CNB CORPORATION
and
THE CONWAY NATIONAL BANK
FINANCIAL REPORT
DECEMBER 31, 2006
www.conwaynationalbank.com
TO OUR SHAREHOLDERS AND FRIENDS:
Conway National continued to experience solid financial performance during 2006. Net income for the year ended December 31, 2006 totaled $10,046,000, up from $9,478,000 earned in 2005. On a per share basis, earnings have grown 6.24% from $12.02 in 2005 to $12.77 in 2006. We are very pleased with the income results for 2006 given the unique circumstances we have experienced during the past eighteen months.
As of December 31, 2006, total assets were $837,989,000, an increase of 5.6% over December 31, 2005; total deposits amounted to $675,419,000, an increase of 1.2% over the previous year; loans totaled $567,345,000, an increase of 12.6% from 2005; and investment securities were $179,598,000, a decrease of 1.3% from the prior year. Stockholders' equity totaled $76,663,000 at December 31, 2006, resulting in a book value of $97.63 per share. Growth in deposits was impacted by the reclassification of certain recurring funds which are now categorized as securities sold under agreement to repurchase. Total federal funds purchased and securities sold under agreement to repurchase were $72,330,000 at December 31, 2006 as compared to $43,296,000 at December 31, 2005, an increase of 67.1%.
Net income for the year ended December 31, 2006 of $10,046,000 represents an annualized return on average assets of 1.24% and an annualized return on average stockholders' equity of 13.36%, which compare favorably to peer and to historical returns experienced by the Bank. Bank earnings are primarily the result of the Bank's net interest income, which increased 9.9% from $27,115,000 for the year ended December 31, 2005 to $29,808,000 for the year ended December 31, 2006. Other factors which affect earnings include the provision for possible loan losses, other expense, and other income. The provision for possible loan losses decreased 36.6% from $1,275,000 in 2005 to $808,000 in 2006. The decline in the provision for possible loan losses despite a significant increase in loans was due, in part, to very low net loan losses during 2006. The allowance for loan losses, as a percentage of net loans, declined from 1.19% at December 31, 2005 to 1.15% at December 31, 2006. This decline is attributable to the Bank's recognition of and adherence to recommendations outlined in recently issued pronouncements of both the accounting industry and regulatory agencies. Other expenses increased 14.1% from $19,529,000 to $22,291,000 and other income increased 10.8% from $6,641,000 to $7,357,000 during the same period. Non-interest expenses have increased due to additional staffing, increased compensation, fixed asset expenditures, increased advertising, increased health care costs, annual meeting related expenses, and expenses associated with the litigation settlement. Non-interest income increased primarily due to increased loan fee income, the taxable portion of insurance proceeds, and gains associated with the sale of real property.
Conway National maintained solid earnings for 2006 as the unusual growth in the local and national economy entered a period of leveling. We completed the construction of and opened our thirteenth banking office, North Conway, which opened on July 17, 2006. We also completed renovations to the first floor of our Operations and Administration building. Renovations to the second and third floors of the Operations and Administration building continue, and we expect these renovations to remain in process during 2007.
In recognition of continued strong performance, the Board of Directors declared the annual cash dividend of $5.25 per share in the fourth quarter of 2006, an increase of 5.0% over the $5.00 per share dividend declared in 2005.
We are very appreciative of your continued support, and we look forward to the future and continuing to build your Bank steeped in our traditions of exceptional customer service, trust, and dedication to all of the communities we serve.
W. Jennings Duncan, President
CNB Corporation and The Conway National Bank
CNB CORPORATION AND SUBSIDIARY
Conway, South Carolina
CONSOLIDATED BALANCE SHEET
(Unaudited) |
|
ASSETS: | Dec. 31, 2006 | Dec. 31, 2005 |
| Cash and due from banks............................................ | $ 34,873,000 | $ 33,461,000 |
| Investment securities: | | |
| Obligations of United States government agencies
and corporations.................................................... |
156,346,000
|
159,127,000
|
| Obligations of states and political subdivisions........... | 21,195,000 | 21,028,000 |
| Other securities........................................................ | 2,057,000 | 1,788,000 |
| Total investment securities............................... | 179,598,000 | 181,943,000 |
| Federal funds sold and securities purchased under
agreement to resell................................................... |
26,000,000
|
46,000,000
|
| Loans......................................................................... | 567,345,000 | 503,926,000 |
| Less allowance for loan losses.................................. | (6,476,000) | (5,918,000) |
| Net loans........................................................ | 560,869,000 | 498,008,000 |
| Bank premises and equipment..................................... | 22,988,000 | 20,574,000 |
| Other assets................................................................ | 13,661,000 | 13,362,000 |
| Total assets..................................................... | $837,989,000 | $793,348,000 |
| | | |
LIABILITIES AND STOCKHOLDERS' EQUITY: | | |
| Liabilities: | | |
| Deposits: | | |
| Noninterest-bearing................................................ | $136,796,000 | $135,081,000 |
| Interest-bearing...................................................... | 538,623,000 | 532,024,000 |
