CNB Financial Corporation and Subsidiary
1995 Annual Report
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FINANCIAL HIGHLIGHTS
(in thousands, except for per share data)
FOR THE YEAR 1995 1994
---- ----
Interest Income................................... $ 21,418 $ 19,168
Interest Expense.................................. 9,223 7,225
Net Interest Income............................... 12,195 11,943
Net Income........................................ 3,817 3,709
Dividends Paid.................................... 1,998 1,861
AT YEAR END
Assets............................................ $297,523 $269,698
Loans (less unearned)............................. 200,038 181,789
Deposits.......................................... 255,787 230,641
Shareholders' Equity.............................. 37,543 34,515
PER SHARE DATA
Net Income........................................ $2.22 $2.15
Dividends Paid.................................... 1.16 1.08
Book Value of Equity End of Year.................. 21.79 20.03
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TABLE OF CONTENTS
Financial Highlights......................................................... 1
Letter to Shareholders....................................................... 2
Market Area and Financial Graphs............................................. 3
Consolidated Statements of Condition......................................... 4
Consolidated Statements of Income............................................ 5
Consolidated Statements of Cash Flows........................................ 6
Consolidated Statements of Changes
in Shareholders' Equity................................................. 7
Notes to Consolidated Financial Statements................................... 10
Report of Independent Auditors............................................... 16
Maturity Distribution........................................................ 17
Quarterly Summary of Earnings................................................ 17
Selected Financial Data - Five Year Comparison............................... 18
Management's Discussion and Analysis......................................... 20
Services for Industry & Consumer............................................. 25
Board of Directors........................................................... 26
Officers..................................................................... 27
Shareholder Information
and Corporate Description............................................... 28
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1
CNB Financial Corporation and Subsidiary
1995 Annual Report
TO OUR SHAREHOLDERS, CUSTOMERS AND FRIENDS:
The hallmark of quality banking lies within distinguishing characteristics
of service, loyalty and success. CNB Financial Corporation and County National
Bank focus on these components to achieve goals and objectives in satisfying
customers and investors alike, service to a broad base of retail customers,
businesses and corporate entities as depositors and borrowers; loyalty to a
growing shareholder base and a dedicated staff; success in growth and earnings
power to support the many communities we serve in central and north central
Pennsylvania.
NET PROFITS this year grew to a record $3.82 million. Net interest income, after
loan loss provision, increased by $399 thousand. Service charges, trust revenue,
investment gains and all other income contributed to the effort by an increase
of $433 thousand for combined income increases to $830 thousand. Operating
expenses increased by a total of $686 thousand while federal income taxes went
up $36 thousand. This resulted in a measure of average asset return of 1.36%.
PER SHARE EARNINGS translate to $2.22 or $0.07 over the prior year, a 3.25%
increase. A little over 50% of the earning per share were distributed in a total
cash dividend of $1.16 yielding an annual return of 3.93%. The remaining $1.06
per share accrued to the capital account as retained earnings.
EQUITY CAPITAL, at the primary measure, of 12.62% is at the top of our peer
comparison for bank holding companies in the state. At $37.5 million this
capital provides safety for depositors, equity for investors, maximum lending
ability and relief from regulatory burden, It also affords necessary support for
asset expansion through growth and acquisition.
ASSETS closed at $297.5 million this year and grew by $27.8 million over 1994.
This 10.3% gain represents the single best percentage increase in a decade. New
competitive deposit products fostered this asset growth supporting increases in
profitable loan activity as did our successful entrance into Bradford, McKean
County.
DEPOSITS, our main source of overall growth, increased by 10.8% to $255 million.
A combination of aggressive pricing, new products and the enlargement of our
banking market were responsible for this accomplishment. This growth compares
favorably to the 3.7% total growth in all FDIC insured institutions nationally.
These institutions saw even lesser cumulative growth rates of 2.2% in aggregate
deposits from 1991 through 1995. During these same five years CNB managed a 15%
cumulative growth rate throughout this slow growth period.
LOANS at $203.7 million represent our best use of deposit funds and income
generator. Loans at year end stood at 80% of deposits. We consider this a very
safe margin especially when analyzed relative to our excellent nonperforming
ratio of .04% and low percent of loan losses.
TRUST AND ASSET MANAGEMENT division closed the year with $71.6 million of
managed assets. This represents 350 individual and corporate trusts,
guardianships, estates and retirement plans. This fiduciary planning and estate
management service generated income revenue of $529 thousand for the year. This
service group or trust department is now housed at 7 South Second Street,
Clearfield, in a major section of County National Bank's expanded facilities.
From this location they are easily available to the public and the Bank through
new comfortable and secure accesses.
NEW FOR 1996 we see electronic banking, additional branch offices and growing
market areas. There are plans for a spring open house at our expanded and
remodeled headquarters in Clearfield. Here you will see state-of-the-art banking
systems and operational designs to transcend the past and prepare for our
future.
THE BOARD OF DIRECTORS, management and staff encourage you to study the detail
contained within this report as it is our opportunity to account for and
illustrate the effort behind maximizing shareholder value. For questions this
report will generate, please feel free to call or stop by for a personal
discussion.
Sincerely,
CNB Financial Corporation
/s/ James P. Moore
James P. Moore
President and Chief Executive Officer
County National Bank
/s/ William F. Falger
William F. Falger
President and Chief Executive Officer
December 31, 1995
2
CNB Financial Corporation and Subsidiary
1995 Annual Report
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands) December 31
------------------------
1995 1994
-------- --------
ASSETS
Cash and Due from Banks (Note 2).............................................. $ 9,110 $ 9,390
Deposits with Other Banks..................................................... 19 18
Federal Funds Sold............................................................ 3,200 325
Investment Securities Available for Sale...................................... 51,007 37,361
Investment Securities Held to Maturity, fair value of $25,540 at
December 31, 1995 and $33,888 at December 31, 1994......................... 24,921 33,953
Loans (Note 4)................................................................ 203,706 184,785
Less: Unearned Discount.................................................... 3,668 2,996
Allowance for Loan Losses (Note 5).................................... 2,145 2,033
-------- --------
NET LOANS.................................................................. 197,893 179,756
Premises and Equipment, Net (Note 6).......................................... 7,782 5,143
Accrued Interest and Other Assets............................................. 3,591 3,752
-------- --------
TOTAL ASSETS............................................................... $297,523 $269,698
======== ========
LIABILITIES
Deposits: (Note 7)
Non-interest Bearing Deposits.............................................. $ 25,705 $ 28,046
Interest Bearing Deposits.................................................. 230,082 202,595
-------- --------
TOTAL DEPOSITS............................................................. 255,787 230,641
Other Borrowings (Note 8)..................................................... 2,846 3,685
Accrued Interest and Other Liabilities........................................ 1,347 857
-------- --------
TOTAL LIABILITIES.......................................................... 259,980 235,183
-------- --------
SHAREHOLDERS' EQUITY
Common Stock $4.00 Par Value
Authorized 2,500,000 Shares
Issued 1,728,000 Shares....................................................... 6,912 6,912
Retained Earnings............................................................. 30,143 28,324
Treasury Stock, At Cost (5,166 Shares)........................................ (100) (100)
Net Unrealized Gains (Losses) on Securities Available for Sale................ 588 (621)
-------- --------
TOTAL SHAREHOLDERS' EQUITY................................................. 37,543 34,515
-------- --------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY................................... $297,523 $269,698
======== ========
The accompanying notes are an integral part of these statements.
4
CNB Financial Corporation and Subsidiary
1995 Annual Report
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Year ended December 31,
----------------------------------------
1995 1994 1993
------- ------- -------
INTEREST INCOME
Loans including Fees.......................................................... $16,849 $14,813 $13,568
Deposits with Banks........................................................... 1 91 243
Federal Funds Sold............................................................ 81 43 89
Other Short Term Investments.................................................. -- -- 24
Investment Securities:
Taxable Securities which are Available for Sale............................ 2,249 1,807 --
Tax-Exempt Securities which are Available for Sale......................... 372 46 --
Taxable Securities being Held to Maturity.................................. 1,015 1,176 3,586
Tax-Exempt Securities being Held to Maturity............................... 851 1,192 1,480
------- ------- -------
TOTAL INTEREST INCOME...................................................... 21,418 19,168 18,990
INTEREST EXPENSE
Deposits...................................................................... 8,946 6,986 7,564
Borrowed Funds................................................................ 277 239 32
------- ------- -------
TOTAL INTEREST EXPENSE..................................................... 9,223 7,225 7,596
------- ------- -------
Net Interest Income........................................................ 12,195 11,943 11,394
Provision for Loan Losses (Note 5)......................................... 380 525 525
------- ------- -------
Net Interest Income After Provision for
Loan Losses............................................................. 11,815 11,418 10,869
OTHER INCOME
Fiduciary Commissions and Fees................................................ 529 456 445
Service Charges - Deposit Accounts............................................ 616 412 293
Other Service Charges and Fees................................................ 411 245 222
Security Gains................................................................ 146 -- --
Gain on Sale of Loans......................................................... 53 45 --
Other Operating Income........................................................ 188 352 297
------- ------- -------
TOTAL OTHER INCOME......................................................... 1,943 1,510 1,257
OTHER EXPENSES
Salaries...................................................................... 3,615 3,297 3,131
Employee Benefits............................................................. 1,210 1,155 1,078
Net Occupancy Expense of Premises............................................. 1,119 1,060 977
Other Operating Expenses...................................................... 2,824 2,570 2,544
------- ------- -------
TOTAL OTHER EXPENSES....................................................... 8,768 8,082 7,730
------- ------- -------
Income before income taxes and cumulative effect of
change in accounting principle.............................................. 4,990 4,846 4,396
Applicable Income Taxes....................................................... 1,173 1,137 1,051
------- ------- -------
Income before cumulative effect of change in
accounting principle....................................................... 3,817 3,709 3,345
Cumulative effect of change in accounting principle........................... -- -- 226
------- ------- -------
Net Income.................................................................... $ 3,817 $ 3,709 $ 3,571
======= ======= =======
EARNINGS PER SHARE, BASED ON WEIGHTED
AVERAGE SHARES OUTSTANDING (1)
Income before cumulative effect of accounting change.......................... $ 2.22 $ 2.15 $ 1.93
Cumulative effect of change in accounting principle........................... -- -- 0.13
------- ------- -------
Net Income.................................................................... $ 2.22 $ 2.15 $ 2.06
Cash Dividends Per Share...................................................... $ 1.16 $ 1.08 $ 1.05
(1) Per share amounts and average shares outstanding have been restated to
reflect a two-for-one split of common stock effected in the form of a 100
percent stock dividend distributed in 1993.
