2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996.
Commission file number 0-10669
C B & T, Inc.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1121054
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1O1 East Main Street
McMinnville, Tennessee 37110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 473-2148
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $2.50 per share
(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 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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 1O-K or any amendment to this Form 10-K. [X]
This filing contains 63 pages.
<PAGE> 1
The aggregate market value of the voting stock held by non-
affiliates of C B & T, Inc. as of March 11, 1997 was $25,252,520.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of March 11, 1997 -- 264,585 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1. Proxy statements for 1996 annual shareholders' meeting of
April 8, 1997 -- Part I and III
2. Annual Report to shareholders for year ended December 31,
1996 -- Parts I and II.
<PAGE> 2
PART I.
Item 1. Business
(a) General Development of Business
C B & T, Inc. ("C B & T") was incorporated in October, 1981 to
take advantage of the opportunities afforded bank holding
companies for expansion of banking operations and diversification
into activities closely related to banking. In September, 1982,
C B & T commenced operations as a registered bank holding company
and The City Bank and Trust Company became a wholly-owned
subsidiary of C B & T. C B & T engages and proposes to engage in
various business activities permitted bank holding companies,
either directly, through newly formed subsidiaries, or through
acquisitions. In 1983, the name of The City Bank and Trust
Company was changed to City Bank & Trust Company ("the Bank").
The Bank extended its services into DeKalb County, Tennessee,
with the July, 1983, acquisition of the assets of The First
Central Bank, Smithville, Tennessee, from the Federal Deposit
Insurance Corporation (the "FDIC"). The Bank subsequently
reopened the offices of The First Central Bank as the Bank's
Smithville Branch.
CBT Realty, Inc., a wholly-owned subsidiary of the Corporation,
was formed for the purpose of holding and disposing of real
estate acquired through foreclosure.
During 1996, the Corporation formed CBT Insurance, Inc., a wholly-
owned subsidiary of the Corporation, for the purpose of selling
insurance services.
(b) Financial Information About Industry Segments
C B & T is a financial services organization incorporated in
Tennessee and registered under the Bank Holding Company Act of
1956, as amended (the "Bank Holding Company Act"). The Bank
which is a wholly-owned subsidiary of C B & T, services the
Warren County and DeKalb County, Tennessee trade area and
provides traditional banking services throughout the area.
(c) Narrative Description of Business
Supervision and Regulation
As a registered bank holding company within the meaning of the
Bank Holding Company Act, the financial condition and operations
of C B & T as well as those of its subsidiary are subject to
examination and supervision by the Board of Governors of the
Federal Reserve System (the "Board of Governors"). C B & T is
required to file with the Board of Governors an annual report and
such additional information as may be required. The Bank Holding
Company Act generally limits the business in which a bank holding
company may engage to banking, managing or controlling banks, and
furnishing or performing services for the banks controlled by it.
The major exception to this rule is that, pursuant to Section
4(c)(8) of the Bank Holding Company Act, a bank holding company
may engage in non-banking activities which, or may acquire shares
in any company the activities of which, the Board of Governors
has determined, by regulation or order, to be so closely related
to banking or managing or controlling banks as to be a proper
incident thereto. The non-banking activities of C B & T and the
Bank are so limited.
<PAGE> 3
Item 1. Business - Continued
The Bank Holding Company Act requires that a bank holding company
obtain prior approval of the Board of Governors before (1)
acquiring directly or indirectly (except in certain limited
circumstances) ownership or control of more than 5% of the voting
stock of a bank, (2) acquiring substantially all of the assets of
a bank, or (3) merging or consolidated with another bank holding
company. The Bank Holding Company Act provides that the Board of
Governors shall not approve any such acquisition, merger, or
consolidation: (a) which would result in a monopoly, or which
would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in
any part of the United States; or (b) the effect of which, in any
section of the country, may be to substantially lessen
competition, or to tend to create a monopoly, or which in any
other manner would be in restraint of trade, unless the Board of
Governors finds that the anti-competitive effects of the proposed
transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and
needs of the community to be served. In conducting its review of
any application for approval the Board of Governors is required
to consider the financial and managerial resources and future
prospects of the company or companies and the banks concerned,
and the convenience and needs of the community to be served. The
Bank Holding Company Act further requires that consummation of
approved acquisitions or mergers be delayed for a period of not
less than 30 days following the date of such approval during
which time company parties may obtain a review of the Board of
Governors' order by filing a petition praying that the order be
set aside in the United States Court of Appeals for the District
of Columbia Circuit, or in the Court of Appeals for the circuit
in which the complaining party has his, her, or its principal
place of business. If no action based on the antitrust laws is
commenced before the termination of the thirty-day period, the
acquisition or merger may not thereafter be attacked in any
judicial proceeding on the ground that it alone and of itself
constituted a violation of any antitrust laws other than Section
2 of the Sherman Antitrust Act.
Except in certain circumstances, the Bank Holding Company Act
also prohibits a bank holding company from acquiring a bank
outside the state where the bank holding company's banking
business is principally conducted, unless the laws of the state
where the bank is located specifically, and not merely by
implication, authorize such acquisitions by out-of-state bank
holding companies. The Tennessee General Assembly enacted a
national reciprocal interstate banking act permitting banking
combinations with banking institutions located anywhere in the
United States, which became effective January 1, 1991.
Effective September 29, 1995, the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 ("IBBEA") amends the Bank
Holding Company Act of 1956 to permit a bank holding company to
acquire a bank located in any state, provided that the
acquisition does not result in the bank holding company
controlling more than 10% of the deposits in the United States or
30% of deposits in the state in which the bank to be acquired is
located. A state may waive the 30% deposit limitation. IBBEA
also permits individual states to restrict the ability of an out-
of-state bank holding company or bank to acquire an instate bank
that has been in existence for less than five years and to
establish a state concentration limit of less than 30% if such
reduced limit does not discriminate against out-of-state bank
holding companies or banks.
Effective June 1, 1997, an "adequately capitalized" bank, with
the approval of the appropriate federal banking agency, may merge
with another adequately capitalized bank in any state that has
not opted out of interstate branching and operate the target's
offices as branches if certain conditions are satisfied. The
same national (10%) and state (30%) deposit concentration limits
and any applicable state minimum-existence restrictions (up to a
maximum of five years) apply to
<PAGE> 4
Item 1. Business-Continued
interstate mergers as to interstate acquisitions. The applicant
also must comply with any nondiscriminatory host state filing and
notice requirements and demonstrate a record of compliance with
applicable federal and state community reinvestment laws. A
state may opt out of interstate branching by enacting a law
before June 1, 1997, expressly prohibiting interstate merger
transactions.
Under IBBEA, the resulting bank to an interstate merger may
establish or acquire additional branches at any location in a
state where any of the banks involved in the merger could have
established or acquired a branch. A bank also may acquire one or
more branches of an out-of-state bank if the law of the target's
home state permits such action. In addition, IBBEA permits a
bank to establish a de novo branch in another state if the host
state by statute expressly permits de novo interstate branching.
IBBEA also permits a bank subsidiary of a bank holding company to
act as agent for other depository institutions owned by the same
holding company for purposes of receiving deposits, renewing time
deposits, closing or servicing loans, and receiving loan payments
effective as of September 29, 1995. Under IBBEA, a savings
association may perform similar agency services for affiliated
banks to the extent that the savings association was affiliated
with a bank on July 1, 1994, and satisfies certain additional
requirements.
The foregoing provisions of IBBEA may increase competition,
within C B & T's existing market area. It is uncertain whether
IBBEA will make banks in predominantly rural markets like
McMinnville more or less attractive acquisition candidates of
larger banks and bank holding companies.
The Federal Reserve Act imposes strict limitations on investments
by subsidiary banks in the stock or other securities of their
parent bank holding company or any of its other subsidiaries and
on the taking of such stock or securities as collateral for loans
to any borrowers. In addition, the Federal Reserve Act imposes
strict limitations on extensions of credit and other transactions
by and between subsidiary banks and their parent bank holding
company or any of its other subsidiaries. The 1974 Amendments to
the Federal Reserve Act also granted the Board of Governors
discretionary authority to regulate interest rates on debt
obligations issued by bank holding company affiliates of banks
which are members of the Federal Reserve System. This authority
does not extend to commercial paper.
The Bank Holding Company Act, as amended, and regulations of the
Board of Governors thereunder prohibit a bank holding company and
its subsidiaries from engaging in certain tie-in arrangements in
connection with any extension of credit, lease, or sale of
property or the furnishing of services. The Bank Holding Company
Act requires that a corporation, partnership, trust, or other
specified entity obtain prior approval of the Board of Governors
before taking any action that causes the corporation to become a
bank holding company, which may occur if it acquires ownership,
control, or the power to vote 25% or more of any class of voting
securities of a bank, or if it otherwise controls the election of
a majority of the directors of the bank, or if the Board of
Governors determines that it exercises a controlling influence
over the management or policies of the bank. Although the Bank
Holding Company Act does not apply to the acquisition of a bank
by an individual, any individual or group of individuals acting
in concert that proposes to acquire control of a bank insured
under the Federal Deposit Insurance Act or the control of a bank
holding company that has control of any such insured bank, must
provide sixty days prior
<PAGE> 5
Item 1. Business-Continued
written notice to the appropriate federal banking agency, which
may disapprove the proposed action under certain standards
specified in the Change in Bank Control Act. For purposes of the
Change in Bank Control Act, control means the power to direct the
management or policies of the bank or to vote 25% or more of any
class of voting securities of the bank. Bank holding company
acquisitions of banks and bank holding companies pursuant to
certain provisions of the Bank Holding Company Act are exempt
from the Change in Bank Control Act.
Tennessee Bank Holding Company Regulation
C B & T is prohibited under Tennessee law from acquiring a bank
outside the four major metropolitan areas (Shelby, Davidson,
Knox, and Hamilton Counties in which Memphis, Nashville,
Knoxville, and Chattanooga are located, respectively) unless the
bank has been incorporated more than five years or is in
financial difficulty as determined by the appropriate regulatory
agency and the regulatory agency approves the acquisition. A
bank holding company is prohibited from acquiring any Tennessee
bank if the holding company's banks control as much as 16 1/2% of
the total deposits in all federally insured financial
institutions in Tennessee. Tennessee banking laws permit a bank
to serve as the agent of another bank for the purposes of
accepting deposits, loan payments, or other payments of funds on
behalf of the bank without regard to the locations of the
respective banks. Under Tennessee law, banks may branch state-
wide, subject in certain instances to the approval by the
Tennessee Commissioner of Financial Institutions.
The Bank
The operations of the Bank are affected by various requirements
and restrictions imposed by the laws of the United States and the
State of Tennessee, including requirements to maintain reserves
against deposits, limitations on the interest rates that may be
paid on various types of deposits, and restrictions on the nature
and amount of loans that may be granted and on the types of
investments that may be made. The operations of the Bank are
also affected by various consumer laws and regulations, including
those relating to equal credit opportunity and regulation of
consumer lending practices. All subsidiary banks of a bank
holding company must become and remain insured banks under the
Federal Deposit Insurance Act.
The Bank is chartered under the banking laws of Tennessee and, as
such is subject to the applicable provisions of such laws.
Tennessee banks are required to maintain certain cash reserves
either directly or indirectly. As a member of the FDIC, the Bank
is subject to the provisions of the Federal Deposit Insurance
Act. The bank, as a state bank whose deposits are insured by the
FDIC, may not engage as principal in any type of activity that is
impermissible for a national bank, unless the FDIC has determined
that the activity would not pose a significant risk to the
deposit insurance fund and the Bank meets applicable capital
standards. The Bank is subject to supervision and regular
examination by the FDIC and by the Tennessee Department of
Financial Institutions. A Tennessee bank may declare dividends
not more than once in each calendar quarter from its undivided
profits account.
<PAGE> 6
Item 1. Business-Continued
Community Investment
The Bank is subject to the provisions of the Community
Reinvestment Act ("CRA"). Under this Act, the Bank has a
continuing and affirmative obligation, consistent with safe and
sound operation, to help meet the credit needs of its entire
community, including low and moderate income neighborhoods. The
CRA does not establish specific lending requirements or programs
for financial institutions, nor does it limit an institution's
discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent
with the CRA. The CRA requires the FDIC, in connection with its
examination of the Bank, to assess the institution's record of
meeting the credit needs of its community and to take such record
into account in its evaluation of certain applications by the
Bank. Information concerning the Bank's CRA rating can be
obtained by contacting its main office at 101 East Main Street,
McMinnville, TN 37110.
Restrictions on Dividends Paid by Subsidiary Banks
Substantially all of the funds available for the payment of
dividends by C B & T are derived from the Bank. Both federal and
state laws impose restrictions on the ability of the Bank to pay
dividends.
The Tennessee banking statutes provide that the directors of a
state bank, after making proper deduction for all expenditures,
expenses, taxes, losses, bad debts, and any write-offs or other
deductions required by the Department of Finance Institutions,
may credit net profits to the bank's undivided profits account,
and therefrom may quarterly, semi-annually, or annually declare a
dividend in such amount as they shall judge expedient after
deducting any net loss from the undivided profits account and
transferring to the bank's surplus account (1) the amount (if
any) required to raise the surplus to 50% of the capital stock
and (2) an amount, not less than 10% of net profits, until the
surplus equals the capital stock, provided that the bank has
adequately reserved against deposits and such reserve will not be
impaired by the declaration of the dividend. A state bank, with
the approval of the Department of Financial Institutions, may
transfer funds from its surplus account to the undivided profits
account or any part of its capital stock account.
The payment of dividends by any bank is, of course, dependent
upon its earnings and financial condition and, in addition to the
limitations referred to above, is subject to the statutory power
of certain federal and state regulatory agencies to act to
prevent unsafe or unsound banking practices.
