UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 1 0 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998 Commission File Number 0-13396
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ----------
CNB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1450605
------------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
County National Bank
1 South Second Street
P.O. Box 42
Clearfield, Pennsylvania 16830
(Address of principal executive offices)
Registrant's telephone number, including area code, (814) 765-9621
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock: $1.00 Par Value
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 for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ----
The number of shares outstanding of the issuer's common stock as of March
31, 1998:
COMMON STOCK: $1.00 PAR VALUE - 3,445,668 SHARES
1
INDEX
PART I.
FINANCIAL INFORMATION
Sequential
Page Number
- -----------
PAGE 3. Notes to Consolidated Financial Statements
PAGE 4. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PAGE 10. Table 1 - Consolidated Balance Sheets - March 31, 1998
PAGE 11. Table 2 - Consolidated Statements of Income - Quarter ending
March 31, 1998
PAGE 12. Table 3 - Consolidated Statements of Cash Flows - Quarter ending
March 31, 1998
PAGE 13. Table 4 - Consolidated Yield Comparisons
PART II.
OTHER INFORMATION
PAGE 14. ITEM 4 Submission of Matters for Security Holders Vote
PAGE 14. ITEM 5 Other Information
PAGE 14. ITEM 6 Exhibits and Reports on Form 8-K
PAGE 14. Signatures
2
CNB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
pursuant to rules and regulations of the Securities and Exchange Commission
(SEC) and in compliance with generally accepted accounting principles. Because
this report is based on an interim period, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
The registrant believes that the disclosures made are adequate to make the
information presented a fair representation of the Corporation's financial
status.
In the opinion of Management of the registrant, the accompanying
consolidated financial statements for the three month period ended March 31,
1998 and 1997 include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the financial condition and
the results of operations for the period. The financial performance reported
for the Corporation for the three month period ended March 31, 1998 is not
necessarily the result to be expected for the full year. This information
should be read in conjunction with the Corporation's Annual Report to
shareholders and Form 10-K for the period ended December 31, 1997.
SFAS No. 130: Reporting Comprehensive Income
- --------------------------------------------
The Corporation adopted SFAS No. 130, "Reporting Comprehensive Income",
effective January 1, 1998. This statement establishes standards for the
reporting and display of comprehensive income and its components. Comprehensive
income includes net income and all other changes in shareholder's equity except
those resulting from investments and distributions to owners. The adoption of
SFAS No. 130 had no impact on the Corporation's net income or shareholder's
equity. Prior year financial statements have been restated to conform to the
requirements of Statement 130. The statement requires that the accumulated
other comprehensive income be descriptively labeled in the shareholder's equity
section of the balance sheet. This descriptor replaces the net unrealized gain
(loss) on available for sale securities that was previously reported. The
following table reflects the statements of comprehensive income for the quarter
ended March 31, 1998 and 1997.
March 31, March 31,
1998 1997
-------- --------
Net income $1,076 $ 869
Other comprehensive income:
Unrealized gains or loss on available for sale securities 322 (189)
Less: reclassification adjustment for gain included in net
income 52 78
------ -----
Total other comprehensive income 270 (267)
Applicable income taxes 92 91
------ -----
Net other comprehensive income 178 (176)
------ -----
Comprehensive income $1,254 $ 693
====== =====
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The following discussion and analysis of the consolidated financial
statements of the Corporation is presented to provide insight into management's
assessment of financial results. The Corporation's only subsidiary County
National Bank (the "Bank") provides financial services to individuals and
businesses within the Bank's market area made up of the west central
Pennsylvania counties of Clearfield, Centre, Elk, and McKean. County National
Bank is a member of the Federal Reserve System and subject to regulation,
supervision and examination by the Office of the Comptroller of the Currency
("OCC").
The health of the economy in the region is somewhat mixed with
unemployment rates (February, 1998) ranging from a low of 2.7% in Centre County
to a high of 10.0% in Clearfield County. Other counties' rates in our market
area are as follows: Cameron 7.9%; Elk 5.1%; Jefferson 8.0% and McKean 7.0%.
