<PAGE> 1
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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 SEPTEMBER 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 SEPTEMBER 30, 1996, THERE WERE 2,801,053 SHARES OF THE REGISTRANT'S COMMON
STOCK OUTSTANDING WITH A $7.50 PAR VALUE.
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<PAGE> 2
CB FINANCIAL CORPORATION
INDEX
<TABLE>
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements
The following consolidated financial statements of CB
Financial Corporation and its subsidiaries included in this
report are:
Page
----
Consolidated Balance Sheet - September 30, 1996,
September 30, 1995 and December 31, 1995................................... 3
Consolidated Statement of Income - For the Three and Nine Months Ended
September 30, 1996 and 1995................................................. 4
Consolidated Statement of Cash Flow - For the Nine Months Ended
September 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. Exhibit 10 and Report on Form 8-K................................... 11
SIGNATURE ............................................................................ 12
The following documents are filed as a part of this report:
Exhibit 10 Employment Agreement and Amendment Number 1 -
Supplemental Retirement Benefit Agreement
Exhibit 27 Financial Data Schedule
</TABLE>
2
<PAGE> 3
CONSOLIDATED BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
(In Thousands) 09/30/96 09/30/95 12/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Cash and Cash Equivalents:
Cash and Due from Banks $29,509 $34,927 $37,068
Money Market Assets 1,461 12,214 1,790
- -----------------------------------------------------------------------------------------------------------------------------------
Total Cash and Cash Equivalents 30,970 47,141 38,858
- -----------------------------------------------------------------------------------------------------------------------------------
Securities Available for Sale:
U.S. Treasury 57,194 37,745 161,390
U.S. Government Agencies 79,538 24,224 39,008
States and Political Subdivisions 10,158 0 11,186
Other 20 209 161
- -----------------------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale 146,910 62,178 211,745
- -----------------------------------------------------------------------------------------------------------------------------------
Securities Held to Maturity (Market value of $144,948) 0 145,810 0
- -----------------------------------------------------------------------------------------------------------------------------------
Loans:
Consumer Loans 169,594 113,924 120,678
Commercial Loans 204,063 171,086 177,921
Tax Exempt Loans 14,696 13,273 14,263
Real Estate Mortgage Loans 189,025 113,744 126,021
- -----------------------------------------------------------------------------------------------------------------------------------
Subtotal Loans 577,378 412,027 438,883
Reserve for Possible Loan Losses (4,240) (4,021) (3,934)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Loans 573,138 408,006 434,949
- -----------------------------------------------------------------------------------------------------------------------------------
Bank Premises and Equipment, Net 14,135 15,800 15,350
Other Real Estate Owned 364 20 0
Income Earned Not Received 5,660 7,135 6,996
Goodwill and Premium on Core Deposits, Net 9,060 10,931 9,937
Other Assets 4,096 3,358 2,048
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $784,333 $700,379 $719,883
===================================================================================================================================
LIABILITIES:
Deposits:
Demand Deposits $108,089 $104,791 $110,459
Interest-Bearing Demand Deposits 126,545 143,643 141,591
Savings Deposits 125,957 122,308 130,254
Time Deposits 319,610 238,113 240,156
- -----------------------------------------------------------------------------------------------------------------------------------
Total Deposits 680,201 608,855 622,460
- -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Interest Bearing Liabilities 12,990 698 6,515
Note Payable and Capital Leases 3,173 5,090 4,611
Accrued Expenses 4,428 4,516 3,868
Dividend Payable 840 840 840
Other Liabilities 5,852 3,918 4,131
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 707,484 623,917 642,425
- -----------------------------------------------------------------------------------------------------------------------------------
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 48,787 46,798 46,730
Unrealized Gains(Losses) on Securities Available for Sale, Net of Tax Effect (1,019) 583 1,647
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 76,849 76,462 77,458
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $784,333 $700,379 $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 Nine Months Ended
September 30, September 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 $3,710 $2,446 $9,865 $7,285
Commercial Loans 4,505 3,981 12,916 11,874
Tax Exempt Loans 213 223 678 687
Real Estate Mortgage Loans 3,517 2,380 9,470 6,698
Interest on Securities Available for Sale
U.S. Treasury 883 712 3,750 2,521
U.S. Government Agencies 1,349 495 3,812 1,575
States and Political Subdivisions 151 0 469 0
Other 2 1 6 4
Interest on Securities Held to Maturity 0 2,106 0 6,323
Interest on Money Market Assets 48 223 156 447
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 14,378 12,567 41,122 37,414
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Demand Deposits 693 930 2,100 3,135
Interest on Savings Deposits 940 790 2,801 2,292
Interest on Time Deposits 4,327 3,244 11,825 8,581
Interest on Other Liabilities 160 106 467 667
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 6,120 5,070 17,193 14,675
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 8,258 7,497 23,929 22,739
Provision for Possible Loan Losses 573 165 1,418 508
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 7,685 7,332 22,511 22,231
- ----------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
Trust Income 517 502 1,545 1,506
Service Charges on Deposit Accounts 874 721 2,489 1,965
Fees for Other Services to Customers 316 431 910 1,068
Securities Gains 114 1 491 30
Other Income 40 21 283 112
- ----------------------------------------------------------------------------------------------------------------------------------
Total Non-Interest Income 1,861 1,676 5,718 4,681
- ----------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSES:
Salaries and Wages 2,795 2,585 7,833 7,795
Employee Benefits 509 594 1,808 2,011
Occupancy Expenses 604 657 1,888 1,890
Furniture and Equipment Expenses 617 623 1,830 1,832
FDIC Insurance Premiums 1 (21) 4 628
Restructuring Charge 0 981 1,102 981
Other Operating Expenses 2,285 2,168 7,163 6,275
- ----------------------------------------------------------------------------------------------------------------------------------
Total Non-Interest Expenses 6,811 7,587 21,628 21,412
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Provision for Federal Income Tax 2,735 1,421 6,601 5,500
Provision for Federal Income Tax 840 410 2,022 1,657
