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, 1997.
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 (931) 473-2147
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 76 pages.
<PAGE> 1
The aggregate market value of the voting stock held by non-
affiliates of C B & T, Inc. as of March 2, 1998 was $31,746,383.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of March 2, 1998 -- 264,113 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1. Proxy statements for 1997 annual shareholders' meeting of May
29, 1998 -- Part I and III
2. Annual Report to shareholders for year ended December 31,
1997 -- 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.
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
<PAGE> 3
Item 1. Business-Continued
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 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.
<PAGE> 4
Item 1. Business-Continued
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 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 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
<PAGE> 5
Item 1. Business-Continued
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.
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.
<PAGE> 6
Item 1. Business-Continued
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 24% until the Tennessee General Assembly
otherwise provides. As of December 31, 1997, 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, 1997, 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.
<PAGE> 7
Item 1. Business-Continued
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.
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, two
federal savings banks 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 582 individual and corporate trust
accounts, and provides investment management and other related
services. The Bank's Trust Department had assets of
approximately $85,991,000 under management as of December 31,
1997. These assets are not included as assets in the balance
sheet of the Bank or C B & T.
<PAGE> 8
Item 1. Business-Continued
Employees
C B & T, including the Bank, has approximately 121 employees,
which includes six 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.
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 8
and 9 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
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, 1997.
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.
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, 1997.
Item 4(b). Executive Officers of Registrant
The following is a list of March 2, 1998 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* 57 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, 1982.
<PAGE> 10
M. Thomas Mullican* 76 Vice Chairman of Corporation since
April, 1983; Board of Directors of
Corporation since November, 1981. Farmer
and Investor.
Larry E. Brown* 51 Executive Vice President of the
Corporation and the Bank since April,
1987; Senior Vice President of the Bank,
1986 - 1987.
Ann Martin 48 Secretary of Corporation since
November, 1986; Secretary to the Board
since December, 1986.
James H. Hillis 58 Treasurer of the Corporation
since October, 1983; Senior Vice President
of the Bank since April, 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 May 29, 1998.
<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
<TABLE>
(a) Identification of Directors
<CAPTION>
Shares of
Position & Position & Director Business Exp. Corp.
Office Held Office Held of Corp. During Last Beneficially Percent
Name Age With Corp. With Bank Since Five Years Owned As of Of Class
3/2/98 1
3/2/98 1 Class
<S> <C> <S> <S> <C> <S> <C> <C>
Robert W. 78 Director Director 1981 Retired Owner, 1,900 2 .72
Boyd, Sr. Globe Nursery
McMinnville, TN
Larry E. 51 Director & Director & 1990 Executive Vice 1,419 .54
Brown Executive Executive President
V.P. V.P. of City Bank
John R. 57 Director Director 1994 President, 2,088 3 .79
Collier, Jr. Pleasant Grove
Nursery, Inc.
McMinnville, TN
James A. 69 Director Director 1981 Agent, Hoover & 3,726 4 1.41
Dillon, Jr. Sons, J.A. Dillon
Ins. Agency
McMinnville, TN
Jeffrey A. 57 Director & Director & 1981 Chairman of the 2,009 5 .76
Golden Chairman of Chairman of Board President
Board, the Board, & Chief Executive
President & President & Officer of City
Chief Chief Bank
Executive Executive
Officer Officer
Charles D. 62 Director Director 1981 Circuit Court 452 6 .17
Haston Judge 31st
Judicial District
State of
Tennessee
James H. 58 Director & Director & 1990 Senior Vice 1,000 7 .38
Hillis Treasurer Senior V.P. President of
City Bank
J. Paul 68 Director Director 1981 Owner, Paul & 14,422 8 5.46
Holder Holder Realty &
Auction Co.
McMinnville, TN
</TABLE>
<PAGE> 13
<TABLE>
(a) Identification of Directors
<CAPTION>
Shares of
Position & Position & Director Business Exp. Corp.
Office Held Office Held of Corp. During Last Beneficially Percent
Name Age With Corp. With Bank Since Five Years Owned As of Of Class
3/11/97 1
<S> <C> <S> <S> <C> <S> <C> <C>
M. Thomas 76 Director & Director & 1981 Farmer and 10,438 9 3.95
Mullican Vice Vice Investor
Charirman Chairman
of the of the
Board Board
James A. 71 Director Director 1981 Investor 194 .07
Puckett
Leon B. 57 Director Director 1992 President, 2,401 .91
Stribling Stribling
Chevrolet-GEO,
Inc. Smithville,
TN
James E. 60 Director Director 1994 President, 765 .29
Walling Tennessee
Roasters
Enterprise, Inc.
Owner, Vilco
Supply Co.
</TABLE>
<PAGE> 14
FOOTNOTES
1 Unless otherwise indicated, all shares are owned of record.
2 1,900 shares are registered to Robert W. Boyd, Sr. or Eleanor
Boyd (Mr. Boyd, Sr.'s wife).
3 1,688 shares are registered to John R. Collier, Jr.
100 shares are registered to Suzanne E. Collier Reynolds (Mr.
Collier, Jr.'s daughter).
300 shares are registered to Pleasant Cove Nursery, Inc. (Mr.
Collier, Jr. is President of PleasantCove Nursery, Inc.).
4 2,971 shares are registered to James A. Dillon, Jr.
223 shares are registered to James A. Dillon, Jr. and Phyllis
M. Dillon (Mr. Dillon, Jr.'s wife).
532 shares are registered to Phyllis M. Dillon (Mr. Dillon, Jr.'s wife).
5 1,404 shares are registered to Jeffrey A. Golden WROS Linda Golden.
605 shares are registered to Linda Golden WROS Jeffrey A. Golden.
6 360 shares are registered to Charles D. Haston.
92 shares are registered to Charles D. Haston, a general partnership.
7 1,000 shares are registered to James H. or Carolyn Hillis (Mr.
Hillis's wife).
8 14,386 shares are registered to J. Paul Holder.
36 shares are registered to Steven Thomas Holder, Trust UMGA
(Mr. Holder's grandson) and J. Paul Holder, Trustee
9 10,168 shares are registered to M. Thomas Mullican.
270 shares are registered to Connie W. Mullican (Mr. Mullican's wife).
<PAGE> 15
(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 - Under the Securities Laws of the
United States, the Corporation's directors, executive officers and any
person who holds more than ten percent (10%) of the Shares of the
Corporation are required to report their ownership of the Shares and any
changes in that ownership to the Securities and Exchange Commission
(the "SEC"). These persons are also required by the SEC's regulations to
furnish the Corporation with copies of these reports. Specific due dates
for these reports have been established by the SEC, and the corporation
is required to report in this Proxy Statement any failure to file by
these dates during 1997. Based solely upon a review of the reports
furnished to the corporation or written representations from the
Corporation's direcors and executive officers, the Corporation
believes that, during the 1997 fiscal year, all filing requirements
applicable to its officers, directors and greater than 10%
beneficial owners were complied.
Item 11. Executive Compensation
The following table sets forth the aggregate compensation accrued or paid by
the Bank during the fiscal years ended December 31, 1997, 1996, and 1995 to the
highest compensated officers whose aggregate compensation exceeds $100,000.00.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name of Individual All Other Co
and Principal Position Year Salary Bonus Compensation (1)
Jeffrey A. Golden 1997 $138,000.00 $ 10,350.00 $31,718.06
Chairman of the Board, 1996 133,500.00 10,012.50 22,499.35
President and Chief 1995 130,000.00 9,750.00 20,684.04
Executive Officer
Larry E. Brown 1997 $93,000.00 $6,975.00 $28,107.30
Director of Bank and 1996 90,000.00 6,750.00 21,147.71
Executive Vice President 1995 86,500.00 6,487.50 15,518.76
James H. Hillis 1997 $83,500.00 $6,262.50 $23,213.44
Director and Treasurer 1996
1995
(1) All Other Compensation for Mr. Golden, Mr. Brown and Mr.
Hillis includes Director fees for the Bank both cash paid and
deferred fees, deferred compensation paid pursuant to the
Corporation's 401(k) plan, a premium payment for life
insurance, use of a bank vehicle and country club dues.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of certain beneficial owners and
management may be found in Item 10(a) of Part III of this Form 10-K.
<PAGE> 16
Item 13. Certain Relationships and Related Transactions
Some of the Corporation's directors and officers, businesses with
which they are associated, and members of their immediate families
are at present, as in the past, customers of the Bank and have had
transactions with the Bank, including borrowings. All transactions
involving loans to such persons and businesses have been made in
the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the
time for comparable transactions with other borrowers. In the
opinion of the Board, such transactions do not involve more than a
normal risk of collectibility nor present any other unfavorable
features.
