CNB CORPORATION
and
THE CONWAY NATIONAL BANK
FINANCIAL REPORT
JUNE 30, 2006
www.conwaynationalbank.com
TO OUR SHAREHOLDERS AND FRIENDS:
Conway National experienced solid financial performance in the first half of 2006. However, net income for the six-month period ended June 30, 2006, totaled $4,538,000, down 3.5% from $4,705,000 for the same period in 2005. The decline in income is attributable, in part, to the approximate $210,000 in direct expenses associated with the proxy contest during the period. On a dividend-adjusted per share basis, earnings fell from $5.97 for the first half of 2005 to $5.76 in 2006.
As of June 30, 2006, total assets were $821,504,000, an increase of 13.9% over June 30, 2005; total deposits amounted to $682,869,000, an increase of 10.9% over the previous year; loans totalled $557,578,000, an increase of 23.4% from 2005; and investment securities were $182,919,000, a decrease of 7.7% from the prior year. Stockholders' equity totaled $74,575,000 at June 30, 2006, resulting in a book value of $94.61 per share.
Net income for the six-month period ending June 30, 2006 of $4,538,000 represents an annualized return on the average assets of 1.15% and an annualized return on the average stockholders' equity of 12.49% which are lower than the previous mid-year's 1.34% and 13.66% annualized returns, respectively. Bank earnings are primarily the result of the Bank's net interest income which increased 10.4% from $13,762,000 for the six-month period ending June 30, 2006, to $15,192,000 for the six-month period ending June 30, 2006. Other factors which affect earnings include the provision for possible loan losses, other expense and other income. The provision for possible loan losses increased from $535,000 during the first half of 2005 to $650,000 during the first half in 2006 due, primarily, to growth in loan outstandings. The allowance for loan losses as a percentage of net loans, declined from 1.26% at June 30, 2005, to 1.16% at June 30, 2006. Other expenses increased 16.0% from $9,403,000 to $10,192,000 and other income increased 2.3% from $3,175,000 to $3,249,000 during the same period. In addition to the above mentioned proxy contest related expenses, non-interest expenses have increased due to additional staffing, increased compensation, and fixed asset expenditures. Non-interest income growth slowed due to lower service charge revenue on deposit accounts substantially offset by increased loan fee income.
Conway National maintained solid earnings for the first half of 2006 despite the unique circumstances we have experienced during the past twelve months, and as the unusual growth in the local and national economy begins to level. As the banking industry continues to move away from a paper-based payment system, electronic banking services remain a primary product offering. We recently eliminated the per item charge associated with debit card transactions in accordance with our commitment to customer service, as well as to support our competitive position in the market place. The first floor renovation of the operations and administration building has been completed and is now occupied by various departments. Renovations to the second and third floors of this facility will continue through the remainder of 2006 and 2007. Our North Conway office opened on July 17, 2006, and has been well received.
We are very appreciative of your substantial support during the past twelve months; and with your continued support, we will strive to build on our foundation of customer service as we serve as your community bank for many years to come.
W. Jennings Duncan, President
CNB Corporation and The Conway National Bank
CNB CORPORATION AND SUBSIDIARY
Conway, South Carolina
CONSOLIDATED BALANCE SHEET
(Unaudited) |
|
ASSETS: | June 30, 2006 | June 30, 2005 |
| Cash and due from banks | $ 32,732,000 | $ 31,047,000 |
| Interest-bearing deposits with banks | 0 | 0 |
| Investment securities: | | |
| United States government securities | 0 | 0 |
| Obligations of United States government agencies
and corporations |
160,885,000
|
174,964,000
|
| Obligations of states and political subdivisions | 18,880,000 | 21,450,000 |
| Other securities | 3,154,000 | 1,790,000 |
| Total investment securities | 182,919,000 | 198,204,000 |
| Federal funds sold and securities purchased under
agreement to resell |
19,000,000
|
16,000,000
|
| Loans | 557,578,000 | 451,732,000 |
| Less allowance for loan losses | (6,394,000) | (5,602,000) |
| Net loans | 551,184,000 | 446,130,000 |
| Bank premises and equipment | 21,259,000 | 17,972,000 |
| Other assets | 14,410,000 | 11,717,000 |
| Total assets | $821,504,000 | $721,070,000 |
| | | |
LIABILITIES AND STOCKHOLDERS' EQUITY: | | |
| Liabilities: | | |
| Deposits: | | |
| Noninterest-bearing | $146,388,000 | $134,109,000 |
| Interest-bearing | 536,481,000 | 481,406,000 |
| Total deposits | 682,869,000 | 615,515,000 |
| | | |
| Federal funds purchased and securities sold under
agreement to repurchase |
32,676,000
|
28,746,000
|
| Other short-term borrowings | 25,187,000 | 1,234,000 |