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $1,895 $1,011 $4,579 $3,843
==================================================================================================================================
Per Share Data:
Net Income Per Common Share $0.67 $0.36 $1.63 $1.37
Average Number of Shares Outstanding 2,802,810 2,804,671 2,803,028 2,803,132
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) Nine Months Ended
September 30,
(In Thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
Cash Flows from Operating Activities:
Interest and Fees Received $48,165 $42,858
Interest Paid ($16,908) (14,013)
Cash Paid to Suppliers and Employees (17,887) (17,612)
Income Taxes Paid (2,210) (1,928)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 11,160 9,305
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from Sale of Securities Available for Sale 105,357 9,044
Proceeds from Maturities/Calls of Securities Available for Sale 22,800 25,000
Proceeds from Maturities/Calls of Securities Held to Maturity 0 1,560
Purchase of Securities Available for Sale (67,358) (5,000)
Net Increase in Loans (139,607) (19,259)
Net (Increase) Decrease in Other Real Estate Owned (364) 337
Proceeds from Sale of Premises and Equipment 711 0
Capital Expenditures (845) (952)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (79,306) 10,730
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Repayment of Note Payable (1,425) (1,425)
Net Increase (Decrease) in Deposits and Short-Term Liabilities 64,217 (23,595)
Cash Dividends Paid (2,521) (2,521)
Payment of Capital Lease Obligations (13) (11)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities 60,258 (27,552)
- ----------------------------------------------------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (7,888) (7,517)
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of Year 38,858 54,658
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $30,970 $47,141
============================================================================================================================
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net Income $4,579 $3,843
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Depreciation and Amortization 1,335 1,409
Amortization of Net Premium on Purchased Subsidiary 895 986
Amortization of Discount and Premiums on
Investment Securities, Net 485 753
Provision for Possible Loan Losses 1,418 508
Securities Gains (490) (30)
Decrease in Income Earned Not Received 1,336 56
(Increase) Decrease in Other Assets 927 212
Gain on Sale of Premises and Equipment (4) (33)
Increase (Decrease) in Interest Payable 284 680
Increase (Decrease) in Income Taxes Payable (188) (272)
Increase in Accrued Expenses 583 1,193
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities $11,160 $9,305
============================================================================================================================
</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 SEPTEMBER 30, 1996
<TABLE>
<S> <C>
Funding Sources:
Cash & Cash Equivalent $ 7,888
Investment Securities 60,799
Deposits 57,741
Short Term Interest Bearing Liabilities 6,476
Operating Activities 11,160
Sale of Premises & Equip. 711
--------
$ 144,775
========
Funding Uses:
Loans $ 139,607
Cash Dividends 2,521
Capital Expenditures 845
Repayment of Note and Capital Leases 1,438
Other Real Estate Owned 364
--------
Total Uses $ 144,775
========
</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 $136.4 million as of
September 30, 1996 from the totals reported at December 31, 1995. Consumer
loans increased $48.9 million from the December 31, 1995 balance due to strong
demand for new automobiles and the entry of CB North into the indirect
automobile financing market. Commercial loans, excluding tax exempt loans,
were $204.1 million as of September 30, 1996, an increase of $26.1 million from
the $177.9 million at December 31, 1995 which reflects a focus on business
development of the small business market. Mortgage loans posted an increase of
$63.0 million through September 30, 1996 from the total of $126.0 million as of
December 31, 1995.
Time deposits increased $79.5 million over the December 31, 1995 balance which
was offset by decreases in all other deposit categories of $21.7 million. The
increase in time account balances resulted from marketing efforts and pricing
strategy to attract additional funds and the migration of funds from demand and
savings accounts. Short term interest bearing liabilities including federal
funds purchased have increased $6.5 million from the December 31, 1995 balances
as funds from operating activities have increased.
7
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
During the first nine 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 September 30, 1996 is more than
adequate to meet its future cash flow needs. Management also closely monitors
capital levels to provide for normal business needs and to comply with
regulatory requirements. As summarized below, the Corporation's capital ratios
were well in excess of the regulatory requirements for classification as "Well
Capitalized":
<TABLE>
<CAPTION>
Regulatory
Minimum for September 30,
"Well Capitalized" 1996 1995
------------------ ------- -------
<S> <C> <C> <C>
Total Capital 10% 13.74% 18.45%
Tier I Capital 6 12.95 17.44
Tier I Leverage Ratio 5 9.11 10.00
</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 Nine Months Ended
September 30, 1996 & 1995 September 30, 1996 and 1995
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
Interest Income $1,811 14.4% $3,708 9.9%
Interest Expense 1,050 20.7 2,518 17.2
----- -----
Net Interest Income 761 10.2 1,190 5.2
Provision for loan losses 408 247.3 910 179.1
----- -----
Net interest income after provision
for loan losses 353 4.8 280 1.3
Other Income 185 11.0 1,037 22.2
Restructuring Expense (981) 121 12.3
Other Expenses 205 3.1 95 .5
----- -----
Income before income tax 1,314 92.5 1,101 20.0
Income Tax Expense 430 104.9 365 22.0
----- -----
Net Income $ 884 87.4 736 19.2
==== =====
</TABLE>
A summary of the components of the net interest margin computation on a tax
equivalent basis for the nine month periods ending September 30, 1996 and 1995
is presented in the following table:
<TABLE>
<CAPTION>
9/30/96 9/30/95
<S> <C> <C>
Interest on Earning Assets 8.19% 8.11%
Interest on Interest Bearing Liabilities 4.16 3.84
Interest Expense Related to Earning Assets 3.38 3.13
Net Interest Margin 4.81 4.98
</TABLE>
8
<PAGE> 9
NET INTEREST INCOME
Interest income increased $3,708,000 (9.9%) through September 30, 1996 over the
amount reported for the same period of 1995. Income on total loans improved
$6.4 million in 1996 over 1995 due to increase in volume which was offset by a
reduction in interest rates. Earnings for the securities portfolio declined
$2.4 million as a result of lower volume. Interest expense for the two
comparable periods increased $2,518,000 (17.2%) in 1996 due to higher deposit
balances, shift in deposit product mix and higher interest rates. Net interest
income increased $1,190,000 (5.2%) 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.
