1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction 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 June 30, 1997 264,163 shares.
This filing contains 13 pages.
<PAGE> 1
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3
Consolidated Balance Sheets for the periods ended
June 30, 1997 and December 31, 1996
(Unaudited) 4
Consolidated Statements of Income for the three
(3) month period and year-to-date ended
June 30, 1997 and 1996, respectively (Unaudited) 5
Consolidated Statements of Cash Flows for the
year-to-date endedJune 30, 1997 and 1996,
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
<PAGE> 2
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE> 3
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
McMinnville, Tennessee 37110
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(Dollars in Thousands)
ASSETS
Cash and due from banks $7,647 7,021
Federal funds sold 7,500 1,175
Investment securities (amortized cost
$105,187 and $101,026, respectively) 106,339 102,070
Loans, net of unearned income and allowance
for possible credit losses 143,252 142,096
Interest receivable 3,326 3,116
Bank premises and equipment,
less allowances for depreciation 2,213 2,333
Other assets 3,837 3,648
TOTAL ASSETS $274,114 261,459
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $31,418 28,178
Interest-bearing deposits (other than time) 74,813 69,826
Time deposits less than $100M 90,563 90,610
Time deposits of $100M or more 30,748 28,943
TOTAL DEPOSITS $227,542 217,557
Accounts payable and accrued liabilities 3,560 3,097
FHLB borrowings 7,210 7,203
Federal funds purchased/repurchase agreements 3,334 1,362
TOTAL LIABILITIES $241,646 229,219
SHAREHOLDERS' EQUITY:
Common Stock of 2.50 par value:
Authorized 1,000,000 shrs, issued 331,814 shrs
including 67,651 and 67,229 Treasury shrs
in June `97 and December `96, respectively $ 830 830
Surplus 5,000 5,000
Retained earnings 31,388 31,179
Less cost of treasury shares (5,465) (5,416)
Net unrealized gains (losses) on available
for sale securities, net of tax 715 647
TOTAL SHAREHOLDERS' EQUITY $ 32,468 32,240
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $274,114 261,459
====== ======
<PAGE> 4
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
McMinnville, Tennessee 37110
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year-to-date
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on loans $3,517 3,416 6,949 6,795
Interest on investment securities:
Taxable income 1,189 1,195 2,349 2,358
Tax-exempt income 413 321 801 629
Other interest income 82 94 114 173
TOTAL INTEREST INCOME $5,201 5,026 10,213 9,955
INTEREST EXPENSE:
Interest on deposits other than
time $ 563 517 1,065 1,019
Time deposits less than $100M 1,216 1,165 2,410 2,361
Time deposits of $100M or more 428 379 849 767
Interest on FHLB borrowings 110 97 221 211
Interest on federal funds
purchased/ repurchase agreements 28 16 45 21
TOTAL INTEREST EXPENSE $2,345 2,174 4,590 4,379
TOTAL NET INTEREST INCOME $2,856 2,852 5,623 5,576
PROVISION FOR POSSIBLE CREDIT LOSSES ( 82) ( 85) ( 222) ( 178)
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
CREDIT LOSSES $2,774 2,767 5,401 5,398
OTHER INCOME:
Service charges on deposit accounts $ 305 311 600 592
Other service charges, commissions
and fees 66 101 119 164
Net realized gains (losses)
on investment securities 2 3 14 3
Other income 149 129 234 195
TOTAL OTHER INCOME $ 522 544 967 954
OTHER EXPENSES:
Salaries and employee benefits $1,007 1,002 1,807 1,788
Net occupancy expense 83 78 170 149
Furniture and equipment expense 206 194 415 377
FDIC Assessment 7 0 13 1
Other 438 406 843 767
TOTAL OTHER EXPENSES $1,741 1,680 3,248 3,082
INCOME BEFORE INCOME TAXES $1,555 1,631 3,120 3,270
Income taxes ( 442) ( 512) ( 928) (1,031)
NET INCOME $1,113 1,119 2,192 2,239
===== ===== ===== =====
Common shares outstanding ended
June 30 264,163 269,654 264,163 269,654
Net income per share of common
stock $4.21 4.15 8.30 8.30
Dividends per share of common stock $2.50 2.04 7.51 6.50
<PAGE> 5
C B & T, INC. AND WHOLLY-SUBSIDIARY
MCMINNVILLE, TENNESSEE 37110
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period Ended
