<PAGE> 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 JUNE 30, 1996
/ / 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 49201-1446
(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 JUNE 30, 1996, THERE WERE 2,801,053 SHARES OF THE REGISTRANT'S COMMON STOCK
OUTSTANDING WITH A $7.50 PAR VALUE.
<PAGE> 2
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:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheet - June 30, 1996,
June 30, 1995 and December 31, 1995 ................................. 3
Consolidated Statement of Income - For the Three and Six Months Ended
June 30, 1996 and 1995 ................................................ 4
Consolidated Statement of Cash Flow - For the Six Months Ended
June 30, 1996 and 1995 ................................................ 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:
Item 6. Report on Form 8-K ............................................ 10
SIGNATURE ....................................................................... 11
The following documents are filed as a part of this report:
Exhibit 27 Financial Data Schedule
</TABLE>
2
<PAGE> 3
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
(In Thousands) 06/30/96 06/30/95 12/31/95
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Cash and Cash Equivalents:
Cash and Due from Banks $ 31,967 $ 40,353 $ 37,068
Money Market Assets 5,005 9,218 1,790
- ---------------------------------------------------------------------------------------------------------------------
Total Cash and Cash Equivalents 36,972 49,571 38,858
- ---------------------------------------------------------------------------------------------------------------------
Securities Available for Sale:
U.S. Treasury 60,025 42,008 161,390
U.S. Government Agencies 80,526 24,341 39,008
States and Political Subdivisions 10,567 0 11,186
Other 160 198 161
- ---------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale 151,278 66,547 211,745
- ---------------------------------------------------------------------------------------------------------------------
Securities Held to Maturity (Market value of $146,050) 0 146,287 0
- ---------------------------------------------------------------------------------------------------------------------
Loans:
Consumer Loans 151,146 108,152 120,678
Commercial Loans 201,231 169,707 177,921
Tax Exempt Loans 14,193 11,597 14,263
Real Estate Mortgage Loans 163,492 104,975 126,021
- ---------------------------------------------------------------------------------------------------------------------
Subtotal Loans 530,062 394,431 438,883
Reserve for Possible Loan Losses (3,976) (4,005) (3,934)
- ---------------------------------------------------------------------------------------------------------------------
Net Loans 526,086 390,426 434,949
- ---------------------------------------------------------------------------------------------------------------------
Bank Premises and Equipment, Net 14,452 16,233 15,350
Other Real Estate Owned 0 20 0
Income Earned Not Received 6,211 6,081 6,996
Goodwill and Premium on Core Deposits, Net 9,352 11,251 9,937
Other Assets 8,197 1,788 2,048
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $752,548 $688,204 $719,883
=====================================================================================================================
LIABILITIES:
Deposits:
Demand Deposits $114,990 $103,128 $110,459
Interest-Bearing Demand Deposits 127,085 149,929 141,591
Savings Deposits 128,712 118,449 130,254
Time Deposits 292,393 223,230 240,156
- ---------------------------------------------------------------------------------------------------------------------
Total Deposits 663,180 594,736 622,460
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Interest Bearing Liabilities 501 3,500 6,515
Note Payable and Capital Leases 3,650 5,565 4,611
Accrued Expenses 4,077 4,031 3,868
Dividend Payable 840 840 840
Other Liabilities 5,267 2,992 4,131
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 677,515 611,664 642,425
- ---------------------------------------------------------------------------------------------------------------------
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 47,733 46,626 46,730
Unrealized Gains(Losses) on Securities Available for Sale, Net of Tax Effect (1,781) 833 1,647
- ---------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 75,033 76,540 77,458
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $752,548 $688,204 $719,883
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE> 4
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
(In Thousands Except Per Share Data) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans
Consumer Loans $ 3,247 $ 2,455 $ 6,155 $ 4,839
Commercial Loans 4,336 3,992 8,411 7,893
Tax Exempt Loans 226 221 465 464
Real Estate Mortgage Loans 3,167 2,216 5,953 4,318
Interest on Investment Securities Available for Sale
U.S. Treasury 1,074 837 2,867 1,809
U.S. Government Agencies 1,396 515 2,463 1,080
States and Political Subdivisions 157 0 318 0
Other 2 1 4 3
Interest on Securities Held to Maturity 0 2,113 0 4,217
Interest on Money Market Assets 52 110 108 224
