FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
For Quarter EndedSeptember 30, 2000 Commission file number: 2-96350
CNB Corporation
(Exact name of registrant as specified in its charter)
South Carolina 57-0792402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 320, Conway, South Carolina 29526
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (843) 248-5721
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 .
The number of shares outstanding of the issuer's $10.00 par value common stock as of September 30, 2000 was 715,812.
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CNB Corporation
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 2000, 1
December 31, 1999 and September 30, 1999
Consolidated Statement of Income for the Three Months 2
and Nine Months Ended September 30, 2000 and 1999
Consolidated Statement of Comprehensive Income 3
for the Three Months and Nine Months Ended
September 30, 2000 and 1999
Consolidated Statement of Changes in Stockholders' 4
Equity for the Nine Months Ended September 30, 2000
and 1999
Consolidated Statement of Cash Flows for the Nine Months 5
Ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements 6-13
Item 2. Management's Discussion and Analysis of Financial 14-23
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURE 24
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CNB Corporation and Subsidiary
Consolidated Balance Sheets
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)
ASSETS:
Cash and due from banks
Interest bearing deposits with banks
Investment Securities
(Fair values of $43,160 at
Sept. 30, 2000, $54,430 at
December 31, 1999, and $59,075
at Sept. 30, 1999)
Securities Available for Sale
(Amortized cost of $89,651 at
Sept. 30, 2000, $90,834 at
December 31, 1999, and $89,760
at Sept. 30, 1999)
Federal Funds sold and securities
purchased under agreement
to resell
Loans:
Gross Loans
Less unearned income
Loans, net of unearned income
Less reserve for possible
loan losses
Net loans
Bank premises and equipment
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing
Interest-bearing
Total deposits
Federal funds purchased and
securities sold under agreement
to repurchase
Other short-term borrowings
Other liabilities
Total liabilities
Stockholders' equity:
Common stock, par value $10 per
share: Authorized 1,500,000 in
2000 and 1999; issued 718,246
in 2000 and 598,687 in 1999
Surplus
Undivided Profits
Net Unrealized Holding
Gains (Losses) on
Available-For-Sale Securities
Less: Treasury stock
Total stockholders' equity
Total liabilities
and stockholders' equity | Sept. 30,
2000
$ 18,248
0
43,365
88,592
14,125
288,318
(74)
288,244
(3,843)
284,401
8,819
8,424
465,974
74,782
301,572
376,354
30,194
7,454
2,896
416,898
7,182
34,732
8,021
(636)
(223)
49,076
465,974 | December 31,
1999
$ 20,259
0
54,868
89,151
11,150
267,416
(275)
267,141
(3,451)
263,690
8,504
8,080
455,702
72,728
302,775
375,503
27,477
3,809
5,201
411,990
5,987
24,546
14,467
(1,011)
(277)
43,712
455,702 | Sept 30,
1999
$ 17,252
0
59,024
88,863
35,925
257,120
(410)
256,710
(3,433)
253,277
8,217
7,563
470,121
77,157
304,384
381,541
36,183
5,091
2,407
425,222
5,987
24,546
15,156
(539)
(251)
44,899
470,121 |
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CNB Corporation and Subsidiary
Consolidated Statement of Income
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)
Interest Income:
Interest and fees on loans
Interest on investment securities:
Taxable investment securities
Tax-exempt investment securities
Other securities
Interest on federal funds sold and securities
purchased under agreement to resell
Total interest income
Interest Expense:
Interest on deposits
Interest on federal funds purchased and securities
sold under agreement to repurchase
Interest on other short-term borrowings
Total interest expense
Net interest income
Provision for possible loan losses
Net interest income after provision for possible
loan losses
Other income:
Service charges on deposit accounts
Gains/(Losses) on securities
Other operating income
Total other income
Other expenses:
Salaries and employee benefits
Occupancy expense
Other operating expenses
Total operating expenses
Income before income taxes
Income tax provision
Net income
*Per share data:
Net income per weighted average shares
outstanding
Cash dividend paid per share
Book value per actual number of shares
outstanding
Weighted average number of shares outstanding
Actual number of shares outstanding
*Restated for a 20% stock dividend issued during
2000.
| Three Months Ended
Sept. 30, |
Nine Months Ended
Sept. 30,
|
2000
$ 6,543
1,705
189
28
181
8,646
3,340
387
64
3,791
4,855
170
4,685
688
0
534
1,222
2,013
434
991
3,438
2,469
804
1,665
$ 2.32
$ 0
$ 68.56
715,746
715,812 | 1999
$ 5,589
1,974
178
14
428
8,183
3,025
334
21
3,380
4,803
200
4,603
634
0
492
1,126
1,852
401
891
3,144
2,585
843
1,742
$ 2.43
$ 0
$ 62.76
716,530
715,444 | 2000
$ 19,124
5,328
574
78
334
25,438
9,450
1,059
203
10,712
14,726
650
14,076
2,056
0
1,337
3,393
6,059
1,359
2,731
10,149
7,320
2,389
4,931
$ 6.89
$ 0
$ 68.56
715,746
715,812 | 1999
$ 16,048
5,821
532
17
1,053
23,471
8,686
1,006
51
9,743
13,728
530
13,198
1,873
0
1,175
3,048
5,561
1,236
2,433
9,230
7,016
2,308
4,708
$ 6.57
$ 0
$ 62.76
716,530
715,444 |
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<PAGE>
CNB Corporation and Subsidiary
Consolidated Statements of Comprehensive Income
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)
Net Income
| Three Months
Ended
September 30, | Nine Months
Ended
September 30, |
2000 | 1999 | 2000 | 1999 |
$1,665
|
$1,742
|
$4,931
|
$4,708
|
Other comprehensive income, net of tax
Unrealized gains/(losses)
on securities:
Unrealized holding gains/(losses)
during period |
494
|
86
|
375
|
(964)
|
Net Comprehensive Income
|
$2,159 |
$1,828 |
$5,306 |
$3,744 |