Overall loan growth of consumer loans in 1995 and 1996 resulted from indirect
auto financing which provides increased profit opportunities along with the
potential for increased delinquencies and charge-offs. The banking industry as
a whole is experiencing an increase in delinquency and charge-offs of consumer
loans. This trend created a higher than historical loan delinquency and
charge-offs for CB Financial Corporation. Strategies have been initiated to
balance consumer loan growth while adhering to high credit standards and
aggressive collection efforts of delinquent loans.
The increase in the loan loss provision during the first nine months of 1996 of
$910,000 or 179.1% reflects increased loan volume and higher net charge offs
recorded in 1996. The reserve for possible loan losses as of September 30,
1996 and 1995 was $4,240,000 and $4,021,000, an increase of $219,000 or 5.4%.
Net loan charge offs for the nine month period ending September 30, 1996 and
1995 were $1,112,000 and $352,000, respectively. Expressed as a percent of
average loans outstanding, the average reserve for possible loan losses was
.77%, 1.00% and .98% as of September 30, 1996, September 30, 1995 and December
31, 1995, respectively. A new software package is in use to analyze coverage
by specific loan types. The Corporation's reserve for possible loan losses is
evaluated quarterly for adequate coverage. Based on historical and projected
performance within the loan portfolio management considers the reserve to be
adequate. When loan portfolios are compared, much of the loan growth
experienced over the past years has occurred in residential real estate loans,
many of which are being packaged for sale in the secondary market, eliminating
the need for reserves, also, this portion of the loan portfolio has a history
of very little losses which further negates the need for a reserve.
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 $1,416,000 at September 30, 1996,
$1,116,000 at September 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 $1,137,000 or 80.3 percent of total impaired loans at September
30, 1996. The loans classified as impaired are well collateralized and no
specific amount of the loan loss reserve has been allocated to the impaired
loans.
9
<PAGE> 10
The average balance of impaired loans was $1,307,000 for the nine month period
ending September 30, 1996. Interest income recognized during the time the
loans were impaired was $18,300 of which $11,500 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 $1,556,000, $1,602,000 and
$1,697,000 at September 30, 1996, September 30, 1995 and December 31, 1995,
respectively. In addition to the loans classified as nonperforming, there are
other potential problem loans of $1,312,000 at September 30, 1996 that
management is closely monitoring the borrowers ability to comply with repayment
terms, but existing conditions do not warrant either a partial charge-off or
classification as non-performing.
OTHER INCOME
Total non-interest income amounted to $5,718,000 and $4,681,000 for the nine
months ended September 30, 1996 and 1995, respectively. Trust income was
$1,545,000 and $1,506,000 for each period, an increase of $39,000 which
resulted from a revised fee schedule in the fourth quarter, 1995. Service
charge income was $2,489,000 and $1,965,000, an increase of $524,000 in 1996
over 1995 due to a revised schedule of fees implemented in the second quarter,
1995. Security gains of $491,000 and $30,000 were recognized in the nine
months ended September 30, 1996 and 1995, respectively. Other income was
$283,000 and $112,000 at September 30, 1996 and 1995 which resulted from
additional gains on loans sold, the adoption of the Statement of Financial
Accounting Standard No. 122 and a litigation settlement of $100,000.
OTHER EXPENSES
Other non-interest expenses amounted to $21,628,000 and $21,412,000 for the
nine months ended September 30, 1996 and 1995, an increase of $216,000 or 1.0%.
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
NINE MONTHS ENDED
AMOUNT AMOUNT
AT AT AMOUNT PERCENT
9/30/96 9/30/95 VARIANCE VARIANCE
------- ------- -------- --------
<S> <C> <C> <C> <C>
Salaries & Employee Benefits $ 9,641 $ 9,806 $ (165) (1.7)%
Occupancy, Furniture & Equipment 3,718 3,722 (4) (.1)
Marketing, Advertising and
Public Relations 552 476 76 16.0
Stationery & Supplies 487 416 71 17.1
FDIC Premium Expense 4 628 (624) (99.4)
Postage Express and Freight 616 505 111 22.0
Merchant Bank Expense 660 590 70 11.9
Restructure Charge 1,102 981 121 12.3
Amortization of Goodwill and Premium
on Core Deposits 877 960 (83) (8.6)
Other Operating Expense 3,971 3,328 643 19.3
------- ------- ---
Total Non-Interest Expenses $ 21,628 $ 21,412 $ 216 1.0%
======== ======== ======
</TABLE>
10
<PAGE> 11
The decrease in salaries and employee benefits is due to a reduction in average
FTE's of 14.7 at September 30, 1996 compared to September 30, 1995 which was
partially offset by increases due to normal performance evaluations. The
increase in marketing, advertising and public relations expenditures 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, outsourcing messengers and the internal audit function,
telephone, consultant fees, etc. The increase in other operating expenses
which resulted from outsourcing messengers and the internal audit function were
offset by a reduction in salaries and employee benefits.
The corporation recorded a restructuring charge of $1.1 million in the second
quarter of 1996 and $981,000 in the third quarter of 1995. This charge in 1996
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. Two (2)
offices were closed in August, 1996. During September, 1996, three (3) offices
were consolidated with other nearby offices and one (1) was relocated from a
supermarket to a free-standing facility nearby. It is anticipated that this
restructuring charge will be recovered by the corporation through lower
operating costs over a 2-3 year period. The restructure charge of $981,000 in
the third quarter of 1995 resulted from an early retirement program offered to
employees.