<PAGE> 17
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:
(3) February 10, 1998 Amendment to Corporate
Bylaws
(13) Annual Report to Security Holders
<PAGE> 18
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, 10, 1998
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 10, 1998
/s/ Jerry N. Brown
Jerry N. Brown, Senior Vice President
City Bank & Trust Company
(Chief Financial Officer)
Date: March 10, 1998
<PAGE> 19
SIGNATURES -- Continued
/s/ Robert W. Boyd, Sr. /s/ James H. Hillis
Robert W. Boyd, Sr., Director James H. Hillis, Director
Date: March 10, 1998 Date: March 10, 1998
/s/ Larry E. Brown /s/ J. Paul Holder
Larry E. Brown, Director J. Paul Holder, Director
Date: March 10, 1998 Date: March 10, 1998
/s/ John R. Collier, Jr. /s/ M. Thomas Mullican
John R. Collier, Jr., Director M. Thomas Mullican, Director
Date: March 10, 1998 Date: March 10, 1998
/s/ James A. Dillon, Jr. /s/ James A. Puckett
James A. Dillon, Jr., Director James A. Puckett, Director
Date: March 10, 1998 Date: March 10, 1998
/s/ Jeffrey A. Golden /s/ Leon B. Stribling
Jeffrey A. Golden, Director Leon B. Stribling, Director
Date: March 10, 1998 Date: March 10, 1998
/s/ Charles D. Haston /s/ James E. Walling
Charles D. Haston, Director James E. Walling, Director
Date: March 10, 1998 Date: March 10, 1998
<PAGE> 20
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, 1997, and
incorporated by reference in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets -- December 31, 1997 and 1996
Consolidated Statements of Income -- Years ended December
31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity -- Years
ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows -- Years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements -- December 31,
1997, 1996 and 1995
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> 21
EXHIBIT INDEX
C B & T, INC.
Exhibit Number Title or Description
(3) February 10, 1998 Amendment to Corporate Bylaws
(13) Annual Report to Security Holders
<PAGE> 22
EXHIBIT 3
BYLAWS
C B & T, INC.
THIS AMENDMENT TO THE AMENDED AND RESTATED BY-LAWS OF C B & T,
INC. (this "Amendment") is made and adopted as of the 10th day of
February, 1998, by the board of directors of C B & T, Inc. (the "Board").
WITNESSETH:
WHEREAS, the Board deems it to be in the best interest of the
Company to permit greater flexibility in setting the date of its annual
meeting, it is therefore
RESOLVED that the Amended and Restated Bylaws for C B & T, Inc.,
be amended as follows:
Article I- Meetings of Shareholders, Section 1 "Annual Meeting": shall
be replaced in its entirety with the following:
"The annual meeting of the shareholders shall be held at such time and
place, either within or without the State of Tennessee, as may be designated
from time to time by the Directors, consistent with state and federal law.
Unless the time and place are otherwise specified by the Directors, the
meeting shall be held on the second Tuesday in April of each year, at the
main office of the Company."
IN WITNESS WHEREOF, the parties hereto have approved this Amendment
as of the day and year first above written to be included in the official
minutes of the meeting of the Board.
<PAGE> 23
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
C B & T, INC.
<PAGE> 24
C B & T, INC.
AND ITS SUBSIDIARIES
CITY BANK & TRUST COMPANY
Financial Review
Forward............................................................... 2
Letter From the President............................................. 6
Financial Discussion.................................................. 9
Report of Independent Certified Public Accountants....................14
Consolidated Balance Sheets...........................................15
Consolidated Statements of Income.....................................16
Consolidated Statements of Shareholder's Equity.......................17
Consolidated Statements of Cash Flows.................................18
Notes to Consolidated Financial Statements............................19
<PAGE> 1
FORWARD
City Bank & Trust Company has completed 85 years
of dedicated service to our trade area. We opened
our doors for business on April 1, 1912 and received
a Charter on October 30, 1912 as a State Bank.
Since that first day, the bank has been among those
at the forefront of business, agricultural, industrial Picture
and technological functions that have helped develop
the economy of our trade area. As we celebrate we
want to review where we have been and tell you where
we are headed.
At the age of 72, having contributed more than 50 years
of business and banking leadership to the community, the
elder Mr. Jesse Walling began the bank with the help of
his three sons, H.R. Walling, E.W. Walling and C.D. Walling.
Pa "J" as he was affectionately called was the bank's first
President. Huel Walling served as the Cashier and E.W. filled
the position of Vice President. The bank has continued to
live by the pledge made by the Walling's to serve the customers
and the community aggressively and efficiently. Assets on
opening day were $42,648.54. One of the town's most aggressive
business men and an influential civic and political leader
assumed the presidency of City Bank & Trust company with the
retirement of the founder. He was James D. Elkins, whose
business affiliations also included President of the
McMinnville Hardware and Furniture Company.
He hired the first woman, Mrs. Georgia Moore who became the
bank's first Assistant Cashier and the first woman officer.
In 1932 the bank merged with Peoples National Bank of
McMinnville. The bank successfully weathered the bank PICTURE
holidays declared in March, 1933 by the President of the
United States and emerged from the crucial economic period
an even stronger financial institute passing the one-
million dollar mark with assets of $1,026,076.44 in 1935.
The bank's founder, Jesse Walling died March 11, 1930, followed by
the unexpected death in 1936 of President Elkins. Turning to the
official family, the bank's directors elected C. D. Walling as
president to succeed Mr. Elkins. The new president brought with him
to the office a wealth of knowledge not only of the banking business,
but of the area served by the bank and it's people. Being the son of
the founder and having "grown up" in the bank, he was eminently qualified to
succeed to the presidency until 1966 when Mr. H. B. Roney was named to the
presidency. Keeping in mind the founders dedication of the bank to service,
management soon found the banking quarters to be inadequate to provide the
services needed by the community. The Board of Directors quickly responded
by opening the West Main Branch in October, 1964. This provided the first
drive-in facility in Warren County.
In January 1962 the Board of Directors named Mr. Joe H. Womack was the
bank's first Assistant Vice President. He was known for his wisdom in
agricultural lending and progressed to the position of Senior Vice
President and member of the Board of Directors.
<PAGE> 2
Mr. Roney was a colorful individual who served
this institution for almost two decades in the
areas of Cashier, Vice President, Executive
Vice President, President and only briefly as
President Emeritus. He was a person who had a
love for life and a love for helping others.
He was a man that appreciated his staff and
PICTURE wanted them to do well. He was constantly
encouraging them and giving them moral and
educational support. Under his leadership
Jeffrey A. Golden became the first First Vice
President. He progressed quickly through the
ranks and currently serves as the banks' Chair-
man of the Board, President and Chief Executive
Officer, the only person to hold all three
titles. Mrs. Glyna F. Lee became the bank's
first woman loan officer, she too became a
leader in the financial industry, and is
currently serving as Senior Vice President and
Director of Marketing and Business Development.
Early on as President it became clear to Mr.
Roney and the Board that we were in need of
another location to handle the growth of the
bank. Again the Board of Directors quickly
initiated plans which resulted in the opening of
the Plaza Branch in temporary quarters in April,
1967. The permanent structure was completed and
occupied in February, 1968. After opening two
modern banking facilities within a four year
period, City Bank & Trust Company was still
facing another problem in order to provide
adequate banking services. The facilities at
the Main Office were crowded to capacity, with
a need for expansion. After acquiring some
adjoining property, plans were formulated to
construct a new main office building. In
February 1968, City Bank & Trust Company moved
into temporary quarters to allow for the
renovation of the new building which was occupied
in May, 1969. In 1974 the Mt. Leo Branch was
opened. Under Mr. Roney's leadership the bank
grew to $68,670,000.00 by year end 1978 when
Mr. Roney retired and the Board of Directors
elected long time employee Jeffrey A. Golden as
President.
Mr. Golden became the youngest President in the
bank's history, taking over the helm at the age
of 38. Under his leadership the bank has
experienced the greatest growth in the history
of the bank, with assets soaring from $68 to $265
million. In 1980 the Federal Deposit Insurance
Corporation and the Tennessee Banking Department
approved the opening of our fifth branch on March
1, 1981 at the Three Star Mall. The bank began
to offer two new types of accounts The N.O.W
account, which stood for "Negotiable Order of
Withdrawal," worked like a regular savings
account, and the new tax free All Savers
Certificate was introduced. As the bank was
experiencing great growth Mr. Golden saw the
need to restructure the bank and set up
division heads so that more time could be
devoted to strengthening the different areas
of the bank. Today Larry E. Brown, Executive
Vice President of the bank oversees the
divisions. The following people presently head
these divisions. Loan Division, Senior Vice
President James H. (Dickie) Hillis; Operations
<PAGE> 3
Division, Senior Vice President and Chief Financial Officer
Jerry N. Brown; Marketing/Business Development Division,
Senior Vice President Glyna F. Lee; Trust/Investment Divi-
sion, Senior Vice President Kenneth W. Smith, and the Data
Processing Division, Vice President Edward Wayne Martin. PICTURE
Under the wise leadership of Mr. Golden another historic
event occurred in the growth of City Bank & Trust Company
when at the annual shareholders meeting, 90.74% of the
shareholders concurred with recommendations of Manage-
ment and the Board of Directors in approving plan to
reorganize The City Bank & Trust Company into a one bank
holding company structure to be known as C B & T, Inc. This
new structure positioned the bank to compete in the new
deregulated market place. Many new deposit accounts were
introduced. It also brought about a different form of lending
as the need for variable rate loans came into place. Changes
in tax laws brought about changes for wage earners in the
Individual Retirement Account program (IRA) that allowed
the deferment of income, as well as earnings on that income.
Deregulation gave use the ability to become more competitive
by being a more complete financial planner for our customers
and still provide personal service.
City Bank & Trust Company's strength and commitment
continued to grow and in July of 1983 the bank was invited by the Federal
Deposit Insurance Corporation to bid for the purchase of certain assets and
assume certain liabilities of the First Central Bank of Smithville. The
bank was successful in this acquisition on July 8, 1983. The bank continued
to expand and offer new services which included the direct Federal Reserve
Wire Service, expanded leasing programs, MasterCard Gold cards, investment
and brokerage services, personal and home equity lines of credit, limited
insurance activities and discount brokerage services.
