UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 Commission File Number 0-13396
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
Market and Second Streets
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_________
----------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 10, 1999.
Common Stock, $1.00 Par Value - $121,597,937
The number of shares outstanding of the issuer's common stock as of March 10,
1999:
Common Stock, $1.00 Par Value - 3,425,294 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Shareholders' Report for the year ended December 31,
1998 are incorporated by reference into Part I and Part II pursuant to Section
13 of the Act.
Portions of the proxy statement for the annual shareholders' meeting on
April 20, 1999 are incorporated by reference into Part II and Part III. The
incorporation by reference herein of portions of the proxy statement shall not
be deemed to specifically incorporate by reference the information referred to
in Item 402(a)(8) of regulation S-K.
Exhibit index is located on sequentially numbered page 15.
INDEX
PART I.
ITEM 1. BUSINESS...................................................... 3
ITEM 2. PROPERTIES.................................................... 11
ITEM 3. LEGAL PROCEEDINGS............................................. 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 11
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS............................... 12
ITEM 6. SELECTED FINANCIAL DATA....................................... 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS................. 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................... 12
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 12
ITEM 11. EXECUTIVE COMPENSATION........................................ 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT........................................ 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............... 13
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K....................................... 13
SIGNATURES.................................................... 14
2
PART I.
ITEM 1. BUSINESS
CNB FINANCIAL CORPORATION
CNB Financial Corporation (The Corporation) is a Bank Holding Company
registered under the Bank Holding Company Act of 1956, as amended. It was
incorporated under the laws of the Commonwealth of Pennsylvania in 1983 for the
purpose of engaging in the business of a Bank Holding Company. On April 26,
1984, the Corporation acquired all of the outstanding capital stock of County
National Bank (the Bank), a national banking chartered institution. The
Corporation is subject to regulation, supervision and examination by the Board
of Governors of the Federal Reserve System. In general, The Corporation is
limited to owning or controlling banks and engaging in such other activity as
the Federal Reserve Board may determine to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. The
Corporation is currently engaged in one nonbanking activity through its wholly
owned subsidiary CNB Investment Corporation. CNB Investment Corporation was
formed in November 1998 to hold and manage investments that were previously
owned by County National Bank and to provide the Corporation with additional
latitude to purchase other investments.
The Corporation does not currently engage in any operating business
activities, other than the ownership and management of County National Bank and
CNB Investment Corporation.
COUNTY NATIONAL BANK
The Bank is a nationally chartered banking institution incorporated in
1934. The Bank's Main Office is located at 1 South Second Street, Clearfield,
(Clearfield County) Pennsylvania. The Bank's primary marketing area consists of
the Pennsylvania Counties of Clearfield, Elk (excluding the Townships of
Millstone, Highland and Spring Creek), McKean and Cameron. It also includes a
portion of western Centre County including Philipsburg Borough, Rush Township
and the western portions of Snow Shoe and Burnside Townships and a portion of
Jefferson County consisting of the boroughs of Brockway, Falls Creek,
Punxsutawney, Reynoldsville and Sykesville, and the townships of Washington,
Winslow and Henderson. The approximate population of the general trade area is
120,000. The economy is diversified and includes manufacturing industries,
wholesale and retail trade, services industries, family farms and the production
of natural resources of coal, oil, gas and timber.
In addition to the Main Office, the Bank has 13 full-service branch
offices and 2 limited service branch facilities located in various communities
in its market area.
The Bank is a full-service bank engaging in a full range of banking
activities and services for individual, business, governmental and institutional
customers. These activities and services principally include checking, savings,
time and deposit accounts; real estate, commercial, industrial, residential and
consumer loans; and a variety of other specialized financial services. Its Trust
division offers a full range of client services.
The Bank's customer base is such that loss of one customer relationship
or a related group of depositors would not have a materially adverse effect on
the business of the Bank.
The Bank's loan portfolio is diversified so that one industry, group of
related industries or changes in household economic conditions does not comprise
a material portion of the loan portfolio.
The Bank's business is not seasonal nor does it have any risks
attendant to foreign sources.
COMPETITION
The banking industry in the Bank's service area continues to be
extremely competitive, both among commercial banks and with financial service
providers such as consumer finance companies, thrifts, investment firms, mutual
funds and credit unions. The increased competition has resulted from changes in
the legal and regulatory guidelines as well as from economic conditions.
