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
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-10669
CB&T, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-1121054
(State or other jurisdiction of incorporation (I.R.S.
Employer or organization) Identification No.)
101 East Main Street, McMinnville, Tennessee
(Address of principal executive offices)
(Zip Code)
37110
(Registrant's telephone number, including area code)
(615) 473-2148
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of
September, 30 1995 270,058 shares.
This filing contains 13 pages.
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C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3
Consolidated Balance Sheets September 30, 1995
and December 31, 1994 (Unaudited) 4
Consolidated Statements of Income for the three
(3) month period and year-to-date ended
September 30, 1995 and 1994, respectively
(Unaudited) 5
Consolidated Statements of Cash Flows for the
year-to-date ended September 30, 1995
and 1994, respectively (Unaudited) 6
Management's Statement 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 12
Signatures 13
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C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
(THIS SPACE INTENTIONALLY LEFT BLANK)
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<TABLE>
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
McMinnville, Tennessee 37110
CONSOLIDATED BALANCE SHEET
<CAPTION>
September 30, December 31,
1995 1994
ASSETS (Dollars in Thousands)
<S> <C> <C> <C> <C>
Cash and due from banks $ 7,247 $ 9,434
Federal funds sold 2,050
Investment securities
available-for-sale (amortized
cost $50,373 and $60,643,
respectively) 51,255 59,583
Investment securities
held-to-maturity (fair value
$44,56 and $49,512,
respectively 43,964 50,736
TOTAL INVESTMENT SECURITIES $ 95,219 $ 110,319
Restricted equity securities 1,105 1,046
Loans 139,493 129,463
Allowances for credit losses (1,808) (1,733)
Unearned income (2,100) (1,593)
NET LOANS $ 135,585 $ 126,137
Interest receivable 3,035 2,942
Bank premises and equipment,
less allowances for
depreciation 2,221 2,372
Other assets 2,254 2,723
TOTAL ASSETS $ 248,716 $ 254,973
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 24,969 $ 26,919
Interest-bearing deposits
(other than time) 73,877 75,325
Time deposits lessthan $100M 84,209 79,308
Time deposits of $100M or more 24,195 31,269
TOTAL DEPOSITS $ 207,250 $ 212,821
Federal funds purchased 5,700
Accounts payable and
accrued liabilities 2,660 2,034
FHLB borrowings 9,378 7,821
TOTAL LIABILITIES $ 219,288 $ 228,376
SHAREHOLDERS' EQUITY:
Common Stock of 2.50 par
value: Authorized
1,000,000 shrs, issued
331,814 shrs including
61,756 and 59,325 Treasury
shrs in Sept. '95 and
Dec. '94, respectively $ 829 $ 829
Surplus 5,000 5,000
Undivided Profit s 27,847 25,974
$ 33,676 $ 31,803
Less cost of treasury shares (4,795) (4,549)
Net unrealized gains (losses)
on available for sale
securities, net of tax 547 ( 657)
TOTAL SHAREHOLDERS'
EQUITY $ 29,428 $ 26,597
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $ 248,716 $ 254,973
</TABLE>
<TABLE>
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C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
McMinnville, Tennessee 37110
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year-to-date
<CAPTION>
Three Months Ended Nine Month Ended
September 30 September 30 1995 1994 1995
1994
INTEREST INCOME:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest and fees on loans $ 3,355 $ 2,814 $ 9,643 $ 8,241
Interest on taxable
securities:
Available-for-sale 790 1,073 2,453 3,202
Held-to-maturity 400 463 1,276 1,218
Exempt from federal income tax:
Available-for-sale 48 51 145 154
Held-to-maturity 235 304 752 970
Restricted equity securities 18 35 26
Other interest income 103 2 228 58
TOTAL INTEREST INCOME $ 4,949 $ 4,707 $ 14,532 $ 13,869
INTEREST EXPENSE:
Interest on deposits
other than time $ 559 $ 643 $ 1,743 $ 1,986
Time deposits less
than $100M 1,163 729 3,253 2,148
Time deposits of $100M
or more 356 298 981 779
Interest on FHLB borrowings 160 119 455 358
Interest on federal
funds purchased 27 54 27
TOTAL INTEREST EXPENSE $ 2,238 $ 1,816 $ 6,486 $ 5,298
TOTAL NET INTEREST INCOM $ 2,711 $ 2,891 $ 8,046 $ 8,571
PROVISION FOR CREDIT LOSSES ( 99) (82) (260) (274)