Usury Provisions
The Constitution of the State of Tennessee requires the state
legislature to fix interest rates in the State of Tennessee. The
Tennessee General Assembly has adopted such statutes. The
general interest rate statutes currently in effect establish a
maximum rate of interest at 4% above the average prime loan rate
(or the average short-term business loan rate, however
denominated) for the most recent week for which such average rate
has been published by the Board of Governors or 24% per annum,
whichever is lower. In the event that the Board of Governors
fails to publish the average rate for four consecutive weeks or
the maximum rate of interest should be adjudicated or become
inapplicable for any reason whatsoever, the maximum rate of
interest is denied to be
<PAGE> 7
Item 1. Business - Continued
24% until the Tennessee General Assembly otherwise provides. As
of December 31, 1996, the maximum effective rate in the state of
Tennessee was 12.5%.
Although the statutory maximum effective rate in the state of
Tennessee as of December 31, 1996, was 12.5%, decisions by
Federal District Courts have held that notwithstanding the
general interest rate statutes described above, the maximum rate
of interest that a state bank may charge is 24%, at least with
respect to the types of loans that a Tennessee industrial loan
and thrift company registered under the provisions of Tennessee
law would have been authorized to make. In general, a Tennessee
industrial loan and thrift company is authorized to charge
interest at a rate of 24% on loans of $100 or more. These
Federal District Court decisions have observed that under federal
law, a national bank can charge interest at the highest rate
allowed by state law in the state where the national bank is
located and held that a national bank in Tennessee can charge
interest at the same rate as a Tennessee industrial loan and
thrift company.
Tennessee banking laws permit a state bank to make loans upon the
same terms and at the maximum effective interest rate as
authorized on credit extended by national banks in Tennessee.
These decisions held that a state bank in Tennessee therefore can
charge the same rate of interest as a Tennessee industrial loan
and thrift company.
The relative importance of the usury laws to the financial
operations of C B & T and the Bank varies from time to time,
depending on a number of factors, including conditions in the
money markets, the cost and the availability of funds, and
prevailing interest rates. The management of C B & T is unable
to state whether existing usury laws have had or will have a
material adverse effect on the business or earnings of C B & T or
the Bank.
Competition
The banking business in the areas served by the Bank is highly
competitive. Competition exists with other area banks for
deposits, loans, and trust accounts, and with larger banks
located in some of the principal cities within Tennessee and
certain other states for commercial loans and trust services.
The Bank also competes for funds with savings and loan
associations and certain government agencies and in the open
money market. Competition also exists for loans from other
financial institutions, such as savings banks, savings and loan
associations, insurance companies, small loan companies, credit
unions, and certain governmental agencies.
Subsidiary
City Bank & Trust Company
The Bank commenced operations in 1912 as a state chartered bank
under the laws of the State of Tennessee. In September, 1982,
the Bank, pursuant to a corporate reorganization, became a wholly-
owned subsidiary of C B & T, a one-bank holding company.
On July 8, 1983, the Bank acquired certain assets and assumed
certain liabilities of The First Central Bank, Smithville,
Tennessee, which commenced operations as the City Bank & Trust
Company, Smithville Branch, on July 11, 1983, which extended the
Banks services into DeKalb County in addition to Warren County.
<PAGE> 8
Item 1. Business - Continued
The Bank conducts a full service banking and trust business in
Warren County and DeKalb County, Tennessee. The Bank's main
office is located in McMinnville, Warren County, Tennessee, and
the Bank operates a full service branch in Smithville, DeKalb
County, Tennessee. There are four banks, including the Bank, one
federal savings bank, one federal savings and loan association,
and one federal credit union within Warren County, which has a
population of approximately 33,000. DeKalb County has a
population of approximately 14,400 and is served by four banks,
including the Bank's Smithville Branch. Both counties are
centers of a diversified commercial, industrial, agricultural,
and tourism area.
The Bank offers such customary commercial banking services as
checking and savings accounts, certificates of deposit, safe
deposit facilities and money transfers. Its principal source of
income is from interest earned on personal, commercial,
agricultural, real estate, and installment loans.
The Bank's Trust Department acts as trustee, executor, and
administrator under wills, and serves in trustee, conservator, VA
guardian, and agent capacities for individual and corporate
customers. It functions as trustee under bond indentures, as well
as trustee and administrator under pension, IRA, SEPP, and other
employee benefit plans for corporations and other organizations.
The Bank handles approximately 564 individual and corporate trust
accounts, and provides investment management and other related
services. The Bank's Trust Department had assets of
approximately $70,661,500 under management as of December 31,
1996. These assets are not included as assets in the balance
sheet of the Bank or C B & T.
Employees
C B & T, including the Bank, has approximately 122 employees,
which includes 4 part-time employees. Four of the Bank's
officers are also officers of C B & T. None of the Bank's
employees are covered by a collective-bargaining agreement.
Distribution of Assets, Liabilities and Stockholder's Equity;
Interest Rate and Interest Differential
This table is incorporated herein by reference as a financial
table pages 36-39 which are attached to and made a part of the
Annual Report to Shareholders which is attached hereto as Exhibit
13.
Investment Portfolio
The investment portfolio is incorporated herein by reference to
Notes to Consolidated Financial Statements pages 20-21 which are
attached and made a part of the Annual Report to Shareholders
which is attached hereto as Exhibit 13.
Loan Portfolio
The loan portfolio is incorporated herein by reference to Notes
to Consolidated Financial Statements pages 22-23 which are
attached to and made a part of Annual Report to Shareholders
which is attached hereto as Exhibit 13.
<PAGE> 9
Item 1. Business - Continued
Risk Element
The risk element is incorporated herein by reference to Notes to
Consolidated Financial Statements page 23 which is attached to
and made a part of Annual Report to Shareholders which is
attached hereto as Exhibit 13.
Summary of Loan Loss Experience
The summary of loan loss experience is incorporated by reference
as a financial table page 40 which is attached to and made a part
of Annual Report to Shareholders which is attached hereto as
Exhibit 13.
Allocation of the Allowance for Possible Loan Losses
The allocation of the allowance for possible loan losses is
incorporated herein by reference to Management's Discussion and
Analysis of Financial Condition and Results of Operation pages 7-
12 which are attached to and made a part of Annual Report to
Shareholders which is attached hereto as Exhibit 13.
Deposits
The deposits are incorporated herein by reference to Notes to
Consolidated Financial Statements pages 25 and 26 which is
attached to and made a part of Annual Report to Shareholders
which is attached hereto as Exhibit 13.
Financial Ratios
Financial ratios are incorporated by reference as a financial
table page 41 which is attached to and made a part of Annual
Report to Shareholders which is attached hereto as Exhibit 13.
Short-Term Borrowings
There were no short-term borrowings with an average balance
outstanding during the year as great as 30% of shareholders'
equity at December 31, 1996.
Item 2. Properties
A discussion of the properties owned by the Corporation and the
Bank is incorporated herein by reference to Notes to Consolidated
Financial Statements page 24 which is attached to and made a part
of Annual Report to Shareholders which is attached hereto as
Exhibit 13.
Item 3. Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business known to
the Board of Directors to which C B & T or the Bank is a party or
of which any of their property is subject.
<PAGE> 10
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the Shareholders during the fourth
quarter of the fiscal year ended December 31, 1996.
Item 4(b). Executive Officers of Registrant
The following is a list of March 11, 1997 showing the names and
ages of all executive officers of the registrant, the nature of
any family relationship between them, and all positions and
offices held by each of them:
Name Age Positions and Offices Held
Jeffrey A. Golden* 56 Chairman of the Corporation and the
Bank since October 1994. President and
Chief Executive Officer of the
Corporation since November, 1981 and the
Bank since January, 1979.
M. Thomas Mullican* 75 Vice Chairman of Corporation since
April, 1983; Board of Directors of
Corporation since November, 1981. Farmer
and Investor.
Larry E. Brown* 50 Executive Vice President of the
Corporation and the Bank since April,
1987; Senior Vice President of the
Corporation and the Bank, 1986 - 1987.
Ann Martin 47 Secretary of Corporation since
November, 1986; Secretary the Board
since January, 1995.
James H. Hillis 57 Treasurer of the Corporation
since October, 1983; Senior Vice
President and Treasurer of the Bank
since March, 1983.
* Member of C B & T's Executive Committee
All of the officers of C B & T listed above are subject to re-
election at the Board of Directors meeting following the Annual
Meeting of Shareholders scheduled for April 8, 1997.
<PAGE> 11
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters
The market for C B & T's Common Stock and related shareholder
matters are incorporated herein by reference to Common Stock
Market Price Information on page 42 of the Annual Report to
Shareholders which is attached hereto as Exhibit 13.
Item 6. Selected Financial Data
The selected financial data is incorporated herein by reference
to Consolidated Selected Financial Data on page 42 of the Annual
Report to Shareholders which is attached hereto as Exhibit 13.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and
Results of Operations is incorporated herein by reference to
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 7-12 of the Annual Report to
Shareholders which is attached hereto as Exhibit 13.
Item 8. Financial Statements and Supplementary Data
Financial statements and supplementary data are incorporated
herein by reference to the Consolidated Financial Statements on
pages 12-35 of the Annual Report to Shareholders which is
attached hereto as Exhibit 13.
Item 9. Disagreements with Accountants on Accounting and
Financial Disclosure
C B & T and its accountants have had no reportable disagreement
on any matter of accounting principles or practices or financial
statement disclosure.
<PAGE> 12
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors - Information regarding
identification of directors is hereby incorporated from
the Election of Directors section of C B & T's definitive
proxy statement for use in connection with the Annual
Meeting of Shareholders to be held April 8, 1997 ("Current
Proxy Statement") on pages 2, 3, 4, 5 and 6.
(b) Identification of Executive Officers - Information
regarding identification of executive officers may be
found in Item 4(b) of Part I of this Form 10-K.
(c) Section 16(a) Reporting Delinquencies - Information
regarding Section 16(a) Reporting Delinquencies is hereby
incorporated from the Section 16(a) Reporting
Delinquencies section of C B & T's Current Proxy Statement
on page 13.
Item 11. Executive Compensation
Information regarding management compensation is hereby
incorporated from the Executive Compensation section of C B & T's
Current Proxy Statement on pages 9, 10, and 11.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding security ownership of certain beneficial
owners and management is hereby incorporated from the Information
Regarding Certain Beneficial Owners section of C B & T's Current
Proxy Statement on pages 3, 4, 5 and 6.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related
transactions is hereby incorporated from the Certain
Relationships and Related Transactions section of C B & T's
Current Proxy Statement on page 13.
<PAGE> 13
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K *
(a) (1) and (2) The response to this portion of
Item 14 is submitted as a separate section of this
report.
(3) The following exhibits are
filed herewith:
(13) Annual report to security
holders
* Bylaws remain the same as those included in the Form
10-K submitted for the fiscal year ended December 31,
1994.
<PAGE> 14
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, Chief Executive
Officer
Date: March 11, 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, Chief Executive Officer
(Principal Executive and Financial Officer)
Date: March 11, 1997
/s/ Jerry N. Brown
Jerry N. Brown, Senior Vice President
City Bank & Trust Company
(Chief Financial Officer)
Date: March 11, 1997
<PAGE> 15
SIGNATURES -- Continued
/s/ Robert W. Boyd, Sr. /s/ James H. Hillis
Robert W. Boyd, Sr., Director James H. Hillis, Director
Date: March 11, 1997 Date: March 11, 1997
/s/ Larry E. Brown /s/ J. Paul Holder
Larry E. Brown, Director J. Paul Holder, Director
Date: March 11, 1997 Date: March 11, 1997
/s/ John R. Collier, Jr. /s/ M. Thomas Mullican
John R. Collier, Jr., Director M. Thomas Mullican, Director
Date: March 11, 1997 Date: March 11, 1997
/s/ James A. Dillon, Jr. /s/ James A. Puckett
James A. Dillon, Jr., Director James A. Puckett, Director
Date: March 11, 1997 Date: March 11, 1997
/s/ Jeffrey A. Golden /s/ Leon B. Stribling
Jeffrey A. Golden, Director Leon B. Stribling, Director
Date: March 11, 1997 Date: March 11, 1997
/s/ Charles D. Haston /s/ James E. Walling
Charles D. Haston, Director James E. Walling, Director
Date: March 11, 1997 Date: March 11, 1997
<PAGE> 16
Form 10-K -- Item 14(a)(1) and (2) and Item 14(d)
C B & T, Inc. and Subsidiaries
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of C B & T, Inc.
and Subsidiaries, included in the annual report of the registrant
to its shareholders for the year ended December 31, 1996, and
incorporated by reference in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets -- December 31, 1996 and 1995
Consolidated Statements of Income -- Years ended December
31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity -- Years
ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows -- Years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements -- December 31,
1996, 1995 and 1994
All schedules to the consolidated financial statements required
by Article 9 of Regulation S-X are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
<PAGE> 17
EXHIBIT INDEX
C B & T, INC.
Exhibit Number Title or Description
(13) Annual report to security holders
<PAGE> 18
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
C B & T, INC.
<PAGE> 19
To Our Shareholders and Friends,
The year 1996 marked another good year in the continuation of
successful progress and profitability for C B & T, Inc. and its
subsidiaries City Bank & Trust Company. I encourage you to
review the enclosed financial information. We will be happy to
answer any questions you may have, as well as listen to any
suggestions for improvement.
Earnings continued to remain strong as Return on Assets for
1996 was 1.60%, this generated $15.37 per share annual income.
During 1996, $6.50 was paid in cash dividends. This was
equivalent to 42.29% of net income. I am very pleased to
report to you, assuming that the value of your investment in C
B & T, Inc. was $100 at December 31, 1991, it would have grown
to $344 at December 31, 1996. This compares to $298 for
regional banks and $244 for the S & P 500.