Mortgage banking firms, leasing companies, financial affiliates of industrial
companies, brokerage firms, retirement fund management firms, and even
government agencies provide additional competition for loans and other financial
services. Some of the financial service providers operating in the Bank's market
area operate
3
on a large-scale regional basis and possess resources greater than those of the
Bank and the Corporation. The Bank is generally competitive with all competing
financial institutions in its service area with respect to interest rates paid
on time and savings deposits, service charges on deposit accounts and interest
rates charged on loans.
SUPERVISION AND REGULATION
The Bank is subject to supervision and examination by applicable
federal and state banking agencies, including the Office of the Comptroller of
the Currency. In addition, the Bank is insured by and subject to some or all of
the regulations of the Federal Deposit Insurance Corporation ("FDIC"). The Bank
is also subject to various requirements and restrictions under federal and state
law, including requirements to maintain reserves against deposits, restrictions
on the types, amounts and terms and conditions of loans that may be granted, and
limitation on the types of investments that may be made and the types of
services that may be offered. Various consumer laws and regulations also affect
the operation of the Bank. In addition to the impact of regulation, commercial
banks are affected significantly by the actions of the Federal Reserve Board,
including actions taken with respect to interest rates, as it attempts to
control the money supply and credit availability in order to influence the
economy.
EXECUTIVE OFFICERS
The table below lists the executive officers of The Corporation and
County National Bank and sets forth certain information with respect to such
persons.
AGE AT PRINCIPAL OCCUPATION
NAME DECEMBER 31, 1998 FOR LAST FIVE YEARS
- ---- ----------------- -------------------
JAMES P. MOORE 63 PRESIDENT AND CHIEF EXECUTIVE
OFFICER, CNB FINANCIAL
CORPORATION SINCE 9/20/83.
CHAIRMAN OF THE BOARD, COUNTY
NATIONAL BANK SINCE 3/19/91,
PREVIOUSLY, PRESIDENT & CHIEF
EXECUTIVE OFFICER, COUNTY
NATIONAL BANK SINCE 4/15/82.
WILLIAM F. FALGER 51 EXECUTIVE VICE PRESIDENT, CNB
FINANCIAL CORPORATION SINCE
3/28/95. PREVIOUSLY VICE
PRESIDENT, SECRETARY AND
TREASURER. PRESIDENT AND CHIEF
EXECUTIVE OFFICER, COUNTY
NATIONAL BANK SINCE 1/01/93,
PREVIOUSLY, GROUP VICE
PRESIDENT, COUNTY NATIONAL
BANK SINCE 4/89;
WILLIAM A. FRANSON 55 SECRETARY, CNB FINANCIAL
CORPORATION SINCE 3/28/95.
PREVIOUSLY , ASSISTANT
SECRETARY SINCE 3/27/84.
EXECUTIVE VICE PRESIDENT AND
CASHIER, CHIEF OPERATING
OFFICER COUNTY NATIONAL BANK
SINCE 1/01/93, PREVIOUSLY
SENIOR VICE PRESIDENT, COUNTY
NATIONAL BANK SINCE 4/15/82.
CARL J. PETERSON 61 ASSISTANT SECRETARY, CNB
FINANCIAL CORPORATION, SINCE
3/27/84. SENIOR VICE PRESIDENT
AND TRUST OFFICER, COUNTY
NATIONAL BANK, SINCE 4/15/82.
4
JOSEPH B. BOWER, JR. 35 TREASURER, CNB FINANCIAL
CORPORATION SINCE 11/18/97.
SENIOR VICE PRESIDENT, CHIEF
FINANCIAL OFFICER, COUNTY
NATIONAL BANK SINCE 11/10/97.
PRIOR THERETO, CONTROLLER,
MIFFLINBURG BANK
MARK D. BREAKEY 40 SENIOR VICE PRESIDENT, SENIOR
LOAN OFFICER, COUNTY NATIONAL
BANK SINCE 3/28/95. PREVIOUSLY
VICE PRESIDENT, COMMERCIAL
BANKING SINCE 4/93, ASSISTANT
VICE PRESIDENT COMMUNITY
LENDING, ST. MARYS, SINCE
12/23/91 PRIOR THERETO,
LENDING OFFICER, MELLON BANK
Officers are elected annually at the reorganization meeting of the
Board of Directors. There are not any arrangements or understandings between any
and all of the above officers and any other persons pursuant to which they were
selected as officers. In addition, there are not any family relationships
between the above officers.