While unemployment levels vary, the region is comparatively in better
economic condition than prior years. Residential housing is in fair demand and
values have been slowly rising throughout the region.
On April 21, 1998, the shareholders of the Corporation approved an
amendment to the articles of incorporation to increase the number of authorized
shares of common stock from 2,500,000 shares to 10,000,000 shares. At this time
the par value was decreased from $4.00 to $1.00 per share. This change was
necessary to allow the Corporation to affect a 2 for 1 stock split effective on
April 30, 1998. The per share information disclosed on the consolidated
statements of income has been restated to reflect the split.
OVERVIEW OF BALANCE SHEET
Total assets (shown in Table 1 "Consolidated Balance Sheet") have grown
-------
2.9% since year end 1997 to $383.7 million. The growth has occurred in the
investment portfolio through the use of favorable funding rates at the Federal
Home Loan Bank.
CASH AND CASH EQUIVALENTS
Cash and Cash equivalents totaled $13,308,000 at March 31, 1998 compared
to $18,436,000 on December 31, 1997. This decrease was primarily the result of
the growth in the investment portfolio of which a portion was funded from these
liquid assets.
Management believes the liquidity needs of the Corporation are satisfied
by the current balance of cash and cash equivalents, readily available access to
traditional funding sources, and the portion of the investment and loan
portfolios that matures within one year. These sources of funds will enable the
Corporation to meet cash obligations and off-balance sheet commitments as they
come due.
INVESTMENT SECURITIES
Investment securities increased $16,079,000 since December 31, 1997. Of
the Corporation's total investment portfolio of $93,111,000 as of March 31,
1998, $81,319,000 (or 87.3%) is classified as available for sale with the
balance of $11,792,000 classified as held to maturity.
The increase is mainly from the Corporation's strategy to utilize
favorable funding rates from the Federal Home Loan Bank of Pittsburgh to
purchase investment securities. In the first quarter of 1998, this strategy was
implemented with a $10 million borrowing which has subsequently benefited the
overall net interest margin.
Management monitors the earnings performance and the effectiveness of the
liquidity of the investment portfolio on a regular basis through Asset/
Liability Committee ("ALCO") meetings. The ALCO also reviews and manages
interest rate risk for the Corporation. Through active balance sheet management
and analysis of the investment securities portfolio, the Corporation maintains
sufficient liquidity to satisfy depositor requirements and various credit needs
of its customers.
4
LOANS
The Corporation's loan volume continued to be strong through the final
three quarters of 1997. Loan demand leveled off, however, in the first quarter
of 1998. Management has made an effort to create tighter underwriting
standards, particularly for consumer credit, with the result of improving the
quality of the balance sheet. The Corporation's lending is focused in the west
central Pennsylvania market and consists principally of retail lending, which
includes single family residential mortgages and other consumer lending, and
also commercial lending primarily to locally owned small businesses.
At March 31, 1998, the Corporation had $259,167,000 in loans and leases
outstanding up $27,763,000 (or 12.0%) since March 31, 1997. This growth pattern
is the result of continued commercial lending opportunities resulting from
customer dissatisfaction with several superregional banks located within the
market. Residential mortgage activity has slowed somewhat but continues to be
strong aided by the Corporation's First Time Home Buyers mortgage product.
Consumer loans appear stagnant but are actually increasing when lease
receivables are included in the total. Conventional auto financing is being
replaced with an ever greater number of leases.
LOAN CONCENTRATION
The Corporation monitors loan concentration by individual industries in
order to track potential risk exposures resulting from industry related
downturns. At March 31, 1998, no concentration exists within our commercial or
real estate loan portfolio as related to concentrations of 10% of the total
loans. Residential real estate lending along with automobile financing
continues to be the largest component of the loan portfolio.