In addition to the progress made by the bank, I am very pleased
to advise you that the Trust/Investment Department has
continued to progress beyond our expectations. This department
reported a record high growth in excess of $70 million at year
end, which is an increase of $11 million in 1996.
We are continually working to provide the very best in
financial service to our trade area. This past year many
enhancements were made:
Our business customers were offered a Cash Management Investment
Account. This program offers business customers an efficient means of
managing their daily funds and earning a fair return on excess cash
through the use of repurchase agreements of U.S. Government
Securities.
We rolled out our new 24-Hour Telephone Banking service, that
offers voice response information to our customers, day or night. We
followed that offering with Loans-by-Phone, that gives our customers
an opportunity to apply for a loan 24 hours a day. The numbers to
access either of these services are (615) 473-2148, (615) 597-4178,
(615) 563-2002 or 1-888-473-2147.
We opened our new SuperCenter Branch in the Wal-Mart Super Store
facility in McMinnville. This full service branch greatly expands the
banking opportunities for our customers and increases our ability to
meet the banking needs of our community through extended banking
hours. It also offers a 24-hour full service ATM in a safe and secure
environment.
<PAGE> 2
A full service ATM was installed in the new Columbia River Park
Hospital. Our presence in this facility again expands our service
capabilities.
We installed a cash dispenser in the CYC (Calsonic Yorozu
Corporation) plant in Morrison, Tennessee. This equipment offers many
of the features of our full service ATM. We expect to make available
more automated facilities in the near future.
In November, we purchased the former H.G. Hill property adjacent
to our West Main Branch. This purchase will give us the opportunity
to expand our West Main facility and also gives us the opportunity to
begin planning the relocation of our Operations Center. This
expansion will improve efficiencies in our operations and will free
space in our main office building for future growth.
The Board of Directors approved the organization of two new
companies during 1996. CBT Insurance, Inc. was organized to provide
the bank new opportunities in the insurance arena and is already
generating some revenue from the sale of life insurance. CBT Realty,
Inc. was organized for the purpose of holding and disposing of
foreclosed properties, but did not have any activity in 1996.
The challenge for management is to keep pace with changes and
opportunities while maintaining our identity as a high
performing community bank fulfilling our motto of "People
Helping People." It is our desire to continue our commitment
to our customers and trade area. We take community involvement
and leadership seriously, and management believes that our
continued success lies in remaining community based.
Thanks to you -- our shareholders and friends for your
business; our staff for their excellent performance; management
for their leadership and commitment; and the board of directors
for their participation and guidance.
We encourage you to take advantage of our many services and we
hope that you will recommend them to your family and friends.
Yours truly,
Jeffrey A. Golden
Chairman of the Board
President and Chief Executive Officer
<PAGE> 3
C B & T, INC. AND SUBSIDIARIES OFFICERS AND ADVISORY COMMITTEE
C B & T, INC. - OFFICERS
Jeffrey A. M. Thomas Larry E. James H. Edith Ann
Golden Mullican Brown Hillis Martin
Chairman, Vice Executive Treasurer Secretary to
President & Chairman Vice the Board
Chief President
Executive
Officer
<PAGE> 4
CITY BANK & TRUST COMPANY - OFFICERS
Jeffrey A. Golden Kenneth D. Martin Dawn M. Christian
Chairman of the Board, Vice President Assistant Vice
President, CEO President
Edith Ann Martin Edward Wayne Martin Deborah E. Glenn
Secretary to the Board Vice President Assistant Vice
President
Larry E. Brown Robert L. Miller Dana M. Green
Executive Vice Vice President *Assistant Vice
President President
Jerry N. Brown Lonnie D. Milstead Shannon L. Haston
Senior Vice President Vice President Assistant Vice
Chief Financial President
Offficer
James H. Hillis Betty L. Parker Johnny T. Taylor
Senior Vice President Vice President Assistant Vice
President
Kenneth Dwayne Woods Donna Bryant W. Ben Holland
Vice President Administrative Senior Auditor
Assistant
Glyna F. Lee Terry B. Vaughn Sherry A. Clendenon
Senior Vice President Vice President Administrative
Assistant
Kenneth W. Smith Susan M. Young Barbara D. Davis
Senior Vice President Vice President Administrative
Assistant
Randall G. Tramel Edmond D. Busic Teresa A. Hennessee
Senior Vice President Loan Review Officer Administrative
Assistant
Eric A. Golden Donna D. Evans Lisa A. Hillis
Cashier Operations Coordinator *Administrative
Assistant
Ronald G. Goodwin Rhonda A. Carr Melanie D. Nichols
Vice President *Auditor Administrative
Assistant
Lynne R. Hamrick Sherry Lynn Daugherty Charles Tim Prater
Human Resource Officer Branch Manager Administrative
Assistant
Debra T. Kell Betty B. Prater Jane Ann Pryor
Vice President Branch Manager Administrative
Assistant
Emogene R. Magness Ella J. Richmond Elizabeth P. Smith
Vice President, Branch Branch Manager Administrative
Manager Assistant
Danny L. Martin Tracie J. Tate Sharon E. West
Vice President Branch Manager Administrative
Assistant
CITY BANK & TRUST COMPANY - SMITHVILLE ADVISORY COMMITTEE
H.J. Judkins Leon B. Stribling Mark Ashburn
H.J. Judkins & Son Stribling Chevrolet- Manager, Smithville
Nursery, Inc. GEO, Inc. Electric System
Jim Ed Rice Vester Parsley Norval Webb, Jr. Jeanette C.
Local Attorney-at-Law F.W. Webb & Son France
Businessman Pharmacy Farming
Operation
*Effective 1/1/97
<PAGE> 5
C B & T, INC.
AND ITS SUBSIDIARIES
CITY BANK & TRUST COMPANY
Financial Review
Financial Discussion 7
Report of Independent Certified Public 12
Accountants
Consolidated Balance Sheets 13
Consolidated Statements of Income 14
Consolidated Statements of 15
Shareholders' Equity
Consolidated Statements of Cash Flows 16
Notes to Consolidated Financial 17
Statements
<PAGE> 6
Financial Discussion
The following discussion is presented to assist in understanding the
current financial condition and results of operations of C B & T, Inc.
and subsidiaries. This discussion should be read in conjunction with
the consolidated financial statements and related disclosures
presented in other sections of this annual report.
PERFORMANCE OVERVIEW
Net income for 1996 was $4,117,000 or $15.37 per share, compared to
$4,067,000 or $15.00 per share in 1995 and $4,260,000 or $14.37 per
share in 1994. Two key measures of performance in the banking
industry are return on average equity (ROE) and return on average
assets (ROA). ROE is the ratio of income earned to average
shareholders' equity. ROE for 1996 was 13.76 percent compared to
14.37 percent in 1995 and 15.12 percent in 1994. ROA measures how
effectively a corporation uses its assets to produce earnings. For
1996, return on average assets was 1.60 percent. ROA was 1.64 percent
in 1995 and 1.68 percent in 1994. ROE and ROA have been negatively
impacted by an increase in the net loan charge offs in 1996.
NET INTEREST INCOME
The Corporation's primary source of earnings is net interest income,
which is the difference between revenue generated from earning assets
and the interest cost of funding those assets. For discussion, net
interest income is adjusted to reflect the effect of the tax benefits
of certain tax-exempt investments and loans to compare with other
sources of interest income. Net interest income on a fully taxable-
equivalent basis has increased to $11,903,000 in 1996, from
$11,334,000 in 1995 and $12,073,000 in 1994. Net yield on interest
earning assets, which is net interest income on a tax equivalent basis
divided by average earning assets, was 4.93 percent in 1996, compared
with 4.87 percent in 1995 and 5.07 percent for 1994. Average earning
assets, as a percentage of total assets, decreased slightly to 93.8
percent in 1996 compared to 93.9 percent in 1995 and 93.8 percent in
1994.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses is an operating expense
recorded to maintain the related balance sheet allowance account that
is provided to cover losses that may be incurred in the normal course
of lending. The total provision for possible loan losses was $628,000
in 1996, $376,000 in 1995 and $330,000 in 1994. Management regularly
monitors the allowance for possible loan losses and considers it to be
adequate.
NONINTEREST INCOME
Total noninterest income of $2,058,000 in 1996 increased $242,000 or
13.3 percent, when compared to 1995. This follows an increase of 35.5
percent in 1995 and a decrease of 22.7 percent in 1994. Service
charges on deposit accounts increased $147,000 in 1996 due,
principally, to growth in transaction and savings deposit accounts
coupled with price increases. Gains and losses on the sale of
investment securities also impact comparisons. Security transactions
resulted in losses of $22,000, $14,000 and $308,000 in 1996, 1995, and
1994.
NONINTEREST EXPENSES
Noninterest expenses increased 5.6 percent in 1996, a slightly higher
rate of growth than the 3.2 percent in 1995 and lower than 6.5 percent
in 1994. The increase in 1996 can be attributed to higher levels of
expense relative to salaries. Salaries, wages and benefits accounted
for 56.5 percent of total noninterest expense in 1996, compared to
56.0 percent in 1995 and 54.1 percent in 1994. These increases are
primarily attributable to the increased cost of benefits and merit
raises. Federal Deposit Insurance Corporation's insurance assessment
decreased $240,000 in 1996 as compared to a decrease of $235,000 in
1995 and an increase of $5,000 in 1994.
<PAGE> 7
Financial Discussion
INCOME TAXES
One element of the Corporation's tax planning is the implementation of
various investment and loan strategies to maximize after-tax profits.
This planning is an ongoing process which considers the levels of tax-
exempt securities and loans, investment securities gains or losses and
allowable loan loss deductions. The Corporation's effective income
tax rate (income tax expense divided by income before income taxes) is
less than the statutory rate primarily due to income on tax-exempt
securities and loans. It should be recognized that the yield on these
types of assets is considerably less than on other investments of the
same maturity and risk.
The income tax provision was $1,856,000 in 1996, compared with
$1,788,000 in 1995 and $1,944,000 in 1994. The Corporation's
effective tax rate was 31.1 percent in 1996, 30.5 percent in 1995 and
31.3 percent in 1994.
It has been determined that for the year ended December 31, 1996, a
valuation allowance is not required on any of the deferred tax assets
recorded due, primarily, to the earnings history of the Corporation
and the significant amount of federal income taxes paid in prior
years.
CREDIT QUALITY AND EXPERIENCE
Impaired Loans
Effective January 1, 1995, the Corporation and the Bank adopted
Statement of Financial Accounting Standards No. 114. (as amended by
No 118), "Accounting by Creditors for Impairment of a Loan". SFAS
114 established the accounting by creditors for impairment of a loan
by specifying how allowances for possible loan losses related to
certain loans should be determined. This Statement also addresses the
accounting by creditors for certain loans that are restructured in a
troubled debt restructuring. A loan is considered impaired when it is
probable that an institution will be unable to collect all amounts due
(principal and interest) according to the contractual terms of the
loan agreement. Management evaluates smaller balance homogeneous
loans collectively for impairment. Loans collateralized by one-to-
four family residential properties, consumer installment loans and
credit card loans are considered smaller-balance homogeneous loans.
Loans that are ninety days past-due, loans on non-accrual status,
loans that are restructured in a troubled debt restructuring, and
loans that are included on the Bank's problem loan list are evaluated
for impairment. A loan on non-accrual status is a loan on which
interest accruals are discontinued. Interest accruals are
discontinued when management believes, after considering economic and
business conditions and collection efforts, that the borrower's
financial condition is such that it is not reasonable to expect that
such interest will be collected. Interest income is subsequently
recognized only to the extent of the excess of cash payments received
over the principal balance due.
When a loan is impaired, the amount of impairment is measured based on
the present value of expected future cash flows discounted at the
loan's effective interest rate. For collateral dependent loans,
impairment is measured based on a loan's observable market price or
the fair value of the collateral. The Bank does not recognize
interest income on impaired loans. The entire change in the net
carrying amount is reported as an adjustment to the provision for
possible loan losses, but in no event are changes in the net present
value used to justify having a loan on the Bank's books at a value
that exceeds its recorded investment. Impaired loans are charged-off
once management has exhausted all efforts to collect the loan.
Inherent in the business of providing financial services is the risk
involved in extending credit. Management believes the objective of a
sound credit policy is to extend quality loans to customers while
reducing risk affecting shareholders' and depositors' investments.
Risk reduction is achieved through diversity of the loan portfolio as
to type, borrower, and industry concentration as well as sound credit
policy guidelines and procedures.
Total impaired loans at December 31, 1996 were $1,280,000 compared to
$398,000 at December 31, 1995 and $1,825,000 at December 31, 1994.
The ratio of impaired loans to the allowance for loan losses at
December 31, 1996, was 66.3 percent compared to 21.4 percent and 105.3
percent at December 31, 1995 and 1994, respectively. Total impaired
loans as a percentage of total loans increased to 0.9 percent at
December 31, 1996, compared to 0.3 percent at December 31, 1995 and
1.4 percent at December 31, 1994.
<PAGE> 8
Financial Discussion
Allowance for Possible Loan Losses and Loan Charge-Offs
The allowance for possible loan losses is the reserve maintained to
cover losses that may be incurred in the normal course of lending.
The allowance for possible loan losses is increased by provisions
charged against income and recoveries of loans previously charged off.
The allowance is decreased by loans that are determined uncollectible
by management and charged against the allowance, net of recoveries.
In determining the adequacy of the allowance for possible loan losses,
management on a regular basis evaluates and gives consideration to the
following factors: estimated future losses of significant loans
including identified problem credits; historical loss experience based
on volume and types of loans; trends in portfolio volume, maturity and
composition; off-balance sheet credit risk; volume and trends in
delinquencies and non-accruals; economic conditions in the market
area; and any other relevant factors that may be pertinent.
