1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ____________________ _ to
_________________________________
Commission file number 0-10669
CB&T, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-1121054
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
101 East Main Street, McMinnville, Tennessee
(Address of principal executive offices)
(Zip Code)
37110
(Registrant's telephone number, including area code)
(615) 473-2148
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of
March 31, 1997 264,507 shares.
This filing contains 13 pages.
<PAGE> 1
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3
Consolidated Balance Sheets for the periods ended
March 31, 1997 and December 31, 1996
(Unaudited) 4
Consolidated Statements of Income for the three
(3) month period and year-to-date ended
March 31, 1997 and 1996, respectively
(Unaudited) 5
Consolidated Statements of Cash Flows for the year-to-
date ended March 31, 1997 and 1996, respectively
(Unaudited) 6
Management's Statement 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 12
Signatures 13
<PAGE> 2
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE> 3
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
McMinnville, Tennessee 37110
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(Dollars in Thousands)
ASSETS
Cash and due from banks $9,441 7,021
Federal funds sold 3,475 1,175
Investment securities (amortized cost
$98,341 and $101,026, respectively) 98,873 102,070
Loans, net of unearned income and allowance
for possible credit losses 144,022 142,096
Interest receivable 3,345 3,116
Bank premises and equipment,
less allowances for depreciation 2,245 2,333
Other assets 4,026 3,648
TOTAL ASSETS $265,427 261,459
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $28,910 28,178
Interest-bearing deposits (other than time) 71,548 69,826
Time deposits less than $100M 90,993 90,610
Time deposits of $100M or more 29,818 28,943
TOTAL DEPOSITS $221,269 217,557
Accounts payable and accrued liabilities 2,985 3,097
FHLB borrowings 7,384 7,203
Federal funds purchased/repurchase agreements 2,120 1,362
TOTAL LIABILITIES $233,758 229,219
SHAREHOLDERS' EQUITY:
Common Stock of 2.50 par value:
Authorized 1,000,000 shrs, issued 331,814 shrs
including 67,307 and 67,229 Treasury shrs
in March `97 and December `96, respectively $ 830 830
Surplus 5,000 5,000
Retained earnings 30,935 31,179
Less cost of treasury shares (5,425) (5,416)
Net unrealized gains (losses) on available
for sale securities, net of tax 329 647
TOTAL SHAREHOLDERS' EQUITY $31,669 32,240
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $265,427 261,459
====== ======
<PAGE> 4
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
McMinnville, Tennessee 37110
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year-to-date
Three Months Ended Three Months Ended
March 31 March 31
1997 1996 1997 1996
INTEREST INCOME:
Interest and fees on loans $3,432 3,379 3,432 3,379
Interest on investment securities:
Taxable income 1,160 1,163 1,160 1,163
Tax-exempt income 388 308 388 308
Other interest income 32 79 32 79
TOTAL INTEREST INCOME $5,012 4,929 5,012 4,929
INTEREST EXPENSE:
Interest on deposits other than
time $ 502 502 502 502
Time deposits less than $100M 1,194 1,196 1,194 1,196
Time deposits of $100M or more 421 388 421 388
Interest on FHLB borrowings 111 114 111 114
Interest on federal funds
purchased/ repurchase agreements 17 5 17 5
TOTAL INTEREST EXPENSE $2,245 2,205 2,245 2,205
TOTAL NET INTEREST INCOME $2,767 2,724 2,767 2,724
PROVISION FOR POSSIBLE CREDIT LOSSES ( 140) ( 93) ( 140) ( 93)
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
CREDIT LOSSES $2,627 2,631 2,627 2,631
OTHER INCOME:
Service charges on deposit accounts$ 295 281 295 281
Other service charges,
commissions and fees 53 63 53 63
Net realized gains (losses)
on investment securities 12 12
Other income 85 66 85 66
TOTAL OTHER INCOME $ 445 410 445 410
OTHER EXPENSES:
Salaries and employee benefits $ 800 786 800 786
Net occupancy expense 87 71 87 71
Furniture and equipment expense 209 183 209 183
FDIC Assessment 6 1 6 1
Other 405 361 405 361
TOTAL OTHER EXPENSES $1,507 1,402 1,507 1,402
