when based on
information and events, it is probable that the corporation will
be unable to collect principal or interest due according to the
contractual terms of the loan. Loan impairment is measured based
on the present value of expected cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at 
the loans observable market price or the fair value of the 
collateral if the loan is collateral dependent.

Payments received on impaired loans are applied against the 
recorded investment in the loan. For loans other than those
that the corporation expects repayment through liquidation
of the collateral, when the remaining recorded investment
in the impaired loan is less than or equal to the present
value of the expected cash flows, income is recorded on a
cash basis.

Loan Fees

Loan origination and commitment fees, net of associated direct
costs,  are  deferred  and  the net amount  is  amortized  as  an
adjustment  to  the  related loan yield on the  interest  method,
generally  over  the  contractual life of the  related  loans  or
commitments.


Other Real Estate Owned

Real estate, other than bank premises, is recorded at the lower
of  cost  or market at the time of acquisition.  Expenses related
to  holding  the  property, net of rental income,  are  charged
against earnings in the current period.

Allowance for Loan Losses

The  allowance  for  loan  losses  represents  management's
estimate of an amount adequate to provide for losses which may be
incurred  on  loans  currently held.  Management  determines  the
adequacy  of the allowance based on reviews of individual  credits,
historical patterns of loan charge-offs and recoveries,  industry
experience,  current economic trends and other factors  relevant
to  the  collectibility of the loans currently in the  portfolio.
The  allowance  is  increased by provisions  charged  to  operating
expense and reduced by net charge-offs.

Premises and Equipment

Premises  and  equipment are carried at cost less  accumulated
depreciation and amortization.  For financial statement reporting
and  income  tax  purposes,  depreciation  is  computed  both  on
straight-line  and accelerated methods over the estimated  useful
life  of the premises and equipment. Charges for maintenance  and
repairs  are expensed as incurred.  Amortization is charged  over
the term of the respective lease or the estimated useful life  of
the asset, whichever is shorter.

Income Taxes

Certain income  and  expense items are accounted for in different
years  for  financial  reporting purposes  than  for  income  tax
purposes.   Deferred  taxes  are  provided  to  recognize   these
temporary   differences.   The  principal  items   involved   are
investment  securities,  employee benefit  plans,  provision  for
loan  losses, net deferred loan fees and costs, and depreciation.
The effect  on  deferred  taxes  of  a  change  in  tax rates  is 
recognized in earnings in the period that includes  the enactment
date.   Income  tax  expense is  not  proportionate  to  earnings
before  taxes,  principally  because  a portion  of revenues from
obligations  of  states  and  political  subdivisions   are
nontaxable.

<PAGE>
(At this point in the 1998 annual report the page is still in three
column format with the first column being in full text and the second
and third columns having text occupy about a fourth of the page. The 
remaining space in the second and third columns consists of a table
that will be identified later on this page.)

Earnings per Share:

Earnings per share have been calculated on the weighted average
number  of shares outstanding of 3,600,000 shares in 1998,  1997
and  1996.  The weighted average number of shares outstanding has
been  adjusted  for  the  effect  of  a two-for-one  stock  split
effected in the form of a stock dividend more fully described  in
Note 13.

In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (FAS 128). This statement redefines the standards for 
computing earnings per share (EPS) previously found in Accounting
Principles Board opinion No. 15, "Earning Per Share." FAS 128
establishes new standards for computing and presenting EPS and 
requires dual presentation of "basic" and "diluted" EPS on the
face of the income statement for all entities with complex 
capital structures. Under FAS 128, basic EPS is to be computed
based upon income available to common shareholders and the 
weighted average number of common shares outstanding for the
period. Diluted EPS is to reflect the potential dilution 
exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of 
the corporation. FAS 128 also requires the restatement of all 
prior-period EPS data presented. The corporation currently 
maintains a simple capital structure, thus there are no dilutive
effects on earnings per share.

Comprehensive Income

As of January 1, 1998, the bank adopted Statement 130, Reporting
Comprehensive Income. Statement 130 established new rules for the
reporting and display of comprehensive income and its components;
however, the  adoption  of this  statement had  no impact  on the
corporation's net  income  or shareholder's equity. Statement 130
requires unrealized gains or losses on the corporation's available
for  sale  securities,  which  prior  to  adoption  were  reported 
separately  in  shareholder's  equity,  to  be  included  in other 
comprehensive income. Prior  year  financial  statements have been
reclassified to conform to the requirements of Statement of 130.

Cash and Cash Equivalents

For  purposes  of  reporting cash flows, the  corporation  has
defined  cash and cash equivalents as those amounts  included  in
the balance sheet caption "Cash and due from banks on demand".

2. Cash and Due from Banks on Demand

Regulations  of the Board of Governors of the Federal  Reserve
System  impose  uniform reserve requirements  on  all  depository
institutions  with transaction accounts (checking  accounts,  NOW
accounts,  etc.)  and non-personal time deposits  (deposits  with
original maturities of 14 days or more).  Reserves are maintained
in  the form of vault cash or a non-interest-bearing balance held
with  the Federal Reserve Bank.  The bank also maintains deposits
with  the  Federal  Reserve  Bank and  other  banks  for  various
services  such  as check clearing.  The amount so  restricted  at
December 31, 1998 and 1997 was $2,675,000 and $2,121,000, 
respectively.

3. Securities
The  amortized cost and estimated market values of  securities
are as follows:
<TABLE>
<CAPTION>
                                                 Gross       Gross       Estimated
                                  Amortized   Unrealized  Unrealized      Market
                                    Cost         Gains       Losses        Value
----------------------------------------------------------------------------------
<S>                           <C>            <C>          <C>         <C>
Securities Available for Sale:
December 31, 1998
U.S. Treasury securities        $15,577,778   $  156,617   $    -      $ 15,734,395
Obligations of U.S. Government
corporations and agencies        61,903,845      700,251      (2,855)    62,601,241
Obligations of states and
 political subdivisions          36,454,587    1,916,896        (239)    38,371,244
Other securities                  2,396,600         -           -         2,396,600
-----------------------------------------------------------------------------------
                               $116,332,810   $2,773,764   $  (3,094)  $119,103,480
                                ===========   ==========   ==========  ============


December 31, 1997
U.S. Treasury securities        $21,186,113   $  111,809   $ (36,037)  $21,261,885
Obligations of U.S. Government
corporations and agencies        31,385,914      289,215        -       31,675,129
Other securities                  1,330,300         -           -        1,330,300
----------------------------------------------------------------------------------
                                $53,902,327   $  401,024   $ (36,037)  $54,267,314
                                ===========   ==========   ==========  ===========

</TABLE>
<PAGE>

Commercial National Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                     Gross      Gross       Estimated
                                    Amortized     Unrealized  Unrealized     Market
                                       Cost          Gains      Losses        Value
-------------------------------------------------------------------------------------
<S>                                <C>           <C>         <C>          <C>
Securities Held to Maturity:
December 31, 1997
Obligations of U.S. Government
  corporations and agencies        $28,495,539   $  162,837  $ (56,186)   $28,602,190
Obligations of states and
  political subdivisions            35,619,236    1,473,526     (3,711)    37,089,051
-------------------------------------------------------------------------------------
                                   $64,114,775   $1,636,363  $ (59,897)   $65,691,241
                                   ===========   ==========  ==========   ===========


</TABLE>

(At this point in the 1998 annual report, the following text is in 
one-column format measuring two columns wide.)

The amortized cost and estimated market values of securities at
December  31,  1998, by contractual maturity,  are  shown  below.
Mortgage-backed security maturities are based upon their contractual 
maturities. Expected  maturities  will  differ  from  contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.


<TABLE>
                                     Securities Available       
                                           for Sale             
--------------------------------------------------------------------------
<CAPTION>
                                     Amortized   Estimated    
                                       Cost     Market Value  
--------------------------------------------------------------------------
<S>                                <C>          <C>          
Due within 1 year                  $ 15,468,716  $ 15,587,310  
Due after 1 but within 5 years       35,918,147    37,018,769  
Due after 5 but within 10 years      29,275,508    30,569,448  
Due after 10 years                   33,273,839    33,531,353  
Equity securities                     2,396,600     2,396,600  
--------------------------------------------------------------------------
                                   $116,332,810  $119,103,480  
                                   ============  ============  
</TABLE>

(The following test reverts back to the one-column format measuring
two columns wide.)

Securities with amortized cost and market values, respectively,
of  $11,798,395 and $12,210,441 at December 31, 1998 and $13,883,365
and  $14,183,281  at  December 31, 1997, were  pledged  to  secure
public  deposits and for other purposes required or permitted  by
law.

Proceeds from sales and calls of securities were $17,361,371, 
$13,608,361  and  $20,730,381  during  1998, 1997 and 1996,
respectively. Gross gains of $17,915, $20,187 and $52,137 and
gross losses of $7,802, $8,626 and $51,560 were realized on those
sales and calls during 1998, 1997 and 1996, respectively.


(At this point in the 1998 annual report. the text is in one-column
format starting with the third column.)


Other  securities consist of Federal Reserve  Bank  stock,  an
equity  security,  with  book and market values  of  $108,000  at
December  31, 1998 and 1997 and Federal Home Loan Bank stock,  an
equity  security,  with book and market values  of  $2,276,100 and
$1,222,300 at December 31, 1998 and 1997, respectively. Also included
in other securities is an investment in Commercial National Insurance
Services, with book and market values of $12,500 at December 31, 1998.

The   corporation  did  not  hold  any  derivative  financial
instruments  such as futures, forwards, swap or option  contracts
at December 31, 1998 or December 31, 1997. Also included in the
investment portfolio are mortgage-backed securities amounting to
$41,303,841 in 1998 and $20,579,009 in 1997 which are subject to
prepayment risk as a result of interest rate fluctuations.

In September 1998, the corporation transferred securities from the
held  to  maturity  classification  to  the  available  for  sale
classification. The transfer was done to enable the corporation to
better manage the interest rate risk associated with the investment
portfolio. The amortized cost and market values of these securities
as of the date of transfer was $53,889,490 and $55,506,850,
respectivley.

The  changes  in  net  unrealized  holding  gain  or  loss  on
securities  available  for sale that has  been  included  in  the
separate  component of shareholders' equity for  the  year  ended
December 31, is as follows:

(At this point in the 1998 annual report, a table appears measuring
two columns wide starting with the second column.)

