SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D. C. 20549FORM 10-KAnnual Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934 For the fiscal year ended
December 31, 2000 Commission file number
0-18676 COMMERCIAL NATIONAL FINANCIAL CORPORATION(Exact name of registrant as specified in its charter)  PENNSYLVANIA

25-1623213(State or other jurisdiction

(I.R.S. Employer Identification No.)of incorporation or organization)  900 Ligonier Street, Latrobe, PA 15650

15650(Address of principal executive offices)

(Zip Code)  Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS

NAME OF EACH EXCHANGE ON WHICH REGISTEREDNONE  Securities registered pursuant to Section 12(g) of the Act: TITLE OF CLASS COMMON STOCK, $2 PAR VALUE  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
X
No  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. (x)  Aggregate market value of common stock held bynon-affiliates of registrant based on closing sale pricebased on the NASDAQ National Market System on March 23, 2001.

$37,580,076   $38,100,000Number of shares of common stock outstanding at March 23, 2001.

3,434,296   DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to shareholders for the fiscal year ended December 31, 2000 are incorporated by reference into Parts I, II, and IV of this report. Portions of the definitive Proxy Statement related to the annual meeting of
shareholders to be held May 15, 2001 are incorporated by reference into Part III.


Commercial National Financial CorporationForm 10-KINDEXPart I



PAGEITEM 1.

BusinessDescription of Business ......................................

3Competition ..................................................

4Supervision and Regulation ...................................

4Effects of Governmental Policies..............................

4Consolidated Financial and Statistical Profile................

5ITEM 2.

Properties ...................................................

9ITEM 3.

Legal Proceedings ............................................

9ITEM 4.

Submission of Matters to a Vote of Security Holders ..........

9Executive Officers of the Registrant..........................

10PART IIITEM 5.

Market for Registrant's Common Stock and RelatedSecurity Holder Matters .....................................

10ITEM 6.

Selected Financial Data.......................................

11ITEM 7.

Management's Discussion and Analysis of FinancialCondition and Results of Operations .........................

11ITEM 7.a

Quantitative and Qualitative Disclosures of Market Risk ......

11ITEM 8.

Financial Statements and Supplementary Data ..................

12ITEM 9.

Changes in and Disagreements with Accountants on Accountingand Financial Disclosures ....................................

13PART IIIITEM 10.

Directors and Executive Officers of the Registrant ...........

14ITEM 11.

Executive Compensation .......................................

14ITEM 12.

Security Ownership of Certain Beneficial Owners andManagement ..................................................

14ITEM 13.

Certain Relationships and Related Transactions ...............

14PART IVITEM 14.

Exhibits, Financial Statement Schedules and ReportsOn Form 8-K..................................................

15      Part I


Item 1.
BUSINESS  Description of Business Commercial National Financial Corporation (the corporation) is a Pennsylvania corporation and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended and as a financial holding company under the Gramm Leach Bliley
Act. The corporation is owner of 100% of the outstanding shares of common stock of Commercial National Bank of Pennsylvania. This subsidiary bank and has been providing banking services since 1934. At the present time, two (2) banking offices are in
operation in Latrobe, two (2) in Unity Township and one (1) each in Ligonier, West Newton, Greensburg, Murrysville and Hempfield Township. An asset management/trust department was established in 1994 and is located in the building that houses the
Greensburg banking office. All of these offices are within the boundaries of Westmoreland County, Pennsylvania. In addition, the building which houses the downtown Latrobe banking office is the location of the corporation's and the bank's executive and
administrative offices. The institution's operations center is located at the Latrobe Plaza in downtown Latrobe. This operations center also houses an in-house data processing system. Each of the banking offices, except for downtown Latrobe and Greensburg, is equipped with twenty-four-hour-a-day automatic teller machines and ATM units are located on the campus of Saint Vincent College in Unity Township, the terminal of the
Westmoreland County Airport in Unity Township, the reception lobby of the Latrobe Area Hospital in Latrobe, an in-store machine in each the Norvelt Open Pantry and New Alexandria Qwik Mart and the lobby of the Kirk S. Nevin Arena located in Greensburg. A
separate freestanding drive-up teller staffed banking facility is attached to the Lincoln Road office in downtown Latrobe. This facility also provides ATM service. The corporation's business activities involve holding the stock of its subsidiary bank and Commercial National Investment Corporation, which is a 50% owner of Commercial National Insurance Services together with the Gooder Agency, Inc., of Ligonier,
Pennsylvania. Commercial National Insurance Services offers a full array of insurance products and services to consumer and commercial markets surrounding the Ligonier area.  The subsidiary bank offers the full range of banking services normally associated with the general commercial banking business. Services include extending credit, providing deposit services, marketing non-deposit investments and offering financial
counseling. The ATM system described earlier is a part of the MAC and Cirrus networks which permits the bank's customers access to an extensive regional and national network. The bank also has implemented a comprehensive electronic online banking system.
By using a personal computer with internet access, customers can access their Commercial National Bank accounts, perform common banking tasks and pay bills 24 hours a day, seven days a week, 365 days a year
 .     Competition  Throughout the subsidiary bank's service area, substantial competition exists both for deposit and loan products. The competitors range from branches of major banks headquartered in Cleveland Ohio, Pittsburgh, Johnstown and Indiana, Pennsylvania,
several independent banks headquartered in Westmoreland County, a variety of thrift institutions and a number of credit unions. Even though some portions of the thrift industry have experienced fairly extensive restructuring, the level of competitive
activity in our service area remains strong. Competition for certificates of deposit and money market deposits remains vigorous with the representatives of insurance companies and securities brokers soliciting customers in our market area. In addition,
out-of-area institutions including retailers continue to solicit business for credit cards, residential mortgages and automobile financing.  Supervision and Regulation   The corporation and the subsidiary bank are subject to the supervision of the following regulatory bodies: The Federal Reserve Board, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Commonwealth of Pennsylvania
Department of Banking and the Federal Deposit Insurance Corporation. The nature of the supervision extends to such areas as safety and soundness, truth-in-lending, truth-in-savings, rate restrictions, consumer protection, permissible loan and securities
activities, merger and acquisition limitations, reserve requirements, dividend payments and regulations concerning activities by corporate officers and directors. The Federal Reserve Board monitors holding company activity while the Office of the
Comptroller of the Currency is the corporation's primary banking regulator. No restrictions or actions are currently pending against the corporation or the bank.  The GLB, enacted by Congress in November 1999, now permits bank holding companies with subsidiary banks meeting certain capital and management requirements to elect to become "financial holding companies". Beginning in March 2000, financial
holding companies may engage in a full range of financial activities, including not only banking, insurance and securities activities, but also merchant banking and additional activities determined to be "financial in nature". GLB also provides
that the list of permissible activities will be expanded as necessary for a financial holding company to keep abreast of competitive and technological change. The corporation was designated a financial holding company in March 2000 by the Federal Reserve
Board.  Although it preserves the Federal Reserve Board as the umbrella supervisor of financial holding companies, GLB adopts an administrative approach to regulation that defers to the approval and supervisory requirements of the functional regulators of
insurers and insurance agents, broker-dealers, investment companies, and banks. Thus, the various state and federal regulators of a financial holding company's operating subsidiaries would retain their jurisdiction and authority over the operating
entities. As the umbrella supervisor, however, the Federal Reserve Board has the potential to affect the operations and activities of financial holding companies' subsidiaries through its power over the financial holding company. In addition, GLB contains
numerous trigger points related to legal noncompliance and other serious problems affecting bank affiliates that could lead to direct Federal Reserve Board involvement and to the possible exercise of remedial authority affecting both financial holding
companies and their affiliated operating companies.    Effects of Governmental Policies  In addition to the regulatory requirements, the corporation and its subsidiary bank are affected by the national economy and the influence on that economy exerted by governmental bodies through monetary and fiscal policies and their efforts to implement
such policies. In particular, the impact of the open market operations on interest rates, the establishment of reserve requirements and the setting of the discount rate will continue to affect business volumes and earnings. The exact nature or the full
extent of this impact is almost impossible to predict; however, management continues to monitor these activities on a regular basis and seeks to modify its policies and procedures accordingly.  EMPLOYEES  As of December 31, 2001, the corporation, the subsidiary bank and other subsidiaries of the corporation had a total of 122 full-time-equivalent employees.  CONSOLIDATED FINANCIAL AND STATISTICAL PROFILE  The data presented on the following pages provides additional information to assist in reviewing the corporation's business activities and must be read with the understanding that it is a supplement to Management's Discussion and Analysis of Financial
Condition and Results of Operations in the annual report to shareholders for the year ended December 31, 2000 which is incorporated herein by reference.  Securities Portfolio  The following table presents the composition of the securities portfolio at year end for the years indicated:  Amortized Cost at December 312000

1999

1998U. S. Treasury securities and otherU. S. Government agencies andcorporations

$ 81,225,195

$ 72,567,628

$ 77,481,622Obligations of states and politicalsubdivisions

18,450,654

51,542,799

36,454,587Other securities

3,369,612

3,371,638

2,396,600Total

$103,045,461

$127,482,065

$116,332,809  Loans  Final loan maturities excluding consumer installment and mortgage loans and before unearned income at December 31, 2000: (in thousands)  Within

One-Five

AfterOne Year

Years

Five Years

TotalCommercial and Industrial

$ 11,905



$ 11,997

$1,901

$25,803Real estate-construction

1,999



-

381

2,380Other

3,338

*

1,678

4,990

$10,006Totals

$17,242



$13,675

$ 7,272

$38,189Loans at fixed interest rates





$ 7,744

$6,949

$14,693Loans at variable interest rates





5,931

323

6,254$13,675

$7,272

$20,947 *Includes $2.0 million PHEAA loans with no fixed maturity date.  CONSOLIDATED FINANCIAL AND STATISTICAL PROFILE (continued)  Non-performing Loans  The following table details, for each of the most recent five years, the year end amounts which were accounted for on a non-accrual basis or were past due 90 days or more:  Dec. 31, 2000Loans on non-accrual basis

$ 358,429Loans past due 90 days or more

207,834Renegotiated loans

170,572Total

$ 736,835Dec. 31, 1999Loans on non-accrual basis

$ 517,644Loans past due 90 days or more

187,259Renegotiated loans

493,215Total

$ 1,198,118Dec. 31, 1998Loans on non-accrual basis

$ 95,032Loans past due 90 days or more

320,438Renegotiated loans

572,352Total

$ 987,822Dec. 31, 1997Loans on non-accrual basis

$ 23,172Loans past due 90 days or more

659,078Renegotiated loans

948,128Total

$ 1,630,378Dec. 31, 1996Loans on non-accrual basis

$ 23,172Loans past due 90 days or more

100,293Renegotiated loans

1,024,550Total

$ 1,148,015 At present no other loans which are outstanding present a serious doubt in regard to the borrower's ability to comply with the current loan repayment terms. As of December 31, 2000 the corporation had $80,792 in other real estate owned and no
in-substance foreclosures.  Effect of non-accrual loans on interest income during 2000 is as follows:  Non-accrualLoansGross amount of interest that would havebeen recorded at original rates

$ 40,167Less: Interest that was reflected in income

-Net reduction to interest income

$ 40,167   CONSOLIDATED FINANCIAL AND STATISTICAL PROFILE (continued)  Summary of Loan Loss Experience  The table below provides an analysis of the allowance for loan losses for the five years ended December 31, 2000:    December 31,2000