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 2,612 2,809 7,786 8,297
OTHER INCOME:
Service charges on deposit
accounts 282 245 765 738
Other service charges,
commissions and fees 82 65 233 186
Net realized gains (losses)
on available-for-sale
securities ( 8) ( 236) ( 14) ( 258)
Other income 91 19 358 243
TOTAL OTHER INCOME 447 2,493 1,342 909
OTHER EXPENSES:
Salaries and employee benefits 798 759 2,493 2,377
Net occupancy expense 74 72 209 208
Furniture and equipment expense 194 162 569 478
FDIC Assessment ( 15) 117 221 350
Other 352 325 1,083 991
TOTAL OTHER EXPENSES 1,403 1,435 4,575 4,404
INCOME BEFORE INCOME TAXES 1,656 1,467 4,553 4,802
INCOME TAXES ( 569) ( 519) ( 1,455) ( 1,557)
NET INCOME 1,087 948 3,098 3,245
Common shares outstanding
ended September 30. 270,058 274,657 270,058 274,657
Net income per share
of common stock 4.03 3.45 11.47 11.81
Dividends per share
of common stock 1.75 1.60 4.50 4.10
</TABLE>
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<TABLE>
C B & T, INC. AND WHOLLY-SUBSIDIARY
MCMINNVILLE, TENNESSEE 37110
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period Ended
September 30
1995 1994
(Dollars in thousands)
Operating activities:
<S> <C> <C> <C> <C>
Net income $ 3,098 $ 3,245
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for credit losses 260 274
Provision for depreciation and
amortization 359 304
(Increase) in interest receivable ( 93) ( 298)
Decrease (Increase) in other assets 469 ( 607)
Increase (Decrease) in other liabilities 626 ( 125)
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,719 $ 2,793
Investing activities:
Purchases of securities
available-for-sale ( 15,830) ( 20,789)
Proceeds from maturities and
sales of securities available-for-sale 26,262 24,611
Purchases of securities held-to-maturity ( 462) ( 14,393)
Proceeds from maturities of securities
held-to-maturity 7,072 11,018
Increase in restricted equity securities ( 59) ( 37)
Net increase in unrealized gains on
available for-sale-securities ( 1,942) ( 140)
Net increase of loans ( 9,708) ( 4,535)
Purchase of premises and equipment ( 208) ( 521)
NET CASH USED BY INVESTING ACTIVITIES 5,125 ( 4,786)
Financing activities:
Net (decrease) in noninterest-bearing
and interest-bearing deposits ( 5,571) ( 1,821)
Net (decrease) in federal funds
purchased ( 5,700) 4,800
Cash dividends ( 1,225) ( 1,239)
Purchase of Treasury Stock ( 246) ( 4,143)
Net increase in other borrowed funds 1,557 235
Increase in after-tax unrealized
gains on securities 1,204 87
NET CASH PROVIDED BY FINANCING ACTIVITIES ( 9,981) ( 2,081)
DECREASE IN CASH AND CASH EQUIVALENTS ( 137) ( 4,074)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 9,434 10,704
CASH AND CASH EQUIVALENTS AT END OF QUARTER 9,297 6,630
</TABLE>
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The unaudited consolidated financial statements have been
prepared on a consistent basis and in accordance with the
instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments necessary for a fair
presentation have been included. These adjustments were normal
reoccurring adjustments. For further information, refer to the
Consolidated financial statements and footnotes included in the
Corporation's Annual Report of Form 10-K for the year ended
December 31, 1994.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
At September 30, 1995, average total assets were $247.5 million
compared to $254.3 million at September 30, 1994 and $254
million at December 31, 1994. Average earning assets at nine
months ended September 30, 1995 totaled $233.4 million as
compared to $240.2 million ended September 30, 1994 and $239.3
million at December 31, 1994, respectively. The following
discussion examines the significant factors relative to changes
in the Corporation's balance sheets.
SECURITIES
The Corporation's average debt securities portfolio at September
30, 1995 was $96.7 million which was a decrease from average
investments of $121.2 million at September 30, 1994 and $119.5
million at December 31, 1994. The Corporation's debt securities
had $ 51.3 million available-for-sale securities and $44 million
held-to-maturity securities at September 30, 1995. This
compares to $62 million and $59.6 million available-for-sale and
$52.6 million and $50.7 million held-to-maturity debt securities
at September 30, 1994 and December 31, 1994, respectively.
