1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM_______________TO_______________.
COMMISSION FILE NUMBER 0-11011
CB FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-2340045
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE JACKSON SQUARE, JACKSON, MICHIGAN 49201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (517) 788-2800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $7.50 PAR VALUE
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR SHORTER PERIOD THAT THE REGISTRANT HAS
BEEN REQUIRED TO FILE SUCH REPORTS); AND (2) HAS BEEN SUBJECT TO FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO____
AT MARCH 31, 1995, THERE WERE 2,801,053 SHARES OF THE REGISTRANT'S COMMON STOCK
OUTSTANDING WITH A $7.50 PAR VALUE.
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CB FINANCIAL CORPORATION
INDEX
Part I. Financial Information:
Item 1. Financial Statements
The following consolidated financial statements of CB Financial Corporation and
its subsidiaries included in this report are:
Page
----
Consolidated Balance Sheet - March 31, 1995,
March 31, 1994 and December 31, 1994.................................................. 3
Consolidated Statement of Income - For the Three Months Ended
March 31, 1995 and 1994............................................................... 4
Consolidated Statement of Cash Flow - For the Three Months Ended
March 31, 1995 and 1994............................................................... 5
Note to Consolidated Financial Statements ............................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, Liquidity, and Capital......................................... 7
Part II. Other Information:
Pursuant to SEC rules and regulations, the following item(s) are included with the
form 10-Q Report:
Item 4. Submission of Matters to a Vote of Security Holders......................... 10
Item 6. Exhibits and Reports on Form 8-K............................................. 10
Pursuant to SEC rules and regulations, the following items are omitted from this Form
10-Q Report as inapplicable or to which the answer is negative:
Item 1. Legal Proceedings
Item 2. Changes in the Rights of the Corporation's Security Holders
Item 3. Defaults by the Corporation on its Senior Securities
Item 5. Other Information
SIGNATURE ........................................................................................... 11
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CONSOLIDATED BALANCE SHEET
(In Thousands) 03/31/95 03/31/94 12/31/94
-------- -------- --------
ASSETS:
Cash and Cash Equivalents:
Cash and Due from Banks $35,767 $33,181 $39,826
Money Market Assets 9,634 7,200 14,832
-------- -------- --------
Total Cash and Cash Equivalents 45,401 40,381 54,658
-------- -------- --------
Securities Available for Sale 75,661 108,338 89,615
-------- -------- --------
Investment Securities Held to Maturity:
U.S. Treasury 132,141 129,327 132,316
U.S. Government Agencies 3,511 3,003 3,511
States and Political Subdivisions 11,611 20,429 12,159
Other 0 1,133 0
-------- -------- --------
Total Investment Securities (Market Value of $143,112,
$152,741 and $139,964, respectively) 147,263 153,892 147,986
-------- -------- --------
Loans:
Consumer Loans, Net of Unearned Interest 108,559 97,683 108,137
Commercial Loans 167,124 147,347 167,869
Tax Exempt Loans 13,783 9,208 14,674
Real Estate Mortgage Loans 101,126 78,289 102,439
-------- -------- --------
Subtotal, Loans 390,592 332,527 393,119
Reserve for Possible Loan Losses (3,893) (3,373) (3,865)
-------- -------- --------
Net Loans 386,699 329,154 389,254
-------- -------- --------
Bank Premises and Equipment, Net 16,288 15,593 16,283
Other Real Estate Owned 358 426 324
Income Earned Not Received 6,636 6,505 7,281
Goodwill and Premium on Core Deposits 11,572 8,449 11,914
Other Assets 4,332 2,790 2,949
-------- -------- --------
TOTAL ASSETS $694,210 $665,528 $720,264
======== ======== ========
LIABILITIES:
Deposits:
Demand Deposits $96,892 $100,317 $109,940
Interest-Bearing Demand Deposits 154,953 157,363 168,610
Savings Deposits 125,216 140,605 132,365
Time Deposits 214,755 177,277 209,734
-------- -------- --------
Total Deposits 591,816 575,562 620,649
-------- -------- --------
Short-Term Interest Bearing Liabilities 13,277 500 12,500
Note Payable and Capital Leases 6,048 8,054 6,526
Accrued Expenses 4,185 3,950 3,730
Dividend Payable 840 840 840
Other Liabilities 2,800 1,954 2,010
-------- -------- --------
TOTAL LIABILITIES 618,966 590,860 646,255
-------- -------- --------
SHAREHOLDERS' EQUITY:
Preferred Stock-No par value, 100,000 shares authorized,
none outstanding 0 0 0
Common Stock-$7.50 par value, 5,000,000 shares authorized,
2,801,053 shares outstanding 21,008 21,008 21,008
Capital Surplus 8,073 8,073 8,073
Undivided Profits 45,983 43,038 45,475
Unrealized Gains(Losses) on Securities Available for Sale,
Net of Tax Effect 180 2,549 (547)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 75,244 74,668 74,009
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $694,210 $665,528 $720,264
======== ======== ========
The accompanying notes are an integral part of this statement.