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<PAGE>
CNB Corporation and Subsidiary
Consolidated Statement of Changes in Stockholders' Equity
(All Dollar Amounts in Thousands)
(Unaudited)
Common Stock:
($10 par value; 1,500,000 shares authorized)
Balance, January 1
Issuance of Common Stock
Stock Dividend
Balance at end of period
| Nine Months Ended
September 30, |
2000 | 1999 |
5,987
None
1,195
7,182
|
5,987
None
None
5,987
|
Surplus:
Balance, January 1
Issuance of Common Stock
Stock Dividend
Gain on sale of Treasury stock
Balance at end of period
|
24,546
None
10,163
23
34,732
|
24,538
None
None
8
24,546
|
Undivided profits:
Balance, January 1
Net Income
Stock Dividend
Cash dividends declared
Balance at end of period
|
14,467
4,931
(11,377)
None
8,021
|
10,448
4,708
None
None
15,156
|
Net unrealized holding gains/(losses) on
Available-for-sale securities:
Balance, January 1
Change in net unrealized gains/(losses)
Balance at end of period
|
(1,011)
375
(636)
|
425
(964)
(539)
|
Treasury stock:
Balance, January 1
(2,722 shares in 2000; 2,066 shares in 1999)
Purchase of treasury stock
Reissue of treasury stock
Balance at end of period
(2,434 shares in 2000; 2,478 shares in 1999)
Total stockholders' equity
|
(277)
(156)
210
(223)
49,076
|
(197)
(193)
139
(251)
44,899
|
Note: Columns may not add due to rounding
- -4-
<PAGE>
CNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
OPERATING ACTIVITIES
Net Income
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation
Provision for loan losses
Provision for deferred income taxes
Loss (gain) on sale of investment
securities
(Increase) decrease in accrued interest
receivable
(Increase) decrease in other assets
(Decrease) increase in other liabilities
| For the nine-month period ended
September 30,
2000 1999 |
$ 4,931
393
650
99
0
(388)
(55)
(44)
|
$ 4,708
394
530
(1,030)
0
(315)
75
(1,505)
|
Net cash provided by operating
activities |
5,586
|
2,857
|
INVESTING ACTIVITIES
Proceeds from sale of investment securities
available for sale
Proceeds from maturities of investment
securities held to maturity
Proceeds from maturities of investment
securities available for sale
Purchase of investment securities held to
maturity
Purchase of investment securities
available for sale
Decrease (increase) in interest-bearing
deposits in banks
(Increase) decrease in federal funds sold
(Increase) decrease in loans
Premises and equipment expenditures
|
0
11,510
6,100
0
(5,548)
0
(2,975)
(21,103)
(708)
|
0
10,294
13,719
(8,670)
(22,000)
0
(8,825)
(27,581)
(1,353)
|
Net cash provided by (used for)
investing activities
|
(12,724)
|
(44,416)
|
FINANCING ACTIVITIES
Dividends paid
Increase (Decrease) in deposits
(Decrease) increase in securities sold
under repurchase agreement
(Decrease) increase in other
short-term borrowings |
(2,086)
851
2,717
3,645
|
(2,090)
35,429
3,665
3,943
|
Net cash provided by (used for)
financing activities
Net increase (decrease) in cash
and due from banks
CASH AND DUE FROM BANKS, BEGINNING OF YEAR
CASH AND DUE FROM BANKS, SEPT. 30, 2000 AND 1999
CASH PAID (RECEIVED) FOR:
Interest
Income taxes
|
5,127
(2,011)
20,259
$ 18,248
$ 11,017
$ 2,420
|
40,947
(612)
17,864
$ 17,252
$ 9,736
$ 2,310
|
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<PAGE>
CNB CORPORATION AND SUBSIDIARY (The "Corporation")
CNB CORPORATION (The "Parent")
THE CONWAY NATIONAL BANK (The "Bank")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Dollar Amounts in Thousands)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net income per share - Net income per share is computed on the basis of the dividend-adjusted weighted average number of common shares outstanding, 715,746 for the nine-month period ended September 30, 2000 and 716,530 for the nine-month period ended September 30, 1999.
NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances either at the Bank or on deposit with the Federal Reserve Bank. The average amount of these reserve balances for the nine-month period ended September 30, 2000 and for the years ended December 31, 1999 and 1998 were approximately $8,905, $8,300, and $6,839, respectively.
6
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NOTE 3 - INVESTMENT SECURITIES
Investment securities with a par value of approximately $77,860 at September 30, 2000 and $82,325 at December 31, 1999 were pledged to secure public deposits and for other purposes required by law.
The following summaries reflect the book value, unrealized gains and losses, approximate market value, and tax-equivalent yields of investment securities at September 30, 2000 and at December 31, 1999.
AVAILABLE FOR SALE
United States Treasury
Within one year
One to five years
| September 30, 2000
Book Unrealized Holding Fair
Value Gains Losses Value Yield(1) |
$ 2,996
11,078
14,074
|
$ -
1
1
|
$ 4
62
66
|
$ 2,992
11,017
14,009
|
6.23%
6.05
6.09
|
Federal agencies
Within one year
One to five years
|
21,488
49,582
71,070
|
1
10
11
|
83
963
1,046
|
21,406
48,629
70,035
|
5.74
5.89
5.84
|
State, county and
municipal
One to five years
Six to ten years
After ten years
Other Securities (Equity)
Total available for sale
|
259
1,754
1,100
3,113
1,394
$89,651
|
- -
21
22
43
-
$ 55
|
- -
2
-
2
-
$1,114
|
259
1,773
1,122
3,154
1,394
$88,592
|
6.81
6.80
7.54
7.06
-
5.92%
|
HELD TO MATURITY
United States Treasury
Within one year
One to five years
|
1,007
1,007
|
-
-
|
8
8
|
999
999
|
5.76
5.76
|
Federal agencies
Within one year
One to Five years
|
14,034
15,096
29,130
|
8
8
|
46
171
217
|
13,996
14,925
28,921
|
6.42%
6.27
6.35
|
State, county and
municipal
Within one year
One to five years
Six to ten years
Total held to maturity |
2,290
6,573
4,365
13,228
$43,365
|
15
19
46
80
$ 88
|
1
22
45
68
$ 293
|
2,304
6,570
4,366
13,240
$43,160
|
7.68%
6.16
6.52
6.55
6.39%
|
(1) Tax equivalent adjustment based on a 34% tax rate.
