<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
CNB BANCSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 0-11510 35-1568731
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
20 N.W. THIRD STREET, EVANSVILLE, 47739
INDIANA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (812) 464-3400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
NONE NONE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE
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 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 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $429,465,000 as of March 4, 1996.
The number of shares outstanding of the registrant's common stock, without
par value, as of March 4, 1996, was 17,845,131 shares.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1995. (Part I, Part II and Part IV)
(2) Portions of the Registrant's Proxy Statement for Annual Meeting of
Shareholders to be held April 16, 1996. (Part III)
Exhibit index is on page 13.
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<PAGE>
PART I
ITEM 1. BUSINESS
OVERVIEW
CNB Bancshares, Inc., (the Corporation) is a regional, multi-bank holding
company headquartered in Evansville, Indiana. Incorporated on May 26, 1983,
under the laws of the State of Indiana, the Corporation began operating in
1984 as a one-bank holding company for The Citizens National Bank of
Evansville (Citizens), which was chartered in 1874. Since that time, the
Corporation has acquired additional financial subsidiaries and currently owns
six commercial banks and one consumer finance company. Certain of the acquired
subsidiaries have subsequently been merged into other subsidiaries of the
Corporation. With assets of $1,825,990,000 at December 31, 1995, Citizens
remains the lead bank and largest of the Corporation's subsidiaries. As of
December 31, 1995, the Corporation had consolidated total assets of
$3,628,682,000 and total shareholders' equity of $297,693,000.
The Corporation's financial subsidiaries are listed below:
<TABLE>
<CAPTION>
FINANCIAL PRINCIPAL YEAR YEAR NUMBER OF TOTAL TOTAL
SUBSIDIARY OFFICE ORGANIZED ACQUIRED LOCATIONS* ASSETS# EQUITY#
---------- --------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
The Citizens National Evansville, Indiana 1874 1984 28 $1,825,990 $133,315
Bank of Evansville
Citizens Bank of Madisonville, Kentucky 1929 1986 22 569,225 50,854
Kentucky
Citizens Bank of Western Terre Haute, Indiana 1890 1990 13 339,429 30,559
Indiana
Citizens Bank of Jasper Jasper, Indiana 1978 1991 2 101,563 6,743
Citizens Bank of Central Greenwood, Indiana 1933 1992 19 476,376 31,344
Indiana
Peoples Security Finance Madisonville, Kentucky 1971 1993 29 39,789 4,705
Company
Citizens Bank of Mt. Vernon, Illinois 1937 1993 8 404,843 29,640
Illinois, N.A.
</TABLE>
- --------
*Number of offices does not include off-site ATM's or nonbanking locations.
#Dollar amounts are reported in thousands.
The Corporation's financial subsidiaries are engaged in commercial and
retail banking, consumer lending, mortgage lending and servicing, trust
services and cash management services for corporate accounts and other banks.
Through its financial subsidiaries, the Corporation has 121 offices throughout
its primary market areas of Indiana, Illinois, Kentucky and portions of
Tennessee.
The above financial subsidiaries offer a broad range of deposit, loan and
other banking products and services to their customers. Deposit products
include certificates of deposit, individual retirement accounts and other time
deposits, checking and other demand deposit accounts, including NOW accounts,
and savings and money market accounts. Loans include commercial and
industrial, real estate mortgage, consumer and agricultural. Other products
and services include deposit and investment brokerage, credit cards, credit-
related insurance, automatic teller machines and safe deposit boxes. Citizens
Trust Company of Indiana, N.A., a subsidiary of The Citizens National Bank of
Evansville, provides trust, asset management and record-keeping services for
retirement plans. The Corporation continues to explore new products and
services to meet the needs and demands of its growing customer base and to
remain competitive with other financial institutions operating in its market
areas.