June 30
1997 1996
(Dollars in thousands)
Operating activities:
Net income $2,192 2,239
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for possible credit losses 222 178
Provision for depreciation and amortization 271 241
Decrease (increase) in interest receivable ( 210) ( 131)
Decrease (increase) in other assets ( 189) ( 673)
Increase (decrease) in accounts payable
and accrued liabilities 463 529
NET CASH PROVIDED BY OPERATING ACTIVITIES $2,749 2,383
Investing activities:
Purchases of investment securities $( 25,075) ( 23,253)
Proceeds from sales of investment
securities 4,970 1,504
Proceeds from maturities, calls and
principal collectionsof investment
securities 15,944 16,773
Net decrease (increase) in unrealized
gains on investment securities ( 108) 1,195
Net decrease (increase) in loans ( 1,378) ( 616)
Purchase of premises and equipment ( 151) ( 194)
NET CASH USED BY INVESTING ACTIVITIES $( 5,798) ( 4,591)
Financing activities:
Net increase (decrease) in noninterest-
bearing and interest-bearing deposits $ 9,985 5,545
Net increase (decrease) in federal funds
purchased/repurchase agreements 1,972 1,123
Cash dividends ( 1,983) ( 1,753)
Purchase of Treasury Stock ( 49) ( 2)
Net increase (decrease) in FHLB borrowings 7 ( 2,713)
Increase (decrease) in after-tax
unrealized gains on securities 68 ( 741)
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 10,000 1,459
INCREASE IN CASH AND CASH EQUIVALENTS $ 6,951 ( 749)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 8,196 13,296
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 15,147 12,547
===== ======
<PAGE> 6
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 on Form 10-K for the year ended December 31, 1996.
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
At June 30, 1997, average total assets were $265.8 million
compared to $256.4 million at June 30, 1996 and $257.3 million at
December 31, 1996. Average earning assets at the period ended
June 30, 1997 totaled $249.0 million as compared to $240.3
million at June 30, 1996 and $241.3 million at December 31, 1996,
respectively. The following discussion examines the significant
factors relative to changes in the Corporation's balance sheets.
SECURITIES
The investment portfolio is comprised of U.S. Treasury and other
U.S. Government agency-backed securities, collateralized mortgage-
backed securities, tax-exempt obligations of states and political
subdivisions and certain other investments. The quality of
obligations of states and political subdivisions will be A, AA,
or AAA, the majority of which will be AA or AAA, as rated by a
nationally recognized service. As a matter of policy, in support
of the local service area, certain unrated bonds of local
municipalities may be purchased provided they are of reasonable
credit risk.
As of December 31, 1995, all investment securities were
classified as available-for-sale. Management classified all
securities as available-for-sale so that securities may be sold
prior to their maturity for purposes of bank asset allocations,
rate sensitivity or liquidity and, hence, tend to be more liquid.
The Corporation's average debt securities portfolio at June 30,
1997 was $99.9 million which was an increase from average
investments of $95.6 million at June 30, 1996 and $97.5 million
at December 31, 1996. At June 30, 1997, the liquidity portion
of the current portfolio, fixed rate debt securities maturing in
the year or less, totaled $17.8 million or 17.8% of total debt
securities and is an integral part of asset/liability management.
In addition, floating rate securities with a repricing frequency
of one year or less totaled $5.4 million or 5.4% of total debt
securities. At June 30, 1996, fixed rate securities maturing in
one year or less totaled $18.5 million and floating rate debt
securities with a repricing frequency of one year or less totaled
$15.2 million.
LOANS
The Corporation's average loan portfolio totaled $143.9 million
at June 30, 1997 which was an increase over the corresponding
period in 1996 with average loans of $138.1 million and $138.5
million at June 30, 1996 and December 31, 1996, respectively.
