10-K 1 k82475e10vk.txt ANNUAL REPORT FOR FISCAL YEAR ENDED 12/31/03 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 Commission File Number 0-17000 COMMERCIAL NATIONAL FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Michigan 38-2799780 (State of Incorporation) (I.R.S. Employer Identification No.) 101 North Pine River Street Ithaca, Michigan 48847 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (989) 875-4144 Securities registered pursuant to Section 12(g) of the Act: Common Stock, No par value (Title of Class) 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] Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes [ ] No [X] State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. Aggregate market value as of March 12, 2004: $33,553,534 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock outstanding as of March 12, 2004: 4,072,570 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's annual report to security holders for the year ended December 31, 2003, are incorporated by reference in Part II and Part IV. Portions of the registrant's proxy statement for its April 27, 2004, annual shareholders meeting are incorporated by reference in Part III and Part IV. INDEX PART I Item 1. Business..................................................................... 2 Item 2. Properties................................................................... 4 Item 3. Legal Proceedings............................................................ 5 Item 4. Submission of Matters to a Vote of Security Holders.......................... 5 PART II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities........................................ 5 Item 6. Selected Financial Data...................................................... 5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................ 5 Item 7A. Quantitative and Qualitative Disclosure About Market Risk.................... 5 Item 8. Financial Statements and Supplementary Data.................................. 5 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................... 5 Item 9a. Control and Procedures....................................................... 5 PART III Item 10. Directors and Executive Officers of the Registrant........................... 6 Item 11. Executive Compensation....................................................... 6 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.................................................. 6 Item 13. Certain Relationships and Related Transactions............................... 6 Item 14. Principal Accountant Fees and Services....................................... 6 PART IV Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............. 7 SIGNATURES Signatures ............................................................................. 9 INDEX TO EXHIBITS ............................................................................. 11
1 PART I ITEM 1. BUSINESS General Commercial National Financial Corporation (the Corporation or Commercial), a financial holding company, was incorporated in Michigan on December 30, 1987. On May 31, 1988, the Corporation acquired all of the stock of Commercial National Bank, a national banking association chartered in 1962. On December 30, 1992, Commercial National Bank converted to a state-chartered bank under the name Commercial Bank (the Bank). On July 16, 1997, the Bank acquired an inactive insurance agency, Commercial National Financial Services Incorporated (the Agency). The Agency in turn purchased a minority interest in Michigan Bankers Title of Northern Michigan, LLC (the Title Agency). During 2000, Michigan Bankers Title of Northern Michigan was dissolved. The Agency made a similar investment in Michigan Bankers Title of Eastern Michigan. The investment in the Title Agency is not material. The Bank established a relationship with The Centennial Group (Centennial), a financial planning group headquartered in Lansing, Michigan in 2000. Through customer referrals to a registered representative of Centennial, the Agency receives commissions for the placement of products and fee based services. During 2001, Commercial Bank formed a mortgage company, CNFC Mortgage Corporation, 100% owned by Commercial Bank. CNFC Mortgage Corporation allows Commercial to pursue out of market mortgages and offer products and services not normally provided by community banks. The Bank concentrates its efforts primarily in two areas, commercial lending and residential real estate lending. Loan, deposit and other products are designed to support these market segments. The Bank also provides a full range of traditional banking services to individuals located in its service area. Commercial Bank offers a variety of deposit products, including checking, savings, money market, individual retirement accounts, certificates of deposit and repurchase agreements. The principal markets for financial services are the mid-Michigan communities in which the Bank is located and the areas immediately surrounding these communities. The Bank serves these markets through nine locations in or near these communities. Commercial also lends outside the principal geographic market in support of existing customers. Commercial does not have any material foreign assets or income. The principal source of revenue for Commercial is interest and fees on loans. On a consolidated basis, interest and fees on loans accounted for 79.25% of total revenue in 2003, 79.47% in 2002, and 79.71% in 