The accompanying notes are an integral part of these statements.
5
CNB Financial Corporation and Subsidiary
1995 Annual Report
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Year ended December 31,
-----------------------------------------
1995 1994 1993
-------- -------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................................... $ 3,817 $ 3,709 $ 3,571
Adjustments to reconcile net income to
net cash provided by operations:
Cumulative effect of change in accounting principle....................... -- -- (226)
Provision for loan losses................................................. 380 525 525
Depreciation.............................................................. 505 455 451
Amortization and accretion of net deferred loan fees...................... (236) (115) (141)
Amortization and accretion of premiums and discounts
on investments.......................................................... 278 371 402
Deferred taxes............................................................ (37) (29) (283)
Security Gains............................................................ (146) -- --
Gain on Sale of Loans..................................................... (53) (45) --
Other..................................................................... -- (81) --
Changes in:
Interest receivable......................................................... (169) (92) 383
Other assets................................................................ (200) (21) (146)
Interest payable............................................................ 56 47 (247)
Other liabilities........................................................... 434 (208) 267
------- ------- -------
Net cash provided by operating activities..................................... 4,703 4,516 4,556
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of:
Investment securities..................................................... 17,748 11,424 35,425
Securities available for sale............................................. 17,702 14,195 --
Proceeds from sales:
Proceeds from the sale of securities available for sale................... 358 -- --
Proceeds from the sale of loans........................................... 4,738 3,243 --
Purchase of:
Investment securities..................................................... (9,025) (1,804) (17,983)
Securities available for sale............................................. (29,728) (14,965) --
Net principal disbursed on loans............................................ (23,108) (17,208) (18,394)
Redemption (Purchase) of Federal Home Loan Bank Stock....................... (14) 20 (812)
Purchase of premises and equipment.......................................... (3,144) (1,237) (304)
Proceeds from the sale of foreclosed assets................................. 56 355 342
------- ------- -------
Net cash used in investing activities......................................... (24,417) (5,977) (1,726)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in:
Checking, money market and savings accounts............................... 19,495 1,825 1,759
Certificates of deposit................................................... 5,651 2,490 (11,320)
Other borrowed funds...................................................... (819) (771) 153
Cash dividends paid......................................................... (1,998) (1,861) (1,808)
Proceeds from Federal Home Loan Bank advances............................... -- 540 1,916
Principal Reduction in Federal Home Loan Bank advances...................... (20) -- --
------- ------- -------
Net cash (used in) provided by financing activities........................... 22,309 2,223 (9,300)
------- ------- -------
Net (decrease) increase in cash and cash equivalents.......................... 2,595 762 (6,470)
Cash and cash equivalents at beginning of year................................ 9,715 8,953 15,423
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR...................................... $12,310 $ 9,715 $ 8,953
======= ======= =======
NONCASH INVESTING ACTIVITIES
Increase in net unrealized gains (loss) on securities available for sale...... $ 1,209 $ 765 $ --
Real estate acquired in settlement of loans................................... 142 51 325
The accompanying notes are an integral part of these statements.
6
CNB Financial Corporation and Subsidiary
1995 Annual Report
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(in thousands)
NET UNREALIZED
GAINS (LOSSES) ON
ADDITIONAL SECURITIES TOTAL
PAID-IN RETAINED TREASURY AVAILABLE STOCKHOLDERS'
COMMON STOCK CAPITAL EARNINGS STOCK FOR SALE EQUITY
----------------------------------------------------------------------------------------
Balance December 31, 1992................. $3,456 $2,036 $26,133 $(100) -- $31,525
Net Income for 1993................... 3,571 3,571
Cash Dividend Declared................ (1,808) (1,808)
Transfer to Reflect Two-For-One
Stock Split......................... 3,456 (2,036) (1,420)
----------------------------------------------------------------------------------------
Balance December 31, 1993................. 6,912 -- 26,476 (100) -- 33,288
Net Income for 1994................... 3,709 3,709
Cash Dividend Declared................ (1,861) (1,861)
Net Unrealized Losses on Securities
Available for Sale.................. (621) (621)
----------------------------------------------------------------------------------------
Balance December 31, 1994................. 6,912 -- 28,324 (100) (621) 34,515
Net Income for 1995................... 3,817 3,817
Cash Dividend Declared................ (1,998) (1,998)
Net Unrealized Gains on Securities
Available for Sale.................. 1,209 1,209
----------------------------------------------------------------------------------------
Balance December 31, 1995................. $6,912 $ -- $30,143 $(100) $ 588 $37,543
========================================================================================
The accompanying notes are an integral part of these statements.
----------------------------------------------------------------------
7
CNB Financial Corporation and Subsidiary
1995 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND ORGANIZATION:
CNB Financial Corporation (the "Corporation"), headquartered in Clearfield,
Pennsylvania, provides a full range of banking and related services through its
wholly owned subsidiary, County National Bank (the "Bank") to individual and
corporate customers and is subject to competition from other financial
institutions and intermediaries with respect to these services and customers.
The Corporation is also subject to examinations by Federal regulators. The
Corporation's market area is in the northern central region of the state of
Pennsylvania.
BASIS OF FINANCIAL PRESENTATION
The financial statements are consolidated to include the accounts of the
Corporation and its wholly owned bank subsidiary. These statements have been
prepared in accordance with generally accepted accounting principles. All
significant intercompany accounts and transactions have been eliminated in the
consolidated financial statements.
Use of estimates in preparing the consolidated statements to conform with
generally accepted accounting practices requires Management to make estimates
and assumptions which affect the amounts reported in the financial statements
and the accompanying notes. Actual results could differ from such estimates.
LOANS:
Interest income with respect to loans is accrued on the principal amount
outstanding, except on certain installment loans on which interest income is
recognized over their terms using methods which approximate level yields. The
Bank discontinues the accrual of interest when the interest or principal is 90
days past due, unless the loan is in the process of collection and no loss of
interest is anticipated. Loan fees and certain direct origination costs are
deferred and the net amount amortized as an adjustment to the related loan yield
over the respective lives of the loans.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is established through provisions for loan
losses which are charged against income. Loans which are deemed to be
uncollectible are charged against the allowance account. Subsequent recoveries,
if any, are credited to the allowance account.
Management determines the adequacy of the reserves based on historical
patterns of charge-offs and recoveries, industry experience, and other
qualitative factors relevant to the collectability of the loan portfolio. While
management believes that the allowance is adequate to absorb estimated potential
loan losses, future adjustments may be necessary in circumstances that differ
substantially from the assumptions used in evaluating the adequacy of the
allowance for loan losses.
INVESTMENT SECURITIES:
At the time of acquisition, Management classifies debt securities as either
held to maturity, available for sale or trading securities. Debt securities are
classified as held to maturity when the Corporation has the positive intent and
ability to hold the securities to maturity. Held to maturity securities are
stated at amortized cost. Debt securities that the Corporation does not have the
positive intent and ability to hold to maturity, and all marketable equity
securities, are classified as available for sale or trading and carried at fair
value. Unrealized gains and losses, net of tax, on securities classified as
available for sale will be carried as a separate component of shareholders'
equity. Unrealized gains and losses on securities classified as trading will be
reported in earnings. Management did not classify any debt or equity securities
as trading.
The amortized cost of debt securities classified as held to maturity or
available for sale is adjusted for the amortization of premiums and the
accretion of discounts to maturity or, in the case of mortgage-backed securities
and collateralized mortgage obligations, over the estimated life of the
security. Such amortization is included in interest income from investments.
Realized gains and losses and declines in value judged to be other than
temporary are included in other income. The cost of securities sold is based on
the specific identification method.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation of premises and equipment is computed principally by the straight
line method over the estimated useful lives of the various classes of assets.
Amortization of leasehold improvements is computed using the straight-line
method over useful lives of the leasehold improvements or the term of lease,
whichever is shorter. Maintenance, repairs and minor renewals are charged to
expense as incurred.
OTHER ASSETS:
Other assets include real estate acquired through foreclosure or in
settlement of debt and is stated at the lower of the carrying amount of the
indebtedness or fair market value, net of selling costs.
TREASURY STOCK:
The purchase of the Corporation's common stock is recorded at cost. At the
date of subsequent reissue, the treasury stock account is reduced by the cost of
such stock on a first-in-first-out basis.
8
CNB Financial Corporation and Subsidiary
1995 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TRUST INCOME:
Trust income is recorded on a cash basis which approximates accrual basis.
For Federal income tax purposes the income earned in the current period to be
collected in a future period is estimated and used in the current period tax
calculation.
EARNINGS PER SHARE:
Earnings per share is calculated on the weighted average number of common
shares outstanding during the year.
CASH AND CASH EQUIVALENTS:
For purposes of the consolidated statement of cash flows, the Corporation
defines cash and cash equivalents as cash and due from banks, and Federal funds
sold.
RECLASSIFICATIONS:
Certain prior year amounts have been reclassified for comparative purposes.
2. RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. The average amount of these reserve balances for the year ended
December 31, 1995, was approximately $1,343,580, which was maintained in vault
cash.