In 1986, Mr. Frank Henegar, the oldest person to serve on the bank's Board
of Directors died at the age of 98 after serving this institution for 39
years. He achieved the singular distinction of "Tennessee's Most Senior
Bank Board Member" presented by the Tennessee State Senate. During that
same year, Mrs. Edith Ann Martin was named Secretary to the Bank's Board
Directors. A job she so capably handles to this date.
As the bank faced the 90's there was a concern for many of the nations
banks. A recognized beginning of a national recession, and a threat of
war in the Middle East. However, C B & T, Inc. grew and prospered during
this difficult period. The bank continued to be a leader in extending
new products & services with new Automated Clearing Operations, which
included new service offerings of direct deposit, payroll services,
automatic bill paying, cash concentrations, and corporate trade payments.
In October, 1994, an era of leadership was brought to an end upon the
retirement of Mr. Clarence D. Walling, Jr.. The Walling family had
served CB &T, Inc., and its subsidiary, City Bank & Trust Company from
its beginning. Mr. Jesse Walling, founder of City Bank & Trust Company
served as Chairman from 1912 until his death on March 11, 1930. His
son, Mr. Clarence D. Walling, Sr. was an original signer of the corporate
charter and virtually served his lifetime for this institution and this
community. His term as chairman ended withi his untimely death in 1969.
Mr. C D. Walling Jr. then served as Chairman from 1970 until 1994 and
served as Chairman of C B & T, Inc. from its inception date in 1981
until 1994, at which time his retirement concluded the Walling era.
1996 was a very successful year for the bank. Business customers were
offered a Cash Management Investment Account. This program offered
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. The Bank rolled out the new
24-Hour Telephone Banking service, that offered voice response
information to customers, day or night as well as Loans-by-Phone. The
opening to the new SuperCenter Branch in the Wal-Mart Super Store
facility offered new extended banking hours with a 24-hour full service
ATM in a safe and secure environment.
<PAGE> 4
A full service ATM was installed in the new River Park Hospital and a
cash dispenser in the Calsonic Yorozu Corporation plant in Morrison,
Tennessee. The H. G. Hill property adjacent to the West Main Branch
was purchased in order to expand the West Main facility. The Board
of Directors approved the organization of two new companies. CBT
Insurance, Inc. was organized to provide the bank new opportunities
in the insurance arena. CBT Realty, Inc. was organized for the
purpose of holding and disposing of foreclosed properties.
As we celebrated our 85th Anniversary many events were planned for our
customers and staff. The bank held customer appreciaion day on the
first Friday of each month in McMinnville and Smithville. The staff
participated in several in-house contests and promotions, which also
involved our customers. There was a pumpkin contest for the kids,
fall decorating contest throughout the bank and a drawing was held for
$1,000.00 in cash. The employees continued to be involved in local
charity, raising thousands of dollars. Also in 1997, there was a
focus on training for our entire staff, preparing our people for the
twenty-first century. To better serve our customers, a cash machine was
installed at our Three Star Mall Branch.
During the last 85 years the bank and its employees have won many
awards for community service, exhibiting sustained superior performance
through strong leadership, as well as, the hard work, talent and input
of our employees on behalf of our customers and community. Among the
bank awards are the 5 Star Superior Bank Award by Bauer Financial,
Named Employer of the Year by the Tennessee Committee for People with
Disabilities, Named the "Best Bank" in a community wide contest
sponsored by the Southern Standard Newpaper, received an "Obelisk" from
KPMG Peat-Marwick of New York for being a Superior Bank, selected as
the "Business of the Year" by the African-American Athletic &
Scholarship organization and received an "A" rating by Sheshunoff for
many years.
As we look to new horizons, we see the financial market becoming
global, the economy is shifting more and more toward services,
and toward work knowledge. New technologies -- especially computers
and telecommunications -- have already created intense, worldwide
competition for business. Considering the scope and speed of change
these days, there will be may priceless opportunities for those of us
who play by the new rules, position ourselves right, and take
personal responsibility for our future. We can't stop the world from
changing. The best we can do is adapt. As we move into the twenty-
first century we pledge to you our continued leadership, superior
service and our efforts to improve the quality of life for all we serve.
<PAGE> 5
TO OUR SHAREHOLDERS AND FRIENDS:
1997 symbolizes 85 years of dedicated service
to our trade area. We realize the success of
C B & T, Inc. and its subsidiary City Bank &
Trust Company could not have been possible
without the support and encouragement of our
shareholders and friends; the excellent perfor-
mance of our current staff and those who have
served in the past years; our management for
PICTURE their leadership and commitment; and our
Board of Directors for their participation
and guidance. Thanks to each of you for your
part in the many successes that we have enjoyed
throughout these 85 years.
We are happy to report that 1997 was a very
successful year as indicated by the following
highlights:
* Income per share increased by $0.79 to a record high of $16.16 while
maintaining a l.60% return on assets
* The percentage of net income to average shareholders' equity at year-end
was 13.33%.
* Shareholders' equity to total average assets increased to 11.98% after
paying a record high $7.50 cash dividend.
* The percentage of dividends declared per average common share to net
income per average common share increased to 46.41%.
The philosophy of our board and management team is to keep pace with changes
and opportunities and provide our market area with a high quality, high
performing, full service financial institution. Therefore, on January 8,
1998, a public announcement was made as a result of a decision made by our
Board of Directors to merge (subject to shareholder and regulatory approval)
with Union Planters Corporation, a Memphis, Tennessee based corporation,
who like C B &T, Inc. and its subsidiary, City Bank & Trust Company, is a
very highly community-oriented company. Personally, I feel this decision
will enable us to keep pace with change and technology and provide more
resources while maintaining high quality services. Also you will continue
to see the same friendly contact staff and management who serve you on a
daily basis.
Please review in detail the financial data and the proposed merger
information. I encourage you to vote FOR the adoption of the Agreement
and the Plan of Merger and return your Proxy to us as soon as possible.
We sincerely appreciate and value your business and ask that you encourage
your family and friends to use our services.
Yours truly,
Jeffrey A. Golden
Chairman of the Board
President and Chief Executive Officer
<PAGE> 6
C B & T, Inc. And Subsidiaries Board of Directors
<TABLE>
<S> <S> <S>
Jeffrey A. Golden1 John R. Collier, Jr. James A. Puckett2
Chairman of the Board President Investor
President & Chief Executive Officer Pleasant Cove Nursery
CB&T, Inc. And (Wholesale Nursery-Trees & Shrubs) Leon B. Stribling3
City Bank & Trust Company President
(State Bank) James A. Dillon, Jr.2 Stribling Chevrolet-GEO Inc.
Chairman, McMinnville Electric System Agent (Automobile Agency)
Hoover & Son -J.A. Dillon
M. Thomas Mullican2 Insurance Agency James E. Walling
Vice Chairman of the Board (General Insurance) President
CB&T, Inc. And Tennessee Roasters Enterprise, Inc.
Farmer & Investor Charles D. Haston2,3 Owner, Vilco Supply Co.
Circuit Court Judge (Car Wash Supply)
Robert W. Boyd, Sr.3 31st Judicial District
Retired Owner State of Tennessee
Globe Nursery J. Ray Troop, Jr. M.D.*3
(Wholesale Nursery-Trees and Shrubs) James H. Hillis Family Practice Physician
Treasurer, CB&T. Inc.
Larry E. Brown2 Senior Vice President Edith Ann Martin
Executive Vice President City Bank & Trust Company Secretary to the Board
CB&T, Inc. And (State Bank) CB&T, Inc. and
City Bank & Trust Company City Bank & Trust Company
(State Bank) J. Paul Holder2 (State Bank)
Owner
Paul Holder Realty & Auction Co. 1 Ex-Officio Member of All
(Land Development, Sales & Auction) Committees except the Audit
Committee
2 Member of Executive Committe
3 Member of Audit Committee
*
Advisory Directory
</TABLE>
PICTURE OF BOARD
<PAGE> 7
C B & T, Inc. And subsidiaries officers and advisory committee
C B & T, INC. - Officers
<TABLE>
<S> <S> <S> <S>
Jeffrey A. Golden M. Thomas Mullican Larry E. Brown James H. Hillis Edith Ann Martin
Chairman, President & Vice Chairman Executive Vice President Treasurer Secretary to the Board
Chief Executive Officer
</TABLE>
CITY BANK & TRUST COMPANY - OFFICERS
<TABLE>
<S> <S> <S>
Jeffrey A. Golden Kenneth D. Martin Dana M. Green
Chairman of the Board, President, CEO Vice President Assistant Vice President
Edith Ann Martin Edward Wayne Martin Shannon L. Haston
Secretary to the Board Vice President Assistant Vice President
Larry E. Brown Robert L. Miller Johnny T. Taylor
Executive Vice President Vice President Assistant Vice President
Jerry N. Brown Lonnie D. Milstead Donna Bryant
Senior Vice President & CFO Vice President Administrative Assistant
James H. Hillis Dan T. Wolfe Sherry A. Clendenon
Senior Vice President Loan Analyst Compliance Officer
Glyna F. Lee Kenneth Dwayne Woods Barbara D. Davis
Senior Vice President Vice President Administrative Assistant
Kenneth W. Smith Edmond D. Busic Teresa A. Hennessee
Senior Vice President Loan Review Officer Administrative Assistant
Randall G. Tramel Donna D. Evans Lisa A. Hillis
Senior Vice President Operations Coordinator Administrative Assistant
Eric Golden Rhonda A. Carr Charles Tim Prater
Cashier Senior Auditor Administrative Assistant
Ronald G. Goodwin Sherry Lynn Daugherty Jane Ann Pryor
Vice President Branch Manager Administrative Assistant
Lynne R. Hamrick Betty B. Prater Elizabeth P. Smith
Human Resource Officer Branch Manager Administrative Assistant
Debra T. Kell Tracie J. Travis Sharon E. West
Vice President Branch Manager Administrative Assistant
Emogene R. Magness Dawn M. Christian
Vice President, Branch Manager Assistant Vice President
Danny L. Martin Deborah E. Glenn
Vice President Assistant Vice President
</TABLE>
CITY BANK & TRUST COMPANY - SMITHVILLE ADVISORY COMMITTEE
H. J. Judkins Vester Parsley
H. J. Judkins & Attorney-at-Law
Son Nursery, Inc.