As of the quarter ended September 30, 2000, the Bank did not hold any securities of an issuer that exceeded 10% of stockholders' equity. The net unrealized holding gains/(losses) on available-for-sale securities component of capital is $(636) as of September 30, 2000.
7
<PAGE>
NOTE 3 - INVESTMENT SECURITIES (Continued)
AVAILABLE FOR SALE
United States Treasury
Within one year
One to five years
| December 31, 1999
Book Unrealized Holding Fair
Value Gains Losses Value Yield(1) |
$ 4,984
10,117
15,101
|
$ 11
-
11
|
$ 10
114
124
|
$ 4,985
10,003
14,988
|
6.38%
5.99%
6.12%
|
Federal agencies
Within one year
One to five years |
11,461
61,746
73,207
|
- -
5
5
|
38
1,533
1,571
|
11,423
60,218
71,641
|
5.96%
5.79%
5.82%
|
State, county and
municipal
One to five years |
1,132
|
1
|
5
|
1,128
|
6.96%
|
Other-restricted
Federal Reserve
Bank Stock
Total available for sale
|
1,394
$90,834
|
-
$ 17
|
-
$1,700
|
1,394
$89,151
|
6.96%
5.80%
|
HELD TO MATURITY
United States Treasury
Within one year
One to five years |
3,000
1,012
4,012
|
5
-
5
|
- -
14
14
|
3,005
998
4,003
|
6.54%
5.76%
6.35%
|
Federal agencies
Within one year
One to five years |
7,613
28,188
35,801
|
- -
25
25
|
11
368
379
|
7,602
27,845
35,447
|
6.30%
6.36%
6.35%
|
State, county and
municipal
Within one year
One to five years
Six to ten years
After ten years
Total held to maturity |
1,759
8,342
4,315
639
15,055
$54,868
|
12
42
17
1
72
$ 102
|
- -
49
78
20
147
$ 540
|
1,771
8,335
4,254
620
14,980
$54,430
|
8.60%
6.50%
6.69%
5.56%
6.76%
6.46%
|
(1) Tax equivalent adjustment based on a 34% tax rate
As of the quarter ended December 31, 1999, the Bank did not hold any securities of an issuer that exceeded 10% of stockholders' equity. The net unrealized holding gains/(losses) on available-for-sale securities component of capital is $(1,011) as of December 31, 1999.
8
<PAGE>
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES
The following is a summary of loans at September 30, 2000 and December 31, 1999 by major classification:
Real estate loans - mortage
- construction
Commercial and industrial loans
Loans to individuals for household,
family and other consumer expenditures
Agriculture
All other loans, including overdrafts
Gross loans
Less unearned income
Less reserve for loan losses
Net loans
| September 30, December 31,
2000 1999 |
$186,426
21,048
43,952
33,759
1,470
1,663
288,318
(74)
(3,843)
284,401 | $163,614
21,013
45,742
33,864
1,447
1,736
267,416
(275)
(3,451)
263,690 |
9
<PAGE>
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES, continued
Changes in the reserve for loan losses for the quarter ended and nine-month period ended September 30, 2000 and 1999 and the year ended December 31, 1999 are summarized as follows:
Balance, beginning of period
Charge-offs:
Commercial, financial, and agricultural
Real Estate - construction and mortgage
Loans to individuals
Total charge-offs
Recoveries:
Commercial, financial, and agricultural
Real Estate - construction and mortgage
Loans to individuals
Total recoveries
Net charge-offs/(recoveries)
Additions charge to operations
Balance, end of period
| Quarter Ended Nine Months Ended
Sept. 30, Sept. 30, December 31,
2000 1999 2000 1999 1999 |
$ 3,828
49
48
116
$ 213
$ 12
0
46
$ 58
$ 155
$ 170
$ 3,843
|
$ 3,377
105
0
110
$ 215
$ 17
10
44
$ 71
$ 144
$ 200
$ 3,433
|
$ 3,451
79
97
295
$ 471
$ 79
19
115
$ 213
$ 258
$ 650
$ 3,843
|
$ 3,132
189
0
330
$ 519
$ 99
21
170
$ 290
$ 229
$ 530
$ 3,433
|
$ 3,132
254
3
559
$ 816
$ 103
21
216
$ 340
$ 476
$ 795
$ 3,451
|
Ratio of net charge-offs during the period
to average loans outstanding during the
period
|
.05%
|
.06%
|
.09%
|
.10%
|
.19%
|
The entire balance is available to absorb future loan losses.
At September 30, 2000 and December 31, 1999 loans on which no interest was being accrued totalled approximately $365 and $527, respectively and foreclosed real estate totalled $0 and $0, respectively; and loans 90 days past due and still accruing totalled $179 and $142, respectively.
OTHER INTEREST-BEARING ASSETS
As of September 30, 2000, the Company does not have any other interest-bearing assets that would be required to be disclosed under Item III.C.1. or 2. if such assets were loans.
10
<PAGE>
NOTE 5 - PREMISES AND EQUIPMENT
Property at September 30, 2000 and December 31, 1999 is summarized as follows:
Land and buildings
Furniture, fixtures and equipment
Construction in progress
Less accumulated depreciation and
amortization
| September 30
2000
$ 10,469
5,825
979
$ 17,273
8,454
$ 8,819 | December 31,
1999
$ 10,460
5,635
469
$ 16,564
8,060
$ 8,504 |
Depreciation and amortization of bank premises and equipment charged to operating expense was $131 and $393 for the quarter ended and the nine month period ended September 30, 2000, respectively and $576 for the year ended December 31, 1999.
NOTE 6 - CERTIFICATES OF DEPOSIT IN EXCESS OF $100,000
At September 30, 2000 and December 31, 1999, certificates of deposit of $100,000 or more included in time deposits totaled approximately $64,913 and $71,309 respectively. Interest expense on these deposits was approximately $975 and $2,746 for the quarter ended and the nine-month period ended September 30, 2000 and $3,513 for the year ended December 31, 1999.