3. INVESTMENT SECURITIES
Investment securities at December 31, 1995 and 1994 were as follows (in
thousands):
DECEMBER 31, 1995
---------------------------------------------------------------
UNREALIZED
AMORTIZED ----------------------- MARKET
COST GAINS LOSSES VALUE
---------------------------------------------------------------
Securities available for sale:
U.S. Treasury............................................. $11,500 $ 99 $ 5 $11,594
U.S. Government agencies
and corporations........................................ 24,527 271 106 24,692
Obligations of States and
Political Subdivisions.................................. 11,155 289 10 11,434
Other Debt Securities..................................... 1,528 17 5 1,540
Marketable Equity Securities.............................. 1,405 342 -- 1,747
---------------------------------------------------------------
$50,115 $1,018 $126 $51,007
===============================================================
Securities to be held to maturity:
U.S. Government agencies
and corporations........................................ 1,989 18 -- 2,007
Obligations of States and
Political Subdivisions.................................. 11,251 439 5 11,685
Other Debt Securities..................................... 11,681 183 16 11,848
---------------------------------------------------------------
$24,921 $640 $ 21 $25,540
==============================================================
DECEMBER 31, 1994
---------------------------------------------------------------
UNREALIZED
AMORTIZED ----------------------- MARKET
COST GAINS LOSSES VALUE
---------------------------------------------------------------
Securities available for sale:
U.S. Treasury............................................. $15,528 $ -- $280 $15,248
U.S. Government agencies
and corporations........................................ 18,233 10 688 17,555
Obligations of States and
Political Subdivisions.................................. 1,735 4 61 1,678
Other Debt Securities..................................... 1,958 -- 87 1,871
Marketable Equity Securities.............................. 816 210 17 1,009
---------------------------------------------------------------
$38,270 $ 224 $1,133 $37,361
===============================================================
Securities to be held to maturity:
U.S. Government agencies
and corporations........................................ -- -- -- --
Obligations of States and
Political Subdivisions.................................. 16,845 360 241 16,964
Other Debt Securities..................................... 17,108 17 201 16,924
---------------------------------------------------------------
$33,953 $ 377 $442 $33,888
===============================================================
Other debt securities include corporate notes and bonds, collateralized
mortgage obligations and asset-backed securities.
On December 31, 1995 investment securities carried at $11,583,000 were
pledged to secure public deposits and for other purposes as provided by law.
The following is a schedule of the contractual maturity of investments
except marketable equity securities, at December 31, 1995 (in thousands):
CARRYING VALUE MARKET VALUE
-------------- ------------
1 year or less............................... $13,824 $13,905
1 year-5 years............................... 41,061 41,644
5 years-10 years............................. 14,818 15,308
After 10 years............................... 2,400 2,403
------------------------------
72,103 73,260
------------------------------
Collateralized Mortgage Obligations
and Other Asset-backed
Securities................................. 1,528 1,540
------------------------------
Total Investment Securities.............. $73,631 $74,800
==============================
Collateralized mortgage obligations and other asset-backed securities are
not due at a single date; periodic payments are received based on the payment
patterns of the underlying collateral.
9
CNB Financial Corporation and Subsidiary
1995 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LOANS
Total Loans at December 31, 1995 and 1994 are summarized as follows (in
thousands):
1995 1994
-------- --------
Commercial, Financial and Agricultural............. $ 49,643 $ 40,643
Residential Mortgage............................... 78,111 68,907
Commercial Mortgage................................ 30,658 31,039
Installment........................................ 45,294 44,196
-------- --------
$203,706 $184,785
======== ========
In the ordinary course of business, the Bank has transactions, including
loans, with it's officers, directors and their affiliated companies. These
transactions were on substantially the same terms as those prevailing at the
time for comparable transactions with unaffiliated parties and do not involve
more than the normal risks. The aggregate of such loans totaled $6,818,000 in
1995 and $7,383,000 at December 31, 1994. During 1995, $23,119,000 of new loans
were made and repayments totaled $23,684,000.
The Bank`s outstanding loans and related unfunded commitments are primarily
concentrated within Central Pennsylvania. The Bank attempts to limit
concentrations within specific industries by utilizing dollar limitations to
single industries or customers, and by entering into participation agreements
with third parties. No specific industry concentration exceeded 10 percent of
total loans outstanding. Collateral requirements are established based on
management`s assessment of the customer.
Effective January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan", as amended by SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures". These standards address the
accounting for certain loans when it is probable that all the amounts due
pursuant to the contractual terms of the loan will not be collected. Impairment
is measured based on either the present values of the expected future cash flows
using the initial effective interest rate on the loan, the observable market
price of the loan, or the value of the collateral if the loan is collateral
dependent. If the recorded investment in the loan exceeds the measure of fair
value, a valuation allowance is established as a component of the allowance for
possible loan losses. Impaired loans consist of non-homogeneous loans, which
based on Management's evaluation of current information and events, it has
determined that it is probable that the Corporation will not be able to collect
all amounts due according to the contractual terms of the loan agreement. The
Corporation evaluates all commercial and commercial real estate loans which have
been classified for regulatory purposes, including nonaccrual and restructured
loans, in determining impaired loans.
The recorded investment in loans that are considered impaired under SFAS
No. 114 was $819,000 (of which $114,000 were on nonaccrual status and $957,000)
at December 31, 1995 and 1994. Included in this year's amount is $705,000 of
impaired loans that as a result of a write-down do not have an allowance for
loan losses. The remaining had a related allowance for loan loss of $23,000. The
average recorded investments in impaired loans during the year ended December
31, 1995 was approximately $870,000. For the year ended December 31, 1995, the
Corporation recognized interest income on those impaired loans of $19,108 which
does not include any interest income recognized using the cash basis method of
income recognition.
5. ALLOWANCE FOR LOAN LOSSES
Transactions in the Allowance for Loan Losses for the three years ended
December 31 were as follows (in thousands):
1995 1994 1993
------ ------ ------
Balance, beginning of year..................... $2,033 $1,750 $1,502
Charge-offs.................................... (369) (382) (333)
Recoveries..................................... 101 140 56
------ ------ ------
Net Charge-off............................. (268) (242) (277)
Provision for Loan Losses...................... 380 525 525
------ ------ ------
Balance, end of year........................... $2,145 $2,033 $1,750
====== ====== ======
10
CNB Financial Corporation and Subsidiary
1995 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. PREMISES AND EQUIPMENT
The following summarizes Premises and Equipment at December 31 (in thousands):
1995 1994
------ ------
Land........................................................................ $1,011 $ 924
Premises and Leasehold Improvements......................................... 5,866 4,040
Furniture and Equipment..................................................... 4,260 3,759
------ ------
11,137 8,723
Less Accumulated Depreciation and Amortization.............................. 3,355 3,580
------ ------
Premises and Equipment, Net............................................... $7,782 $5,143
====== ======
Depreciation on Premises and Equipment amounted to $505,000 in 1995,
$455,000 in 1994, and $451,000 in 1993.
During 1995, the Corporation substantially completed a $2.46 million
expansion of its Headquarters Building.
7. DEPOSIT
Deposits at December 31, 1995 and 1994 consisted of the following (in
thousands):
1995 1994
--------- --------
Checking and Money Market Accounts.......................................... $104,526 $ 79,061
Savings Accounts............................................................ 35,589 41,559
Certificates of Deposit..................................................... 115,672 110,021
--------- --------
$255,787 $230,641
========= ========
During 1995, the Bank introduced a money market checking account called the
"Prime Money Fund" for deposits of $25,000 and above. The Prime Money Fund pays
a rate which is maintained at a level comparable to money market mutual funds
available from non-banking financial service institutions. For accounts opened
in 1995, a 0.5% incentive was added through year end. On December 31, 1995 this
account, included in the Money Market Account line above, had a balance of $42
million.
Certificates of Deposit of $100,000 or more totaled $12,676,000 and
$14,493,000 at December 31, 1995 and 1994.
8. OTHER BORROWINGS
Other borrowings include $0.4 million and $1.2 million of demand notes
payable to the U.S. Treasury Department at December 31, 1995 and 1994. These
notes are issued under the U.S. Treasury Department`s program of investing the
treasury tax and loan account balances in interest bearing demand notes insured
by depository institutions. These notes bear interest at a rate of .25 percent
less than the average Federal funds rate as computed by the Federal Reserve
Bank. In addition, other borrowings include $2.4 million of advances from the
Federal Home Loan Bank (FHLB) at December 31, 1995. These advances mature within
15 years, and bear interest rates between 4.56% and 6.51%. The FHLB advances are
secured by the Bank's FHLB stock, deposits held at the FHLB, and certain
residential mortgages, and are subject to substantial prepayment penalties. At
year end the Bank had borrowing capacity with the FHLB of $67 million.
9. INCOME TAXES
The Corporation adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" in 1993. This statement requires the use of
the liability method to account for deferred income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities. These are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
1995 1994 1993
------ ------ ------
Current................................................................. $1,210 $1,129 $1,335
Deferred................................................................ (37) 8 (284)
------ ------ ------
Net provision for Income Taxes.......................................... $1,173 $1,137 $1,051
====== ====== =======
Deferred taxes in 1993 resulted primarily from the adoption of SFAS No.
109.