EMPLOYEES
The Corporation has no employees who are not employees of the County
National Bank. As of December 31, 1998, the Bank had a total of 207 employees of
which 167 were full time and 40 were part time.
MONETARY POLICIES
The earnings and growth of the banking industry are affected by the
credit policies of monetary authorities, including the Federal Reserve System.
An important function of the Federal Reserve System is to regulate the national
supply of bank credit in order to control recessionary and inflationary
pressures. Among the instruments of monetary policy used by the Federal Reserve
to implement these objectives are open market activities in U.S. Government
Securities, changes in the discount rate on member bank borrowings and changes
in reserve requirements against member bank deposits. These operations are used
in varying combinations to influence overall economic growth and indirectly,
bank loans, investments and deposits. These variables may also affect interest
rates charged on loans or paid for deposits. The monetary policies of the
Federal Reserve authorities have had a significant effect on the operating
results of commercial banks in the past and are expected to continue to have
such an effect in the future.
In view of the changing conditions in the national economy and in the
money markets, as well as the effect of actions by monetary and fiscal
authorities including the Federal Reserve System, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand or
their effect on the business and earnings of the Corporation and the Bank.
DISTRIBUTION OF ASSETS, LIABILITIES, & SHAREHOLDER'S EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following tables set forth statistical information relating to the
Registrant and its wholly-owned subsidiaries. The table should be read in
conjunction with the consolidated financial statements of the Registrant which
are incorporated by reference hereinafter.
5
CNB FINANCIAL CORPORATION
AVERAGE BALANCES AND NET INTEREST MARGIN
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1998 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL INTEREST AVERAGE ANNUAL INTEREST
BALANCE RATE INC./EXP. BALANCE RATE INC./EXP.
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-bearing deposits with banks $ 3,887 0.31% $ 12 $ 43 2.33% $ 1
Federal funds sold and securities
purchased under agreements to resell 4,812 5.44% 262 3,814 5.48% 209
Investment Securities:
Taxable 61,927 6.01% 3,720 48,016 6.26% 3,005
Tax-Exempt (1) 26,840 7.28% 1,955 24,642 6.62% 1,632
Equity Investments (1) 5,562 4.98% 277 3,717 6.83% 254
- ------------------------------------------------------------------------------------------------------------------------
Total Investments 103,028 6.04% 6,226 80,232 6.36% 5,101
LOANS
Commercial (1) 54,060 8.45% 4,566 52,735 8.04% 4,240
Mortgage (1) 157,590 8.85% 13,952 142,978 8.74% 12,495
Installment 38,351 9.38% 3,596 41,082 9.36% 3,847
Leasing 19,793 7.74% 1,532 10,396 7.95% 826
- ------------------------------------------------------------------------------------------------------------------------
Total loans (2) 269,794 8.76% 23,646 247,191 8.66% 21,408
Total earning assets 372,822 8.01% 29,872 327,423 8.10% 26,509
NON INTEREST BEARING ASSETS
Cash & Due From Banks 5,731 0 9,745 0
Premises & Equipment 9,745 0 9,151 0
Other Assets 8,073 0 7,321 0
Allowance for Possible Loan Losses (3,033) 0 (2,579) 0
- ------------------------------------------------------------------------------------------------------------------------
Total Non-interest earning assets 20,516 -- 0 23,638 -- 0
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $393,338 $29,872 $351,061 $26,509
======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING DEPOSITS
Demand - interest-bearing $ 88,869 2.86% $ 2,546 $ 83,244 2.94% $ 2,450
Savings 32,836 1.71% 561 35,052 1.68% 588
Time 173,054 5.46% 9,455 151,242 5.52% 8,354
- ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 294,759 4.26% 12,562 269,538 4.23% 11,392
Short-term borrowings 2,202 4.63% 102 3,392 5.28% 179
Long-term borrowings 15,074 5.52% 832 4,114 6.10% 251
- ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 312,035 4.33% 13,496 277,044 4.27% 11,822
Demand - non-interest-bearing 33,384 0 30,513 0
Other liabilities 4,524 0 2,789 0
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities 349,943 3.86% 13,496 310,346 3.81% 11,822
Shareholders' equity 43,395 -- 0 40,715 0
- ------------------------------------------------------------------------------------------------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $393,338 $13,496 $351,061 $11,822
======================================================================
Interest income/earning assets 8.01% 29,872 8.10% $26,509
Interest expense/interest bearing liabilities 4.33% 13,496 4.27% 11,822
- ------------------------------------------------------------------------------------------------------------------------
NET INTEREST SPREAD 3.69% $16,376 3.83% $14,687
================== ==================
Interest Income/Interest Earning Assets 8.01% $29,872 8.10% $26,509