ALLOWANCE FOR LOAN AND LEASE LOSSES
The Allowance for Loan and Lease Losses as a percentage of loans
increased from 1.09% at March 31, 1997 and 1.08% at December 31, 1997 to 1.14%
at March 31, 1998. The dollar amount of the reserve increased $142,000 since
year end 1997. The gross charge-offs for the first quarter of 1998 were
$113,000 while recoveries were $30,000. This level of charge-offs is consistent
with those experienced in the first quarter of 1997 when charge-offs were
$105,000 with recoveries of $33,000.
This trend is consistent with the trend nationwide in the financial
services industry. It is the result of increased consumer credit problems often
resulting in bankruptcies. Management of the Corporation has implemented
increased loan collection activities which has resulted in decreased levels of
loan delinquency.
Management continues to closely monitor loan delinquency and loan losses.
Non-performing assets (NPA), which include loans 90 or more days past due, non-
accrual loans and other real estate owned were $677,000 or 0.18% of total assets
on March 31, 1998 compared to $1,346,000 or 0.40% on March 31, 1997.
The adequacy of the allowance for loan and lease losses is subject to a
formal analysis by the loan review staff of the Bank and is deemed to be
adequate to absorb inherent losses in the portfolio as of March 31, 1998.
FUNDING SOURCES
The Corporation considers deposits, short-term borrowings, and term debt
when evaluating funding sources. Traditional deposits continue to be the most
significant source of funds for the Corporation reaching $319,865,000 at March
31, 1998. Deposit growth has been minimal since year end 1997 primarily
resulting from management's decision to better control the cost of funds.
The Corporation utilizes term borrowings from the Federal Home Loan Bank
(FHLB) to meet funding needs not accommodated by deposit growth. During the
first three months of 1998, the Corporation borrowed $10 million as mentioned on
page 4 in the investment securities section. Management plans to maintain
access to short-term and long-term FHLB borrowings as an appropriate funding
source.
5
The Corporation continues to experience a change in the mix of its
deposit base. The mix is continually changing to a larger pool of time deposits
at 54.0% of all deposits at March 31, 1998 compared to 48.3% at March 31, 1997.
Management expects this shift in deposit mix to stabilize over the remainder of
1998.
SHAREHOLDERS' EQUITY
The Corporation's capital continues to provide a strong base for
profitable growth. Total Shareholders' Equity was $42,841,000 at March 31, 1998
compared to $42,208,000 at year-end 1997, an increase of $633,000 (or 1.5%). In
the first three months of 1998, the Corporation earned $1,076,000 and declared
dividends of $620,000, a dividend payout ratio of 57.6% of net income.
Approximately 87% of the investment securities in the Corporation's
portfolio are classified as available-for-sale making this portion of the
Corporation's balance sheet more sensitive to the changing market value of
investments. Interest rates in the first quarter of 1998 have been fairly
stable allowing the Bank's bond portfolio to maintain market value gains. Also,
the equity markets have continued their growth giving the Corporation further
appreciation in their equity holdings.
The Corporation has also complied with the standards of capital adequacy
mandated by the banking regulators. Bank regulators have established "risk-
based" capital requirements designed to measure capital adequacy. Risk-based
capital ratios reflect the relative risks of various assets banks hold in their
portfolios. A weight category of either 0% (lowest risk assets), 20%, 50%, or
100% (highest risk assets), is assigned to each asset on the balance sheet. The
Corporation's total risk-based capital ratio of 16.19% at March 31, 1998 is well
above the minimum standard of 8%. The Corporation's Tier 1 capital ratio of
15.03% is above the regulatory minimum of 4%. The leverage ratio at March 31,
1998 was 10.36%, also above the minimum standard of 4%. The Corporation is
deemed to be well capitalized under regulatory industry standards. The ratios
provide quantitative data demonstrating the strength and future opportunities
for use of the Corporation's capital base. Management continues to evaluate
risk-based capital ratios and the capital position of the Corporation as part of
its strategic decision making process.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity measures an organizations' ability to meet cash obligations as
they come due. The Consolidated Statement of Cash Flows presented on page 12 of
the accompanying financial statements provide analysis of the Corporation's cash
and cash equivalents. Additionally, management considers that portion of the
loan and investment portfolio that matures within one year as part of the
Corporation's liquid assets. The Corporation's liquidity is monitored by the
ALCO which establishes and monitors ranges of acceptable liquidity. Management
feels the Corporation's current liquidity position is acceptable.