<TABLE>
<CAPTION>
                                                1998        1997         1996
--------------------------------------------------------------------------------
<S>                                         <C>         <C>         <C> 
Gross change in unrealized gain (loss)
  on securities available for sale         $2,405,684   $ 348,711   $ (428,308)
Deferred taxes                                817,932     118,563     (145,626)
-------------------------------------------------------------------------------
Net change in unrealized gain (loss)
  on securities available for sale         $1,587,752   $ 230,148   $ (282,682)
                                            ==========  ==========  ===========

</TABLE>

<PAGE>

4.  Loans
Loans are summarized as follows:

(At this point, the following table measures two columns wide
in a three column format starting with the first column.)


<TABLE>
<CAPTION>
                                                December 31,
                                        --------------------------
                                             1998         1997
------------------------------------------------------------------
<S>                                     <C>           <C>
Commercial  loans                       $ 20,893,911  $ 19,052,486
Real estate loans - commercial            52,165,384    44,289,723
Real estate loans - construction           2,754,964     3,510,809
Real estate loans - other                 96,210,304    95,570,632
Installment loans                          5,388,246     6,219,577
Municipal loans                            3,757,563     3,340,405
Other loans                               11,068,877    11,655,453
------------------------------------------------------------------
                                        $192,239,249  $183,639,085
                                        ============  ============ 

</TABLE>

(At this point, the following text is in one-column format
measuring two columns wide.)


The corporation's loan portfolio is collateralized with assets located
primarily within Western Pennsylvania. Although the corporation has a
diversified  portfolio, exposure to credit loss can be  adversely
impacted   by   downturns  in  local  economic   and   employment
conditions.

5.  Allowance for Loan Losses

Transactions in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
                                              1998           1997         1996
----------------------------------------------------------------------------------
<S>                                        <C>           <C>          <C>
Balance at January 1,                      $1,882,251    $ 2,035,818  $ 2,081,700
----------------------------------------------------------------------------------
Losses charged against allowance             (412,867)      (448,308)    (173,952)
Recoveries on previously charged-off loans      9,790         24,741       23,070
Provision charged to operating expense        435,000        270,000      105,000
----------------------------------------------------------------------------------
Balance at December 31,                    $1,914,174    $ 1,882,251  $ 2,035,818
                                           ==========    ===========  ===========
</TABLE>

(At this point the following text is in three-column format occupying the
first column.)

Impairment of loans having recorded investments of  $3,838,099
and  $2,488,585  at  December 31, 1998  and  1997, respectively, 
has been recognized in conformity with FAS  114  as amended  by 
FAS 118. The average recorded investment in impaired loans during
1998, 1997 and 1996 was $4,595,916, $3,231,563 and $3,738,895,
respectively. The total allowance for loan losses related to these
loans was $331,642 and $256,826 at December 31, 1998 and 1997, 
respectively. Interest income on impaired loans of $429,512,
$258,241 and $249,676 was recognized for cash payments received in 
1998, 1997 and 1996, respectively.

6.  Financial Instruments with Off-Balance-Sheet Risk

The  corporation is a party to financial instruments with off-
balance-sheet risk in the normal course of business to  meet  the
financing  needs  of its customers.  These financial  instruments
include  commitments to extend credit, standby letters of credit,
financial  standby letters of credit, and commercial  letters  of
credit.   Those instruments involve, to varying degrees, elements
of  credit  and  interest  rate risk  in  excess  of  the  amount
recognized in the balance sheet.  The contract or notional amount
of  those  instruments  reflect the  extent  of  involvement  the
corporation  has in particular classes of financial  instruments.
The  corporation  does  not  issue  any  other  instruments  with
significant off-balance-sheet risk.

The  corporation's exposure to credit loss  in  the  event  of
nonperformance by the other party to the financial instrument for
commitments  to  extend  credit,  standby  letters   of   credit,
financial  standby letters of credit, and commercial  letters  of
credit  written is represented by the contract or notional amount
of  those  instruments.  The corporation  uses  the  same  credit
policies in making commitments and conditional obligations as  it
does  for  on-balance-sheet  instruments.   The  following  table
identifies the contract or notional amount of those instruments.

(At this point, the following table is located at the bottom two-thirds
of the page occupying the second and third columns.)

<TABLE>
<CAPTION>
                                                        December  31,
----------------------------------------------------------------------------
                                                     1998           1997
----------------------------------------------------------------------------
<S>                                              <C>             <C>
Financial instruments whose contract amounts
  represent credit risk
    Commitments to extend credit                 $44,315,527     $42,603,755
    Standby letters of credit                    $ 2,768,940     $ 2,923,379   
    Financial standby letters of credit          $ 4,541,531     $ 4,442,424

</TABLE>
<PAGE>

Commercial National Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
-----------------------------------------------------------------------------

(At this point, the following text is in three-column format with only 
the first column being occupied.)

Commitments  to  extend credit are agreements  to  lend  to  a
customer  as  long  as  there is no violation  of  any  condition
established  in the contract.  Commitments generally  have  fixed
expiration  dates or other termination clauses  and  may  require
payment of a fee.  Since many of the commitments are expected  to
expire without being drawn upon, the total commitment amounts  do
not   necessarily   represent  future  cash  requirements.    The
corporation evaluates each customer's credit worthiness on a case-
by-case  basis.   The  amount of collateral  obtained  if  deemed
necessary by the corporation upon extension of credit is based on
management's credit evaluation of the counter party.   Collateral
held  varies  but  may  include accounts  receivable,  inventory,
property,  plant and equipment, and income-producing  commercial
properties.

Standby letters of credit, financial standby letters of credit,
and   commercial  letters  of  credit  written  are   conditional
commitments   issued  by  the  corporation   to   guarantee   the
performance of a customer to a third party.  Those guarantees are
primarily   issued  to  support  public  and  private   borrowing
arrangements.   The  credit risk involved in issuing  letters  of
credit is essentially the same as that involved in extending loan
facilities to customers.


(At this point  the following text and tables appear in
one-column format measuring two columns wide. The text begins 
at the top of the second column in a standard three column page.)


7.      Premises and Equipment

The depreciation and amortization on premises and equipment charged to
operating expense amounted to $604,772 in 1998, and $593,862 in 1997.

The composition of premises and equipment at December 31, is as follows:

<TABLE>
<CAPTION>
                                           1998         1997
---------------------------------------------------------------- 
  <S>                                   <C>          <C>
  Premises                              $6,101,386   $5,827,969
  Leasehold improvements                   214,866      214,866
  Furniture and equipment                5,443,402    5,127,110
----------------------------------------------------------------
                                        11,759,654   11,169,945

  Less accumulated depreciation          
    and amortization                     6,558,389    5,953,617
----------------------------------------------------------------
                                         5,201,265    5,216,328
  Land                                     826,231      774,458
----------------------------------------------------------------
                                        $6,027,496   $5,990,786
                                         =========    =========
</TABLE>

 8.     Interest-Bearing Deposits

Interest  bearing  deposits include certificates  of  deposit  issued  in
denominations  of  $100,000  or  more  which  amounted  to  $30,016,225  and
$31,480,272  at  December 31, 1998 and 1997.  Interest  expense  related  to
certificates  of  $100,000  or  greater  was  $1,587,148,  $1,577,237   and
$1,213,126,  for the  years  ended  December  31,  1998,  1997  and   1996,
respectively.

Interest bearing deposits at December 31, are detailed as follows:

<TABLE>
<CAPTION>
                                           1998            1997
---------------------------------------------------------------------
        <S>                           <C>             <C>
        Savings accounts              $ 45,622,724    $ 44,637,868
        NOW accounts                    12,598,378      12,644,010
        Money Market NOW accounts        8,811,086       9,324,094
        FIMM accounts                   42,210,709      43,085,563
        Time deposits                  112,698,859     115,029,529
---------------------------------------------------------------------
                                      $221,941,756    $224,721,064
                                       ===========     ===========
</TABLE>

Included in time deposits at December 31, 1998 were certificates of deposit
with the following scheduled maturities:

         1998                   $ 81,327,417
         1999                     20,719,584
         2000                      5,091,559
         2001                      2,449,972
         2002 and thereafter       3,110,327
                                ------------
                                $112,698,859
                                ============

(At this point in the 1998 annual report, the folowing text and table
is in one-column format measuring three columns wide.)

9.      Short-Term Borrowings

Short-term borrowings at December 31 were as follows:

<TABLE>
<CAPTION>

                                            1998                            1997
----------------------------------------------------------------------------------------------
                                Ending     Average   Average     Ending    Average   Average
                                Balance    Balance    Rate       Balance   Balance    Rate
----------------------------------------------------------------------------------------------
<S>                          <C>          <C>          <C>      <C>          <C>          <C> 
Federal funds purchased      $ 1,775,000  $ 2,397,534  5.60%    $ 6,850,000  $1,371,233   5.68%
Borrowings from
 Federal Home Loan Bank        2,000,000    8,578,753  5.76%     11,000,000   3,447,945   6.11%
----------------------------------------------------------------------------------------------

                             $ 3,775,000  $10,976,287  5.72%    $17,850,000  $4,819,178   5.99%
==============================================================================================
Maximum total at any
month-end                    $20,450,000                       $17,850,000
                             ===========                       ===========
</TABLE>

At December 31, 1998 the corporation had approved but unused borrowing 
with the Federal Home Loan Bank of $10,000,000.

<PAGE>
Commercial National Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
-----------------------------------------------------------------------------


(At this point in the 1998 annual report, the following text and tables 
are in one-column format measuring two columns wide.)

Interest expense on short-term borrowings for the years ended December
31 is detailed below:

                                               1998       1997       1996
---------------------------------------------------------------------------

Federal funds purchased                     $134,332   $ 77,888    $51,016
Borrowings from Federal Home Loan Bank       493,784    210,607       -
---------------------------------------------------------------------------
Total interest on short-term borrowings     $628,116   $288,495    $51,016
===========================================================================

10.     Long-Term Borrowings

Long-term borrowings at December 31, 1998, follows:

                                          Amount         Rate
                                          ------         ----
     Borrowings from FHLB
       due January 30, 2001         $ 5,000,000.00       5.70%

     Borrowings from FHLB
       due November 25, 2005        $ 5,000,000.00       4.82%
                                    --------------      ------
                                    $10,000,000.00
                                    ==============

The corporation pays interest monthly on these advances, with
principal due at maturity. FHLB advances due January 30, 2001
are at a fixed rate.  Advances  due  November 25, 2005 can be 
repriced quarterly  after November 24, 2001, at that time, if
the interest rate  increases, the  corporation  will have the 
option to repay  the  advance without  incurring a prepayment
penalty.