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CONSOLIDATED STATEMENT OF INCOME
Three Months Ended
March 31,
(In Thousands Except Per Share Data) 1995 1994
------ ------
INTEREST INCOME:
Interest and Fees on Loans $8,630 $6,724
Interest on Securities Available for Sale 1,539 2,112
Interest on Investment Securities Held to Maturity:
U.S. Treasury 1,871 1,762
U.S. Government Agencies 56 47
States and Political Subdivisions 177 236
Interest on Money Market Assets 114 95
------ ------
Total Interest Income 12,387 10,976
------ ------
INTEREST EXPENSE:
Interest on Demand Deposits 1,136 971
Interest on Savings Deposits 770 862
Interest on Time Deposits 2,506 1,803
Interest on Other Liabilities 299 163
------ ------
Total Interest Expense 4,711 3,799
------ ------
NET INTEREST INCOME 7,676 7,177
------ ------
Provision for Possible Loan Losses 179 116
------ ------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 7,497 7,061
------ ------
NON-INTEREST INCOME:
Trust Income 522 524
Service Charges on Deposit Accounts 558 578
Fees for Other Services to Customers 297 261
Securities Gains 12 133
Other Income 21 426
------ ------
Total Non-Interest Income 1,410 1,922
------ ------
NON-INTEREST EXPENSES:
Salaries and Wages 2,541 2,450
Employee Benefits 696 719
Occupancy Expenses 645 630
Furniture and Equipment Expenses 605 505
FDIC Insurance Premiums 324 312
Other Operating Expenses 2,172 1,950
------ ------
Total Non-Interest Expenses 6,983 6,566
------ ------
Income Before Provision for Federal Income Tax 1,924 2,417
Provision for Federal Income Tax 576 781
------ ------
NET INCOME $1,348 $1,636
====== ======
PER SHARE DATA:
Net Income $0.48 $0.58
Average Number of Shares Outstanding -
Primary and fully diluted 2,802,854 2,803,687
The accompanying notes are an integral part of this statement.
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CONSOLIDATED STATEMENT OF CASH FLOW
Three Months Ended
March 31,
(In Thousands) 1995 1994
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
Cash Flows from Operating Activities:
Interest and Fees Received $14,684 $13,329
Interest Paid (4,612) (3,863)
Cash Paid to Suppliers and Employees (7,011) (5,942)
Income Taxes Paid (346) (129)
------- -------
Net Cash Provided by Operating Activities 2,715 3,395
------- -------
Cash Flows from Investing Activities:
Proceeds from Sale of Securities Available for Sale 6,012 10,366
Proceeds from Sales/Calls of Investment Securities Held to Maturity 525 0
Proceeds from Maturities of Securities Available for Sale 9,000 0
Proceeds from Maturities of Investment Securities Held to Maturity 0 20,700
Purchase of Securities Available for Sale 0 0
Purchase of Investment Securities Held to Maturity 0 (30,368)
Net (Increase) Decrease in Loans 2,377 2,660
Net (Increase) in Other Real Estate Owned (35) (21)
Purchase of Subsidiary Banks and Branches 0 0
Capital Expenditures (477) (867)
Cash Acquired in Purchase of Subsidiary Banks and Branches 0 0
------- -------
Net Cash Provided (Used) by Investing Activities 17,402 2,470
------- -------
Cash Flows from Financing Activities:
Repayment of Note Payable (475) (474)
Net Increase (Decrease) in Deposits and Short-Term Liabilities (28,056) (9,631)
Cash Dividends Paid (840) (840)
Payment of Capital Lease Obligations (3) (3)
------- -------
Net Cash Provided (Used) by Financing Activities (29,374) (10,948)
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents (9,257) (5,083)
------- -------
Cash and Cash Equivalents at Beginning of Year 54,658 45,464
------- -------
Cash and Cash Equivalents at End of Period $45,401 $40,381
======= =======
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net Income $1,348 $1,636
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Depreciation and Amortization 463 435
Accretion of Net Discount on Purchased Subsidiary 328 214
Amortization of Discount and Premiums on
Investment Securities, Net 254 321
Provision for Possible Loan Losses 179 116
Securities Gains (12) (133)
(Increase) Decrease in Income Earned Not Received 645 107
(Increase) Decrease in Other Assets (442) 1,961
Gain on Sale of Other Real Estate Owned 0 (1)
Increase (Decrease) in Interest Payable 99 (60)
Increase in Income Taxes Payable 230 652
Increase (Decrease) in Accrued Expenses (377) (1,853)
------- -------
Net Cash Provided by Operating Activities $2,715 $3,395
======= =======
The accompanying notes are an integral part of this statement.