Potential problem loans are those loans which are on the Corporation's
"watch list". These loans exhibit characteristics that could cause
the loans to become impaired or require restructuring in the future.
Periodically, and at a minimum monthly, this "watch list' is reviewed
and adjusted for changing conditions.
FINANCIAL CONDITION
The following discussions address key elements of financial condition,
including earning assets, the source of funds supporting earning
assets, capital adequacy and asset and liability management.
EARNING ASSETS
Loans
At December 31, 1996, loans were $144.9 million, compared to $140.5
million at December 31, 1995. This represents an increase of 3.1
percent in 1996. In 1995, loans increased 8.5 percent from $129.5
million at December 31, 1994.
Loans comprise the majority of the Corporation's earning assets
representing 57.4 percent of average earning assets in 1996 and 56.5
percent in 1995. Average loans outstanding increased 5.1 percent in
1996 and 12.5 percent in 1995.
The largest category in the loan portfolio was real estate mortgage
loans, which comprised 66.5 percent of total loans at the end of 1996.
Installment loans totaled 22.1 percent of the portfolio and
commercial, financial and agricultural loans comprised 9.4 percent of
the portfolio. All other loans were 2.0 percent of the portfolio. In
1995, real estate mortgages were 63.8 percent of the portfolio,
installment loans were 21.9 percent, commercial, financial and
agricultural loans were 12.5 percent and other loans were 1.8 percent.
The mix within the commercial loan portfolio is diverse and represents
loans to a broad range of business interests located, primarily,
within the Bank's defined market area with agribusiness industry being
the only concentration. The installment loan portfolio is composed,
principally, of financing to individuals for vehicles and consumer
assets. The real estate portfolio is primarily residential mortgages.
Loans that mature within one year totaled $50,377,000, or 34.8 percent
of the loan portfolio at December 31, 1996.
Investment Securities
The investment portfolio represented 40.4 percent of average earning
assets in 1996 and 41.3 percent in 1995. Average investment
securities increased 1.4 percent in 1996 compared to 1995. The tax-
equivalent yield on the entire portfolio was 6.96, 7.01 and 6.75
percent in 1996, 1995 and 1994, respectively. These investments
provide a stable yet diversified income stream and serve useful roles
in liquidity and interest-rate-sensitivity management. In addition,
they serve as a source of collateral for low-cost funding. The
decision to purchase securities is based upon the assessment of
current economic, tax status and financial trends.
<PAGE> 9
Financial Discussion
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 is AA or AAA, as rated by a nationally
recognized service. As a matter of policy, in support of our service
area, we may purchase certain unrated bonds of local municipalities
provided they are of reasonable credit risk.
On November 15, 1995, the Financial Accounting Standards Board issued
a guide for the implementation of SFAS 115 which allowed a bank to
reassess the appropriateness of the classification of all securities
held at November 15, 1995 and until December 31, 1995, and account for
any resulting changes in classifications as a transfer. Changes in
classification from the held-to-maturity category that result from
this one-time reassessment did not call into question the intent of a
bank to hold other debt securities to maturity in the future. As a
result of this one-time reassessment, on November 30, 1995, the Bank
transferred securities with a book value of approximately $42.8
million and related unrealized gains and losses of approximately $0.8
million and $0.2 million, respectively (net unrealized gain of
approximately $0.6 million), from held-to-maturity to available-for-
sale.
As of December 31, 1996, 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.
Federal Funds Sold
Federal funds sold are used to manage interest rate sensitivity and to
meet liquidity needs. During 1996, 1995 and 1994, these funds
represented approximately 2.2 percent, 2.2 percent and 0.7 percent,
respectively, of average earning assets.
SOURCES OF FUNDS
Deposits
The Corporation's major source of investable funds is core deposits
from retail and business customers. Core deposits consist of interest-
bearing and noninterest-bearing deposits, including certificates of
deposit over $100,000. Average interest-bearing core deposits,
comprised of interest-bearing checking accounts, savings, certificates
of deposit, money market and other time accounts, increased 5.0
percent in 1996, compared to 5.3 percent reduction in 1995 and 1.1
percent growth in 1994. Average demand deposits (noninterest-bearing
core deposits) increased 0.8 percent in 1996, 10.3 percent in 1995 and
9.5 percent in 1994. These deposits represent approximately 12.6 and
13.1 percent of average core deposits in 1996 and 1995, respectively.
Federal Home Loan Bank Borrowings
In 1996 these average borrowings decreased slightly to 2.6 percent of
average assets compared to 4.0 percent in 1995.
Shareholders' Equity and Capital Adequacy
Shareholders' equity is a stable, noninterest-bearing source of funds
which provides support for asset growth and is the primary component
of capital. Capital adequacy refers to the level of capital required
to sustain growth over time and to absorb unanticipated losses.
Shareholders' equity at December 31, 1996, was $32.2 million, or
$121.85 per share, compared with $30.7 million, or $113.92 per share
at December 31, 1995 and $26.6 million, or $97.61 per share at
December 31, 1994. At December 31, 1996, the Corporation's leverage
ratio was 12.2 percent. At December 31, 1996, the Corporation's risk-
based capital ratios based on Federal Reserve Board guidelines were
21.4 percent for Tier 1, or "core" capital, and 22.7 percent for total
qualifying capital. At December 31, 1995, the Corporation's leverage
ratio was 11.9 percent. At December 31, 1995, the Corporation's risk-
based capital ratios based on Federal Reserve Board guidelines were
21.0 percent for Tier 1 or "core" capital at 22.3 percent for tested
qualifying capital. These ratios substantially exceed the Federal
Reserve Board's capital guidelines for a well-capitalized institution,
which are 6.00 percent for Tier 1, 10.00 percent for total qualifying
capital, and 5.00 percent for leverage ratio. 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.
<PAGE> 10
Financial Discussion
INTEREST RATE SENSITIVITY
Balance sheet structure and interest rate changes play important roles
in the growth of net interest income. The Bank's Asset/Liability
Committee manages the overall rate sensitivity and mix of the balance
sheet to anticipate and minimize the effects of interest rate
fluctuations and to maintain a consistent net interest margin.
Interest rate risk is monitored through gap analysis to ensure proper
positioning of the Corporation in various interest rate scenarios.
LIQUIDITY
Liquidity management ensures that the cash flow requirements of
borrowers, depositors and the Corporation can be met. The funds for
short-term liquidity needs are provided through maturing securities,
the Bank's extensive core deposit base, payments received on loans and
the acquisition of new deposits. Long-term funding needs can
additionally be met, if required, through the issuance of common
stock. The Corporation's liquidity is considered by management to be
adequate to meet all current and projected levels of need.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ON THE
FINANCIAL STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD
The Financial Accounting Standards Board (FASB) has issued one
standard that has not been adopted by C B & T, Inc. but will be
required to be adopted after December 31, 1996 as follows:
Statement of Financial Accounting Standards No. 125, Accounting
for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.
(a) Effective prospectively for transfers and servicing
of financial assets and extinguishment of liabilities
occurring after December 31, 1996.
(b) The statement supersedes statement No. 122,
Accounting for Mortgage Servicing Rights, which was effective
for fiscal year beginning after December 15, 1995.
(c) The statement will eliminate the distinction
between servicing rights based on normal servicing fees and
excess servicing fees and will generally reclassify the cash
flows associated with those assets into new type servicing
assets.
(d) Management does not believe this statement will
have any material effect on future issues.
<PAGE> 11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
C B & T, Inc.
McMinnville, Tennessee
We have audited the accompanying consolidated balance sheets of C
B & T, Inc. (the "Corporation") and its wholly-owned subsidiary,
principally City Bank & Trust Company (the "Bank"), as of December 31,
1996 and 1995, and the related consolidated statements of income,
shareholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. The
consolidated statements of income, shareholders' equity and cash flows
of C B & T, Inc. and subsidiaries for the year ended December 31, 1994
were audited by other auditors whose report dated January 18, 1995,
expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 1996 and 1995 financial statements referred
to above present fairly, in all material respects, the consolidated
financial position of C B & T, Inc. and subsidiaries as of December
31, 1996 and 1995, and the consolidated results of their operations
and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Notes 1 and 2 to the consolidated financial
statements, effective January 1, 1994, the Corporation and the Bank
changed their method of accounting for investments in debt and equity
securities. Also, as discussed in Notes 1 and 3, effective January 1,
1995, the Corporation and the Bank adopted the method of accounting
for impaired loans prescribed by Statement of Financial Accounting
Standards No. 114, as amended by No. 118.
Nashville, Tennessee
January 17, 1997
<PAGE> 12
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(Dollars in Thousands, Except Share Data)
1996 1995
ASSETS
Cash and due from banks $ 7,021 $ 8,596
Federal funds sold 1,175 4,700
Investment securities - Note 2 102,070 97,643
Loans, net of unearned income and
allowance for possible
loan losses - Notes 3 and 4 142,096 136,539
Interest receivable 3,116 3,061
Bank premises and equipment, at cost
less allowance for depreciation 2,333 2,131
Note 5
Other assets - Notes 6 and 13 3,648 3,212
TOTAL ASSETS $261,459 $255,882
LIABILITIES
Deposits:
Noninterest-bearing deposits $ 28,178 $ 28,174
Interest-bearing deposits
(including certificates of
deposit over $100: 1996- 189,379 185,083
$28,943; 1995 - $27,287) - Note 7
217,557 213,257
Securities sold under agreements to 1,362
repurchase - Note 8
Accounts payable and accrued 1,637 1,349
liabilities - Note 13
Interest payable 1,460 1,329
Federal Home Loan Bank borrowings-
Note 9 7,203 9,226
TOTAL LIABILITIES 229,219 225,161
COMMITMENTS AND CONTINGENCIES - Notes
10, 11 and 17
SHAREHOLDERS' EQUITY - Note 14
Common stock, $2.50 par value,
authorized 1,000,000
shares; issued 331,814 shares,
including 67,229 treasury shares
in 1996 and 62,147 treasury shares 830 830
in 1995
Additional paid-in capital 5,000 5,000
Retained earnings - Note 15 31,179 28,815
Net unrealized gains (losses) on
available-for-sale securities,
net of deferred income taxes of:
1996 - $397;
1995 - $559 - Note 2 647 912
37,656 35,557
Less cost of treasury shares ( 5,416) ( 4,836)
TOTAL SHAREHOLDERS' EQUITY 32,240 30,721
TOTAL LIABILITIES AND SHAREHOLDERS' $261,459 $255,882
EQUITY
See accompanying notes to consolidated financial statements.
<PAGE> 13
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands, Except Share Data)
1996 1995 1994
INTEREST INCOME
Interest and fees on loans $13,657 $13,021 $11,196
Interest on investment securities:
Taxable interest 4,772 4,952 5,857
Tax-exempt interest 1,336 1,180 1,460
6,108 6,132 7,317
Other interest income 280 301 59
TOTAL INTEREST INCOME 20,045 19,454 18,572
INTEREST EXPENSE
Interest on deposits 8,372 8,069 6,712
Interest on other borrowed funds - Note 8 46 56 64
Interest on long-term debt - Note 9 412 593 475
TOTAL INTEREST EXPENSE 8,830 8,718 7,251
NET INTEREST INCOME 11,215 10,736 11,321
Provision for possible loan losses - Note 4 628 376 330
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 10,587 10,360 10,991
NONINTEREST INCOME
Service charges on deposit accounts 1,211 1,064 993
Other service charges, commissions and fees 333 310 214
Net realized losses on investment
securities ( 22) ( 14) ( 308)
Other income 536 456 441
TOTAL NONINTEREST INCOME 2,058 1,816 1,340
NONINTEREST EXPENSES
Salaries and employee benefits-Notes 12 3,772 3,540 3,317
and 18
Net occupancy expense 306 283 275
Furniture and equipment expense 812 764 651
Deposit insurance premium 2 242 477
Directors deferred compensation expense 249 235 156
Other expenses 1,531 1,257 1,251
TOTAL NONINTEREST EXPENSES 6,672 6,321 6,127
INCOME BEFORE PROVISION FOR INCOME TAXES 5,973 5,855 6,204
Provision for income taxes - Note 6 1,856 1,788 1,944
NET INCOME $ 4,117 $ 4,067 $ 4,260
Weighted average number of shares 267,865 271,150 296,456
outstanding
Per share of Common Stock:
Net income $ 15.37 $ 15.00 $ 14.37
See accompanying notes to consolidated financial statements.
<PAGE> 14
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands, Except Share Data)
Net
Unrealized
Gains
Addit- (Losses)on
ional Available-
Common Stock Paid-in Retained For-Sale Treasury
Shares Amount Capital Earnings Securities Shares Total
BALANCE-JANUARY 1, 331,814 $830 $5,000 $22,952 $ - ($ 217) $28,565
1994
Cumulative effect
change in
accounting
principle,net
of $1,232
deferred income
taxes - Note 1 - - - - 2,011 - 2,011
Net income for 1994 - - - 4,260 - - 4,260
Cash dividends
declared, $4.10
per share - - - ( 1,239) - - ( 1,239)
Purchase ofoutstand-
ing Common Stock - - - - - ( 4,332)( 4,332)
Net change in un-
realized gains
(losses) on
available-for-
sale securities,
net of $1,635
deferred income
taxes - - - - ( 2,668) - ( 2,668)
BALANCE-DECEMBER
31, 1994 331,814 830 5,000 25,973 ( 657)( 4,549) 26,597
Net income for 1995 - - - 4,067 - - 4,067
Cash dividends
declared, $4.50
per share - - - ( 1,225) - - ( 1,225)
Purchase of out-
standing Common
Stock - - - - - (287) (287)
Adjustment to account
for transfer of
securities from
held-to-maturity
to available-for-
sale, net of
deferred income
taxes-Note 1 - - - - 375 - 375
Net change in un-
realized gains
(losses) on
available-for-
sale securities,
net of $732
deferred income
taxes - - - - 1,194 - 1,194
BALANCE-DECEMBER 31,
1995 331,814 830 5,000 28,815 912 ( 4,836) 30,721
Net income for 1996 - - - 4,117 - - 4,117
Cash dividends
declared, $6.50
per share - - - ( 1,753) - - ( 1,753)
Purchase of out-
standing Common
Stock - - - - - ( 580) ( 580)
Net change in un-
realized gains
(losses) on
available-for-
sale securities,
net of $162
deferred income
taxes - - - - ( 265) - ( 265)
BALANCE-DECEMBER
31, 1996 $331,814 $830 $5,000 $31,179 $647 $(5,416) $32,240
See accompanying notes to consolidated financial statements.