2
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The Corporation also has three nonbanking subsidiaries. Citizens Information
Systems, Inc., based in Evansville, Indiana, provides data processing and
information services to the Corporation and its subsidiaries and other banks
and businesses in Indiana, Kentucky, and Illinois. Citizens Life Assurance
Company underwrites credit life and disability insurance sold through the
Corporation's affiliates in Indiana and Illinois. Citizens Insurance of
Evansville sells property and casualty insurance.
PENDING ACQUISITIONS
The Corporation continues to engage in analyses and investigations designed
to lead to the acquisition of other financial institutions and businesses
closely relating to banking.
On November 17, 1995, the Corporation announced the signing of a definitive
agreement to acquire all of the outstanding shares of DuQuoin Bancorp, Inc.,
parent company for DuQuoin National Bank, DuQuoin, Illinois. Under terms of the
agreement, the Corporation will issue approximately 499,000 shares of its
common stock. The transaction will be accounted for under the pooling of
interests method of accounting and is subject to approval by DuQuoin Bancorp
shareholders. Although the Corporation anticipates that the merger will be
consummated during the second quarter of 1996, there can be no assurance that
the acquisition will be completed. At December 31, 1995, DuQuoin Bancorp, Inc.
had total assets and shareholders' equity of $83,279,000 and $6,570,000,
respectively.
COMPETITION
The business of the Corporation and its subsidiaries is highly competitive.
There are numerous bank holding companies and groupings of banks located in
southern Illinois, southern, western, and central Indiana, Kentucky, and
Tennessee, which offer substantial competition in the acquisition and operation
of banks, savings associations and nonbank financial institutions. The
financial subsidiaries and the Corporation's data processing subsidiary
encounter substantial competition in all of their banking and related
activities and expect such competition to intensify as the financial industry
expands due to more nonbank competitors offering financial services. In
addition, recent changes in laws relating to interstate banking have permitted
some local institutions to become part of larger regional and national
organizations.
The Corporation's financial subsidiaries compete with other commercial banks,
savings associations and credit unions for loans and deposits and with money
market funds for deposits. Consumer and commercial finance companies, mortgage
banks, securities brokerage companies, investment banking firms and insurance
companies also compete with the financial subsidiaries for various types of
loans and financial services. Some of these entities and institutions are not
subject to the same regulatory restrictions as financial institution holding
companies and their subsidiary banks and savings associations and therefore
enjoy certain competitive advantages. The principal methods of competition in
banking activities are price, service and convenience.
REGULATIONS AND SUPERVISION
The United States banking industry is highly regulated, with federal and
state agencies having supervisory authority regarding the chartering,
supervision and examination of banks, savings banks and their bank holding
companies. There are numerous laws and regulations which limit how a bank
holding company and its subsidiaries conduct their businesses, including
minimum capital levels, limitations on the payment of dividends and regulation
of acquisitions and mergers.
As a bank holding company, the Corporation is subject to regulation under the
Bank Holding Company Act of 1956, as amended (the Act), which is administered
by the Board of Governors of the Federal Reserve System (Federal Reserve
Board). The Corporation is required to file reports with the Federal Reserve
Board and various other federal and state agencies and to provide such
additional information as may be required.
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A bank holding company must obtain Federal Reserve Board approval before
acquiring, directly or indirectly, ownership or control of any voting shares
of any bank or bank holding company if, after such acquisition, it would own
or control more than 5 percent of such shares (unless it already owns or
controls a majority of such shares). Federal Reserve Board approval must also
be obtained before any bank holding company acquires all or substantially all
of the assets of another bank or bank holding company or merges or
consolidates with another bank holding company.
The Act also prohibits a bank holding company, with certain limited
exceptions, from acquiring or retaining direct or indirect ownership or
control of more than 5 percent of the voting shares of any company which is
not a bank or bank holding company, or from engaging in any activities other
than those of banking, managing or controlling banks, or providing services
for its subsidiaries. The principal exceptions to these prohibitions involve
certain activities which the Federal Reserve Board has determined to be so
closely related to the business of banking or managing or controlling banks as
to be a proper incident thereto. Under the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 (FIRREA), bank holding companies are
allowed to acquire a savings association in any state, subject to approval by
the OTS and the Federal Reserve Board.