1999

1998

1997

1996Loans outstanding at beginning of year,net of unearned income

$204,839,335

$192,115,160

$183,481,157

$159,935,523

$144,288,002Average loans outstanding

$207,343,068

$194,664,755

$186,418,665

$169,849,234

$151,056,637Allowance for loan losses:Balance, beginning of year

$ 1,919,453

$ 1,914,174

$ 1,882,251

$ 2,035,818

$ 2,081,700Loans charged off:Commercial, industrial & other

70,342

2,678,266

24,306

4,859

-Installment and charge card

232,915

616,786

377,353

437,003

170,719Real estate

92,019

12,971

11,208

6,446

3,233Total loans charged off

395,276

3,308,023

412,867

448,308

173,952Recoveries:Commercial, industrial & other

2,000

-

300

-

-Installment and charge card

34,045

23,596

9,490

22,669

23,070Real estate

490

-

-

2,072

-Total recoveries

36,535

23,596

9,790

24,741

23,070Net loans charged off

358,741

3,284,427

403,077

423,567

150,882Provision charged to expense

1,176,000

3,289,706

435,000

270,000

105,000Balance, end of year

$ 2,736,712

$ 1,919,453

$ 1,914,174

$ 1,882,251

$ 2,035,818Ratios:Net charge-offs as a percentageof average loans outstanding

.17%

1.69%

.22%

.25%

.10%Allowance for loan lossesas a percentage of average loansoutstanding

1.32

.99

1.03

1.11

1.35 Management review and evaluation of loan loss experience and loan loss potential on outstanding loans occurs on a quarterly basis and is considered in conjunction with current economic conditions and the current requirements of the appropriate
regulatory agencies.  As a result of this on-going study, management believes that the reserve amount shown for December 31, 2000 is adequate to offset the losses which may exist as a result of under collateralization or uncollectibility.  CONSOLIDATED FINANCIAL AND STATISTICAL PROFILE (continued)  Deposits  The following table presents average deposits by type and the average interest rates paid as of 2000, 1999 and 1998:  December 31,2000

1999

1998Average

Average

Average

Average

Average

AverageBalance

Rate Paid

Balance

Rate Paid

Balance

Rate PaidNon-interest bearing demand

$ 45,127,383

- %

$ 41,744,536

- %

$ 37,565,870

- %Interest bearing demand

20,552,997

.68

21,376,716

.72

20,709,992

1.69Money market

43,301,728

3.53

43,545,503

3.51

41,921,741

3.89Savings

45,405,821

2.54

46,836,966

2.52

45,672,055

2.93Time

118,235,702

5.51

115,189,889

5.11

112,647,588

5.40Total

$272,623,631

3.42%

$268,693,610

3.26%

$258,517,246

3.64%  Remaining maturities of certificates of deposit $100,000 or more: December 31,2000

1999

1998Amount

Percent

Amount

Percent

Amount

PercentRemaining maturity:3 months or less

$19,910,828

59%

$26,559,928

72%

$16,943,373

57%Over 3 through 6 months

2,999,206

9

4,159,920

11

2,965,786

10Over 6 months through 12 months

7,145,067

21

3,166,384

8

6,109,446

20Over 12 months

3,920,347

11

3,429,108

9

3,997,620

13Total

$ 33,975,448

100%

$37,315,340

100%

$30,016,225

100%  Item 2.
Properties  All of the corporation's banking and support facilities are owned and free of liens and encumbrances with the exception of one(1) banking office and an adjacent drive-up facility, both of which are leased. All of the properties are used in their
entirety for banking purposes. In each case, the properties have been maintained in good repair, are well suited for their present use and appear to be adequate for the immediate needs of the corporation and the bank. Physical locations can be found on
page 31 of the Annual Report to Shareholders.  Item 3.
Legal Proceedings  Other than proceedings which occur in the normal conduct of business, there are no legal proceedings to which either the corporation or the subsidiaries is a party which will have any material effect on the financial position of the corporation and its
subsidiaries.  Item 4.
Submission of Matters to a Vote of Security Holders  Not applicable.  EXECUTIVE OFFICERS OF THE REGISTRANT  The following table shows the names and ages of the current executive officers and the present and previous positions held by them for at least the past five years.  Name

Age

Present and Previous PositionsLouis A. Steiner

70

Chairman of the board (1977 to present)Chief executive officer (1977 to 1997)Louis T. Steiner

39

President (April 1998 to present),chief executive officer (November 1997to present), vice chairman (December1995 to present), vice president(January 1994 to November 1995),Gregg E. Hunter

42

Vice chairman and chief financialofficer (December 1995 to present),vice president and chief financialofficer (January 1994 to November1995)Wendy S. Schmucker

32

Secretary/treasurer and vice president,manager corporate administration (November1997 to present), assistant vice president

and managing corporate officer (December

1996 to October 1997), assistant

secretary/treasurer and corporate

and financial administrative officer

(December 1995 to November 1996),

corporate administrator (January

1995 to November 1995)Ryan M. Glista

33

Vice president/comptroller (December 1997to present), assistant vice president/controller(December 1995 to November 1997),corporate accountant (June 1994 to November1994)Susan F. Robb

26

Assistant secretary (April 1998 to present),corporate administrator (September 1997 topresent), customer service representative(September 1996 to September 1997) Part II   Item 5.
Market for Registrant's Common Stock and Related Security Holder Matters  Information appearing in the annual report to shareholders for the fiscal year ended December 31, 2000 on page 20 is incorporated herein by reference in response to this item. As of March 23, 2001 there were 517 shareholders of record of the
registrant's common stock. The number of beneficial shareholders is approximately 767.    Item 6.
Selected Financial Data  Information appearing in the annual report to shareholders for the fiscal year ended December 31, 2000 on page 21 is incorporated herein by reference in response to this item.   Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information appearing in the annual report to shareholders for the fiscal year ended December 31, 2000 on page 22 is incorporated herein by reference in response to this item.  Item 7.a
Quantitative and Qualitative Disclosures of Market Risk  The corporation's interest rate risk management is the responsibility of the Asset/Liability Management Committee, which reports to the Board of Directors. This committee establishes policies that monitor and coordinate the corporation's sources, uses
and pricing of funds. The committee is also involved with management in the corporation's planning and budgeting process.  The corporation regularly reviews its exposure to changes in interest rates. Among the factors considered are changes in the mix of earning assets and interest-bearing liabilities, interest rate spreads and repricing periods. Typically, the committee
reviews on at least a quarterly basis the bank subsidiary's relative ratio of rate sensitive assets to rate sensitive liabilities and the related cumulative gap for different time periods. Additionally, the committee and management utilize a simulation
model in assessing the corporation's interest rate sensitivity.  This simulation modeling process projects a baseline net interest income (assuming no changes in interest rate levels) and estimates changes to that baseline net interest income resulting from changes in interest rate levels. The corporation utilized the
results of this model in evaluating its interest rate risk. This model incorporates a number of additional factors. These factors include: (1) the expected exercise of call features on various assets and liabilities, (2) the expected rates at which
various rate sensitive assets and liabilities will reprice, (3) the expected relative movements in different interest rate indexes which are used as the basis for pricing or repricing various assets and liabilities, (4) expected changes in administered
rates on interest-bearing transaction, savings, money market and time deposit accounts and the expected impact of competition on the pricing or repricing of such accounts and (5) other factors. Inclusion of these factors in the model is intended to more
accurately project the corporation's changes in net interest income resulting from an immediate and sustained parallel shift in interest rates of up 100 basis points (bps), up 200 bps, down 100 bps and down 200 bps. While the corporation believes this
model provides a useful projection of its interest rate risk, the model includes a number of assumptions and predictions which may or may not be accurate. These assumptions and predictions include inputs to compute baseline net interest income, growth
rates, competition and a variety of other factors that are difficult to accurately predict. Accordingly, there can be no assurance the simulation model will reflect future results.   The following table presents the simulation model's projected impact of an immediate and sustained parallel shift in interest rates on the projected baseline net interest income for a twelve month period commencing January 1,2001.  $ Change in Projected

% Change in ProjectedChange in Interest

Baseline

BaselineRates

Net Interest Income

Net Interest Income(dollar amounts in thousands)+200 basis points

$ (134)

-0.9%+100 basis points

$ 17

0.1%-100 basis points

$ (71)

-0.5%-200 basis points

$ (153)

-1.0%   In the event of a shift in interest rates, management may take certain actions intended to mitigate the negative impact to net interest income or to maximize the positive impact to net interest income. These actions may include, but are not limited to,
restructuring of earning assets and interest-bearing liabilities, seeking alternative funding sources or investment opportunities and modifying the pricing or terms of loans and deposits.   Item 8.
Financial Statements and Supplementary Data  The following information appearing in the annual report to shareholders for the fiscal year ended December 31, 2000 is incorporated herein by reference in response to this item.  AnnualReportPageReport of Independent Certified Public Accountants . . . . . . . . . .

19Financial Statements:Consolidated Statements of Financial Conditionas of December 31, 2000 and 1999 . . . . . . . . . . . . . . . . .

6Consolidated Statements of Income for the Years EndedDecember 31, 2000, 1999, and 1998. . . . . . . . . . . . . . . . .

7Consolidated Statements of Changes in Shareholders' Equity forthe Years Ended December 31, 2000, 1999 and 1998 . . . . . . . . .

8Consolidated Statements of Cash Flows for the Years EndedDecember 31, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . .

9Notes to Consolidated Financial Statements . . . . . . . . . . . .

10Quarterly Summary of Financial Data (Unaudited) . . . . . . . . .

20 Prior Years Opinion Letter from previous Certifying Accountant  INDEPENDENT AUDITOR'S REPORT  Board of Directors and Shareholders Commercial National Financial Corporation and Subsidiaries Latrobe, Pennsylvania  We have audited the accompanying consolidated statement of financial condition of Commercial National Financial Corporation and subsidiaries as of December 31, 1999 and the related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the two years in the period ended December 31, 1999. 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, 1999, and the results of their
operations and their cash flows for each of the two years in the period ended December 31, 1999, in conformity with generally accepted accounting principles.   /s/ Stokes & Hinds, LLC Stokes & Hinds, LLC  Pittsburgh, Pennsylvania January 28, 2000     Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  On October 23, 2000, the corporation filed Form 8-K with the Securities and Exchange Commission reporting its change in the corporation's certifying accountant from Stokes Kelly & Hinds LLC to Beard Miller Company LLP.  Part III   Item 10.
Directors and Executive Officers of the Registrant   Information appearing in the definitive proxy statement related to the annual meeting of shareholders to be held May 15, 2001 on pages 4 and 5 and from part I of this report on Form 10-K is incorporated herein by reference in response to this item.  Based on a review of the applicable forms, there was no director, officer or beneficial owner of more than 10 percent of common
stock who failed to file on a timely basis reports required by Section 16(a) of the 1934 Act during the most recent fiscal year or prior years.   Item 11.
Executive Compensation  Information appearing in the definitive proxy statement related to the annual meeting of shareholders to be held May 15, 2001 on page 11 is incorporated herein by reference in response to this item.   Item 12.
Security Ownership of Certain Beneficial Owners and Management  Information appearing in the definitive proxy statement related to the annual meeting of shareholders to be held May 15, 2001 on page 7 is incorporated herein by reference in response to this
 item.   Item 13.
Certain Relationships and Related Transactions  Information appearing in the definitive proxy statement related to the annual meeting of shareholders to be held May 15, 2001 on page 14 is incorporated herein by reference to this item.  Part IV   Item 14.
Exhibits, Financial Statement Schedules and Reports on Form 8-K  (a)(1)  Financial statements  All financial statements of the registrant as set forth under  Item 8 of this report on Form 10-K.  (2) Financial statement schedules are omitted as they are not applicable.  Page Number or(3) Exhibit



Incorporated byNumber

Description

Reference to3.1

Articles of Incorporation

Exhibit C to Form S-4Registration StatementFiled April 9, 19903.2

By-laws of Registrant

Exhibit D to Form S-4Registration StatementFiled April 9, 19903.3

Amendment to Articles of

Exhibit A to definitiveIncorporation

Proxy Statement filed forthe special meeting ofshareholders heldSeptember 18, 19903.4

Amendment to Articles of

Exhibit A to definitiveIncorporation

Proxy Statement filed forthe meeting ofshareholders held onApril 15, 199716

Letter regarding Change in

Exhibit A to Form 8-KCertifying Accountant

filed on October 23, 200013

Annual Report to Shareholders

Filed on March 30, 2001for the Fiscal Year EndedDecember 31, 200021

Subsidiaries of the Registrant22

Commercial National Financial

Filed on March 23, 2001Corporation 2001 AnnualProxy Statement to Shareholders (b) Report on Form 8-K filed in the fourth quarter of 2000:  October 23, 2000 - Commercial National Financial Corporation notifies the Securities and Exchange Commission of its change in the Registrants Certifying Accountant from Stokes Kelly & Hinds, LLC to Beard Miller Company LLP effective on October 17,
2000.   SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.COMMERCIAL NATIONAL FINANCIAL CORPORATION(Registrant)By:
/s/ Louis T. SteinerLouis T. Steiner, Vice Chairman, Presidentand Chief Executive OfficerMarch 29, 2001  Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  SIGNATURE AND CAPACITY

DATE/s/Louis A. Steiner

March 20, 2001Louis A. Steiner, Chairman of the Board and Director/s/Louis T. Steiner

March 20, 2001Louis T. Steiner, Vice Chairman of the Board, Director and Principal Executive Officer/s/ Gregg E. Hunter

March 20, 2001Gregg E. Hunter, Vice Chairman of the Board, Director, Principal Financial and Accounting Officer/s/Wendy S. Schmucker

March 20, 2001Wendy S. Schmucker, Secretary/Treasurer/s/ John T. Babilya

March 20, 2001John T. Babilya, Director/s/George A. Conti, Jr.

