CNB CORPORATION
and
THE CONWAY NATIONAL BANK
FINANCIAL REPORT
MARCH 31, 2012
www.conwaynationalbank.com
TO OUR SHAREHOLDERS AND FRIENDS:
The U.S. national and local economies continued to recover slowly during the first quarter of 2012. The Bureau of Economic Analysis, a division of the U.S. Department of Commerce, has indicated in its advance estimate that real gross domestic product (GDP) grew at an annual rate of 2.2% for the first quarter of 2012, as compared to the fourth quarter of 2011 at 3.0%. The deceleration in the rate of growth reflects a deceleration in private inventory investment and a downturn in nonresidential fixed investment that were partly offset by personal consumption expenditures and increased exports. Locally, the real estate sector declined slightly in the first quarter of 2012, with the total number of real estate transactions decreasing approximately 4% as compared to the first quarter of 2011.
The Company's net income for the first quarter ended March 31, 2012 totaled $557,000, up 45.8% from $382,000 for the same period in 2011, for a return on average assets of .24% and a return on average equity of 2.49% as compared to .16% and 1.75%, respectively, for 2011. Although the Company continued to experience low profitability for the first quarter of 2012, the Bank's performance improved in comparison to 2011. On a per share basis, earnings increased 47.8% from $.23 for the first quarter of 2011 to $.34 for the same period in 2012.
Total assets decreased to $930.2 million at March 31, 2012, a decrease of 1.2% from $941.5 million at March 31, 2011, and capital stood at $89.4 million at March 31, 2012 compared to $87.1 million at March 31, 2011, up 2.6%. Total deposits were $746.7 million at March 31, 2012, an increase of 1.3% from $736.9 million at March 31, 2011. The Bank experienced a decrease in repurchase agreements, which decreased 18.9% from $111.3 million at March 31, 2011 to $90.2 million at March 31, 2012. This decrease is primarily attributable to the implementation of a new wholesale funding policy during 2011. Loans totaled $469.7 million at March 31, 2012, a decrease of 10.3% from March 31, 2011; and investment securities were $331.9 million, an increase of 15.0% from March 31, 2011.
Net income for the quarter ended March 31, 2012 of $557,000 represents an improvement in comparison to 2011. However, operating results remain significantly lower than historical returns experienced by the Bank. Bank earnings are primarily the result of the Bank's net interest income, which decreased 2.7%, to $7,270,000 for the first quarter of 2012 from $7,468,000 for the first quarter of 2011. Other factors which affect earnings include the provision for possible loan losses, noninterest expense, and noninterest income. The provision for possible loan losses decreased slightly, 1.4%, from $2,112,000 for the first quarter of 2011 to $2,083,000 for the first quarter of 2012. The allowance for loan losses, as a percentage of gross loans, was increased to 2.69% at March 31, 2012 as compared to 2.25% at March 31, 2011. Noninterest expense increased ..6% from $6,261,000 for the first quarter of 2011 to $6,297,000 for the same period in 2012; and noninterest income increased 31.7% from $1,391,000 to $1,832,000 for the same periods, respectively. Noninterest expense increased primarily due to a substantial increase in the net cost of holding other real estate owned, partially offset by decreased FDIC deposit insurance assessments. Noninterest income increased primarily due to increased gains on sales of investment securities, partially offset by decreased service charges on deposit accounts.
With the national and local economies expected to remain subdued through 2012, we anticipate that profitability will continue to improve over time but remain well below historical levels, and, at the same time, we expect that the Bank will continue to grow, further strengthen, and generally prosper. Although the Bank's credit concerns have remained moderate in comparison to the magnitude of non-performing assets in the industry and local markets, we will continue to address credit concerns during 2012. Loan losses are expected to remain above historical levels during 2012, but at levels lower than those experienced for 2011. The Bank has been well positioned and prepared to meet future demands and opportunities.