NOTE 7 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
At September 30, 2000 and December 31, 1999, securities sold under repurchase agreements totaled approximately $30,194 and $27,477. U.S. Government securities with a book value of $38,570 ($38,116 market value) and $34,588 ($34,121 market value), respectively, are used as collateral for the agreements. The weighted-average interest rate of these agreements was 5.04 percent and 4.34 percent at September 30, 2000 and December 31, 1999.
NOTE 8 - LINES OF CREDIT
At September 30, 2000, the Bank had unused short-term lines of credit to purchase Federal Funds from unrelated banks totaling $23,000. These lines of credit are available on a one to seven day basis for general corporate purposes of the Bank. All of the lenders have reserved the right to withdraw these lines at their option.
The Bank has a demand note through the U.S. Treasury, Tax and Loan system with the Federal Reserve Bank of Richmond. The Bank may borrow up to $7,000 under the arrangement at a variable interest rate. The note is secured by U.S. Treasury and Agency Notes with a market value of $7,828 at September 30, 2000. The amount outstanding under the note totaled $2,454 and $3,809 at September 30, 2000 and December 31, 1999, respectively.
The Bank also has a line of credit from the Federal Home Loan Bank of Atlanta for $70 million secured by a lien on the Bank's 1-4 family mortgages. Allowable terms range from overnight to 20 years at varying rates set daily by the FHLB. An advance of $5,000 and $0 was outstanding at September 30, 2000 and December 31, 1999, respectively.
NOTE 9 - INCOME TAXES
Income tax expense for the quarter ended September 30, 2000 and September 30, 1999 on pretax income of $2,469 and $2,585 totalled $804 and $843 respectively. Income tax expense for the nine-month period ended September 30, 2000 and September 30, 1999 on pretax income of $7,320 and $7,016 totalled $2,389 and $2,308 respectively. The provision for federal income taxes is calculated by applying the 34% statutory federal income tax rate and increasing or reducing this amount due to any tax-exempt interest, state bank tax (net of federal benefit), business credits, surtax exemption, tax preferences, alternative minimum tax calculations, or other factor. A summary of income tax components and a reconciliation of income taxes to the federal statutory rate are included in fiscal year-end reports.
11
<PAGE>
NOTE 9 - INCOME TAXES (Continued)
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES
From time to time the bank subsidiary is a party to various litigation, both as plaintiff and as defendant, arising from its normal operations. No material losses are anticipated in connection with any of these matters at September 30, 2000.
Also, in the normal course of business, the bank subsidiary has outstanding commitments to extend credit and other contingent liabilities, which are not reflected in the accompanying financial statements. At September 30, 2000, commitments to extend credit totalled $24,297; financial standby letters of credit totalled $670; and performance standby letters of credit totalled $441. In the opinion of management, no material losses or liabilities are expected as a result of these transactions.
NOTE 11 - EMPLOYEE BENEFIT PLAN
The Bank has a defined contribution pension plan covering all employees who have attained age twenty-one and have a minimum of one year of service. Upon ongoing approval of the Board of Directors, the Bank matches one hundred percent of employee contributions up to three percent of employee salary deferred and fifty percent of employee contributions in excess of three percent and up to five percent of salary deferred. The Board of Directors may also make discretionary contributions to the Plan. For the three-month and nine month period ended September 30, 2000 and years ended December 31, 1999, 1998 and 1997, $109, 336, $423, $378, and $361, respectively, was charged to operations under the plan.
NOTE 12 - REGULATORY MATTERS
The Bank is 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 financial statements. The regulations require the Bank to meet specific capital adequacy guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital classification is also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Tier I capital to adjusted total assets (Leverage Capital ratio) and minimum ratios of Tier I and total capital to risk-weighted assets. To be considered adequately capitalized under the regulatory framework for prompt corrective action, the Bank must maintain minimum Tier I leverage, Tier I risk-based and total risked-based ratios as set forth in the table. The Bank's actual capital ratios are presented in the table below as of September 30, 2000:
Total Capital (to risk
weighted assets)
Tier I Capital (to risk
weighted assets)
Tier I Capital (to avg.
assets
| To be
well capitalized
For under prompt
Capital adequacy corrective action
Purposes provisions
Actual Minimum Minimum
Amount Ratio Amount Ratio Amount Ratio |
$50,403
46,714
46,714 | 17.08%
15.83
10.07 | $23,609
11,805
18,560 | 8.0%
4.0
4.0 | $29,512
17,707
23,200 | 10.0%
6.0
5.0 |
12
<PAGE>
NOTE 13 - CONDENSED FINANCIAL INFORMATION
Following is condensed financial information of CNB Corporation (parent company only):
CONDENSED BALANCED SHEET
SEPTEMBER 30, 2000
(Unaudited) |
ASSETS
Cash
Investment in subsidiary
Fixed assets
Other assets |
$ 2,170
46,078
791
37
$ 49,076
|
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liability
Stockholders' equity
|
$ 0
49,076
$ 49,076
|
CONDENSED STATEMENT OF INCOME
For the nine-month period ended September 30, 2000
(Unaudited) |
EQUITY IN NET INCOME OF SUBSIDIARY
OTHER INCOME
OTHER EXPENSES
Net Income | $ 4,969
1
(39)
$ 4,931 |
DISCUSSION OF FORWARD-LOOKING STATEMENTS
Information in the enclosed report, other than historical information, may contain forward-looking statements that involve risks and uncertainties, including, but not limited to, timing of certain business initiatives of the Company, the Company's interest rate risk condition, and future regulatory actions of the Comptroller of the Currency and Federal Reserve System. It is important to note that the Company's actual results may differ materially and adversely from those discussed in forward-looking statements.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis is provided to afford a clearer understanding of the major elements of the corporation's results of operations, financial condition, liquidity, and capital resources. The following discussion should be read in conjunction with the corporation's financial statements and notes thereto and other detailed information appearing elsewhere in this report. In addition, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal and recurring nature.
