1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number:
Commercial Bank Employee Savings and Stock Ownership Plan
Commercial National Financial Corporation
101 N. Pine River
Ithaca, Michigan 48847
(517) 875-4534
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REPORT OF INDEPENDENT AUDITORS
Plan Administrator of Commercial Bank
Employee Savings and Stock Ownership Plan
Ithaca, Michigan
We have audited the accompanying statements of net assets available for benefits
of the Commercial Bank Employee Savings and Stock Ownership Plan ("the Plan") as
of December 31, 2000 and 1999 and the related statement of changes in net assets
available for benefits for the year ended December 31, 2000. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in net assets available for benefits
for the year ended December 31, 2000, in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements as
a whole.
Crowe, Chizek and Company LLP
South Bend, Indiana
May 23, 2001
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COMMERCIAL BANK EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2000 and 1999
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2000 1999
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ASSETS
Investments, at fair value (Note 4)
Common stock $ 1,081,779 $ 1,172,325
Mutual funds 1,707,032 1,773,888
Loans to plan participants - 984
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2,788,811 2,947,197
Receivables
Employer contribution 113,241 99,488
Participant contributions - 4,075
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113,241 103,563
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NET ASSETS AVAILABLE FOR BENEFITS $ 2,902,052 $ 3,050,760
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See accompanying notes to financial statements.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31, 2000
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ADDITIONS TO NET ASSETS ATTRIBUTABLE TO:
Investment income (loss)
Net depreciation in fair value
of investments (Note 4) $ (471,297)
Dividends - cash 75,998
Dividends - stock 56,163
------------
(339,136)
Contributions
Employer 113,241
Participants 174,194
------------
287,435
------------
Total additions (51,701)
DEDUCTIONS FROM NET ASSETS ATTRIBUTABLE TO:
Benefits paid to participants 97,007
------------
Total deductions 97,007
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NET INCREASE (DECREASE) (148,708)
Net assets available for benefits
Beginning of year 3,050,760
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End of year $ 2,902,052
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See accompanying notes to financial statements.
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
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NOTE 1 - DESCRIPTION OF PLAN
The following description of the Commercial Bank Employee Savings and Stock
Ownership Plan (the Plan) is provided for general information purposes only.
Participants should refer to the Plan agreement for a more complete description
of the Plan's provisions.
General: The Plan was established by the plan sponsor, Commercial Bank (the
Bank), effective January 1, 1997. The Bank acts as trustee for the Plan assets.
The Plan is a defined contribution plan which covers all employees who have
completed 90 days of employment and attained the age of 21. The Plan has a
contributory 401(k) portion based on elective contributions from participants in
the Plan. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
Contributions: Elective deferrals by participants under the 401(k) provisions
are based on a percentage of their compensation as defined in the Plan agreement
which are subject to certain limitations. Employees also may rollover account
balances from other plans into their account. The Bank may, at the sole
discretion of the Board of Directors, contribute to each participant's account a
matching contribution which is a percentage of the participant's elective
contribution for the year. For 2000, the Bank made matching contributions equal
to 100% of the first 6% of the compensation deferred by each 401(k) participant
subject to certain limitations as specified in the Plan agreement.
Participant Accounts: Each participant's account is credited with the
participant's contributions an allocation of (a) the Bank's contributions and
(b) Plan earnings. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is the
aggregate of the participant's deferrals, rollovers and employer matching
contributions.
Investment options: Participants may direct, on a quarterly basis, the trustee
to invest their elective 401(k) contributions as well as employer matching
contributions to the Plan in any of the available investment options.
Participants can individually determine their investment options based on
desired level of risk and return for all contributions (employer and employee)
to the Plan.
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(Continued)
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
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NOTE 1 - DESCRIPTION OF PLAN (Continued)
Retirement, Death and Disability: A participant is entitled to 100% of his or
her account balance upon retirement, death or disability while employed.
Vesting: Participants are immediately vested in their elective contributions
plus actual earnings thereon, and employer matching contributions.
Payment of Benefits: A participant or his or her beneficiary receives the vested
portion in the participant's account in a lump-sum. A participant may receive
the portion of his or her account invested in Commercial National Financial
Corporation common stock in stock or cash.
Loan Provisions: The Plan provides that participants can borrow funds against
their account balances up to 50% of their vested account balance, or $50,000,
whichever is less.
Expenses: Substantially all administrative expenses are paid by the Plan
sponsor.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Valuation and Income Recognition: Investments are stated at fair
value. Mutual fund shares are traded on national exchanges and are valued at the
last sales price on the date of valuation. Commercial National Financial
Corporation common stock is traded over-the-counter and is valued at the last
sales price on the date of valuation. Purchases and sales of securities are
recorded on a trade-date basis. Interest income is recorded on the accrual
basis. Dividends are recorded on the ex-dividend date.
Net Appreciation (Depreciation) in Fair Value of Investments: In accordance with
the policy of stating investments at fair value, net unrealized appreciation
(depreciation) for the year along with gains and losses on sales of investments
are reflected in the Statement of Changes in Net Assets Available for Benefits
as net appreciation (depreciation) in fair value of investments. Unrealized
appreciation (depreciation) for investments held as of the end of the current
fiscal year is the difference between the current value of those investments and
the value of those investments as of the end of the prior fiscal year or the
purchase date for investments purchased during the year. The gain or loss on
securities sold is the difference between the proceeds received and the fair
value of the security at the end of the prior fiscal year or the purchase date
for securities purchased during the year.