11
CNB Financial Corporation and Subsidiary
1995 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The components of the net deferred tax asset as of December 31, 1995 and 1994 are as follows (in thousands):
1995 1994
----- -----
Deferred tax assets
Allowance for loan losses............................................... $444 $406
Unrealized loss on investment securities available for sale............. -- 288
Post-retirement benefits................................................ 15 --
Loan origination fees................................................... -- --
Fiduciary Income Earned not Recorded.................................... 80 80
----- -----
539 774
Deferred tax liabilities
Premises and equipment.................................................. 270 254
Unrealized gain on investment securities available for sale............. 304 --
----- -----
574 254
----- -----
Net deferred tax (liability) asset.......................................... $(35) $520
===== =====
The reconciliation of income tax attributable to continuing operations at
the Federal statutory tax rates to income tax expense is as follows (in
thousands):
1995 1994 1993
------ ------ ------
Tax at statutory rate....................................................... $1,697 $1,648 $1,495
Tax exempt income, net...................................................... (499) (475) (486)
Other....................................................................... (25) (36) 42
------ ------ ------
Income tax provision........................................................ $1,173 $1,137 $1,051
====== ====== ======
10. EMPLOYEE BENEFIT PLANS
The Bank provides a defined contribution pension plan that covers all
active officers and employees twenty-one years of age or older, employed by the
Bank for one year. Contributions to the plan, based on prior year compensation,
are 9 percent of total compensation plus 5.7 percent of the compensation in
excess of $55,500. The Corporation recognized pension expense of $274,000 in
1995, $268,000 in 1994, and $241,000 in 1993.
In addition to the abovementioned pension benefit plan, the Corporation
provides certain health care benefits for retired employees and their qualifying
dependents.
The following table sets forth the plan`s funded status:
December 31,
1995 1994
------ ------
Accumulated post-retirement benefit obligation:
Retirees............................................................ $ 18,692 $ 20,815
Fully eligible active plan participants............................. 23,164 79,999
Other active plan participants...................................... 293,665 449,881
----------- ----------
Total accumulated post-retirement benefit obligation.................... 335,521 550,695
Unrecognized net transition obligation.................................. (132,218) (412,822)
Unrecognized net (loss) gains........................................... (39,067) 25,224
----------- ----------
Accrued post-retirement obligation...................................... $164,236 $163,097
Net periodic post-retirement benefit cost:
Service cost........................................................ 18,531 28,258
Interest cost....................................................... 21,725 42,369
Amortization of transition obligation over 21 years................. 7,566 21,727
----------- ----------
$ 47,822 $ 92,354
=========== ==========
The weighted average discount rate used to calculate net periodic benefit
cost and the accrued post-retirement liability was 6.50% in 1995 and 7.75% in
1994. The health care cost trend rate used to measure the expected costs of
benefits for 1996 was 10.0%, 9.0%, in 1997 and 8.0% thereafter. A one percent
increase in the health care trend rates would result in an increase of $53,272
and $8,143 in the service and interest cost components, respectively. The
presentation above reflects the current year policy change which grants
eligibility to these benefits to employees 60 years of age with 30 years of
service. Prior to the January 1, 1995 adoption of this change, an employee was
eligible for these benefits at 55 years of age and 30 years of service. The plan
amendment resulted in a $215,174 reduction to the accrued post-retirement
benefit obligation. This reduction is being amortized over the average service
of the covered employee.
12
CNB Financial Corporation and Subsidiary
1995 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, to meet the financing needs of its
customers, the Bank enters into commitments involving financial instruments with
off-balance sheet risks. Commitments to extend credit are agreements to lend to
a customer at a future date, subject to the meeting of the contractual terms.
These commitments generally have fixed expiration dates (less than one year),
and require the payment of a fee. The Bank utilizes the same credit policies in
making these obligations as it does for on-balance-sheet instruments. The credit
risk involved in issuing these commitments is essentially the same as that
involved in extending loan facilities to customers. However, since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent actual future cash requirements
of the Bank. As of December 31, 1995, the Bank had $22.7 million of unfunded
commercial lines of credit; $10.6 million of unused credit card lines; $0.8
million of outstanding commitments to fund residential loans; $1.7 million in
standby letters of credit and $1.4 million of home equity lines.
The Corporation was party to an interest rate swap which matured in
December, 1995.
12. RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES
Certain restrictions exist regarding the ability of the Bank to transfer
funds to the Corporation in the form of cash dividends, loans or advances. The
approval of the Comptroller of the Currency is required to pay dividends in
excess of earnings retained in the current year plus retained net profits of the
preceding two years. As of December 31, 1995, $7.47 million of undistributed
earnings of the Bank, included in consolidated retained earnings, was available
for distribution to the Corporation as dividends without prior regulatory
approval.
Under Federal Reserve restrictions, the Bank also is limited to the amount
it may loan to its affiliates, including the Corporation, unless such loans are
collateralized by specific obligations. Further, such secured loans are limited
in the amount to ten percent of the Bank`s capital and surplus.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statements of Financial Accounting Standards No. 107 "Disclosures about
Fair Value of Financial Instruments" and Statement No. 119 "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments"
require the disclosure of estimated fair value of all assets, liability and off-
balance sheet instruments.
The fair value estimates of the Corporation's financial instruments are
made at a point in time, based on the then current market information and
available financial information about the financial instrument. Fair market
values are quoted on market prices for financial instruments where price exists.
In cases where quoted market prices are not available, fair values are derived
from estimates using discounted cash flow techniques. Generally, market prices
do not exist for a substantial portion of the Corporation's financial
instruments, fair value estimates are based on judgments with regard to future
cash flow expectations, perceived credit risk, interest rate risk, prepayment
risk, local and national economic conditions and other factors. The estimates
are therefore subjective and may not reflect the amount that could be realized
upon immediate sale of the instrument. Changes in certain assumptions could also
significantly affect the estimates.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND SHORT-TERM ASSETS:
The carrying amounts reported in the statement of condition for cash and
short-term assets approximates those asset`s fair values primarily due to their
short-term nature. For purposes of this disclosure only, short-term assets
include due from banks, deposits with other banks, Federal funds sold, and
accrued interest receivable.
INVESTMENT SECURITIES:
The fair value of investment securities are based on quoted market prices,
where available. For equity securities for which quoted market prices are not
available, fair value has been estimated to be the securities carrying value.
NET LOANS:
For demand and variable rate commercial, consumer loans, and residential
mortgages that reprice frequently, fair values are estimated by reducing
carrying amounts by estimated credit loss factors. For fixed rate commercial,
consumer and residential mortgage loans, including nonaccrual loans, fair values
are estimated using discounted cash flow analyses, with cash flows reduced by
estimated credit loss factors and discount rates equal to interest rates
currently being offered for similar loans.
DEPOSITS:
The carrying amount for noninterest-bearing demand and interest-bearing
money-market and saving deposits approximates fair values. For certificates of
deposit fair value has been estimated using discounted cash flow analyses that
apply interest rates currently being offered on certificates with similar
maturities.
ADVANCES FROM THE FEDERAL HOME LOAN BANK:
Fair value is determined by discounting the advances using current rates of
advances with comparable maturities.
13
CNB Financial Corporation and Subsidiary
1995 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OTHER BORROWINGS:
Other borrowings consist of short-term demand notes payable to the U.S.
Treasury Department under its program of investing treasury tax and loan account
balances with depository institutions. Because of their short-term nature
carrying value is considered to be fair value.
ACCRUED INTEREST PAYABLE:
The carrying amounts reported in the statement of condition for accrued
interest payable approximates its fair values primarily due to its short-term
nature.
STANDBY LETTERS OF CREDIT:
The fair value of letters of credit are estimated based upon the amount of
deferred fees and the creditworthiness of the counterparties.
INTEREST RATE SWAP AGREEMENT:
The fair value of the interest rate swap agreement in 1994 represented the
quoted cost to terminate the agreement at that time.
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------------------------------------------------------
ASSETS
Cash and short-term assets....................................... $14,426 $14,426 $ 11,662 $ 11,662
Investment securities............................................ 75,928 76,547 71,314 71,319
Net Loans........................................................ 197,893 197,102 179,756 177,162
LIABILITIES
Deposits......................................................... 255,787 256,464 230,641 229,964
Advances from the Federal Home Loan Bank......................... 2,436 2,413 2,456 2,262
Other Borrowings................................................. 410 410 1,229 1,229
Accrued Interest Payable......................................... 809 809 753 753
OFF-BALANCE-SHEET
Interest Rate Swaps.............................................. -- -- 34 (115)
14. PARENT COMPANY FINANCIAL INFORMATION
The Corporation's financial information (parent company only) is summarized as follows (in thousands):
DECEMBER 31,
-----------------------
BALANCE SHEET 1995 1994
------ ------
ASSETS
Cash........................................................... $ 366 $ 24
Investment in Bank subsidiary.................................. 35,580 33,530
Securities-Available for Sale.................................. 1,747 1,009
Other assets................................................... -- 17
------- -------
TOTAL ASSETS................................................. $37,693 $34,580
======= =======
LIABILITIES
Income Taxes Payable........................................... $ 34 $ --
Deferred Tax Liability......................................... 116 65
------- -------
TOTAL LIABILITIES............................................ 150 65
TOTAL SHAREHOLDERS' EQUITY................................... 37,543 34,515
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................... $37,693 $34,580
======= =======
14
CNB Financial Corporation and Subsidiary
1995 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF INCOME YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
------ ------ ------
INCOME
Dividends from:
Bank subsidiary................................................. $2,791 $2,350 $1,820
Other non-subsidiary investments................................ 56 18 16
Other............................................................. 128 24 9
------ ------ ------
TOTAL INCOME....................................... 2,975 2,392 1,845
------ ------ ------
EXPENSES
Other...................................................... 63 90 56
------ ------ ------
TOTAL EXPENSES..................................... 63 90 56
------ ------ ------
INCOME BEFORE INCOME TAXES AND EQUITY
IN DISTRIBUTED NET INCOME OF SUBSIDIARY...................... 2,912 2,302 1,789
Applicable Income Tax (Obligation) Benefit................. (34) 17 8
Equity in undistributed net income of subsidiary............... 939 1,390 1,774
------ ------ ------
NET INCOME......................................... $3,817 $3,709 $3,571
====== ====== ======
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
------ ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.......................................................... $3,817 $3,709 $3,571
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed net income of subsidiary.................. (939) (1,390) (1,774)
Increase (Decrease) in other assets............................... 17 (7) (10)
Increase (Decrease) in other liabilities.......................... 34 (1) 1
Gain on sale of available for sale securities..................... (125) -- --
------ ------ ------
Net cash provided by operating activities......................... 2,804 2,311 1,788
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available for sale........................... (801) (505) (96)
Proceeds from the sale of securities available for sale............. 337 44 --
------ ------ ------
Net cash provided by (used in) investing activities............... (464) (461) (96)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid...................................................... (1,998) (1,861) (1,808)
------ ------ ------
Net cash used in financing activities............................. (1,998) (1,861) (1,808)
------ ------ ------
Net Increase (Decrease) in Cash..................................... 342 (11) (116)
Cash beginning of year.............................................. 24 35 151
------ ------ ------
CASH END OF YEAR.................................................... $ 366 $ 24 $ 35
====== ====== ======
15
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]
Report of Independent Auditors
Board of Directors and Shareholders
CNB Financial Corporation
We have audited the accompanying consolidated statements of condition of CNB
Financial Corporation and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the CNB Financial
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CNB Financial
Corporation and subsidiary at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in the Notes to Consolidated Financial Statements, CNB Financial
Corporation changed its method of accounting for income taxes in 1993.