Securities classified as available-for-sale upon the adoption of
Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities", are reported
at fair value with unrealized gains and losses, net of taxes,
reported as a separate component of shareholders' equity. Net
unrealized gains on the available-for-sale securities at
September 30, 1995 totaled $881.9 thousand. Held-to-maturity
securities are reported at amortized cost and the Corporation's
management has the intent and ability to hold these securities
to maturity. The substantial reduction of total debt securities
beginning in 1994 was the result of the need to fund the
expanding loan growth and to make available the funds necessary
to meet customer deposit withdrawals. To avoid the expense of
additional funds borrowings, it was Management's decision to
supply these needed funds through the sales of securities and
simultaneously, reduce a portion of the existing borrowings from
Federal Home Loan Bank. Management determined that realized net
losses from the securities sales would ultimately be offset by
the reduced interest expense of borrowed funds coupled with the
higher yield earned in loan growth and that such sales would not
negatively impact future net interest income in subsequent
years. The liquidity portion of the current portfolio, fixed
rate debt securities maturing in the year or less, totaled $12.9
million or 13.5% of the total debt securities and is an integral
part of the asset/ liability management. In addition, floating
rate securities with a repricing frequency of one year or less
totaled $15.6 or 16.4% of total debt securities. At December
31, 1994, fixed rate securities maturing in the year or less
totaled $6.9 million and floating rate debt securities with a
repricing frequency of one year or less totaled $15.1 million.
The liquidity portion of the debt securities portfolio increased
significantly in 1995 over 1994 and available funds reinvested
within the portfolio are currently being placed in securities
yielding higher than those securities sold in 1994 and early
1995.
LOANS
The Corporation's average loan portfolio totaled $130.4 million
at September 30, 1995 which was a substantial increase over the
corresponding period in 1994 with average loans of $115.8
million and $117.2 million at September 30, 1994 and December
31, 1994, respectively. Average loan growth reflected an
increase of $14.7 million or 12.7% over September 30, 1994 and
$13.3 million or 11.3% over December 31, 1994. The increase in
the loan portfolio was attributed primarily to the substantial
growth in real estate mortgage leading which increased $7.2
million or 11% over the period ended September, 1994 and $4.5
million or 6.7% over December, 1994. The loan portfolio
included commercial paper which totaled $4.9 million at the end
of the current reporting period.
Upon adoption of the Statement of Financial Accounting Standards
Nos. 114 and 118 "Accounting By Creditors for Impairment of a
Loan" and "Accounting By Creditors for Impairment of a Loan -
Income Recognition and Disclosures", the Corporation's
Management defines an impaired loan as one for which it is
likely the subsidiary
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will not collect its principal and interest in accordance with
the contracted schedule. Since SFAS 114 states that the
classifying of loans as impaired need not be applied
individually to "large groups of smaller balance
homogeneous loans", Management has taken the position that SFAS
114 does not apply to the Corporation's consumer loan portfolio
or residential mortgage loans which are collectively evaluated
for impairment. Management may, however, choose to apply the
Statement to certain specific larger mortgage loans. As a
matter of the Corporation's policy, there is no difference
between impaired loans and nonaccruing loans with the exception
of those loans which will be evaluated collectively.
A loan is placed on nonaccrual status when interest or principal
has not been paid for 90 days. Exceptions to this policy are
those loans that are in the process of collection and are well
secured. A well-secured loan is secured by collateral with
sufficient market value to repay principal and all accrued
interest. When evaluating a loan, the loan officer first
considers the following factors: ability to pay, financial
condition of the borrower, management, collateral and
guarantors, structure, industry and economics. These factors
having been weighed, the loan is then assigned to one of the
following ratings: A-Excellent, B-Good, C-Fair, D-Watch
(Substandard), E-Doubtful (Impaired). Losses on impaired loans
are recognized in a timely manner, as soon as there is a
reasonable probability of loss and the amount of loss can be
calculated, that loss will be recognized.
At September 30, 1995, the recorded investment in loans that
were considered to be impaired under SFAS 114 was $15,739, all
of which were on a nonaccrual basis. The related allowance for
credit losses for the impaired loans was $410. The average
recorded investment in impaired loans during the nine months
ended September 30, 1995 was approximately $19,367. Impairment
was measured using a present value calculation. The Corporation
does not recognize interest income on impaired loans and the
entire change in the net carrying amount is reported as an
adjustment to provision for credit losses, but in no event are
changes in the net present value used to justify having a loan
booked at a value that exceeds its recorded investment value.