<PAGE> 15
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands)
1996 1995 1994
OPERATING ACTIVITIES
Net income for the year $ 4,117 $ 4,067 $ 4,260
Adjustments to reconcile net income
to net cash provided by operating
activities:
Stock dividend ( 82) ( 79) ( 52)
Provision for possible loan losses 628 376 330
Provision for depreciation and
amortization 531 481 415
Amortization of investment security
premiums, net of accretion of
discounts ( 3) 11 -
Net realized losses on investment
securities 22 14 308
Net loss on the disposal of fixed
assets - 4 -
Deferred income taxes ( 51) ( 107) ( 114)
Increase in interest receivable ( 55) ( 119) ( 90)
Increase in interest payable 131 441 146
Decrease (increase) in other assets 102 ( 40) ( 415)
Increase in other liabilities 287 203 57
Other, net - - 251
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,627 5,252 5,096
INVESTING ACTIVITIES
Purchases of investment securities (54,964) (23,970) (36,893)
Proceeds from sale of investment
securities 17,254 22,537 21,346
Proceeds from maturities, calls and
principal collections of
investment securities 32,838 16,615 18,680
Net increase in loans ( 6,185) (10,778) (12,304)
Net purchases of premises and equipment ( 731) ( 245) ( 654)
Increase in cash value of life insurance ( 244) ( 179) ( 184)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (12,032) 3,980 (10,009)
FINANCING ACTIVITIES
Net increase in noninterest-bearing
and interest-bearing deposits 4,300 436 3,422
Net cash provided by securities
sold under agreements to repurchase 1,362 - -
Net increase (decrease) in federal
funds purchased - ( 5,700) 5,700
Cash dividend ( 1,753) ( 1,225) ( 1,239)
Purchase of outstanding common stock ( 580) ( 287) ( 4,332)
Proceeds from long-term debt 993 4,000 639
Repayments of long-term debt ( 3,017) ( 2,594) ( 547)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 1,305 ( 5,370) 3,643
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ( 5,100) 3,862 ( 1,270)
CASH AND CASH EQUIVALENTS-
BEGINNING OF YEAR 13,296 9,434 10,704
CASH AND CASH EQUIVALENTS-
END OF YEAR 8,196 13,296 9,434
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest expense $8,699 $8,281 $7,105
Income taxes 2,105 1,753 2,189
See accompanying notes to consolidated financial statements.
<PAGE> 16
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
C B & T, Inc. (the "Corporation") is a one-bank holding company
formed in 1981, with a wholly-owned subsidiary, City Bank &
Trust Company, McMinnville, Tennessee (the "Bank"). The Bank,
which is regulated by the Federal Deposit Insurance Corporation
and Tennessee Department of Financial Institutions, provides
deposit services and grants real estate, commercial,
agricultural and consumer loans to customers primarily in Warren
and DeKalb counties of Tennessee.
CBT Realty, Inc., a wholly-owned subsidiary of the Corporation,
was formed for the purpose of holding and disposing of real
estate acquired through foreclosure.
During 1996, the Corporation formed CBT Insurance, Inc., a
wholly-owned subsidiary of the Corporation, for the purpose of
selling insurance services.
The accounting principles followed and the methods of applying
those principles conform with generally accepted accounting
principles and to general practices in the banking industry.
The significant policies are summarized as follow:
Principles of Consolidation
The accompanying consolidated financial statements present the
accounts and operations of the Corporation and the Bank.
Material intercompany accounts and transactions have been
eliminated in consolidation.
Cash and Due from Banks
Reserve requirements amounted to approximately $1.4 million at
December 31, 1996 and 1995.
Cash Equivalents
Cash equivalents include amounts due from banks, interest-
bearing deposits in other banks and federal funds sold.
Generally, federal funds are purchased or sold for one-day
periods.
Investment Securities
Effective January 1, 1994, the Bank adopted and implemented
Statement of Financial Accounting Standards No.115 (SFAS 115),
"Accounting for Certain Investments in Debt and Equity
Securities", which requires that securities be categorized as
held-to-maturity, available-for-sale, and trading securities.
In accordance with the Statement, prior period financial
statements were not restated to reflect the change in accounting
principle. The cumulative effect as of January 1, 1994 of
adopting Statement 115 was an increase in shareholders' equity
of $2.011 million (net of $1.232 million in deferred income
taxes) to reflect the net unrealized gains on securities
classified as available for sale that were previously carried at
amortized cost.
On November 15, 1995, the Financial Accounting Standards Board
issued a guide for the implementation of SFAS 115 which allowed
a bank to reassess the appropriateness of the classification of
all securities held at November 15, 1995 and until December 31,
1995, and account for any resulting changes in classifications
as a transfer. Changes in classification from the held-to-
maturity category that result from this one-time reassessment
did not call into question the intent of a bank to hold other
debt securities to maturity in the future. As a result of this
one-time reassessment, on November 30, 1995, the Bank
transferred securities with a book value of approximately $42.8
million and related unrealized gains and losses of approximately
$0.8 million and $0.2 million, respectively (net unrealized gain
of approximately $0.6 million), from held-to-maturity to
available-for-sale.
<PAGE> 17
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment Securities (Continued)
Trading Securities
Debt and equity securities held principally for resale in the near
term are classified as trading account securities and recorded at
their fair values. Unrealized gains and losses on trading account
securities are recognized currently.
Securities Held-to-Maturity
Debt securities which the Bank has the positive intent and ability
to hold to maturity are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using the interest
method over the period to maturity.
Securities Available-for-Sale
Securities not classified as trading or held-to-maturity are
classified as available-for-sale. Unrealized holding gains and
losses, net of deferred income taxes, on available-for-sale
securities are netted and reported as a separate component of
shareholders' equity until realized. Realized gains and losses on
the sale of available-for-sale securities are determined using the
specific-identification method.
Restricted Equity Securities
Federal Home Loan Bank and First Community L.P. stock are classified
as a restricted equity security and included in other assets.
Declines in the fair value of individual available-for-sale and held-
to-maturity securities below their cost that are other than
temporary result in write-downs of the individual securities to
their fair value. The related write-downs are included in earnings
as realized losses.
Loans
Loans receivable that management has the intent and ability to hold
for the foreseeable future or until maturity or payoff are reported
at their outstanding unpaid principal balances reduced by any charge-
offs or specific valuation accounts and net of any deferred fees or
costs on originated loans. Loan origination fees and certain
related direct costs are deferred and recognized as an adjustment of
the yield on the interest method. Interest on commercial loans and
real estate mortgage loans is recognized as income based on the
daily loan principal amounts outstanding. Interest on direct and
indirect installment loans is recognized using the interest method
or the Rule of 78's method which provides substantially the same
results as the interest method.
Effective January 1, 1995, the Corporation and the Bank adopted
Statement of Financial Accounting Standards No. 114 (as amended by
No. 118), "Accounting by Creditors for Impairment of a Loan". SFAS
114 establishes the accounting by creditors for impairment of a loan
by specifying how allowances for possible loan losses related to
certain loans should be determined. This Statement also addresses
the accounting by creditors for certain loans that are restructured
in a troubled debt restructuring. A loan is considered impaired
when it is probable that an institution will be unable to collect
all amounts due (principal and interest) according to the
contractual terms of the loan agreement. The Bank evaluates smaller
balance homogeneous loans collectively for impairment. Loans
collateralized by one-to-four family residential properties,
consumer installment loans and credit card loans are considered
smaller-balance homogeneous loans.
When a loan is impaired, the amount of impairment is measured based
on the present value of expected future cash flows discounted at the
loan's effective interest rate. For collateral dependent loans,
impairment is measured based on a loan's observable market price or
the fair value of the collateral. Interest accruals on impaired
loans are discontinued when management believes, after considering
economic and business conditions and collection efforts, that the
borrower's financial condition is such that it is not reasonable to
expect such interest will be collected. Interest income is
subsequently recognized only to the extent cash payments are
received.
<PAGE> 18
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as
of the date of the balance sheet and the revenues and expenses for
the period. Actual results could differ significantly from those
estimates. Material estimates that are particularly susceptible to
significant change in the near term relate to the determination of
the allowance for possible loan losses.
Allowance for Possible Loan Losses
The allowance for possible loan losses is established by charges to
operations and is maintained at an amount which management believes
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of loan collectibility and on
prior loan loss experience. The evaluations consider such factors
as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current
economic conditions that may affect the borrower's ability to pay.
Uncollectible loans are charged to the allowance account in the
period such determination is made. Subsequent recoveries on loans
previously charged off are credited to the allowance account in the
period received.
While management uses available information to recognize losses on
loans, future losses may be accruable based on changes in economic
conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the
Bank's allowance for possible loan losses. Such agencies may
require the Bank to recognize additional losses based on their
judgment of information available to them at the time of their
examination.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated
depreciation and amortization. The provision for depreciation is
computed substantially by the straight-line method over the
estimated useful lives of the assets, which are as follows:
buildings - up to 40 years; equipment - 5 to 10 years. Leasehold
improvements are amortized over the lesser of the lease terms or the
estimated lives of the improvements. Gains or losses from the
disposition of property are reflected in operations, and the asset
accounts and related allowance for depreciation are reduced.
Trust Department Income
Trust department income is recognized on the accrual basis in
accordance with generally accepted accounting principles.
Income Taxes
The Corporation and its subsidiaries file a consolidated federal
income tax return.
Deferred income tax assets and liabilities are computed annually for
the differences between the financial statement and tax bases of
assets and liabilities. Such differences will result in taxable or
deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to
be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Reclassification
Certain amounts have been reclassified in the 1995 and 1994
consolidated financial statements to conform to the 1996
presentation.
<PAGE> 19
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Other Real Estate
Other real estate, which is included in other assets, represents
real estate acquired through foreclosure and is stated at lower of
(i) fair value minus estimated costs to sell, or (ii) cost. If, at
the time of foreclosure, the fair market value of the real estate is
less than the Bank's carrying value of the related loan, a writedown
is recognized through a charge to the allowance for possible loan
losses, and the fair market value becomes the new cost for
subsequent accounting. If the Bank later determines that the cost
of the property cannot be recovered through sale or use, a writedown
is recognized by a charge to operations. When the property is not
in a condition suitable for sale or use at the time of foreclosure,
completion and holding costs, including such items as real estate
taxes, maintenance and insurance, are capitalized up to the
estimated net realizable value of the property. However, when the
property is in a condition for sale or use at the time of
foreclosure, or the property is already carried at its estimated net
realizable value, any subsequent holding costs are expensed. Legal
fees and any other direct costs relating to foreclosures are charged
to operations when incurred.
Net Income Per Share
Net income per share of common stock has been computed based on the
weighted average number of shares of common stock outstanding each
period.
NOTE 2 - INVESTMENT SECURITIES
The following tables reflect the amortized cost, estimated fair
values and gross unrealized gains and losses of debt securities held
at December 31, 1996 and 1995:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in Thousands)
1996
Available-for-sale securities:
U.S. Government and
agency securities $ 44,058 $ 387 $ 58 $ 44,387
Mortgage-backed securities 16,029 118 156 15,991
State and municipal
securities 27,939 741 48 28,632
Corporate debt securities 13,000 70 10 13,060
$101,026 $ 1,316 $ 272 $102,070
1995
Available-for-sale securities:
U.S. Government and
agency securities $ 47,615 $ 809 $ 196 $ 48,228
Mortgage-backed securities 16,835 172 218 16,789
State and municipal
securities 22,331 836 26 23,141
Corporate debt securities 9,391 97 3 9,485
$ 96,172 $ 1,914 $ 443 $ 97,643
No investment securities were required to be written down pursuant
to any other than temporary declines in fair value in 1996, 1995 or
1994.
<PAGE> 20
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 2 - INVESTMENT SECURITIES (CONTINUED)
The amortized cost, estimated fair value and weighted yields of debt
securities at December 31, 1996, by contractual maturities, are
shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Mortgage-
backed securities are included in the schedule below based on the
final stated maturities which are consistent with the remaining
portfolio. For tax-exempt obligations, the yields are shown on a
fully taxable basis assuming a 34% tax rate.
Amortized Fair Yield
Cost Value (unaudited)
(Dollars in Thousands)
U.S. Government and agency
securities:
Within one year $ 9,501 $ 9,542 6.40%
After one but within five
years 30,601 30,873 6.65%
After five but within ten
years 3,956 3,972 7.71%
Mortgage-backed securities:
Within one year 423 434 8.35%
After one but within five
years 1,151 1,183 8.27%
After five but within ten
years 10,599 10,628 7.03%
After ten years 3,856 3,746 6.08%
States and political sub-
divisions:
Within one year 2,217 2,223 6.40%
After one but within five
years 11,644 12,125 8.71%
After five but within ten
years 6,065 6,265 8.28%
After ten years 8,013 8,019 7.68%
Other investments:
Within one year 11,410 11,464 6.17%
After one but within five
years 1,590 1,596 6.20%
$101,026 $102,070
1996 1995 1994
(Dollars in Thousands)
Proceeds from sales of
investment securities $17,254 $22,537 $21,346
Gross realized gains $ 19 $ 70 $ 47
Gross realized losses 41 84 355
Investment securities gain
(losses), net ($ 22) ($ 14) ($ 308)
Securities carried at $22 million and $21 million at December 31,
1996 and 1995, respectively (fair value: 1996 - $22.7 million;
1995 - $21.4 million), were pledged to secure deposits or for
other purposes as required or permitted by law.