| Other liabilities | 6,197,000 | 4,725,000 |
| Total Liabilities | 746,929,000 | 650,220,000 |
| | | |
| Stockholders' Equity: | | |
| Common stock, par value $10.00 per share:
Authorized 1,500,000; issued 789,774 in
2004 and 2005 |
7,898,000
|
7,898,000
|
| Surplus | 43,547,000 | 43,543,000 |
| Undivided profits | 25,631,000 | 20,265,000 |
| Net unrealized holding gains (losses) on
available-for-sale securities |
(2,282,000)
|
(678,000)
|
| Less treasury stock | (219,000) | (178,000) |
| Total stockholders' equity | 74,575,000 | 70,850,000 |
| Total liabilities and stockholders' equity | $821,504,000 | $721,070,000 |
| | | |
CNB CORPORATION AND SUBSIDIARY
Conway, South Carolina
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) |
| Six Months Ended |
INTEREST INCOME | June 30, 2006 | June 30, 2005 |
| Interest and fees on loans | $ 19,327,000 | $ 14,105,000 |
| Interest on investment securities: | | |
| Taxable investment securities | 2,909,000 | 3,303,000 |
| Tax -exempt investment securities | 404,000 | 447,000 |
| Other securities | 41,000 | 38,000 |
| Interest on federal funds sold and securities
purchased under agreement to resell |
502,000
|
248,000
|
| Total interest income | 23,183,000 | 18,141,000 |
| | | |
INTEREST EXPENSE: | | |
| Interest on deposits | 7,374,000 | 4,088,000 |
| Interest on federal funds purchased and securities
sold under agreement to repurchase |
521,000
|
266,000
|
| Interest on other short-term borrowings | 96,000 | 25,000 |
| Total interest expense | 7,991,000 | 4,379,000 |
Net interest income | 15,192,000 | 13,762,000 |
Provision for loan losses | 650,000 | 535,000 |
Net interest income after provision for loan losses | 14,542,000 | 13,227,000 |
Other income: | | |
| Service charges on deposit accounts | 1,654,000 | 1,700,000 |
| Gains/(losses) on securities | (6,000) | 2,000 |
| Other operating income | 1,601,000 | 1,473,000 |
| Total other income | 3,249,000 | 3,175,000 |
Other expenses: | | |
| Salaries and employee benefits | 6,788,000 | 6,029,000 |
| Occupancy expense | 1,612,000 | 1,336,000 |
| Other operating expenses | 2,512,000 | 2,038,000 |
| Total other expenses | 10,912,000 | 9,403,000 |
Income before income taxes | 6,879,000 | 6,999,000 |
| Income tax provision | 2,341,000 | 2,294,000 |
Net Income | $ 4,538,000 | $ 4,705,000 |
| | |
Per share: | | |
| Net income per weighted average shares outstanding | $ 5.76 | $ 5.97 |
| | | |
| Cash dividend paid per share | $ 0 | $ 0 |
| | | |
| Book value per actual number of shares outstanding | $ 94.61 | $ 89.86 |
| | | |
| Weighted average number of shares outstanding | 788,443 | 788,538 |
| | | |
| Actual number of shares outstanding | 788,216 | 788,427 |
| | | |
| Member Federal Reserve System - Member FDIC |
| | | |
CNB CORPORATION
BOARD OF DIRECTORS |
James W. Barnette, Jr. | R. Phil Hucks |
William R. Benson | Edward T. Kelaher |
Harold G. Cushman | George F. Sasser |
H. Buck Cutts | Howard B. Smith, III |
W. Jennings Duncan | |
CONWAY NATIONAL BANK OFFICERS
|
W. Jennings Duncan | Interim President |
L. Ford Sanders, II | Interim Executive Vice President |
William R. Benson | Senior Vice President |
Marion E. Freeman, Jr. | Senior Vice President |
Phillip H. Thomas | Senior Vice President |
W.G. Holt, Jr. | Vice President |
M. Terry Hyman | Vice President |
Raymond Meeks | Vice President |
A. Mitchell Godwin | Vice President |
Jackie C. Stevens | Vice President |
Betty M. Graham | Vice President |
Ernest J. Lareau | Vice President |
F. Timothy Howell | Vice President |
E. Wayne Suggs | Vice President |
Janice C. Simmons | Vice President |
Patricia C. Catoe | Vice President |
W. Michael Altman | Vice President |
Boyd W. Gainey, Jr. | Vice President |
William Carl Purvis | Vice President |
Bryan T. Huggins | Assistant Vice President |
Gail S. Sansbury | Assistant Vice President |
L. Ray Wells | Assistant Vice President |
W. Page Ambrose | Assistant Vice President |
Roger L. Sweatt | Assistant Vice President |
L. Kay Benton | Assistant Vice President |
Virginia B. Hucks | Assistant Vice President |
Timothy L. Phillips | Assistant Vice President |
Helen A. Johnson | Assistant Vice President |
Elaine H. Hughes | Assistant Vice President |
Gwynn D. Branton | Assistant Vice President |
Tammy S. Scarberry | Assistant Vice President |
D. Scott Hucks | Assistant Vice President |
Sherry S. Sawyer | Banking Officer |
Rebecca G. Singleton | Banking Officer |
Josephine C. Fogle | Banking Officer |
Jeffrey P. Singleton | Banking Officer |
Debra B. Johnston | Banking Officer |
Freeman R. Holmes, Jr. | Banking Officer |
Doris B. Gasque | Banking Officer |
Carlton A. Terry | Banking Officer |
James A. Hansen III | Banking Officer |
Jennie L. Hyman | Banking Officer |
Marsha S. Jordan | Banking Officer |
Sylvia G. Dorman | Banking Officer |
Marcie T. Shannon | Banking Officer |
Caroline P. Juretic | Banking Officer |
Sheila A. Graham | Banking Officer |
John H. Sawyer, Jr. | Banking Officer |
Nicole Scalise | Banking Officer |
Janet F. Carter | Banking Officer |
Dawn L. DePencier | Banking Officer |