11.     Employee Benefits Plans

The corporation sponsors an employee profit sharing plan available to all
employees with at least one year of service.  The corporation contributes to
the  plan,  as  determined by the Board of Directors, in an  amount  not  to
exceed  15% of compensation of eligible participants.  The corporation  also
has  a supplemental retirement plan for certain employees.  The expense  for
the  employee  benefit plans was  $506,572, $520,978 and  $474,692  for  the
years ended December 31, 1998, 1997 and 1996.

12.     Income Taxes

The  balance  sheets include approximately ($279,623) and $555,486  of  net
deferred tax asset (liability) at December 31, 1998 and 1997, respectively. 
The components of the net deferred tax  asset (liability)  at December 31, 
1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                December 31,
                                           ----------------------
                                             1998          1997
------------------------------------------------------------------
  <S>                                     <C>           <C>
  Allowancee for loan losses              $ 492,014     $ 481,160
  Accrued benefits                          180,263       194,035
  Deferred loan fees                         42,190        53,695
  Premises and equipment                      1,161         2,195
------------------------------------------------------------------
  Total deferred tax assets                 715,628       731,089
 
  Securities accretion                       53,223        51,507
  Unrealized gain on securities
    available for sale                      942,028       124,096
------------------------------------------------------------------
  Total deferred tax liabilities            995,251       175,603
------------------------------------------------------------------
  Net deferred tax asset                  ($279,623)     $555,486
                                           =========     ========
</TABLE>
                                      
                                      
The total tax provision or credit for financial reporting purposes differs
from the amount computed by applying statutory rates to income before income
taxes.  The differences for the years ended December 31, are as follows:

<TABLE>
<CAPTION>
                                                 1998         1997         1996
-----------------------------------------------------------------------------------
 <S>                                         <C>          <C>          <C>
 Tax at statutory rates                      $2,076,611   $1,822,531   $1,703,079
  Increase (decrease) resulting from:
    Non-taxable interest and dividend income   (700,181)    (626,324)    (516,972)
    Non-deductible interest expense              89,263       79,904       61,313
    Other                                          (622)      (2,334)       5,169
-----------------------------------------------------------------------------------
  Total tax provision                        $1,465,071   $1,273,777   $1,252,589
                                              =========    =========    =========
</TABLE>


(At this point, the text reverts back to the three-column format beginning in
third column.)

13.     Stock Split

On  November  17, 1998, the Board of Directors approved  a  two-for-one
stock  split  effected in the form of a stock dividend  to  shareholders  of
record on December 15, 1998. The stock split in the form of a stock  dividend
has  been  given  retroactive effect and per share data for all prior periods
presented  has been restated.

14.     Fair Value of Financial Instruments

Below are various estimated fair values at December 31, 1998 and 1997, as
required by Statement of Financial Accounting Standards No. 107 (FAS 107).
Such information, which pertains to the corporation's financial instruments,
is  based  on the requirements set forth in FAS 107 and does not purport  to
represent  the  aggregate  net fair value of the  corporation.   It  is  the
corporation's general practice and intent to hold its financial  instruments
to   maturity,  except  for  certain  securities  designated  as  securities
available  for sale, and not to engage in trading activities.  Many  of  the
financial instruments lack an available trading market, as characterized  by
a  willing buyer and seller engaging in an exchange transaction.  Therefore,
the  corporation  had  to  use  significant estimations  and  present  value
calculations to prepare this disclosure.

Changes in the assumptions or methodologies used to estimate fair  values
may  materially affect the estimated amounts.  Also, management is concerned
that  there may not be reasonable comparability between institutions due  to
the wide range of permitted assumptions and the methodologies in absence  of
active  markets.   This lack of uniformity gives rise to a  high  degree  of
subjectivity in estimating financial instrument fair values.

The  following  methods and assumptions were used by the  corporation  in
estimating financial instrument fair values:

CASH AND SHORT-TERM INVESTMENTS: The carrying amounts for cash and short-
term investments approximate the estimated fair values of such assets.

SECURITIES:  Fair values for securities held to maturity  and  securities
available  for  sale are based on quoted market prices, if available. If
quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.

<PAGE>
Commercial National Financial Corporation and Subsidiary
Notes to Consolidated Financial Statements (continued)
-----------------------------------------------------------------------------

(At this point in the 1998 annual report, the following text and table 
is in three-column format occupying the about two-thirds of the first
and second columns.)

LOANS RECEIVABLE: Fair values of variable-rate loans subject to frequent
repricing  and  which entail no significant credit risk  are  based  on  the
carrying values.  The estimated fair values of other loans are estimated  by
discounting the future cash flows using interest rates currently offered for
loans  with  similar  terms  to borrowers of similar  credit  quality.   The
carrying  amount of accrued interest is considered a reasonable estimate  of
fair value.

OFF-BALANCE-SHEET INSTRUMENTS: Many of the corporation's off-balance-sheet
instruments, primarily loan commitments and standby letters of  credit,  are
expected  to  expire  without being drawn upon,  therefore,  the  commitment
amounts  do  not necessarily represent future cash requirements.  Management
has determined that due to the uncertainties of cash flows and difficulty in
predicting the timing of such cash flows, fair values were not estimated for
these instruments.

DEPOSIT LIABILITITES: For deposits which  are  payable  on  demand  at  the 
reporting  date,  representing  all  deposits  other  than  time  deposits,
management  estimated  that  the  carrying  value  of  such  deposits  is a 
reasonable  estimate  of fair value. The carrying  amounts of variable-rate
time deposit accounts and certificates  of  deposit  approximate their fair
values at the report date. Fair  values  of  fixed-rate time  deposits  are
estimated by discounting the future cash flows using interest rates currently
being offered and a schedule of aggregate expected maturities. The carrying
amount of accrued interest payable approximates its fair value.

SHORT-TERM BORROWINGS: The carrying amounts for short-term borrowings 
approximate the estimated fair value of such liabilities.

LONG-TERM BORROWINGS: Fair values of fixed rate borrowings  are estimated by 
discounting the future cash flows using the corporation's estimated incremental 
borrowing rate for similar types of borrowing arrangements.

<TABLE>
<CAPTION>
                                                               December 31, 
---------------------------------------------------------------------------------------------------
                                                     1998                          1997  
---------------------------------------------------------------------------------------------------
                                           Carrying         Fair         Carrying           Fair
                                            Amount          Value         Amount            Value
---------------------------------------------------------------------------------------------------
<S>                                    <C>            <C>             <C>              <C>
Financial assets
  Cash and short term investments      $   7,723,899  $   7,723,899   $   9,841,963    $  9,841,963
  Securities available for sale          119,103,480    119,103,480      54,267,314      54,267,314
  Securities held to maturity                   -              -         64,114,775      65,691,241
  Loans, net of reserve                  190,200,986    196,094,171     181,598,906     188,390,805
  Accrued interest receivable              2,210,909      2,210,909       2,445,164       2,445,164

Financial liabilities
  Deposits                              $266,460,521   $268,140,263    $260,689,757    $261,978,797
  Short-term borrowings                    3,775,000      3,775,000      17,850,000      17,850,000
  Accrued interest payable                 1,287,472      1,287,472       1,340,412       1,340,412
  Long-term borrowings                    10,000,000     10,068,773            -               -
----------------------------------------------------------------------------------------------------
</TABLE>


(At this point the following two paragraphs occupy the first two columns 
and begin directly under the preceding table about two-thirds
of the way down the page. The table appears at the bottom of the page and
occupies the second and third columns of a three-column page.)


15.  Related Party Transactions

Some of the corporation's or the bank's directors, principal officers,
principal  shareholders, and their related interests had  transactions  with
the  bank  in  the ordinary course of business during 1998.  All  loans  and
commitments  to  loans in such transactions were made on  substantially  the
same terms, including collateral and interest rates, as those prevailing  at
the  time for comparable transactions.  In the opinion of management,  these
transactions  do  not  involve more than normal risk  of  collectibility  or
present  other  unfavorable features.  It is anticipated that  further  such
extensions  of credit will be made in the future.  The aggregate  amount  of
credit  extended to these directors and principal officers was approximately
$941,275 and $631,928 at December 31, 1998 and 1997.

The  following  is  an analysis of loans to those parties  whose  loan
balances exceeded $60,000 for the years ended December 31:



<TABLE>
<CAPTION>
                                               1998               1997
--------------------------------------------------------------------------
      <S>                                 <C>
      Balances at January 31,             $  527,254          $1,055,482
      Advances                               730,758             144,516
      Repayments                            (516,355)           (672,744)
--------------------------------------------------------------------------
      Balances at December 31,            $  741,657          $  527,524
                                          ===========         ===========

</TABLE>

(At this point the following text is back to three-column format 
beginning at the third column.)


16.  Capital Requirements and Dividend Restrictions

The corporation and the bank are subject to various regulatory capital
requirements administered by the federal banking agencies.  Failure to  meet
minimum  capital  requirements can initiate certain mandatory  and  possibly
additional  discretionary, actions by regulators that, if undertaken,  could
have  a  direct  material effect on the consolidated  financial  statements.
Under  capital adequacy guidelines and the regulatory framework  for  prompt
corrective  action, the corporation and the bank must meet specific  capital
guidelines  that  involve quantitative measures of the assets,  liabilities
and   certain   off-balance-sheet  items  as  calculated  under   regulatory
accounting  practices.   The  capital amounts and  classification  are  also
subject  to  qualitative judgments by the regulators about components,  risk
weighting and other factors.

Quantitative  measures  established by regulation  to  ensure  capital
adequacy require the maintenance of minimum amounts and ratios (set forth in
the  tables  below)  of  total  and  Tier  I  capital  (as  defined  in  the
regulations) to risk-weighted assets (as defined), and of Tier I Capital 
(as defined). Management believes,  as of  December  31, 1998, that the
corporation and the bank meet  all  capital adequacy requirements to which 
they are subject.