2001. Interest on investment securities accounted for 6.82% of total revenue in 2003, 7.82% in 2002, and 8.04% in 2001. At December 31, 2003, the Bank had no significant concentrations of loans to any group of borrowers engaged in similar activities that would be impacted by economic or other conditions. The Bank employed 95 individuals at December 31, 2003. Competition The business of banking is highly competitive. In addition to competition from other commercial banks, banks face competition from non-bank financial institutions. Savings associations compete with commercial banks for deposits and loans. Credit unions and finance companies compete for consumer loans. Commercial banks compete for deposits with other entities such as mutual funds and corporate and government debt securities. Financial service providers compete for customers principally through price (interest rates paid on deposits, interest rates charged on borrowings and fees charged for services) and service (convenience and quality of services rendered to customers). The Bank competes directly with fifteen financial institutions in the market it serves. The Bank's competitors include other commercial banks, savings associations and local credit unions. The Bank does not believe that its ability to compete for loans and deposits is affected by the rank among its competitors. Critical Accounting Policies The "Management's Discussion and analysis of Financial Condition and Results of Operations," as well as disclosures found elsewhere in the annual report, are based upon Commercial's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires Commercial to estimate and make judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Material estimates that are particularly susceptible to significant change in the near term relate to the 2 determination of the allowance for loan losses, the valuation of mortgage servicing assets and the valuation of stock options. Actual results could differ significantly from these estimates. Allowance for Loan Losses The allowance for loan losses is maintained at a level believed adequate by management to absorb probable losses inherent in the consolidated loan portfolio. Management's evaluation of the adequacy of the allowance is an estimate based on an assessment of loss exposure on individual loans identified as substandard or substandard and impaired, and an assessment of the performance of homogenous categories of loans. A detailed discussion of Commercial's allowance for loan loss methodology is included in the Provision and Allowance for Loan Losses section of the management discussion and analysis. Mortgage Servicing Assets Servicing assets are recognized as separate assets when loans are sold with servicing retained. Capitalized servicing rights are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are valued based upon the estimated fair value of the rights. Value is determined by stratifying servicing rights by predominant characteristics, including term, and rate and applying a discounted cash flow model to determine an estimated market value. Some of the assumptions used in the discounted cash flow model, including the estimated life of the servicing asset, can influence the final market value. Negative adjustments to the value (referred to as impairment), are recognized through a valuation allowance by charges against mortgage servicing income. See Note 5 of the consolidated financial statements for additional information. Stock Options Incentive and non-qualified stock options are periodically issued to certain employees and directors under shareholder approved stock option plans. The options are granted at an exercise price equal to the fair value of the underlying shares at the date of grant. Employee options are generally granted for a term of 10 years with a 5 year vesting schedule. Director options are granted for a term of 10 years with a 6 month vesting schedule. Management uses the Black-Scholes option pricing model to determine the fair value of stock options. This model has certain limitations, such as not factoring in the non-transferability of employee options. The model is generally used to value options with terms shorter than the contractual ten-year life. Because of these limitations, and the use of subjective assumptions in the model, this and other option pricing models do not necessarily provide a reliable measure of the fair value of stock options. The question arises as to why management selected the Black-Scholes pricing model if it may not be reliable. In the current market place we are unable to find a reasonably priced model that will provide a more reliable measure of fair value. Management also believes that obtaining an independent appraisal of value would be cost prohibitive and also inherently unreliable. The more significant assumptions used in estimating the fair value of stock options include the risk-free interest rate, the dividend yield, the weighted average expected life of the stock options and the expected price volatility of our common stock. The risk-free interest rate is based on U.S. Treasury securities with a term equal to the expected life of the stock options. The dividend yield is based on Commercial's expected dividend payout level. The expected life is based on historical experience adjusted for changes in terms and the amount of awards granted. The expected volatility, which is the assumption where the most judgment is used, is based on historical