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 nine month periods ended September 30, 1996 and 1995 was
$2,022,000 and $1,657,000, an increase of $365,000, which reflects an increase
in operating income.
Part II. OTHER INFORMATION
Item 6. Exhibit and Report on Form 8-K:
(a) Exhibit 10: Employment Agreement and Amendment Number 1 -
Supplemental Retirement Benefit Agreement
(b) A Form 8-K Report was not filed during the three months ended
September 30, 1996.
(c) Exhibit 27: Financial Data Schedule
11
<PAGE> 12
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: /s/ A. Wayne Klump
------------------------
A. Wayne Klump
Senior Vice President
Chief Financial Officer
and Treasurer
Dated: November 13, 1996
12
<PAGE> 13
CB FINANCIAL
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
10 Employment Agreement and Amendment
Number 1 - Supplemental Retirement
Benefit Agreement
27 Financial Data Schedule
13
<PAGE> 1
EXHIBIT 10
EMPLOYMENT AGREEMENT
This Agreement is effective as of October 22, 1996 between CB
FINANCIAL CORPORATION, a Michigan Corporation with an office at One Jackson
Square, Jackson, Michigan 49201 (the "Company") and
BRIAN D. BELL
whose address is: 3410 Vrooman Rd.
------------------------
Jackson, MI 49201
------------------------
(the "Employee")
W I T N E S S E T H
WHEREAS, the Employee has been employed by the Company or the
Company's subsidiary, City Bank & Trust Company, most recently as Chairman and
CEO of the Company; and
WHEREAS, the Company recognizes the unique value and experience that
the Employee provides to the Company and its shareholders due to the Employee's
long and distinguished career with the Company; and
WHEREAS, the Company wishes to provide an incentive to the Employee to
remain employed by the Company for at least a three year period; and
WHEREAS, it is in the best interests of the Company to secure the
continued services of the Employee regardless of a change in control of the
Company; and
WHEREAS, the Company is willing, in order to provide the Employee a
measure of security with respect to his employment with the Company in the
event of a change in control of the Company so that the Employee will be in a
position to act with respect to a possible change in control of the Company in
the interests of CB Financial Corporation and its
<PAGE> 2
shareholders, without concern as to the Employee's own financial security, and
in order to induce the Employee to remain in employment with the Company, to
agree that employment of the Employee shall be terminable only for cause for a
limited period after a change in control of the Company.
NOW, THEREFORE, the Company and the Employee agree as follows:
SECTION 1
EMPLOYMENT
1.1 TERM. The Company shall employ the Employee and the Employee
shall remain in employment with the Company for a period commencing with the
effective date of this Agreement and ending on September 1, 1999 (the "Initial
Term") unless terminated prior to the expiration of the Initial Term pursuant
to Section 2.
1.2 COMPENSATION. As compensation for services provided to the
Company by the Employee pursuant to this Agreement, the Company shall pay the
Employee the salary the Employee is earning as of the effective date of this
Agreement. Effective January 1, 1997, and in lieu of the afformentioned
salary, the Company shall pay the Employee the salary set forth in Appendix A,
which salary may be increased from time to time by the Company. The Company
shall pay such salary to Employee in accordance with its normal payroll
practices. The Employee shall also be eligible to actively participate in any
other compensation and benefit plans generally available to executive employees
of the Company of like grade and salary including, but not limited to,
retirement plans, group life, disability, accidental death and dismemberment,
travel and accident, health and dental insurance plans and stock option plans.
Employee shall also be entitled to the benefits described in the Supplemental
Retirement Benefit
2
<PAGE> 3
Agreement, dated November 15, 1994 by and between the Company and Employee,
pursuant to its terms. The above mentioned compensation and benefit plans are
hereinafter referred to collectively as the "Compensation and Benefit Plans".
In the event the Company adopts additional compensation or benefit plans after
the date of this Agreement, the Board of Directors of the Company shall have
the discretion to determine whether or not Employee shall participate in such
additional compensation or benefit plans. Employee shall also be entitled to
the use of an automobile, the expense for which shall be paid for by the
Company. Title to such automobile shall be transferred to Employee upon
completion by Employee of the services provided for in this Agreement, or, in
the event of the Employee's termination of employment following a Change in
Control, as hereinafter defined, for any reason other than cause, upon such
termination of employment.
1.3 DUTIES. The Employee shall perform such duties and functions
as are assigned to him by the Board of Directors of the Company, or by a duly
authorized committee of the Board of Directors of the Company, and which are
appropriate for a Chief Executive Officer or Chairman of the Board of a bank
holding company. The Employee shall continue to serve as: (i) Chief Executive
Officer and Chairman of the Board of Directors of the Company, subject to his
removal in accordance with the by-laws of the Company, and (ii) President and
Chief Executive Officer of City Bank and Trust Company, subject to his removal
in accordance with the by-laws of City Bank and Trust Company.
The Company and the Employee recognize that the salary established by
Appendix A is significantly less than the salary earned by the Employee as
Chairman and CEO of the Company. The Company anticipates that the duties to be
assigned by the Board of Directors
3
<PAGE> 4
as of January 1, 1997, will require substantial, but less than full-time,
employment. The Company reserves the right, by action of the Board of
Directors, to require the Employee to return to full-time employment with the
Company, in which case the Employee's salary shall be no lesser than his salary
as Chairman and CEO immediately prior to the effective date of this Agreement.
1.4 DUTY OF LOYALTY. The Employee shall work for the Company
only, provided that:
(a) he may also engage in charitable, civic and other
similar activities;
(b) with the consent of the Board of Directors of the
Company, he may serve as a director of a business
organization not competing with the Company; and
(c) he may make such investments and reinvestment in
business activities as shall not require a
substantial portion of his time.