/s/ Ernst & Young LLP
January 26, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
CNB Financial Corporation and Subsidiary
1995 Annual Report
MATURITY DISTRIBUTION
Remaining maturity/earliest repricing as of December 31, 1995:
AFTER THREE AFTER SIX
WITHIN MONTHS BUT MONTHS BUT
THREE WITHIN SIX WITHIN ONE
MONTHS MONTHS YEAR
------------------------------------------
Interest earning assets:
Federal Funds Sold........................ $ 3,200 $ -- $ --
Investment Securities..................... 13,257 2,075 7,700
Interest Bearing Deposits................. 19
Loans (Net)............................... 25,952 12,146 22,957
-------- ------- -------
Total................................. 42,428 14,221 30,657
Interest bearing liabilities:
Interest bearing demand deposits.......... 50,815 -- --
Savings................................... -- -- --
Time...................................... 33,170 18,085 25,825
Borrowed funds............................ 431 -- 916
-------- ------- -------
Total................................. 84,416 18,085 26,741
-------- ------- -------
Gap....................................... $ (41,988) $ (3,864) $ 3,916
Cumulative Gap............................ $ (41,988) $(45,852) $(41,936)
Sensitivity Ratio......................... 0.50 0.79 1.15
Cumulative Sensitivity Ratio.............. 0.50 0.55 0.68
AFTER ONE
YEAR BUT AFTER
WITHIN FIVE
FIVE YEARS YEARS TOTAL
-----------------------------------------
Interest earning assets:
Federal Funds Sold........................ $ -- $ -- $ 3,200
Investment Securities..................... 33,875 19,021 75,928
Interest Bearing Deposits................. 19
Loans (Net)............................... 118,955 17,883 197,893
-------- ------- -------
Total................................. 152,830 36,904 277,040
Interest bearing liabilities:
Interest bearing demand deposits.......... 23,627 4,725 79,167
Savings................................... 29,657 5,932 35,589
Time...................................... 38,221 25 115,326
Borrowed funds............................ 1,105 394 2,846
-------- ------- -------
Total................................. 92,610 11,076 232,928
-------- ------- -------
Gap....................................... $ 60,220 $25,828 $ 44,112
Cumulative Gap............................ $ 18,284 $44,112
Sensitivity Ratio......................... 1.65 1.43 1.19
Cumulative Sensitivity Ratio.............. 1.08 1.19
----------------------------------------
QUARTERLY SUMMARY OF EARNINGS
The unaudited quarterly results of operations for the years ended December 1995 and 1994 are as follows
(in thousands, except per share data):
QUARTERS ENDED
1995
------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
Total Interest Income................. $5,037 $5,275 $5,473 $5,633
Net Interest Income................... 3,051 3,046 3,037 3,061
Provision for Loan Losses............. 125 125 65 65
Other Income.......................... 412 518 421 592
Other Expense......................... 2,140 2,249 2,099 2,280
Income Before Income Taxes............ 1,198 1,190 1,294 1,308
Applicable Income Taxes............... 334 268 277 294
Net Income............................ 864 922 1,017 1,014
Net Income Per Share (1).............. 0.50 0.54 0.59 0.59
1994
------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
Total Interest Income................. $4,575 $4,703 $4,913 $4,977
Net Interest Income................... 2,856 2,945 3,068 3,074
Provision for Loan Losses............. 131 132 131 131
Other Income.......................... 351 377 348 434
Other Expense......................... 2,036 2,001 1,998 2,047
Income Before Income Taxes............ 1,040 1,189 1,287 1,330
Applicable Income Taxes............... 253 311 302 271
Net Income............................ 787 878 985 1,059
Net Income Per Share (1).............. 0.46 0.51 0.57 0.61
----------------------------------------
QUARTERLY SHARE DATA
The following table sets forth, for the periods indicated, the quarterly
high and low bid price of stock as reported through the National Quotation
Bureau and actual cash dividends paid per share. As of December 31, 1995, the
approximate number of shareholders of the Corporation's common stock was 1,421.
Price Range of Common Stock Cash Dividends Paid
1995 1994
HIGH LOW High Low 1995 1994
--------------------------------------- ------------------
First Quarter.......... $29.50 $28.25 $25.50 $24.50 First Quarter............ $ 0.29 $ 0.27
Second Quarter......... 29.00 27.50 27.25 25.00 Second Quarter........... 0.29 0.27
Third Quarter.......... 28.25 27.00 29.25 25.50 Third Quarter............ 0.29 0.27
Fourth Quarter......... 29.00 27.00 29.50 28.25 Fourth Quarter........... 0.29 0.27
------ ------
$ 1.16 $ 1.08
====== ======
17
CNB Financial Corporation and Subsidiary
1995 Annual Report
SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31
----------------------
1995
----------------------
(in thousands, except per share data)
Interest Income
Loans including fees..................................................... $ 16,849
Deposits with Banks...................................................... 1
Federal Funds Sold....................................................... 81
Other Short-Term Investments............................................. --
Investment Securities:
U.S. Treasury Securities.............................................. 747
Securities of U.S. Government Agencies and Corporations............... 1,480
Obligations of States and Political Subdivisions...................... 1,222
Other Securities...................................................... 1,038
--------
Total Interest Income.................................................... $ 21,418
Interest Expense
Deposits................................................................. $ 8,946
Other Borrowings......................................................... 277
--------
Total Interest Expense................................................... $ 9,223
Net Interest Income......................................................... $ 12,195
Provision for Loan Losses................................................... 380
--------
Net Interest Income After Provision
for Loan Losses.......................................................... $ 11,815
Other Operating Income...................................................... 1,943
Other Operating Expenses.................................................... 8,768
--------
Income Before Taxes and cumulative effect adjustment........................ 4,990
Applicable Income Taxes..................................................... 1,173
--------
Income before cumulative effect adjustment.................................. 3,817
Cumulative effect adjustment................................................ --
Net Income............................................................... $ 3,817
========
Per Share Data(1)
Income before cumulative effect adjustment............................... $ 2.22
Cumulative effect adjustment............................................. $ --
Net Income............................................................... $ 2.22
Dividends Declared....................................................... $ 1.16
Book Value Per Share at Year End......................................... $ 21.79
At End of Period
Total Assets............................................................. $297,523
Investment Securities.................................................... 75,928
Loans, Net of Unearned Discount.......................................... 200,038
Allowance for Loan Losses................................................ 2,145
Deposits................................................................. 255,787
Shareholders' Equity..................................................... 37,543
Key Ratios
Return on Average Assets................................................. 1.36%
Return on Average Equity................................................. 10.58%
Loan to Deposit Ratio.................................................... 77.36%
Dividend Payout Ratio.................................................... 52.36%
Average Equity to Average Assets Ratio................................... 12.86%
(1) Per share amounts have been restated to reflect a two-for-one split of
common stock in 1993.
18
CNB Financial Corporation and Subsidiary
1995 Annual Report
FIVE YEAR COMPARISON
- ---------------------------------------------------------------------------------------------------------
1994 1993 (1) 1992 (1) 1991 (1)
- ------------- ------------- ------------- -------------
$ 14,813 $ 13,568 $ 13,935 $ 14,677
91 243 848 1,594
43 89 224 478
-- 24 156 240
729 920 955 899
1,060 1,170 1,511 1,557
1,238 1,480 1,491 1,416
1,194 1,496 1,563 1,480
- ------------- ------------- ------------- -------------
$ 19,168 $ 18,990 $ 20,683 $ 22,341
$ 6,986 $ 7,564 $ 9,690 $ 11,977
239 32 35 71
- ------------- ------------- ------------- -------------
$ 7,225 $ 7,596 $ 9,725 $ 12,048
$ 11,943 $ 11,394 $ 10,958 $ 10,293
525 525 500 413
- ------------- ------------- ------------- -------------
$ 11,418 $ 10,869 $ 10,458 $ 9,880
1,510 1,257 1,040 1,041
8,082 7,730 6,949 6,598
- ------------- ------------- ------------- -------------
4,846 4,396 4,549 4,323
1,137 1,051 1,038 1,021
- ------------- ------------- ------------- -------------
3,709 3,345 3,511 3,302
-- 226 -- --
- ------------- ------------- ------------- -------------
$ 3,709 $ 3,571 $ 3,511 $ 3,302
============= ============= ============= =============
$ 2.15 $ 1.93 $ 2.04 $ 1.91
$ -- $ 0.13 $ -- $ --
$ 2.15 $ 2.06 $ 2.04 $ 1.91
$ 1.08 $ 1.05 $ 1.00 $ .93
$ 20.03 $ 19.32 $ 18.30 $ 17.26
$269,698 $264,547 $270,525 $255,267
71,314 78,927 92,493 72,036
181,789 167,956 150,024 144,872
2,033 1,750 1,502 1,369
230,641 226,326 235,887 222,262
34,515 33,288 31,525 29,737
1.39% 1.35% 1.34% 1.32%
11.07% 11.06% 11.48% 11.45%
77.94% 73.44% 63.56% 65.18%
50.18% 51.00% 49.07% 48.51%
12.43% 12.21% 11.66% 11.55%
19
CNB Financial Corporation and Subsidiary
1995 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The purpose of the following pages is to provide discussion and analysis
about CNB Financial Corporation (the Corporation) and its wholly owned
subsidiary County National Bank (the Bank) which may not be apparent from the
consolidated financial statements included within this report. The reader can
refer to those statements and the accompanying financial data for a better
understanding of the following review.