volatility. See notes 1 and 10 of Commercial's consolidated financial statements for further discussion of stock options. Management believes the accounting estimates related to the allowance for loan losses, valuations of mortgage servicing assets and the valuation of stock options are critical accounting estimates. These estimates are susceptible to change from period to period because they require management to make assumptions concerning future events. Management regularly discusses the methodology used to determine these accounting estimates with the audit committee of the board of directors. Supervision and Regulation Banks and bank holding companies are extensively regulated. The Bank is chartered as a state bank under Michigan law and is supervised, examined and regulated by the Office of Financial and Insurance Services ("OFIS") and the Federal Deposit Insurance Corporation ("FDIC"). The business activities of the registrant are limited to banking and to other activities determined by the Board of Governors of the Federal Reserve System to be closely related to banking. Deposits of the Bank are insured by the FDIC to the extent provided by law. Commercial banks are subject to a number of federal and state laws and regulations that have a material impact on their business. These include, among others, state usury laws, state laws relating to fiduciaries, the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Expedited Funds Availability Act, the Community Reinvestment Act, electronic funds transfer laws, redlining laws, antitrust laws, environmental laws and privacy laws. The policies of the 3 Federal Reserve System, and other authorities, may materially affect the growth and distribution of loans, investments and deposits and interest rates on deposits and loans. The FDIC Improvement Act of 1991 (the "FDIC Improvement Act"), revised sections of the Federal Deposit Insurance Act affecting bank regulation, deposit insurance and provisions for the funding of the bank insurance fund. The FDIC Improvement Act also revised bank regulatory structures embodied in several other federal banking statutes, links the bank regulators' authority to intervene to the deterioration of a bank's capital level, places limits on real estate lending and increases audit requirements. Among the significant revisions that could have an impact on the Corporation is the authority granted to the FDIC to impose special assessments on insured depository institutions to repay FDIC borrowings from the United States Treasury or other sources and to establish semiannual assessment rates on bank insurance fund member banks so as to maintain the bank insurance fund at the designated reserve ratio defined in the FDIC Improvement Act. The FDIC Improvement Act also required the FDIC to implement a system of risk-based premiums for deposit insurance pursuant to which the premiums paid by a depository institution are based on the perceived probability that the bank insurance fund will incur a loss in respect of such institution. Under 1994 amendments to the Federal Bank Holding Company Act, the Corporation is authorized to acquire subsidiary banks in any state in which state laws permit such acquisitions. Out-of-state bank holding companies in any state are permitted to acquire banks located in Michigan if the laws of the state in which the out-of-state bank holding company is located authorize a bank holding company located in Michigan to acquire ownership of banks in that state on a reciprocal basis. Under amendments to the Michigan Banking Code which became effective on November 29, 1995, the Bank is authorized to merge with or acquire out-of-state banks or branches in any state in which state laws permit such acquisitions. Enacted late in 1999, the Gramm-Leach-Bliley Act ("Gramm-Leach-Bliley"), broadens the scope of financial services that banks may offer to consumers, essentially removing the barriers erected during the Depression that separated banks and securities firms, closes the loophole which permitted commercial enterprises to own and operate a thrift institution, and provides some new consumer protections with respect to privacy issues and ATM usage fees. Gramm-Leach-Bliley permits affiliations between banks, securities firms and insurance companies (which affiliations were previously prohibited under the Glass-Steagall Act). Under Gramm-Leach-Bliley, a bank holding company may qualify as a financial holding company and thereby offer expanded range of financial oriented products and services which products and services may not be offered by bank holding companies. To qualify as a financial holding company, a bank holding company's subsidiary depository institutions must be well-managed, well-capitalized and have received a "satisfactory" rating on its latest examination under the Community Reinvestment Act. Gramm-Leach-Bliley provides for some regulatory oversight by the Securities and Exchange Commission for bank holding companies engaged in certain activities, and reaffirms that insurance activities are to be regulated on the state level. States, however, may not prevent depository institutions and their affiliates from engaging in insurance activities. Commercial enterprises are no longer able to establish or acquire a thrift institution and thereby become a unitary thrift holding company. Thrift institutions may only be established or acquired by financial organizations. Gramm-Leach-Bliley provides new consumer protections