As  of  December  31,  1998,  the most recent  notification  from  the
regulatory  agencies   categorized the  bank  as  well capitalized under 
the regulatory framework for prompt corrective action.  To be  categorized
as well capitalized the corporation and  the  bank  must maintain minimum
total risk-based, Tier I risk-based and Tier I leverage ratios as set forth
in the table. There are no conditions or events since those notifications 
that management believes have changed those categories.

<PAGE>

<TABLE>
<CAPTION>
                                                                                            To Be Well Capitalized
                                                                       For Capital               Under Prompt
                                                Actual              Adequacy Purposes    Corrective Action Provisions:   
----------------------------------------------------------------------------------------------------------------------
                                             Amount     Ratio       Amount      Ratio        Amount        Ratio
----------------------------------------------------------------------------------------------------------------------

                                                                  As of December 31, 1998:
----------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>       <C>            <C>        <C>           <C>
Total Capital (to Risk Weighted Assets)

  Commercial National Financial Corp.        $43,247,180  23.1%     $15,007,898    >8.0%
  Commercial National Bank                    43,258,545  23.1%      15,006,498    >8.0%       18,758,122   >10.0%
----------------------------------------------------------------------------------------------------------------------
Tier I Capital (To Risk Weighted Assets)

  Commercial National Financial Corp.         41,333,006  22.0%       7,503,949    >4.0%
  Commercial National Bank                    41,344,371  22.0%       7,503,249    >4.0%       11,254,873   >6.0%
----------------------------------------------------------------------------------------------------------------------
Tier I Capital (to Average Assets)

  Commercial National Financial Corp.         41,333,006  12.8%      12,950,394    >4.0%
  Commercial National Bank                    41,344,371  12.8%      12,950,262    >4.0%       16,187,827   >5.0%
----------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                  As of December 31, 1997:
----------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>       <C>            <C>        <C>           <C> 
Total Capital (to Risk Weighted Assets)

  Commercial National Financial Corp.        $40,086,371  21.7%     $14,779,213    >8.0%
  Commercial National Bank                    40,070,753  21.7%      14,780,286    >8.0%       18,475,358   >10.0%
----------------------------------------------------------------------------------------------------------------------
Tier I Capital (to Risk Weighted Assets)

  Commercial National Financial Corp.         38,204,120  20.7%       7,389,606    >4.0%
  Commercial National Bank                    38,188,502  20.7%       7,390,143    >4.0%       11,085,215   >6.0%
-----------------------------------------------------------------------------------------------------------------------
Tier I Capital (to Average Assets)

  Commercial National Financial Corp.         38,204,120  12.4%      12,345,867    >4.0%
  Commercial National Bank                    38,188,502  12.4%      12,346,264    >4.0%       15,432,830   >5.0%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>


(At this point the following text occupies two columns of the three column 
format. It begins in the first column a little more than three-quarters of
the way down the page.)


The  amount  of funds available to a parent from its subsidiary  bank  is
limited for all national banks by restrictions imposed by the Comptroller of
the  Currency.   Dividends  from  the bank were  restricted  not  to  exceed
$11,350,350 at December 31, 1998.  These restrictions have  not had, and are
not expected to have, a significant impact on the corporation's ability to 
meet its cash obligations.

<PAGE>


17. Condensed Financial Information fo Commercial National Financial Corporation
    (Parent Only)

<TABLE>
Balance Sheets
-----------------------------------------------------------------------
<CAPTION>
                                                   December 31,
                                                1998          1997
                                           ----------------------------
    <S>                                    <C>            <C>
    Assets:
     Cash                                  $      6,441   $     62,524
     Investment in subsidiaries              43,193,014     38,429,394
-----------------------------------------------------------------------
                                           $ 43,199,455   $ 38,491,918
                                            ===========    ===========  
    Liabilities and shareholders' equity:
     Accounts payable                      $     37,806   $     46,907
     Shareholders' equity                    43,161,649     38,445,011
-----------------------------------------------------------------------
                                           $ 43,199,455   $ 38,491,918
                                            ===========    ===========  
</TABLE>

<TABLE>
Statements of Income and Changes in Retained Earnings
------------------------------------------------------------------------
<CAPTION>
                                                              Years Ended December 31,
                                                    ------------------------------------------
                                                        1998           1997           1996
  <S>                                              <C>            <C>            <C>
  Dividends and fees from subsidiaries             $  1,582,000   $  1,380,000   $  1,194,000
  Expenses                                              109,997         78,824        120,051
                                                    ------------------------------------------
                                                      1,472,003      1,301,176      1,073,949
  Applicable tax benefit                                 13,014        (14,000)        16,331
                                                    ------------------------------------------
                                                      1,485,017      1,287,176      1,090,280
  Equity in undistributed earnings of subsidiaries    3,155,869      2,799,433      2,666,186
                                                    ------------------------------------------  
  Net income                                          4,640,886      4,086,609      3,756,466
  Retained earnings January 1,                       34,604,120     31,777,511     29,143,045
  Dividends paid                                     (1,512,000)    (1,260,000)    (1,122,000)
  Stock split                                        (3,600,000)          -              -
                                                    ------------------------------------------
  Retained earnings December 31,                    $34,133,006    $34,604,120    $31,777,511
                                                     ==========     ==========     ==========
</TABLE>

<TABLE>
Statements of Cash Flows
<CAPTION>
                                                                Years Ended December 31,
                                                         -------------------------------------
                                                            1998         1997          1996
----------------------------------------------------------------------------------------------
 <S>                                                    <C>          <C>          <C>
 Operating activities:
 Net income                                             $ 4,640,886  $ 4,086,609  $  3,756,466
 Adjustments to reconcile net income to
   net cash provided by operating activities:
     Equity in undistributed earnings of subsidiaries    (3,155,869)  (2,799,433)   (2,666,186)
     Increase (decrease) in accounts payable                 (9,100)      29,344       (10,438)
                                                         --------------------------------------
 Net cash provided by operating activities                1,475,917    1,316,520     1,079,842
                                                         --------------------------------------
 Investing activities:
   Investment subsidiary                                    (20,000)        -             -

 Financing activities:
   Dividends paid                                        (1,512,000)  (1,260,000)   (1,122,000)
                                                         --------------------------------------
 Net increase (decrease) in cash                            (56,083)      56,520       (42,158)
 Cash at beginning of year                                   62,524        6,004        48,162
                                                         --------------------------------------
 Cash at end of year                                    $     6,441   $   62,524    $    6,004
                                                        ===========   ==========    ==========
</TABLE>

<PAGE>

(At this point, the following text is in the second and third columns of the
three-column format. The address to the Board and shareholders is located
at the top of first column.)

Board of Directors and Shareholders
Commercial National Financial Corporation and Subsidiaries
Latrobe, PA 

Report of Stokes Kelly & Hinds, LLC  Independent Certified Public Accountants
--------------------------------------------------------------------------
We have audited the accompanying consolidated balance sheets of Commercial
National Financial Corporation and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, changes in share-
holders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. These consolidated financial statements are the 
responsibility of the corporation's management. Our responsibility is to 
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the 
consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Commercial National Financial Corporation and subsidiaries as of 
December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting
principles.

/s/ Stokes Kelly & Hinds, LLC
January 27, 1999
Pittsburg, Pennsylvania

Logo

Stokes Kelly & Hinds, LLC
Certified Public Accountants & Business Advisors


Management's Statement on Financial Reporting 
---------------------------------------------

The management of Commercial National Financial Corporation and its 
subsidiaries, Commercial National Bank of Westmoreland County and 
Commercial National Investment Corporation, are responsible for the 
preparation, content and integrity of the financial statements 
contained in this annual report and all other information in the other
sections of the annual report, including amounts that must necessarily
be based on management's judgements and estimates. Management believes
that the financial statements have been prepared in conformity with 
generally accepted accounting principles applied on a consistent basis 
to reflect, in all respects, the substance of events and transactions 
that should be included, and that the other information in the annual 
report is consistent with those financial statements. In meeting its 
responsibility for the reliability of the financial statements, 
management depends upon the bank's accounting system and related 
internal accounting controls. This system is designed to provide 
reasonable assurance that assets are safeguarded and that transactions
are properly recorded and executed in accordance with management's 
authorization. This system is augmented by written policies and 
procedures and by examinations performed by our internal audit staff 
which reports to the Board of Directors through the Board's Audit Committee.

The appointment of the independent certified public accountants for 
the corporation and its subsidiaries is recommended by the Audit
Committee, approved by the Board of Directors and ratified by 
the shareholders of the corporation. The Audit Committee, composed
solely of outside directors, meets on a scheduled basis with the 
internal auditors and, as requested, with the independent auditors
to discuss and review the scope and findings of their respective
audits. The independent auditors and the internal auditors each 
have full access to the Audit Committee, without management present,
to discuss internal accounting control, accounting, auditing and
financial reporting matters.