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(Continued)
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make estimates
and assumptions that affect certain reported amounts and disclosures, and actual
results may differ from these estimates. It is at least reasonably possible that
a significant change may occur in the near term for the estimates of investment
valuation.
Concentration of Credit Risk: At December 31, 2000 and 1999, 36.9% and 38.4% of
the Plan's assets were invested in Commercial National Financial Corporation
common stock.
NOTE 3 - PLAN TERMINATION
Although it has not expressed any intent to do so, the Bank has the right under
the Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA and its related regulations.
NOTE 4 - INVESTMENTS
The following presents investments that represent 5% or more of the Plan's net
assets as of December 31.
2000 1999
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INVESTMENTS, AS DETERMINED BY
QUOTED MARKET PRICE
George Putnam Fund of Boston, 14,676 and 13,103
shares, respectively $ 251,995 $ 213,541
Putnam Growth and Income Fund, 23,613 and 20,862
shares, respectively 461,164 393,984
Putnam Investors Fund, 24,467 and 21,452
shares, respectively 375,806 408,792
Putnam OTC & Emerging Growth Fund, 15,562 and 10,610
shares, respectively 216,617 394,783
Putnam International Growth Fund, 7,737 and 6,300
shares, respectively 191,169 186,667
Commercial National Financial Corporation common stock,
98,343 and 94,399 shares, respectively 1,081,779 1,172,325
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(Continued)
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
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NOTE 4 - INVESTMENTS (Continued)
All of the Plan's investments are uninsured.
During 2000, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) depreciated in value by
$471,297 as follows:
Mutual funds $ 281,096
Common stock 190,201
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$ 471,297
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NOTE 5 - PARTY-IN-INTEREST TRANSACTIONS
Parties-in-interest are defined under Department of Labor (DOL) regulations as
any fiduciary of the Plan, any party rendering service to the Plan, the
employer, and certain others. Professional fees for the administration and audit
of the Plan are paid by the Bank.
As of December 31, the Plan held the following party-in-interest investments (at
fair value):
2000 1999
---- ----
Baird Money Market $ 80,605 $ 63,826
Commercial National Financial Corporation
common stock, 98,343 and 94,399 shares 1,081,779 1,172,325
The 98,343 and 94,399 shares of Commercial National Financial Corporation common
stock held by the Plan as of December 31, 2000 and 1999 represent 2.96% and
2.82% of the Corporation's outstanding shares as of December 31, 2000 and 1999.
During 2000, cash dividends of $50,997 were paid to the Plan by the Corporation.
During 2000, the Plan, under employee direction, purchased 8,093 shares of
Commercial National Financial Corporation common stock for a total purchase
price of $104,600 and sold 4,334 shares of Commercial National Financial
Corporation common stock for $56,343. In addition, the Corporation issued a 5%
stock dividend which resulted in 4,680 additional shares in 2000. The number of
shares outstanding at December 31, 1999 has been restated to reflect the 2000
stock dividend.
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(Continued)
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COMMERCIAL BANK EMPLOYEE SAVINGS AND
STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
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NOTE 6 - TAX STATUS
The Internal Revenue Service has determined and informed Commercial National
Financial Corporation by letter dated August 1, 1997, that the Plan and related
trusts are designed in accordance with the applicable sections of the Internal
Revenue Code (IRC) for tax exempt status. While the Plan has been amended
subsequent to this date, the Plan administrator believes that the Plan continues
to be designed and operated in accordance with the IRC.
NOTE 7 - TERMINATED PARTICIPANTS
Included in net assets available for benefits are amounts allocated to
individuals who have elected to withdraw from the Plan, but who have not yet
been paid. Plan assets allocated to these participants were $0 and $87,551 at
December 31, 2000 and December 31, 1999, respectively.
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COMMERCIAL BANK EMPLOYEE SAVINGS
AND STOCK OWNERSHIP PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2000
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Name of plan sponsor: Commercial Bank
Employer identification number: 38-2799780
Three-digit plan number: 003
(B)
Identity of Issuer, (E)
Borrower, Lessor, (C) (D) Current
(A) or Similar Party Shares/Units Cost Value
- --- ---------------- ------------ ---- -----
George Putnam Fund of Boston 14,676 $ 251,995
Putnam Growth & Income Fund 23,613 461,164
Putnam Income Fund 20,325 129,676
Putnam International Growth Fund 7,737 191,169
Putnam Investors Fund 24,467 375,806
Putnam OTC & Emerging Growth
Fund 15,562 216,617
* Baird Money Market 70,822 80,605
* Commercial National Financial
Corporation common stock 98,343 1,081,779
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$ 2,788,811
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* Party in interest
(d) All investments are participant directed, therefore, historical cost
information is not required.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Commercial Bank Employee Savings and
Stock Ownership Plan
Date: June 27, 2001 /s/ Jeffrey Barker
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Jeffrey Barker, Trustee
Date: June 27, 2001 /s/ Patrick Duffy
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Patrick Duffy, Trustee
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
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23 Consent of Independent Public Accountants