DISTRIBUTION OF ASSETS AND LIABILITIES
The Company maintains a conservative approach in determining the distribution of assets and liabilities. Loans, net of unearned income, have increased 12.3% from $256,710 at September 30, 1999 to $288,244 at September 30, 2000 and have increased as a percentage of total assets from 54.6% to 61.9% over the same period as loan demand remains strong in our market. Securities and federal funds sold have decreased as a percentage of total assets from 39.1% at September 30, 1999 to 31.3% at September 30, 2000 as we have utilized funds in the lending area. This level of investments and federal funds sold provides for a more than adequate supply of secondary liquidity. Management has sought to build the deposit base with stable, relatively no n-interest-sensitive deposits by offering the small to medium deposit account holders a wide array of deposit instruments at competitive rates. Non-interest-bearing demand deposits decreased as a percentage of total assets from 16.4% at September 30, 1999 to 16.1% at September 30, 2000 as more customers, both business and personal, are attracted to interest-bearing deposit accounts. We expect the percentage of demand deposits to decline over the long-term. Interest-bearing deposits have remained constant at 64.7% of total assets at September 30, 1999 and 2000 while securities sold under agreement to repurchase have decreased from 7.7% to 6.5% over the same period. Other short-term borrowings have increased from 1.1% of total assets at September 30, 1999 to 1.6% at September 30, 2000 due primarily to a $5,000 FHLB advance outstanding at September 30, 2000.
The following table sets forth the percentage relationship to total assets of significant components of the corporation's balance sheet as of September 30, 2000 and 1999:
Assets:
Earning assets:
Loans, net of unearned income
Investment securities
Securities Available for Sale
Federal funds sold and securities purchased
under agreement to resell
Other earning assets
Total earning assets
Other assets
Total assets
| September 30,
2000 1999 |
61.9%
9.3
19.0
3.0
-
93.2
6.8
100.0%
|
54.6%
12.6
18.9
7.6
-
93.7
6.3
100.0%
|
Liabilities and stockholder's equity:
Interest-bearing liabilities:
Interest-bearing deposits
Federal funds purchased and securities sold
under agreement to resell
Other short-term borrowings
Total interest-bearing liabilities
Noninterest-bearing deposits
Other liabilities
Stockholders' equity
Total liabilities and stockholders' equity
|
64.7%
6.5
1.6
72.8
16.1
.6
10.5
100.0%
|
64.7%
7.7
1.1
73.5
16.4
.5
9.6
100.0%
|
14
<PAGE>
RESULTS OF OPERATION
CNB Corporation experienced earnings for the three-month period ended September 30, 2000 and 1999 of $1,665 and $1,742, respectively, resulting in a return on average assets of 1.43% and 1.48% and a return on average stockholders' equity of 14.43% and 15.89%.
CNB Corporation experienced earnings for the nine-month period ended September 30, 2000 and 1999 of $4,931 and $4,708, respectively, resulting in a return on average assets of 1.43% and 1.39% and a return on average stockholders' equity of 14.24% and 14.66%.
The earnings were primarily attributable to net interest margins in each period (see Net Income-Net Interest Income). Other factors include management's ongoing effort to maintain other income at adequate levels (see Net Income - Other Income) and to control other expenses (see Net Income - Other Expenses). This level of earnings, coupled with a conservative dividend policy, have supplied the necessary capital funds to support the growth in total assets. Total assets increased $50,634 or 12.1% from $419,487 at September 30, 1998 to $470,121 at September 30, 1999 but decreased $4,417 or .9% to $465,974 at September 30, 2000 due to the loss of additional deposits tied to Y2K concerns. The following table sets forth the financial highlights for the three-month and nine-month periods ending September 30, 2000 and September 30, 1999:
CNB Corporation
CNB Corporation and Subsidiary
FINANCIAL HIGHLIGHTS
(All Dollar Amounts, Except Per Share Data, in Thousands)
|
Net interest income after provision
for loan losses
Income before income taxes
Net Income
Per Share*
Cash dividends declared
Per Share*
Total assets
Total deposits
Loans, net of unearned income
Investment securities and
securities available for sale
Stockholders' equity
Book value per share*
Ratios (1):
Annualized return on average total
assets
Annualized return on average
stockholders'equity
*Restated for a 20% stock dividend
issued during 2000.
| Three-Month Period
Ended September 30,
Percent
Increase
2000 1999 (Decrease) | Nine-Month Period
Ended September 30,
Percent
Increase
2000 1999 (Decrease) |
4,685
2,469
1,665
2.32
0
0
465,974
376,354
288,244
131,957
49,076
68.56
1.43%
14.43% | 4,603
2,585
1,742
2.43
0
0
470,121
381,541
256,710
147,887
44,899
62.76
1.48%
15.89% | 1.8%
(4.5)
(4.4)
(4.5)
- -
- -
(.9)%
(1.4)
12.3
(10.8)
9.3
9.2
(3.4)%
(9.2)% | 14,076
7,320
4,931
6.89
0
0
465,974
376,354
288,244
131,957
49,076
68.56
1.43%
14.24% | 13,198
7,016
4,708
6.57
0
0
470,121
381,541
256,710
147,887
44,899
62.76
1.39%
14.66% | 6.7%
4.3
4.7
4.9
- -
- -
(.9)%
(1.4)
12.3
(10.8)
9.3
9.2
2.9%
(2.9)% |
(1) For the three-month period ended September 30, 2000 and September 30, 1999, average total assets amounted to $464,824 and $471,703 with average stockholders' equity totaling $48,010 and $43,856, respectively. For the nine-month period ended September 30, 2000 and September 30, 1999, average total assets amounted to $459,040 and $451,021 with average stockholders' equity totaling $46,156 and $42,830, respectively.
15
<PAGE>
NET INCOME
Net Interest Income - Earnings are dependent to a large degree on net interest income, defined as the difference between gross interest and fees earned on earning assets, primarily loans and securities, and interest paid on deposits and borrowed funds. Net interest income is effected by the interest rates earned or paid and by volume changes in loans, securities, deposits, and borrowed funds.