<PAGE>

Commercial National Financial Corporation and Subsidiaries
Quarterly Summary of Financial Data (Unaudited)
----------------------------------------------------------------

The unaudited quarterly results of operations for the years ended 
December 31, 1998 and December 31, 1997 are  as follows:

<TABLE>
<CAPTION>
                                                          1998
                                      ----------------------------------------------
                                        First      Second       Third       Fourth
                                       Quarter     Quarter      Quarter     Quarter
------------------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>         <C>
Interest income                       $5,926,333  $5,901,234  $5,831,114  $6,008,411
Interest expense                       2,642,444   2,564,825   2,551,856   2,559,456
                                       ---------------------------------------------
  Net interest income                  3,283,889   3,336,409   3,279,258   3,448,955

Provision for loan losses                 90,000     105,000     120,000     120,000 
                                       ---------------------------------------------
  Net interest income after
  provision for loan losses            3,193,889   3,231,409   3,159,258   3,328,955

Other income (including security
   transactions)                         458,511     408,110     433,118     433,351

Other expenses                         2,090,072   2,136,342   2,159,940   2,154,290
                                       ---------------------------------------------  
  Income before taxes                  1,562,328   1,503,177   1,432,436   1,608,016
Applicable income taxes                  382,000     355,000     336,000     392,071
------------------------------------------------------------------------------------
  Net income                          $1,180,328  $1,148,177  $1,096,436  $1,215,945
                                       =========   =========   =========   =========
Earnings per share                    $      .33  $      .32  $      .30  $      .34
                                       =========   =========   =========   =========
</TABLE>


<TABLE>
<CAPTION>
                                                          1997
                                       ---------------------------------------------  
                                        First      Second       Third      Fourth
                                       Quarter     Quarter     Quarter     Quarter
------------------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>         <C>
Interest income                       $5,142,007  $5,433,657  $5,525,009  $5,781,219
Interest expense                       2,223,218   2,366,278   2,487,579   2,600,063
                                       ---------------------------------------------
  Net interest income                  2,918,789   3,067,379   3,037,430   3,181,156

Provision for loan losses                 45,000      60,000      75,000      90,000
                                       ---------------------------------------------
  Net interest income after
  provision for loan losses            2,873,789   3,007,379   2,962,430   3,091,156

Other income (including security
  transactions)                          342,300     385,032     383,687     378,050

Other expenses                         2,040,982   2,022,832   1,914,980   2,084,643
                                       ---------------------------------------------
  Income before taxes                  1,175,107   1,369,579   1,431,137   1,384,563
Applicable income taxes                  284,000     327,000     347,000     315,777
------------------------------------------------------------------------------------
  Net income                          $  891,107  $1,042,579  $1,084,137  $1,068,786
                                       =========   =========   =========   =========
Earnings per share                    $      .25  $      .29  $      .30  $      .30
                                       =========   =========   =========   =========
</TABLE>


(At this point, the text is located in the lefthand column about three
quarters down the page. A table appears to the right of the text 
occupying the second and third columns.)


Common Stock Information

The  following table sets forth the high and low sales prices for 
the  common stock,  as  reported on The Nasdaq Stock Market, Inc. 
and the cash  dividends declared per share on the common stock for
the periods indicated.

Commmercial National Financial Corporation stock is traded in the 
over-the-counter market on  The Nasdaq Stock Market, Inc., under
the trading symbol "CNAF" with an additional descriptive listing of
"CmclNat."

<TABLE>
<CAPTION>
                                                          Cash Dividend
1998                              High         Low          Per Share
------------------------------------------------------------------------
<S>                              <C>         <C>             <C>
First Quarter                    $19.25      $17.75          $ .10
Second Quarter                    19.375      18.50            .10
Third Quarter                     20.125      18.50            .11
Fourth Quarter                    21.00       18.375           .11
</TABLE>

<TABLE>
<CAPTION>
1997
------------------------------------------------------------------------
<S>                              <C>         <C>             <C>
First Quarter                    $18.50      $17.00          $ .08
Second Quarter                    18.50       17.25            .09
Third Quarter                     18.50       17.25            .09
Fourth Quarter                    18.50       17.625           .09

</TABLE>

<PAGE>

Commercial National Financial Corporation and Subsidiaries
----------------------------------------------------------

Selected Financial Data
-----------------------
                                      
The following financial information is not covered by the auditor's report
and must be read in conjunction with the consolidated financial statements
and related notes along with management's discussion and analysis of 
financial condition and results of operations.
<TABLE>
<CAPTION>                                      
                                                               Years Ended December 31
                                         -------------------------------------------------------------------
                                            1998          1997          1996           1995           1994
-------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>           <C>             <C>
Interest Income
  Interest and fees on loans           $ 16,755,493  $ 15,312,410  $ 13,549,080  $  12,843,170   $ 11,250,168
  Interest and dividends on securities    6,862,194     6,521,952     6,305,557      6,138,993      5,807,222
  Interest on money market investments       49,405        47,530        92,930        240,311        326,188
-------------------------------------------------------------------------------------------------------------
Total interest income                    23,667,092    21,881,892    19,947,567     19,222,474     17,383,578
Interest Expense
  Deposits                                9,537,002     9,388,643     8,394,110      8,251,854      6,444,799
  Short-term borrowings                     493,784       288,495        51,016            365           -
  Long-term borrowings                      287,795          -             -              -              -  
-------------------------------------------------------------------------------------------------------------
Total Interest Expense                   10,318,581     9,677,138     8,445,126      8,252,219      6,444,799
-------------------------------------------------------------------------------------------------------------
Net interest income                      13,348,511    12,204,754    11,502,441     10,970,255     10,938,779
Provision for loan losses                   435,000       270,000       105,000         90,000        180,000
-------------------------------------------------------------------------------------------------------------
Net interest income after provision
   for loan losses                       12,913,511    11,934,754    11,397,441     10,880,255     10,758,779
Other operating income                    1,733,090     1,489,069     1,256,190      1,112,942      1,015,791
Other operating expenses                  8,540,644     8,063,437     7,644,576      7,046,171      7,138,659
-------------------------------------------------------------------------------------------------------------
Income before taxes                       6,105,957     5,360,386     5,009,055      4,947,026      4,635,911
Applicable income taxes                   1,465,071     1,273,777     1,252,589      1,253,833      1,150,991
-------------------------------------------------------------------------------------------------------------
Net income                             $  4,640,886  $  4,086,609  $  3,756,466   $  3,693,193   $  3,484,920
                                       ============  ============  ============   ============   ============
Per Share Data
  Net income                           $       1.29  $       1.14  $       1.04   $       1.03   $        .97
  Dividends declared                   $        .42  $        .35  $        .31   $        .28   $        .27
  Average shares outstanding (a)          3,600,000     3,600,000     3,600,000      3,600,000      3,600,000


At End of Period
  Total assets                         $326,379,353  $319,741,956  $278,110,524   $266,176,018   $251,141,709
  Securities                            119,103,480   118,382,089   102,355,972    103,480,616     96,675,122
  Loans and leases, net of
    unearned income                     192,115,160   183,481,157   159,935,523    144,288,002    139,066,657
  Allowance for loan losses               1,914,174     1,882,251     2,035,818      2,081,700      2,077,553
  Deposits                              266,460,521   260,689,757   238,808,071    230,736,311    219,560,923
  Shareholders' equity                   43,161,649    38,445,011    35,388,254     33,036,470     29,556,943

Key Ratios
  Return on average assets                     1.46%         1.39%         1.39%          1.43%          1.42%
  Return on average equity                    11.47         11.14         11.02          11.80          12.15
  Net loan-to-deposit ratio                   71.38         69.66         66.12          61.63          62.39
  Dividend payout ratio (dividends
    declared divided by net income)           32.58         30.83         29.87          27.29          27.55
  Equity-to-assets ratio (average equity
    divided by average total assets)          12.72         12.47         12.64          12.13          11.72%
</TABLE>

[FN]
(a)  Retroactively adjusted for a two-for-one stock split in the form of a
     dividend declared in November 1998.

<PAGE>

Commercial National Financial Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
   
(At this point, the following text occupies the first and second columns
of the three column text. The third column is blank.)


  INTRODUCTION
  
  The purpose of this discussion and the accompanying financial data is to
  provide aid in understanding and evaluating the financial condition and
  results of operations of Commercial National Financial Corporation (the
  corporation) for the years ending on December 31, 1998, 1997 and 1996.
  This information should be read in conjunction with the consolidated
  financial statements and related footnotes for the years under review.
  
  In November 1998, the Board of Directors authorized a two-for-one stock
  split effected in the form of a stock dividend to shareholders of record
  as of December 15, 1998.  All per share data has been restated to allow
  meaningful comparison with prior periods.
  
  All material intercompany transactions have been eliminated in
  consolidation.
  
  RESULTS OF OPERATIONS
  
  Net income for 1998 was $4,640,886, compared to $4,086,609 in 1997 and
  $3,756,466 in 1996. Earnings per share were $1.29 in 1998 compared to
  1997's earnings of $1.14 per share. In 1996, earnings per share were
  $1.04.
  
  Return on average assets was 1.46% in 1998, 1.39% in 1997 and 1.39% in
  1996. For the same years return on average equity was 11.47%, 11.14% and
  11.02%, respectively.
  
  NET INTEREST INCOME
  
  The largest segment of earnings is represented by net interest income
  which is calculated by deducting the interest paid on interest-bearing
  liabilities from the interest received on interest-earning assets. In
  1998, net interest income was $13,348,511 compared  to $12,204,754 in 1997
  and $11,502,441 in 1996.
  
  Average earning assets grew $20,956,507 in 1998, $23,235,041 in 1997 and
  $10,364,280 in 1996. Average interest-bearing liabilities increased
  $15,869,057 in 1998, $20,639,642 in 1997 and $7,908,162 in 1996. The return
  on earning assets, calculated on a tax-equivalent basis, equaled 8.20% in
  1998 compared to 8.14% in 1997 and 8.06% in 1996. The cost-of-funds rate
  was 4.35% in 1998, 4.36% in 1997 and 4.21% in 1996.  The tax-equivalent
  net interest margin was 4.78% in 1998, 4.69% in 1997 and 4.77% in 1996.
  