INCOME BEFORE INCOME TAXES $1,565 1,639 1,565 1,639
Income taxes ( 486) ( 519) ( 486) ( 519)
NET INCOME $1,079 1,120 1,079 1,120
===== ===== ===== =====
Common shares outstanding ended
March 31 264,507 269,667 264,507 269,667
Net income per share of common
stock $ 4.08 4.15 4.08 4.15
Dividends per share of common stock $ 5.00 4.46 5.00 4.46
<PAGE> 5
C B & T, INC. AND WHOLLY-SUBSIDIARY
MCMINNVILLE, TENNESSEE 37110
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period Ended
March 31
1997 1996
(Dollars in thousands)
Operating activities:
Net income $1,079 1,120
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for possible credit losses 140 93
Provision for depreciation and amortization 133 116
Decrease (increase) in interest receivable ( 229) ( 108)
Decrease (increase) in other assets ( 378) ( 401)
Increase (decrease) in accounts payable
and accrued liabilities ( 112) 283
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 633 1,103
Investing activities:
Purchases of investment securities $(9,964) (4,572)
Proceeds from sales of investment
securities 4,970
Proceeds from maturities, calls and principal
collections of investment securities 7,678 7,138
Net decrease (increase) in unrealized
gains on investment securities 513 389
Net decrease (increase) in loans (2,066) 104
Purchase of premises and equipment ( 45) ( 108)
NET CASH USED BY INVESTING ACTIVITIES $ 1,086 2,951
Financing activities:
Net increase (decrease) in noninterest-
bearing and interest-bearing deposits $ 3,712 169
Net increase (decrease) in federal funds
purchased/repurchase agreements 758 1,578
Cash dividends (1,323) (1,203)
Purchase of Treasury Stock ( 9) 0
Net increase (decrease) in FHLB borrowings 181 (2,562)
Increase (decrease) in after-tax unrealized
gains on securities ( 318) ( 241)
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 3,001 (2,259)
DECREASE IN CASH AND CASH EQUIVALENTS $ 4,720 1,795
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 8,196 13,296
CASH AND CASH EQUIVALENTS AT END
OF QUARTER $12,916 15,091
===== ======
<PAGE> 6
The unaudited consolidated financial statements have been
prepared on a consistent basis and in accordance with the
instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments necessary for
a fair presentation have been included. These adjustments
were normal reoccurring adjustments. For further information,
refer to the consolidated financial statements and footnotes
included in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1996.
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
At March 31, 1997, average total assets were $260.7 million
compared to $253.4 million at March 31, 1996 and $257.3 million
at December 31, 1996. Average earning assets at the period ended
March 31, 1997 totaled $244.2 million as compared to $237.3
million at March 31, 1996 and $241.3 million at December 31,
1996, respectively. The following discussion examines the
significant factors relative to changes in the Corporation's
balance sheets.
SECURITIES
The investment portfolio is comprised of U.S. Treasury and other
U.S. Government agency-backed securities, collateralized mortgage-
backed securities, tax-exempt obligations of states and political
subdivisions and certain other investments. The quality of
obligations of states and political subdivisions will be A, AA,
or AAA, the majority of which will be AA or AAA, as rated by a
nationally recognized service. As a matter of policy, in support
of the local service area, certain unrated bonds of local
municipalities may be purchased provided they are of reasonable
credit risk.
On November 15, 1995, the Financial Accounting Standards Board
issued a guide for the implementation of SFAS 115 which allows 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 will 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, 1995, all investment securities were
classified as available-for-sale. Management classified all
securities as available-for-sale so that securities may be sold
prior to their maturity for purposes of bank asset allocations,
rate sensitivity or liquidity and, hence, tend to be more liquid.