Interest rates paid on deposits and borrowed funds and earned on loans and investments have generally followed the fluctuations in market interest rates in 2000 and 1999. However, fluctuations in market interest rates do not necessarily have a significant impact on net interest income, depending on the bank's rate sensitivity position. A rate sensitive asset (RSA) is any loan or investment that can be repriced either up or down in interest rate within a certain time interval. A rate sensitive liability (RSL) is an interest paying deposit or other liability that can be repriced either up or down in interest rate within a certain time interval. When a proper balance between RSA and RSL exists, market interest rate fluctuations should not have a significant impact on earnings. The larger the imbalance, the greater the interest rate risk assumed by the bank and the greater the positive or negative impact of interest rate fluctuations on earnings. The bank seeks to manage its assets and liabilities in a manner that will limit interest rate risk and thus stabilize longrun-earning power. Management believes that a rise or fall in interest rates will not materially effect earnings.
The Bank has maintained adequate net interest margins for the three-month and nine-month periods ended September 30, 2000 and 1999 by earning satisfactory yields on loans and securities and funding these assets with a favorable deposit mix containing a significant level of noninterest-bearing demand deposits.
Fully-tax-equivalent net interest income showed a 1.2% increase from $4,895 for the three-month period ended September 30, 1999 to $4,953 for the three-month period ended September 30, 2000. During the same period, total fully-tax-equivalent interest income increased by 5.7% from $8,275 to $8,744 and total interest expense increased by 12.2% from $3,380 to $3,791. Fully-tax-equivalent net interest income as a percentage of total earning assets has shown an increase of .13% from 4.45% for the three-month period ended September 30, 1999 to 4.58% for the three-month period ended September 30, 2000.
Fully-tax-equivalent net interest income showed a 7.3% increase from $14,002 for the nine-month period ended September 30, 1999 to $15,022 for the nine-month period ended September 30, 2000. During the same period, total fully-tax-equivalent interest income increased by 8.4% from $23,745 to $25,734 and total interest expense increased by 9.9% from $9,743 to $10,712. Fully-tax-equivalent net interest income as a percentage of total earning assets has shown an increase of .26% from 4.43% for the nine-month period ended September 30, 1999 to 4.69% for the nine-month period ended September 30, 2000.
The tables on the following four pages present selected financial data and an analysis of net interest income.
16
<PAGE>
CNB Corporation and Subsidiary
Selected Financial Data |
Assets:
Earning assets:
Loans, net of unearned income
Securities:
Taxable
Tax-exempt
Federal funds sold and
securities purchased under
agreement to resell
Other earning assets
Total earning assets
Other assets
Total assets
Liabilities and stockholder equity
Interest-bearing liabilities:
Interest-bearing deposits
Federal funds purchased and
securities sold under
agreement to repurchase
Other short-term borrowings
Total interest-bearing
liabilities
Noninterest-bearing deposits
Other liabilities
Stockholders' equity
Total liabilities and
stockholders' equity
Net interest income as a percent
of total earning assets
(1) Tax-equivalent adjustment
based on a 34% tax rate
| Three Months Ended 9/30/00 Three Months Ended 9/30/99
Avg. Interest Avg. Ann. Avg. Interest Avg. Ann.
Balance Income/ Yield or Balance Income/ Yield or
Expense Rate Expense(1) Rate |
$288,137
116,949
16,128
11,728
0
432,942
31,882
$464,824
$297,932
32,539
2,760
$333,231
80,634
2,949
48,010
$464,824
$432,942
|
$ 6,543
1,733
287
181
0
8,744
3,340
387
64
$ 3,791
$ 4,953
$ 98
|
9.08%
5.93
7.12
6.17
- -
8.08
4.48
4.76
9.28
4.55
4.58
|
$253,589
135,443
14,882
36,198
0
440,112
31,591
$471,703
$311,450
32,260
1,932
$345,642
79,476
2,729
43,856
$471,703
$440,112
|
$ 5,589
1,988
270
428
0
8,275
$ 3,025
334
21
$ 3,380
$ 4,895
$ 92
|
8.82%
5.87
7.26
4.73
- -
7.52
3.89
4.14
4.35
3.91
4.45
|
Ratios:
Annualized return on average total assets
Annualized return on average stockholders' equity
Cash dividends declared as a percent of net income
Average stockholders' equity as a percent of:
Average total assets
Average total deposits
Average loans, net of unearned income
Average earning assets as a percent of
average total assets
|
1.43
14.43
0
10.33
12.68
16.66
93.14
|
1.48
15.89
0
9.30
11.22
17.29
93.30
|
17
<PAGE>
CNB Corporation and Subsidiary
Selected Financial Data |
Assets:
Earning assets:
Loans, net of unearned income
Securities:
Taxable
Tax-exempt
Federal funds sold and
securities purchased under
agreement to resell
Other earning assets
Total earning assets
Other assets
Total assets
Liabilities and stockholder equity
Interest-bearing liabilities:
Interest-bearing deposits
Federal funds purchased and
securities sold under
agreement to repurchase
Other short-term borrowings
Total interest-bearing
liabilities
Noninterest-bearing deposits
Other liabilities
Stockholders' equity
Total liabilities and
stockholders' equity
Net interest income as a percent
of total earning assets
(1) Tax-equivalent adjustment
based on a 34% tax rate
| Nine Months Ended 9/30/00 Nine Months Ended 9/30/99
Avg. Interest Avg. Ann. Avg. Interest Avg. Ann.