<PAGE>
<TABLE>
                                                                    Financial  Comparisons
                                               Consolidated Average Balance Sheet, Interest Income/Expense and Rates
<CAPTION>
                                              1998                              1997                             1996
  
                                             Interest                          Interest                         Interest
                                  Average    Income/   Yield or   Average      Income/    Yield or  Average     Income/     Yield oR
                                  Balance    Expense   Rate(a)    Balance      Expense    Rate(a)   Balance     Expense     Rate(a)
--------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>         <C>     <C>           <C>          <C>    <C>           <C>          <C>
Interest-earning Assets 

  Loans(b)(c) net of
     unearned income           $186,418,665 $16,755,493  9.03%  $169,849,234  $15,312,410  9.06%  $151,056,637  $13,549,080  9.01%
  Taxable securities             77,380,692   4,967,679  6.42     77,615,939    4,827,530  6.22     78,491,319    4,914,451  6.26
  Non-taxable securities         36,888,885   1,894,515  7.78     32,285,316    1,694,422  7.95     26,118,891    1,391,106  8.07
  Interest-bearing deposits 
     with banks                     108,280       7,858  7.26        110,211        7,167  6.50        127,222        6,252  4.91
  Federal funds sold                758,904      41,547  5.47        738,219       40,363  5.47      1,569,809       86,678  5.52
---------------------------------------------------------------------------------------------------------------------------------
Total earning assets            301,555,426  23,667,092  8.20    280,598,919   21,881,892  8.14    257,363,878   19,947,567  8.06

Non-interest-earning Assets
  Cash                            7,027,443                        6,572,767                         6,182,888
  Allowance for loan losses      (1,876,326)                      (1,950,574)                       (2,080,108)
  Other assets                   11,117,942                        9,039,928                         8,241,254
-----------------------------------------------------------------------------------------------------------------------------------
Total non-interest-
     earning assets              16,269,059                       13,662,121                        12,344,034
-----------------------------------------------------------------------------------------------------------------------------------
Total assets                   $317,824,485                     $294,261,040                      $269,707,912
                               ============                     ============                      ============

Liabilities and Shareholders' Equity

Interest-bearing Deposits
  NOW accounts                 $ 20,709,992     350,081  1.69%  $ 20,204,634     386,186  1.91%   $ 18,110,581     353,404   1.95
  Money Market accounts          41,921,741   1,630,147  3.89     42,542,349   1,732,133  4.07      39,754,528   1,506,643   3.79
  Savings deposits               45,672,055   1,337,385  2.93     44,871,628   1,387,360  3.09      44,744,695   1,357,140   3.03
  Time deposits                 112,647,588   6,085,057  5.40    108,744,105   5,882,964  5.41      97,004,511   5,176,923   5.34
  Short-term borrowings          10,976,287     628,116  5.72      4,819,178     288,495  5.99         927,937      51,016   5.50
  Long-term borrowings            5,123,288     287,795  5.62           -           -      -              -           -       -
----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
  liabilities                   237,050,951  10,318,581  4.35    221,181,894   9,677,138  4.36     200,542,252   8,445,126   4.21

Non-Interest-bearing Liabilities and Capital

  Non-interest-bearing deposits  37,565,870                       34,124,049                        32,920,490
  Other liabilities               2,756,896                        2,255,578                         2,156,953
  Shareholders' equity           40,450,768                       36,699,519                        34,088,217
----------------------------------------------------------------------------------------------------------------------------------
Total non-interest-bearing
  funding sources                80,773,534                       73,079,146                        69,165,650
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
  shareholders' equity         $317,824,485                     $294,261,040                      $269,707,912
                                ===========                      ===========                       ===========
Net Interest Income and 
Net Yield on Interest-
earning Assets                              $13,348,511  4.78%                 $12,204,754  4.69%                $11,502,441   4.77%
                                            ===========                        ===========                       ===========     
</TABLE>

[FN]
(a) Yields on interest earning assets have been computed on a tax-equivalent 
    basis using the 34% federal income tax statutory rate.
(b) Income on non-accrual loans is accounted for on the cash basis, and
    the loan balances are included in interest earning assets.
(c) Loan income includes net loan fees.

<PAGE>

Commercial National Financial Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
------------------------------------------------------------

(At this point, a table appears at the top and occupies the first third
of the page.)

The following table illustrates the impact and interaction of rate and 
volume changes for the years under review:


<TABLE>
                                                   Analysis of Year-to-Year Changes in Net Interest Income
                                        -----------------------------------------------------------------------------
                                              1998 Change from 1997                   1997 Change from 1996
                                        -----------------------------------------------------------------------------
<CAPTION>
                                          Total      Change Due   Change Due      Total       Change Due   Change Due
                                          Change     to Volume      to Rate       Change      to Volume      to Rate
--------------------------------------------------------------------------------------------------------------------- 
<S>                                    <C>          <C>          <C>            <C>          <C>          <C>
Interest-earning Assets
Loans net of unearned income           $1,443,083   $1,493,783   $  (50,700)    $1,763,330   $1,685,609   $   77,721 
Securities
  Taxable                                 140,149      (14,632)     154,781        (86,921)     (54,809)     (32,112)
  Non-taxable                             200,093      241,608      (41,515)       303,316      328,427      (25,111)
Interest-bearing deposits with banks          691         (126)         817            915         (836)       1,751
Federal funds sold                          1,184        1,131           53        (46,315)     (45,917)        (398)
---------------------------------------------------------------------------------------------------------------------
Total interest income                   1,785,200    1,721,764       63,436      1,934,325    1,912,474       21,851 


Interest-bearing Liabilities
Deposits                                   14,027      199,116     (185,089)       994,533      704,298      290,235 
Short-term borrowings                     339,621      368,589      (28,968)       237,479      213,932       23,547
Long-term debt                            287,795         -         287,795           -            -            -
---------------------------------------------------------------------------------------------------------------------
Total interest expense                    641,443      567,705       73,738      1,232,012      918,230      313,782 
---------------------------------------------------------------------------------------------------------------------
Net interest income                    $1,143,757   $1,154,059    $ (10,302)    $  702,313   $  994,244   $ (291,931)
                                       ==========   ==========    =========     ==========   ==========   ===========
          
</TABLE>

[FN]
Included in interest income are loan fees of $305,826 in 1998,
$212,453 in 1997 and $227,189 in 1996.
     

(At this point, the following text reverts back to three-column format.)

     
The  provision  for  loan  losses  is  the  amount  added  to
the allowance against which actual loan losses are charged. The
amount of the provision is determined by an analysis of the
loan portfolio's size, quality and risk potential as compared
to the size of the allowance itself. The amount of the provision
was $435,000 in 1998, $270,000 in 1997 and $105,000 in 1996.
For each of the same years the net charge-off against the
allowance for loan losses was $403,077, $423,567 and $150,882,
respectively.  On  December  31,  1998  the  allowance  for 
loan losses equaled 1.00% of total loans compared to 1.03% at
the end of 1997 and 1.27% at the end of 1996. Loans which were
past due 90 days or more, or were on non-accrual equaled 0.22%
of total loans on December 31, 1998, 0.89% on December 31,
1997 and 0.08% on December 31, 1996. The corporation's policy
is to place loans on a non-accrual basis when they become 90
days past due provided that the loan is well collateralized
and gives evidence of a reasonable likelihood for full
collection. During the review of the loan portfolio,
management did not note any trends such as industry
uncertainties which raise concerns regarding future adverse
impact on operating results, liquidity or capital resources.
    
NON-INTEREST INCOME AND EXPENSE
In 1998, total non-interest income increased $244,021 to
$1,733,090 from $1,489,069 in 1997. Asset management and trust
income grew $75,988 to $240,418. Service charges on deposit
accounts increased $12,659 to $584,783. Other service charges
and fees increased by $148,198 to $530,530. This increase is
mainly attributable to ATM and debit card revenues. Net gains
on sold and called investments amounted to $10,113. Other income
increased by $8,624 to $367,246. In 1996, total non-interest
income was $1,256,190.
     
Non-interest expense in 1998 was $8,540,644. This represented
an increase of $477,207 over 1997's non-interest expense which
totaled $8,063,437. The major area contributing to this
increase was personnel expense which rose $219,500. Coupled with 
personnel expense was an increase in other operating expense of
$183,442. The large increases in the aforementioned items were
moderated somewhat by smaller increases in the following item.
Net occupancy expense increased $61,323 and furniture and 
equipment expense declined slightly by $15,468. Pennsylvania
shares tax increased $28,410 over 1997. Non-interest expense 
in 1996 was $7,644,576.
    
Income tax expense was $1,465,071 in 1998, $1,273,777 in 1997
and $1,252,589 in 1996. The effective tax rate was 23.99%,
23.76% and 25.01%, respectively. The corporation's sizeable
municipal bond holdings continued to favorably influence
income tax expense levels.
     
LIQUIDITY
Liquidity measurements attempt to evaluate the corporation's
ability to meet the cash-flow needs of its depositors and
borrowers. The primary source of liquidity is deposit growth.
Additional liquidity is provided by the maturity of
investments in loans and securities and the interest received
from those earning assets. Another source of liquidity is
represented by the corporation's ability to sell both loans
and available for sale securities. Supplemental external
funding sources have been established and are available to
meet both short- and long-term funding needs.

<PAGE>

(At this point in the 1998 annual report, the following text
is still in three-column format but only occupies the top
third of the page. The remaining page is depicts two tables 
that will be described later in this page.)


On December 31, 1998, total deposits were $5,770,764 greater
than on December 31, 1997. Interest-bearing deposits decreased
$2,779,308  in  1998  while  demand  deposits  increased
$8,550,072. The decrease in interest bearing deposits was 
attributed to the unattractiveness of deposit rates in this
year's declining rate environment and competition from nonbank
financial service companies.
   
During the same period, total loans, net of unearned income, grew
by $8,634,003. Competition for high-quality loans remained intense
throughout 1998. Real-estate secured commercial loan products had
strong growth in 1998 while commercial loans also posted significant
increases from year-end 1997.
     
The amortized cost of the corporation's securities portfolio decreased
$1,684,292 and was $116,332,810 on December 31, 1998. On that same 
date, the estimated market value of the entire securities portfolio was 
$119,103,480 which was higher than amortized cost by $2,770,670 and
represented the net of $2,773,764 gross unrealized gains less $3,094
gross unrealized losses. On December 31, 1998 the amount of securities
which would reach maturity within one year was $15,468,716 as compared
to $12,159,462 at the end of the previous year.

The following tables present a five-year summary of loan classifications
and the maturity distribution of securities at December 31, 1998.