with respect to the transfer and use of a consumer's nonpublic personal information and generally enables financial institution customers to "opt-out" of the dissemination of their personal financial information to unaffiliated third parties. ATM operators who charge a fee to non-customers for use of its ATM must disclose the fee on a sign placed on the ATM and before the transaction is made as a part of the on-screen display or by a paper notice issued by the machine. Enacted on July 30, 2002, the Sarbanes-Oxley Act of 2002 attempts to address several issues including corporate governance, auditing and accounting oversight, executive compensation, and enhanced timely disclosure of corporate information for publicly traded companies. The rule making process used to implement the law is ongoing, however, several provisions of the Act have been implemented. Effective August 29, 2002, as directed by Section 302 (a) of Sarbanes-Oxley, Commercial's chief executive officer and chief financial officer are each required to certify that Commercial's quarterly and annual reports do not contain any untrue statement of a material fact. The rules require that these officers certify that they are responsible for establishing, maintaining and regularly evaluating the effectiveness of Commercial's internal controls; they have made certain disclosures to Commercial's auditors and the Audit Committee of the Board of Directors about internal controls; and they have included information in Commercial's quarterly and annual reports about their evaluation and whether there have been significant changes in Commercial's internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation. ITEM 2. PROPERTIES The Bank currently conducts business from nine banking offices. The executive offices of the Corporation are located at 101 North Pine River Street, Ithaca, Michigan. The main office of the Bank is located at 301 North State Street, Alma, Michigan. 4 The main office property of the Bank is leased for a term expiring on December 31, 2013. The offices of the Bank are located in Alma, Greenville, Middleton, Mount Pleasant, Pompeii, and St. Louis, Michigan. The Bank owns the property for six of the office locations. Two offices are leased, one pursuant to a lease that expires August 1, 2008, subject to 2 renewals of 10 years each and one pursuant to a lease that expires January 2008 subject to 2 renewals of 5 years each. The Corporation considers all of its facilities to be well maintained and in generally good operating condition and suitable for the purposes for which they are intended. ITEM 3. LEGAL PROCEEDINGS The Corporation and the Bank are parties, as plaintiff or defendant, to several legal proceedings, none of which is considered material, and all of which arose in the ordinary course of business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES The information under the captions "Common Stock Information" and "Dividend Information" of the registrant's annual report to shareholders for the year ended December 31, 2003, is hereby incorporated by reference to Exhibit 13. ITEM 6. SELECTED FINANCIAL DATA The information under the caption "Selected Financial Data" of the registrant's annual report to shareholders for the year ended December 31, 2003, is hereby incorporated by reference to Exhibit 13. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information under the heading "Management's Discussion and Analysis and Results of Operations" of the registrant's annual report to shareholders for the year ended December 31, 2003, is hereby incorporated by reference to Exhibit 13. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information under the heading "Quantitative and Qualitative Disclosures About Market Risk" of the registrant's annual report to shareholders for the year ended December 31, 2003, is hereby incorporated by reference to Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements, notes and report of independent auditor included in the registrant's annual report to shareholders for the year ended December 31, 2003, are hereby incorporated by reference to Exhibit 13. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable ITEM 9a. CONTROLS AND PROCEDURES The management of Commercial National Financial Corporation is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of December 31, 2003, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based on that evaluation, management concluded that the Corporation's disclosure controls and procedures as of December 31, 2003 were effective, in all material respects, in ensuring that information required to be disclosed in this Annual Report on Form 10-K was recorded, processed, summarized, and reported within the time period required by the United States Securities and Exchange Commission's rules and forms. 5 Management's responsibilities related to establishing and maintaining effective disclosure controls and procedures include maintaining effective internal controls over financial reporting that are designed to produce reliable financial statements in accordance with accounting principles generally accepted in the United States. As disclosed in Management's Responsibility for Financial Statements on page 22 of the Annual Report to Shareholders for the year ending December 31, 2003, management assessed the Corporation's system of internal control over financial reporting as of December 31, 2003, in relation to criteria for effective internal control over financial reporting as described in "Internal Control - Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2003, its system of internal control over financial reporting met those criteria. The Corporation also conducted an evaluation of internal controls over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2003, that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting. Based on this evaluation, there has been no such change during the quarter that ended December 31, 2003. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT For information concerning directors and certain executive officers of the Corporation, see "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Corporation's 2004 Annual Meeting Proxy Statement ("Proxy Statement") which is incorporated herein by reference. For Information concerning the Corporation's Audit Committee financial experts, see "Corporate Governance and the Board of Directors" in the Proxy Statement which is incorporated herein by reference. The Corporation has adopted a Code of Business Conduct and Ethics that applies to the Corporation's Chief Executive Officer and Principal Financial Officer. The Corporation shall provide to any person without charge upon request, a copy of its Code of Business Conduct and Ethics. Written requests should be sent to: Secretary, Commercial National Financial Corporation, 101 North Pine River, Ithaca, Michigan 48847. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the captions "Compensation of Executive Officers" and "Compensation of Directors" in the registrant's definitive Proxy Statement for its April 27, 2004, annual meeting of shareholders is here incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information set forth under the caption "Voting Securities" in the registrant's definitive Proxy Statement for its April 27, 2004, annual meeting of shareholders is here incorporated by reference. The following table sets forth certain information for all equity compensation plans and individual compensation arrangements (whether with employees or non-employees, such as directors), in effect as of December 31, 2003.
Number of Shares Remaining Number of Shares to be Weighted-Average Available for Future Issuance Issued Upon the Exercise Exercise Price of (Excluding Shares Reflected Plan Category Of Outstanding Options Outstanding Options in First Column) ------------------------------------------------------------------------------------------------------------------------ Equity Compensation Plans Approved by Security Holders 2001 Plan 138,141 $11.59 151,265 1991 Plan 155,699 9.21 - Equity Compensation Plans Not Approved by Security Holders - - - ------------------------------------------------------------------------------------------------------------ Total 293,840 $10.32 151,265 ============================================================================================================
6 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the caption "Certain Relationships" in the registrant's definitive Proxy Statement for its April 27, 2004, annual meeting of shareholders is hereby incorporated by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information appearing in the definitive proxy statement, dated as of March 22, 2004, is incorporated herein by reference in response to this item. 7 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) Financial Statements. The following financial statements, notes to financial statements, and report of independent auditor of the Corporation and its subsidiary are filed as part of this report: Report of Independent Auditors* Consolidated Balance Sheets - December 31, 2003 and 2002* Consolidated Statements of Income for each of the three years ended December 31, 2003* Consolidated Statements of Changes in Shareholders' Equity for each of the three years in the period ended December 31, 2003* Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2003* Notes to Consolidated Financial Statements* * Incorporated by reference from the 2003 Annual Report to Shareholders. (a)(2) All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. With the exception of the portions of the registrant's annual report to shareholders for the year ended December 31, 2003 specifically incorporated herein by reference, such report shall not be deemed filed as part of this annual report on Form 10-K. (a) (3) The following exhibits are filed as part of this report: Number Exhibit 3(a) Restated Articles of Incorporation. Previously filed as an exhibit to the registrant's Form S-4 filed January 22, 1988. Here incorporated by reference. 3(b) Bylaws. Previously filed as an exhibit to the registrant's Form S-4 filed January 22, 1988. Here incorporated by reference. 10(a) 1991 Stock Option Plan. Previously filed as an exhibit to the registrant's Form 10-K for the year ended December 31, 1990. Here incorporated by reference.* 10(b) Amendment to 1991 Stock Option Plan. Previously filed as an exhibit to the registrant's Form 10-K for the year ended December 31, 1995. Here incorporated by reference.* 10(c) Lease for Main Office. Previously filed as an exhibit to registrant's Form 10-K for the year ended December 31, 1991. Here incorporated by reference. 10(d) Amendment to 1991 Stock Option Plan. Previously filed as an exhibit to the registrant's Form 10-K for the year ended December 31, 1998. Here incorporated by reference.* 10(e) Change in Control Agreement. Previously filed as an exhibit to the registrant's Form 10-K for the year ended December 31, 1998. Here incorporated by reference.