Jim Ed Rice Norval Webb, Jr. Picture of Advisory
Local Businessman F.Z. Webb & Son Pharmacy Committee
Leon B. Stribling Mark Ashburn
Stribling Chevrolet Manager, Smithville Elec. System
- -Geo, Inc.
Jeanette France Lena Buck
Farming Operation Attorney-at-Law
<PAGE> 8
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 1997 was $4,271,000 or $16.16 per share, compared to
$4,117,000 or $15.37 per share in 1996 and $4,067,000 or $15.00 per
share in 1995. 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 1997 was 13.33 percent compared to 13.76 percent in 1996 and
and 14.37 percent in 1995. ROA measures how effectively a corporation
uses its assets to produce earnings. For 1997, return on average assets
was 1.60 percent. ROA was 1.60 percent in 1996 and 1.64 percent in 1995.
ROE and ROA have been negatively impacted by an increase in the net loan
charge offs in 1997 and 1996 as compared to 1995.
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 $12,142,000 in 1997, from
$11,903,000 in 1996 and $11,334,000 in 1995. Net yield on interest
earning assets, which is net interest income on a tax equivalent basis
divided by average earning assets, was 4.85 percent in 1997, compared
with 4.93 percent in 1996 and 4.87 percent for 1995. Average earning
assets, as a percentage of total assets, decreased slightly to 93.7 in
1997 compared to 93.8 percent in 1996 and 93.9 percent in 1995.
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 $413,000
in 1997, $628,000 in 1996, and $376,000 in 1995. Management regularly
monitors the allowance for possible loan losses and considers it to be
adequate.
NONINTEREST INCOME
Total noninterest income of $2,122,000 in 1997 increased $64,000 or
3.1 percent, when compared to 1996. This follows an increase of 13.3
percent in 1996 and 35.5 percent in 1995. Service charges on deposit
accounts increased $12,000 in 1997 due, principally, to growth in
transaction and savings deposit accounts. Other service charges
decreased $67,000 in 1997, due, principally, to reductions in credit
life and accident and health insurance commissions. Gains and losses
on the sale of investment securities also impact comparisons.
Security transactions resulted in a gain of $36,000 in 1997 and in
losses of $22,000 and $14,000 in 1996 and 1995.
NONINTEREST EXPENSES
Noninterest expenses increased 4.2 percent in 1997, a slightly lower
rate of growth than the 5.6 percent in 1996 and higher than 3.2
percent in 1995. The smaller increase in 1997 can be attributed to a
leveling of salaries and other expenses. Salaries, wages and benefits
accounted for 54.9 percent of total noninterest expense in 1997
compared to 56.5 percent of total noninterest expense in 1996 and 56.0
percent in 1995. Federal Deposit Insurance Corporation's insurance
assessment increased $25,000 in 1997 after a decrease of $240,000 in
1996 and a decrease of $235,000 in 1995.
<PAGE> 9
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 $1,754,000 in 1997 compared with
$1,856,000 in 1996 and $1,788,000 in 1995. The Corporation's
effective tax rate was 29.1 percent in 1997, 31.1 percent in 1996 and
30.5 percent in 1995.
It has been determined that for the year ended December 31, 1997, 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 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. Estimated losses from impaired
loans are included in the Bank's allowance for possible loan losses.
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, 1997 were $1,404,000 compared to
$1,733,000 and $398,000 at December 31, 1996 and 1995 respectively.
The ratio of impaired loans to the allowance for loan losses at
December 31, 1997, was 73.4 percent compared to 89.7 percent and 21.4
percent at December 31, 1996 and 1995, respectively. Total impaired
loans as a percentage of total loans decreased to 1.0 percent at
December 31, 1997, compared to 1.2 percent at December 31, 1996 and
0.3 percent at December 31, 1995.
<PAGE> 10
Financial Discussion
Allowance for Possible Loan Losses and Loan Charge-Offs
The allowance for possible loan losses is 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, 1997, loans were $147.5 million, compared to $144.9
million at December 31, 1996. This represents an increase of 1.8
percent in 1997. In 1996, loans increased 3.1 percent from $140.5
million at December 31, 1995.
Loans comprise the majority of the Corporation's earning assets
representing 57.7 percent of average earning assets in 1997 and 57.4
percent in 1996. Average loans outstanding increased 4.4 percent in
1997 and 5.1 percent in 1996.
The largest category in the loan portfolio was real estate mortgage
loans, which comprised 66.2 percent of total loans at the end of 1997.
Installment loans totaled 22.2 percent of the portfolio and
commercial, financial and agricultural loans comprised 9.1 percent of
the portfolio. All other loans were 2.5 percent of the portfolio. In
1996, real estate mortgages were 66.5 percent of the portfolio,
installment loans were 22.1 percent, commercial, financial and
agricultural loans were 9.4 percent and other loans were 2.0 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 $49,514,000, or 33.6 percent
of the loan portfolio at December 31, 1997.
Investment Securities
The investment portfolio represented 40.7 percent of average earning
assets in 1997 and 40.4 percent in 1996. Average investment
securities increased 4.5 percent in 1997 compared to 1996. The tax-
equivalent yield on the entire portfolio was 7.07, 6.96 and 7.01
percent in 1997, 1996 and 1995, 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> 11
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 BAA, 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, 1997, 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 1997, 1996 and 1995, these funds
represented approximately 1.5 percent, 2.2 percent and 2.2 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 2.7
percent in 1997, compared to 5.0 percent in 1996 and a 5.3 percent
reduction in 1995. Average demand deposits (noninterest-bearing core
deposits) increased 2.4 percent in 1997, 0.8 percent in 1996 and 10.3
percent in 1995. These deposits represent approximately 12.6 of
average core deposits in 1997 and 1996.
Federal Home Loan Bank Borrowings
In 1997 these average borrowings increased slightly to 2.7 percent of
average assets compared to 2.6 percent in 1996.
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, 1997, was $34.9 million, or
$132.09 per share, compared with $32.2 million, or $121.85 per share
at December 31, 1996 and $30.7 million, or $113.92 per share at
December 31, 1995. At December 31, 1997, the Corporation's leverage
ratio was 12.5 percent. At December 31, 1997, the Corporation's risk-
based capital ratios based on Federal Reserve Board guidelines were
22.5 percent for Tier 1, or "core" capital, and 23.8 percent for total
qualifying capital. 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. These ratios substantially exceed the Federal
Reserve Board's capital guidelines for a well-capitalized institution,
which are 6.0 percent for Tier 1, 10.0 percent for total qualifying
capital, and 5.0 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> 12
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 two
standards that have not been adopted by C B & T, Inc. but will be
required to adopt after December 31, 1997 as follows:
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income
a. Effective for fiscal year beginning after December 15,
1997.
b. The purpose of reporting comprehensive income is to
report a measure of all changes in equity of an enterprise
that result from recognized transactions and other economic
events of the period other than transactions with owners in
their capacity or owners.
c. Management does not believe this statement will have
any material effect on future financial statements.
Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information
a. Effective for fiscal year beginning after December 15,
1997.
b. This statement applies to public business enterprises.
c. An operating segment is a component of an enterprise:
1. That engages in business activities from which
it may earn revenue and incur expense.
2. Whose operating results are regularly reviewed
by the enterprise's chief operating decision maker to
make decisions about resources to be allocated to the
segment and assess its performance, and
3. For which discrete financial information is
available.
d. Management does not believe this statement will have
any material effect on future financial statements.
The Financial Accounting Standards Board (FASB) has issued two
standards that have been adopted by C B & T, Inc. as follows:
Statement of Financial Accounting Standards No. 128, Earnings Per Share
a. Effective prospectively for earnings per share
computation for both interim and annual periods ending after
December 15, 1997.
b. The statement requires a reconciliation of the
numerators and the denominators of the basic and diluted per-
share computation for income and from continuing operations.
c. Management does not believe this statement will have
any material effect on future financial statements.
Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure.
a. Effective for financial statements for periods ending
after December 15, 1997.
b. An entity shall explain, in summary form within its
financial statements, the pertinent rights and privileges
of the various securities outstanding.
c. Management does not believe this statement will have
any material effect on future financial statements.
<PAGE> 13
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 subsidiaries,
principally City Bank & Trust Company (the "Bank"), as of December 31,
1997 and 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. 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.