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NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING AND REPORTING POLICIES
The accounting and reporting policies of CB Financial Corporation (the
"Corporation") and its subsidiaries are in accordance with generally
accepted accounting principles and conform to practice within the
banking industry.
The condensed consolidated financial statements included herein
have been prepared by the Corporation, without an audit, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
financial statements and the notes contained in the 1994 Annual Report
to Shareholders of CB Financial Corporation and the Corporation's 1994
Form 10-K filed with the Securities and Exchange Commission.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
assure the fair presention of financial condition and results of
operations. All material intercompany accounts and transactions have
been eliminated. All such adjustments are of a normal recurring
nature.
RECLASSIFICATION
Certain amounts in the consolidated income statement for the period
ended March 31, 1994 have been reclassified to conform with the
presentation in 1995.
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Part I: Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Corporation's financial condition and earnings
during the periods included in the accompanying consolidated financial
statements.
FINANCIAL CONDITION
A summary of the period changes in principal sources and uses of funds is shown
below in thousands of dollars.
CHANGE FROM DECEMBER 31, 1994
TO MARCH 31, 1995
-----------------------------
Funding Sources:
Cash & Cash Equivalents $ 9,257
Investment Securities 15,779
Loans 2,527
Short Term Interest-Bearing
Liabilities 777
Operating Activities 2,715
----------
$ 31,055
==========
Funding Uses:
Deposits 28,833
Cash Dividends 840
Capital Expenditures 477
Other, Net 905
----------
Total Uses $ 31,055
==========
The primary source of funds for the runoff of deposits was the sale and
maturity of investment securities available for sale and decreased cash and
cash equivalent balances. Time deposits increased over the December 31, 1994
balance but this was offset by decreases in demand, interest bearing demand and
savings deposits. This decrease is partially attributable to seasonality of
demand deposit accounts. Net loans remained relatively stable at their year
end levels.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1995 there were no significant changes with
respect to the capital resources of the Corporation. Management feels that the
liquidity position of the Corporation as of March 31, 1995 is more than
adequate to meet its future cash flow needs. Management also closely monitors
capital levels to provide for normal business needs and to comply with
regulatory requirements. As summarized below, the Corporation's capital ratios
were well in excess of the regulatory requirements for classification as "Well
Capitalized":
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8
Regulatory
Minimum for March 31,
"Well Capitalized" 1995 1994
------------------ ---- ----
Total Capital 10% 16.9% 18.7%
Tier I Capital 6 15.9 17.8
Tier I Leverage Ratio 5 9.2 9.6
RESULTS OF OPERATIONS
A summary of the period to period changes in the principal items included in
the consolidated statement of income is shown below in thousands of dollars,
and as a percent.
Comparison of
Three Months Ended
March 31, 1995 & 1994
---------------------
Interest Income $ 1,411 12.9 %
Interest Expense 912 24.0
------- -----
Net Interest Income 499 7.0
Provision for loan losses 63 54.3
------- -----
Net interest income after provision
for loan losses 436 6.2
Other Income (512) (26.6)
Other Expenses 417 6.4
------- -----
Income before income tax (493) (20.4)
Income Tax Expense (205) 26.2
------- -----
Net Income (288) (17.6)
======= =====
NET INTEREST INCOME
The increase in net interest income during the first quarter of 1995 is due to
increased loan volume and rates over the comparable period in 1994. The
acquisition of three Republic Bank branches by CB North in December 1994 added
approximately $23.1 million of loans. The increase in interest expense for the
three month period of 1995 versus 1994 is due to higher deposit balances and
higher interest rates being paid, particularly on interest bearing demand
deposits and time deposits. The acquisition in December 1994 by CB North
increased deposits by $47.7 million.