The Corporation's average debt securities portfolio at March 31,
1997 was $98.5 million which was an increase from average
investments of $94.3 million at March 31, 1996 and $97.5 million
at December 31, 1996. At March 31, 1997, the liquidity portion
of the current portfolio, fixed rate debt securities maturing in
the year or less, totaled $19.3 million or 19.5% of total debt
securities and is an integral part of asset/liability management.
In addition, floating rate securities with a repricing frequency
of one year or less totaled $5.5 million or 5.5% of total debt
securities. At March 31, 1996, fixed rate securities maturing in
one year or less totaled $20.0 million and floating rate debt
securities with a repricing frequency of one year or less totaled
$15.2 million.
LOANS
The Corporation's average loan portfolio totaled $143.2 million
at March 31, 1997 which was a substantial increase over the
corresponding period in 1996 with average loans of $137.1 million
and $138.5 million at March 31, 1996 and December 31, 1996,
respectively. Average loan growth reflected an increase of $6.1
million or 4.5% over March 31, 1996 and $4.7 million or 3.4 %
over December 31, 1996. The increase in the loan portfolio was
attributed primarily to the growth in real estate mortgage
lending which increased $6.8 million or 9.3% over the period
ended March 31, 1996 and $1.2 million or 1.5% over December,
1996. There was no commercial paper included in the loan
portfolio at the end of the current reporting period.
<PAGE> 8
Upon adoption of the Statement of Financial Accounting Standards
Nos. 114 and 118 "Accounting By Creditors for Impairment of a
Loan" and "Accounting By Creditors for Impairment of a Loan -
Income Recognition and Disclosures", the Corporation's Management
defines an impaired loan as one for which it is likely the
subsidiary will not collect its principal and interest in
accordance with the contracted schedule. Since SFAS 114 states
that the classifying of loans as impaired need not be applied
individually to "large groups of smaller balance homogeneous
loans", Management has taken the position that SFAS 114 does not
apply to the Corporation's consumer loan portfolio or residential
mortgage loans which are collectively evaluated for impairment.
Management may, however, choose to apply the Statement to certain
specific larger mortgage loans. As a matter of the Corporation's
policy, there is no difference between impaired loans and
nonaccruing loans with the exception of those loans which will be
evaluated collectively.
A loan is placed on nonaccrual status when interest or principal
has not been paid for 90 days. Exceptions to this policy are
those loans that are in the process of collection and are well
secured. A well-secured loan is secured by collateral with
sufficient market value to repay principal and all accrued
interest. When evaluating a loan, the loan officer first
considers the following factors: ability to pay, financial
condition of the borrower, management, collateral and guarantors,
structure, industry and economics. These factors having been
weighed, the loan is then assigned to one of the following
ratings: A-Excellent, B-Good, C-Fair, D-Watch (Substandard), E-
Doubtful (Impaired). Losses on impaired loans are recognized in
a timely manner, as soon as there is a reasonable probability of
loss and the amount of loss can be calculated, that loss will be
recognized.
At March 31, 1997, the recorded investment in loans that were
considered to be impaired under SFAS 114 was $33,154, all of
which were on a nonaccrual basis. The related allowance for
possible credit losses for the impaired loans at March 31, 1997
was $13,586. The average recorded investment in impaired loans
at March 31, 1997 was approximately $108,223. Impairment on one
loan with a recorded investment of $23,255 was measured based on
the fair value of the collateral. Impairment on one loan with a
recorded investment of $9,899 was measured using a present value
calculation. The Corporation does not recognize interest income
on impaired loans and the entire change in the net carrying
amount is reported as an adjustment to provision for possible
credit losses, but in no event are changes in the net present
value used to justify having a loan booked at a value that
exceeds its recorded investment value.
The Corporation maintains sound credit polices through its loan
review committee and various loan committees by evaluating loan
and credit quality, reviewing identified problem loans and
continually monitoring their status and implementing immediate
procedures to minimize any potential negative impact on the
Corporation's operations. The following represent risk factors
categorically in the loan portfolio at March 31, 1997 (in
thousands): Loans accounted for on a nonaccrual basis - $25;
Loans past-due ninety days or more as to interest or principal
payments - $548; There were no trouble debt restructuring loans;
Impaired loans - $33. At December 31, 1996, these risks factors
were: Nonaccruing loans - $119; Loans past due ninety days or
more - $851; There were no trouble debt restructuring loans;
Impaired loans - $310.