1.5 DUTY NOT TO DISCLOSE CONFIDENTIAL INFORMATION. The Employee
acknowledges that his relationship with the Company is one of high trust and
confidence, and that he has access to Confidential Information (as hereinafter
defined) of the Company. The Employee shall not, directly or indirectly,
communicate, deliver, exhibit or provide any Confidential Information to any
person, firm, partnership, corporation, organization or entity, except as
required in the normal course of the Employee's duties. The duties contained
in this paragraph shall be binding upon the Employee during the time that he is
employed by the Company and following the termination of such employment. Such
duties will not apply to any such Confidential Information which is or becomes
in the public domain through no action on the part of the Employee, is
generally disclosed to third parties by the Company without restriction on such
third parties, or is approved for release by written authorization of the Board
of Directors of the Company. The term "Confidential Information" shall mean
any and all confidential, proprietary,
4
<PAGE> 5
or secret information relating to the Company's business, services, customers,
business operations, or activities and any and all trade secrets, products,
methods of conducting business, information, skills, knowledge, ideas, know-how
or devices used in, developed by, or pertaining to the Company's business and
not generally known, in whole or in part, in any trade or industry in which the
Company is engaged.
SECTION 2
TERMINATION
2.1 TERMINATION OF AGREEMENT. Unless sooner terminated in
accordance with the terms of this Section 2, this Agreement shall terminate at
the expiration of the Initial Term, and all obligations hereunder shall
terminate except as specifically set forth in Section 2.5. Notwithstanding the
foregoing, provided that the Employee remains employed until expiration of the
Initial Term, the Company shall continue to provide retiree medical coverage to
the Employee and the Employee's spouse at the same level of coverage that is
provided as of the date of the termination of this Agreement to employees of
the Company, who retire at or after age 60, with 25 or more years of service.
The Employee may, with the consent of the Company, continue in the employ of
the Company after the expiration of the Initial Term on such terms and
conditions as may be agreed upon by the Company and the Employee.
2.2 TERMINATION BY THE EMPLOYEE. The Employee may voluntarily
terminate this Agreement by providing two weeks notice to the Company, in which
event the Company shall have no further obligation to the Employee hereunder
from the date of such termination and the Employee shall have no further
obligation to the Company hereunder except the duty to not disclose
Confidential Information in accordance with Section 1.5 and the duty not to
compete
5
<PAGE> 6
in accordance with Section 2.6. In the event the Employee's employment with
the Company is terminated due to the Employee's death, the Company shall have
no further obligation under this Agreement to the Employee, his heirs or
legatees hereunder from the date of such termination except to provide retiree
medical coverage to the Employee's spouse at the same level that is provided as
of the date of Employee's death to employees of the Company, who retire at or
after age 60, with 25 or more years of service. In the event the Employee's
employment with the Company is terminated due to the Employee's permanent
disability, the Company shall continue to make salary payments and to provide
benefits under the Company's dental and health plans to the Employee for the
remaining period of the Initial Term and the Company shall provide retiree
medical coverage to the Employee's spouse at the same level that is provided as
of the date of Employee's death to employees of the Company, who retire at or
after age 60, with 25 or more years of service. Such payments shall be reduced
by the amount of any other Company disability benefits paid to Employee during
the Initial Term.
For purposes of this Agreement, the term "Permanent Disability" means
a physical or mental condition of the Employee which:
(a) has continued uninterrupted for six months;
(b) is expected to continue indefinitely; and
(c) is determined by the Company to render the Employee
incapable of adequately performing his duties under
Section 1.3 of this Agreement.
2.3 TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may
terminate this Agreement without cause prior to a Change in Control, as defined
in Section 2.8, by providing two weeks notice to the Employee. In such event,
the Employee shall have no further obligation to the Company hereunder, except
the duty to not disclose Confidential Information
6
<PAGE> 7
in accordance with Section 1.5 and the duty not to compete in accordance with
Section 2.6, and the Company shall have no further obligation to the Employee
hereunder from the date of such termination except the obligation to (i) make
salary payments, (ii) permit the Employee to continue active participation in
employee benefit plans, in accordance with the Company's severance program in
effect on the date of such termination, (iii) provide retiree medical coverage
to the Employee and the Employee's spouse at the same level of coverage that is
provided as of the date of the Employee's termination of employment to
employees of the Company, who retire from the Company at or after age 60, with
25 or more years of service; and (iv) continue to provide to Employee the
benefits described in the Supplemental Retirement Benefit Agreement, dated
November 15, 1994.
2.4 TERMINATION BY THE COMPANY WITH CAUSE. The Company, by
resolution of its Board of Directors, may terminate this Agreement by providing
the Employee with notice, which may be provided as late as the effective date
of such termination, if the Employee:
(a) willfully engages in conduct that materially injures
the Company; or
(b) willfully and materially breaches the provisions of
this Agreement.
In such event, the Company will have no further obligation to the Employee
under the Agreement from the date of such termination. No action, or failure
to act, shall be considered "willful" if it is done by the executive in good
faith and with reasonable belief that his action or omission was in the best
interest of the Company.