<TABLE>
<CAPTION>
                                                                       Loans by Classification on December 31,
------------------------------------------------------------------------------------------------------------------------------
                                        1998                1997               1996               1995                1994
                               -----------------------------------------------------------------------------------------------
                                            Per                 Per                Per                Per                 Per
                                  Amount    Cent      Amount    Cent    Amount     Cent     Amount    Cent      Amount    Cent
------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>    <C>          <C>   <C>          <C>   <C>          <C>    <C>          <C>
Commercial                     $ 20,893,911  11%   $ 19,052,486  10%  $ 17,115,404  11%  $ 14,494,356  10%   $  9,794,172   7%
Real estate - commercial         52,165,384  27      44,289,723  24     33,437,360  21     32,460,803  23      32,108,097  23
Real estate - construction        2,754,964   1       3,510,809   2      1,924,619   1      1,523,490   1       1,637,794   1
Real estate - other              96,210,304  50      95,570,632  52     86,045,874  54     79,910,652  55      80,702,169  58
Consumer - installment            5,388,246   3       6,219,577   4      6,542,365   4      4,803,258   3       5,535,248   4
Municipal                         3,757,563   2       3,340,405   2      3,183,483   2      1,332,403   1       1,350,655   1
Other                            11,068,877   6      11,655,453   6     11,799,130   7      9,998,413   7       8,238,730   6
------------------------------------------------------------------------------------------------------------------------------
Total loans                    $192,239,249 100%   $183,639,085 100%  $160,048,235 100%  $144,523,755 100%   $139,366,865 100%
Unearned Income                    (124,089)           (157,928)          (112,712)          (235,373)           (300,208)
------------------------------------------------------------------------------------------------------------------------------
Total loans,
net of unearned income         $192,115,160        $183,481,157       $159,935,523       $144,288,002        $139,066,657  
                                ===========         ===========        ===========        ===========         =========== 

</TABLE>



<TABLE>
                                    Maturity Distribution of Securities on December 31, 1998
<CAPTION>
                         U.S. Treasury          State &                             Total      Weighted
                         & other U.S. Govt.     Political           Other         Amortized    Average
                         Agencies & Corp.       Subdivisions(1)   Securities        Cost        Yield
-------------------------------------------------------------------------------------------------------
<S>                         <C>                  <C>                <C>         <C>               <C>
Within 1 year               $15,063,657          $   405,059        $     -     $ 15,468,716     5.96%
After 1 but within 5 years   23,305,834           12,612,313              -       35,918,147     7.17
After 5 but within 10 years   8,131,215           21,144,293              -       29,275,508     7.40
After 10 years               30,980,917            2,292,922              -       33,273,839     6.92
No fixed maturity                  -                    -            2,396,600     2,396,600     6.19
-------------------------------------------------------------------------------------------------------
                            $77,481,623          $36,454,587        $2,396,600  $116,332,810     6.98%
                            ===========          ===========        ==========  ============     ===== 

</TABLE>

[FN]
(1) Yield on tax-exempt obligations has been computed on a fully
    tax-equivalent basis (using statutory federal income tax rate of 34%)

<PAGE>

Commercial National Financial Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition and 
Results of Operations
--------------------------------------------------------------------
(At this point in the 1998 annual report, the following text is in
three-column format occupying top quarter of the page followed by a
table that occupies the full three columns.)


INTEREST SENSITIVITY
One of the desired goals of investment management is to
achieve a balance between the need for consistent income
growth and the risks inherent in achieving a portion of
that income through managed maturity imbalances between
interest-earning assets and interest-bearing liabilities.
These relationships are generally so complex that exact
measurement of the impact of interest rate changes is
virtually impossible. However, an indication of an
institution's vulnerability to such changes can be roughly
gauged through the measurement and analysis of the so-
called "gap" or the difference between the dollar volumes
of assets and liabilities eligible for repricing within a
variety of time periods. When the amount of the assets so
defined is greater than the liabilities, the gap is labeled
positive and the institution's interest rate spread will
widen and earnings will respond favorably to a general rise
in interest rates. The opposite relationship produces a
negative gap and the interest rate spread will increase and
earnings will show a favorable response in a declining rate
environment.
     
<TABLE>

                                           Interest Sensitivity Analysis (In Thousands)
<CAPTION>
                           0-30 Days  31-90 Days  91-180 Days  181-365 Days     1-5 Yrs    Over 5 Yrs
------------------------------------------------------------------------------------------------------
<S>                        <C>        <C>         <C>            <C>          <C>          <C> 
Interest-earning Assets:
  Securities               $   2,185  $   3,486   $    6,909     $  9,999     $  36,367    $  54,989
  Federal funds sold and
   deposits with banks            68        -            -            -             -            -
  Loans                       43,241      3,041        6,363       12,557        73,531       53,375
------------------------------------------------------------------------------------------------------
Total interest-sensitive 
   assets                     45,494      6,527       13,272       22,556       109,898      108,364



Interest-bearing liabilities:
  Certificates of deposit      9,411     25,511       18,557       27,850        31,264          106
  Other interest-bearing 
    liabilities                 -         6,527        6,527       10,907        68,029       17,253
  Other borrowings             1,775      2,000         -            -           10,000         -
------------------------------------------------------------------------------------------------------
Total 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               $34,308   $  6,797     $ (5,015)    $(21,216)    $ (20,611)     $70,394
                             =======   =========    =========    =========    ==========     =======
Ratio of cumulative gap to
earning assets                 11.02%      2.18%      (1.61%)      (6.82%)       (6.62%)       22.62%
                             ========  =========    =========    =========    ==========     =======

</TABLE>

(At this point the text is back to three column format with a table 
included in the second column of the text.)

CREDIT REVIEW
Maintaining a high quality loan portfolio is of great importance to
the corporation. The corporation manages the risk characteristics of
the loan portfolio through the use of prudent lending policies and
procedures and monitors risk through a periodic review process
provided by internal auditors, regulatory authorities and our loan
review staff. These reviews include the analysis of credit quality,
diversification of industry, compliance to policies and procedures,
and an analysis of current economic conditions.
     
In the management of its credit portfolio, the corporation
emphasizes the importance of the collection of loans as well as
asset and earnings diversification. The corporation immediately
recognizes as a loss, all credits judged to be uncollectible and has
established an allowance for  loan  losses  that  may  exist  in the
loan portfolio at a point in time, but have not been specifically
identified.
    
For analytical purposes, the following table sets forth an
allocation of the allowance for loan losses on December 31,
1998 and December 31, 1997 according to the categories indicated:
     
<TABLE>
              Allocation of the Allowance for Loan Losses
                      (dollar amounts in thousands)
<CAPTION>
                                          1998      1997
    ----------------------------------------------------
    <S>                                 <C>       <C> 
    Commercial, Industrial, Financial,
       Agricultural and Tax Free        $  455    $  555

    Residential mortgages                   29       231

    Loans to individuals                   913       622

    Off-balance sheet items                114       138

    Year 2000                              190       141

    Unallocated                            213       195
                                        ----------------
    Total                               $1,914    $1,882
                                        ======    ======
    Reserve as a percentage
           of average total loans         1.03%     1.11%
                                        =======   =======
</TABLE>


CAPITAL RESOURCES
Shareholders' equity grew $4,716,638 during 1998 and was
$43,161,649 on December 31, 1998 compared to $38,445,011 on
December 31, 1997. Unrealized gains on securities available for
sale on December 31, 1998 temporarily increased shareholders'
equity by $1,828,643. The retained earnings retention rate was
67.42% in 1998 as compared to 69.17% in 1997.
  
The shareholders' equity or the capital base represents the
investment by the corporation's owners either initially or
through retention of earnings (net after income tax less
dividend payments). This investment acts as a safeguard against
future uncertainties. The amount of capital which is deemed
appropriate is dependent upon an assessment of the
corporation's total assets, the quality of its loans and
securities, its historical earnings record, its business
prospects for the near and long term, the management and

<PAGE>

At this point the whole page is in three column format.)

information systems in place and the general competence and
abilities of the corporation's management.
   
On December 31, 1998, the corporation's capital (not including
the  allowance  for  loan losses)  amounted  to  $43,161,649
or 13.22% of total assets. The inclusion of the allowance
increases the capital ratio to 13.81%. On the same basis of
calculation, these ratios were 12.02% and 12.61% respectively
on December 31, 1997.
     
The Federal Reserve Board's risk-based capital adequacy
standards are designed principally as a measure of credit risk.
These standards require that (1) at least 50% of total capital
must be common and certain other "core" equity capital (Tier I
Capital); (2) assets and off-balance sheet items must be
weighted according to risk; (3) the total capital to risk-
weighted asset ratio must be at least 8%; and (4) a minimum 4%
leverage ratio of Tier I Capital to average total assets must
be maintained. The final ruling on section 305 of the Federal
Deposit Insurance Corporation Improvement Act regarding
interest rate risk capital requirements indicates that although
no measures or capital charges are required presently, insured
financial institutions must still monitor their interest rate
risk position in conjunction with close supervision from the
appropriate regulatory agency.
     
As of December 31, 1998, the corporation had Tier I and total
equity capital to risk adjusted asset ratios of 22.03% and
23.05%, respectively. The leverage ratio was 12.77%. At
December 31, 1997, the corporation had Tier I and total equity
capital to risk adjusted assets ratios of 20.68% and 21.70%,
respectively.
     
     
     
     
     
<TABLE>
    The table below presents the corporation's capital position on December 31, 1997
                         (dollar amounts in thousands)
<CAPTION>
                                                        Percent
                                                      of Adjusted
                                      Amount             Assets
     -------------------------------------------------------------
     <S>                              <C>                 <C>
     Tier I capital                   41,333              22.03
     Tier I capital requirement        7,504               4.00

     Total equity capital             43,247              23.05
     Risk-based requirement           15,008               8.00
     -------------------------------------------------------------
     Leverage capital                 41,333              12.77
     Leverage requirement             12,950               4.00

</TABLE>


INFLATION AND CHANGING PRICES
Inflation can have significance to a banking institution
because of its implication for the interest rate environment
and its influence on personnel expenses and the costs of
supplies and materials needed for day to day operations.
Because such a large portion of the corporation's assets and
liabilities are represented by monetary investments,
inflationary impact tends to be dampened except for the
dislocation caused by maturity variances. Management efforts to
gauge and control these variables have been discussed earlier
under rate sensitivity. The inflationary effect on non-interest
expenses is monitored closely by management and consistent
attention is given to controlling these cost areas in an
attempt to limit their increase to levels which are lower than
the rate of asset growth.
     
ASSESSMENT OF FUTURE ENVIRONMENT
Management has not identified nor is aware of any internal
matter or external condition, including potential regulatory
recommendations, which could have a critical impact on the
corporation's ability to continue its present business
activities or adversely impair future operating results other
than the Year 2000 issue which will be discussed in further 
detail in the next section.

Certain interest rate movements will continue to influence
ongoing earnings levels. Even though the exact impact of these
factors cannot be predicted, the corporation believes that
given its financial strength and stability, it will be able to
meet these situations in a positive manner.

YEAR 2000
In 1997, the corporation's year 2000 committee was formed and
began and analysis of 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.
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 is 
currently completing the testing of all software regarding the
year 2000 issue. The corporation is primarily dependent upon
systems that have been developed by third parties and, therefore,
is dependent upon vendor compliance. The corporation has contingency
plans for all systems in place. These plans involve automated as
well as manual actions and may require additional staffing 
requirements.