At December 31, 1996, the Corporation did not hold securities of
any single issuer, other than obligations of the U.S. Treasury
and other U.S. Government agencies, whose aggregate book value
exceeded ten percent of shareholders' equity.
<PAGE> 21
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 3 - LOANS
The following is a summary by category of loans outstanding as of
December 31, 1996 and 1995:
1996 1995
(Dollars in Thousands)
Commercial, financial and agricultural $ 13,574 $ 17,558
Real estate - construction 2,903 2,552
Real estate - mortgage 96,326 89,566
Installment 32,073 30,717
Lease financing 68 84
144,944 140,477
Less:
Unearned income ( 917) ( 2,074)
Allowance for possible loan losses ( 1,931) ( 1,864)
$ 142,096 $ 136,539
A summary of loan maturities as of December
31, 1996 and 1995 follows:
Fixed Rate Loans
Due in one year or less $ 31,155 $ 33,365
Due after one year 81,703 76,616
Due after five years 7,957 8,111
$ 120,815 $ 118,092
Floating Rate Loans
Due in one year or less $ 19,222 $ 17,027
Due after one year 4,525 5,064
Due after five years 382 294
$ 24,129 $ 22,385
Directors, executive officers or principal holders of equity
securities (and their associates, including organizations of which
such person is a general partner or in which such person holds a ten
percent or more ownership) of the Corporation and/or the Bank were
customers of, and had loans and other transactions with, the Bank in
the ordinary course of business. The following is a summary of the
changes in related party loans in 1996 and 1995.
1996 1995
(Dollars in Thousands)
Balance - beginning of year $3,524 $3,580
New loans made or additions to existing
loans 2,365 1,710
Repayments ( 2,391) ( 1,766)
Balance - end of year $3,498 $3,524
These loan transactions were made on substantially the same terms as
those prevailing at the time for comparable loans to other persons.
They did not involve more than the normal risk of collectibility or
present other unfavorable features.
<PAGE> 22
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 3 - LOANS (CONTINUED)
Impaired loans generally include nonaccrual loans, loans past due
90 days or more and still accruing interest, loans identified as
non-performing on the Bank's problem loan list, and all loans
restructured in a troubled debt restructuring subsequent to the
adoption of SFAS No. 114. There have been no loans restructured
under troubled debt restructuring since the adoption of SFAS No.
114.
The following loans have been identified as impaired in
accordance with the provisions of SFAS Statement No. 114 as of
December 31:
1996 1995
(Dollars in Thousands)
Loans accounted for on a nonaccrual basis $ 119 $ 19
Loans contractually past due ninety
days or more as to interest or
principal payments 851 379
Loans identified as non-performing on the
Bank's problem loan list 310 -
$ 1,280 $ 398
As of December 31, 1996 and 1995, losses on impaired loans were
adequately provided in accordance with SFAS No. 114. The average
recorded investment in impaired loans during the year ended
December 31, 1996 was approximately $1,296,000 ($403,000 in
1995).
During 1996, the Bank recognized interest income on impaired
loans of $95,000, which included $89,000 of cash payments
received. Interest income in the amount of $19,000 was
recognized for cash payments received in 1995.
NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the allowance for possible loan losses follow:
1996 1995 1994
(Dollars in Thousands)
Balance - beginning of year $1,864 $1,733 $1,601
Provision charged to operating
expenses 628 376 330
2,492 2,109 1,931
Amount charged off ( 639) ( 339) ( 343)
Recoveries 78 94 145
Net loans charged off ( 561) ( 245) ( 198)
Balance - end of year $1,931 $1,864 $ 1,733
<PAGE> 23
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES (CONTINUED)
It is management's opinion that the allowance was adequate at
December 31, 1996 and 1995, based on conditions reasonably known to
management. However, the allowance may be increased or decreased
based on loan growth, changes in credit quality, and changes in
general economic conditions.
For federal income tax purposes, the allowance for possible loan
losses is maintained at the maximum amount allowable by the Internal
Revenue Code.
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment consist of the following at December 31:
1996 1995
(Dollars in Thousands)
Land $ 208 $ 208
Buildings 1,732 1,489
Fixtures and equipment 3,777 3,352
5,717 5,049
Less allowances for depreciation ( 3,384) ( 2,918)
$ 2,333 $ 2,131
The provision for depreciation of premises and equipment amounted to
$531,000 for 1996, $481,000 for 1995, and $415,000 for 1994.
NOTE 6 - INCOME TAXES
The provisions for income taxes consist of the following:
1996 1995 1994
(Dollars in Thousands)
Current:
Federal $ 1,536 $ 1,526 $ 1,756
State 371 369 425
Total current 1,907 1,895 2,181
Deferred:
Federal ( 43) ( 91) ( 204)
State ( 8) ( 16) ( 33)
Total deferred ( 51) ( 107) ( 237)
Total provision for income tax $1,856 $1,788 $1,944
<PAGE> 24
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 6 - INCOME TAXES (CONTINUED)
The deferred tax effects of principal temporary differences are
shown in the following table:
1996 1995
(Dollars in Thousands)
Deferred tax assets:
Deferred benefit plan liability $ 400 $ 315
Allowance for possible loan losses 335 309
Leases 2 3
Premises and equipment - 7
Total deferred tax assets 737 634
Deferred tax liabilities:
Premises and equipment 21 -
Stock dividends received 84 53
Net unrealized gain on
available-for-sale securities 397 559
Total deferred tax liabilities 502 612
Net deferred tax asset $ 235 $ 22
A reconciliation of total income taxes reported with the amount
of income taxes computed at the federal statutory rate (34%
each year) follows:
1996 1995 1994
(Dollars in Thousands)
Tax expense at statutory rates $2,031 $1,991 $2,109
Increase (decrease) in taxes
resulting from:
Nondeductible interest expense 57 54 55
Tax-exempt income ( 474) ( 413) ( 509)
Tax effect of state income taxes 239 232 259
Other -net 3 ( 76) 30
$1,856 $1,788 $1,944
NOTE 7 - DEPOSITS
The following is a detail of the maturity ranges of
certificates of deposit of $100,000 or more as of December 31,
1996 and 1995:
1996 1995
(Dollars in Millions)
Under 3 months $ 7.4 $ 6.0
3 to 6 months 7.0 7.8
6 to 12 months 10.8 6.9
Over 12 months 3.7 6.6
$ 28.9 $ 27.3
<PAGE> 25
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 7 - DEPOSITS (CONTINUED)
Deposits from related parties amounted to $3.8 million at December
31, 1996 and $4.5 million at December 31, 1995.
NOTE 8 - FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE
For the year ended December 31, 1996, the average balance of federal
funds purchased was $7,000 ($800,000 in 1995), and the average
interest rate charged was 5.6% (6.5% in 1995). Unused lines of
credit for short-term financing totaled $11 million at December 31,
1996 ($9 million at December 31, 1995).
Securities sold under agreements to repurchase mature one business
day following the transaction date. The securities sold represent
investments which are registered to and under control of the Bank.
For the year ended December 31, 1996, securities sold under
agreement to repurchase averaged approximately $1,129,000. The
average interest rate paid on such agreements during the year was
4.00%, and the maximum month-end balance during the year was
$1,578,000. There were no securities sold under agreements to
repurchase for the year ended December 31, 1995.
NOTE 9 - FEDERAL HOME LOAN BANK BORROWINGS
The Bank has a line-of-credit under an agreement with the Federal
Home Loan Bank of Cincinnati (FHLB). The purpose of the line is to
hedge the interest rate on long-term lending. The Bank applied for
and received various commitments under the agreement, with respect
to which borrowings outstanding amounted to $7,203,000 at December
31, 1996 ($7,226,000 at December 31, 1995). Such borrowings mature
in level monthly installments through 2013. All remaining
commitments under this arrangement will contractually expire on
March 5, 1997.
The advances accrue interest at a fixed rate which is determined
when the advance is made. The weighted average rate on all such
borrowings drawn to date is 6.04%.
In March, 1995, pursuant to its Blanket Agreement for advances and
security agreement with the Federal Home Loan Bank, the Bank
obtained an additional advance in the amount of $4,000,000 with the
interest rate based on the London Inter-Bank Offering Rate ("LIBOR-
Based Advance"). The Bank made one prepayment during the year
against this borrowing in the amount of $2,000,000 and retired the
balance of $2,000,000 in January 1996.
The FHLB requires the Bank to maintain FHLB stock and obligations of
the United States of America, obligations fully guaranteed by the
United States of America, or other securities approved by and
delivered to the FHLB as collateral for such borrowings. The
carrying value of the collateral securing the advances at December
31, 1996 and 1995, was as follows:
1996 1995
(Dollars in Thousands)
FHLB stock $ 1,227 $ 1,144
U.S. Government agency securities 8,500 10,753
$ 9,727 $11,897
<PAGE> 26
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 9 - FEDERAL HOME LOAN BANK BORROWINGS (CONTINUED)
During each twelve month period, the Bank has the option of making
one partial prepayment of principal without a prepayment fee. The
remaining principal balance of all advances outstanding as of
December 31, 1996, matures as follows:
Year ending December 31, Amount
(Dollars in Thousands)
1997 $750
1998 781
1999 811
2000 845
2001 883
Thereafter 3,133
$7,203
NOTE 10 - LEASES
The Corporation and the Bank are obligated for rental payments under
various operating leases. All building leases have renewal options
available. There are no contingent rental clauses in any of the
leases.
Total rental expense incurred under all operating leases amounted to
$70,000 in 1996 ($72,000 in 1995 and $75,000 in 1994).
Future minimum rental commitments as of December 31, 1996 for all
noncancellable operating leases with initial or remaining terms of
one year or more are as follows:
Year ending December 31, Amount
(Dollars in Thousands)
1997 $85
1998 67
1999 55
2000 55
2001 31
Thereafter 56
Total future minimum lease payments $349
NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit risk in excess of
the amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contract or notional amount of those instruments. The Bank uses the
same credit policies in making commitments and conditional
obligations as it does for extending loans.
<PAGE> 27
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
(CONTINUED)
Unless noted otherwise, the Bank does not require collateral or
other security to support financial instruments with credit risk.
Contract or
Notional Amount
(Dollars in Thousands)
Financial instruments whose contract
amounts represent credit risk at
December 31, 1996:
Commitments to extend credit $23,793
Standby letters of credit 107
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent
future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained is based on management's credit assessment of the customer.
Collateral held varies but consists primarily of real estate.
Standby letters of credit and financial guarantees written are
conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. Both arrangements have
credit risks essentially the same as that involved in extending
loans to customers and are subject to the Bank's normal credit
policies.
Income from fees on lines of credit and letters of credit is
recognized as collected.
NOTE 12 - DEFINED CONTRIBUTION PLAN
The Bank sponsors an employees' Thrift Plan (the "Plan"), which
encourages employees (Participants) to set aside a percentage of
their earnings in an account to provide a source of income for their
retirement. The Plan has been amended and restated since its
initial adoption to comply with tax law changes, add a 401(k)
provision, clarify the definition of compensation and reflect
participants' ability to direct investments.
The Plan, a defined contribution plan, meets the requirements of the
Employee Retirement Income Security Act of 1974 ("ERISA") which,
among other things, prohibits discriminating in favor of officers,
shareholders or highly compensated employees with respect to
eligibility, contributions or benefits. To participate in the Plan,
Participants must be 21 years of age and have completed one year of
service in which they are credited with at least 1,000 hours of
service. Vesting of Bank contributions to the Plan is as follows:
Years of Employment Percentage of Account
at Termination Vested
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 years or more 100%
<PAGE> 28
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 12 - DEFINED CONTRIBUTION PLAN (CONTINUED)
The Bank contributes to the Plan a minimum of 1% of each
Participant's compensation (compensation excludes bonuses and
gifts). In addition, the Bank matches Participants' before-tax
contributions up to 3% of each Participant's compensation whenever
Bank profits are deemed adequate by the Board of Directors. Plan
Participants may contribute before-tax dollars, up to 15% of their
annual compensation, to the 401(k) Plan (to a maximum contribution
of $9,500, indexed by the rate of change in inflation, per calendar
year subject to overall IRS limitations). These contributions will
be tax-deferred, within limits prescribed by the Plan. Plan
Participants may also make voluntary after-tax contributions of up
to 10% of their compensation to the Plan. The fund earnings to
their Individual Account are also tax-deferred.
The contributions are invested in a Trust fund managed by the Bank's
Trust Department and from which benefits are distributed. As of
December 31, 1996, 98 persons (95 in 1995 and 104 in 1994) were
participating in the Plan, and the Bank's annual contribution
amounted to $103,000 ($98,000 in 1995 and $88,000 in 1994). Total
salaries of Participants during 1996 were $2,664,000 ($2,521,000 in
1995 and $2,535,000 in 1994). The Bank contributed approximately
3.87% of Participants' salaries in 1996 (3.89% in 1995 and 3.47% in
1994).
NOTE 13 - DEFERRED COMPENSATION PLAN
In 1988, the Bank entered into nonqualified deferred compensation
agreements with certain of its directors. There are presently
eleven directors and two former directors included in the group
which, when certain conditions are met, will be paid monthly
benefits of varying amounts for up to 180 months. Upon retirement
on or after normal retirement age, benefits will be paid to the
covered person or his beneficiary, in case of the director's death,
for the maximum term of 180 months. If the director retires for any
other reason, the benefits will be reduced pro rata based on the
length of time the director was included in the plan.