2.5 TERMINATION FOLLOWING CHANGE IN CONTROL. In the event there
is a Change in Control of the Company, as defined in Section 2.8, during the
Initial Term, and within the Initial Term, either:
7
<PAGE> 8
(a) the Employee's employment hereunder is terminated by
the Company other than with cause under Section 2.4;
or
(b) the Employee resigns from his employment hereunder
upon thirty days written notice given to the Company
within thirty days following a material change in the
Employee's title, authorities or duties, in effect
immediately prior to the Change in Control, a
reduction in the compensation or a reduction in
benefits provided pursuant to this Agreement or the
Compensation and Benefit Plans (other than a
reduction resulting from the computation of incentive
award payments pursuant to the Compensation and
Benefit Plans) below the amount of compensation and
benefits in effect immediately prior to the Change in
Control, or a change of the Employee's principal
place of employment without his consent to a city
different from the city which is the principal place
of the Employee's employment immediately prior to the
Change in Control, then:
the Employee shall, for the remainder of the Initial Term, (A) continue to
receive salary under Section 1.2 at the greater of the rate in effect at the
time of his termination of employment or the rate in effect immediately prior
to the Change in Control, and (B) continue to actively participate in the
Compensation and Benefit Plans, except as otherwise provided below, that he
actively participated in at the time of such termination of employment as
though he continued in the employment of the Company (without regard to any
amendment or termination of the Compensation and Benefit Plans made on or after
the date of a Change in Control); provided, however, that any benefit to be
provided by a Compensation and Benefit Plan under subclause (B) above may be
provided by the Company through cash of equivalent value or through a
nonqualified arrangement or arrangements if, in the judgment of the Company,
permitting the Employee to participate in such plan after his termination of
employment would adversely affect the tax status of such plan; and
The Company's obligation to make payments under Section 2.5
shall not be affected by the earnings or any other income of the Employee,
except to the extent provided in
8
<PAGE> 9
the non-compete provisions contained in Section 2.6. To the extent benefits to
be provided pursuant to Section 2.5 are determined on the basis of the
Employee's compensation, the compensation to be used to determine such benefits
after the Employee's termination of employment shall be the greater of the
Employee's compensation used to determine such benefits immediately prior to
the Change in Control or the Employee's compensation used to determine such
benefits immediately prior to the Employee's termination of employment. To the
extent that benefits to be provided by the Company pursuant to this Section 2.5
are matching contributions pursuant to the Company Retirement Savings Plan, the
amount of matching contributions to be paid by the Company in any year
following the date of the Employee's termination of employment shall be the
greater of the amount of the matching contribution made by the Company for the
most recent plan year that ended prior to the Change in Control or the amount
of matching contributions made by the Company for the most recent plan year
that ended prior to the Employee's termination of employment. To the extent
benefits payable pursuant to this Section 2.5 are determined by reference to
the Employee's years of service with the Company, such as the determination of
the Employee's accrued benefits under the Company's qualified or nonqualified
retirement plans, such years of service shall be determined by including years
that occur during the Initial Term, regardless of whether the Employee elects
to receive salary payments payable to him pursuant to Section 2.5 in a lump-sum
payment.
In addition to the medical benefits to be provided to the Employee
during the Initial Term, in the event of a termination of employment under
Section 2.5(a) or (b), the Employee shall be entitled to receive retiree
medical coverage at the same level of coverage provided by
9
<PAGE> 10
the Company to its retirees immediately prior to the change in control, or, if
greater, at the level of coverage provided to retirees of the Company at the
time of the Employee's termination of employment.
2.6 NON-COMPETE PROVISIONS. In the event of the termination of
the Employee's employment for any reason, the Employee agrees not to compete
with the Company, pursuant to the following terms and conditions.
For the period of two years from and after the date of the such
termination of employment, the Employee shall not engage in any employment
activity or directly or indirectly own (except for passive investments in which
the Employee owns less than a 50% ownership interest), manage, operate, control
or be employed by, participate in or be connected in any manner with the
ownership, operation or control of any business that provides commercial,
retail or mortgage lending services or sells financial products or services,
which are competitive with or substantially similar to the commercial, retail,
mortgage, trust, investment or insurance services or products of the Company,
its subsidiaries and other affiliates, at any location in the State of
Michigan.
If any court shall determine that the duration or geographical limit
of any restriction contained in this covenant not to compete (the "Covenant")
is unenforceable under applicable law, this Covenant shall not thereby be
terminated, but shall be deemed amended to the extent required to render it
valid and enforceable, such amendment to apply only with respect to the
operation of the Covenant in the jurisdiction of the Court that has made such
determination.
10
<PAGE> 11
Other than amendments that are deemed to be made pursuant to the
preceding paragraph of this Agreement, no change or modification of this
Covenant shall be valid unless the same be in writing and signed by the Company
and Employee.
Upon a breach by Employee of this Covenant, the Company shall be
entitled to recover, as liquidated damages, the Employee's annual base salary
in effect on the date of the Employee's termination of employment. This amount
shall be deducted from the payments due to the Employee pursuant to Section 2.5
of this Agreement. In the event that all payments pursuant to Section 2.5 have
been made to the Employee, the Employee shall pay the aforementioned amount to
the Company.
If any legal action or proceeding is brought for the enforcement of
this Covenant, or because of an alleged dispute, breach, default or
misrepresentation in connection with this Covenant, the successful or
prevailing party in such action shall be entitled to recover reasonable
attorneys' fees and costs connected with such action or proceeding in addition
to all other recovery or relief.
2.7 TIMING OF PAYMENTS. All payments to be made in cash
pursuant to Section 2.5 shall be paid in a single lump-sum payment, payable
within sixty days following the Employee's termination of employment. Any
lump-sum payment to be made to the Employee shall be equal to the present value
of the payments otherwise payable to the Employee, using an interest rate
assumption equal to the annual, short-term, applicable federal interest rate,
as determined for the month during which the lump-sum payment is made pursuant
to Section 1274(d) of the Internal Revenue Code of 1986. In addition to the
lump-sum payment described above, the Company shall pay the Employee an
additional amount equal to the present value of the additional federal income
taxes for which Employee becomes liable as a result of the payments
11
<PAGE> 12
under this Agreement in the form of a lump-sum, rather than over the term of
this Agreement. The determination of the amount of payments under this section
shall be made by an accounting firm mutually acceptable to the Company and the
Employee.