March 20, 2001George A. Conti Jr., Director/s/ Richmond H. Ferguson

March 20, 2001Richmond H. Ferguson, Director/s/Dorothy S. Hunter

March 20, 2001Dorothy S. Hunter, Director/s/Frank E. Jobe

March 20, 2001Frank E. Jobe, DirectorRoy M. Landers, Director/s/John C. McClatchey

March 20, 2001John C. McClatchey, Director/s/Joseph A. Mosso

March 20, 2001Joseph A. Mosso, Director/s/Joedda M. Sampson

March 20, 2001Joedda M. Sampson, Director/s/Debra L. Spatola

March 20, 2001Debra L. Spatola, Director/s/George V. Welty

March 20, 2001George V. Welty, Director/c/C. Edward Wible

March 20, 2001C. Edward Wible, Director


EXHIBIT INDEX TABLE OF CONTENTSExhibitNumber

Description21

Subsidiaries of the Registrant    Exhibit 21 -
Subsidiaries of Commercial National Financial Corporation  Percent OwnershipBy RegistrantCommercial National Bank of Pennsylvania

100%900 Ligonier StreetLatrobe, PA 15650Nationally Chartered BankCommercial National Investment Corporation

100%900 Ligonier StreetLatrobe, PA 15650                                               The corporation will provide without charge to any shareholder a copy of its 2000 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 STOCK TRANSFER DEPARTMENT P.O. BOX 429 LATROBE, PA 15650   Our Commitment To Those We Serve  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 business 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 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.

 To Our Shareholders  With another year having passed, I am pleased to report on the activities of your company during 2000. We posted near-record earnings rivaling those achieved in 1998, a clear indication that our core financial condition and performance remained solid
even after experiencing an income decline in 1999 that resulted from a commercial loan charge-off. The comeback in 2000 also was helped by undertaking a number of initiatives and by the hard work and dedication of our employees who implemented them.  In March 2000, the Federal Reserve Board designated Commercial National Financial Corporation as a "financial holding company," giving us flexibility to provide products and services to our customers.  Commercial National Insurance Services, in which the company holds a 50 percent interest, completed its first full year of operation. During that time we saw client volume increase, which subsequently grew the associated commission revenues. By offering
insurance services to those we serve, we can give customers the benefit of "one-stop shopping" for financial needs. The insurance agency's Website at www.cnbinsurance.com further enables customers to review products and services any time.  The Asset Management and Trust Division of Commercial National Bank of Pennsylvania continued its outstanding performance in the past year. The division now manages more than $100 million in assets, the highest volume since its 1994 formation, helping to
continue its trend of double-digit growth of revenue, which amounted to more than $449,000 in 2000. Also during the year, trust division clients were given the ability to view accounts online via the bank's Website at www.cnbthebank.com. Accounts are
updated weekly to provide reasonably current information.  The company's Online Banking product continued to grow in popularity among customers with marked expansion noticeable in both the number of enrollments and transaction volume. A free demonstration of Online Banking, available at the bank's Website, helps
introduce and familiarize viewers with this convenient system.  As should be evident from this report, much of our most recent advancement has come about largely through the use of technology. We believe that alternative methods of service delivery will continue to be in demand, and so we seek to provide customers
with a variety of channels by which they may do business. Of course, we regularly review the technology landscape to offer our customers the latest innovations available, provided that the benefit to the company is worth the investment.  We look forward to a very busy year in 2001 when many of the initiatives previously described will continue to flourish as we lay the groundwork for an even more productive future.  The support you give as shareholders -- to both the corporation and its staff -- is greatly appreciated. We value the opportunity you have given us to work on your behalf.   /s/ Louis T. Steiner Louis T. Steiner Vice Chairman, President and Chief Executive Officer    In year 2000

, we returned to "business as usual" after an earlier business downturn in 1999

...  ... that resulted from the default on sizeable borrowings made to a single commercial account. During 2000, however, the corporation moved aggressively to overcome that decline and continued to carefully build new business.  Audited earnings for the year of $4,631,512, for a record $1.32 per share, were up considerably from the $3,203,605 or $0.90 per share realized in 1999. An especially strong fourth-quarter generated earnings of $1.36 million, also a company record.  As indicated by the information in the following pages, the core financial standing of Commercial National Financial Corporation remains strong, the company remains heavily capitalized and it continues to maintain adequate reserves for the years ahead.  Despite a volatile market, the business stayed strong.  In spite of some depreciation in the year-end share price to $14.63, Commercial National Financial Corporation (traded as CNAF on the Nasdaq Stock Market, Inc.) was not alone in experiencing such an effect as most other "old market" financial
services had similar results through 2000. During the year, stock traded at prices ranging from a low of $13.25 per share to a high of $19.75. Further affecting the performance, we believe, was the "irrational exuberance" in the market with a
bias toward high-tech investments, a bent that later proved to be misguided.  Nevertheless, the dividend payout on shares owned by Commercial National investors improved again in 2000, increasing by more than 13 percent from $0.60 per share paid in 1999 to $0.68 per share this year.  Although non-interest-bearing deposits held by the company actually grew by 18 percent, a slip of nearly 6 percent in the larger category of interest-bearing funds resulted in an overall 2.3 percent decline in total deposits. By December 31, total
deposits managed by the corporation had receded to $266.6 million from $272.9 million in 1999.  This deposit shift we attribute to a continuation of highly competitive pricing in a rising-rate environment (during the first half) and the maturity of numerous "jumbo" certificates of deposit, those valued at $100,000 or more. Consumers also
seemed to maintain a preference for investing through nontraditional service providers. Despite the potential -- and later, obvious -- risks of a market with such high volatility, deposits here still showed outflow into other investments.  The loan portfolio at Commercial National grew by a bit more than 1 percent in 2000 to nearly $208 million from $204.8 million last year. Most of that growth resulted from a $9.4 million surge in the company's commercial-loan segments. Tax-free loans --
those on which our interest income is nontaxable because they're made to governmental and nonprofit agencies -- showed a dramatic jump from $4.3 million in 1999 to $7.1 million in 2000.  Purchase-mortgage and home-equity loan categories both posted slight growth for the year while totals for construction mortgages and installment loans actually declined. Vigorous loan activity in the first half of the year helped offset the February sale
of the company's $6.3 million credit-card portfolio.  Interest income for 2000 totaled $26.1 million at year-end, up more than $1.7 million or about 7 percent from the $24.3 million earned a year earlier. Concurrently, however, interest expense rose by $1.7 million to $11.7 million from $10 million last
year, a 17 percent increase. As a result, net interest income of $14.3 million was up by only $61,000 or less than 1 percent from that realized in 1999.  Because of substantial growth in the commercial loan portfolio, the company reevaluated its loan-review process and increased the adequacy of its allowance for loan losses. The allowance increased by about $817,000 over that allowed in 1999 to equal 1.32
percent of total loans compared to 0.94 percent at the end of last year. Charge-offs against the allowance declined significantly to $358,741 from the $3,284,427 incurred in the prior year, a change that calculated net charge-offs at only 0.17 percent for
2000 compared to the 1.69 percent realized in 1999, both figures considerably lower than those of similarly sized banks nationwide.  Other operating income of $2.36 million was up 19 percent from the $1.99 million earned last year. Contributing to the improvement were a 47 percent increase in income from the Asset Management and Trust Division, a nearly 10 percent increase in general
service charges and fees, and a 3.5 percent growth in service charges collected on deposit accounts. Such improvement is evidence of a conscientious effort to further diversify revenue streams.  The return on average assets, after taxes, improved to 1.32 percent from the 0.95 percent return posted for the preceding year. The substantial change principally is attributed to the 1999 decline in return on average assets that resulted from the
commercial loan charge-off.  Total assets of the corporation dropped to $329.9 million at the end of 2000 from $355.3 million a year prior, a 7 percent change due primarily to the general economic slowdown and a restructuring of the firm's investment portfolio, including the
retirement of long-term debt.  Service and technology were maintained as our 2000 watchwords.  As year 2000 arrived, Commercial National experienced no disruption of business whatsoever, in spite of many dire predictions. Our "Year 2000 Committee" obviously had devoted the appropriate time and resources to avoid any threat of a shutdown. The
arrival of the New Year without incident quietly reinforced what we had been telling customers all along - that Commercial National indeed was "Y2K-OK."  Understanding that no single delivery channel could keep the corporation successful, our management team determined that 2000 would be a true example of blending "high tech" electronics with "high touch" personal-service
 .  During the year, staff at the nine community offices of Commercial National Bank of Pennsylvania worked closely with agents from Commercial National Insurance Services, a partnership of Gooder & Mary, Inc. and Commercial National Investment
Corporation. Together, their efforts generated additional business for the company as they provided customers with a wider array of financial services, all available from a single location. Plans were begun to blend insurance services offerings into
standard marketing materials in 2001, attempting to reach an even broader audience.  Excellent growth in our Asset Management and Trust Division enabled that group to become self-sustaining much sooner than we had anticipated. Typically such units require ten years to generate net income. Ours, on the other hand, became productive in its
sixth year, managing more than $100 million by year's end. Mutual fund sales company-wide grew by more than 35 percent.  By the end of the year, more than 350 Commercial National customers had become regular users of the company's Online Banking service. System users can check account balances, transfer funds, print reports and even pay bills electronically to virtually
any vendor. Online customers averaged about 800 bill-pay transactions each month during the year.  Additionally, Web surfers continued to use the Internet site, www.cnbthebank.com, which makes available product information, rates and loan calculators for anyone, anywhere, 24 hours a day. By the end of the year, users had logged onto the system for
more than 106,000 sessions, which consists of one visit during which several pages of the site are viewed.  Another electronic-access system, the Commercial National Bank TouchTone Teller, also handled a great deal of business in 2000. On average, calls to the service each month tallied more than 18,000. Callers checked balances, inquired about the status of a
particular checks, transferred funds between accounts and more. Such a system has allowed our staff to focus on more substantial business instead of handling more routine but easily resolved inquiries.  Finally, by December 2000, we had installed and gone live with our first platform automation installations, a service that enables community office staff to open accounts more efficiently by doing it directly online. The procedure saves money for the
corporation by saving time for the customer and our staff.    We know good people build a good company.  Recognizing that our employees make the company what it is, we presented two Chairman's Awards in 2000 to individuals who consistently performed above the expectations of their jobs. They were ... --  Eleanor A. Bridge Operations Specialist Bank Operations Center ... who was acknowledged in March for coordinating the elements required to effect the sale of our credit-card loan portfolio. By doing it so efficiently, she enabled the company to realize a positive impact on its financial condition and performance.  In November, another Chairman's Award was presented to ... --Patricia A. Queer Assistant Manager Ligonier Community Office ... for the record-breaking number of referrals made to the Asset Management and Trust Division. She proved to be the top referral source for the group this year, helping it to develop several new relationships and capture more than $2 million in new
business.  The year was a good one.  In the face of difficult times, our Commercial National managers and staff again managed well and improved the business so that investments of our shareholders could perform well and so that our communities could remain vibrant. We're working every day
to make banking - and life - even easier for all we're privileged to serve.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITIONDecember 31,

