CNB CORPORATION
and
THE CONWAY NATIONAL BANK
FINANCIAL REPORT
MARCH 31, 2009
www.conwaynationalbank.com
TO OUR SHAREHOLDERS AND FRIENDS:
Despite our continued recessionary economy, Conway National maintained a solid financial position and favorable operating results for the first quarter of 2009. Real estate markets remain in a state of decline and the financial industry has continued to experience institution failures. Congress, the Administration, the Board of Governors of the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) have implemented unprecedented measures and enacted significant legislation in their efforts to stabilize the financial markets and promote economic activity. Throughout these difficulties, Conway National has experienced solid financial performance.
Net income for the quarter ended March 31, 2009 totaled $1,938,000, down from $2,540,000 for the same period in 2008, 23.7%. Although earnings declined for the first quarter of 2009, Conway National performed very well in comparison to peer banks and to other banks operating within our market. Additionally, the decline in income was anticipated and actual net income exceeded expectations for the period. On a per share basis, earnings declined 22.0% from $3.00 in 2008 to $2.34 in 2009 representing an annualized return on average assets of ..87% and an annualized return on average equity of 9.05% as compared to 1.16% and 12.24%, respectively, for the same period in 2008.
Total assets grew to $894.5 million at March 31, 2009, an increase of 4.7% over March 31, 2008, and capital stood at $84.9 million at March 31, 2009 compared to $83.9 million at March 31, 2008. Total deposits totaled $673.9 million at March 31, 2009, a decrease of 5.1% from $710.1 million for the previous year. The decline in deposits primarily represents a shift in customer product preference as large depositors have sought to secure deposits through increased utilization of repurchase agreements, which increased 95.3% from $49.5 million at March 31, 2008 to $96.7 million at March 31, 2009. Loans totaled $597.8 million at March 31, 2009, an increase of 2.4% from 2008; and investment securities were $212.1 million, an increase of 2.8% from the prior year.
Net income for the quarter ended March 31, 2009 of $1,938,000 compares favorably to peer and industry performances but is lower than historical returns experienced by the Bank. Bank earnings are primarily the result of the Bank's net interest income, which decreased 1.5% to $7,868,000 for the quarter ended March 31, 2009 from $7,986,000 for the same period in 2009. Other factors which affect earnings include the provision for possible loan losses, other expense, and other income. The provision for possible loan losses increased significantly, 242.9%, from $359,000 for 2008 to $1,231,000 for 2009. The allowance for loan losses, as a percentage of net loans, was increased to 1.18% at March 31, 2009 as compared to 1.15% at March 31, 2008. Noninterest expenses increased .6% from $5,637,000 to $5,671,000 for the first quarter of 2009 as compared to the first quarter of 2008; and noninterest income increased 2.5% from $1,845,000 to $1,892,000 for the same periods, respectively. Noninterest expense increased overall due primarily to increased FDIC insurance premiums. Noninterest income decreased due to decreased service charge income on deposit accounts and decreased other operating income. These declines were offset by realized gains from sales of investment securities.
With the national and local economic recessions expected to continue through much of 2009, we anticipate that profitability will remain below historical levels while, at the same time, expect that the Bank will continue to grow, further strengthen, and generally prosper. Although the Bank's credit concerns have been relatively minor in terms of the magnitude of non-performing assets in the industry and local markets, we have appropriately addressed the majority of credit concerns during the first quarter of 2009 and expect to address the remainder of these prior to the close of the second quarter of 2009. However, the Bank will incur significant additional recently announced increases in FDIC premiums in the second half of 2009.
Although much uncertainty remains about the economic environment and a turnaround in economic activity is difficult to predict, we are confident that your bank will continue to thrive throughout this difficult period. We expect the Bank to perform in the same strong manner consistent with our history and based in our conservative policies and procedures. At the same time, the Bank is being positioned and prepared to meet future demands and opportunities.