The interest rate sensitivity position at March 31, 1998, indicated the
Corporation was liability sensitive in the short-term and asset sensitive for
periods longer than one year. Management measures the potential impact of
significant changes in interest rates on both the earnings and equity of the
Corporation. By the use of computer generated models, the potential impact of
these changes has been determined to be acceptable with modest affects on net
income and equity given an interest rate shock of an increase or decrease in
rates of 2.0%. Management continues to monitor the interest rate sensitivity
through the ALCO and uses this data to make appropriate strategic decisions.
6
RESULTS OF OPERATIONS
OVERVIEW OF THE INCOME STATEMENT
For the three months ended March 31, 1998, the Corporation earned
$1,076,000 in net income, an increase of 23.8% from $869,000 in net income in
the same period last year. Net income in the first quarter has benefited when
compared to the same period in 1997 by an increased net interest margin and
improved efficiency ratio. The affects to income in 1997 resulting from the
acquisition of four branches, as reported previously, have reversed as earning
assets have grown to anticipated levels and operational costs have stabilized.
INTEREST INCOME AND EXPENSE
Net interest income totaled $3,764,000 in the first quarter, an increase
of 11.4% over the first quarter of 1997. The aforementioned efforts to enhance
the net interest margin is largely responsible for the increase as well as
strong loan growth throughout the last three quarters of 1997. Total interest
income increased during the quarter by $927,000 or 15.2% while interest expense
only increased by $543,000 or 20% when compared to the first quarter of 1997.
The Corporation recorded a provision for loan and lease losses in the
first quarter of $225,000 up from $150,000 from the first quarter of 1997 to
reflect industry trends in consumer lending.
NON-INTEREST INCOME
Non-interest income increased $52,000 or 8.9% in the first quarter of
1998 when compared to the first quarter of 1997. Increased deposit account
service charges have been the primary source of the growth in non-interest
income. In the first quarter, account service charges totaled $242,000 up
$61,000 (or 33.7%) over last year's first quarter. These increases in fee
income were the result of the growth in the number of customers and related
deposit accounts over the past twelve months.
NON-INTEREST EXPENSE
Non-interest expense increased $72,000 or 2.7% during the first quarter
when compared to the first quarter of 1997. This increased level of non-
interest expense is attributable to salaries and benefits which have increased
$202,000 or 14.9% over the first quarter of 1997. This was anticipated as our
employee benefit package was forecasted to increase in 1998. These increases
were offset by a decrease of $125,000 or 14.7% in other expenses attributable to
increased internal efficiencies related to general supplies and operational
practices.
The Corporation has begun construction of a new facility in the DuBois
market area to replace a currently leased property. This will cause a slight
increase in the occupancy expenses when the project is opened later in 1998.
RETURN ON ASSETS
For the quarter ended March 31, 1998, the Corporation's return on average
assets ("ROA") totaled 1.14% up from the 1.04% recorded in the first quarter of
1997.
Increased ROA can be attributed to a better net interest margin and
controlled operating expenses. Management expects the continued increase of ROA
throughout the remaining three quarters of 1998 resulting from the widening net
interest margin and efficiencies that have been realized subsequent to 1997
acquired growth.
7
RETURN ON EQUITY
The Corporation's return on average shareholder's equity ("ROE") in the
first quarter was 10.05% compared to 8.74% for the first quarter of 1997. The
increase can be attributed primarily to increased profits as discussed above.
Management recognizes continued improvement in ROE during 1998 and
anticipates further increases with earnings growth. The Corporation is well
capitalized under regulatory industry standards.
FEDERAL INCOME TAX EXPENSE
Federal income taxes increased to $386,000 in the first quarter of 1998
compared to $304,000 in the first quarter of 1997. The increase in the first
quarter reflects higher pre-tax income in the period when compared to the same
quarter of the prior year.