The Corporation maintains sound credit policies through its loan
review committee and various loan committees by evaluating loan
and credit quality, reviewing identified problem loans and
continually monitoring their status and implementing immediate
procedures to minimize any potential negative impact on the
Corporation's operations. The following represent risk factors
categorically in the loan portfolio at September 30, 1995 (in
thousands): Loans accounted for on a nonaccrual basis - $26;
Loans past-due ninety days or more as to interest or principal
payments - $658; there were no trouble debt restructuring loans;
Impaired loans - $16. At December 31, 1994, these risks factors
were: Nonaccruing loans - $96; Loans past due ninety days or
more - $436; Trouble debt restructuring loans - $954; Loans
doubtful as to ability of the borrower to comply with payment
terms- $339.
Any loans classified for regulatory purposes do not represent or
result from trends or uncertainties which management reasonably
expects will materially affect operating results, liquidity or
capital resources nor is management aware of any known trends,
events, or uncertainties that will have or that are likely to
have a material effect on the Corporation's liquidity, capital
resources or operations.
OTHER EARNING ASSETS
At reporting period ended September 30, 1995, average federal
funds sold totaled $5.1 million compared to $2.2 million and
$1.6, which equates to $3 million or 138.3% and $3.5 million or
216.9% over September, 1994 and December, 1994, respectively.
DEPOSITS
Average deposits of the Corporation for the first nine months of
1995 were $204.9 million compared to $215.7 million and $214.3
million for the first nine months of 1994 and the year ended
December, 1994, respectively.
Short and medium terms rate increases caused depositors to move
deposits from money market deposits accounts
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and savings, which decreased $16.3 million or 24.9% from
December 31,1994, to longer term certificates of deposit.
Certificates of deposit of less than $100 thousand increased
$7.6 million or 10.3% while certificates of deposit of $100
thousand more decreased from December 31, 1994 by $3.3 million
or 12.5%.
CAPITAL
The capital growth rate, exclusive of unrealized net gains or
losses on securities, increased $2,453 thousand or 9.3% at
September 30, 1995 over September 30, 1994 and increased $1,627
thousand or 6% over December 31, 1994. For the nine months
ending September, 1995, the Corporation had an equity capital to
asset ratio of 11.5% compared to 10.6% at both September, 1994
and December 1994. Regulatory risk-adjusted capital adequacy
standards were revised in 1993. Under risk-adjusted capital
requirements, total capital consists of Tier 1 capital which is
essentially Common Shareholders' equity less tangible assets,
and Tier 2 capital which consists of certain types of preferred
stock, subordinated debt, and allowance for credit losses not to
exceed 1.25% of risk-adjusted assets. The capital ratio is then
computed by dividing the sum of Tier 1 and Tier 2 capital by the
total of risk-adjusted assets including converted
off-balance-sheet risks. The minimum requirement for Tier 1
capital is 4% and total capital (Tier 1 plus Tier 2) is 8%. The
Corporation's Tier 1 capital ratio was 20.9% and total capital
was 22.2% at September 30, 1995 compared to 22.1% and 23.4% at
September 30, 1994 and 21.8% and 23.1% at December 31, 1994.
Total stock redemptions through nine months ended September 30,
1995, totaled $246 thousand which is 2,431 shares redeemed in
year-to-date 1995. At the close of the first nine months of
1995, additional dividends of approximately $27 million could
have been declared by the subsidiary without prior approval from
the regulatory agency, however, the net assets of the Bank are
restricted because of the capital requirements of the Bank as
determined by the regulatory agencies. The Corporation's
Management is not aware of any current recommendations by the
regulatory authorities which, if implemented, would have a
material effect or liquidity, capital resources or operations.
MATERIAL CHANGES IN RESULTS OF OPERATION
Interest from investment securities (including restricted equity
securities) decreased during the current 1995 quarter by $400
thousand or 21.2% from the corresponding 1994 quarter.
Investment income for the 1995 year-to-date decreased $909
thousand or 16.3% from the same nine month period in 1994. This
decrease in investment income is attributable to the substantial
reduction in the volume of the investment portfolio.