- --------------------------------------------------------------------------------------------------------
Total Interest Income 13,657 12,460 26,744 24,847
- --------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Demand Deposits 685 1,069 1,407 2,205
Interest on Savings Deposits 925 732 1,861 1,502
Interest on Time Deposits 3,911 2,831 7,498 5,337
Interest on Other Liabilities 166 262 307 561
- --------------------------------------------------------------------------------------------------------
Total Interest Expense 5,687 4,894 11,073 9,605
- --------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 7,970 7,566 15,671 15,242
Provision for Possible Loan Losses 580 164 845 343
- --------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 7,390 7,402 14,826 14,899
- --------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Trust Income 554 482 1,028 1,004
Service Charges on Deposit Accounts 802 686 1,615 1,244
Fees for Other Services to Customers 296 340 594 637
Securities Gains 12 17 377 29
Other Income 115 70 243 91
- --------------------------------------------------------------------------------------------------------
Total Non-Interest Income 1,779 1,595 3,857 3,005
- --------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSES:
Salaries and Wages 2,652 2,669 5,038 5,210
Employee Benefits 591 721 1,299 1,417
Occupancy Expenses 637 588 1,284 1,233
Furniture and Equipment Expenses 619 604 1,213 1,209
FDIC Insurance Premiums 1 325 3 649
Restructuring Charge 1,102 0 1,102 0
Other Operating Expenses 2,493 1,935 4,878 4,107
- --------------------------------------------------------------------------------------------------------
Total Non-Interest Expenses 8,095 6,842 14,817 13,825
- --------------------------------------------------------------------------------------------------------
Income Before Provision for Federal Income Tax 1,074 2,155 3,866 4,079
Provision for Federal Income Tax 306 671 1,182 1,247
- --------------------------------------------------------------------------------------------------------
NET INCOME $ 768 $ 1,484 $ 2,684 $ 2,832
========================================================================================================
Per Share Data:
Net Income Per Common Share $ 0.28 $ 0.53 $ 0.96 $ 1.01
Average Number of Shares Outstanding 2,802,890 2,802,970 2,803,283 2,802,886
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE> 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED) Six Months Ended
June 30,
(In Thousands) 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
Cash Flows from Operating Activities:
Interest and Fees Received $ 31,291 $ 29,562
Interest Paid ($10,901) (9,224)
Cash Paid to Suppliers and Employees (15,582) (10,529)
Income Taxes Paid (2,135) (1,590)
- ------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 2,673 8,219
- ------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from Sale of Securities Available for Sale 100,183 9,026
Proceeds from Maturities/Calls of Securities Available for Sale 15,425 17,000
Proceeds from Maturities/Calls of Securities Held to Maturitity 0 1,290
Purchase of Securities Available for Sale (60,314) (1,000)
Net Increase in Loans (91,982) (1,515)
Net Decrease in Other Real Estate Owned 0 337
Proceeds from Sale of Premises and Equipment 573 0
Capital Expenditures (509) (889)
- ------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (36,624) 24,249
- ------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Repayment of Note Payable (950) (950)
Net Increase (Decrease) in Deposits and Short-Term Liabilities 34,707 (34,912)
Cash Dividends Paid (1,681) (1,681)
Payment of Capital Lease Obligations (11) (12)
- ------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities 32,065 (37,555)
- ------------------------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (1,886) (5,087)
- ------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of Year 38,858 54,658
- ------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 36,972 $49,571
================================================================================================
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net Income $ 2,684 $ 2,832
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Depreciation and Amortization 892 921
Accretion of Net Discount on Purchased Subsidiary 600 657
Amortization of Discount and Premiums on
Investment Securities, Net 356 506
Provision for Possible Loan Losses 845 344
Securities Gains (377) (11)
Decrease in Income Earned Not Received 784 1,249
(Increase) Decrease in Other Assets (2,017) 1,763
(Gain) Loss on Sale of Premises and Equipment (73) (33)
Increase (Decrease) in Interest Payable 172 380
Increase (Decrease) in Income Taxes Payable (953) (343)
Decrease in Accrued Expenses (240) (46)
- ------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities $ 2,673 $ 8,219
================================================================================================
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING AND REPORTING POLICIES
BASIS OF PRESENTATION
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 1995 Annual Report and Form 10-K to shareholders
of CB Financial Corporation filed with the Securities and Exchange
Commission.
CONSOLIDATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
assure the fair presentation 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.
LOANS
Effective January 1, 1995, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures."
These Statements require that impaired loans be measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan
is collateral dependent. The adoption of these statements on January 1,
1995 had no significant impact on the financial position or the results
of operations of the Corporation.
Effective January 1, 1996, the Corporation adopted Statement of
Financial Accounting Standard No. 122, "Accounting for Mortgage
Servicing Rights." The statement requires capitalization of servicing
rights on mortgage loans, when the loans are to be sold and the servicing
retained. The adoption of this accounting standard did not have a
material impact on the Corporation's financial position or results of
operations.
OTHER
Effective January 1, 1996, the Corporation adopted Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of." This new
accounting standard requires impairment losses on long-lived assets to be
recognized when an asset's book value exceeds its expected future cash
flows (undiscounted). The adoption of this accounting standard did not
impact the Corporation's financial position or results of operations.
6
<PAGE> 7
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, 1995
TO JUNE 30, 1996
<TABLE>
<S> <C>
Funding Sources:
Cash & Cash Equivalents $ 1,886
Investment Securities 55,294
Deposits 40,720
Operating Activities 2,673
Sale of Premises & Equip. 573
--------
$101,146
========
Funding Uses:
Loans $ 91,982
Short Term Interest Bearing Liabilities 6,013
Cash Dividends 1,681
Capital Expenditures 509
Repayment of Note and Capital Leases 961
--------
Total Uses $101,146
========
</TABLE>
The primary source of funds for loan growth was the sale and maturity of
investment securities available for sale, increase in deposits and decreased
cash and cash equivalent balances. Net loans increased $92.0 million as of
June 30, 1996 from the totals reported at December 31, 1995. Time deposits
and savings accounts increased $50.7 million over the December 31, 1995 balance
which was offset by decreases in demand and interest bearing demand accounts
of $10.0 million. The increase in time and savings account balances resulted
from marketing efforts and pricing strategy to attract additional funds and the
migration of funds from demand deposit accounts. Short term interest bearing
liabilities including federal funds purchased have decreased $6.0 million from
the December 31, 1995 balances as funds from operating activities have
increased.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1996 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 June 30, 1996 is more than
adequate to meet its future cash flow needs. Management also closely monitors
capital levels to provide for normal
7
<PAGE> 8
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":
<TABLE>
<CAPTION>
Regulatory
Minimum for June 30,
"Well Capitalized" 1996 1995
------------------ ---- ----
<S> <C> <C> <C>
Total Capital 10% 13.4% 17.1%
Tier I Capital 6 14.2 16.1
Tier I Leverage Ratio 5 9.2 9.5
</TABLE>
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.
<TABLE>
<CAPTION>
Comparison of Comparison of
Three Months Ended Six Months Ended
June 30, 1996 & 1995 June 30, 1996 and 1995
-------------------- ----------------------
<S> <C> <C> <C> <C>
Interest Income $1,197 9.6% $1,897 7.6%
Interest Expense 793 16.2 1,468 15.3
------ ----- ------ -----
Net Interest Income 404 5.3 429 2.8
Provision for loan losses 416 253.7 502 146.4
------ ----- ------ -----
Net interest income after provision
for loan losses (12) (.2) (73) (.5)
Other Income 184 11.5 852 28.4
Restructuring Expense 1,102 0 1,102 0
Other Expenses 151 2.2 (110) .8
------ ----- ------ -----
Income before income tax (1,081) (50.2) (213) (5.2)
Income Tax Expense (365) (54.4) 65 (5.2)
------ ----- ------ -----
Net Income $ (716) (48.2) (148) 5.2
====== ===== ====== =====
</TABLE>
A summary of the components of the net interest margin computation on a tax
equivalent basis for the six month period ending June 30, 1996 and 1995 is
presented in the following table:
<TABLE>
<CAPTION>
6/30/96 6/30/95
------- -------
<S> <C> <C>
Interest on Earning Assets 8.18% 8.14%
Interest on Interest Bearing Liabilities 4.12 3.78
Interest Expense Related to Earning Assets 3.34 3.10
Net Interest Margin 4.84 5.04
</TABLE>
NET INTEREST INCOME
Interest income increased $1,897,000 (7.6%) through June 30, 1996 over the
amount reported for the same period of 1995 which resulted primarily from an
increase in loan volume and rates. Interest expense for the two
8
<PAGE> 9
comparable periods increased $1,468,000 (15.3%) in 1996 due to higher deposit
balances, shift in deposit product mix and higher interest rates. Net interest
income increased $429,000 (2.8%) in 1996 over 1995.