Balance Income/ Yield or Balance Income/ Yield or
Expense Rate Expense(1) Rate |
$281,991
121,617
16,178
7,508
0
427,294
31,746
$459,040
$297,004
30,089
4,300
$331,393
78,254
3,237
46,156
$459,040
$427,294
|
$ 19,124
5,406
870
334
0
25,734
9,450
1,059
203
$ 10,712
$ 15,022
$ 296
|
9.04%
5.93
7.17
5.93
- -
8.03
4.24
4.69
6.29
4.31
4.69
|
$244,355
132,895
14,732
29,496
0
421,478
29,543
$451,021
$297,962
32,622
1,518
$332,102
73,592
2,497
42,830
$451,021
$421,478
|
$ 16,048
5,838
806
1,053
0
23,745
$ 8,686
1,006
51
$ 9,743
$ 14,002
$ 274
|
8.76%
5.86
7.29
4.76
- -
7.51
3.89
4.11
4.48
3.91
4.43
|
Ratios:
Annualized return on average total assets
Annualized return on average stockholders' equity
Cash dividends declared as a percent of net income
Average stockholders' equity as a percent of:
Average total assets
Average total deposits
Average loans, net of unearned income
Average earning assets as a percent of
average total assets
|
1.43
14.24
0
10.05
12.30
16.37
93.08
|
1.39
14.66
0
9.50
11.53
17.53
93.45
|
18
<PAGE>
CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Three Months Ended September 30, 2000 and 1999
(Dollars in Thousands)
Earning Assets:
Loans, Net of unearned
Income (2)
Investment securities:
Taxable
Tax-exempt
Federal funds sold and
Securities purchased under
agreement to resell
Other earning assets
Total Earning Assets
Interest-bearing
Liabilities:
Interest-bearing deposits
Federal funds purchased and
securities sold under
agreement to repurchase
Other short-term borrowings
Total Interest-bearing
Liabilities
Interest-free Funds
Supporting Earning Assets
Total Funds Supporting
Earning Assets
Interest Rate Spread
Impact of Non-interest-
bearing Funds on Net Yield
on Earning Assets
Net Yield on Earning Assets
|
Average
Volume
2000
288,137
116,949
16,128
11,728
0
432,942
297,932
32,539
2,760
333,231
99,711
432,942
|
Average
Volume
1999
253,589
135,443
14,882
36,198
0
440,112
311,450
32,260
1,932
345,642
94,470
440,112
|
Yield/Rate
2000 (1)
9.08%
5.93%
7.12%
6.17%
-
8.08%
4.48%
4.76%
9.28%
4.55%
3.50%
3.53%
1.05%
4.58%
|
Yield/Rate
1999 (1)
8.82%
5.87%
7.26%
4.73%
-
7.52%
3.89%
4.14%
4.35%
3.91%
3.07%
3.61%
.84%
4.45%
|
Interest
Earned/Paid
2000 (1)
6,543
1,733
287
181
0
8,744
3,340
387
64
3,791
3,791
4,953
|
Interest
Earned/Paid
1999 (1)
5,589
1,988
270
428
0
8,275
3,025
334
21
3,380
3,380
4,895
|
Variance
954
(255)
17
(247)
0
469
315
53
43
411
411
|
Change
Due to
Rate
165
20
(5)
130
-
310
459
50
24
533
533
|
Change
Due to
Volume
762
(271)
23
(289)
-
225
(131)
3
9
(119)
(119)
| Change
Due to
Rate X
Volume
27
(4)
(1)
(88)
-
(66)
(13)
- -
10
(3)
(3) |
(1) Tax-equivalent adjustment based on a 34% tax rate.
(2) Includes non-accruing loans which does not have a material effect on the Net Yield on Earning Assets.
19
<PAGE>
CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Nine Months Ended September 30, 2000 and 1999
(Dollars in Thousands)
Earning Assets:
Loans, Net of unearned
Income (2)
Investment securities:
Taxable
Tax-exempt
Federal funds sold and
Securities purchased under
Agreement to resell
Other earning assets
Total Earning Assets
Interest-bearing
Liabilities:
Interest-bearing deposits
Federal funds purchased and
Securities sold under
Agreement to repurchase
Other short-term borrowings
Total Interest-bearing
Liabilities
Interest-free Funds
Supporting Earning Assets
Total Funds Supporting
Earning Assets
Interest Rate Spread
Impact of Non-interest-
Bearing Funds on Net Yield
On Earning Assets
Net Yield on Earning Assets
|
Average
Volume
2000
281,991
121,617
16,178
7,508
0
427,294
297,004
30,089
4,300
331,393
95,901
427,294
|
Average
Volume
1999
244,355
132,895
14,732
29,496
0
421,478
297,962
32,622
1,518
332,102
89,376
421,478
|
Yield/Rate
2000 (1)
9.04%
5.93%
7.17%
5.93%
-
8.03%
4.24%
4.69%
6.29%
4.31%
3.34%
3.72%
.97%
4.69%
|
Yield/Rate
1999 (1)
8.76%
5.86%
7.29%
4.76%
-
7.51%
3.89%
4.11%
4.48%
3.91%
3.08%
3.60%
.83%
4.43%
|
Interest
Earned/Paid
2000 (1)
19,124
5,406
870
334
0
25,734
9,450
1,059
203
10,712
10,712
15,022
|
Interest
Earned/Paid
1999 (1)
16,048
5,838
806
1,053
0
23,745
8,686
1,006
51
9,743
9,743
14,002
|
Variance
3,076
(432)
64
(719)
-
1,989
764
53
152
969
969
|
Change
Due to
Rate
513
70
(13)
259
-
829
795
142
21
958
958
|
Change
Due to
Volume
2,473
(496)
79
(785)
-
1,271
(30)
(78)
93
(15)
(15)
| Change
Due to
Rate X
Volume
90
(6)
(2)
(193)
-
(111)
(1)
(11)
38
26
26 |
(1) Tax-equivalent adjustment based on a 34% tax rate.
(2) Includes non-accruing loans which does not have a material effect on the Net Yield on Earning Assets.
20
<PAGE>
NET INCOME (continued)
Provision for Possible Loan Losses - It is the policy of the bank to maintain the reserve for possible loan losses at the greater of 1.20% of net loans or the percentage based on the actual loan loss experience over the previous five years. In addition, management may increase the reserve to a level above these guidelines to cover potential losses identified in the portfolio.
The provision for possible loan losses was $170 for the three-month period ended September 30, 2000 and $200 for the three-month period ended September 30, 1999. Net loan charge-offs/(recoveries) totaled $155 or the three-month period ended September 30, 2000 and $144 for the same period in 1999.
The provision for possible loan losses was $650 for the nine-month period ended September 30, 2000 and $530 for the nine-month period ended September 30, 1999. Net loan charge-offs/(recoveries) totaled $258 for the nine-month period ended September 30, 2000 and $229 for the same period in 1999.