FUTURE OUTLOOK
First quarter results showed improvement over the prior year's first
quarter and were marginally better than management expectations. Management
continues to focus on asset growth from general growth via increased market
share. Management continues to be encouraged by the growth in the DuBois and
St. Marys markets served by the Bank.
Loan demand was weak in the first quarter and slightly less than
management's expectations. While loan growth is expected to pick up throughout
the remainder of the year, it is not expected to be as significant as the growth
in 1997. The Corporation's loan to deposit ratio has remained relatively
unchanged at the end of the first quarter at 81.7% compared to 82.0% at year-end
1997. Management expects the loan to deposit ratio to remain relatively stable
during 1998.
Consumer loan charge-offs in the first quarter continued to comprise the
majority of the Corporation's recent charge-offs. In the first quarter, total
net charge-offs were $83,072 of which consumer net charge-offs totaled $49,448.
The level of charge-offs has declined and is beginning to stabilize. Management
believes that the increased efforts of loan review and collections as well as
continued strengthening of our underwriting standards will give the Bank better
charge-off experience.
Enhanced non-interest income and controlled non-interest expense are
important factors in the success of the Corporation and is measured in the
financial services industry by the efficiency ratio, calculated according to the
following: non-interest expense (less amortization of intangibles) as a
percentage of fully taxable net interest income and non-interest income (less
non-recurring income). For the three months ended March 31, 1998, the
Corporation's efficiency ratio was 62.20% compared to 67.48% for the same period
last year.
The efficiency ratio has improved as the level of non-interest expense
has stabilized and non-interest income has increased. Management believes that
this trend will continue until the efficiency ratio returns to pre-1997 levels.
The interest rate environment will continue to play an important role in
the future earnings of the Corporation. The net interest margin has been
improving as more higher cost time deposits continue to roll into lower cost
products. Overall net interest income continues to increase due to growth in
interest earning assets. Management expects the net interest margin to increase
slightly and further growth in net interest income for the remainder of 1998.
Management concentrates on return on average assets and earnings per
share evaluations, plus other methods, to measure and direct the performance of
the Corporation. While past results are not an indication of future earnings,
management feels the Corporation is positioned to enhance performance of normal
operations through the remainder of 1998.
8
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The statements in this Form 10-Q which are not historical fact are
forward looking statements that involve risks and uncertainties, including, but
not limited to, the interest rate environment, the effect of federal and state
banking and tax regulations, the effect of economic conditions, the impact of
competitive products and pricing, and other risks detailed in the Corporation's
Securities and Exchange Commission filings.
9
TABLE 1
CONSOLIDATED BALANCE SHEETS
CNB FINANCIAL CORPORATION
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
March 31, Dec. 31 March 31,
ASSETS 1998 1997 1997
--------- -------- ---------
Cash and Due from Banks........................................ $5,892 $9,555 $12,409
Deposits with Other Banks...................................... 3,916 31 14
Federal Funds Sold............................................. 3,500 8,850 --
Investment Securities Available for sale 81,319 63,521 62,176
Investment Securities Held to Maturity, fair value of $11,972
at March 31, 1998, $13,707 at December 31, 1997 and
$17,615 at March 31, 1997...................................... 11,792 13,511 17,362
Loans and Leases............................................... 265,941 267,608 237,193
Less: Unearned Discount...................................... 3,783 3,707 3,238
Less: Allowance for Loan Losses.............................. 2,991 2,849 2,551
--------- -------- ---------
NET LOANS.................................................... 259,167 261,052 231,404
Premises and Equipment......................................... 9,514 8,795 9,311
Accrued Interest Receivable.................................... 2,289 2,199 2,263
Other Assets and Intangibles................................... 6,348 5,353 5,533
--------- -------- ---------
TOTAL ASSETS................................................. $383,737 $372,867 $340,472
LIABILITIES
Deposits:
Non-interest bearing deposits................................ $32,156 $32,893 $31,078
Interest bearing deposits.................................... 287,709 286,580 260,795