In September 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (Interstate Act) was signed into law, authorizing,
among other things, interstate acquisitions by bank holding companies,
interstate mergers of banks and "agency banking" with affiliates in different
states. The Interstate Act amended the Bank Holding Company Act to allow an
adequately capitalized and managed bank holding company to acquire banks
located in any state, beginning September 29, 1995, subject to state deposit
caps and a 10 percent nationwide deposit cap. Adequately capitalized banks
will be permitted to merge across state lines without regard to whether the
merger is prohibited by the laws of any state beginning June 1, 1997. States
may "opt out" of this provision prior to the effective date, and
alternatively, states may "opt in" earlier than June 1, 1997. The Interstate
Act's "agency banking" provisions, effective September 29, 1995, permit
affiliated banks to act as agent for each other in the conduct of most core
banking activities. Affiliated banks may receive deposits, renew time
deposits, close loans, service loans and receive payments on loans and other
obligations on behalf of each other, without being treated as branches.
A bank holding company and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with the extension of credit or the
lease or sale of any property or the furnishing of services. Subsidiary banks
of a bank holding company are also subject to certain restrictions imposed by
the Federal Reserve Act on any extensions of credit to the bank holding
company or any of its subsidiaries, or investments in stock or other
securities thereof, and on the taking of such stock or other securities as
collateral for loans.
The Federal Reserve Board has prescribed capital adequacy guidelines for use
in its examination and regulation of bank holding companies. If the capital of
a bank holding company falls below the minimum levels established by these
guidelines, it may be denied approval to acquire or establish additional banks
or nonbank businesses. The guidelines established by the Federal Reserve Board
set a minimum leverage ratio of 3.0 percent for the most highly rated bank
holding companies that do not anticipate significant growth. All other
institutions are required to maintain a ratio of 4.0 to 5.0 percent depending
on their particular circumstances and risk profile. This ratio is defined as
shareholders' equity less non-qualifying intangible assets, as a percentage of
the sum of quarter to date total average assets less non-qualifying intangible
assets. The Corporation's leverage ratio was 7.6 percent in 1995 and 7.8
percent in 1994. The Federal Reserve Board has also adopted risk-based capital
guidelines which assign various risk weightings to assets and off-balance
sheet items and set minimum capital requirements. Under the current rules,
banks are required to have core capital (Tier 1) of at least 4.0 percent of
risk weighted assets and total capital of 8.0 percent of risk weighted assets.
Tier 1 capital consists primarily of shareholders' equity less intangible
assets; and total capital consists of Tier 1 capital, certain long-term debt
and convertible debentures and a portion of the allowance for loan losses. The
Federal Reserve Board and other regulatory agencies have released regulations
for the implementation of various provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA). Under these rules, institutions
must have a leverage ratio of 5.0 percent or above, Tier 1 capital to risk-
based assets of 6.0 percent or above, and total capital to risk-based assets
of 10.0 percent or above in order to qualify as well capitalized. The Federal
Reserve Board has
4
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proposed regulations which would revise the current risk-based capital
guidelines to include a measurement of interest rate risk. The proposed change
would not have a material impact to the Corporation's capital ratios based on
its interest rate sensitivity position. At December 31, 1995, the
Corporation's leverage, Tier 1 and total capital ratios were 7.6 percent, 12.2
percent, and 13.9 percent, respectively, all well above regulatory minimums
for well capitalized institutions.
The Federal Reserve Board has issued a policy statement on the payment of
cash dividends by bank holding companies. In the statement, the Federal
Reserve Board expressed its view that a holding company experiencing earnings
weaknesses should not pay cash dividends exceeding its net income nor pay a
dividend which can only be funded in a way that weakens the holding company's
financial health, such as by borrowing. The Federal Reserve Board periodically
examines bank holding companies and possesses cease and desist powers over
bank holding companies and their nonbank subsidiaries if their actions
represent unsafe or unsound practices.