Average loan growth reflected an increase of $5.9 million or 4.3%
over June 30, 1996 and $5.4 million or 3.9 % over December 31,
1996. The increase in the loan portfolio was attributed
primarily to the growth in real estate mortgage lending and
consumer lending. Real estate loans increased $6.4 million or
8.6% over June 30, 1996 and $4.5 million or 5.9% over December
31, 1996. Consumer loans increased $.5 million or 2.9% and $.3
million or 1.3% over June 30, 1996 and December 31, 1996,
respectively. There was no commercial paper included in the loan
portfolio 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 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.
<PAGE> 8
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 June 30, 1997, the recorded investment in loans that were
considered to be impaired under SFAS 114 was $75,222, all of
which were on a nonaccrual basis. The related allowance for
possible credit losses for the impaired loans at June 30, 1997
was $6,628. The average recorded investment in impaired loans at
June 30, 1997 was approximately $75,231. Impairment on two loans
with a recorded investment of $75,222 was measured based on the
fair value of the collateral. 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
possible 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 polices 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 June 30, 1997 (in
thousands): Loans accounted for on a nonaccrual basis - $77;
Loans past-due ninety days or more as to interest or principal
payments - $832; There were no trouble debt restructuring loans;
Impaired loans - $75. At December 31, 1996, these risks factors
were: Nonaccruing loans - $119; Loans past due ninety days or
more - $851; There were no trouble debt restructuring loans;
Impaired loans - $310.
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 material effect on the Corporation's liquidity, capital
resources or operations.
OTHER EARNING ASSETS
At the reporting period ended June 30, 1997, average federal
funds sold totaled $5.1 million compared to $6.5 million and $5.2
million, which equates to $1.4 million less than June 1996 and
$.1 million less than December, 1996, respectively.
DEPOSITS
Average deposits of the Corporation for the period ended June
1997 were $230.9 million compared to $215.7 million and $216.0
million for the corresponding period in 1996 and the year ended
December, 1996, respectively. Short and medium term rate
increases caused depositors to take advantage of certificates of
deposit rates which resulted in an increase in these deposits.
Certificates of deposit of less than $100 thousand increased $3
million or 3.4% and $2.5 million or 2.8% over the periods ended
June and December, 1996, respectively. Certificates of deposit
of $100 thousand or more increased over June 30, 1996 by $3.0
million or 11.2% and December 31, 1996 by $2.7 million or 9.8%
<PAGE> 9
CAPITAL
The capital growth rate, exclusive of unrealized net gains or
losses on securities, increased $1,460 thousand or 4.8% over June
30, 1996 and increased $160 thousand or 0.5% over December 31,
1996. For the period ended June, 1997, the Corporation had an
equity capital to assets ratio of 11.9% compared to 11.6% for
both June 30, 1996 and December 1996, respectively. 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 possible 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 June 30, 1997
compared to 21.5% and 22.8% at June 30, 1996 and 21.4% and 22.7%
at December 31, 1996. These ratios substantially exceed the
Federal Reserve Board's capital guidelines for a "well-
capitalized" institution, which are 6% for Tier 1 and 10% for
total capital. It is management's intent to maintain a level of
capitalization that allows the flexibility to take advantage of
opportunities that may arise in the future.
The formation of two nonbank subsidiaries resulted in the July,
1996 business opening of CBT Insurance, Inc. and CBT Realty, Inc.
Both subsidiaries are wholly owned by CB&T, Inc. with an initial
investment in each of $1,000 to purchase one hundred percent
(100%) of the stock issued by each of the newly formed
subsidiaries.
The principal activity of CBT Insurance, Inc. is insurance sales.
CBT Realty, Inc. will engage in the holding and disposing of real
estate acquired through foreclosure; however, through June 1997,
there has been no activity in CBT Realty, Inc.
MATERIAL CHANGES IN RESULTS OF OPERATION
Interest from investment securities for the current quarter
increased by $86 thousand or 5.7% from the corresponding 1996
period. This increase in investment income is attributable to
the increase in municipal bonds in the portfolio, therefore
resulting in a higher average yield than that of 1996.