The reserve for possible loan losses as a percentage of net loans was 1.35% at September 30, 2000 and 1.36% at September 30, 1999. The increased provision during the nine-month period ended September 30, 2000 was due to continued strong loan growth during 2000.
Securities Transactions - The Bank had no security sales during the first nine months of 2000 or 1999. At September 30, 2000, December 31, 1999, and September 30, 1999 market value appreciation/(depreciation) in the securities portfolio totaled $(1,264), $(2,121), and $(846). As indicated, market value has decreased in 1999 and 2000 due to rising market interest rates.
Other Income - Other income, net of any gains/losses on security transactions, increased by 8.5% from $1,126 for the three-month period ended September 30, 1999 to $1,222 for the three-month period ended September 30, 2000.
Other income, net of any gains/losses on security transactions, increased by 11.3% from $3,048 for the nine-month period ended September 30, 1999 to $3,393 for the nine-month period ended September 30, 2000.
This increase in the three-month period and nine-month period ended September 30, 2000 was due to an increase in deposit account volumes and higher merchant discount income.
Other Expenses - Other expenses increased by 9.4% from $3,144 for the three-month period ended September 30, 1999 to $3,438 for the three-month period ended September 30, 2000. The major components of other expenses are salaries and employee benefits which increased 8.7% from $1,852 to $2,013; occupancy expense which increased 8.2% from $401 to $434; and other operating expenses which increased by 11.2% from $891 to $991.
Other expenses increased by 4.3% from $7,016 for the nine-month period ended September 30, 1999 to $7,320 for the nine-month period ended September 30, 2000. The major components of other expenses are salaries and employee benefits which increased 9.0% from $5,561 to $6,059; occupancy expense which increased 10.0% from $1,236 to $1,359; and other operating expense which increased by 12.2% from $2,433 to $2,731.
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The increase in the three-month and nine-month period ended September 30, 2000 salaries and employee benefits and occupancy expense was due to the opening of the new "Murrells Inlet Office" in the spring of 2000 and increases in the cost to provide employee benefits - particularly health insurance coverage. Other operating expenses have shown an increase due to higher credit card department related costs to support the strong growth in merchant discount income.
Income Taxes - Provisions for income taxes decreased 4.6% from $843 for the three-month period ended September 30, 1999 to $804 for the three-month period ended September 30, 2000. Income before income taxes less interest on tax-exempt investment securities decreased by 5.3% from $2,407 for the three-month period ended September 30, 1999 to $2,280 for the same period in 2000. State tax liability increased as income before income taxes decreased 4.5% from $2,585 to $2,469 during the same period.
Provisions for income taxes increased 3.5% from $2,308 for the nine-month period ended September 30, 1999 to $2,389 for the nine-month period ended September 30, 2000. Income before income taxes less interest on tax-exempt investment securities increased by 4.0% from $6,484 for the nine-month period ended September 30, 1999 to $6,746 for the same period in 2000 and state tax liability increased as income before income taxes increased 4.3% from $7,016 to $7,320 during the same period.
LIQUIDITY
The bank's liquidity position is primarily dependent on short-term demands for funds caused by customer credit needs and deposit withdrawals and upon the liquidity of bank assets to meet these needs. The bank's liquidity sources include cash and due from banks, federal funds sold and short-term investments. In addition, the bank has established federal funds lines of credit from correspondent banks and has the ability to borrow funds from the Federal Reserve System and the Federal Home Loan Bank of Atlanta. Management feels that short-term and long-term liquidity sources are more than adequate to meet funding needs.
CAPITAL RESOURCES
Total stockholders' equity was $49,076, $43,712, $41,201 and $37,717 at September 30, 2000, December 31, 1999, December 31, 1998, and December 31, 1997, representing 10.53%, 9.59%, 9.66%, and 9.90% of total assets, respectively. At September 30, 2000, the Bank exceeds quantitative measures established by regulation to ensure capital adequacy (see NOTE 12 - REGULATORY MATTERS). Capital is considered sufficient by management to meet current and prospective capital requirements and to support anticipated growth in bank operations.
The Company paid an approximate 20% stock dividend on September 11, 2000. The Board increased the $3.00 per share annual cash dividend paid at year-end 1997 to $3.50 per share at year-end 1998 which increased the cash dividend payout ratio and cash dividend yield.
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EFFECTS OF REGULATORY ACTION
The Federal Deposit Insurance Corporation (FDIC) reduced FDIC insurance premium rates during the third quarter of 1995 which has had a positive effect on subsequent earnings and should favorably impact future year's income. Effective March 11, 2000, the Gramm-Leach-Bliley Act of 1999 allows bank holding companies to elect to be treated as financial holding companies which may engage in a broad range of securities, insurance, and other financial activities. At this time, neither the Company nor the Bank plan to enter these new lines of business. The management of the Company and the Bank is not aware of any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on liquidity, capital resources, or operations.
ACCOUNTING ISSUES
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instrument and Hedging Activities". All derivatives are to be measured at fair value and recognized in the balance sheet as assets or liabilities. The statement is effective for fiscal years and quarters beginning after June 15, 2000. Because the Company does not use derivative transactions at this time, management does not expect that this standard will have a significant effect on the Company.
YEAR 2000
The Year 2000 date change posed a unique challenge to the banking industry. This technical problem posed not only a physical system threat but also a threat to the public's confidence in the banking industry. The Conway National Bank's investment of its staff and financial resources to address operational issues and to maintain the confidence of our customers resulted in an uneventful but successful Year 2000 date change.
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EXHIBITS AND REPORTS ON FORM 8-K
See Exhibit Index appearing below.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter covered by this report.
EXHIBIT INDEX
Exhibit
Number
27 Financial Data Schedule - Article 9 Financial Data Schedule for 10-Q for electronic filers (pages 25 and 26).
All other exhibits, the filing of which are required with this Form, are not applicable.
CNB Corporation
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CNB Corporation
(Registrant)
Paul R. Dusenbury
________________________________________ _
Paul R. Dusenbury
Treasurer
(Chief Financial and Accounting Officer)
Date: November 13, 2000
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