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 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, 1997 and
1996, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Nashville, Tennessee
January 16, 1998
<PAGE> 14
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Dollars in Thousands, Except Share Data)
1997 1996
ASSETS
Cash and due from banks $ 8,456 $ 7,021
Federal funds sold - 1,175
Investment securities - Note 2 105,404 102,070
Loans, net of unearned income and allowance for
possible loan losses - Notes 3 and 4 145,335 142,096
Interest receivable 3,160 3,116
Bank premises and equipment, at cost
less allowance for depreciation - Note 5 2,061 2,333
Other assets - Notes 6 and 13 4,070 3,648
TOTAL ASSETS $268,486 $261,459
LIABILITIES
Deposits:
Noninterest-bearing deposits $ 28,207 $ 28,178
Interest-bearing deposits (including certificates
of deposit over $100: 1997 - $31,387; 1996 -
$28,943) - Note 7 190,936 189,379
219,143 217,557
Securities sold under agreements to repurchase - 2,273 1,362
Note 8
Federal funds purchased - Note 8 2,000 -
Accounts payable and accrued liabilities - Note 13 1,839 1,637
Interest payable 1,558 1,460
Federal Home Loan Bank borrowings - Note 9 6,787 7,203
TOTAL LIABILITIES 233,600 229,219
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 67,701
treasury shares in 1997 and 67,229 treasury
shares in 1996 830 830
Additional paid-in capital 5,000 5,000
Retained earnings - Note 15 33,467 31,179
Net unrealized gains (losses) on available-for-
sale securities, net of deferred income taxes -
Note 2 1,060 647
40,357 37,656
Less cost of treasury shares ( 5,471) ( 5,416)
TOTAL SHAREHOLDERS' EQUITY 34,886 32,240
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $268,486 $261,459
See accompanying notes to consoidated financial statements
<PAGE> 15
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands, Except Share Data)
1997 1996 1995
INTEREST INCOME
Interest and fees on loans $14,043 $13,657 $13,021
Interest on investment securities:
Taxable interest 4,632 4,772 4,952
Tax-exempt interest 1,699 1,336 1,180
6,331 6,108 6,132
Other interest income 216 280 301
TOTAL INTEREST INCOME 20,590 20,045 19,454
INTEREST EXPENSE
Interest on deposits 8,779 8,372 8,069
Interest on other borrowed funds - Note 8 109 46 56
Interest on long-term debt - Note 9 435 412 593
TOTAL INTEREST EXPENSE 9,323 8,830 8,718
NET INTEREST INCOME 11,267 11,215 10,736
Provision for possible loan losses - Note 4 413 628 376
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 10,854 10,587 10,360
NONINTEREST INCOME
Service charges on deposit accounts 1,223 1,211 1,064
Other service charges, commissions and fees 266 333 310
Net realized gains (losses) on investment
securities - Note 2 36 ( 22) ( 14)
Other income 597 536 456
TOTAL NONINTEREST INCOME 2,122 2,058 1,816
NONINTEREST EXPENSES
Salaries and employee benefits - Notes 12 and 18 3,817 3,772 3,540
Net occupancy expense 352 306 283
Furniture and equipment expense 859 812 764
Deposit insurance premium 27 2 242
Directors deferred compensation expense 213 249 235
Other expenses 1,683 1,531 1,257
TOTAL NONINTEREST EXPENSES 6,951 6,672 6,321
INCOME BEFORE PROVISION FOR INCOME TAXES 6,025 5,973 5,855
Provision for income taxes - Note 6 1,754 1,856 1,788
NET INCOME $ 4,271 $ 4,117 $ 4,067
Weighted average number of shares outstanding 264,288 267,865 271,150
Per share of Common Stock:
Net income $ 16.16 $ 15.38 $ 15.00
See accompanying notes to consolidated financial statements.
<PAGE> 16
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
Net Unrealized
Gains (Losses)
Additional on Available-
Common Stock Paid-in Retained For-Sale Treasury <S>
Shares Amount Capital Earnings Securities Shares Total
<C> <C> <C> <C> <C> <C> <C>
BALANCE - JANUARY 1, 1995 331,814 $830 $5,000 $25,973 ($ 657) ($4,549) $26,597
<S>
Net income for 1995 - - - 4,067 - - 4,067
Cash dividends declared, $4.50 per
share - - - ( 1,225) - - ( 1,225)
Purchase of outstanding 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 unrealized gains (losses)
on available-for-sale securities,
net of 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 outstanding Common
Stock - - - - - ( 580) ( 580)
Net change in unrealized gains (losses)
on available-for-sale securities,
net of deferred income taxes - - - - ( 265) - ( 265)
BALANCE - DECEMBER 31, 1996 331,814 830 5,000 31,179 647 ( 5,416) 32,240
Net income for 1997 - - - 4,271 - - 4,271
Cash dividends declared, $7.50
per share - - - ( 1,983) - - ( 1,983)
Purchase of outstanding Common Stock - - - - - ( 55) ( 55)
Net change in unrealized gains (losses)
on available-for-sale securities,
net of deferred income taxes - - - - 413 - 413
BALANCE - DECEMBER 31, 1997 331,814 $830 $5,000 $33,467 $1,060 ($5,471) $34,886
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 17
C B & T, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
1997 1996 1995
OPERATING ACTIVITIES
Net income for the year $ 4,271 $ 4,117 $ 4,067
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock dividend ( 90) ( 82) ( 79)
Provision for possible loan losses 413 628 376
Provision for depreciation and amortization 563 531 481
Amortization of investment security premiums,
net of accretion of discounts 82 ( 3) 11
Net realized (gains) losses on investment
securities ( 36) 22 14
Net loss on the disposal of fixed assets 12 - 4
Deferred income taxes ( 88) ( 51) ( 107)
Increase in interest receivable ( 44) ( 55) ( 119)
Increase in interest payable 98 131 441
Decrease (increase) in other assets ( 167) 102 ( 40)
Increase in other liabilities 201 287 203
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,215 5,627 5,252
INVESTING ACTIVITIES
Purchases of investment securities (56,440) (54,964) (23,970)
Proceeds from sale of investment securities 24,575 17,254 22,537
Proceeds from maturities, calls and principal
collections of investment securities 29,151 32,838 16,615
Net increase in loans ( 3,651) ( 6,185) (10,778)
Net purchases of premises and equipment ( 304) ( 731) ( 245)
Increase in cash value of life insurance ( 330) ( 244) ( 179)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ( 6,999) (12,032) 3,980
FINANCING ACTIVITIES
Net increase in noninterest-bearing 1,586 4,300 436
Proceeds from securities sold under
agreements to repurchase 912 1,362 -
Net increase (decrease) in federal
funds purchased 2,000 - ( 5,700)
Cash dividends ( 1,983) ( 1,753) ( 1,225)
Purchase of outstanding common stock ( 55) ( 580) ( 287)
Proceeds from long-term debt 349 993 4,000
Repayments of long-term debt ( 765) ( 3,017) ( 2,594)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,044 1,305 ( 5,370)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 260 ( 5,100) 3,862
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 8,196 13,296 9,434
CASH AND CASH EQUIVALENTS - END OF YEAR $ 8,456 $ 8,196 $13,296
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 9,225 $ 8,699 $ 8,281
Income taxes 1,875 2,105 1,753
See accompanying notes to consolidated
financial statements.
<PAGE> 18
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 follows:
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 $1.6 million and
$1.4 million at December 31, 1997 and 1996, respectively.
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
The Bank follows the accounting and reporting principles of
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, as
follows:
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.
<PAGE> 19
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment Securities (Continued)
Restricted Equity Securities
Federal Home Loan Bank and First Community L.P. stock are classified
as restricted equity securities and included in other assets.
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.
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 loans is recognized
as income based on the daily loan principal amounts outstanding.
Loans are considered impaired when, based on current information, it
is probable that all amounts of principal and interest due will not
be collected according to the contractual terms of the loan
agreement. The amount of impairment is measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate, or for collateral dependent loans,
impairment is measured based on a loan's observable market price or
the fair value of the collateral. For purposes of applying
impairment standards, the bank defines impaired loans as nonaccrual
loans, loans contractually past due ninety days or more, loans
identified as non-performing on the bank's problem loan list and
certain loans restructured in a troubled debt restructuring.
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.
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.
<PAGE> 20
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Long-Lived Assets
On January 1, 1996, the Corporation adopted SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-
lived Assets to be Disposed Of." SFAS 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by
the Corporation be reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset
may not be recoverable. Measurement of an impairment loss for long-
lived assets and identifiable intangibles that an entity expects to
hold and use is based on the fair market value of the asset. This
statement requires that the majority of long-lived assets and
certain identifiable intangibles to be disposed of be reported at
the lower of carrying amount or fair value less costs to sell. The
adoption of this statement had no effect on the consolidated
financial statements.
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 1996 and 1995
consolidated financial statements to conform to the 1997
presentation.
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.
<PAGE> 21
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 2 - INVESTMENT SECURITIES
<TABLE>
The following tables reflect the amortized cost, estimated fair
values and gross unrealized gains and losses of debt securities held
at December 31, 1997 and 1996:
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> (Dollars in Thousands)
1997
Available-for-sale securities:
U.S. Government and agency <C> <C> <C> <C>
securities $ 28,305 $ 274 ($ 4) $ 28,575 184 ( 28,796
Mortgage-backed securities 28,720 184 ( 108) 28,796
State and municipal securities 34,346 1,319 - 35,665
Corporate debt securities 12,324 44 - 12,368
$103,695 $ 1,821 ($ 112) $105,404
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
</TABLE>
No investment securities were required to be written down pursuant
to any other than temporary declines in fair value in 1997, 1996 or
1995.