RESULTS OF OPERATIONS OVERVIEW
Net income for 1995 was $3.82 million compared to $3.71 million in 1994 and
$3.57 million in 1993. The earnings growth for the year of 2.9%, resulted from a
modest increase in net interest income and from increased other operating
revenues, including gains on the sale of some of the Corporation's equity
holdings. These increases were sufficient to offset a $686,000 increase in
operating expenses to produce an increase of $107,800 in net income over the
prior year.
The Corporation and the Bank completed, or substantially completed many
important strategic initiatives. These include:
. The Corporation's headquarter's expansion was placed into operation on
May 1, 1995. The new addition provided much needed space for the Bank's
Trust/Asset Management Division and houses the sizeable investment made
in electronic data processing.
. A new management accounting system was successfully implemented on May 8,
1995.
. A new Trust accounting system was placed into service on June 5, 1995
which has greatly enhanced that division's ability to handle today's
competitive customer requirements.
. The Bank instituted a new product in May, 1995 for first-time home-buyers
which allowed many low to moderate income families to purchase their own
residence. The Bank has lent approximately $5.6 million under this
program.
. The Bank implemented a competitive new deposit product in July, 1995
which by year end had attracted approximately $25 million in new
deposits.
. The Bank opened its eleventh full service branch in Bradford, McKean
County, Pennsylvania on November 15, 1995.
. The Bank had completed construction of its twelfth full-service branch in
Houtzdale, Pennsylvania and notified regulators of its January 10, 1996
opening date.
Each initiative carried a monetary and human resource expenditure which
reflected in increased operating costs. However, these achievements have already
allowed for rapid product implementation, increased management information for
decision making and an ability to significantly leverage the Bank's existing
asset size under a controlled system.
On a per share basis, earnings grew 3.26% over the prior year. The book
value of equity per share rose from $20.03 at the end of 1994 to $21.79 at year
end 1995. As the end of 1993 the book value per share was $19.32. Approximately
$0.70 of the per share increase in 1995 was attributable to changes in the
unrealized gain on investment securities available for sale as required under
generally accepted accounting practices.
BALANCE SHEET HIGHLIGHTS
LOANS
- -----
Total assets on December 31, 1995 were $297.5 million compared with $269.7
million one year ago and $264.6 million on December 31, 1993. This 10.3%
increase resulted from an $18.9 million increase in the loan portfolios, a $4.6
million increase in the investment portfolio and $3.2 million of federal funds
sold at year end.
With regard to the loan portfolios, the Bank expanded its lending
activities into further northern portions of the state with the opening of its
Bradford, McKean County branch and placing a full-time business development
officer to serve that region. Also, the "First-Time Home Buyers" mortgage
program mentioned above proved very successful and helped in the $9.2 million
increase in residential mortgage loans. Continued personalized service in all
lending areas, helped maintain the Bank's position of the predominant lender in
its local region.
As shown below, the portfolio composite has remained relatively the same
from year to year.
1995 1994
Loan Categories (000'S) (000's)
--------------- ------- -------
Commercial, Financial
& Agriculture.........$ 49,643 24.37% $ 40,643 21.99%
Residential Mortgage........ 78,111 38.34% 68,907 37.29%
Commercial Mortgage......... 30,658 15.05% 31,039 16.80%
Consumer Installment
Loans................. 45,294 22.23% 44,196 23.92%
-------- ------- -------- -------
$203,706 100.00% $184,785 100.00%
Management takes careful measures to ensure that loans are not concentrated
in any particular industry or category. This helps the Corporation diversify its
credit risks and avoid economic downturns in specific business sectors.
20
CNB Financial Corporation and Subsidiary
1995 Annual Report
INVESTMENTS
- -----------
Investment securities are the next predominant earning asset after loans.
The Corporation's investments consist of $11.6 million of U.S. Treasury
obligations, $28.2 million of U.S. Agency obligations, $22.7 million of Tax-Free
State and Municipal Authority Debt Securities and $12.6 million of corporate
debt. Included in the corporate debt is $1.5 million of collateralized mortgage
obligations and asset backed securities. These latter investments are all rated
AAA by Moody's Rating service. The parent Corporation also holds $1.4 million of
various bank equities. At year-end the Bank had $3.2 million of federal funds
sold outstanding.
Upon purchasing a security, Management considers various factors such as
loan and deposit growth, the Corporation's capital position and the interest
rate risk position and classifies the debt security as available for sale or
held to maturity. The Corporation's investment policy specifically prohibits
trading activities, therefore, the Corporation has no investments which were
designated as such. These procedures comply with Financial Accounting Standard
No. 115 which the Bank adopted last year.
At year end the Corporation had $51 million in securities available for
sale and $25.5 million of securities it intends to hold until maturity.
Management made no changes in classifications under the period between November
15, 1995 and December 31, 1995 which the Accounting Standards Board and
regulators allowed reclassifications amongst categories without "tainting" the
portfolio. Management's decision not to reclassify any securities was based on
its current review of designated available for sale securities and the
Corporation`s liquidity needs.
DEPOSITS
- --------
The Corporation's main source of funding is consumer deposits gathered
through the Bank's branch network. The Bank concentrates its deposit gathering
activities in the markets it serves and does not solicit monies from outside
those areas.
Total consumer deposits in 1995 grew by $25.1 million. In large part, the
growth was attributable to the introduction of a new deposit type of account.
Called "The Prime Money Fund", the account is a Money Market Deposit Account
(MMDA). The minimum balance required to qualify for this account is $25,000 and
the rate is maintained at a level comparable to money market mutual funds
available from non-banking financial service institutions. For accounts opened
in 1995, a 0.5% premium was added for incentive, especially to organizations or
individuals whose monies were in non-FDIC insured money funds, to take advantage
of the Bank's competitive product. The account proved highly successful ending
the year with a $42 million balance. Management estimates that $16.9 million of
monies was from the Bank's existing customers' accounts. Management further
estimates that $25 million was attracted from local competing financial
institutions and monies which were withdrawn from non-banking financial service
institutions. Although the account increased the Bank's cost of funds (as will
be discussed under "Net Interest Income"), Management was extremely satisfied at
the number of new customers the product attracted and the additional services
which were, or can be, sold to them.
The Bank also saw an increase in term certificates of deposits from $91.6
million at year end 1994 to $97.8 million on December 31, 1995. This was
encouraging as the banking industry as a whole had been experiencing declines in
its traditional funding sources. Bank management constantly pursues new products
which serve the customers' needs, so that it can maintain an entire relationship
and fulfill its "full-service" promise to the customer.
PURCHASED FUNDS
- ---------------
As a community bank, County National Bank strives to maintain the prudent
balance between the demand for funds for loans and withdrawal of consumer
deposits. During the course of operations, however, timing differences in cash
flows may cause the Bank to purchase federal funds from banks who have committed
to extend credit to the Bank. At year end 1995, the Bank had no purchased funds
and the average purchased funds for the year were $22,500.
CAPITAL & SHAREHOLDER'S EQUITY
- ------------------------------
The Corporation's Primary Capital Position rose from $33.3 million on
December 31, 1993 to $34.5 million at December 31, 1994 to $37.54 million at
year end. This converts to a period end consolidated equity to asset ratio of
12.62%. After adding in the reserve held against possible loan losses, the
Corporation's total capital to asset ratio is 13.24%.
The Board of Directors and Management work together to deploy excess
portions of the capital into resources which they believe best for Corporation
shareholders.
INCOME STATEMENT HIGHLIGHTS
NET INTEREST INCOME
- -------------------
The Corporation's primary source of earnings comes from the difference
between interest earned on loans and investments (including deposits with other
banks and federal funds sold) and the interest expense paid on deposits and
borrowed funds.
21
CNB Financial Corporation and Subsidiary
1995 Annual Report
The table below compares volume and yields for the past two years for
various categories. The interest income is shown on a non-FTE basis:
1995 1994
------------------------------------------
Avg Yld Avg Yld
($000's) ($000's)
Investment Securities
(Taxable) $ 56,149 5.97% $ 58,148 5.35%
Investment Securities
(Non-Taxable) 21,495 5.69% 21,744 5.69%
Commercial Loans 44,621 8.56% 37,544 7.41%
Mortgage Loans 89,215 9.03% 85,892 8.68%
Installment Loans 54,293 9.16% 53,756 8.51%
------------------------------------------
Average Earning Assets $265,773 8.06% $257,084 7.46%
Non Interest Bearing
Demand $ 27,554 -- $ 27,424 --
Interest Bearing Checking 56,284 1.98% 50,779 1.84%
Savings 38,716 2.72% 42,719 2.07%
Time Deposits 116,239 5.83% 109,912 4.70%
FHLB Advances & T.T.&L 5,229 5.32% 5,162 4.63%
------------------------------------------
Average Liabilities $244,022 3.78% $235,996 3.06%
As mentioned in the discussion on deposits, the Bank's "Prime Money
Fund" paid a competitive market rate plus an added bonus through year end. In
1995, the account had an average annual percentage yield (APY) of 5.93%. The
above market rate was clearly a successful marketing tool in attracting new
customers into the Bank. Concurrently with the introduction of this product,
Management had determined the Bank would receive at least $145,000 in the
form of a refund for the overpayment of insurance premiums since June 1,
1995. Management, working with the Board of Directors, had concluded that
deposit customers had carried the burden of the six year premium increase and
had begun exploring means for passing this refund back to its deposit
customers. In that process, it was realized that on an aggregate basis the
refund would have a negligible effect. Instead, Management decided that
depositors who had carried the highest portion of the premium surcharge were
the same group who would be most inclined to switch to the "Prime Money
Fund". The Board and Management believe that the action taken to offset the
higher interest expense with lower non interest expense (discussed later) was
the most equitable process by which to distribute the refund. Further, it was
believed that the shareholders derive longer term benefits as the deposits
gathered under this program were deployed in our communities through lending
activities.