At year-to-date June 30, 1997, there were net realized gains
(losses) on the sales of securities of $14 thousand compared to
$3 thousand in June, 1996 and ($22) thousand in December, 1996.
At June 30, 1997 net unrealized gains in securities totaled $1.1
million and categorically were; Treasuries - $.1 million,
Agencies - $.1 and Municipals -$.9 million. For the corresponding
period in 1996, net unrealized gains totaled $.3 million and
categorically were; Treasuries - $.1 million, Agencies - $ (.2)
million and Municipals - $.4 million.
The Corporation's interest from loans for the quarter ended June
30, 1997, increased $101 thousand or 3.0% over the same period in
1996. This increase in loan interest income is primarily a
result of the increase in the volume of loans outstanding,
especially in the area of real estate lending.
Interest income on federal funds sold increased $9 thousand or
9.9% in the second quarter of 1997 from the corresponding period
in 1996.
Due to slightly rising interest rates on deposit accounts and
growth in higher yielding certificates of deposit, interest
expense on interest-bearing deposits increased over the June,
1996 period by $146 thousand or 7.1%. Interest expense for the
1997 reporting period on certificates of deposit of less than
$100 thousand increased by $51 thousand or 4.4% for the second
quarter and interest on time certificates of $100 thousand or
more increased by $49 thousand or 12.9%. Total interest expense
on transaction accounts and savings deposits for the 1997
reporting period increased over that of 1996 by $46 thousand or
8.9%. Interest expense on F.H.L.B. borrowings increased $13
thousand or 13.4% from the same quarter in 1996 due to an
increase in the balance outstanding to F.H.L.B. during the
current year.
<PAGE> 10
Non-interest income (excluding securities transaction) decreased
$21 thousand or 3.9% for the June 30, 1997 quarter over the
corresponding period in 1996. This decrease is primarily
attributable to a decrease in insurance commissions and mortgage
loan application and closing fees.
For the quarter ended June 30, 1997, non-interest expense
increased by $61 thousand or 3.6%. This increase in non-
interest expense in 1997 over the corresponding period in 1996 is
a result of the rising costs of salaries and employee benefits,
occupancy and furniture and equipment expenses associated with
the opening a new branch in the fall of 1996, and an increase in
FDIC insurance premium assessments.
Year-to-date 1997, provision for possible credit losses reflects
a increase of $44 thousand or 24.7% over the corresponding period
in 1996.
The net result of operations after federal income taxes for 1997
is a decrease of $47 thousand or 2.1% over the same year-to-date
period in 1996.
It is the opinion of management that during the current reporting
period of June 1997, the effect of general inflation was
relatively immaterial to the operation of the Corporation and the
results thereof.
<PAGE> 11
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
PART II. OTHER INFORMATION
Items 1.-5. None applicable to the reporting period for the
three (3) months ended June 30, 1997.
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 June 30, 1997.
(b) - No reports on Form 8-K were filed by the
Registrant during the three months ended
June 30, 1997.
<PAGE> 12
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: August 7, 1997
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: August 7, 1997
/s/ Jerry N. Brown
Jerry N. Brown, Sr Vice-President
City Bank & Trust Company
(Chief Financial Officer)
Date: August 7, 1997
<PAGE> 13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,528
<INT-BEARING-DEPOSITS> 119
<FED-FUNDS-SOLD> 7,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 105,187
<INVESTMENTS-MARKET> 106,339
<LOANS> 145,160
<ALLOWANCE> (1,908)
<TOTAL-ASSETS> 274,114
<DEPOSITS> 227,542
<SHORT-TERM> 3,334
<LIABILITIES-OTHER> 3,560
<LONG-TERM> 7,210
830
0
<COMMON> 0
<OTHER-SE> 31,638
<TOTAL-LIABILITIES-AND-EQUITY> 274,114
<INTEREST-LOAN> 6,949
<INTEREST-INVEST> 3,150
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<INTEREST-TOTAL> 10,213
<INTEREST-DEPOSIT> 4,324
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