The amortized cost, estimated fair value and weighted yields of debt
securities at December 31, 1997, by contractual maturities, are
presented on the following schedule. 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 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.
<PAGE> 22
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 2 - INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Amortized Fair Yield
Cost Value (unaudited)
(Dollars in Thousands)
<S>
U.S. Government and agency securities: <C> <C> <C>
Within one year $ 4,495 $ 4,508 6.76%
After one but within five years 18,206 18,417 6.79%
After five but within ten years 5,604 5,650 6.68%
Mortgage-backed securities:
Within one year 108 111 8.09%
After one but within five years 1,307 1,350 8.26%
After five but within ten years 25,368 25,398 6.92%
After ten years 1,937 1,937 6.74%
States and political subdivisions:
Within one year 1,103 1,113 8.17%
After one but within five years 12,800 13,351 8.75%
After five but within ten years 7,726 8,067 7.62%
After ten years 12,717 13,134 7.56%
Other investments:
Within one year 4,390 4,413 6.75%
After one but within five years 7,934 7,955 6.14%
$ 103,695 $ 105,404
1997 1996 1995
(Dollars in Thousands)
Proceeds from sales of investment
securities $ 24,575 $ 17,254 $22,537
Gross realized gains $ 56 $ 19 $ 70
Gross realized losses 20 41 84
Investment securities gain (losses), net $ 36 ($ 22) ($ 14)
</TABLE>
Securities carried at $24 million and $22 million at December 31,
1997 and 1996, respectively (fair value: 1997 - $24.1 million;
1996 - $22.7 million), were pledged to secure deposits or for
other purposes as required or permitted by law.
At December 31, 1997, 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> 23
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 3 - LOANS
The following is a summary by category of loans outstanding as of
December 31, 1997 and 1996:
1997 1996
(Dollars in Thousands)
Commercial, financial and agricultural $ 13,475 $ 13,574
Real estate - construction 3,597 2,903
Real estate - mortgage 97,653 96,326
Installment 32,758 32,073
Lease financing 52 68
147,535 144,944
Less:
Unearned income ( 287) ( 917)
Allowance for possible loan losses ( 1,913) ( 1,931)
$145,335 $142,096
A summary of loan maturities as of December
31, 1997 and 1996 follows:
Fixed Rate Loans
Due in one year or less $ 28,573 $ 31,155
Due after one year 85,823 81,703
Due after five years 8,098 7,957
$122,494 $120,815
Floating Rate Loans
Due in one year or less $ 20,941 $ 19,222
Due after one year 3,343 4,525
Due after five years 757 382
$ 25,041 $ 24,129
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 1997 and 1996.
1997 1996
(Dollars in Thousands)
Balance - beginning of year $3,498 $3,524
New loans made or additions to existing loans 1,807 2,365
Repayments (2,161) ( 2,391)
Balance - end of year $3,144 $3,498
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> 24
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 3 - LOANS (CONTINUED)
Impaired Loans
The following loans have been identified as impaired as of
December 31:
1997 1996
(Dollars in Thousands)
Impaired loans with an allowance $1,115 $1,280
Impaired loans without an allowance 289 453
Total impaired loans $1,404 $1,733
Allowance for impaired loans $ 317 $ 370
Average balance of impaired loans during
the year $1,568 $1,724
During 1997, the Bank recognized interest income on impaired
loans of $119,000 ($123,000 in 1996), which included $113,000 of
cash payments received ($104,000 in 1996). 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:
1997 1996 1995
(Dollars in Thousands)
Balance - beginning of year $ 1,931 $ 1,864 $ 1,733
Provision charged to operating
expenses 413 628 376
2,344 2,492 2,109
Amount charged off ( 614) ( 639) ( 339)
Recoveries 183 78 94
Net loans charged off ( 431) ( 561) ( 245)
Balance - end of year $ 1,913 $ 1,931 $ 1,864
<PAGE> 25
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES (CONTINUED)
It is management's opinion that the allowance was adequate at
December 31, 1997 and 1996, 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:
1997 1996
(Dollars in Thousands)
Land $ 208 $ 208
Buildings 1,732 1,732
Fixtures and equipment 3,888 3,777
5,828 5,717
Less allowances for depreciation ( 3,767) ( 3,384)
$ 2,061 $ 2,333
The provision for depreciation of premises and equipment amounted to
$563,000 for 1997, $531,000 for 1996, and $481,000 for 1995.
NOTE 6 - INCOME TAXES
The provisions for income taxes consist of the following:
1997 1996 1995
(Dollars in Thousands)
Current:
Federal $1,470 $1,536 $1,526
State 372 371 369
Total current 1,842 1,907 1,895
Deferred:
Federal ( 74) ( 43) ( 91)
State ( 14) ( 8) ( 16)
Total deferred ( 88) ( 51) ( 107)
Total provision for income tax $1,754 $1,856 $1,788
<PAGE> 26
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 6 - INCOME TAXES (CONTINUED)
The deferred tax effects of principal temporary differences are
shown in the following table:
1997 1996
(Dollars in Thousands)
Deferred tax assets:
Deferred benefit plan liability $ 497 $400
Allowance for possible loan losses 328 335
Leases - 2
Premises and equipment 14 -
Total deferred tax assets 839 737
Deferred tax liabilities:
Leases 1 -
Premises and equipment - 21
Stock dividends received 118 84
Net unrealized gain on
available-for-sale securities 650 397
Total deferred tax liabilities 769 502
Net deferred tax asset $ 70 $235
A reconciliation of total income taxes reported with the amount
of income taxes computed at the federal statutory rate (34%
each year) follows:
1997 1996 1995
(Dollars in Thousands)
Tax expense at statutory rates $ 2,049 $2,031 $1,991
Increase (decrease) in taxes
resulting from:
Nondeductible interest expense 71 57 54
Tax-exempt income ( 587) ( 474) ( 413)
Tax effect of state income taxes 236 239 232
Other - net ( 15) 3 ( 76)
$ 1,756 $1,856 $1,788
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,
1997 and 1996:
1997 1996
(Dollars in Millions)
Under 3 months $ 7.4 $ 7.4
3 to 6 months 6.4 7.0
6 to 12 months 8.4 10.8
Over 12 months 9.2 3.7
$ 31.4 $28.9
<PAGE> 27
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 7 - DEPOSITS (CONTINUED)
Deposits from related parties amounted to $3.3 million at December
31, 1997 and $3.8 million at December 31, 1996.
NOTE 8 - FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE
For the year ended December 31, 1997, the average balance of federal
funds purchased was $131,000 ($7,000 in 1996), and the average
interest rate charged was 5.6% (5.6% in 1996). Unused lines of
credit for short-term financing totaled $12 million at December 31,
1997 ($11 million at December 31, 1996).
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, 1997, securities sold under
agreements to repurchase averaged approximately $2,380,000
($1,129,000 in 1996). The average interest rate paid on such
agreements during the year was 4.00% (4.00% in 1996), and the
maximum month-end balance during the year was $3,334,000 ($1,578,000
in 1996).
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 $6,787,000 at December
31, 1997 ($7,203,000 at December 31, 1996). Such borrowings mature
in level monthly installments through 2013. The Bank had no
remaining optional takedown commitments under the agreement at
December 31, 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 6.06%.
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, 1997 and 1996, was as follows:
1997 1996
(Dollars in Thousands)
FHLB stock $ 1,317 $ 1,227
U.S. Government agency securities 8,318 8,500
$ 9,635 $ 9,727
<PAGE> 28
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
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, 1997, matures as follows:
Year ending December 31, Amount
(Dollars in Thousands)
1998 $ 821
1999 849
2000 879
2001 914
2002 953
Thereafter 2,371
$ 6,787
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
$77,000 in 1997 ($70,000 in 1996 and $72,000 in 1995).
Future minimum rental commitments as of December 31, 1997 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)
1998 $ 99
1999 80
2000 65
2001 40
2002 18
Thereafter 43
Total future minimum
lease payments $ 345
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> 29
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
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, 1997:
Commitments to extend credit $ 31,089
Standby letters of credit 105
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> 30
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
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, 1997, 100 persons (98 in 1996 and 95 in 1995) were
participating in the Plan, and the Bank's annual contribution
amounted to $105,000 ($103,000 in 1996 and $98,000 in 1995). Total
salaries of Participants during 1997 were $2,901,000 ($2,664,000 in
1996 and $2,521,000 in 1995). The Bank contributed approximately
3.62% of Participants' salaries in 1997 (3.87% in 1996 and 3.89% in
1995).
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
1997 was $268,000 ($226,000 in 1996 and $201,000 in 1995).
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:
1997 1996
(Dollars in Thousands)
Value of contracts - beginning of year $1,485 $1,241
Increase in surrender value 330 244
Value of contracts - end of year $1,815 $1,485
Liabilities for contracts - beginning of year $1,054 $ 831
Increase in liabilities recognized as
expense for the year 268 235
Payment of benefits ( 12) ( 12)
Liabilities for contracts - end of year $1,310 $1,054
The Board of Directors elected to terminate the plan effective
January 7, 1998. Under the provisions of this resolution, no
additional fees may be deferred after January 7, 1998. The Bank
further elected to pay monthly benefits to all current and past
directors in the same manner and amount that would have occurred had
the participant terminated service as a director on January 7, 1998.