The amount of net interest income is dependent not only on the mix of
assets and liabilities, but is also heavily influenced by the ability to have
assets and liabilities concurrently reprice in response to changes in market
rates. As described later in the discussion on interest rate sensitivity,
Management pays particular attention to the net amount of assets and
liabilities (mainly referred to as the "interest rate gap") which reprice in
periodic time frames. The Corporation strives to be in a neutral position
with regard to repricing and does not take substantial risks to maximize the
net interest margin spread.
NON INTEREST INCOME
- -------------------
The Bank charges fees for certain services it provides and charges
penalties for noncompliance with product agreements. Other income not deemed to
be interest income is also part of the category called "Noninterest income".
Examples of this source of revenue are the fiduciary fees earned by the Trust
Department for its services, late fees charged when customers make payments
after the agreed upon payment date and the service charges the Bank receives for
demand deposit accounts.
Total revenues from these activities rose by 28.68% for the fiscal year of
1995 versus the same 12 months of 1994 and are 54.57% over year end 1993. Trust
division commissions and fiduciary fees rose 16.0% over 1994 year end levels.
Trust officers reported that the increase resulted from the settlement of
several significant estates and the ability, provided by the new computer
system, to accelerate remittances of fees earned. Service charge fees rose by
almost 50% or $204,000 during 1995 without any increases in account or item
charges. The increase resulted from a larger customer base and continued
interest by our customers for flat fee based transaction accounts versus low
balance charges when account balances drop below stated minimums.
Other items in this category include credit card fees and safe deposit
rents. The Bank recognized $53,000 in a one-time gain on the sale of
Pennsylvania Higher Education Loans it sold to the Student Loan Marketing
Association (SLMA). The Bank will still be an active lender for these types of
loans, however, the servicing will be performed by SLMA. Also, the parent
company recognized $125,000 in pre-tax profits from the sale of part of its
equity holdings. The Bank recognized $21,000 in security gains from the early
redemption of State & Municipal securities with discounts being accreted to
maturity.
NON INTEREST EXPENSE
- --------------------
The costs associated with operating the Corporation rose by 8.48% over 1994
and are 13.43% over 1993 year end results. These costs include salaries paid to
personnel, supplies, data processing expenses and occupancy expenses. As
mentioned in this report, the Bank opened one branch in 1995 and was to open
another shortly after the end of the fiscal year. Personnel expenses for new
branches are incurred prior to the opening as training and other necessary
preparations are important to the event. This explains some of the increase in
personnel costs. Merit and cost of living increases also contributed to the
increase in salaries. Benefit costs, in large part, are driven by increases in
salaries, as many benefits such as retirement contributions, and payroll taxes
are
22
CNB Financial Corporation and Subsidiary
1995 Annual Report
computed as a function of salaries. Overall, salary and benefits increased 8.38%
on a combined basis. In 1995, the Corporation expensed $66,300 under the
accounting for its long term obligation for post-retirement benefits as required
under SFAS No. 106. This is $32.348 lower than this expense for 1994. The
expense accrual was lowered due to a change in the plan which now grants
eligibility to these benefits at age 60 as compared to age 55: the change did
not effect the thirty year service requirement.
Net occupancy expenses rose by 5.6% in 1995 over the same period of 1994.
This increase had been anticipated as the Corporation placed its headquarter's
expansion into service on May 1, 1995. In connection with this, the Bank
outsourced its data processing through an outside service company, M&I Data
Services, Inc. under an eight year contract. The Corporation invested heavily in
microcomputers as part of this conversion, and correspondingly is seeing the
rewards of the expenditures through office automation. Management expects
additional increases in this category through the next fiscal year, as a smaller
expansion/renovation project is completed in the Corporation's longstanding main
building.
Other expenses which contain advertising and other pertinent costs involved
in running the business rose 9.98% or $254,000 more than in 1994. The
Corporation expensed $45,000 of travel for employees of the data processing
company in converting its systems and a comparable amount was spent for its own
employees traveling to training sites. These are viewed as one-time nonrecurring
costs. Expenses for FDIC insurance decreased by $246,000 as, the FDIC lowered
insurance premiums in 1995 as the Bank Insurnace Fund was determined to be
funded to the required level, established under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989. The increase in other expenses
also include the costs for non-capitalized expenditures relating to the branch
openings and the business development costs as the Bank's geographic market
expands. Management monthly reviews operating expenses to prevent inefficiencies
from recurring.
FEDERAL INCOME TAXES
- --------------------
The Corporation provided $36,000 more in Federal income tax expense in
1995 over 1994. This increase is due to the higher earnings of the
Corporation. The effective tax rate for 1995 was 23.5%, the same as in 1994.
Increases or decreases in the effective tax rate are influenced by the amount
of tax-free interest income from loans and securities, as well as the amount
of income deferrable into future periods. A reconcilement of taxes accrued
versus the Corporation's statutory rate is provided in Footnote No. 9.
NET INCOME
- ----------
Net income was $108,000 higher for the year ending December 31, 1995
than 1994. Net income totalled $3.82 million in 1995 compared to $3.71
million one year ago. On a per share basis, earnings were $2.22 compared with
$2.15 for 1994. This represents a 3.26% increase in per share earnings.In
1993 net income was $3.57 million and $2.06 per share, of which $.13 was the
result of the cumulative accounting adjustment for
SFAS No. 109.
Return on average assets for 1995 was 1.36% compared to 1.39% for 1994.
Return on average equity was 10.58% for 1995 versus 11.07% for 1994. The
return on average equity is influenced by changes in capital caused by
accounting for the unrealized gains and losses on investments available for
sale.
CAPITAL RESOURCES
The Corporation's capital position, increasing to $37.54 million at
December 31, 1995, provides an above average capital position as compared to
other bank holding companies of similar size. Capital adequacy for a
financial institution is its ability to support asset growth and to
sufficiently protect itself and depositors against risk. The Corporation has
relied on retained earnings to increase equity, while providing a desirable
return on invested capital to its shareholders.
The Federal Reserve Board standards classify capital into two tiers,
referred to as Tier 1 and Tier 2. Tier 1 capital consists of common
shareholders` equity, noncumulative and cumulative perpetual preferred stock,
and minority interests less goodwill. Tier 2 capital consists of allowance
for loan losses, perpetual preferred stock (not used in Tier 1), hybrid
capital instruments, term subordinate debt and intermediate-term preferred
stock. All banks are required to meet a minimum ratio of 8% of qualifying
total capital to risk-adjusted total assets and at least a 5.5% Tier 1
capital ratio. Capital that qualifies as Tier 2 capital is limited to 100% of
Tier 1 capital. In addition to the above risk based capital requirements, the
Federal Reserve also requires a minimum leverage capital ratio of 3% of Tier
1 capital to total risk based assets less any goodwill.
The table below illustrates the Corporation`s regulatory capital
(adjusted for regulatory accounting differences including SFAS No. 115
accounting) and the corresponding capital ratios at December 31, 1995 and
1994 (dollars and thousands):
1995 1994
Tier 1 Capital $ 36,752 $ 35,136
Tier 2 Capital 2,145 2,033
-------- --------
Total Qualifying Capital $ 38,897 $ 37,169
Risk Adjusted Total Assets (including off-balance
sheet exposures) $251,276 $209,573
Tier 1 Risk-Based Capital Ratio 14.62% 16.77%
Total Risk-Based Capital Ratio 15.48% 17.74%
Leverage Ratio 12.35% 13.03%
LIQUIDITY
As a financial intermediary, the Bank must manage its
liquidity in order to ensure its abilities to meet the cash flow requirements
of deposit customers who may
23
CNB Financial Corporation and Subsidiary
1995 Annual Report
potentially want to withdraw their funds and to assure borrowers that
sufficient funds are available to meet their credit needs. The Bank's major
source of new funds has come from the growing number of depositors. As
interest rates have fallen the banking industry has seen deposit growth rates
drop to minimal levels. In this regard, Management continually explores new
products which may attract customers searching for customized financial
vehicles. The Prime Money Fund is an example of how quickly Management can
develop a product for customer's needs.
Aside from the capital markets open to the Corporation, the Bank has
substantial avenues it can use to augment its liquidity needs. First, the
Bank is a member of the Federal Home Loan Bank and had an average of $67
million of additional borrowing capacity with that organization. Secondly,
the bank has committed lines from other banks to purchase up to $18 million
in Federal funds on a short term basis. And lastly, the Corporation has $50
million of investments classified as available for sale, which could be sold
to provide additional funding if necessary. The investment portfolio has a
short weighted average maturity and in 1996 $21.1 million of securities will
mature. These monies could be used to meet liquidity needs or reinvested in
high quality, short term investments.