* 10(f) Commercial National Financial Corporation 2001 Stock Option and Incentive Plan. Previously filed as an exhibit to the registrant's Form S-8 filed May 11, 2001 (File No. 333-60894). Here incorporated by reference.* 13 Incorporated Portions from 2003 Annual Report to Shareholders. 14 Code of Business Conduct and Ethics. Here incorporated by reference.* 21 Subsidiary of Registrant. Previously filed as an exhibit to the registrant's Form S-4 filed January 22, 1988. Here incorporated by reference. 8 23 Consent of Certified Public Accountants. 31(a) Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) 31(b) Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) 32(a) Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32(b) Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * Management contract or compensatory plan or arrangement. The registrant will furnish a copy of any exhibit listed above to any shareholder of the registrant without charge upon written request to Patrick Duffy, Commercial National Financial Corporation, 101 North Pine River Street, Ithaca, Michigan 48847. (b) Reports on Form 8-K. During the quarter ended December 31, 2003, the registrant filed the following report on Form 8K: Current report on Form 8-K dated November 24, 2003 filed with the Security and Exchange Commission on November 24, 2003 announcing third quarter earnings. Current report on Form 8-K dated December 1, 2003 filed with the Security and Exchange Commission on December 4, 2003 announcing fourth quarter dividend. Current report on Form 8-K dated October 31, 2003 filed with the Security and Exchange Commission on November 12, 2003 announcing a 5% stock dividend. Current report on Form 8-K dated December 17, 2003 filed with the Security and Exchange Commission on December 22, 2003 filing a copy of the amended and restated Charter of the Audit Committee. (c) Exhibits. See Item 15(a)(3) (d) Financial Statement Schedules. There are no financial statement schedules required to be filed with this report. 9 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMMERCIAL NATIONAL FINANCIAL CORPORATION (registrant) /s/ Jeffrey S. Barker ----------------------------------------------- Jeffrey S. Barker President and Chief Executive Officer March 26, 2004 10 COMMERCIAL NATIONAL FINANCIAL CORPORATION 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. March 26, 2004 /s/ Jeffrey S. Barker -------------------------- Jeffrey S. Barker Director, President and Chief Executive Officer (Principal Executive Officer) March 26, 2004 /s/Richard F. Abbott -------------------------- Richard F. Abbott Director March 26, 2004 /s/ Jefferson P. Arnold -------------------------- Jefferson P. Arnold Director March 26, 2004 /s/ Don J. Dewey -------------------------- Don J. Dewey Director March 26, 2004 /s/ Patrick G. Duffy -------------------------- Patrick G. Duffy Director (Principal Financial and Accounting Officer) March 26, 2004 /s/ David A. Ferguson -------------------------- David A. Ferguson Director March 26, 2004 /s/ Paul B. Luneack -------------------------- Paul B. Luneack Director March 26, 2004 /s/Kim C. Newson -------------------------- Kim C. Newson Director March 26, 2004 /s/ Howard D. Poindexter ------------------------ Howard D. Poindexter Director March 26, 2004 /s/ Scott E. Sheldon -------------------------- Scott E. Sheldon Director 11 COMMERCIAL NATIONAL FINANCIAL CORPORATION INDEX TO EXHIBITS
Number Exhibit Page ------ ------- ---- 3(a) Restated Articles of Incorporation. Previously filed as an exhibit to the registrant's Form S-4 filed January 22, 1988. Here incorporated * by reference. 3(b) Bylaws. Previously filed as an exhibit to the registrant's Form S-4 filed January 22, 1988. Here incorporated by reference. * 10(a) 1991 Stock Option Plan. Previously filed as an exhibit to the registrant's Form * 10-K for the year ended December 31, 1990. Here incorporated by reference. 10(b) Amendment to 1991 Stock Option Plan. Previously filed as an exhibit to the * registrant's Form 10-K for the year ended December 31, 1995. Here incorporated by reference. 10(c) Lease for Main Office. Previously filed as an exhibit to registrant's Form 10-K * for the year ended December 31, 1991. Here incorporated by reference. 10(d) Amendment to 1991 Stock Option Plan. Previously filed as an exhibit to registrant's Form 10-K for the year ended December 31, 1999. Here incorporated by reference. * 10(e) Change in Control Agreement. Previously filed as an exhibit to registrant's Form 10-K for the year ended December 31, 1999. Here incorporated by reference. * 10(f) Commercial National Financial Corporation 2001 Stock Option and Incentive Plan. Previously filed as an exhibit to the registrant's Form S-8 filed May 11, 2001 (File No. 333-60894). Here incorporated by reference. * 13 Incorporated Portions from 2003 Annual Report to Shareholders. * 14 Code of Business Conduct and Ethics * 21 Subsidiary of Registrant. Previously filed as an exhibit to the registrant's Form * S-4 filed January 22, 1988. Here incorporated by reference. 23 Consent of Independent Certified Public Accountants. 31(a) Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) 31(b) Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) 32(a) Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32(b) Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*This exhibit is filed by incorporation by reference to a prior filing. 12