<PAGE> 31
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
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, 1997 and 1996,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1997 and 1996, 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 March 3, 1997, 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, 1997 and 1996 are as follow:
<TABLE>
<CAPTION>
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
<S> (Dollars in Thousands)
As of December 31, 1997
Total Capital (to Risk
Weighted Assets): <C> <C> <C> <C> <C> <C>
Consolidated $35,703 23.8% $12,013 8.0% $15,016 10.0%
Bank $35,616 23.9% $11,932 8.0% $14,916 10.0%
Tier 1 Capital (to Risk
Weighted Assets):
Consolidated $33,826 22.5% $ 6,006 4.0% $ 9,009 6.0%
Bank $33,751 22.6% $ 5,966 4.0% $ 8,949 6.0%
Tier 1 Capital (to
Average Assets):
Consolidated $33,826 12.5% $10,867 4.0% $13,584 5.0%
Bank $33,751 12.5% $10,765 4.0% $13,457 5.0%
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%
</TABLE>
<PAGE> 32
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
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 - SELF-INSURED PLANS
On October 1, 1996, the Bank began self-insuring its employees'
medical and short-term disability claims. A liability and a
provision for claims is recorded monthly by the Bank to
recognize estimated claims under this plan. A portion of these
costs is recovered through employee contributions, which
amounted to $101,800 in 1997 and $20,700 in 1996. Those
eligible under the plan include full-time employees who have met
certain length-of-service requirements.
The Bank's maximum liability for covered claims under the plan
for the year ended September 30, 1998 is estimated to be
approximately $350,000 (less employee contributions), with a
maximum of $10,000 for any individual employee claim. The
Bank's expense under the plan amounted to $158,000 in 1997
($50,470 in 1996).
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
The Bank has 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 1997, the bonus was $133,000 ($136,000
in 1996 and $126,000 in 1995).
<PAGE> 33
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 19 - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
CONDENSED BALANCE SHEETS
1997 1996
(Dollars in Thousands)
ASSETS
Cash $ 1 $ -
Investment in bank subsidiary 34,811 32,169
Investment in non-bank subsidiaries 9 6
Other investments 69 69
$34,890 $32,244
LIABILITIES
Taxes payable $ 4 $ 4
SHAREHOLDERS' EQUITY
Common stock, par value $2.50 per share,
authorized 1,000,000 shares;
issued 331,814 shares, including
67,701 treasury shares in 1997
(67,229 treasury shares in 1996) 830 830
Additional paid-in capital 5,000 5,000
Retained earnings 33,467 31,179
Net unrealized gains (losses) on
available-for-sale securities 1,060 647
40,357 37,656
Less cost of treasury shares ( 5,471) ( 5,416)
34,886 32,240
$34,890 $32,244
CONDENSED STATEMENTS OF INCOME
1997 1996 1995
(Dollars in Thousands)
INCOME:
Dividends received - bank $1,999 $2,306 $1,481
Other income 46 33 56
2,045 2,339 1,537
EXPENSES:
Professional fees - - -
Income before income tax allocation and
equity in undistributed net income
of subsidiary 2,045 2,339 1,528
Allocation of income taxes 7 4 5
INCOME BEFORE EQUITY IN UNDISTRIBUTED
NET INCOME OF SUBSIDIARY 2,038 2,335 1,523
Net income of subsidiaries less
distributions:
Subsidiary bank 2,230 1,778 2,544
Non-bank subsidiaries 3 4 -
2,233 1,782 2,544
NET INCOME $ 4,271 $4,117 $4,067
<PAGE> 34
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 19 - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
1997 1996 1995
(Dollars in Thousands)
OPERATING ACTIVITIES
Net income $4,271 $4,117 $4,067
Adjustments to reconcile net income to
net cash provided by
operating activities:
Net income of subsidiaries less
distributions:
Subsidiary bank ( 2,229) ( 1,778) ( 2,544)
Non-bank subsidiaries ( 3) ( 4) -
Increase (decrease) in taxes payable - - ( 11)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,039 2,335 1,512
INVESTING ACTIVITIES
Investment in non-bank subsidiaries - ( 2) -
NET CASH USED IN INVESTING ACTIVITIES - ( 2) -
FINANCING ACTIVITIES
Purchase of outstanding common stock ( 55) ( 580) ( 287)
Cash dividends ( 1,983) ( 1,753) ( 1,225)
NET CASH USED IN FINANCING ACTIVITIES ( 2,038) ( 2,333) ( 1,512)
INCREASE IN CASH 1 - -
CASH - BEGINNING OF YEAR - - -
CASH - END OF YEAR $ 1 $ - $ -
NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates made as of December 31, 1997 and 1996 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.
<PAGE> 35
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
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, 1997 and 1996. 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, 1997 December 31, 1996
Carrying Fair Carrying Fair
Amounts Values Amounts Values
(Dollars in Thousands)
Financial Assets
Cash and cash
equivalents $ 8,456 $ 8,456 $ 8,196 $ 8,196
Securities available-
for-sale 105,404 105,404 102,070 102,070
Loans, net of
allowance for possible
loan losses 145,335 142,345 142,096 141,754
Accruedinterest
receivable 3,160 3,160 3,116 3,116
Financial Liabilities
Deposits 219,143 219,306 217,557 217,701
Long-term debt 6,787 6,759 7,203 6,755
Short-term borrowings 4,273 4,273 1,362 1,362
Accrued interest payable 1,558 1,558 1,460 1,460
At December 31, 1997 and 1996, 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.
<PAGE> 36
C B & T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
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)
1997
Interest income $ 5,012 $ 5,201 $ 5,225 $ 5,152 $20,590
Interest expense 2,245 2,345 2,376 2,357 9,323
Net interest income 2,767 2,856 2,849 2,795 11,267
Provision for possible
loan losses 140 82 91 100 413
Noninterest expenses, net
of noninterest income 1,062 1,219 1,107 1,441 4,829
Income before income taxes 1,565 1,555 1,651 1,254 6,025
Income taxes 486 442 487 339 1,754
Net income $ 1,079 $ 1,113 $ 1,164 $ 915 $ 4,271
Earnings per share $ 4.08 $ 4.21 $ 4.41 $ 3.46 $ 16.16
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
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
NOTE 22 - MERGER AGREEMENT
Effective January 6, 1998, the Bank's Board of Directors
approved a preliminary merger agreement pursuant to which, if
consummated, the Bank will become a subsidiary of Union Planters
National Bank, a registered bank holding company with its
principal office in Memphis, Tennessee. The Board is scheduled
to meet on May 29, 1998 to finalize the agreement. The
agreement is subject to the approval of the Bank's shareholders
and appropriate regulatory authorities and includes certain
other conditions precedent.