INTEREST RATE SENSITIVITY
The monies provided by deposit gathering and other borrowings are used
by the Bank in its lending activities. In general, the ability to
simultaneously reprice the deposits and loans does not occur. This difference
is called interest rate risk and can represent substantial uncertainty as to
the stability of earnings if interest rates rise or fall by relatively modest
amounts. The process of asset/liability management is the continuous
monitoring of the amount of monies available for repricing in periodic time
frames. The primary function of asset/liability management is to assure
stabilized earnings regardless of interest rate swings. Management's guiding
principle in managing interest rate risk is to attempt to keep the amount of
liabilities and assets maturing or repricing in a particular time frame as
close to equal as possible. Therefore, any changes in market interest rates
should affect the renewing of the obligations to much the same extent,
therefore, net interest income should not fluctuate.
Management uses several methods to manage its interest rate risk one of
which is the interest rate sensitive assets to interest-rate sensitive
liabilities report sometimes called the "gap report". Also, the Corporation
uses a computer simulation model which attempts to duplicate all the
repricing/maturity characteristics of the assets and liabilities and provide
an ongoing estimate of net interest income under various interest rate
environments. This second method has special uses in that it is helpful in
judging not only short term risk, but the risk in longer time-frames also.
24
CNB Financial Corporation and Subsidiary
1995 Annual Report
SERVICES FOR INDUSTRY & CONSUMER
County National Bank is a nationally chartered full-service commercial bank
which provides all conventional banking services customers associate with
like institutions. Above those services County National Bank provides the
following:
Automated Clearing House Originations & EFT Transactions
Accounts Receivable Financing through "Business Manager" (TM)
Cash Concentration Accounts through ACH
[LOGO OF CHECK CARD APPEARS HERE] for Customers with Active Lifestyles
Direct Deposit Services for Payroll
Automobile Leasing (available May 1996)
Telephone Banking (available May 1996)
Rainbow Account Services for Customers 50 years of age & better
Customized Statement Cycles for Business and Organizations
Expedited Loan Approvals
401-K Administration
Self-Directed IRA's
Private Banking and Retirement Planning
25
CNB Financial Corporation and Subsidiary
1995 Annual Report
BOARD OF DIRECTORS
CNB FINANCIAL CORPORATION PRINCIPAL OCCUPATION
L. E. Soult, Jr. Chairman of the Board
Vice President and Treasurer, Soult Wholesale Co. (Building Materials
Wholesaler)
Robert E. Brown Vice President, E. M. Brown, Inc. (Coal Producer)
Richard D. Gathagan President & Owner of Pharmaceutical & Medical Companies (Health Care)
James J. Leitzinger President, Leitzinger Realty (Real Estate Investments)
Dennis L. Merrey President, Clearfield Powdered Metals, Inc. (Manufacturer)
James P. Moore President and Chief Executive Officer - CNB Financial Corporation
Chairman of the Board - County National Bank
William R. Owens Retired, Formerly Vice President, Secretary and Treasurer, CNB Financial
Corporation and President & Chief Executive Officer, County National Bank
Robert C. Penoyer President, Penoyer Contracting Co., Inc. (Contractor)
Carl J. Peterson Assistant Secretary - CNB Financial Corporation
Senior Vice President & Trust Officer - County National Bank
Jeffrey S. Powell President, J.J. Powell, Inc. (Petroleum Distributor)
Edward B. Reighard Retired
Peter F. Smith Attorney at Law
Robert G. Spencer President, Hepburnia Coal Sales Corp. (Coal Producer)
Joseph L. Waroquier, Sr. President, Waroquier Coal Company (Coal Producer)
DIRECTOR EMERITUS - W. K. Ulerich
BOARD OF DIRECTORS
COUNTY NATIONAL BANK PRINCIPAL OCCUPATION
James P. Moore Chairman of the Board
Robert E. Brown Vice President, E. M. Brown, Inc. (Coal Producer)
William F. Falger President and Chief Executive Officer
Richard D. Gathagan President & Owner of Pharmaceutical & Medical Companies (Health Care)
James J. Leitzinger President, Leitzinger Realty (Real Estate Investments)
Dennis L. Merrey President, Clearfield Powdered Metals, Inc. (Manufacturer)
William R. Owens Retired, Formerly Vice President, Secretary and Treasurer, CNB Financial
Corporation and President & Chief Executive Officer, County National Bank
Robert C. Penoyer President, Penoyer Contracting Co., Inc. (Contractor)
Jeffrey S. Powell President, J.J. Powell, Inc. (Petroleum Distributor)
Edward B. Reighard Retired
Peter F. Smith Attorney at Law
L. E. Soult, Jr. Vice President and Treasurer, Soult Wholesale Co. (Building Materials Wholesaler)
Robert G. Spencer President, Hepburnia Coal Sales Corp. (Coal Producer)
Joseph L. Waroquier, Sr. President, Waroquier Coal Company (Coal Producer)
DIRECTOR EMERITUS - W. K. Ulerich
26
CNB Financial Corporation and Subsidiary
1995 Annual Report
CORPORATE OFFICERS
James P. Moore, President and Chief Executive Officer
William F. Falger, Executive Vice President
William A. Franson, Secretary
Carl J. Peterson, Assistant Secretary
J. Matthew McEnroe, Treasurer
BANK EXECUTIVE OFFICERS
James P. Moore, Chairman
William F. Falger, President & Chief Executive Officer
William A. Franson, Executive Vice President & Cashier, Chief Operating Officer
Carl J. Peterson, Senior Vice President & Senior Trust Officer
J. Matthew McEnroe, Senior Vice President & Chief Financial Officer
Mark D. Breakey, Senior Vice President & Senior Loan Officer
BRANCH OFFICE ADMINISTRATION
Jacqueline A. Hynd, Assistant Vice President, Branch Administrator
Rodger L. Read, Assistant Vice President, Madera Office
Jeffrey A. Herr, Assistant Vice President, Philipsburg Office
Susan J. Shimmel, Assistant Cashier, Old Town Road Office
Deborah M. Young, Assistant Cashier, St. Marys Office
Nancy J. Fink, Assistant Cashier, Bonds & Securities
S. Jean Sankey, Branch Manager, Lending Officer, Osceola Mills Office
LENDING OPERATIONS
Robin L. Hay, Vice President, Community Banking
Joseph H. Yaros, Vice President, Community Banking, Bradford
William J. Mills, Assistant Vice President, Community Banking, St.
Marys
Ronald E. Billotte, Assistant Vice President
David W. Ogden, Assistant Vice President, Loan Review
Duane P. Shifter, Assistant Vice President
Merrill A. Dunlap, Assistant Cashier
Larry A. Putt, Assistant Cashier
Richard L. Bannon, Credit Administration Officer
Paul A. McDermott, Collection Officer
Keith M. Folmar, Lending Officer, Philipsburg
Jo Potter, Lending Officer, Philipsburg
Ruth Anne Ryan, Lending Officer, Leasing
FINANCE & ACCOUNTING
Rachel E. Larson, Assistant Vice President, Accounting Operations
Edward H. Proud, Assistant Vice President, Electronic Technology
C. Glenn Myers, Controller & Assistant Financial Officer
Dennis J. Sloppy, Assistant Cashier, Electronic Technology
TRUST & ASSET MANAGEMENT SERVICES
Donald E. Shawley, Vice President & Trust Officer
Scott R. Muirhead, Trust Officer
Eunice M. Peters, Assistant Trust Officer
AUDITING
Brenda L. Terry, Auditor
COMPLIANCE
Donna J. Casteel, Compliance Officer
HUMAN RESOURCES
Mary Ann Conaway, Assistant Vice President
MARKETING
Helen G. Kolar, Vice President, Marketing Director
27
CNB Financial Corporation and Subsidiary
1995 Annual Report
SHAREHOLDER INFORMATION
ANNUAL MEETING
The Annual Meeting of the Shareholders of CNB Financial Corporation will be
held Tuesday, April 16, 1996 at 2:00 p.m. at the Corporation's Headquarters.
CORPORATE ADDRESS
CNB Financial Corporation
P.O. Box 42
Corner of Market & Second Streets
Clearfield, PA 16830
(814) 765-9621
STOCK TRANSFER AGENT AND REGISTRAR
County National Bank
P.O. Box 42
Corner of Market & Second Streets
Clearfield, PA 16830
(814) 765-9621
FORM 10-K
Shareholders may obtain a copy of the Annual
Report to the Securities and Exchange Commission
on Form 10-K by writing to:
CNB Financial Corporation
P.O. Box 42
Corner of Market & Second Streets
Clearfield, PA 16830
ATTN: Shareholder Relations
QUARTERLY SHARE DATA
For information regarding the Corporation's
quarterly share data, please refer to page 17.
MARKET MAKERS
The following firms have chosen to make a market
in the stock of the Corporation. Inquiries concerning
their services should be directed to:
Ferris Baker Watts, Inc.
6 Bird Cage Walk
Hollidaysburg, PA 16648
(800) 343-5149
Monroe Securities, Inc.
47 State Street
Rochester, NY 14614
(800) 766-5560
F. J. Morrissey & Co.
1700 Market Street, Suite 1420
Philadelphia, PA 19103
(800) 842-8928
Parker Hunter, Inc.
484 Jeffers Street
P.O. Box 1105
DuBois, PA 15801
(800) 238-0067
Ryan, Beck & Co.
3 Parkway
Philadelphia, PA 19102
(800) 766-5560
Sandler O'Neill & Partners
2 World Trade Center
104th Floor
New York, NY 10048
(800) 635-6860
CORPORATE DESCRIPTION
CNB Financial Corporation is a bank holding company established April 26,
1984. Its assets consist principally of all the outstanding stock of County
National Bank, Clearfield, Pennsylvania. County National Bank is a
full-service financial institution with the main office located at the corner
of Market and Second Streets, Clearfield, Pennsylvania; and 11 full-service
branch offices in the communities of Clearfield, Karthaus, Madera, Osceola
Mills, Philipsburg, St. Marys, and Bradford, McKean County, Pennsylvania. The
Bank competes actively with several other commercial banks, savings banks,
local credit unions and small loan and consumer loan companies having offices
within its market areas.
[LOGO OF FDIC APPEARS HERE]