--------- -------- ---------
TOTAL DEPOSITS............................................... 319,865 319,473 291,873
Other Borrowings............................................... 16,832 8,071 5,742
Accrued Interest and Other Liabilities......................... 4,199 3,115 3,035
--------- -------- ---------
TOTAL LIABILITIES............................................ $340,896 $330,659 $300,650
SHAREHOLDERS' EQUITY
Common Stock $1.00 Par Value for 1998 and $4.00 for 1997
Authorized 10,000,000 Shares for 1998 and 2,500,000 for 1997
Issued 3,456,000 Shares for 1998 and 1,728,000 for 1997...... $3,456 $6,912 $6,912
Additional paid in Capital................................... 3,456 -- --
Retained Earnings............................................ 34,701 34,246 32,571
Treasury Stock, At Cost (10,332 Shares for 1998 and 5,166
Shares for 1997)............................................. (100) (100) (100)
Accumulated other comprehensive income....................... 1,328 1,150 439
--------- -------- ---------
TOTAL SHAREHOLDERS' EQUITY................................... 42,841 42,208 39,822
--------- -------- ---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY..................... $383,737 $372,867 $340,472
10
TABLE 2
CONSOLIDATED STATEMENTS OF INCOME
CNB FINANCIAL CORPORATION: March 31, 1998
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
THREE MONTHS ENDED MARCH 31...
1998 1997
INTEREST INCOME --------- --------
Loans including Fees.................................................................. $5,745 $4,908
Deposits with Other Banks............................................................. 3 0
Federal Funds Sold.................................................................... 96 16
Investment Securities:
Taxable Securities: Available for Sale........................................ 796 798
Tax-Exempt Securities: Available for Sale..................................... 248 224
Taxable Securities: Being Held to Maturity.................................... 50 43
Tax-Exempt Securities: Being Held to Maturity................................. 84 106
------ ------
TOTAL INTEREST INCOME......................................................... $7,022 $6,095
INTEREST EXPENSE
Deposits.............................................................................. $3,079 $2,589
Borrowed Funds........................................................................ 179 126
------ ------
TOTAL INTEREST EXPENSE........................................................ $3,258 $2,715
Net Interest Income........................................................... $3,764 $3,380
Provision for possible loan losses............................................ 225 150
------ ------
NET INTEREST INCOME AFTER PROVISION................................................... $3,539 $3,230
OTHER INCOME
Trust & Asset Management Fees......................................................... $154 $159
Service charges on deposit accounts................................................... 242 181
Other service charges and fees........................................................ 105 102
Securities gains...................................................................... 52 78
Gains on Sales of Loans............................................................... 4 2
Other income.......................................................................... 80 63
------ ------
TOTAL OTHER INCOME............................................................ $637 $585
OTHER EXPENSES
Salaries.............................................................................. $1,191 $1,114
Employee benefits..................................................................... 364 239
Net occupancy expense................................................................. 431 436
Other Operating Expense.............................................................. 728 853
------ ------
TOTAL OTHER EXPENSES.......................................................... $2,714 $2,642
Income Before Income Taxes............................................................ $1,462 $1,173
Applicable Income Taxes............................................................... 386 304
------ ------
NET INCOME.................................................................... $1,076 $869
====== ======
Per Share Data*
- ---------------
Net Income............................................................................ 0.31 0.25
Cash Dividends Per Share.............................................................. 0.18 0.17
- --------------------------------------------------------------------------------
*Per Share Data are restated to reflect the 2 for 1 stock split effective on
April 30, 1998.
11
TABLE 3
CONSOLIDATED STATEMENTS OF CASHFLOWS
CNB FINANCIAL CORPORATION
Consolidated Statements of Cash Flows (unaudited)
(Dollars in thousands)
Three Months Ended March 31...