In the third quarter and year-to-date ended September 30, 1994,
there were net realized losses on the sales of securities of
$236 thousand and $258 thousand, respectively. The sales of
securities during the current year resulted in net realized
losses of $8 thousand for the third quarter and $14 thousand for
the year-to-date. At September 30, 1994, net unrealized losses
in securities totaled $.2 million and categorically were;
Treasuries - $.2 million, Agencies - $ (.9) million and
Municipals - $.5 million. During 1995, net unrealized gains
totaled $.9 million and categorically were; Treasuries - $.4
million, Agencies - $.2 million and Municipals - $.3 million.
The Corporation's interest from loans for the quarter ended
September 30, 1995, increased $541 thousand or 19.2% over the
corresponding quarter in 1994. Loan interest income for the
1995 year-to-date increased $1,402 thousand or 17% over the same
period in 1994. This increase in year-to-date loan interest
income is primarily a result of the substantial increase in the
volume of loans outstanding and a rising average yield on loans
due to higher interest rates in the first half of 1995.
Interest on federal funds sold increased $226 thousand and $170
thousand in the third quarter and year-to-date 1995 over the
corresponding periods in 1994.
Due to higher rates on deposit accounts and a shift in deposit
accounts to higher yielding certificates of deposit,
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interest expense on interest-bearing deposits increased over the
corresponding 1994 quarter by $408 thousand or 24.4%. Interest
expense for the 1995 year-to-date increased by $1,064 thousand
or 21.7% over the corresponding period in 1994. Interest
expense for the 1995 reporting periods on certificates of
deposits of less than $100 thousand increased by $434 thousand
or 59.5% for the current quarter and $1,105 thousand or 51.4%
year-to-date. Interest on time certificates of $100 thousand or
more increased by $58 thousand or 19.5% and $202 thousand or
25.9% for the third quarter and year-to-date, respectively.
Total interest expense on transaction accounts and savings
deposits for the 1995 reporting period decreased from 1994 by
$84 thousand or 13.1% for the third quarter and $243 thousand
or 12.2% for the year-to-date. Interest expense on borrowed
funds, primarily F.H.L.B. borrowings, increased $14 thousand or
9.6% and $124 thousand or 32.2% for the current quarter and
year-to-date, respectively.
Non-interest income (excluding securities transaction) increased
by $126 thousand or 38.3% for the 1995 quarter and $189 thousand
or 16.2% for the current year-to-date over the corresponding
periods in 1994. The major portion of the 1995 increase is due
to a prior year tax refund which is reflected in other
non-interest income.
For the quarter ended September 30, 1995, non-interest expense
decreased by $32 thousand or 2.2%. For the1995 year-to-date,
non-interest expense increased $171 thousand or 3.9% over the
corresponding period in 1994. Additional non-interest expense
for the 1995 year-to-date is attributable primarily to
additional salary expense and employee benefits. The decrease
in non-interest expense for the third quarter 1995 from the
corresponding quarter in 1994 was due to an F.D.I.C. assessment
refund of $128 thousand.
Year-to-date 1995 provision for credit losses reflects a
decrease of $14 thousand or 5.1% from the corresponding period
in 1994.
The net result of operations after federal income taxes for 1995
is an increase of $264 thousand or 27.9% for the quarter and a
decrease of $147 thousand or 4.5% for the year-to-date period
from the same periods in 1994.
It is the opinion of management that during the current
reporting period of September 1995, the effect of general
inflation was relatively immaterial to the operation of the
Corporation and the results thereof.
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C B &T, INC. AND WHOLLY-OWNED SUBSIDIARY
PART II. OTHER INFORMATION
Items 1.-5. None applicable to the reporting for the three (3)
months ended September 30, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) - No exhibits were furnished in accordance with Item 601
of Regulation S-K for three (3) months ended September 30, 1995.
(b) - Reports on Form 8-K were filed on July 19, 1995 by the
Registrant as notice of change in Registrant's certifying
accountants.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
C B & T, INC.
By: /s/ Jeffrey A. Golden
Jeffrey A. Golden, Chairman, President
and Chief Executive Officer
Date: November 7, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ Jeffrey A. Golden
Jeffrey A. Golden, Chairman, President
and Chief Executive Officer
(Principal Executive and Financial Officer)
Date: November 7, 1995
/s/ Susan M. Young
Susan M. Young, Vice President
City Bank & Trust Company
(Principal Financial Reporting Officer)
Date: November 7, 1995
13