Based on our assessment of the vendors and testing currently being
done, 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 out questionnaires to its commercial customers regarding the
potential effect that 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 year 2000 readiness.

(This page is left intentionally blank.)


<PAGE>

Commercial National Financial Corporation


CORPORATE OFFICERS
-------------------------------------------------------------------------
Louis A. Steiner           Chairman of the Board
Louis T. Steiner           Vice Chairman, President and Chief Executive Officer
Gregg E. Hunter            Vice Chairman and Chief Financial Officer
Wendy S. Schmucker         Vice President and Secretary/Treasurer
Ryan M. Glista             Vice President and Comptroller
Susan F. Robb              Assistant Secretary/Treasurer


CORPORATE DIRECTORS
-------------------------------------------------------------------------
John T. Babilya           Frank E. Jobe             Debra L. Spatola
President, C.E.O.         Retired,                  Vice President,
& Co-owner                former Executive Vice     Laurel Valley Foods, Inc.
Arc Weld, Inc.            President, Commercial    
                          National Bank of 
                          Westmoreland County

George A. Conti, Jr.      Roy M. Landers            Louis A. Steiner
Attorney at Law           Retired,                  Chairman of the Board
                          former Executive Vice     Commercial National Bank
                          President, R & L          of Westmoreland County
                          Development Co.

Richmond H. Ferguson      John C. McClatchey        Louis T. Steiner
Attorney at Law           Chief Executive Officer   Vice Chairman, President 
Ferguson Law              JCM Industries            and Chief Executive Officer
Associates                                          Commercial National Bank
                                                    of Westmoreland County

Dorothy S. Hunter         Joseph A. Mosso           George V. Welty
Vice President,           Retired, former           Attorney, Partner, 
Latrobe Foundry           President Mosso's         Flickinger & Welty
Machine & Supply Co.      Pharmacy Inc. 

Gregg E. Hunter           Joedda M. Sampson         C. Edward Wible
Vice Chairman and         President, Allegheny      Certified Public Accountant
Chief Financial Officer   City Resorations, Inc.    Horner Wible & Associates,
of Commercial National                              Certified Public Accountants
Bank of Westmoreland 
County                                       

                                       
All corporate directors also serve as directors of
Commercial National Bank of Westmoreland County
                                       
DIRECTORS EMERITUS
----------------------------------------------------------------------------
James A. Charley          William M. Charley        William W. Washnock


<PAGE>

Commercial National Bank of Westmoreland County
  
BANK OFFICERS
-----------------------------------------------------------------------------
Chairman of the Board                                 Louis A. Steiner
-----------------------------------------------
Vice Chairman/President/Chief Executive Officer       Louis T. Steiner
-----------------------------------------------
Vice Chairman/Chief Financial Officer                 Gregg E. Hunter
-----------------------------------------------


Senior Vice Presidents 
----------------------------------------------------------------------
Donna L. Belluchie        Martin E. May            Philip S. Pettina


Vice Presidents
----------------------------------------------------------------------
Ryan M. Glista            Michael L. Matthews      Keith M. Visconti
William N. Hamilton, Jr.  Michael J. Palko         Thomas D. Watters
Cheryl M. Letterio        Wendy S. Schmucker

Assistant Vice Presidents  
-----------------------------------------------------------------------
Karen E. Burick           Kelly R. Moreman         James T. Vaughan
Donna J. Daugherty        Marsha J. Salley         Rebecca J. Weiner
William J. Johnston       Thomas E. Sylvester*     Phyllis S. Yesh*

Community Office Managers
-------------------------------------------------------------------------
Douglas P. Arndt          Michael A. Schmidt       Jerome M. Supko
Linda A. Burns            Laura A. Steiner         Patricia L. Torrance
Debra Gras

Service Officers       
--------------------------------------------------------------------------
Lisa A. Ball              Judy A. Hoffer           Susan L. Roebuck
Mona A. Birt              Gina M. Kovatch          Elizabeth M. Rosa
Terrie L. Bowman          Jonna M. Kundla          Kristin Rossi
Eleanor A. Bridge         Dina M. Lauricia         Roxanne Shadron
Regina L. Calabrace       Sharon M. Lewis          Jennifer L. Sopcisak
Jennifer M. Chemski       Susan M. Matenkosky      John H. Sperandio
Judith J. Ciocco          Charles H. McDowell      Sean E. Swansboro
Karen J. Ciocco           Tiffany D. McMahon       Charles L. Taylor
Kathy S. Claycomb         Florence E. Pevarnik     Marilyn A. Tlumach
James V. Conforti         William W. Rice II       Cynthia M. Varner
Virginia E. Halucka       Susan F. Robb            Jodi L. Zyvith
H. Alan Hamill            Randi L. Robinson

[FN]
* also serve as community office manager

<PAGE>

COMMUNITY ADVISORY BOARDS
-------------------------------------------------------------------------------
Greensburg        Ligonier             Murrysville            West Newton

Patrick A. Love   Jean M. Case         Walter F. Baczkowski   Robert D. Austin
Barry W. Morris   W. Scott Clites      August I. Bondi        Linda L. Lunt
Edward J. Smith   John C. Horrell      Fred C. Honsberger     Dee M. Taylor 
                  Barry R. Shebeck     Leonard L. Poliziani   


BUSINESS LOCATIONS
-------------------------------------------------------------------------------

Corporate Headquarters      Latrobe                     Murrysville
900 Ligonier Street         900 Ligonier Street         4785 Old William Penn 
P.O. Box 429                P.O. Box 429                Highway
Latrobe, PA 15650           Latrobe, PA 15650           P.O. Box 4
724/539-3501                724/539-3501                Murrysville, PA 15668
724/539-0816 (Fax)          724/537-9966 (Fax)          724/733-4888
                                                        724/733-7110 (Fax)
Asset Management and        Lawson Heights
Trust Division              Route 981 at Terry Way      Pleasant Unity
19 North Main Street        P.O. Box 429                Routes 981 and 130
Greensburg, PA 15601        Latrobe, PA 15650           P.O. Box 503
724/836-7670                724/539-9774                Pleasant Unit, PA 15676
724/836-7675 (Fax)          724/539-3523 (Fax)          724/423-5222
                                                        724/423-1155 (Fax)

Courthouse Square           Ligonier                    West Newton
19 North Main Street        201 West Main Street        109 East Main Street
Greensburg, PA 15601        P.O. Box 528                P.O. Box 219
724/836-7699                Ligonier, PA 15668          West Newton, PA 15089
724/836-7675 (Fax)          724/238-9538                724/872-5100
                            724/238-9530 (Fax)          724/872-5143 (Fax)

Eastgate                    Lincoln Road
Georges Station Road        Lincoln Road Shopping Center
P.O. Box 3206               P.O. Box 429
Greensburg, PA 15601        Latrobe, PA 15650
724/836-7600                724/537-9980
724/836-7604 (Fax)          724/537-9982 (Fax)



In addition to the full-service MAC machines located at all Commercial
National Bank offices indicated above (except Latrobe and Courthouse Square),
additional ATMs are available for your 24-hour banking convenience at Latrobe
Area Hospital, Saint Vincent College and Westmoreland County Airport. All are
linked to the national Cirrus, Honor and Plus networks and also accept
MasterCard, Visa, Discover and American Express for cash advances.


TOUCH TONE TELLER 24-hour banking service              WEBSITE
------------------------------------------------------------------------
724/537-9977                                           Further information on
FREE from Blairsville, Derry                           Commercial National Bank
Greensburg, Kecksburg, Latrobe                         of Westmoreland County 
Ligoner and New Alexandria.                            now is available at
1-800-803-BANK                                         www.cnbthebank.com
FREE from all other locations.
                                       
Insurance
-----------------------------------------------------------------------
Commercial National Insurance Services                 Commercial National
232 North Market Street                                Insurance Services is
Ligonier, PA 15658                                     a partnership of Gooder
724/238-4617                                           & Mary, Inc., and 
877/205-4617 (toll free)                               Commercial National 
724/238-0160 (fax)                                     Investment Corporation,
gooder@imail.iix.com                                   a wholly owned subsidiary
                                                       of Commercial National
                                                       Financial Corporation.


<PAGE>

Commercial National Financial Corporation   
-----------------------------------------------------------------------


Market Makers
------------------------------------------------------------------------
The  following firms have committed to make a market  in  the
stock of Commercial National Financial Corporation. Inquiries
concerning their services should be directed to:

Ferris Baker Watts      Keefe, Bruyette & Woods, Inc.  M.H. Meyerson & Co.
100 Light Street        Two World Trade Center         525 Washington Boulevard
Baltimore, MD 21202     New York, NY 10048             34th Floor
800-638-7411            800-966-1559                   Jersey City, NJ 07303
                                                       800-333-3113

FJ Morrissey & Co Inc.  Knight Securities              Ryan, Beck & Co.
Suite 1420              525 Washington Boulevard       80 Main Street
1700 Market Street      Jersey City, NJ 07310          West Orange, NJ 07052
Philadelphia, PA 19103  800-222-4910                   973-597-6020
800-842-8928              




Transfer Agent
-----------------------------------------------------------------------------
Should   you  need  assistance  regarding  changes   in   the
registration   of   certificates   or   in   reporting   lost
certificates please contact:

Commercial National Financial Corporation
Stock Transfer Department
P.O. Box 429
Latrobe, PA 15650
724/537-9923
724/539-1137 (Fax)

More general shareholder inquiries also may be directed to this department.

Form 10-K
-----------------------------------------------------------------------------
The   corporation  will  provide  without   charge   to   any
shareholder a copy of its 1998 Annual Report on Form 10-K  as
required  to  be  filed  with  the  Securities  and  Exchange
Commission. Requests should be made in writing to:

Commercial National Financial Corporation
P.O. Box 429
Latrobe, PA 15650

<PAGE>

(The inside of the back cover is intentionally left blank.)

<PAGE>

(The following appears in the upper left corner of the back cover along
with the corporate logo)

Commercial National Financial Corporation
900 Ligonier Street
P.O. Box 429
Latrobe, PA 15650

<PAGE>