Interest expense/Interest Earning Assets 3.62% 13,496 3.61% 11,822
- ------------------------------------------------------------------------------------------------------------------------
NET INTEREST MARGIN 4.39% $16,376 4.49% $14,687
================== ==================
DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------
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 1,597 5.45% 87
Investment Securities:
Taxable 52,103 6.35% 3,309
Tax-Exempt (1) 24,740 7.30% 1,806
Equity Investments (1) 2,999 5.44% 163
- ------------------------------------------------------------------------------------------
Total Investments 81,453 6.59% 5,365
LOANS
Commercial (1) 47,679 8.09% 3,856
Mortgage (1) 116,233 8.96% 10,411
Installment 40,860 9.40% 3,841
Leasing 1,149 8.09% 93
- ------------------------------------------------------------------------------------------
Total loans (2) 205,921 8.84% 18,201
Total earning assets 287,374 8.20% 23,566
NON INTEREST BEARING ASSETS
Cash & Due From Banks 8,579 0
Premises & Equipment 8,297 0
Other Assets 3,724 0
Allowance for Possible Loan Losses (2,301) 0
- ------------------------------------------------------------------------------------------
Total Non-interest earning assets 18,299 -- 0
- ------------------------------------------------------------------------------------------
TOTAL ASSETS $305,673 23,566
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING DEPOSITS
Demand - interest-bearing $ 76,496 3.13% $ 2,397
Savings 36,266 1.66% 601
Time 117,339 5.47% 6,423
- ------------------------------------------------------------------------------------------
Total interest-bearing deposits 230,101 4.09% 9,421
Short-term borrowings 7,186 5.23% 376
Long-term borrowings 0 #DIV/0! 0
- ------------------------------------------------------------------------------------------
Total interest-bearing liabilities 237,287 4.13% 9,797
Demand - non-interest-bearing 27,852 0
Other liabilities 2,054 0
- ------------------------------------------------------------------------------------------
Total Liabilities 267,193 3.67% 9,797
Shareholders' equity 38,480 -- 0
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $305,673 $ 9,797
===================================
Interest income/earning assets 8.20% 23,566
Interest expense/interest bearing liabilities 4.13% 9,797
- ------------------------------------------------------------------------------------------
NET INTEREST SPREAD 4.07% $13,769
=====================
Interest Income/Interest Earning Assets 8.20% $23,566
Interest expense/Interest Earning Assets 3.41% 9,797
- ------------------------------------------------------------------------------------------
NET INTEREST MARGIN 4.79% $13,769
=====================
(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
6
Net Interest Income For Twelve Months Ended December 31, For Twelve Months Ended December 31,
RATE-VOLUME VARIANCE 1998 over(under) 1997 1997 over(under) 1996
(DOLLARS IN THOUSANDS) Due to Change in Due to Change in
- ----------------------------------------------------------------------------------------------------------------------------------
VOLUME RATE NET VOLUME RATE NET
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
SECURITIES
Interest-Bearing Deposits with Banks $ 89 ($78) $ 11 $ 0 $ 1 $ 1
Federal Funds Sold 55 (2) 53 121 1 122
INVESTMENT SECURITIES:
Taxable 871 (156) 715 (260) (44) (304)
Tax-Exempt 146 177 323 (7) (167) (174)
Equity Investments 126 (103) 23 39 52 91
----------------------------- ---------------------------------
Total Securities 1,287 (162) 1,125 (107) (157) (264)
LOANS
Commercial 107 219 326 409 (25) 384
Mortgage 1,277 180 1,457 2,396 (312) 2,084
Installment (256) 5 (251) 21 (15) 6
Leasing 747 (41) 706 748 (15) 733
----------------------------- ---------------------------------
Total loans 1,875 363 2,238 3,574 (367) 3,207
----------------------------- ---------------------------------
TOTAL EARNING ASSETS $3,162 $ 201 $3,363 $3,467 ($524) $2,943
============================= =================================
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING DEPOSITS
Demand - Interest-Bearing $ 166 ($70) $96 $ 211 ($158) $ 53
Savings (37) 10 (27) (20) 7 (13)
Time 1,205 (104) 1,101 1,856 75 1,931
----------------------------- ---------------------------------
Total Interest-Bearing Deposits 1,334 (164) 1,170 2,047 (76) 1,971
Short-Term Borrowings (63) (14) (77) (199) 2 (197)
Long-Term Borrowings 669 (88) 581 251 0 251
----------------------------- ---------------------------------
Total Interest-Bearing Liabilities $1,940 ($266) $1,674 $2,099 ($74) $2,025
============================= =================================
============================= =================================
CHANGE IN NET INTEREST INCOME $1,222 $467 $1,689 $1,368 ($450) $ 918
============================= =================================
1. The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
2. Included in interest income is $389,465, $336,912 and $228,576 of fees for
the years ending 1998, 1997 and 1996, respectively.