2000

1999ASSETSCash and due from banks on demand

$

9,532,528

$

8,654,617Interest bearing deposits with banks



284,136



558,781Federal funds sold



-



5,750,000Securities available for sale



104,703,464



124,743,186Loans



207,956,789



204,839,335Allowance for loan losses



(2,736,712)



(1,919,453)Net loans



205,220,077



202,919,882Premises and equipment



6,027,137



6,304,454Accrued interest receivable



1,941,771



2,057,925Other assets



2,156,010



4,309,145Total assets

$

329,865,123

$

355,297,990LIABILITIES AND STOCKHOLDERS' EQUITYLiabilities:Deposits:Non-interest bearing

$

49,027,941

$

41,534,998Interest bearing



217,583,429



231,412,405Total deposits



266,611,370



272,947,403Short-term borrowings



7,575,000



15,000,000Other liabilities



2,541,836



2,946,694Long-term borrowings



10,000,000



25,000,000Total liabilities



286,728,206



315,894,097Shareholders' equity:Common stock, par value $ 2 per share; authorized 10,000,000

shares; issued 3,600,000 shares; outstanding 3,458,355 and

3,539,643 shares in 2000 and 1999, respectively



7,200,000



7,200,000Retained earnings



37,438,970



35,190,986Accumulated other comprehensive income (loss), net of deferred

taxes 2000 $ 563,721; 1999 $ (931,218)



1,094,282



(1,807,660)45,733,252



40,583,326Less treasury stock, at cost, 141,645 and 60,357 shares in 2000

and 1999



(2,596,335)



(1,179,433)Total shareholders' equity



43,136,917



39,403,893Total liabilities and shareholders' equity

$

329,865,123

$

355,297,990  See Notes to Consolidated Financial Statements.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOMEYears Ended December 31,

2000

1999

1998Interest income:Interest and fees on loans

$

17,513,408

$

16,693,455

$

16,755,493Interest and dividends on securities:Taxable



6,916,752



5,432,186



4,967,679Exempt from federal income taxes



1,504,099



2,043,482



1,894,515Interest on deposits with banks



16,498



10,824



7,858Interest on federal funds sold



105,030



122,785



41,547Total interest income



26,055,787



24,302,732



23,667,092Interest expense



11,704,900



10,013,456



10,318,581Net interest income



14,350,887



14,289,276



13,348,511Provision for loan losses



1,176,000



3,289,706



435,000Net interest income after provision

for loan losses



13,174,887



10,999,570



12,913,511Other operating income:Service charges on deposit accounts



716,231



691,899



584,783Other service charges and fees



677,756



616,811



530,530Net security gains (losses)



(691,700)



(349,940)



10,113Trust department income



448,708



304,998



240,418Gain on sale of credit card loans



822,875



-



-Other income



391,048



721,452



367,246Total other operating income



2,364,918



1,985,220



1,733,090Other operating expenses:Salaries and employee benefits



5,108,578



5,111,197



4,883,607Net occupancy



588,858



580,883



604,730Furniture and equipment



890,429



712,922



601,934Pennsylvania shares tax



381,829



344,333



306,602Other expenses



2,519,329



2,544,746



2,143,771Total other operating expenses



9,489,023



9,294,081



8,540,644Income before income taxes



6,050,782



3,690,709



6,105,957Income tax expense



1,419,270



487,104



1,465,071Net income

$

4,631,512

$

3,203,605

$

4,640,886Net income per common share

$

1.32

$

0.90

$

1.29   See Notes to Consolidated Financial Statements.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYYears Ended December 31, 2000 and 1999Common

Stock

Retained

Earnings

(Deficit)

Accumulated

Other

Comprehensive

Income (Loss)

Treasury

Stock

Total

Stockholders'

EquityBalance, December 31, 1997

$

3,600,000

$

34,604,120

$

240,891

$

-

$

38,445,011Comprehensive income:Net income



-



4,640,886



-



-



4,640,886Change in unrealized net gains on

securities available for sale of

$ 1,594,427, net of reclassification

adjustment for losses included

in net income of $ (6,675)



-



-



1,587,752



-



1,587,752Total comprehensive income



















6,228,638Stock split in the form of a dividend



3,600,000



(3,600,000)



-



-



-Cash dividends declared, $ 0.42

per share



-



(1,512,000)



-



-



(1,512,000)Balance, December 31, 1998



7,200,000



34,133,006



1,828,643



-



43,161,649Comprehensive income:Net income



-



3,203,605



-



-



3,203,605Change in unrealized net losses on

securities available for sale of

$ (3,867,263), net of reclassifica-

tion adjustment for losses included

in net income of $ 230,960



-



-



(3,636,303)



-



(3,636,303)Total comprehensive loss



















(432,698)Cash dividends declared, $ 0.60

per share



-



(2,145,625)



-



-



(2,145,625)Purchases of treasury stock



-



-



-



(1,179,433)



(1,179,433)Balance, December 31, 1999



7,200,000



35,190,986



(1,807,660)



(1,179,433)



39,403,893Comprehensive income:Net income



-



4,631,512



-



-



4,631,512Change in unrealized net gains on

securities available for sale of

$ 2,445,420, net of reclassifica-

tion adjustment for losses included

in net income of $ 456,522











2,901,942







2,901,942-



-







-Total comprehensive income



















7,533,454Cash dividends declared, $ 0.68

per share



-



(2,383,528)



-



-



(2,383,528)Purchases of treasury stock



-



-



-



(1,416,902)



(1,416,902)Balance, December 31, 2000

$

7,200,000

$

37,438,970

$

1,094,282

$

(2,596,335)

$

43,136,917  See Notes to Consolidated Financial Statements.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended December 31,

2000

1999

1998CASH FLOWS FROM OPERATING ACTIVITIESNet income

$

4,631,512

$

3,203,605

$

4,640,886Adjustments to reconcile net income to net cash

provided by operating activities:Depreciation and amortization



793,492



717,001



604,772Provision for loan losses



1,176,000



3,289,706



435,000Net amortization (accretion) of securities and

loan fees



(297,449)



77,801



202,283Net security (gains) losses



691,700



349,940



(10,113)Gain on sale of credit card loans



(822,875)



-



-Deferred tax expense (benefit)



(78,687)



(118,693)



17,176Change in assets and liabilities:(Increase) decrease in:Accrued interest receivable



116,154



152,984



234,255Other assets



(108,064)



(403,630)



(185,021)Increase (decrease) in:Interest payable



(130,519)



316,569



52,939Income taxes payable



-



(3,307)



23,409Income taxes receivable



869,947



(963,219)



-Other liabilities



(274,339)



(69,128)



(130,976)Net cash provided by operating activities



6,566,872



6,549,629



5,884,610CASH FLOWS FROM INVESTING ACTIVITIESNet (increase) decrease in deposits with other banks



274,645



(490,846)



63,002(Increase) decrease in federal funds sold



5,750,000



(5,750,000)



-Purchases of securities available for sale



(58,047,132)



(69,437,582)



(25,334,138)Purchases of securities held to maturity



-



-



(1,966,778)Maturities, calls and principal repayments of securities

available for sale



15,524,813



28,192,935



7,654,065Proceeds from sales of securities available for sale



66,509,684



29,625,903



8,996,484Maturities and calls of securities held to maturity



-



-



12,175,000Net increase in loans



(8,946,824)



(16,084,250)



(9,069,590)Proceeds from sale of credit card loans



6,323,491



-



-Purchases of premises and equipment



(516,175)



(993,959)



(641,482)Net cash provided by (used in) investing activities



26,872,502



(34,937,799)



(8,123,437)CASH FLOWS FROM FINANCING ACTIVITIESNet increase (decrease) in deposits



(6,336,033)



6,486,882



5,770,764Net increase (decrease) in short-term borrowings



(7,425,000)



11,225,000



(14,075,000)Proceeds from issuance of long-term borrowings



-



15,000,000



10,000,000Repayments of long-term borrowings



(15,000,000)



-



-Dividends paid



(2,383,528)



(2,145,625)



(1,512,000)Purchase of treasury stock



(1,416,902)



(1,179,433)



-Net cash provided by (used in) financing activities



(32,561,463)



29,386,824



183,764Increase (decrease) in cash and cash

equivalents



877,911



998,654



(2,055,063)Cash and cash equivalents:Beginning



8,654,617



7,655,963



9,711,026Ending

$

9,532,528

$

8,654,617

$

7,655,963


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)Years Ended December 31,

2000

1999

1998SUPPLEMENTAL DISCLOSURES OF CASH FLOW

INFORMATIONCash payments for:Interest

$

11,835,419

$

9,696,887

$

10,265,642Income taxes

$

1,442,900

$

1,598,200

$

1,423,900   See Notes to Consolidated Financial Statements.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     1 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 Pennsylvania (the bank) and Commercial National
Investment Corporation. All material intercompany transactions have been eliminated.  The bank operates under a national bank charter and provides full banking services. The corporation is subject to regulation by the Federal Reserve Board and the bank is subject to regulation by the Office of the Comptroller of the Currency. The bank's
primary business consists of taking deposits and granting loans to customers who generally do business in the area of Westmoreland County, Pennsylvania.  The following summary of accounting and reporting policies is presented to aid the reader in obtaining a better understanding of the consolidated 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 consolidated 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 consolidated 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, 1999 and 1998 have been reclassified to conform with the December 31, 2000 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 reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity. Premiums and discounts are recognized as interest income using
the interest method over the terms of the securities.  Net gain or loss on the sale of securities is determined using the specific identification method.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     1 36177:



SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Loans: Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances. Interest income is accrued on the unpaid principal balance. Loan
origination fees are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The corporation is generally amortizing these amounts over the contractual life of the loan.  The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently
performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid
interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management's judgment as to the
collectibility of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total
contractual principal and interest is no longer in doubt.  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
: Foreclosed real estate is composed of property acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure and loans classified as in-substance foreclosure when the bank has taken possession of the collateral, regardless of
whether formal foreclosure proceedings take place. Foreclosed assets initially are recorded at fair value, net of estimated selling costs, at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed
by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell. Revenues and expenses form operations and changes in the valuation allowance are included in other expenses.  Allowance for loan losses: The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.  The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management's periodic evaluation of the adequacy of the allowance is based on the corporation's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant
factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     1 36461:



SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Allowance for loan losses (continued): A loan is considered impaired when, based on current information and events, it is probable that the association will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.
Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and
construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price or the fair value of the collateral if the loan is collateral dependent.  Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the corporation does not separately identify individual consumer and residential loans for impairment disclosures.  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.  Advertising costs: The corporation follows the policy of charging the costs of advertising expense as incurred. Total advertising expense for the years ended December 31, 2000, 1999 and 1998 was $72,000, $115,000 and $122,000, respectively.  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.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     1 36745:



SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Earnings per share: Earnings per share have been calculated on the weighted average number of shares outstanding of 3,511,603 in 2000, 3,578,894 shares in 1999 and 3,600,000 shares in 1998. 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 for 1998.  The corporation currently maintains a simple capital structure, thus there are no dilutive effects on earnings per share.  Treasury stock: The acquisition of treasury stock is recorded under the cost method. At the date of subsequent reissue, the treasury stock is reduced by the cost of such stock on the average cost basis, with any excess proceeds being credited to additional paid-in
capital.  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".  New accounting standards: In June 1998, the Financial Accounting Standards Board issued Statement No. 133 (as amended by Statement Nos. 137 and 138), Accounting for Derivative Instruments and Hedging Activities. This statement and its amendments establishes accounting and
reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other contracts, and requires that an entity recognize all derivatives as assets or liabilities in the balance sheet and measure
them at fair value. The statement requires that changes in the fair value of derivatives be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. The corporation is required to adopt the statement on January 1, 2001. The adoption of the statement did not have a significant impact on the financial condition or results of operations of the corporation.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     1 37023:



SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  New accounting standards (continued): In September 2000, the Financial Accounting Standards Board issued Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This statement replaces SFAS No. 125 of the same name. It revises the
standards of securitizations and other transfers of financial assets and collateral and requires certain disclosures, but carries over most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after March 31, 2001. The statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. This statement is to be applied prospectively with certain exceptions. Other than these exceptions, earlier or retroactive application of its accounting provision is not permitted. The adoption of the statement
is not expected to have a significant impact on the corporation.   2 37109:



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 average required reserve at December 31, 2000 and 1999 was approximately $ 3,370,000 and $ 2,549,000, respectively.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     3 37281:



SECURITIES  The amortized cost and fair values of securities are as follows:  Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Fair

ValueAvailable for sale securities:December 31, 2000:Obligations of U.S. Government

agencies

$

12,953,725

$

224,102

$

-

$

13,177,827Obligations of states and

political subdivisions



18,450,654



394,969



(101,601)



18,744,022Mortgage-backed securities



68,271,470



1,392,757



(252,224)



69,412,003Other securities



3,369,612



-



-



3,369,612$

103,045,461

$

2,011,828

$

(353,825)

$

104,703,464December 31, 1999:U.S. Treasury securities

$

3,002,818

$

5,312

$

-

$

3,008,130Obligations of U.S. Government

agencies



14,497,290



6,120



(60,218)



14,443,192Obligations of states and

political subdivisions



51,542,799



371,814



(903,809)



51,010,804Mortgage-backed securities



55,067,520



-



(2,158,098)



52,909,422Other securities



3,371,638



-



-



3,371,638$

127,482,065

$

383,246

$

(3,122,125)

$

124,743,186


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     3 SECURITIES (CONTINUED)  The amortized cost and fair values of securities at December 31, 2000 by contractual maturity, are shown below. Mortgage-backed security maturities are based upon their estimated 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.  Amortized

Cost

Fair

ValueDue in one year or less

$

-

$

-Due after one year through five years



22,697,365



22,949,200Due after five years through ten years



54,704,507



55,177,634Due after ten years



22,273,977



23,207,018Equity securities



3,369,612



3,369,612$

103,045,461

$

104,703,464  Securities with amortized cost and fair values of $33,896,711 and $33,919,513, respectively, at December 31, 2000 and $62,760,127 and $60,739,684, respectively, at December 31, 1999 were pledged to secure public deposits and for other purposes
required or permitted by law.  Gross gains of $400,475, $243,708 and $17,915 and gross losses of $1,092,175, $593,648 and $7,802 were realized on those sales and calls during 2000, 1999 and 1998, respectively.  Equity securities consist of restricted investments of Federal Reserve Bank stock, Federal Home Loan Bank stock and an investment in Commercial National Insurance Services.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     4 LOANS  Loans at December 31, 2000 and 1999 are summarized as follows
:  2000

1999Commercial loans

$

25,802,529

$

23,069,385Real estate loans:Commercial



66,051,811



59,386,543Construction



2,380,737



4,275,988Other



100,347,143



99,769,594Installment loans



3,433,993



4,396,065Municipal loans



7,114,306



4,290,289Other loans



2,891,746



9,771,934$

208,022,265

$

204,959,798    The corporation's loan portfolio is collateralized with assets located 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.  During 2000, the corporation sold its credit card loan portfolio which had a principal balance of $ 6.3 million. The gain recognized on this sale was $ 822,875, which is included in other income.   5 ALLOWANCE FOR LOAN LOSSES  Transactions in the allowance for loan losses are summarized as follows:  2000

1999

1998Balance, January 1

$

1,919,453

$

1,914,174

$

1,882,251Loss charged against the allowance



(395,276)



(3,308,023)



(412,867)Recoveries on previously charged-off

loans



36,535



23,596



9,790Provision charged to operating

expense



1,176,000



3,289,706



435,000Balance, December 31

$

2,736,712

$

1,919,453

$

1,914,174    At December 31, 2000 and 1999, the recorded investment in loans considered to be impaired was
 $ 13,195,222 and $ 3,900,080, respectively. The average recorded investment in impaired loans during 2000, 1999 and 1998 was $ 14,569,050, $ 6,697,653 and $ 4,545,916, respectively. Impaired loan, with balances of $3,656,173 and
#288,242 at December 31, 2000 and 1999, had related allowance for loan losses of $1,601,651 and $95,181, respectively. Interest income on impaired loans of $1,302,588, $ 624,414 and $ 331,642 was recognized for cash payments received in 2000,
1999 and 1998, respectively.    COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     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:  2000

1999Financial instruments whose contracts amounts

represent credit risk:Commitments to extend credit

$

35,543,427

$

65,792,354Standby letters of credit



1,400,131



1,787,191Financial standby letters of credit



3,462,355



4,154,814  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.   COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   7 PREMISES AND EQUIPMENT  The depreciation and amortization on premises and equipment charged to operating expense amounted to $ 793,492 and $ 717,001 in 2000 and 1999, respectively.  The composition of premises and equipment at December 31, 2000 and 1999 is as follows:  2000

1999Premises

$

6,261,195

$

6,119,503Leasehold improvements



214,866



214,866Furniture and equipment



4,892,068



6,419,24411,368,129



12,753,613Less accumulated depreciation and amortization



6,167,223



7,275,3905,200,906



5,478,223Land



826,231



826,231$

6,027,137

$

6,304,454   8 INTEREST BEARING DEPOSITS  Interest bearing deposits include certificates of deposit issued in denominations of $ 100,000 or more which amounted to $ 34,075,448 and $ 37,315,340 at December 31, 2000 and 1999, respectively. Interest expense related to
certificates of $ 100,000 or greater was $ 3,236,224, $ 1,870,326 and $ 1,587,148 for the years ended December 31, 2000, 1999 and 1998, respectively.  Interest bearing deposits at December 31, 2000 and 1999 are detailed as follows:  2000

1999Savings accounts

$

44,156,613

$

45,991,977NOW accounts



13,044,025



13,056,700Money market NOW accounts



8,200,474



9,235,891FIMM accounts



37,727,396



46,098,370Time deposits



114,454,921



117,029,467$

217,583,429

$

231,412,405   COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     8 44243:



INTEREST BEARING DEPOSITS (CONTINUED)  Included in time deposits at December 31, 2000 were certificates of deposit with the following scheduled maturities:  2001





$

84,367,0942002







14,865,8902003







7,258,5822004







2,213,0852005 and thereafter







5,750,270$

114,454,921   9 44719:



SHORT-TERM BORROWINGS  Short-term borrowings at December 31, 2000 and 1999 were as follows:  Ending

Balance

Average

Balance

Average

RateDecember 31, 2000:Federal funds purchased

$

2,575,000

$

1,836,270

6.54

%Borrowings from Federal Home Loan Bank



5,000,000



6,666,667

5.38$

7,575,000

$

8,502,937

5.63

%Maximum total at any month-end

$

25,875,000December 31, 1999:Federal funds purchased

$

-

$

2,168,767

5.37

%Borrowings from Federal Home Loan Bank



15,000,000



6,412,260

5.53$

15,000,000

$

8,581,027

5.49

%Maximum total at any month-end

$

25,000,000


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     9 SHORT-TERM BORROWINGS (CONTINUED)  At December 31, 1999, the corporation had an approved but unused line of credit with the Federal Home Loan Bank of $ 10,000,000.  Interest expense on short-term borrowings for the years ended December 31, 2000, 1999 and 1998 is detailed as follows:  2000

1999

1998Federal funds purchased

$

120,149

$

116,389

$

134,332Federal Reserve Discount Window



-



477



-Borrowings from Federal Home Loan

Bank



358,528



354,846



493,784Total interest on short-term

borrowings

$

478,677

$

471,712

$

628,116   10 LONG-TERM BORROWINGS  Long-term borrowings consist of Federal Home Loan Bank (FHLB) Advances which are collateralized by certain mortgages and investment securities. The bank is required to maintain an investment in the capital stock of the FHLB of Pittsburgh in an amount of
either 1% of mortgage related assets as calculated at December 31 of each year.  Advances from the FHLB at December 31, 2000 and 1999 consist of the following:  2000

1999Stated Maturity



Amount

Weighted

Average

Rate

Amount

Weighted

Average

RateJanuary 2001











$

5,000,000

5.70

%December 2002





-







5,000,000

6.93December 2004





-







5,000,000

7.00November 2005





5,000,000

4.82





5,000,000

4.82March 2009





5,000,000

5.52





5,000,000

5.52$

10,000,000

5.17

%

$

25,000,000

5.43

$


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     10 LONG-TERM BORROWINGS (CONTINUED)  Of the outstanding advances, $ 10,000,000 are convertible rate notes which carry an option, at the interest rate change date, to repay the advance without incurring a prepayment penalty.  Advances from the FHLB of Pittsburgh are secured by the bank's stock in the FHLB of Pittsburgh, qualifying residential mortgage loans, U.S. Government securities, U.S. agency securities and mortgage-backed securities issued or guaranteed by GNMA, FHLMC
and FNMA to the extent that the defined statutory value must be at least equal to the advances outstanding. The maximum remaining borrowing capacity at December 31, 2000 is $ 163,000,000.  11 EMPLOYEE BENEFIT 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 $ 605,651, $ 580,000 and $ 506,572, for the years ended December 31, 2000, 1999 and
1998, respectively.  12 COMPREHENSIVE INCOME  Comprehensive income: Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, are reported
as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.  The components of other comprehensive income and related tax effects for the years ended December 3, 2000, 1999 and 1998 are as follows:  2000

1999

1998Gross change in unrealized gain (loss) on

securities available for sale

$

3,705,181

$

(5,859,489)

$

2,415,797Less reclassification adjustment for (gains) losses realized in income



691,700



349,940



(10,113)Net unrealized gains (losses)



4,396,881



(5,509,549)



2,405,684Tax effect



1,494,939



(1,873,246)



817,932Net of tax amount

$

2,901,942

$

(3,636,303)

$

1,587,752


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     13 INCOME TAXES  The components of the net deferred tax assets at December 31, 2000 and 1999 are as follows:  2000

1999Unrealized net losses on securities available for sale

$

-

$

931,218Allowance for loan losses



771,677



663,680Accrued benefits



135,067



138,433Deferred loan fees



22,262



40,957Premises and equipment



-



405Total deferred tax assets



929,006



1,774,693Securities accretion



69,221



62,377Unrealized net gains on securities available for sale



563,721



-Total deferred tax liabilities



632,942



62,377Net deferred tax asset

$

296,064

$

1,712,316  The income tax provision is summarized for the years ended December 31, 2000, 1999 and 1998 is as follows:  2000

1999

1998Current

$ 1,497,957

$605,796

$1,447,894Deferred

(78,687)

(118,692)

17,177$1,419,270

$ 487,104

$ 1,465,071   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, 2000, 1999 and 1998 are as follows:  2000

1999

1998Tax at statutory rates

$

2,057,262

$

1,254,841

$

2,076,611Increase (decrease) resulting from:Non-taxable interest and dividend

income



(709,589)



(759,541)



(700,181)Non-deductible interest expense



92,376



90,021



89,263Life insurance



(26,964)



(105,819)