Conway National continues firm and strong, maintaining substantial financial position and profitability above the industry average. As our area and our country continue to weather this economic downturn throughout 2009, Conway National will remain steadfast to its conservative and prudent banking practices; and, as always, we are very appreciative of your continued support. 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: | March 31, 2009 | March 31, 2008 |
Cash and due from banks................................................ | $ 36,548,000 | $ 19,068,000 |
Investment securities: | | |
Obligations of United States government sponsored
enterprises.................................................................. |
178,827,000
|
176,121,000
|
Obligations of states and political subdivisions................ | 29,532,000 | 27,783,000 |
Other securities............................................................. | 3,784,000 | 2,396,000 |
Total investment securities....................................... | 212,143,000 | 206,300,000 |
Federal funds sold and securities purchased under
agreement to resell........................................................ |
18,000,000
|
17,500,000
|
Loans............................................................................. | 597,763,000 | 583,759,000 |
Less allowance for loan losses....................................... | (6,965,000) | (6,639,000) |
Net loans................................................................ | 590,798,000 | 577,120,000 |
Bank premises and equipment......................................... | 23,852,000 | 23,078,000 |
Other assets.................................................................... | 13,204,000 | 11,168,000 |
Total assets............................................................. | $ 894,545,000 | $ 854,234,000 |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY: | | |
Liabilities: | | |
Deposits: | | |
Noninterest-bearing..................................................... | $ 107,497,000 | $ 113,733,000 |
Interest-bearing........................................................... | 566,434,000 | 596,365,000 |
Total deposits......................................................... | 673,931,000 | 710,098,000 |
| | |
Federal funds purchased and securities sold under
agreement to repurchase.............................................. |
96,688,000
|
49,508,000
|
Other short-term borrowings.......................................... | 32,617,000 | 1,430,000 |
Other liabilities............................................................... | 6,449,000 | 9,345,000 |
Total Liabilities....................................................... | 809,685,000 | 770,381,000 |
| | |
Stockholders' Equity: | | |
Common stock, par value $10.00 per share:
Authorized 1,500,000; issued 828,892 in
2009 and 840,661 in 2008........................................... |
8,289,000
|
8,407,000
|
Capital in excess of par value of stock............................. | 49,992,000 | 51,773,000 |
Retained earnings........................................................... | 25,588,000 | 21,587,000 |
Accumulated other comprehensive income...................... | 991,000 | 2,086,000 |
Total stockholders' equity........................................ | 84,860,000 | 83,853,000 |
Total liabilities and stockholders' equity.................... | $ 894,545,000 | $ 854,234,000 |
CNB CORPORATION AND SUBSIDIARY
Conway, South Carolina
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) |
| Three Months Ended |
INTEREST INCOME | March 31, 2009 | March 31, 2008 |
Interest and fees on loans................................................... | $ 9,378,000 | $ 10,587,000 |
Interest on investment securities: | | |
Taxable investment securities........................................... | 1,554,000 | 2,466,000 |
Nontaxable investment securities..................................... | 285,000 | 273,000 |
Other securities.............................................................. | 15,000 | 34,000 |
Interest on federal funds sold and securities
purchased under agreement to resell................................. |
22,000
|
320,000
|
Total interest income................................................... | 11,254,000 | 13,680,000 |
| | |
INTEREST EXPENSE: | | |
Interest on deposits | 2,990,000 | 5,103,000 |
Interest on federal funds purchased and securities
sold under agreement to repurchase ................................ |
288,000
|
479,000
|
Interest on other short-term borrowings............................. | 108,000 | 112,000 |
Total interest expense................................................. | 3,386,000 | 5,694,000 |
Net interest income........................................................... | 7,868,000 | 7,986,000 |
Provision for loan losses.................................................... | 1,231,000 | 359,000 |
Net interest income after provision for loan losses.............. | 6,637,000 | 7,627,000 |
Noninterest income: | | |
Service charges on deposit accounts................................ | 819,000 | 940,000 |
Gains on sale of securities................................................ | 477,000 | 0 |
Other operating income................................................... | 593,000 | 905,000 |
Total noninterest income............................................. | 1,892,000 | 1,845,000 |
Noninterest expense: | | |
Salaries and employee benefits........................................ | 3,568,000 | 3,721,000 |
Occupancy expense........................................................ | 790,000 | 839,000 |
Other operating expenses................................................ | 1,313,000 | 1,077,000 |
Total noninterest expense........................................... | 5,671,000 | 5,637,000 |
Income before income taxes.............................................. | 2,858,000 | 3,835,000 |
Income tax provision ........................................................ | 920,000 | 1,295,000 |
Net income....................................................................... | $ 1,938,000 | $ 2,540,000 |
| | |
Per share: | | |
| | |
Net income per weighted average shares outstanding............ | $ 2.34 | $ 3.00 |
| | |
Cash dividend paid per share............................................... | $ 0 | $ 0 |
| | |
Book value per actual number of shares outstanding............. | $ 102.38 | $ 99.75 |
| | |
Weighted average number of shares outstanding................... | 829,187 | 847,936 |
| | |
Actual number of shares outstanding.................................... | 828,892 | 840,661 |
| | |
Member Federal Reserve System - Member FDIC |