<PAGE> 37
C B & T, INC. AND SUBSIDIARIES
Table 1 -- Distribution of Assets, Liabilities and Shareholders'
Equity, Interest Rates and Interest Differential
1997
Average Interest Interest
Balance Income/Expense Rate
(Dollars in Thousands)
ASSETS
Bank interest-bearing deposits $ 65 $ 4 6.15%
U.S. Treasury securities 8,295 579 6.98
U.S. Government agencies and
corporations 49,397 3,265 6.61
Securities of States and political
subdivisions 31,638 2,574 * 8.14
Other investments 12,603 788 6.25
Federal funds sold 3,869 212 5.48
Loans, net 144,592 14,043 9.71
TOTAL EARNING ASSETS 250,459 $21,465 8.57
Cash and due from banks 7,033
Other assets 9,859
TOTAL ASSETS $267,351
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW accounts $ 23,826 $ 578 2.43%
Money market deposit accounts 19,694 761 3.86
Savings 29,415 875 2.97
Time of $100M or more 30,381 1,747 5.75
Time--other 90,487 4,818 5.32
TOTAL INTEREST-BEARING DEPOSITS 193,803 8,779 4.53
Federal funds purchased 2,505 109 4.35
Long-term debt 7,134 435 6.10
TOTAL INTEREST-BEARING LIABILITIES 203,442 $9,323 4.58
Demand deposits 27,864
Other liabilities 4,006
TOTAL LIABILITIES 235,312
Shareholders' equity 32,039
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $267,351
Spread between combined rates earned
and combined rates paid* 3.99%
Net yield on interest earning assets* 4.85%
*Taxable equivalent basis
<PAGE> 38
Year Ended December 31,
1996 1995
Average Interest Interest Average Interest Interest
Balance Income/Expense Rate Balance Income/Expense Rate
(Dollars in Thousands) (Dollars in Thousands)
$ 62 $ 5 8.06% $ 60 $ 3 5.00%
18,221 1,284 7.05 20,465 1,451 7.09
43,377 2,797 6.45 49,820 3,227 6.48
24,765 2,024 * 8.17 21,454 1,788 * 8.33
11,212 691 6.16 4,466 274 6.14
5,199 275 5.29 5,070 297 5.86
138,511 13,657 9.86 131,761 13,021 9.88
241,347 $20,733 8.59 233,096 $20,061 8.61
6,855 6,353
9,148 8,880
$257,350 $248,329
$ 24,158 $ 588 2.43% $ 23,758 $ 660 2.78%
18,333 574 3.13 18,990 593 3.12
30,530 904 2.96 30,733 1,003 3.26
27,186 1,543 5.68 23,622 1,348 5.71
88,563 4,763 5.38 82,632 4,466 5.40
188,770 8,372 4.44 179,735 8,070 4.49
1,136 46 4.05 825 54 6.55
6,802 412 6.06 9,907 593 5.99
196,708 $8,830 4.49 190,467 $8,717 4.58
27,217 27,013
3,498 2,538
227,423 220,018
29,927 28,311
$257,350 $248,329
4.10% 4.03%
4.93% 4.87%
<PAGE> 39
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:
1997 Compared to 1996
Increase (Decrease)
Volume Rate Net
(Dollars in Thousands)
Interest Income
Bank interest-bearing deposits $ 0 ($ 1) ($ 1)
Net Loans 600 ( 214) 386
Taxable investment securities ( 311) 74 ( 237)
Nontaxable investment securities* 562 ( 12) 550
Other securities 86 11 97
Federal funds sold ( 70) 7 ( 63)
TOTAL INTEREST INCOME* $867 ($135) $732
Interest Expense
NOW accounts ($ 10) ($ 0) ($ 10)
Money market deposit accounts 43 144 187
Savings ( 33) 4 ( 29)
Time deposits 288 ( 29) 259
Federal funds purchased 55 8 63
Long-term debt 20 3 23
TOTAL INTEREST EXPENSE $363 $130 $493
* 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> 40
1996 Compared to 1995 1995 Compared to 1994
Increase (Decrease) Increase (Decrease)
Volume Rate Net Volume Rate Net
(Dollars in Thousands) (Dollars in Thousands)
$ 0 $ 2 $ 2 ($ 1) $ 1 $ 0
667 ( 31) 636 1,395 430 1,825
( 576) ( 21) ( 597) ( 1,379) 297 (1,082)
276 ( 40) 236 ( 340) ( 84) ( 424)
414 3 417 136 41 177
8 ( 30) ( 22) 119 122 241
$789 ($117) $672 ($ 70) $807 $ 737
$ 11 ($ 83) ($ 72) ($ 13) $ 22 $ 9
( 21) 2 ( 19) ( 286) 38 ( 248)
( 7) ( 92) ( 99) ( 175) 76 ( 99)
524 ( 32) 492 235 1,461 1,696
20 ( 28) ( 8) ( 25) 15 ( 10)
( 186) 5 ( 181) 116 2 118
$341 ($228) $113 ($148) $1,614 $1,466
<PAGE> 41
C B & T, INC. AND SUBSIDIARIES
Table 3 --Summary of Loan Loss Experience
Year Ended December 31,
1997 1996 1995 1994 1993
(Dollars in Thousands)
Balance at beginning of period $1,931 $1,864 $1,733 $1,601 $1,453
Loans charged off:
Commercial, financial, and
agricultural 206 170 128 129 143
Real estate-mortgage 105 241 39 90 49
Installment 303 228 172 124 179
TOTAL LOANS CHARGED OFF 614 639 339 343 371
Recoveries of loans previously
charged off:
Commercial, financial, and
agricultural 8 21 25 65 9
Real estate--mortgage 109 17 5 3 9
Installment 66 40 64 77 70
TOTAL RECOVERIES 183 78 94 145 88
NET LOANS CHARGED OFF 431 561 245 198 283
Additions to the allowance charged
to operating expenses 413 628 376 330 431
BALANCE AT END OF PERIOD $1,913 $1,931 $1,864 $1,733 $1,601
1997 1996 1995 1994 1993
Ratio of net charge-offs
(recoveries) during
the periods to average
loans outstanding .30% .41% .19% .17% .26%
<PAGE> 42
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,
1997 1996 1995
Percentage of net income to:
Total average assets 1.60 1.60 1.64
Average shareholders' equity 13.33 13.76 14.37
Percentage of dividends declared
per average
Common share to net income
per average Common Share 46.41 42.29 30.00
Percentage of average shareholders'
equity
to total average assets 11.98 11.63 11.40
<PAGE> 43
C B & T, INC. AND SUBSIDIARIES
SUMMARY OF CONSOLIDATED SELECTED FINANCIAL DATA
1997 1996 1995 1994 1993
(Dollars in Thousands - Except Per Share)
Interest Income $ 20,590 $ 20,045 $ 19,454 $ 18,572 $ 18,730
Net interest income 11,267 11,215 10,736 11,321 11,578
Provision for possible loan losses 413 628 376 330 431
Income from continuing operations
(net income) 4,271 4,117 4,067 4,260 4,966
Total assets 268,486 261,459 255,882 254,973 247,524
Long-term debt 6,787 7,203 9,226 7,821 7,729
Per share data of Common Stock:
Income from continuing
operations (net income) 16.16 15.37 15.00 14.37 15.58
Dividends 7.50 6.50 4.50 4.10 3.95
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 625 shareholders of record of the Common
Stock of the Corporation at December 31, 1997.
The price range of the known sales of the Common Stock of the
corporation for 1997 and 1996 was a minimum of $115.40 to a maximum of
$120.20 and a minimum of $76.00 to a maximum of $115.40 respectively.
The Corporation paid dividends of $7.50 per share in 1997 and $6.50
per share in 1996. 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> 44
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 Ronald D. Goodwin Amanda J. Odom
Donna L. Argo Amy L. Green Barbara L. Orrick
Judith E. Baker Dana M. Green J. Allan Parker
Angela K. Bigley N. Sue Grissom M. Lynn Parker
Teresa F. Black Linda C. Hamilton Christopher J. Patterson
Joe N. Blanton Shannon C. Hamilton Betty B. Prater
Jean Bonner Lynne R. Hamrick C. Tim Prater
Correen K. Boren Lisa C. Hash Sheryl L. Prater
Demple L. Boyd Shannon L. Haston Jane Ann Pryor
Dean Brewer C. Renee Hawkins Amy C. Rains
Barbara J. Broussard Nancy C. Hendrix Rita M. Ramsey
Carole Ann Brown Teresa A. Hennessee Tammy R. Reynolds
Jerry N. Brown James H. Hillis Nina J. Rhody
Larry E. Brown Lisa A. Hillis Ella J. Rickmond
Donna Bryant Melissa A. Holland V. Sue Roberts
Nelda S. Burklow M. Preston Huckeby Nancy A. Rogers
Terri L. Burnett Judy A. Huddleston Marlene A. Sauer
Edmond D. Busic Vivian T. Johnson Andrea R. Searcy
Cheryl R. Byford Elaine C. Jones Tammy L. Sharpe
Shelia D. Caldwell Janice E. Jones Elizabeth P. Smith
Rhonda A. Carr J. Gail Jones Kenneth W. Smith
E. LeAnn Cartwright Debra T. Kell Sue J. Stewart
Lois B. Cates Judye C. Killian Shirley A. Stout
Dawn C. Christian Denise A. King Starla A. Strickland
Sherry A. Clendenon Regina L. Kirby Tracie J. Travis
Larry C. Couch Cindy R. Lann Johnny T. Taylor
S. Lynn Daugherty Glyna F. Lee Patricia A. Taylor
Barbara D. Davis V. Lorrie Lee Rayola M. Teal
Pam S. England Rosa Lee Madewell Randall G. Tramel
Donna D. Evans Emogene R. Magness Sandra A. Turner
Lisa G. Garrison Danny L. Martin Jewell Walker
Candace A. Gentry E. Wayne Martin Kathy C. Ward
Diana L. George Kenneth D. Martin Sharon E. West
Doris A. Giles James A. McBee Tarron G. Williams
Linda S. Gilley Patty L. Mikes Dan T. Wolfe
Deborah E. Glenn Robert L. Miller K. Dwayne Woods
Eric A. Golden Lonnie D. Milstead Heather B. Young
Jeffrey A. Golden Vicki L. Mitchell S. Todd Young
<PAGE> 45
COMMUNITY INVOLVEMENT PICTURES
<PAGE> 46
COMMUNITY INVOLVEMENT PICTURES
<PAGE> 47
COMMUNITY INVOLVEMENT PICTURES
<PAGE> 48
COMMUNITY INVOLVEMENT PICTURES
<PAGE> 49
COMMUNITY INVOLVEMENT PICTURES
<PAGE> 50
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 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 (931)473-2147
Annual Meeting: May 29, 1998, 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 Bldg.
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 19097 annual report
filed with the Securities and Exchange Commission
on Form 10-K is available without charg. To
obtain a 10-K report or any additional financial
information, write or call Ann Martin, Secretary,
C B & T, Inc.
<PAGE> 51
<PAGE> 52
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,336
<INT-BEARING-DEPOSITS> 120
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 103,695
<INVESTMENTS-MARKET> 105,404
<LOANS> 147,248
<ALLOWANCE> (1,913)
<TOTAL-ASSETS> 268,486
<DEPOSITS> 219,143
<SHORT-TERM> 4,273
<LIABILITIES-OTHER> 3,397
<LONG-TERM> 6,787
830
0
<COMMON> 0
<OTHER-SE> 34,056
<TOTAL-LIABILITIES-AND-EQUITY> 268,486
<INTEREST-LOAN> 14,043
<INTEREST-INVEST> 6,331
<INTEREST-OTHER> 216
<INTEREST-TOTAL> 20,590
<INTEREST-DEPOSIT> 8,779
<INTEREST-EXPENSE> 9,323
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</TABLE>