In accordance with generally accepted accounting principles, the
Bank has recorded a liability in the amount of the present value of
an investment necessary to amortize the future liability over the
years the services are rendered. The amount charged to expense for
1996 was $226,000 ($201,000 in 1995 and $156,000 in 1994).
The Bank has chosen to fund the obligation by purchasing and owning
life insurance contracts, naming the Bank as beneficiary, on each
participating director. The value of the contracts is carried as an
asset of the Bank as follows:
1996 1995
(Dollars in Thousands)
Value of contracts-beginning of year $1,241 $1,062
Increase in surrender value 244 221
Redemption of policy - ( 42)
Value of contracts - end of year $1,485 $1,241
Liabilities for contracts-beginning of year $ 831 $ 687
Increase in liabilities recognized as
expense for the year 235 201
Distribution to resigning director - ( 47)
Payment of benefits ( 12) ( 6)
Other - ( 4)
Liabilities for contracts - end of year $1,054 $ 831
year
<PAGE> 29
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 14 - REGULATORY MATTERS
The Corporation and the Bank are subject to various federal and
state regulatory capital requirements. Failure to meet capital
requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that could have
a direct material effect on the Corporation and the Bank's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the
Corporation and the Bank are required to meet specific capital
adequacy guidelines that involve quantitative measures of the
Corporation's and the Bank's assets, liabilities and certain off-
balance-sheet items as calculated under regulatory accounting
practices. The capital classification is also subject to
qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Corporation and the Bank to
maintain minimum amounts and ratios of Total Capital and Tier I
Capital to risk-weighted assets and of Tier I Capital to average
assets. Management believes, as of December 31, 1996 and 1995,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1996 and 1995, the Corporation and the Bank
both had ratios which exceeded the regulatory requirement to be
classified as " well capitalized" under the regulatory
framework for prompt corrective action. As of December 31,
1994, the most recent notification from the Federal Deposit
Insurance Corporation categorized the bank as "well capitalized"
under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, the Corporation and the Bank
must maintain minimum total risk-based, Tier I risk-based, Tier
I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management
believes have changed the institution's category.
The Corporation's and the Bank's risk-based capital and related
ratios as of December 31, 1996 and 1995 are as follow:
Capitalized
Under Prompt
For Capital Corrective
Adequacy Action
Actual Purposes: Provisions:
Amount Ratio Amount Ratio Amount Ratio
(Dollars in Thousands)
As of December 31, 1996
Total Capital (to Risk
Weighted Assets):
Consolidated $33,436 22.7% $11,789 8.0% $14,736 10.0%
Bank $33,356 22.7% $11,731 8.0% $14,664 10.0%
Tier 1 Capital (to
Risk Weighted
Assets):
Consolidated $31,593 21.4% $ 5,895 4.0% $ 8,843 6.0%
Bank $31,522 21.5% $ 5,865 4.0% $ 8,798 6.0%
Tier 1 Capital (to
Average Assets):
Consolidated $31,593 12.2% $10,370 4.0% $12,963 5.0%
Bank $31,522 12.2% $10,367 4.0% $12,959 5.0%
As of December 31, 1995
Total Capital (to Risk
Weighted Assets):
Consolidated $31,582 22.3% $11,341 8.0% $14,176 10.0%
Bank $31,506 22.4% $11,268 8.0% $14,085 10.0%
Tier 1 Capital (to
Risk Weighted Assets):
Consolidated $29,809 21.0% $ 5,670 4.0% $ 8,505 6.0%
Bank $29,744 21.1% $ 5,634 4.0% $ 8,451 6.0%
Tier 1 Capital (to
Average Assets):
Consolidated $29,809 11.9% $10,036 4.0% $12,545 5.0%
Bank $29,744 11.9% $10,034 4.0% $12,543 5.0%
<PAGE> 30
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 15 - DIVIDEND AND NET ASSET RESTRICTIONS
Dividends paid by the Bank are the primary source of funds
available to the Corporation for payment of dividends to its
shareholders and for other working capital needs. Applicable
Tennessee statutes and regulations impose restrictions on the
amount of dividends that may be declared by the subsidiary Bank.
NOTE 16 - RELATED PARTY TRANSACTIONS
On June 30, 1994 the Corporation redeemed 42,457 shares of
outstanding common stock from a shareholder, who was the
Chairman of the Board, and his associates for $4,005,817, or
$94.35 per share.
NOTE 17 - SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
The Bank grants agribusiness, commercial and residential loans
to customers primarily in Warren and DeKalb Counties, Tennessee.
Although the Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their
contracts is dependent on the agribusiness industry.
NOTE 18 - INCENTIVE BONUS PLAN
In 1990, the Bank adopted an incentive bonus plan pursuant to
which officers of the Bank receive, subject to an annual review
and modification by the Bank's Board of Directors, a bonus
determined by the Bank's performance as measured by its return
on assets. For the year 1996, the bonus was $136,000 ($126,000
in 1995 and $116,000 in 1994).
<PAGE> 31
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 19 - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
CONDENSED BALANCE SHEETS
1996 1995
(Dollars in Thousands)
ASSETS
Investment in bank subsidiary $32,169 $30,657
Investment in non-bank subsidiaries 6 -
Other investments 69 69
$32,244 $30,726
LIABILITIES
Taxes payable $ 4 $ 5
SHAREHOLDERS' EQUITY
Common stock, par value $2.50 per share,
authorized 1,000,000 shares; issued
331,814 shares, including 67,229
treasury shares in 1996 (62,147
treasury shares in 1995) 830 830
Additional paid-in capital 5,000 5,000
Retained earnings 31,179 28,815
Net unrealized gains (losses) on
available-for-sale securities, net of
deferred income taxes of: 1996 - $397;
1995 - $559 647 912
37,656 35,557
Less cost of treasury shares ( 5,416) ( 4,836)
32,240 30,721
$32,244 $30,726
CONDENSED STATEMENTS OF INCOME
1996 1995 1994
(Dollars in Thousands)
INCOME:
Dividends received - bank $2,306 $1,481 $5,449
Other income 33 56 86
2,339 1,537 5,535
EXPENSES:
Professional fees - 9 5
Income before income tax allocation and
equity in undistributed net income
of subsidiary 2,339 1,528 5,530
Allocation of income taxes 4 5 10
INCOME BEFORE EQUITY IN UNDISTRIBUTED
NET INCOME OF SUBSIDIARY 2,335 1,523 5,520
Net income of subsidiaries less
distributions:
Subsidiary bank 1,778 2,544 (1,260)
Non-bank subsidiaries
4 - -
1,782 2,544 (1,260)
NET INCOME $4,117 $4,067 $4,260
<PAGE> 32
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 19 - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
1996 1995 1994
(Dollars in Thousands)
OPERATING ACTIVITIES:
Net income $4,117 $4,067 $4,260
Adjustments to reconcile net income to
net cash provided by operating
activities:
Net income of subsidiaries less
distributions:
Subsidiary bank ( 1,778) ( 2,544) 1,260
Non-bank subsidiaries ( 4) - -
Increase (decrease) in taxes payable - ( 11) 9
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,335 1,512 5,529
INVESTING ACTIVITIES
Investment in non-bank subsidiaries ( 2) - -
NET CASH USED IN INVESTING ACTIVITIES ( 2) - -
FINANCING ACTIVITIES:
Purchase of outstanding common stock ( 580) ( 287) ( 4,332)
Cash dividends ( 1,753) ( 1,225) ( 1,239)
NET CASH USED IN FINANCING ACTIVITIES ( 2,333) ( 1,512) ( 5,571)
INCREASE (DECREASE) IN CASH - - ( 42)
CASH - BEGINNING OF YEAR - - 42
CASH - END OF YEAR $ - $ - $ -
<PAGE> 33
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates made as of December 31, 1996 and 1995 are based
on relevant market information about the financial instruments.
These estimates do not reflect any premiums or discounts that could
result from offering for sale at one time the Corporation's or the
Bank's entire holding of a particular financial instrument. In
cases where quoted market prices are not available, fair value
estimates are based on judgments regarding future expected loss
experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates
are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used in estimating the
fair value disclosures for financial instruments:
Cash and Cash Equivalents -- The carrying amounts reported in the
balance sheets for cash and short-term instruments approximate those
assets' fair values.
Securities Available-for-Sale -- Fair values were based on quoted
market prices available. If quoted market prices were not
available, fair values were based on quoted market prices of
comparable instruments.
Loans -- The carrying values, reduced by estimated inherent credit
losses, of variable-rate loans and other loans with short-term
characteristics were considered fair values. For other loans, the
fair market values were calculated by discounting scheduled future
cash flows using current interest rates offered on loans with
similar terms adjusted to reflect the estimated credit losses
inherent in the portfolio.
Accrued Interest Receivable and Accrued Interest Payable -- The
carrying amounts reported in the balance sheets for accrued interest
receivable and accrued interest payable approximate their fair
values.
Deposit Liabilities -- The fair value of deposits with no stated
maturity, was, by definition, equal to the amount payable on demand
as of December 31, 1996 and 1995. The fair value of certificates of
deposit was based on the discounted value of contractual cash flows,
calculated using discount rates equal to interest rates offered at
the valuation date for deposits of similar remaining maturities.
Short-Term Borrowings -- The carrying amounts of federal funds
purchased, borrowings under repurchase agreements, and other short-
term borrowings, if any, are considered to approximate their fair
values.
The estimated fair values of financial instruments are as follows:
December 31, 1996 December 31, 1995
Carrying Fair Carrying Fair
Amounts Values Amounts Values
(Dollars in Thousands)
Financial Assets
Cash and cash equivalents $ 8,196 $ 8,196 $ 13,296 $ 13,296
Securities available-
for-sale 102,070 102,070 97,643 97,643
Loans, net of allowance
for possible loan losses 142,096 141,754 136,539 138,329
Accrued interest receivable 3,116 3,116 3,061 3,061
Financial Liabilities
Deposits 217,557 217,701 213,257 213,114
Long-term debt 7,203 6,755 9,226 8,843
Short-term borrowings 1,362 1,362 - -
Accrued interest payable 1,460 1,460 1,328 1,328
<PAGE> 34
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
At December 31, 1996 and 1995, the Bank had commitments to extend
credit and outstanding standby letters of credit. These off-
balance-sheet financial instruments are generally exercisable at
the market rate prevailing at the date the underlying transaction
will be completed and, therefore, are deemed to have no current
fair market value.
Fair value estimates are based on existing on-balance sheet and off-
balance sheet financial instruments without attempting to estimate
the value of anticipated future business and the value of assets
and liabilities that are not considered financial instruments.
Significant assets and liabilities that are not considered
financial assets or liabilities include the value of deferred tax
assets, premises and equipment.
NOTE 21 - QUARTERLY RESULTS OF OPERATIONS
The following is a summary of the unaudited consolidated quarterly
results of operations:
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
(Dollars in Thousands Except Share Data)
1996
Interest income $4,929 $5,026 $5,049 $5,041 $20,045
Interest expense 2,205 2,174 2,206 2,245 8,830
Net interest income 2,724 2,852 2,843 2,796 11,215
Provision for possible
loan losses 93 85 123 327 628
Noninterest expenses, net
of noninterest income 992 1,136 1,037 1,449 4,614
Income before income taxes 1,639 1,631 1,683 1,020 5,973
Income taxes 519 512 533 292 1,856
Net income $1,120 $1,119 $1,150 $ 728 $ 4,117
Earnings per share $ 4.15 $ 4.15 $ 4.35 $ 2.72 $ 15.37
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
1995
Interest income $ 4,667 $ 4,899 $ 4,931 $ 4,957 $19,454
Interest expense 2,073 2,175 2,238 2,232 8,718
Net interest income 2,594 2,724 2,693 2,725 10,736
Provision for possible
loan losses 90 71 99 116 376
Noninterest expenses, net
of noninterest income 1,057 1,203 938 1,307 4,505
Income before income taxes 1,447 1,450 1,656 1,302 5,855
Income taxes 459 427 569 333 1,788
Net income $ 988 $ 1,023 $ 1,087 $ 969 $ 4,067
Earnings per share $ 3.63 $ 3.76 $ 4.01 $ 3.60 $ 15.00
<PAGE> 35
C B & T, INC. AND SUBSIDIARIES
Table 1 -- Distribution of Assets, Liabilities and Shareholders'
Equity, Interest Rates and Interest Differential
1996
Average Interest Interest
Balance Income/Expense Rate
(Dollars in Thousands)
ASSETS
Bank interest-bearing deposits $ 62 $ 5 8.06%
U.S. Treasury securities 18,221 1,284 7.05%
U.S. Government agencies and
Corporations 43,377 2,797 6.45%
Securities of States and
Political Subdivisions 24,765 2,024 * 8.17%
Other investments 11,212 691 6.16%
Federal funds sold 5,199 275 5.29%
Loans, net 138,511 13,657 9.86%
TOTAL EARNING ASSETS 241,347 $20,733 8.59%
Cash and due from banks 6,855
Other assets 9,148
TOTAL ASSETS $257,350
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW accounts $ 24,158 $ 588 2.43%
Money market deposit accounts 18,333 574 3.13%
Savings 30,530 904 2.96%
Time of $100M or more 27,186 1,543 5.68%
Time--other 88,563 4,763 5.38%
TOTAL INTEREST-BEARING
DEPOSITS 188,770 8,372 4.44%
Federal funds purchased 1,136 46 4.05%
Long-term debt 6,802 412 6.06%
TOTAL INTEREST-BEARING
LIABILITIES 196,708 $ 8,830 4.49%
Demand deposits 27,217
Other liabilities 3,498
TOTAL LIABILITIES 227,423
Shareholders' equity 29,927
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $257,350
Spread between combined rates earned
and combined rates paid* 4.10%
Net yield on interest earning assets* 4.93%
*Taxable equivalent basis
<PAGE> 36
Year Ended December 31,
1995 1994
Average Interest Interest Average Interest Interest
Balance Income/Expense Rate Balance Income/Expense Rate
(Dollars in Thousands) (Dollars in Thousands)
$ 60 $ 3 5.00% $ 80 $ 3 3.75%
20,465 1,451 7.09% 37,130 2,341 6.30%
49,820 3,227 6.48% 55,107 3,419 6.20%
21,454 1,788 * 8.33% 25,357 2,212 * 8.72%
4,466 274 6.14% 1,862 97 5.21%
5,070 297 5.86% 1,621 56 3.45%
131,761 13,021 9.88% 117,160 11,196 9.56%
233,096 $20,061 8.61% 238,317 $19,324 8.11%
6,353 7,192
8,880 8,524
$248,329 $254,033
$ 23,758 $ 660 2.78% $ 24,244 $ 651 2.69%
18,990 593 3.12% 28,798 841 2.92%
30,733 1,003 3.26% 36,519 1,102 3.02%
23,622 1,348 5.71% 26,313 1,131 4.30%
82,632 4,466 5.40% 73,940 2,987 4.04%
179,735 8,070 4.49% 189,814 6,712 3.54%
825 54 6.55% 1,350 64 4.74%
9,907 593 5.99% 7,976 475 5.96%
190,467 $8,717 4.58% 199,140 $7,251 3.64%
27,013 24,500
2,538 2,222
220,018 225,862
28,311 28,171
$248,329 $254,033
4.03% 4.47%
4.87% 5.07%
<PAGE> 37
C B & T, INC. AND SUBSIDIARIES
Table 2 --Distribution of Assets, Liabilities and Shareholders'
Equity, Interest Rates and Interest Differential -- (Continued)
The following table sets forth for the periods indicated a summary of
the changes in interest earned and interest paid resulting from
changes in volume and changes in rates:
1996 Compared to 1995
Increase (Decrease)
Volume Rate Net
(Dollars in Thousands)
Interest Income
Bank interest-bearing deposits $ - $ 2 $ 2
Net Loans 667 ( 31) 636
Taxable investment securities ( 576) ( 21) ( 597)
Nontaxable investment securities* 276 ( 40) 236
Other securities 414 3 417
Federal funds sold 8 ( 30) ( 22)
TOTAL INTEREST INCOME* $ 789 ($ 117) $ 672
Interest Expense
NOW accounts $ 11 ($ 83) ($ 72)
Money market deposit accounts ( 21) 2 ( 19)
Savings ( 7) ( 92) ( 99)
Time deposits 524 ( 32) 492
Federal funds purchased 20 ( 28) ( 8)
Long-term debt ( 186) 5 ( 181)
TOTAL INTEREST EXPENSE $ 341 ($ 228) $ 113
* Tax equivalent basis
The rate/volume variances are allocated between rate and volume
variances in proportion to the relationship of the absolute dollar
amounts of the change in each.