PROVISION FOR LOAN LOSSES
The increase in the loan loss provision during the first quarter of 1995
indicates a desire by the subsidiary banks to maintain an adequate reserve and
is based on the increase in loans outstanding. The allowance for loan losses
at the end of the first quarter is $28,000 higher than at December 31, 1994, or
.7%. Net loan charge-offs year to date have been $19,430 compared to $360,000
in the first quarter of 1994. Expressed as a percentage of outstanding loans
the allowance is 1.00% at both March 31, 1995 and December 31, 1994.
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Nonperforming loans totaled $1,014,000 at March 31, 1995 compared to $1,123,000
at March 31, 1994 and $1,063,000 at December 31, 1994. Total nonperforming
assets which also includes other real estate owned and assets acquired through
repossession are $1,387,000, $1,549,000 and $1,400,000 at March 31, 1995,
March 31, 1994 and December 31, 1994, respectively.
OTHER INCOME
In 1994, CB North recognized a gain on the sale of a bank facility of $224,000.
Gains on sales of loans amounted to $4,000 at March 31, 1995 compared to
$124,000 at March 31, 1994. Security gains amounted to $12,000 at March 31,
1995 compared to $133,000 for the same period in 1994.
OTHER EXPENSES
The increase in other expenses resulted from increases in the major categories
of other expenses, indicative of the normal effects of inflation as well as the
growth of the organization. The major components of other expenses fluctuated
as follows:
Comparison of
Three Months Ended
March 31, 1995 & 1994
----------------------
Salaries & employee benefits 2.2 %
Occupancy, furniture & equipment 10.1
FDIC Premiums 3.8
Other 11.3
The increase in occupancy and furniture and equipment expense is due to recent
branch acquisitions and technology improvements. The increase in other expense
is primarily attributable to increased advertising and postage costs to inform
customers of new products and fees which are being introduced in 1995.
APPLICABLE INCOME TAX
Applicable income tax expense is based on income, less that portion which is
exempt from federal taxation, taxed at the statutory federal income tax rate of
34%. The provision is further reduced by other smaller items. The decrease in
the 1995 income tax provision reported in the accompanying financial statements
for the first quarter is due to the decrease in pre-tax income of the
Corporation for the first quarter of 1995.
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Part II. OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of CB Financial was held on April
17, 1995, for the purpose of electing members to the board of
directors and approving the appointment of auditors. Proxies for the
meeting were solicited pursuant to Section 14(a) of the Securities
Exchange Act of 1934 and there was no solicitation in opposition to
management's solicitations.
All of management's nominees for directors as listed in the proxy
statement were elected with the following vote:
Shares
Voted Shares
"For" "Withheld"
------------ ----------
James N. Franklin 2,048,148 35,193
Harold P. Andrews 2,062,101 21,240
Brian D. Bell 2,057,826 25,515
Alvin L. Glick 2,061,968 21,373
Monte R. Story 2,058,886 24,455
The following directors will continue their term of office:
Douglas L. Burdick
Sherwood M. Furman
Stephen J. Lazaroff
Philip G. Miller
Brandon C. White, Jr.
The appointment of Arthur Andersen LLP as independent auditor was
approved by the following vote:
Shares Shares
Voted Voted Shares
"For" "Against" "Abstaining"
---------- --------- ------------
2,054,097 4,517 24,727
Item 6. Exhibits and Reports on Form 8-K:
(a) Financial Statements:
The following consolidated financial statements of CB
Financial Corporation and its subsidiaries included in this
report are:
Consolidated Balance Sheet - March 31, 1995; March 31, 1994;
and December 31, 1994
Consolidated Statement of Income - For the Three Months Ended
March 31, 1995 and 1994
Consolidated Statement of Cash Flow - For the Three Months
Ended March 31, 1995 and 1994
Note to Consolidated Financial Statements
(b) A Form 8-K Report was not filed during the three months ended
March 31, 1995.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
CB FINANCIAL CORPORATION
BY: A. Wayne Klump
______________
A. Wayne Klump
Treasurer
Dated: May 5, 1995
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EXHIBIT INDEX
Exhibit
No. Description Page
- - ------- ----------- ----
27 Financial Data Schedule