2.8 CHANGE IN CONTROL DEFINED. A Change in Control of the Company
shall have occurred:
(a) on the fifth day preceding the scheduled expiration
date of a tender offer by, or exchange offer by any
corporation, person, other entity or group (other
than the Company or any of its wholly owned
subsidiaries), to acquire Voting Stock of the Company
if:
(i) after giving effect to such offer such
corporation, person, other entity or group
would own 25% or more of the Voting Stock of
the Company;
(ii) there shall have been filed documents with
the Securities and Exchange Commission in
connection therewith (or, if no such filing
is required, public evidence that the offer
has already commenced); and
(iii) such corporation, person, other entity or
group has secured all required regulatory
approvals to own or control 25% or more of
the Voting Stock of the Company;
(b) if the shareholders of the Company approve a
definitive agreement to merge or consolidate the
Company with or into another corporation in a
transaction in which neither the Company nor any of
its wholly owned subsidiaries will be the surviving
corporation, or to sell or otherwise dispose of all
or substantially all of the Company's assets to any
corporation, person, other entity or group (other
that the Company or any of its wholly owned
subsidiaries), and such definitive agreement is
consummated;
(c) if any corporation, person, other entity or group
(other than the Company or any of its wholly owned
subsidiaries) becomes the Beneficial Owner (as
defined in the Company's Articles of Incorporation)
of stock representing 25% or more of the Voting Stock
of the Company; or
(d) if during any period of two consecutive years
Continuing Directors cease to comprise a majority of
the Company's Board of Directors.
12
<PAGE> 13
The term "Continuing Director" means:
(a) any member of the Board of Directors of the Company
at the beginning of any period of two consecutive
years; and
(b) any person who subsequently becomes a member of the
Board of Directors of the Company; if
(i) such person's nomination for election or
election to the Board of Directors of the
Company is recommended or approved by
resolution of a majority of the Continuing
Directors; or
(ii) such person is included as a nominee in a
proxy statement of the Company distributed
when a majority of the Board of Directors of
the Company consists of Continuing Directors.
"Voting Stock" shall mean those shares of the Company entitled
to vote generally in the election of directors.
2.9 NO OBLIGATION TO REIMBURSE FOR TAXES. Except as provided in
Section 2.7 of this Agreement The Company shall not be obligated to reimburse
the Employee due to the Employee's liability to pay any applicable federal or
state income, employment or excise taxes which result from any payments made
pursuant to this Agreement.
2.10 EMPLOYEE'S COSTS OF ENFORCEMENT. The Company shall pay all
expenses of the Employee, including but not limited to attorney fees, incurred
in enforcing payments by the Company pursuant to this Agreement.
2.11 REDUCTION OF SALARY PAYMENTS. If payments or benefits under
this Agreement, after taking into account all other payments or benefits to
which the Employee is entitled from the Company (and which are in whole or in
part considered contingent upon a Change in Control), are expected to result in
an excise tax to the Employee or the loss of certain tax deductions by the
Company by reason of Sections 280G and 4999 of the Internal Revenue Code of
1986 or any successor provisions to those Sections, salary payments under
Section 2.5(b)(i)
13
<PAGE> 14
shall be reduced by the least amount required to avoid such excise tax and loss
of deductions unless the failure to reduce such salary payments would be
financially beneficial to the Employee. The failure to reduce such salary
payments will be financially beneficial to the Employee if it results in an
after-tax value to the Employee of all payments and benefits referenced in the
preceding sentence, despite the application of the excise tax and income tax,
which value is greater than the after-tax value the Employee would realize if
salary payments were reduced to avoid the application of the excise tax. If
the Employee and the Company shall disagree as to whether a payment under this
Agreement could result in the loss of a deduction, the matter shall be resolved
by an opinion of Howard and Howard Attorneys, or if Howard & Howard Attorneys
is unable to provide such an opinion, counsel selected by the Company, and
agreed to by the Employee. Counsel's opinion need not be unqualified. The
Company shall choose a consulting firm, agreed to by the Employee, which shall
provide Counsel with a determination of the base amount and excess parachute
payments, as such terms are defined by Section 280G of the Code or its
successor. Counsel's opinion shall be based on these determinations. The
Company shall pay the fees and expenses of such counsel and consulting firm,
and shall make available such information as may be reasonably requested by
such counsel and consulting firm to prepare the opinion. If the maximum amount
payable to the Employee pursuant to this Section 2.11 cannot be determined
prior to the due date for such payment, the Company shall pay on the due date
the minimum amount which it in good faith determines to be payable, and shall
pay the remaining amount as soon as practicable after such remaining amount is
determined.
14
<PAGE> 15
SECTION 3
MISCELLANEOUS
3.1 ASSIGNMENT OF EMPLOYEE'S RIGHTS The Employee may not assign,
pledge or otherwise transfer any of the benefits of this Agreement either
before or after termination of employment, and any purported assignment,
pledge or transfer of any payment to be made by the Company hereunder shall be
void and of no effect. No payment to be made to the Employee hereunder shall
be subject to the claims of creditors of the Employee.
3.2 AGREEMENTS BINDING ON SUCCESSORS. This Agreement shall be
binding and inure to the benefit of the parties hereto and their respective
successors, assigns, personal representatives, heirs, legatees and
beneficiaries.
3.3 NOTICES. Any notice required or desired to be given under
this Agreement shall be deemed given if in writing and sent by first class mail
to the Employee or the Company at his or its address as set forth above, or to
such other address of which either the Employee or the Company shall notify the
other in writing.
3.4 WAIVER OF BREACH. The waiver by either party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by either the Employee or the Company.
3.5 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties. It may be modified or amended only by an
agreement in writing signed by the party against whom enforcement of any change
or amendment is sought.
3.6 SEVERABILITY OF PROVISIONS. If for any reason any paragraph,
term or provision of this Agreement is held to be invalid or unenforceable, all
other valid provisions herein shall remain in full force and effect and all
paragraphs, terms and provisions of this Agreement shall be deemed to be
severable in nature.