Conway National continues to maintain a substantial financial position and profitability which compare favorably to local markets. Conway National remains dedicated 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 | ||
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ASSETS: | Mar. 31, 2012 | Mar. 31, 2011 |
Cash and cash equivalents: |
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Cash and due from banks............................................... | $ 24,718,000 | $ 23,241,000 |
Due from Federal Reserve Bank, balance in excess |
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Federal funds sold.......................................................... | 13,000,000 | 32,000,000 |
Total cash and cash equivalents.............................. | 95,683,000 | 94,821,000 |
Investment securities available for sale................................ | 301,409,000 | 269,421,000 |
Investment securities held to maturity |
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Other investments, at cost.................................................. | 1,865,000 | 2,729,000 |
Loans................................................................................ | 469,706,000 | 523,745,000 |
Less allowance for loan losses.......................................... | (12,612,000) | (11,803,000) |
Net loans............................................................... | 457,094,000 | 511,942,000 |
Premises and equipment..................................................... | 21,043,000 | 21,922,000 |
Other real estate owned..................................................... | 9,262,000 | 6,446,000 |
Accrued interest receivable................................................ | 4,073,000 | 4,377,000 |
Other assets....................................................................... | 9,257,000 | 10,671,000 |
Total assets............................................................ | $ 930,166,000 | $ 941,532,000 |
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LIABILITIES AND STOCKHOLDERS' EQUITY: |
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Liabilities: |
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Deposits: |
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Noninterest-bearing....................................................... | $ 129,823,000 | $ 111,146,000 |
Interest-bearing............................................................. | 616,876,000 | 625,801,000 |
Total deposits........................................................ | 746,699,000 | 736,947,000 |
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Securities sold under agreement to repurchase.................. | 90,248,000 | 111,274,000 |
United States Treasury demand notes............................... | - | 1,336,000 |
Other liabilities................................................................. | 3,829,000 | 4,872,000 |
Total Liabilities....................................................... | 840,776,000 | 854,429,000 |
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Stockholders' Equity: |
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Common stock, $5 par value; authorized 3,000,000; |
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Capital in excess of par value of stock.............................. | 50,298,000 | 50,485,000 |
Retained earnings............................................................. | 29,436,000 | 28,042,000 |
Accumulated other comprehensive income........................ | 1,351,000 | 253,000 |
Total stockholders' equity....................................... | 89,390,000 | 87,103,000 |
Total liabilities and stockholders' equity................... | $ 930,166,000 | $ 941,532,000 |
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| For the Three Months Ended | |
INTEREST INCOME: | Mar. 31, 2012 | Mar. 31, 2011 |
Interest and fees on loans.............................................................. | $ 7,227,000 | $ 7,991,000 |
Interest on investment securities: |
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Taxable investment securities...................................................... | 756,000 | 838,000 |
Nontaxable investment securities................................................ | 315,000 | 261,000 |
Other securities.......................................................................... | 6,000 | - |
Interest on federal funds sold and Federal Reserve Bank |
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Total interest income......................................................... | 8,337,000 | 9,116,000 |
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INTEREST EXPENSE: |
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Interest on deposits | 1,012,000 | 1,552,000 |
Interest on securities sold under agreement to repurchase............... | 55,000 | 96,000 |
Total interest expense........................................................ | 1,067,000 | 1,648,000 |
Net interest income....................................................................... | 7,270,000 | 7,468,000 |
Provision for loan losses................................................................ | 2,083,000 | 2,112,000 |
Net interest income after provision for loan losses.......................... | 5,187,000 | 5,356,000 |
Noninterest income: |
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Service charges on deposit accounts............................................ | 781,000 | 815,000 |
Gains on sales of securities.......................................................... | 446,000 | - |
Other operating income............................................................... | 605,000 | 576,000 |
Total noninterest income.................................................... | 1,832,000 | 1,391,000 |
Noninterest expense: |
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Salaries and employee benefits.................................................... | 3,464,000 | 3,423,000 |
Occupancy expense.................................................................... | 828,000 | 830,000 |
Examination and professional fees................................................ | 240,000 | 256,000 |
FDIC deposit insurance assessments........................................... | 139,000 | 356,000 |
Net cost of operation of other real estate owned.......................... | 531,000 | 286,000 |
Other operating expenses............................................................ | 1,095,000 | 1,110,000 |
Total noninterest expense................................................... | 6,297,000 | 6,261,000 |
Income before income taxes.......................................................... | 722,000 | 486,000 |
Income tax provision..................................................................... | 165,000 | 104,000 |
Net income.................................................................................. | $ 557,000 | $ 382,000 |
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Per share: |
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Net income per weighted average shares outstanding................... | $ .34 | $ .23 |
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Book value per actual number of shares outstanding..................... | $ 53.82 | $ 52.33 |
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Weighted average number of shares outstanding.......................... | 1,661,636 | 1,664,620 |
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Actual number of shares outstanding............................................ | 1,661,010 | 1,664,614 |
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Member Federal Reserve System - Member FDIC | ||
CNB CORPORATION | |
James W. Barnette, Jr., Chairman | |
Dana P. Arneman, Jr. | W. Jennings Duncan |
William R. Benson | William O. Marsh |
Michael R. Bookout | George F. Sasser |
Harold G. Cushman, III | Lynn G. Stevens |
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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 |
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 |
Richard A. Cox | Vice President |
Gail S. Sansbury | Vice President |
Roger L. Sweatt | Vice President |
Tammy L. Scarberry | Vice President |
Timothy L. Phillips | Vice President |
Helen A. Johnson | Assistant Vice President |
Elaine H. Hughes | Assistant Vice President |
Gwynn D. Branton | Assistant Vice President |
D. Scott Hucks | Assistant Vice President |
Jeffrey P. Singleton | Assistant Vice President |
C. Joseph Cunningham | Assistant Vice President |
Rebecca G. Singleton | Assistant Vice President |
Doris B. Gasque | Assistant Vice President |
John H. Sawyer, Jr. | Assistant Vice President |
John M. Proctor | Assistant Vice President |
Sherry S. Sawyer | Banking Officer |
Josephine C. Fogle | Banking Officer |
Freeman R. Holmes, Jr. | 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. Johnston | Banking Officer |
Nicole W. Bearden | Banking Officer |
Janet F. Carter | Banking Officer |
Dawn L. DePencier | Banking Officer |
Steven D. Martin | Banking Officer |
Carol M. Butler | Banking Officer |
W. Eugene Gore, Jr. | Banking Officer |
James P. Jordan, III | Banking Officer |
Bonita H. Smalls | Banking Officer |
P. Alex Clayton, Jr. | Banking Officer |
Jeremy L Hyman | Banking Officer |
Adam C. Rabon | Banking Officer |
Patsy H. Martin | Banking Officer |
Karen C. Singleton | Banking Officer |
Pamela M. Clifton | Banking Officer |
Amber R. Rabon | Banking Officer |
W. Kyle Hawley | Banking Officer |