1998 1997
Cash flows from operating activities: ------- -------
Net Income............................................................................. $ 1,076 $ 869
Adjustments to reconcile net income to
net cash provided by operations:
Provisions for loan losses......................................................... 225 150
Depreciation....................................................................... 272 262
Amortization and accretion of net deferred loan fees............................... (75) (147)
Amortization and accretion of premiums and discounts on investments................ 131 0
Security Gains..................................................................... (52) (78)
Gains on sale of loans............................................................. (4) (2)
Proceeds from sale of loans........................................................ 1,910 262
Changes in:
Interest receivable................................................................ (90) (82)
Other assets and intangibles....................................................... (3,075) (154)
Interest payable................................................................... 5 (260)
Other liabilities.................................................................. 820 715
------- -------
Net cash provided by operating activities.............................................. 1,143 1,535
Cash flows from investing activities:
Proceeds from maturities of:
Securities held to maturity........................................................ 2,180 1,000
Securities available for sale...................................................... 8,583 2,080
Proceeds from sale of:
Securities available for sale...................................................... 155 153
Purchase of:
Securities held to maturity........................................................ 0 0
Securities available for sale...................................................... (26,278) (3,300)
Net principal disbursed on loans..................................................... 1,802 (12,240)
Purchase of Federal Home Loan Bank Stock............................................. (460) 240
Purchase of premises and equipment................................................... (912) (182)
Proceeds from the sale of foreclosed assets.......................................... 126 0
------- -------
Net cash used in investing activities.................................................. (14,804) (12,249)
Cash flows from financing activities:
Net change in:
Checking, money market and savings accounts........................................ 171 2,314
Certificates of deposit............................................................ 221 19,503
Cash dividends paid.................................................................. (620) (586)
Net advances (repayments) from other borrowings...................................... 8,761 (8,914)
------- -------
Net cash provided by financing activities.............................................. 8,533 12,317
Net increase (decrease) in cash and cash equivalents................................... (5,128) 1,603
Cash and cash equivalents at beginning of year......................................... 18,436 10,820
------- -------
Cash and cash equivalents at end of period............................................. $13,308 $12,423
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (including amount credited directly to certificate accounts).............. $3,263 $2,716
Income Taxes....................................................................... $235 $0
Noncash Investing Activities:
Inc. (Dec.) in net unrealized gain on securities available for sale................ $178 ($176)
TABLE 4
CONSOLIDATED YIELD COMPARISONS
CNB Financial Corporation
Average Balances and Net Interest Margin
(Dollars in thousands)
March 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
Average Annual Interest
Balance Rate Inc./Exp.
- ---------------------------------------------------------------------------------------------------------------------
Assets
Interest-bearing deposits with banks $2,114 0.57% $3
Federal funds sold and securities
purchased under agreements to resell 7,151 5.37% 96
Investment Securities:
Taxable 57,723 5.86% 846
Tax-Exempt (1) 26,075 7.71% 503
- -------------------------------------------------------------------------------------------------------------
Total Investments 93,063 6.22% 1,448
Loans
Commercial (1) 54,232 8.52% 1,155
Mortgage (1) 153,693 8.79% 3,375
Installment 40,143 9.61% 965
Leasing 16,320 7.60% 310
- -------------------------------------------------------------------------------------------------------------
Total loans (2) 264,388 8.78% 5,805
Total earning assets 357,451 8.12% 7,253
Non Interest Bearing Assets
Cash & Due From Banks 7,444 0
Premises & Equipment 9,263 0
Other Assets 6,221 0
Allowance for Possible Loan Losses (2,915) 0
- -------------------------------------------------------------------------------------------------------------
Total Non-interest earning assets 20,013 -- 0
- -------------------------------------------------------------------------------------------------------------
Total Assets $377,464 $7,253
===========================================================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - interest-bearing $81,548 2.75% $560
Savings 33,023 1.67% 138
Time 172,682 5.52% 2,381
- -------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 287,253 4.29% 3,079
Short-term borrowings 727 6.05% 11
Long-term borrowings 12,240 5.49% 168
- -------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 300,220 4.34% 3,258
Demand - non-interest-bearing 30,613 0
Other liabilities 3,824 0
- -------------------------------------------------------------------------------------------------------------
Total Liabilities 334,657 3,258
Shareholders' equity 42,807 -- 0
- -------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $377,464 $3,258
===========================================================
Interest income/earning assets 8.12% 7,253
Interest expense/interest bearing liabilities 4.34% 3,258
- -------------------------------------------------------------------------------------------------------------
Net Interest Spread 3.78% $3,995
========================================
Interest Income/Interest Earning Assets 8.12% $7,253
Interest expense/Interest Earning Assets 3.65% 3,258
- -------------------------------------------------------------------------------------------------------------
Net Interest Margin 4.47% $3,995
========================================
CNB Financial Corporation
Average Balances and Net Interest Margin
(Dollars in thousands)
March 31, 1997
- -------------------------------------------------------------------------------------------------------------
Average Annual Interest
Balance Rate Inc./Exp.