| Total deposits.................................................. | 675,419,000 | 667,105,000 |
| | | |
| Federal funds purchased and securities sold under
agreement to repurchase......................................... |
72,330,000
|
43,296,000
|
| Other short-term borrowings....................................... | 2,865,000 | 2,197,000 |
| Other liabilities............................................................ | 10,712,000 | 10,192,000 |
| Total Liabilities................................................ | 761,326,000 | 722,790,000 |
| | | |
| Stockholders' Equity: | | |
| Common stock, par value $10.00 per share:
Authorized 1,500,000; issued 789,774 in
2006 and 2005...................................................... |
7,898,000
|
7,898,000
|
| Surplus..................................................................... | 43,555,000 | 43,547,000 |
| Undivided profits...................................................... | 27,017,000 | 21,093,000 |
| Net unrealized holding gains/(losses) on
available-for-sale securities..................................... |
(1,120,000)
|
(1,810,000)
|
| Less treasury stock................................................. | (687,000) | (170,000) |
| Total stockholders' equity................................ | 76,663,000 | 70,558,000 |
| Total liabilities and stockholders' equity............ | $837,989,000 | $793,348,000 |
| | | |
CNB CORPORATION AND SUBSIDIARY
Conway, South Carolina
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) |
| Twelve Months Ended |
INTEREST INCOME | Dec. 31, 2006 | Dec. 31, 2005 |
| Interest and fees on loans.......................................... | $ 40,940,000 | $ 30,725,000 |
| Interest on investment securities: | | |
| Taxable investment securities.................................. | 5,807,000 | 6,396,000 |
| Tax -exempt investment securities........................... | 803,000 | 881,000 |
| Other securities...................................................... | 128,000 | 65,000 |
| Interest on federal funds sold and securities
purchased under agreement to resell....................... |
1,333,000
|
782,000
|
| Total interest income..................................... | 49,011,000 | 38,849,000 |
| | | |
INTEREST EXPENSE: | | |
| Interest on deposits | 16,226,000 | 9,778,000 |
| Interest on federal funds purchased and securities
sold under agreement to repurchase ....................... |
1,611,000
|
667,000
|
| Interest on other short-term borrowings..................... | 558,000 | 14,000 |
| Total interest expense.................................... | 18,395,000 | 10,459,000 |
Net interest income....................................................... | 30,616,000 | 28,390,000 |
Provision for loan losses................................................ | 808,000 | 1,275,000 |
Net interest income after provision for loan losses.......... | 29,808,000 | 27,115,000 |
Other income: | | |
| Service charges on deposit accounts.......................... | 3,279,000 | 3,410,000 |
| Gains/(losses) on securities........................................ | (6,000) | 2,000 |
| Other operating income............................................. | 4,084,000 | 3,229,000 |
| Total other income........................................ | 7,357,000 | 6,641,000 |
Other expenses: | | |
| Salaries and employee benefits.................................. | 13,684,000 | 12,459,000 |
| Occupancy expense.................................................. | 3,248,000 | 2,728,000 |
| Other operating expenses.......................................... | 5,359,000 | 4,342,000 |
| Total other expenses...................................... | 22,291,000 | 19,529,000 |
Income before income taxes......................................... | 14,874,000 | 14,227,000 |
| Income tax provision ................................................ | 4,828,000 | 4,749,000 |
Net Income.................................................................. | $ 10,046,000 | $ 9,478,000 |
| | |
Per share: | | |
| Net income per weighted average shares outstanding.. | $ 12.77 | $ 12.02 |
| | | |
| Cash dividend paid per share..................................... | $ 5.25 | $ 5.00 |
| | | |
| Book value per actual number of shares outstanding... | $ 97.63 | $ 89.48 |
| | | |
| Weighted average number of shares outstanding......... | 786,899 | 788,496 |
| | | |
| Actual number of shares outstanding........................... | 785,279 | 788,534 |
| | | |
| Member Federal Reserve System - Member FDIC |
| | | |
CNB CORPORATION
BOARD OF DIRECTORS |
Harold G. Cushman, Jr., Chairman |
James W. Barnette, Jr. | Edward T. Kelaher |
William R. Benson | George F. Sasser |
W. Jennings Duncan | Lynn G. Stevens |
| | |
THE CONWAY NATIONAL BANK OFFICERS |
W. Jennings Duncan | President |
L. Ford Sanders, II | Executive Vice President |
William R. Benson | Senior Vice President |
Marion E. Freeman, Jr. | Senior Vice President |
Phillip H. Thomas | Senior Vice President |
M. Terry Hyman | Senior 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 | Vice President |
Virginia B. Hucks | Vice President |
W. Page Ambrose | Vice President |
L. Ray Wells | Vice President |
L. Kay Benton | Vice President |
Gail S. Sansbury | Assistant Vice President |
Roger L. Sweatt | 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 |
Carlis L. Causey | Assistant Vice President |
Jeffrey P. Singleton | Assistant Vice President |
Sherry S. Sawyer | Banking Officer |
Rebecca G. Singleton | Banking Officer |
Josephine C. Fogle | Banking Officer |
Debra B. Johnston | Banking Officer |
Freeman R. Holmes, Jr. | Banking Officer |
Doris B. Gasque | Banking Officer |
Carlton A. Terry | 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 |
Steven D. Martin | Banking Officer |
Carol M. Butler | Banking Officer |
Christopher D. Wright | Banking Officer |
W. Eugene Gore, Jr. | Banking Officer |
James P. Jordan, III | Banking Officer |
John M. Proctor | Banking Officer |