PROVISION FOR LOAN LOSSES
The Corporation has adopted SFAS No.114, "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures," effective January
1, 1995. Under these Statements, a loan is considered impaired when it is
probable that all amounts due will not be collected according to the
contractual terms of the loan agreement. The Statements require that an
impaired loan be measured based on the present value of the expected future
cash flows discounted at the loan's effective interest rate, the observable
market price of the loan or the fair value of the collateral if the loan is
collateral dependent.
The increase in the loan loss provision during the first six months of 1996 of
$502,000 or 146.4% reflects increased loan volume and higher net charge offs
recorded in 1996 which indicates a desire by the subsidiary banks to maintain
an adequate reserve. The reserve for possible loan losses as of June 30, 1996
and 1995 was $3,976,000 and $4,005,000, a decline of $29,000 or .7%. Net loan
charge offs for the six month period ending June 30, 1996 and 1995 were
$803,000 and $204,000, respectively. Overall loan growth and expansion into
new types of retail lending have led to higher charge-offs than normal during
the first six months of 1996. Expressed as a percent of average loans
outstanding, the average reserve for possible loan losses was .80%, 1.00% and
.98% as of June 30, 1996, June 30, 1995 and December 31, 1995, respectively.
Nonperforming Loans are defined by the Corporation to include loans on which
interest is not being accrued, and restructured loans where interest rates have
been renegotiated at below market rates. For purposes of calculating an
impairment reserve in accordance with SFAS No. 114, the Corporation considers
non-accrual loans and loans 90 days or more past due (excluding small balance
homogeneous consumer loans and residential mortgage loans) where it is probable
that the Corporation will not collect all amounts due under the contractual
terms of the loan as meeting the statement's definition of impaired loans.
Loans classified as impaired totaled $1,356,000 at June 30, 1996, $1,050,000 at
June 30, 1995 and $1,331,000 at December 31, 1995. Large balance impaired
loans (generally those with balances of $100,000 or more) accounted for
$884,000 or 65.0 percent of total impaired loans at June 30, 1996. The
impairment reserve on these loans included in the reserve for possible loan
losses amounted to $336,000 at June 30, 1996. The average balance of impaired
loans was $1,155,000 for the six month period ending June 30, 1996. Interest
income recognized during the time the loans were impaired was $17,000 of which
$10,000 was received on a cash basis. The remaining performing loan portfolio
was collectively evaluated for impairment.
Total nonperforming assets which includes non-accrual loans, other real estate
owned and assets acquired through repossession were $1,307,000, $1,170,000 and
$1,697,000 at June 30, 1996, June 30, 1995 and December 31, 1995, respectively.
OTHER INCOME
Total non-interest income amounted to $3,857,000 and $3,005,000 for the six
months ended June 30, 1996 and 1995, respectively. Trust income was $1,028,000
and $1,004,000 for each period, an increase of $24,000 which resulted from a
revised fee schedule in the fourth quarter, 1995. Service charge income was
$1,615,000 and $1,244,000, an increase of $371,000 in 1996 over 1995 due to a
revised schedule of fees implemented in the second quarter, 1995. Security
gains of $377,000 and $29,000 were recognized in the six months ended June 30,
1996 and 1995, respectively. Other income was $243,000 and $91,000 at June 30,
1996 and 1995 which resulted from additional gains on loans sold, the adoption
of the Statement of Financial Accounting Standard No. 122 and litigation
settlement of $100,000.