(7,458)Other



6,185



7,602



6,836$

1,419,270

$

487,104

$

1,465,071


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     14 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 as of December 15, 1998. The stock split in the form of a stock dividend has been given
retroactive effect and per share data for the prior period presented has been restated.   15 FAIR VALUE OF FINANCIAL INSTRUMENTS  Below are various estimated fair values at December 31, 2000 and 1999, 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 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.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     15 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED

)  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.  Deposit liabilities: 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.  Accrued interest receivable and payable: The carrying amount of accrued interest receivable and payable is considered a reasonable estimate of fair value.   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


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     15 52065:



FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED

)  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 December 31, 2000

December 31, 1999Carrying

Amount

Fair

Value

Carrying

Amount

Fair

ValueFinancial assets:Cash and short-term

investments

$

9,816,664

$

9,816,664

$

14,963,398

$

14,963,398Securities available for

sale



104,703,464



104,703,464



124,743,186



124,743,186Loans, net of allowance



205,220,077



201,249,728



202,919,882



203,460,163Accrued interest

receivable



1,941,771



1,941,771



2,057,925



2,057,925Financial liabilities:Deposits



266,611,370



267,491,524



272,947,403



273,642,038Short-term borrowings



7,575,000



7,575,000



15,000,000



15,000,000Accrued interest

payable



1,473,521



1,473,521



1,604,041



1,604,041Long-term borrowings



10,000,000



9,624,100



25,000,000



24,581,867Off-balance sheet financial instruments



-



-



-



-   16 RELATED PARTY TRANSACTIONS  Some of the corporation's or the bank's directors, principal officers, principal stockholders and their related interests had transactions with the bank in the ordinary course of business during 2000. 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 $ 3,439,165
and $ 7,218,856 at December 31, 2000 and 1999, respectively.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     16 RELATED PARTY TRANSACTIONS (CONTINUED)  The following is an analysis of loans to those parties whose loan balances exceeded $ 60,000 for the year ended December 31, 2000:  Balance, January 1

$

3,634,540Advances



3,649,505Repayments



(5,381,939)Balance, December 31

$

1,902,106  During 2000, the corporation had loan advances to certain directors which, when aggregated with loans existing prior to January 1, 2000, caused their aggregate loan balances to exceed $ 60,000. Therefore, the balance at January 1, 2000
was adjusted to reflect these directors' loan additions.  17 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) to average assets (as defined). Management believes, as of December 31, 2000, that the corporation and the bank meet all capital adequacy requirements to which they are subject.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     17 54447:



CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS (CONTINUED)  As of December 31, 2000, 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 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.  Actual

For Capital

Adequacy

Purposes

To Be Well

Capitalized Under

Prompt Corrective

Action ProvisionsAmount

Ratio

Amount

Ratio

Amount

RatioAs of December 31, 2000:Total capital (to risk weighted assets):Commercial National Financial

Corp.

$

44,507,063

22.6

%

$

3

15,750,559

3

8.0Commercial National Bank



44,502,326

22.6





3

15,746,792

3

8.0

%

$

3

19,683,490

3

10.0

%Tier I capital (to risk weighted assets):Commercial National Financial

Corp.



42,042,635

21.4





3

7,875,279

3

4.0Commercial National Bank



42,038,479

21.4





3

7,873,396

3

4.0





3

11,810,094

3

6.0Tier I capital (to average assets):Commercial National Financial

Corp.



42,042,635

12.5





3

13,486,633

3

4.0Commercial National Bank



42,038,479

12.5





3

13,486,088

3

4.0





3

16,857,610

3

5.0As of December 31, 1999:Total capital (to risk weighted assets)Commercial National Financial

Corp.

$

43,131,006

20.8

%

$

3

16,592,553

3

8.0Commercial National Bank



43,150,074

20.8





3

16,591,455

3

8.0

%

$

3

20,739,319

3

10.0

%Tier I capital (to risk weighted assets)Commercial National Financial

Corp.



41,211,553

19.9





3

8,296,276

3

4.0Commercial National Bank



41,230,621

19.9





3

8,295,727

3

4.0





3

12,443,591

3

6.0Tier I capital (to average assets)Commercial National Financial

Corp.



41,211,553

11.8





3

14,006,993

3

4.0Commercial National Bank



41,230,621

11.8





3

13,925,709

3

4.0





3

17,407,136

3

5.0  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 to a maximum of $ 3,850,000 at December 31,
2000. These restrictions have not had, and are not expected to have, a significant impact on the corporation's ability to meet its cash obligations.


COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    18 CONDENSED FINANCIAL INFORMATION OF COMMERCIAL NATIONAL FINANCIAL CORPORATION (PARENT ONLY)  BALANCE SHEETSDecember 31,

2000

1999ASSETSCash

$

1,910

$

4,620Investment in subsidiary, Commercial National Bank of Pennsylvania



43,132,761



39,422,961Investment in subsidiary, Commercial National Insurance Services



13,634



15,758Other Assets



3,092



-$

43,151,397

$

39,443,339LIABILITY AND STOCKHOLDERS' EQUITYLiability, accounts payable

$

14,481

$

39,446Stockholders' equity



43,136,916



39,403,893$

43,151,917

$

39,443,339  STATEMENTS OF INCOMEYears Ended December 31,

2000

1999

1998Dividends from subsidiary, Commercial National Bank of Pennsylvania

$

3,800,430

$

3,325,058

$

1,512,000Fees from subsidiary, Commercial National Bank of Pennsylvania



161,500



147,000



70,000Expenses



123,094



152,245



109,9973,838,836



3,319,813



1,472,003Applicable tax benefit (expense)



(13,059)



1,784



13,0143,825,777



3,321,597



1,485,017Equity in undistributed earnings of subsidiaries



805,735



(117,992)



3,155,869Net income

$

4,631,512

$

3,203,605

$

4,640,886   COMMERCIAL NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     18 CONDENSED FINANCIAL INFORMATION OF COMMERCIAL NATIONAL FINANCIAL CORPORATION (PARENT ONLY) (CONTINUED)  STATEMENTS OF CASH FLOWSYears Ended December 31,

2000

1999

1998CASH FLOWS FROM OPERATING

ACTIVITIESNet income

$

4,631,512

$

3,203,605

$

4,640,886Adjustments to reconcile net income to

net cash provided by operating

activities:Equity in undistributed earnings of

subsidiaries



(805,735



117,992



(3,155,869)(Increase) in other assets



(3,092)



-



-Increase (decrease) in accounts

payable



(24,965)



1,640



(9,100)Net cash provided by operating

activities



3,797,720



3,323,237



1,475,917CASH FLOWS USED IN INVESTING

ACTIVITIESInvestment subsidiary



-



-



(20,000)CASH FLOWS FROM FINANCING

ACTIVITIESDividends paid



(2,383,528)



(2,145,625)



(1,512,000)Purchase of treasury stock



(1,416,902)



(1,179,433)



-Net cash used in financing

activities



(3,800,430)



(3,325,058)



(1,512,000)Decrease in cash



(2,710)



(1,821)



(56,083)Cash:Beginning



4,620



6,441



62,524Ending

$

1,910

$

4,620

$

6,441   INDEPENDENT AUDITOR'S REPORT     To the Board of Directors and Stockholders Commercial National Financial Corporation and Subsidiaries Latrobe, Pennsylvania   We have audited the accompanying consolidated statement of financial condition of Commercial National Financial Corporation and subsidiaries as of December 31, 2000, and the related consolidated statements of income, stockholders' equity and cash
flows for the year then ended. 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 audit. The consolidated
financial statements of Commercial National Financial Corporation for the years ended December 31, 1999 and 1998 were audited by other auditors whose report, dated January 28, 2000, expressed an unqualified opinion on those statements.   We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.   In our opinion, the 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, 2000, and the results of their operations
and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.   /s/ Beard Miller Company LLP Pittsburgh, Pennsylvania January 28 2001  (logo)  Beard Miller Company

LLP Certified Public Accountants and Consultants
MANAGEMENT'S STATEMENT ON FINANCIAL REPORTING  The management of Commercial National Financial Corporation and its subsidiaries, Commercial National Bank of Pennsylvania and Commercial National Investment Corporation, is 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 material 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 corporation'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 acc
ounting control, accounting, auditing and financial reporting matters.   Quarterly Summary of Financial Data (Unaudited)  The unaudited quarterly results of operations for the years ended December 31, 2000 and December 31, 1999 are as follows:  2000First

Second

Third

FourthQuarter

Quarter

Quarter

QuarterInterest income

$6,536,808

$6,505,292

$6,756,149

$6,437,538Interest expense

2,774,878

2,869,095

3,081,376

2,979,551Net interest income

3,581,930

3,636,197

3,674,773

3,457,987Provision for loan losses

165,000

465,000

510,000

36,000Net interest income afterProvision for loan losses

3,416,930

3,171,197

3,164,773

3,421,987Other income (including securityTransactions)

507,090

525,978

577,761

754,089Other expenses

2,397,809

2,351,330

2,387,386

2,352,498Income before taxes

1,526,211

1,345,845

1,355,148

1,823,578Applicable income taxes

304,700

308,500

345,900

460,170Net income

$1,221,511

$1,037,345

$1,009,248

$1,363,408Earnings per share

$ .35

$ .29

$ .29

$ .39  1999First

Second

Third

FourthQuarter

Quarter

Quarter

QuarterInterest income

$5,956,183

$5,975,508

$6,123,967

$6,247,074Interest expense

2,409,985

2,411,734

2,497,350

2,694,387Net interest income

3,546,198

3,563,774

3,626,617

3,552,687Provision for loan losses

120,000

120,000

165,000

2,884,706Net interest income afterProvision for loan losses

3,426,198

3,443,774

3,461,617

667,981Other income (including securityTransactions)

539,806

490,705

528,743

425,966Other expenses

2,271,739

2,268,946

2,306,697

2,446,699Income before taxes

1,694,265

1,665,533

1,683,663

(1,352,752)Applicable income taxes

407,800

406,100

420,500

(747,296)Net income

$1,286,465

$1,259,433

$1,263,163

$ ( 605,456)Earnings per share

$ .36

$ .35

$ .35

$ ( .16)


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.   Cash Dividend2000



High



Low



Per ShareFirst Quarter

$

18.50

$

13.50

$

.17Second Quarter



19.75



13.63



.17Third Quarter



18.50



13.25



.17Fourth Quarter



18.25



14.63



.171999First Quarter

$

21.50

$

19.50

$

.13Second Quarter



20.00



17.88



.15Third Quarter



19.25



17.00



.15Fourth Quarter



21.25



15.38



.17    Commercial 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."  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. Years Ended December 312000

1999

1998

1997

1996Interest incomeInterest & fees on loans

$17,513,408

$ 16,693,455

$ 16,755,493

$ 15,312,410

$ 13,549,080Interest & dividends onsecurities

8,420,851

7,475,668

6,862,194

6,521,952

6,305,557Interest on money marketinvestments

121,528

133,609

49,405

47,530

92,930Total interest income

26,055,787

24,302,732

23,667,092

21,881,892

19,947,567Interest expense-deposits

9,336,596

8,749,173

9,537,002

9,388,643

8,394,110Interest expense-short-term borrowings

528,580

471,711

493,784

288,495

51,016Interest expense-long-term borrowings

1,839,724

792,572

287,795

-

-Total interest expense

11,704,900

10,013,456

10,318,581

9,677,138

8,445,126Net interest income

14,350,887

14,289,276

13,348,511

12,204,754

11,502,441Provision for loan losses

1,176,000

3,289,706

435,000

270,000

105,000Net interest income afterprovision for loan losses

13,174,887

10,999,570

12,913,511

11,934,754

11,397,441Other operating income

2,364,918

1,985,220

1,733,090

1,489,069

1,256,190Other operating expenses

9,489,023

9,294,081

8,540,644

8,063,437

7,644,576Income before taxes

6,050,782

3,690,709

6,105,957

5,360,386

5,009,055Applicable income taxes

1,419,270

487,104

1,465,071

1,273,777

1,252,589Net income

$ 4,631,512

$ 3,203,605

$ 4,640,886

$ 4,086,609

$ 3,756,466Per share dataNet income

$ 1.32

$ .90

$ 1.29

$ 1.14

$ 1.04Dividends declared

$ .68

$ .60

$ .42

$ .35

$ .31Average shares outstanding (a)