15
<PAGE> 16
3.7 GOVERNING LAW. This Agreement is made in, and shall be
governed by, the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
B. D. Bell
----------------------------------
Employee
CB FINANCIAL CORPORATION
Attest:
Karen R. Gamin By: A. Wayne Klump
- ------------------------- ------------------------------------
Secretary Senior Vice President, Chief
Its: Financial Officer and Treasurer
------------------------------------
16
<PAGE> 17
APPENDIX A TO
MANAGEMENT CONTINUITY AGREEMENT BETWEEN
CB FINANCIAL CORPORATION AND
BRIAN D. BELL
Title: Chairman and Chief Executive Officer
CB Financial Corporation
Employee's Salary as of
effective date of Agreement: $ 136,377
<PAGE> 18
AMENDMENT #1
CB FINANCIAL CORPORATION
SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENT
WHEREAS, CB Financial Corporation (the "Corporation") and Brian D.
Bell (the "Employee") are parties to a Supplemental Retirement Benefit
Agreement (the "Agreement") dated November 15, 1994; and
WHEREAS, the Corporation and Employer wish to amend the Agreement to
specify the benefits that will be payable to Employee pursuant to the Agreement
in the event of a Change in Control of the Corporation.
NOW, THEREFORE, the Agreement is amended as follows:
1. Section 1(A) of the Agreement is amended to add the following
provisions at the end of said Section:
In the event the Employee is employed by the
Corporation on the date of a Change in Control of the
Corporation prior to December 1, 1999, the
nonforfeitable percentage of the Employee's benefit
under the Agreement shall be 100%. For purposes of
this Agreement, a Change in Control shall have
occurred:
(a) on the fifth day preceding the scheduled expiration
date of a tender offer by, or exchange offer by any
corporation, person, other entity or group (other
than the Company or any of its wholly owned
subsidiaries), to acquire Voting Stock of the Company
if:
(i) after giving effect to such offer such
corporation, person, other entity or group
would own 25% or more of the Voting Stock of
the Company;
(ii) there shall have been filed documents with
the Securities and Exchange Commission in
connection therewith (or, if no such filing
is required, public evidence that the offer
has already commenced); and
(iii) such corporation, person, other entity or
group has secured all required regulatory
approvals to own or control 25% or more of
the Voting Stock of the Company;
(b) if the shareholders of the Company approve a
definitive agreement to merge or consolidate the
Company with or into another corporation in a
transaction in which neither the Company nor any of
its wholly owned subsidiaries will be the surviving
corporation, or to sell or otherwise dispose of all
or substantially all of the Company's assets to any
corporation, person, other entity or group (other
that the Company or any of its wholly owned
subsidiaries), and such definitive agreement is
consummated;
<PAGE> 19
(c) if any corporation, person, other entity or group
(other than the Company or any of its wholly owned
subsidiaries) becomes the Beneficial Owner (as
defined in the Company's Articles of Incorporation)
of stock representing 25% or more of the Voting Stock
of the Company; or
(d) if during any period of two consecutive years
Continuing Directors cease to comprise a majority of
the Company's Board of Directors.
The term "Continuing Director" means:
(a) any member of the Board of Directors of the Company
at the beginning of any period of two consecutive
years; and
(b) any person who subsequently becomes a member of the
Board of Directors of the Company; if
(i) such person's nomination for election or
election to the Board of Directors of the
Company is recommended or approved by
resolution of a majority of the Continuing
Directors; or
(ii) such person is included as a nominee in a
proxy statement of the Company distributed
when a majority of the Board of Directors of
the Company consists of Continuing Directors.
"Voting Stock" shall mean those shares of the Company entitled
to vote generally in the election of directors.
2. Section 2 of the Agreement is amended to provide as follows:
In the event of the Employee's retirement or
termination of employment following a Change in
Control of the Corporation, the benefit payable to
Employer shall be determined as set forth above in
this Section 2, except that such benefit shall not be
less than $28,964 per year, for the remainder of the
Employee's lifetime.
CB FINANCIAL CORPORATION
-----------------------------------
By: A. Wayne Klump
-----------------------------------
Senior Vice President, Chief
Its: Financial Officer and Treasurer
-----------------------------------
B. D. Bell
-----------------------------------
Brian D. Bell
Dated: 10/22/96
--------------
2
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 29,509
<INT-BEARING-DEPOSITS> 1,461
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 146,910
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 577,378
<ALLOWANCE> 4,240
<TOTAL-ASSETS> 784,333
<DEPOSITS> 680,201
<SHORT-TERM> 12,990
<LIABILITIES-OTHER> 11,120
<LONG-TERM> 3,173
0
0
<COMMON> 21,008
<OTHER-SE> 55,841
<TOTAL-LIABILITIES-AND-EQUITY> 784,333
<INTEREST-LOAN> 32,929
<INTEREST-INVEST> 8,037
<INTEREST-OTHER> 156
<INTEREST-TOTAL> 41,122
<INTEREST-DEPOSIT> 16,726
<INTEREST-EXPENSE> 467
<INTEREST-INCOME-NET> 23,929
<LOAN-LOSSES> 1,418
<SECURITIES-GAINS> 491
<EXPENSE-OTHER> 21,628
<INCOME-PRETAX> 6,601
<INCOME-PRE-EXTRAORDINARY> 6,601
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,579
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
<YIELD-ACTUAL> 4.81
<LOANS-NON> 928
<LOANS-PAST> 662
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,312
<ALLOWANCE-OPEN> 3,934
<CHARGE-OFFS> 1,522
<RECOVERIES> 410
<ALLOWANCE-CLOSE> 4,240
<ALLOWANCE-DOMESTIC> 3,142
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,098
</TABLE>