Under FIRREA's "cross-guarantee" provisions, each financial subsidiary of
the Corporation could be liable for any loss incurred by the FDIC in
connection with the failure of any other financial subsidiary of the
Corporation.
Each of the financial subsidiaries is subject to supervision and regulation
by its chartering authority. The primary supervisory authorities of the
Corporation's bank subsidiaries are the Comptroller of the Currency (national
banks) and appropriate state banking regulatory authorities (state banks).
Each regulator regularly examines such areas as reserves, loans, investments,
management practices and other aspects of bank operations, and has the
authority to prevent a bank from engaging in an unsafe or an unsound practice
in conducting its business. In addition, the Corporation's subsidiary banks
are members of, and subject to regulation by, the Federal Deposit Insurance
Corporation (FDIC).
Federal and state banking laws and regulations govern, among other things,
the scope of a bank's business, the investments it may make, the reserves
against deposits it must maintain, loans a bank makes and collateral it takes,
minimum capital levels, activities with respect to mergers and consolidations,
and the establishment of branches.
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 was enacted. FDICIA contains various provisions relating to the
supervision, regulation, and operation of banks and bank holding companies.
Various regulations implementing FDICIA have been promulgated by bank
regulators. FDICIA, among other things, identifies the following capital
standards for depository institutions: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized. A depository institution is well capitalized if it
significantly exceeds the minimum level required by regulation for each
relevant capital measure, adequately capitalized if it meets each such
measure, undercapitalized if it fails to meet any such measure, significantly
undercapitalized if it is significantly below any such measure, and critically
undercapitalized if it fails to meet any critical capital level set forth in
the regulations. FDICIA requires a bank that is determined to be
undercapitalized to submit a capital restoration plan, and the bank's holding
company must guarantee that the bank will meet its capital plan, subject to
certain limitations. FDICIA also prohibits banks from making any capital
distribution or paying any management fee if the bank would thereafter be
undercapitalized. All of the Corporation's financial subsidiaries were well
capitalized for purposes of FDICIA and exceeded all other regulatory capital
requirements at year-end 1995.
FDICIA grants the FDIC authority to impose special assessments on insured
depository institutions to repay FDIC borrowings from the United States
Treasury or other sources and to establish semiannual assessment rates on Bank
Insurance Fund (BIF) and Savings Association Insurance Fund (SAIF) member
banks so as to maintain the funds at the designated reserve ratios defined in
FDICIA. FDICIA also required the FDIC to implement a risk-based insurance
assessment system pursuant to which the premiums paid by a depository
institution are based on the probability that the BIF or SAIF will incur a
loss in respect of such institution. Each of the Corporation's financial
subsidiaries was in the category of institutions that paid deposit assessments
at the lowest rates.
5
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A portion of the Corporation's deposits were acquired from thrifts over the
years and remain insured by the Savings Association Insurance Fund (SAIF) of
the FDIC. Congress is currently considering a special, one-time assessment on
SAIF-insured deposits. If enacted as presently proposed, this assessment could
result in a one-time, pre-tax charge of up to $7,300,000, which could be
offset by lower ongoing insurance costs in the future.
Management of the Corporation is not aware of any other current
recommendations by its regulatory authorities or any other known trends,
events, or uncertainties that will have or that are reasonably likely to have
a material effect on its operations.
GOVERNMENT POLICIES
The policies of federal and state agencies including the Federal Reserve
Board, the FDIC and other regulatory authorities may have a significant effect
on the operating results of the Corporation and the banking industry. An
important function of the Federal Reserve Board is to regulate aggregate money
supply and credit conditions and interest rates in order to influence general
economic conditions. The Federal Reserve Board, primarily through open market
operations of U.S. Government securities, and by varying the discount rate for
member bank borrowings and changing reserve requirements against member bank
deposits, can exercise significant influence on the overall growth and
distribution of bank loans and deposits and interest rates charged on loans
and earned on investments or paid for time and savings deposits. The general
effect, if any, of such policies upon the future business and earnings of the
Corporation and its financial subsidiaries cannot be determined.