Any loans classified for regulatory purposes do not represent or
result from trends or uncertainties which management reasonably
expects will materially affect operating results, liquidity or
capital resources nor is management aware of any known trends,
events, or uncertainties that will have or that are likely to
have material effect on the Corporation's liquidity, capital
resources or operations.
OTHER EARNING ASSETS
At the reporting period ended March 31, 1997, average federal
funds sold totaled $2.4 million compared to $5.9 million and $5.2
million, which equates to $3.5 million less than March 1996 and
$2.8 million less than December, 1996, respectively.
<PAGE> 9
DEPOSITS
Average deposits of the Corporation for the period ended March
1997 were $217.8 million compared to $213.2 million and $216.0
million for the corresponding period in 1996 and the year ended
December, 1996, respectively. Short and medium term rate
increases caused depositors to take advantage of certificates of
deposit rates which resulted in an increase in these deposits.
Certificates of deposit of less than $100 thousand increased $3
million or 3.7% and $2.5 million or 2.9% over the periods ended
March and December, 1996, respectively. Certificates of deposit
of $100 thousand or more increased over March 31, 1996 by $2.3
million or 8.6% and December 31, 1996 by $2.2 million or 8.1%.
CAPITAL
The capital growth rate, exclusive of unrealized net gains or
losses on securities, increased $1,614 million or 5.4% over March
31, 1996 and decreased $253 thousand or 0.8% over December 31, 1996.
For the period ended March, 1997, the Corporation had an equity
capital to assets ratio of 11.7% compared to 11.6% over both
March 31, 1996 and December 1996, respectively. Regulatory risk-
adjusted capital adequacy standards were revised in 1993. Under
risk-adjusted capital requirements, total capital consists of
Tier 1 capital which is essentially Common Shareholders' equity
less tangible assets, and Tier 2 capital which consists of
certain types of preferred stock, subordinated debt, and
allowance for possible credit losses not to exceed 1.25% of risk-
adjusted assets. The capital ratio is then computed by dividing
the sum of Tier 1 and Tier 2 capital by the total of risk-
adjusted assets including converted off-balance-sheet risks. The
minimum requirement for Tier 1 capital is 4% and total capital
(Tier 1 plus Tier 2) is 8%. The Corporation's Tier 1 capital
ratio was 20.9% and total capital was 22.2% at March 31, 1997
compared to 21.1% and 22.4% at March 31, 1996 and 21.4% and 22.7%
at December 31, 1996. These ratios substantially exceed the
Federal Reserve Board's capital guidelines for a "well-
capitalized" institution, which are 6% for Tier 1 and 10% for
total capital. It is management's intent to maintain a level of
capitalization that allows the flexibility to take advantage of
opportunities that may arise in the future.
The formation of two nonbank subsidiaries resulted in the July,
1996 business opening of CBT Insurance, Inc. and CBT Realty, Inc.
Both subsidiaries are wholly owned by CB&T, Inc. with an initial
investment in each of $1,000 to purchase one hundred percent
(100%) of the stock issued by each of the newly formed
subsidiaries.
The principal activity of CBT Insurance, Inc. is insurance sales.
CBT Realty, Inc. will engage in the holding and disposing of real
estate acquired through foreclosure, however, through March 1997,
there has been no activity in CBT Realty, Inc.
MATERIAL CHANGES IN RESULTS OF OPERATION
Year-to-date 1997, interest from investment securities increased
by $77 thousand or 5.2% from the corresponding 1996 period. This
increase in investment income is attributable to the increase in
municipal bonds in the portfolio, therefore resulting in a higher
average yield than that of 1996.