3,511,603

3,578,894

3,600,000

3,600,000

3,600,000At end of periodTotal assets

$329,865,123

$355,297,990

$326,379,353

$319,741,956

$278,110,524Securities

104,783,464

124,743,186

119,090,980

118,382,089

102,355,972Loans and leases, net ofunearned income

207,956,789

204,839,335

192,115,160

183,481,157

159,935,523Allowance for loan losses

2,736,712

1,919,453

1,914,174

1,882,251

2,035,818Deposits

266,611,370

272,947,403

266,460,521

260,689,757

238,808,071Shareholders' equity

43,136,917

39,403,893

43,161,649

38,445,011

35,388,254Key ratiosReturn on average assets

1.32%

.95%

1.46%

1.39%

1.39%Return on average equity

11.21

7.50

11.47

11.14

11.02Net loans-to-deposit ratio

78.00

74.34

71.38

69.66

66.12Dividend payout ratio (dividendsdeclared divided by net income)

51.46

66.98

32.58

30.83

29.87Equity-to-assets ratio (average equitydivided by average total assets)

11.82

12.68

12.72

12.47

12.64 (a) Retroactively adjusted for a two-for-one stock split in the form of a dividend declared in November 1998.  Management's Discussion and Analysis of Financial Condition and Results of Operations   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, 2000, 1999 and 1998. 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 2000 was $4,631,512, compared to $3,203,605 in 1999 and $4,640,886 in 1998. Earnings per share were $1.32 in 2000 compared to 1999's earnings of $.90 and $1.29 in 1998. The significant difference in net income and earnings per share
resulted from the charge of $2,619,706 taken when a single commercial customer defaulted on borrowings. The after-tax effect of the loss decreased 1999 income by $1,729,006.  Return on average assets was 1.32% in 2000, .95% in 1999 and 1.46% in 1998. For the same years return on average equity was 11.21%, 7.50% and 11.47%, respectively. Return on average assets and return on average equity for 1999 were adversely affected by
the previously described charge-off.  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 2000, net interest income was $14,350,887
compared to $14,289,276 in 1999 and $13,348,511 in 1998. The return on earning assets, calculated on a tax-equivalent basis, equaled 8.08% in 2000 compared to 7.94% in 1999 and 8.20% in 1998. The cost-of- funds rate was 4.47% in 2000, 4.00% in 1999 and
4.35% in 1998. The increase in 2000 was due to rising rates that were associated with an overheating economy through most of the year. The tax-equivalent net interest margin was 4.60% in 2000, 4.82% in 1999 and 4.78% in 1998. Higher cost of funding in a
rising rate environment coupled with the loss of ongoing interest income from the credit card loan portfolio sale were the major contributing factors to a lower net interest margin in 2000.   Average earning assets grew $15,195,803 in 2000, $18,875,552 in 1999 and $20,956,507 in 1998. Loan growth in the first half of the year offset the sale of the credit card portfolio and contributed heavily towards the increase in average earning assets
over 1999.  Average interest-bearing liabilities increased $11,740,155 in 2000, $13,088,953 in 1999 and $15,869,057 in 1998. Funding needed to support loan growth in 2000 was primarily led by average increases in long-term debt from the Federal Home Loan Bank and
time deposits.    C
OMMERCIAL NATIONAL FINANCIAL CORPORATIONFinancial ComparisonsConsolidated Average Balance Sheet, Interest Income/Expense and Rates   2000

1999

1998   Average

Interest

Yield or

Average

Interest

Yield or

Average

Interest

Yield orBalance

Income/

Rate (a)

Balance

Income/

Rate (a)

Balance

Income/

Rate (a)Expense





Expense





ExpenseInterest-earning AssetsLoans (b)(c) net of unearned income

$207,343,068

$17,513,408

8.59%

$194,664,755

$16,693,455

8.58%

$186,418,665

$16,755,493

9.03%Taxable securities

96,284,706

6,916,752

7.18

82,519,029

5,432,186

6.58

77,380,692

4,967,679

6.42Non-taxable securities

29,970,497

1,504,099

7.60

40,568,028

2,043,482

7.63

36,888,885

1,894,515

7.78Interest-bearing deposits with banks

233,496

16,498

7.07

136,426

10,824

7.93

108,280

7,858

7.26Federal funds sold

1,795,014

105,030

5.85

2,542,740

122,785

4.83

758,904

41,547

5.47Total earning assets

335,626,781

26,055,787

8.08

320,430,978

24,302,732

7.94

301,555,426

23,667,092

8.20Non-interest-earning AssetsCash

7,481,338





7,826,298





7,027,443Allowance for loan losses

(2,283,390)





(1,909,438)





(1,876,326)Other assets

8,798,388





10,460,125





11,117,942Total non-interest-earning assets

13,996,336





16,376,985





16,269,059Total assets

$349,623,117





$336,807,963





$317,824,485Liabilities and Shareholders' EquityInterest-bearing DepositsNOW accounts

$20,552,997

139,885

.68

$21,376,716

154,154

.72

$20,709,992

350,081

1.69Money Market accounts

43,301,728

1,527,244

3.53

43,545,503

1,528,089

3.51

41,921,741

1,630,147

3.89Savings deposits

45,405,821

1,153,342

2.54

46,836,966

1,180,938

2.52

45,672,055

1,337,385

2.93Time deposits

118,235,702

6,516,125

5.51

115,189,889

5,885,992

5.11

112,647,588

6,085,057

5.40Short-term borrowings

8,113,319

528,580

6.51

8,588,090

471,711

5.49

10,976,287

628,116

5.72Long-term borrowings

26,270,492

1,839,724

7.00

14,602,740

792,572

5.43

5,123,288

287,795

5.62Total interest-bearing liabilities

261,880,059

11,704,900

4.47

250,139,904

10,013,456

4.00

237,050,951

10,318,581

4.35Non-interest-bearing deposits

45,127,383





41,744,536





37,565,870Other liabilities

1,297,731





2,227,436





2,756,896Shareholders' equity

41,317,944





42,696,087





40,450,768Total non-interest-bearingfunding sources

87,743,058





86,668,059





80,773,534Total liabilities andshareholders' equity

$349,623,117





$336,807,963





$317,824,485Net Interest Income and Net Yieldon Interest Earning Assets



$14,350,887

4.60%



$14,289,276

4.82%



$13,348,511

4.78% (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.  The following table illustrates the impact a  The following table illustrates the impact and interaction of rate and volume changes for the years under review: Analysis of Year-to-Year Changes in Net Interest Income  2000 Change from 1999

1999 Change from 1998Total

Change Due

Change Due

Total

Change Due

Change DueChange

To Volume

to Rate

Change

to Volume

To Rate to Volume to RateInterest-earning assetsLoans net of unearned income

$ 819,953

$1,087,227

$(267,274)

$(62,038)

$741,166

$(803,204)SecuritiesTaxable

1,484,566

906,187

578,379

464,507

347,035

117,472Non-taxable

(539,383)

(533,816)

(5,567)

148,967

171,786

(22,819)Interest-bearing deposits with banks

5,674

7,702

(2,028)

2,966

2,043

923Federal funds sold

(17,755)

(36,107)

18,352

81,238

97,658

(16,420)Total interest income

1,753,055

1,431,193

321,862

635,640

1,359,688

(724,048)Interest-bearing liabilitiesDeposits

587,423

21,094

566,329

(787,829)

120,902

(908,731)Short-term borrowings

56,869

(26,077)

82,946

( 22,073)

( 2,332)

(19,741)Long-term borrowings

1,047,152

633,273

413,879

504,777

532,498

(27,721)Total interest expense

1,691,444

628,290

1,063,154

(305,125)

651,068

(956,193)Net interest income

$ 61,611

$802,903

$(741,292)

$940,765

$708,620

$232,145 Included in interest income are loan fees of $329,339 in 2000, $211,752 in 1999 and $305,826 in 1998.   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 $1,176,000 in 2000, $3,289,706 in 1999 and $435,000 in 1998. During 2000, the corporation implemented and completed additional enhancements of loan review and allowance for loan losses adequacy. The
allowance increased by approximately $800,000 over 1999 while total loans increased only $440,000. For each of the same years the net charge-off against the allowance for loan losses was $358,741, $3,284,427 and $403,077, respectively. On December 31,
2000 the allowance for loan losses equaled 1.32% of total loans compared to .94% at the end of 1999 and 1.00% at the end of 1998. Loans that were past due 90 days or more, or were on non-accrual equaled .39% of total loans on December 31, 2000, 0.58% on
December 31, 1999 and 0.22% on December 31, 1998. 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 that raise concerns regarding future adverse impact on operating results, liquidity or capital resources.   Other Operating Income and Expense  Total other operating income for 2000 of $2,364,918 increased by $379,698 from the $1,985,220 earned in 1999. The year was productive for our Asset Management and Trust Division as the unit added new products and services, resulting in the addition of
numerous new clients. Those efforts generated asset management and trust income of $448,708, up from last year by $143,710. Service charges on deposit accounts grew $24,332 to $716,231. Other service charges and fees increased by $60,945 to $677,756. Net
losses on sold investments amounted to $691,700. To ensure earnings stability in future years, the bank repositioned the investment portfolio to take advantage of higher yields available in the bond market. Other income increased by $492,471 to
$1,213,923, including a premium of $822,875 received by the bank for the sale of its credit-card loan portfolio which was utilized to offset securities portfolio restructuring costs. In 1998, total other operating income was $1,733,090.  Total other operating expense in 2000 amounted to $9,489,023, and increase of $194,942 over the $9,294,081 logged in 1999. A commitment by management to control operating expense helped hold the increase to a minimal 2 percent. Accounting for a majority
of the increase, $177,507 was expensed for furniture and equipment requiring annual maintenance and upgrades. Personnel expense, accounting for more than 50% of total non-interest expense, actually decreased $2,619. The change is attributed to savings
realized by incentive compensation accrual reductions due to the bank not reaching the specified goals required to trigger certain aspects of the incentive performance plan. Net occupancy expense increased by a modest $7,975. Pennsylvania shares tax
increased $37,496 over 1999 while other operating expense decreased $25,4172. Total other operating expense in 1998 was $8,540,644.  Income tax expense was $1,419,270 in 2000, $487,104 in 1999 and $1,465,071 in 1998. The effective tax rate was 23.46%, 13.20% and 23.99%, respectively. The reason for 1999's lower effective tax rate was related to the write-off of loans held by one large
commercial account.  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. The bank is a member of the Federal Home Loan Bank (FHLB)
system. The FHLB provides an additional source for liquidity for long- and short-term funding. Other supplemental external sources have been established for short-term funding.  On December 31, 2000, total deposits were $6,336,033 less than on December 31, 1999. Interest bearing deposits decreased $13,828,976 in 2000 while demand deposits increased $7,492,943. The decrease in interest bearing deposits was attributed to
competitive pricing in a rising rate environment and maturities of jumbo certificates of deposit.  The amortized cost of the corporation's securities portfolio was $103,045,461 on December 31, 2000. On that same date, the estimated market value of the entire securities portfolio was $104,703,464 which was higher than amortized cost by $1,658,003 and
represented the net of $2,011,828 gross unrealized gains less $353,825 gross unrealized losses.  For December 31, the corporation had available funding of approximately $163,000,000 at the FHLB with an additional $30,000,000 of short-term funding available through federal funds lines of credit.