<PAGE> 38
1995 Compared to 1994 1994 Compared to 1993
Increase(Decrease) Increase (Decrease)
Volume Rate Net Volume Rate Net
(Dollars in Thousands) (Dollars in Thousands)
($ 1) $ 1 $ - $ - $ 1 $ 1
1,395 430 1,825 619 ( 346) 273
( 1,379) 297 ( 1,082) 307 ( 457) ( 150)
( 340) ( 84) ( 424) ( 212) ( 230) ( 442)
136 41 177 50 ( 8) 42
119 122 241 ( 48) 15 ( 33)
($ 70) $807 $ 737 $ 716 ($1,025) ($ 309)
($ 13) $ 22 $ 9 $ 60 ($ 46) $ 14
( 286) 38 ( 248) ( 75) ( 53) ( 128)
( 175) 76 ( 99) ( 47) ( 86) ( 133)
235 1,461 1,696 163 ( 3) 160
( 25) 15 ( 10) 58 1 59
116 2 118 135 ( 8) 127
($ 148) $1,614 $1,466 $294 ($ 195) $ 99
<PAGE> 39
C B & T, INC. AND SUBSIDIARIES
Table 3 --Summary of Loan Loss Experience
Year Ended December 31,
1996 1995 1994 1993 1992
(Dollars in Thousands)
Balance at beginning of period $1,864 $1,733 $1,601 $1,453 $1,191
Loans charged off:
Commercial, financial, and
agricultural 170 128 129 143 116
Real estate-mortgage 241 39 90 49 125
Installment 228 172 124 179 162
TOTAL LOANS CHARGED OFF 639 339 343 371 403
Recoveries of loans previously charged off:
Commercial, financial, and
agricultural 21 25 65 9 31
Real estate--mortgage 17 5 3 9 3
Installment 40 64 77 70 66
TOTAL RECOVERIES 78 94 145 88 100
NET LOANS CHARGED OFF 561 245 198 283 303
Additions to the allowance charged to
operating expenses 628 376 330 431 565
BALANCE AT END OF PERIOD $1,931 $1,864 $1,733 $1,601 $1,453
1996 1995 1994 1993 1992
Ratio of net charge-offs (recoveries)
during the periods to average loans
outstanding .41% .19% .17% .26% .30%
<PAGE> 40
C B & T, INC. AND SUBSIDIARIES
Table 4 -- Financial Ratios
The ratio of net income to average shareholders' equity and average
total assets, and certain other ratios, are presented below:
Year Ended December 31,
1996 1995 1994
Percentage of net income to:
Total average assets 1.60 1.64 1.68
Average shareholders' equity 13.76 14.37 15.12
Percentage of dividends declared per average
Common share to net income
per average Common Share 42.29 30.00 28.53
Percentage of average shareholders' equity
to total average assets 11.63 11.40 11.09
<PAGE> 41
C B & T, INC. AND SUBSIDIARIES
SUMMARY OF CONSOLIDATED SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992
(Dollars in Thousands - Except Per Share)
Interest Income $ 20,045 $ 19,454 $ 18,572 $ 18,730 $ 18,955
Net interest income 11,215 10,736 11,321 11,578 10,463
Provision for possible loan losses 628 376 330 431 565
Income from continuing operations
(net income) 4,117 4,067 4,260 4,966 4,428
Total assets 261,459 255,882 254,973 247,524 239,626
Long-term debt 7,203 9,226 7,821 7,729 350
Per share data of Common Stock:
Income from continuing
operations (net income) 15.37 15.00 14.37 15.58 13.88
Dividends 6.50 4.50 4.10 3.95 3.00
COMMON STOCK MARKET PRICE INFORMATION
There is no established public trading market for the Corporation's
common Stock and the stock is not traded on any securities exchange.
There were approximately 632 shareholders of record of the Common
Stock of the Corporation at December 31, 1996.
The price range of the known sales of the Common Stock of the
corporation for 1996 and 1995 was a minimum of $76.00 to a maximum of
$115.40 and a minimum of $93.10 to a maximum of $107.00 respectively.
The Corporation paid dividends of $6.50 per share in 1996 and $4.50
per share in 1995. The dividends were paid semiannually.
The Corporation expects to continue to pay regular semiannual cash
dividends, although there is no assurance as to future dividends
because they are dependent on future earnings, capital requirements
and financial condition.
<PAGE> 42
Our Commitment/Our Staff
Our staff is committed to providing quality professional service to
all our customers in a very friendly way. . . we enjoy and take
serious our job of serving our trade area well.
Shannon R. Adamson Amy L. Green Barbara L. Orrick
Donna L. Argo Dana M. Green Betty L. Parker
Judith E. Baker N. Sue Grissom J. Allan Parker
Teresa F. Black Linda C. Hamilton M. Lynn Parker
Joe N. Blanton Lynne R. Hamrick Christopher J.Patterson
Jean Bonner Lisa C. Hash Betty B. Prater
Demple L. Boyd Shannon L. Haston C. Tim Prater
Dean Brewer C. Renee Hawkins Sheryl L. Prater
Barbara J. Broussard Nancy C. Hendrix Linda P. Pritchett
Carole Ann Brown Teresa A. Hennessee Jane Ann Pryor
Jerry N. Brown James H. Hillis Rita M. Ramsey
Larry E. Brown Lisa A. Hillis Tammy R. Reynolds
Donna Bryant Peggy D. Hillis Nina J. Rhody
Terri L. Burnett Kimberly N. Hobbs Ella J. Richmond
Edmond D. Busic Melissa A. Holland V. Sue Roberts
Cheryl R. Byford W. Ben Holland Nancy A. Rogers
Janice M. Cantrell M. Preston Huckeby Marlene A. Sauer
Rhonda A. Carr Vivian T. Johnson Susan R. Seaborn
E. LeAnn Cartwright Elaine C. Jones Andrea R. Searcy
Lois B. Cates Janice E. Jones Tammy L. Sharpe
Dawn M. Christian J. Gail Jones Elizabeth P. Smith
Sherry A. Clendenon Debbie T. Kell Kenneth W. Smith
Angie D. Collins Judye C. Killian Amber S. Southard
Larry C. Crouch Denise A. King Sue J. Stewart
Lynette M. Curtis Rhonda R. King Shirley A. Stout
S. Lynn Daugherty Regina L. Kirby Starla A. Strickland
Barbara D. Davis Cindy R. Lann Tracie J. Tate
Susan R. Elliott Glyna F. Lee Johnny T. Taylor
Pam S. England V. Lorrie Lee Patricia A. Taylor
Donna D. Evans Rosa Lee Madewell Rayola M. Teal
V. Michele Fuston Emogene R. Magness Regina A. Templeton
Lisa G. Garrison Danny L. Martin Randall G. Tramel
Tanera L. Garrison E. Ann Martin Sandra A. Turner
Candace A. Gentry E. Wayne Martin Terry B. Vaughn
Diana L. George Kenneth D. Martin Nancy C. Wade
Doris A. Giles Patty L. Mikes Sharon E. West
Linda S. Gilley Robert L. Miller Tarron G. Williams
Deborah E. Glenn Kimberly J. Mills K. Dwayne Woods
Eric A. Golden Lonnie D. Milstead Heather B. Young
Jeffrey A. Golden Melanie D. Nichols Susan M. Young
Ronald D. Goodwin Amanda J. Odom
<PAGE> 43
THE CORPORATION
C B & T, INC. is a one-bank holding company incorporated in Tennessee
and registered under the Bank Holding Company Act of 1956, offering a
full line of traditional banking services through its wholly-owned
subsidiaries, City Bank & Trust Company.
Chartered in 1912, City Bank & Trust Company provides the Warren and
DeKalb County trade area with financial services including general,
commercial and retail banking, personal and corporate trusts and
financial management services. A total of six offices are located in
McMinnville and one in Smithville. A cash machine is located at CYC,
Inc. and a full service Automated Teller Machine provides service at
Columbia River Park Hospital.
C B & T, INC. is subject to the regulatory authority of the Federal
Reserve Board and the Securities and Exchange Commission. City Bank &
Trust Company is subject to the regulating authority of the State of
Tennessee Department of Financial Institutions and the Federal Deposit
Insurance Corporation.
CORPORATE INFORMATION
Corporate Headquarters: 101 East Main Street, McMinnville,Tennessee 37110
1-888-473-2147 or (615) 473-2147
Annual Meeting: April 8, 1997, 2:30 p.m
Director's Room, 2nd Floor, City Bank & Trust
Company Bldg.101 East Main Street, McMinnville,
Tennessee 37110
Transfer Agent and
Registrar: City Bank & Trust Company
Stock Transfer Department
P.O. Box 100, McMinnville, Tennessee 37111
Legal Counsel: B. Timothy Pirtle
3rd Floor, City Bank & Trust Company Building
101 East Main Street, McMinnville,Tennessee 37110
Auditors/Tax Accountants: Kraft Bros., Esstman, Patton & Harrell, PLLC
Certified Public Accountants
Nashville, Tennessee 37219
FORM 10-K A copy of the Corporation's 1996 annual report
filed with the Securities and Exchange Commission
on Form 10-K is available without charge. To
obtain a 10-K report or any additional financial
information, write or call Ann Martin, Secretary,
C B & T, Inc.
<PAGE> 44
[ARTICLE] 9
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[CASH] 6,901
[INT-BEARING-DEPOSITS] 120
[FED-FUNDS-SOLD] 1,175
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 0
[INVESTMENTS-CARRYING] 101,026
[INVESTMENTS-MARKET] 102,070
[LOANS] 144,027
[ALLOWANCE] 1,931
[TOTAL-ASSETS] 261,459
[DEPOSITS] 217,557
[SHORT-TERM] 1,362
[LIABILITIES-OTHER] 3,097
[LONG-TERM] 7,203
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 830
[OTHER-SE] 31,410
[TOTAL-LIABILITIES-AND-EQUITY] 261,459
[INTEREST-LOAN] 13,657
[INTEREST-INVEST] 6,108
[INTEREST-OTHER] 280
[INTEREST-TOTAL] 20,045
[INTEREST-DEPOSIT] 8,372
[INTEREST-EXPENSE] 8,830
[INTEREST-INCOME-NET] 11,215
[LOAN-LOSSES] 628
[SECURITIES-GAINS] 22
[EXPENSE-OTHER] 6,672
[INCOME-PRETAX] 5,973
[INCOME-PRE-EXTRAORDINARY] 5,973
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 4,117
[EPS-PRIMARY] 15.37
[EPS-DILUTED] 15.37
[YIELD-ACTUAL] 8.59
[LOANS-NON] 119
[LOANS-PAST] 851
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 310
[ALLOWANCE-OPEN] 1,864
[CHARGE-OFFS] 639
[RECOVERIES] 78
[ALLOWANCE-CLOSE] 1,931
[ALLOWANCE-DOMESTIC] 0
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