9
<PAGE> 10
OTHER EXPENSES
Other non-interest expenses amounted to $14,817,000 and $13,825,000 for the six
months ended June 30, 1996 and 1995, an increase of $992,000 or 7.2%. The
fluctuation of the major components of non-interest expenses are presented
below (in thousands of dollars and as a percent):
<TABLE>
<CAPTION>
COMPARISON OF
SIX MONTHS ENDED
AMOUNT AMOUNT
AT AT AMOUNT PERCENT
6/30/96 6/30/95 VARIANCE VARIANCE
------- ------- -------- --------
<S> <C> <C> <C> <C>
Salaries & Employee Benefits $ 6,337 6,627 (290) (4.4)%
Occupancy, Furniture & Equipment 2,497 2,442 55 2.3
Marketing, Advertising and
Public Relations 443 271 172 63.5%
Stationery & Supplies 316 273 43 15.8
FDIC Premium Expense 3 649 (646) (99.5)
Restructure Charge 1,102 0 1,102 0
Other Operating Expense 4,119 3,563 556 15.6
------- ------ ----- -------
Total Non-Interest Expenses $14,817 13,825 992 7.2%
======= ====== ===== =======
</TABLE>
The decrease in salaries and employee benefits is due to a reduction in average
FTE's of 29.4 at June 30, 1996 compared to June 30, 1995 which was partially
offset by increases due to normal performance evaluations. The increase in
marketing, advertising and public relations expenditures were projected in the
1996 Budget and reflect strategies to increase loans and introduce new deposit
products to generate additional accounts and balances. The decline in FDIC
premium expense reflects the reduction in the assessment rate since the Bank
Insurance Fund (BIF) was over funded. Other operating expenses increased as a
result of higher costs associated with greater volumes such as loans and
postage, outsourcing messengers and the internal audit function, telephone,
consultant fees, etc.
The corporation recorded a restructuring charge of $1.1 million in the second
quarter of 1996. This charge resulted from an extensive study of its retail
delivery system over the past twelve months. Based on recommendations of the
study, some of the corporation's delivery system facilities will experience
relocation, closures and enhancements over the next twelve months. The
restructuring charge consists primarily of costs to close six (6) financial
centers including personnel expenses related to rebuilding the retail delivery
system. It is anticipated that the restructuring charge will be recoverd by
the corporation through lower operating costs over a 2-3 year period.
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 to a lesser extent by other tax-exempt
items. The income tax provision reported in the accompanying financial
statements for the six month periods ended June 30, 1996 and 1995 was
$1,182,000 and $1,247,000, a reduction of $65,000, which reflects the decline
in operating income due to the restructuring charge.
Part II. OTHER INFORMATION
Item 6. Exhibit and Report on Form 8-K:
(a) A Form 8-K Report was not filed during the three months ended June 30,
1996.
(b) Exhibit 27: Financial Data Schedule
10
<PAGE> 11
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
Treasurer
Dated: August 13, 1996
11
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 31,967
<INT-BEARING-DEPOSITS> 2,005
<FED-FUNDS-SOLD> 3,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 151,278
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 530,062
<ALLOWANCE> 3,976
<TOTAL-ASSETS> 752,548
<DEPOSITS> 663,180
<SHORT-TERM> 501
<LIABILITIES-OTHER> 10,184
<LONG-TERM> 3,650
0
0
<COMMON> 21,008
<OTHER-SE> 54,025
<TOTAL-LIABILITIES-AND-EQUITY> 752,548
<INTEREST-LOAN> 20,984
<INTEREST-INVEST> 5,652
<INTEREST-OTHER> 108
<INTEREST-TOTAL> 26,744
<INTEREST-DEPOSIT> 10,766
<INTEREST-EXPENSE> 307
<INTEREST-INCOME-NET> 15,671
<LOAN-LOSSES> 845
<SECURITIES-GAINS> 377
<EXPENSE-OTHER> 14,817
<INCOME-PRETAX> 3,866
<INCOME-PRE-EXTRAORDINARY> 3,866
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,684
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
<YIELD-ACTUAL> 4.84
<LOANS-NON> 1,307
<LOANS-PAST> 611
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 615
<ALLOWANCE-OPEN> 3,934
<CHARGE-OFFS> 1,019
<RECOVERIES> 216
<ALLOWANCE-CLOSE> 3,976
<ALLOWANCE-DOMESTIC> 2,895
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,081
</TABLE>