At year-to-date March 31, 1997, there were net realized gains
(losses) on the sales of securities of $12 thousand and none in
1996. At March 31, 1997 net unrealized gains in securities
totaled $.5 million and categorically were; Treasuries - $.1
million, Agencies - $(.2) million and Municipals -$.6 million.
For the corresponding period in 1996, net unrealized gains
totaled $1 million and categorically were; Treasuries - $.2
million, Agencies - $ .1 million and Municipals - $.7 million.
The Corporation's interest from loans for the period ended March
31, 1997, increased $53 thousand or 1.6% over the same period in
1996. This increase in loan interest income is primarily a
result of the increase in the volume of loans outstanding.
<PAGE> 10
Interest income on federal funds sold decreased $48 thousand or
62.1% through the first quarter of 1997 from the corresponding
period in 1996.
Due to slightly rising interest rates on deposit accounts and
growth in higher yielding certificates of deposit, interest
expense on interest-bearing deposits increased over the March,
1997 period by $31 thousand or 1.5%. Interest expense for the
1997 reporting period on certificates of deposit of less than
$100 thousand decreased by $2 thousand or less than 1% through
the first quarter and interest on time certificates of $100
thousand or more increased by $33 thousand or 8.5%. Total
interest expense on transaction accounts and savings deposits for
the 1997 reporting period remained constant with 1996. Interest
expense on F.H.L.B. borrowings decreased $3 thousand or 2.6% from
the same year-to-date period in 1996.
Non-interest income (excluding securities transaction) increased
$23 thousand or 5.6% for the year-to-date 1997 over the
corresponding period in 1996. This increase is primarily
attributable to an increase in service charges on insufficient
funds and returned checks as well as gains on sale of other
assets.
Through March 31, 1997, non-interest expense increased by $105
thousand or 7.5%. This increase in non-interest expense in 1997
over the corresponding period in 1996 is a result of the rising
costs of salaries and employee benefits due to additional
employees required to adequately manage growth in the volume of
assets and liabilities, and occupancy and furniture and equipment
expenses associated with opening a new branch.
Year-to-date 1997, provision for possible credit losses reflects
an increase of $47 thousand or 51% over the corresponding period
in 1996.
The net result of operations after federal income taxes for 1997
is a decrease of $41 thousand or 3.7% over same year-to-date
period in 1996.
It is the opinion of management that during the current reporting
period of March 1997, the effect of general inflation was
relatively immaterial to the operation of the Corporation and the
results thereof.
<PAGE> 11
C B & T, INC. AND WHOLLY-OWNED SUBSIDIARY
PART II. OTHER INFORMATION
Items 1.-5. None applicable to the reporting period for the
three (3) months ended March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K.
(a) - No exhibits were furnished in accordance with Item
601 of Regulation S-K for three (3) months
ended March 31, 1997.
(b) - No reports on Form 8-K were filed by the
Registrant during the three months ended
March 31, 1997.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
C B & T, INC.
By: /s/ Jeffrey A.Golden
Jeffrey A. Golden, Chairman,
President and Chief Executive
Officer
Date: May 6, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ Jeffrey A. Golden
Jeffrey A. Golden, Chairman, President
and Chief Executive Officer
(Principal Executive and Financial Officer)
Date: May 6, 1997
/s/ Jerry N. Brown______________________________
Jerry N. Brown, Sr Vice-President
City Bank & Trust Company
(Chief Financial Officer)
Date: May 6, 1997
<PAGE> 13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,327
<INT-BEARING-DEPOSITS> 114
<FED-FUNDS-SOLD> 3,475
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 98,341
<INVESTMENTS-MARKET> 98,873
<LOANS> 146,060
<ALLOWANCE> 2,037
<TOTAL-ASSETS> 265,427
<DEPOSITS> 221,269
<SHORT-TERM> 2,120
<LIABILITIES-OTHER> 2,985
<LONG-TERM> 7,384
0
0
<COMMON> 830
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<TOTAL-LIABILITIES-AND-EQUITY> 265,427
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<INCOME-PRETAX> 1,565
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