3. Income on restructured loans accounted for under SFAS Nos. 114 & 118 are
included in interest earning assets; there is no income being recognized on a
cash basis.
7
INVESTMENT PORTFOLIO
(DOLLARS IN THOUSANDS) December 31, 1998 December 31, 1997
--------------------------------------- ----------------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
---------------- -----------------
Cost Gains Losses Value Cost Gains Losses Value
--------------------------------------- ----------------------------------------------
SECURITIES HELD TO MATURITY:
U.S. Treasury.................. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
U.S. Government agencies
and corporations........... -- -- -- -- -- -- -- --
Obligations of States and
Political Subdivisions..... 4,073 152 -- 4,225 6,398 180 -- 6,578
Other Debt Securities.......... 2,003 33 -- 2,036 6,006 18 5 6,019
Restricted Equity Securities... 1,606 -- -- 1,606 1,107 -- -- 1,107
--------------------------------------- ----------------------------------------------
$ 7,682 $ 185 $ 0 $ 7,867 $13,511 $ 198 $ 5 $13,704
======================================= ==============================================
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury.................. $ 9,522 $ 76 $ -- $ 9,598 $15,482 $ 40 $ 4 $15,518
U.S. Government agencies
and corporations........... 11,028 67 4 11,091 19,088 100 37 19,151
Obligations of States and
Political Subdivisions..... 33,421 1,013 -- 34,434 18,788 718 -- 19,506
Other Debt Securities.......... 40,079 304 184 40,199 5,347 8 43 5,312
Marketable Equity Securities 3,845 1,069 115 4,799 3,074 961 1 4,034
--------------------------------------- ----------------------------------------------
$97,895 $2,529 $303 $100,121 $61,779 $1,827 $ 85 $63,521
======================================= ==============================================
(DOLLARS IN THOUSANDS) December 31, 1996
-------------------------------------------
Amortized Unrealized Market
-----------------
Cost Gains Losses Value
-------------------------------------------
SECURITIES HELD TO MATURITY:
U.S. Treasury.................. $ -- $ -- $ $ -- $ --
U.S. Government agencies
and corporations........... 997 -- 1 996
Obligations of States and
Political Subdivisions..... 7,319 289 -- 7,608
Other Debt Securities.......... 9,071 66 24 9,113
Restricted Equity Securities... -- -- -- --
-------------------------------------------
$17,387 $ 355 $ $ 25 $17,717
-------------------------------------------
SECURITIES AVAILABLE FOR SALE:
U.S. Treasury.................. $13,496 $ 36 $ $ 24 $13,508
U.S. Government agencies
and corporations........... 26,192 118 203 26,107
Obligations of States and
Political Subdivisions..... 17,562 486 -- 18,048
Other Debt Securities.......... 1,047 4 6 1,045
Marketable Equity Securities 2,080 538 17 2,601
-------------------------------------------
$60,377 $1,182 $250 $61,309
===========================================
MATURITY DISTRIBUTION OF INVESTMENT
SECURITIES (DOLLARS IN THOUSANDS)
DECEMBER 31, 1998
Collateralized Mortgage
Obligations and Other
Within After One But After Five But After Asset Backed
One Year Within Five Years Within Ten Years Ten Years Securities
$ Amt Yield $ Amt Yield $ Amt Yield $ Amt Yield $ Amt Yield
------------------------------------ ---------------------------------- --------------------
SECURITIES HELD TO MATURITY:
U.S. Government agencies
and corporations.......... $ -- -- $ -- -- $ -- -- $ -- -- $ -- --
Obligations of States and
Political Subdivisions.... 1,015 8.85% 999 6.29% -- -- -- -- -- --
Other Debt Securities......... 1,004 6.52% 3,058 8.65% -- -- -- -- -- --
------------------------------------ ---------------------------------- --------------------
2,019 7.69% 4,057 8.07% -- -- -- -- -- --
Securities Available for Sale:
U.S. Treasury................. 7,497 6.00% 2,025 5.55% -- -- -- -- -- --
U.S. Government agencies
and corporations.......... 5,040 6.53% 5,988 5.73% -- -- -- -- -- --
Obligations of States and
Political Subdivisions.... 935 6.44% 3,352 8.04% 16,832 7.31% 12,302 6.85% -- --
Other Debt Securities......... 1,029 5.17% 3,643 6.06% -- -- -- -- 35,407 5.93%
------------------------------------ ---------------------------------- --------------------
14,501 6.18% 15,008 6.30% 16,832 7.31% 12,302 6.85% 35,407 5.93%
------------------------------------ ---------------------------------- --------------------
==================================== ================================== ====================
TOTAL $16,520 6.36% $19,065 6.67% $16,832 7.31% $12,302 6.85% $35,407 5.93%
==================================== ================================== ====================
The weighted average yields are based on book value and effective yields
weighted for the scheduled maturity with tax-exempt securities adjusted to a
taxable-equivalent basis using a tax rate of 34%.