- -------------------------------------------------------------------------------------------------------------
Assets
Interest-bearing deposits with banks $14 0.00% $0
Federal funds sold and securities
purchased under agreements to resell 1,156 5.27% 16
Investment Securities:
Taxable 54,847 6.14% 842
Tax-Exempt (1) 25,395 7.88% 500
- ------------------------------------------------------------------------------------------------------
Total Investments 81,412 6.67% 1,358
Loans
Commercial (1) 50,686 8.11% 1,027
Mortgage (1) 129,694 8.65% 2,802
Installment 41,517 9.15% 949
Leasing 6,179 8.35% 129
- ------------------------------------------------------------------------------------------------------
Total loans (2) 228,076 8.61% 4,907
Total earning assets 309,488 8.10% 6,265
Non Interest Bearing Assets
Cash & Due From Banks 9,592 0
Premises & Equipment 9,334 0
Other Assets 6,368 0
Allowance for Possible Loan Losses (2,520) 0
- ------------------------------------------------------------------------------------------------------
Total Non-interest earning assets 22,774 -- 0
- ------------------------------------------------------------------------------------------------------
Total Assets $332,262 $6,265
====================================================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - interest-bearing $83,751 3.13% $657
Savings 35,754 1.68% 150
Time 132,592 5.38% 1,782
- ------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 252,097 4.11% 2,589
Short-term borrowings 8,150 5.35% 109
Long-term borrowings 1,071 6.34% 17
- ------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 261,318 4.16% 2,715
Demand - non-interest-bearing 28,684 -- 0
Other liabilities 2,386 -- 0
- ------------------------------------------------------------------------------------------------------
Total Liabilities 292,388 3.71% 2,715
Shareholders' equity 39,874 -- 0
- ------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $332,262 $2,715
====================================================
Interest income/earning assets 8.10% $6,265
Interest expense/interest bearing liabilities 4.16% 2,715
- ------------------------------------------------------------------------------------------------------
Net Interest Spread 3.94% $3,550
==================================
Interest Income/Interest Earning Assets 8.23% $6,265
Interest expense/Interest Earning Assets 3.51% 2,715
- ------------------------------------------------------------------------------------------------------
Net Interest Margin 4.72% $3,550
==================================
(1) The amounts are reflected on a fully tax equivalent basis using the federal
statutory rate of 34% in 1998 and 1997, adjusted for certain tax
preferences.
(2) Average outstanding includes the average balance outstanding of all non-
accrual loans. Loans consist of the average of total loans less average
unearned income. The amount of loan fees included in the interest income on
loans is not material.
13
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS FOR SECURITY HOLDERS VOTE
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports for the period ended March 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CNB FINANCIAL CORPORATION
(Registrant)
DATE: May 12, 1997 /s/ James P. Moore
------------ ------------------
James P. Moore
President and Director
(Principal Executive Officer)
DATE: May 12, 1997 /s/ Joseph B. Bower, Jr.
------------ -------------------------
Joseph B. Bower, Jr.
Treasurer
(Principal Financial Officer)
(Principal Accounting Officer)
14