The following tables present a five-year summary of loan classifications and the maturity distribution of securities on December 31, 2000.  Loans by Classification on December 31,2000



1999



1998



1997



1996Cent Amount Cent Amount Cent Amount Cent Amount CentCommercial

$25,802,529

12%

$23,069,385

11%

$20,893,911

11%

$19,052,486

10%

$17,115,404

11%Real estate - commercial

66,051,811

32

59,386,543

29

52,165,384

27

44,289,723

24

33,437,360

21Real estate - construction

2,380,737

1

4,275,988

2

2,754,964

1

3,510,809

2

1,924,619

1Real estate - other

100,347,143

48

99,769,594

49

96,210,304

50

95,570,632

52

86,045,874

54Consumer - installment

3,433,993

2

4,396,065

2

5,388,246

3

6,219,577

4

6,542,365

4Municipal

7,114,306

4

4,290,289

2

3,757,563

2

3,340,405

2

3,183,483

2Other

2,891,746

1

9,771,934

5

11,068,877

6

11,655,453

6

11,799,130

7Total loans

208,022,265

100%

204,959,798

100%

192,239,249

100%

183,639,085

100%

160,048,235

100%Unearned income

(65,476)



(120,463)



(124,089)



(157,928)



(112,712)Total loans, net ofunearned income

$207,956,789



$204,839,335



$192,115,160



$183,481,157



$159,935,523    Maturity Distribution of Securities on December 31, 2000U.S. Treasury

State &



Total

Weighted& other U.S. Govt.

Political

Other

Amortized

AverageAgencies & Corp.

Subdivisions (1)

Securities

Cost

YieldWithin 1 year

$ -

$ -

$ -

$ -After 1 but within 5 years

16,574,358

6,123,007

-

22,697,365

7.11After 5 but within 10 years

42,376,860

12,327,647

-

54,704,507

7.27After 10 years

22,273,977

-

-

22,273,977

7.56No fixed maturity

-

-

3,369,612

3,369,612

8.62$81,225,195

$18,450,654

$3,369,612

$103,045,461

7.34% (1) Yield on tax-exempt obligations has been computed on a fully tax-equivalent basis (using statutory federal income tax rate of 34%)


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.    Interest Sensitivity Analysis (In thousands)0-30 Days



31-90 Days



91-180 Days



181-365Days



1-5 Years



Over 5 YearsInterest-earning assets:Securities

$

521

$

1,052

$

1,601

$

3,250

$

41,089

$

52,163Federal funds sold &other deposits with banks



284



-



-



-



-



-Loans



31,751



3,771



5,405



13,842



85,694



66,958Total interest-sensitiveAssets



32,556



4,823



7,006



17,092



126,783



119,121Interest-bearing liabilities:Certificates of deposit



14,790



21,175



18,767



29,502



24,337



5,750Other interest-bearing liabilities



-



4,122



4,122



6,009



39,222



49,787Other-term borrowings



7,575

-

-



-



5,000



5,000



-Total interest-sensitiveLiabilities



22,365



25,297



22,889



40,511



68,559



55,537Interest sensitivity gap

$

10,191

$

(20,474)

$

(15,883)

$

(23,419)

$

58,224

$

63,584Cumulative gap

$

10,191

$

(10,283)

$

(26,166)

$

(49,585)

$

8,639

$

72,223Ratio of cumulative gap toearning assets



3.26%



(3.29%)



(8.38%)



(15.87%)



2.77%



23.12%


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, 2000 and December 31, 1999 according to the categories indicated:    Allocation of the Allowance for Loan Losses(dollar amounts in thousands)2000

1999Commercial, industrial, financial,agricultural and tax free

$1,895

$397Residential mortgages

194

65Loans to individuals

235

1,069Off-balance sheet items

196

235Year 2000

0

153Unallocated

217

0Total

$2,737

$1,919Allowance as a percentage of averagetotal loans, net of unearned income

1.32%

.99%                Capital Resources   Shareholders' equity increased $3,733,024 during 2000 and was $43,136,917 on December 31, 2000 compared to $39,403,893 on December 31, 1999. Net unrealized gains on securities available for sale on December 31, 2000 temporarily increased shareholders'
equity by $1,094,282. The corporation's stock repurchase program reduced shareholders' equity in 2000 by $1,416,902.  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 information systems in place and the general competence and abilities of the corporation's management.  On December 31, 2000, the corporation's capital (not including the allowance for loan losses) amounted to $43,136,917 or 13.08% of total assets. The inclusion of the allowance increases the capital ratio to 13.91%. On the same basis of calculation, these
ratios were 11.09% and 11.63% respectively on December 31, 1999.  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.  As of December 31, 2000, the corporation had Tier I and total equity capital to risk adjusted asset ratios of 21.35% and 22.61%, respectively. The leverage ratio was 12.47%. At December 31, 1999, the corporation had Tier I and total equity capital to
risk adjusted assets ratios of 19.87% and 20.80%, respectively.        The table below presents the corporation's capital position on December 31, 2000 (dollar amounts in thousands)    Percentof AdjustedAmount

AssetsTier I capital

42,043

21.35Tier I capital requirement

7,875

4.00Total equity capital

44,507

22.61Risk-based requirement

15,750

8.00Leverage capital

42,043

12.47Leverage requirement

13,487

4.00    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. The Year 2000 came and went with no significant issues reported.  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.   C

ORPORATE OFFICERS  Louis A. Steiner

Chairman of the BoardLouis T. Steiner

Vice Chairman, President and Chief Executive OfficerGregg E. Hunter

Vice Chairman and Chief Financial OfficeWendy S. Schmucker

Vice President and Secretary/TreasurerRyan M. Glista

Vice President and ComptrollerSusan F. Robb

Assistant Vice President and Assistant Secretary/TreasurerCORPORATE DIRECTORSJohn T. Babilya

Frank E. Jobe

Debra L. SpatolaPresident, Arc Weld Inc.

Retired, former Executive

Vice President,Vice President of the Bank

Laurel Valley Foods, Inc.George A. Conti, Jr.

Roy M. Landers

Louis A. SteinerAttorney at Law

Retired, former Executive Vice

Chairman of the BoardPresident R & L Development Co.Richmond H. Ferguson

John C. McClatchey

Louis T. SteinerAttorney at Law

C.E.O.

Vice Chairman and ChiefJCM Industries

Executive Officer of the BankDorothy S. Hunter

Joseph A. Mosso

George V. WeltyVice President, Latrobe

Retired, former President

Attorney, PartnerFoundry Machine & Supply Co.

Mosso's Pharmacy, Inc.

Flickinger & WeltyGregg E. Hunter

Joedda M. Sampson

C. Edward WibleVice Chairman and Chief

Business Entrepreneur

Certified Public AccountantFinancial Officer of the Bank



Horner Wible & Associates,Certified Public AccountantsAll corporate directors also serve as directors ofCommercial National Bank of Pennsylvania       BUSINESS LOCATIONSCorporate Headquarters

Latrobe

Murrysville900 Ligonier Street

900 Ligonier Street

4785 Old William Penn HighwayP.O. Box 429

P.O. Box 429

P.O. Box 4 cnisiLatrobe, PA 15650

Latrobe, PA 15650

Murrysville, PA 15668724/539-3501

724/539-3501

724/733-4888724/532-2973 (Fax)

724/539-0816 (Fax)

724/733-7110 (Fax)Asset Management and Trust

Lawson Heights

Pleasant UnityDivision

Route 981 at Terry Way

Routes 981 and 13019 North Main Street

P.O. Box 429

P.O. Box 503Greensburg, PA 15601

Latrobe, PA 15650

Pleasant Unity, PA 15676724/836-7670

724/539-9774

724/423-5222724/836-7675 (Fax)

724/539-3523 (Fax)

724/423-1155 (Fax)Courthouse Square

Ligonier

West Newton19 North Main Street

201 West Main Street

109 East Main StreetGreensburg, PA 15601

P.O. Box 528

P.O. Box 219724/836-7699

Ligonier, PA 15658

West Newton, PA 15089724/836-7675 (Fax)

724/238-9538

724/872-5100724/238-9530 (Fax)

724/872-5143 (Fax)Eastgate

Lincoln RoadGeorges Station Road

Lincoln Road Shopping CenterP.O. Box 3206

P.O. Box 429Greensburg, PA 15601

Latrobe, PA 15650724/836-7600

724/537-9980724/836-7604 (Fax)

724/537-9982 (Fax)  In addition to the full-service MAC machines located at all Commercial National Bank community offices indicated above (except Latrobe and Courthouse Square), additional ATMs are available for your 24-hour banking convenience at Arnold Palmer Regional Airport, Greensburg Kirk Nevin Arena, Latrobe Area Hospital, New Alexandria Qwik Mart, Norvelt Open Pantry and Saint Vincent College. All are linked to the national Cirrus, Honor and Plus networks and also accept MasterCard, Visa Discover and American Express for cash advances.  Touch Tone Teller

24-hour banking service

Website724/537-9977

Further information onFREE from Blairsville, Derry

Commercial National BankGreensburg, Kecksburg, Latrobe

of Pennsylvania isLigonier and New Alexandria.

available on the World1-800-803-BANK

Wide Web at:FREE from all other locations.

www.cnbthebank.com.InsuranceCommercial National Insurance Services

Commercial National232 North Market Street

Insurance Services isLigonier, PA 15658

a partnership of Gooder727/238-4617

& Mary, Inc. and877/205-4617 (toll free)

Commercial National724/238-0160 (fax)

Investment Corporation,cnisinfo@cnbinsurance.com

a wholly owned subsidiarywww.cnbinsurance.com

of Commercial NationalFinancial Corporation.


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 PresidentsDonna L. Belluchie

Michael J. Palko

Keith M. ViscontiMichael L. Matthews

Philip S. PettinaVice PresidentsRyan M. Glista

Patricia A. Nemchik

Thomas D. WattersWilliam N. Hamilton

Michael A. Schmidt

Rebecca J. WeinerCheryl M. Letterio

Wendy S. SchmuckerKelly R. Moreman

James T. VaughanAssistant Vice PresidentsKaren E. Burick

Kelly R. Moreman

Charles L. TaylorDonna J. Daugherty

Nancy L. Sale

Rebecca J. WeinerWilliam J. Johnston

Marsha J. Salley

Phyllis S. YeshRodger E. Miller

Thomas E. Sylvester*Community Office ManagersMona R. Birt

Regina L. Calabrace

Jerome M. SupkoLinda A. Burns

Kimberly A. Stefkovich

Patricia L. TorranceService OfficersDouglas P. Arndt

Denise M. Guzik

Elizabeth M. RosaJennifer L. Battaglia

Virginia E. Halucka

Kristin RossiTerrie L. Bowman

Judy A. Hoffer

Roxanne ShadronLaura I. Bradley

Lori J. Krise

John H. SperandioEleanor A. Bridge

Dennis L. Marshall

Sean E. SwansboroJudith J. Ciocco

Susan M. Matenkosky

Edward A. ThomasKaren J. Ciocco

William T. McBeth

Marilyn A. TlumachKathy S. Claycomb

Tiffany D. McMahon

Kimberly A. TurchekJames V. Conforti

Florence E. Pevarnik

Cynthia M. VarnerAmy E. Dayok

Patricia A. Queer

Joseph W. YuhouseBeth Ann Ferlin

Susan F. Robb

Jodi L. ZyvithCynthia A. Fontaine

Susan L. Roebuck  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

Ryan, Beck & Co.100 Light Street

80 Main StreetBaltimore, MD 21202

West Orange, NJ 07052800-638-7411

973-597-6020F.J. Morrissey & Company, Inc.

Spear, Leads & KelloggSuite 420

10 Exchange Place, 11
th
 Floor1700 Market Street

Jersey City, NJ 07302Philadelphia, PA 19103

800-526-3160800-842-8928M. H. Meyerson & Co.525 Washington Blvd34
th
 FloorJersey City, NJ 07303800-333-3113   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)  Form 10-K  The corporation will provide without charge to any shareholder a copy of its 2000 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