8
LOAN PORTFOLIO
A. TYPE OF LOAN
(Dollars in thousands); 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Commercial, Financial and Agricultural $ 63,400 $ 58,282 $ 45,037 $ 49,643 $ 40,643
Residential Mortgage 118,245 112,393 100,402 78,111 68,907
Commercial Mortgage 46,701 37,702 31,451 30,658 31,039
Installment 35,251 41,001 43,448 45,294 44,196
Lease Receivables 29,362 18,231 6,069 0 0
-------- -------- -------- -------- --------
GROSS LOANS 292,959 267,609 226,407 203,706 184,785
Less: Unearned Income 4,570 3,707 3,304 3,668 2,996
-------- -------- -------- -------- --------
TOTAL LOANS NET OF UNEARNED $288,389 $263,902 $223,103 $200,038 $181,789
B. LOAN MATURITIES AND INTEREST SENSITIVITY
December 31, 1998
One Year One Through Over Total Gross
Commercial, Financial and Agricultural or Less Five Years Five Years Loans
------- ----------- ---------- -----------
Loans With Predetermined Rate $ 3,385 $13,690 $12,239 $29,314
Loans With Floating Rate 28,622 2,398 3,066 34,086
------------------------------------------------------------------------------
$32,007 $16,088 $15,305 $63,400
==============================================================================
C. RISK ELEMENTS
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Loans on non-accrual basis $ 120 $ 305 $ 230 $ 114 $ 957
Accruing loans which are contractually past due 90
days or more as to interest or principal payments 1,480 600 2,166 2,503 307
Troubled Debt Restructurings 538 597 654 705 --
-----------------------------------------------------------------------
$2,138 $1,502 $3,050 $3,322 $1,264
=======================================================================
1. Interest income recorded on the non-accrual loans for the year ended
December 31, 1998 was $500. Interest income which would have been recorded
on these loans had they been on accrual status was $2,000.
2. Loans are placed in non-accrual status when the interest or principal is 90
days past due, unless the loan is in collection, well secured and it is
believed that there will be no loss of interest or principal.
3. At December 31, 1998 there was $6,959,000 in loans which are considered
problem loans. In the opinion of management, these loans are adequately
secured and losses are believed to be minimal.
9
SUMMARY OF LOAN LOSS EXPERIENCE
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS) YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Balance at beginning of Period $2,849 $2,473 $2,145 $2,033 $1,750
Charge-offs:
Domestic:
Commercial, Financial and Agricultural 47 88 5 59 0
Commercial Mortgages 0 0 0 28 95
Residential Mortgages 16 14 0 0 33
Consumer Loans and Credit Cards 454 513 355 282 254
Leasing 42 25 0 0 0
------- ------- ------- ------- --------
559 640 360 369 382
Recoveries:
Domestic:
Commercial, Financial and Agricultural 21 2 5 0 19
Commercial Mortgages 0 0 1 0 0
Residential Mortgages 2 0 0 0 0
Consumer Loans and Credit Cards 111 114 82 101 121
Leasing 1 0 0 0 0
------- ------- ------- ------- --------
135 116 88 101 140
Net Charge-offs: (424) (524 (272) (268) (242)
Provision for Loan Losses 675 900 600 380 525
======= ======= ======= ======= =======
Balance at End-of Period $3,100 $2,849 $2,473 $2,145 $2,033
======= ======= ======= ======= =======
Percentage of net charge-offs during the period
to average loans outstanding 0.16 0.21 0.13 0.14 0.18
The Provision for loan losses reflects the amount deemed appropriate by
management to establish an adequate reserve to meet the present and foreseeable
risk characteristics of the present loan portfolio. Management's judgement is
based on the evaluation of individual loans, the overall risk characteristics of
various portfolio segments, past experience with losses, the impact of econmic
conditions on borrowers, and other relevant factors.
ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
(in thousands)
1998 1997 1996 1995 1994
------------------------------------------------------------------------------------------------
Domestic: % of Loans in % of Loans in % of Loans in % of Loans in % of Loans in
each Category each Category each Category each Category each Category
$ Amt. to Total $ Amt. to Total $ Amt. to Total $ Amt. to Total $ Amt. to Total
------------------------------------------------------------------------------------------------
Real Estate Mortgages $521 56.31% $492 56.09% $425 58.24% $387 53.40% $60 54.09%
Installment Loans to Individuals 453 12.04% 402 15.32% 600 19.19% 422 22.24% 210 23.92%
Commercial, Financial and 435 21.65% 361 21.78% 583 19.89% 446 24.36% 895 21.99%
Agricultural
Leasing 140 10.00% 80 6.81% 0 2.68% 0 0.00% 0 0.00%
Unallocated 1,551 N/A 1,514 N/A 865 N/A 890 N/A 868 N/A
===============================================================================================
TOTALS $3,100 100.00% $2,849 100.00% $2,473 100.00% $2,145 100.00% $2,033 100.00%
===============================================================================================
1. In determining the allocation of the allowance for possible credit losses,
County National Bank considers economic trends, historical patterns and
specific credit reviews.
2. With regard to the credit reviews, a "watchlist" is evaluated on a monthly
basis to determine potential commercial losses. Consumer loans and mortgage
loans are allocated using historical loss experience. The total of these
reserves is deemed "allocated", while the remaining balance is "unallocated".
10
DEPOSITS
(in thousands)
December 31, 1998 1997 1996
Amount Amount Amount
---------- ---------- -------------
Demand - Non Interest Bearing $ 36,612 $ 32,893 $ 30,812
Demand - Interest Bearing 125,822 82,339 82,184
Savings Deposits 31,581 32,676 36,183
Time Deposits 176,799 171,565 120,877
========= ========= ==========
TOTAL DEPOSITS $ 370,814 $ 319,473 $ 270,056
========= ========= ==========
The maturity of certificates of deposits and other time deposits in denomination
of $100,000 or more as of December 31, 1997 (in thousands):
Maturing in:
Three months or less......................................... $ 3,292
Greater than three months and through six months............. 5,114
Greater than six months and through twelve months............ 6,162
Greater than tweleve months.................................. 7,756
==========
TOTAL $22,324
==========
RETURN ON EQUITY AND ASSETS
Information required by this section is presented on pages 22 and 23 of the
Annual Report to Shareholders for the year ended December 31, 1998, and is
incorporated herein by reference.
ITEM 2. PROPERTIES
The headquarters of the Corporation and the Bank is located at 1 South
Second Street, Clearfield, Pennsylvania. The Bank operates 14 full-service and 2
limited service offices. Of these 16 offices, 12 are owned and 4 are leased from
independent owners. There are no incumberances on the offices owned and the
rental expense on the leased property is immaterial in relation to operating
expenses.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Corporation or the Bank is a party, or of which any of their property is the
subject, except ordinary routine proceedings which are incidental to the
ordinary conduct of business. In the opinion of management and counsel, pending
legal proceedings will not have a material adverse effect on the consolidated
financial position of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through the
solicitation of proxies, or otherwise, for the three months ended December 31,
1998.
11
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS
MATTERS
Information relating to the Corporation's common stock is on pages 21
and 36 of the Annual Shareholders' Report for the year ended December 31, 1998
and is herein incorporated by reference. There were 1,484 registered
shareholders of record as of March 10, 1999.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this section is presented on pages 22 and 23 of
the Annual Shareholders' Report for the year ended December 31, 1998 and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this section is presented on pages 24-32 of the
Annual Shareholders' Report for the year ended December 31, 1998 and is
incorporated herein by reference.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this section is presented on pages 30 of the
Annual Shareholders' Report for the year ended December 31, 1998 and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements which appear in the
Annual Shareholders' Report for the year ended December 31, 1998 are
incorporated herein by reference to such annual report:
Pages in
Annual Report
Report of Independent Auditors 5
Consolidated Statements of Condition 6
Consolidated Statements of Income 7
Consolidated Statements of Cash Flows 8
Consolidated Statements of Changes in Shareholders' Equity 9
Notes to Consolidated Financial Statements 10 - 20
Quarterly financial data relating to the results of operations for the year
ended December 31, 1998 and 1997, appears in the Annual Shareholders' Report for
the year ended December 31, 1998 under the caption "Quarterly Summary of
Earnings" at Page 21 and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to Executive Officers is included in Part I and
information describing the Corporation's directors is included by reference on
pages 3 and 4 of the Proxy Statement for the Annual Meeting to be held on April
20, 1999.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this section is presented on pages 10 - 12 of
the Proxy Statement for the Annual Meeting of Shareholders to be held April 20,
1999 and is incorporated herein by reference.
12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this section is presented on pages 3 - 4 of the
Proxy Statement for the Annual Meeting of Shareholders to be held April 20, 1999
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this section is presented on page 12 of the
Proxy Statement for the Annual Meeting of Shareholders to be held April 20, 1999
and is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A.)1. FINANCIAL STATEMENTS FILED
The Financial Statements listed below are incorporated herein by
reference from the Annual Shareholders' Report for the year ended December 31,
1998.
Pages in
Annual Report
-------------
CNB Financial Corporation and Subsidiary:
Report of Independent Auditors 5
Consolidated Statements of Condition 6
Consolidated Statements of Income 7
Consolidated Statements of Cash Flows 8
Consolidated Statements of Changes in Shareholders' Equity 9
Notes to Consolidated Financial Statements 10 to 20
Quarterly Summary of Earnings and Per Share Data 21
2. FINANCIAL STATEMENT SCHEDULES:
All schedules are omitted since they are not applicable.
(B.)REPORTS ON FORM 8-K
Form 8-K dated October 13, 1998 was filed announcing a branch
acquisition from First Western Bank, N.A. The branch acquired is in
Punxsutawney, PA and consists of approximately $36 million in deposits and $11.5
million in loans. The branch was consolidated into County National Bank.
13
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
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: March 25, 1999 By: /s/ James P. Moore
--------------------------- -------------------------------------
JAMES P. MOORE
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1999.
/s/ James P. Moore President and Chief Executive Officer,
- --------------------------------
JAMES P. MOORE Director
/s/ William F. Falger Executive Vice President, Principal Financial Officer,
- --------------------------------
WILLIAM F. FALGER Principal Accounting Officer
/s/ William A. Franson Secretary
- --------------------------------
WILLIAM A. FRANSON
/s/ Carl J. Peterson Assistant Secretary, Director
- --------------------------------
CARL J. PETERSON
/s/ Robert E. Brown Director /s/ Jeffrey S. Powell
- -------------------------------- -----------------------------------
ROBERT E. BROWN JEFFREY S. POWELL
/s/ Richard D. Gathagan Director /s/ Edward B. Reighard
- -------------------------------- -----------------------------------
RICHARD D. GATHAGAN EDWARD B. REIGHARD
/s/ James J. Leitzinger Director /s/ Peter F. Smith
- -------------------------------- -----------------------------------
JAMES J. LEITZINGER PETER F. SMITH
/s/ Dennis L. Merrey Director /s/ L.E. Soult, Jr.
- -------------------------------- -----------------------------------
DENNIS L. MERREY L.E. SOULT, JR.
/s/ William R. Owens Director /s/ Robert G. Spencer
- -------------------------------- -----------------------------------
WILLIAM R. OWENS ROBERT G. SPENCER
/s/ Robert C. Penoyer Director /s/ Joseph L. Waroquier, Sr.
- -------------------------------- -----------------------------------
ROBERT C. PENOYER JOSEPH L. WAROQUIER, SR.
14
EXHIBITS:
The exhibits listed below are filed herewith or are incorporated herein
by reference to other filings:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3 (i) Articles of Association
3 (ii) By-Laws
10 Material Contracts
10 (iii) A Deferred Compensation Plan
13 Annual Report to Shareholders for 1998
21 Subsidiaries of the Registrant
27 Financial Data Schedule
15