6
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of all executive officers
of the Corporation, including all positions and offices with the Corporation
held by each such person, the term of office and the period during which he
has served as such.
<TABLE>
<CAPTION>
NAME AGE OFFICE AND BUSINESS EXPERIENCE
---- --- ------------------------------
<C> <C> <S>
H. Lee Cooper...... 57 Chairman of the Board of the Corporation since 1986.
Previously, Mr. Cooper also served as Chief Executive
Officer and President of the Corporation and in
various capacities as a senior executive officer of
both the Corporation and Citizens.
James J. Giancola.. 47 President and Chief Executive Officer of the
Corporation. Mr. Giancola has been President since
1994 and was named Chief Executive Officer in March
1996. Prior to joining the Corporation in 1992, Mr.
Giancola was President of Gainer Bank of
Merrillville, Indiana.
M. Lynn Cooper..... 45 Executive Vice President of the Corporation since
1994. Prior to 1994, Mr. Cooper served as Chairman of
the Board, President and Chief Executive Officer of
Citizens Bank of Kentucky, a subsidiary of the
Corporation.
Marvin Huff, Jr.... 62 Executive Vice President of the Corporation since
March 1996 and President of Citizens Information
Systems, Inc., a subsidiary of the Corporation, since
1994. Previously, Mr. Huff served in various
capacities as an officer of Citizens.
David L. Knapp..... 56 Executive Vice President of the Corporation since
1986. Mr. Knapp was named President and Chief
Executive Officer of Citizens in 1994. Previously,
Mr. Knapp served as Chief Financial Officer of the
Corporation and Citizens and in various other
capacities as a senior executive officer of both the
Corporation and Citizens.
John R. Spruill.... 53 Executive Vice President and Chief Financial Officer
of the Corporation since 1995. Prior to 1995, Mr.
Spruill served as Executive Vice President and Chief
Financial Officer of Southern National Corporation in
North Carolina.
David M. Viar...... 46 Executive Vice President of the Corporation since
March 1996. Previously, Mr. Viar served as Senior
Vice President and Treasury Officer of the
Corporation. Prior to joining the Corporation in
1993, Mr. Viar was Senior Vice President--Funds
Management of Dominion Bancshares.
William E. Vieth... 54 Executive Vice President of the Corporation since
1986. Mr. Vieth was appointed Chairman of the Board
of Citizens in 1994. Previously, Mr. Vieth also
served as President and Chief Executive Officer of
Citizens and has served in various other capacities
as a senior executive officer of both the Corporation
and Citizens.
Ralph L. Alley..... 44 Senior Vice President, Controller and Treasurer of
the Corporation and Senior Vice President and
Controller of Citizens since 1985. Previously, Mr.
Alley served in various capacities as an officer of
Citizens.
Jerry W. Cecil..... 61 Senior Vice President and Chief Credit Officer of the
Corporation since 1988, and Senior Vice President of
Citizens since 1983.
James R. Dodd...... 50 Senior Vice President of the Corporation since 1993.
In 1996, Mr. Dodd was named President of Citizens
Trust Co. Prior to joining the Corporation in 1993,
he was President of BancOklahoma Trust Company.
Douglas R. Hanks... 49 Senior Vice President and Director of Marketing of
the Corporation since 1994. Prior to joining the
Corporation in 1994, Mr. Hanks served as Vice
President--Director of Field Marketing for BancOne
Corporation.
John M. Oberhelman. 54 Senior Vice President of Human Resources for the
Corporation since 1992 and Senior Vice President and
Human Resources Director of Citizens. Previously, Mr.
Oberhelman served in various capacities as an officer
of Citizens.
</TABLE>
7
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There are no family relationships between any of the named persons. Each
executive officer is elected by the Corporation's Board of Directors to serve
until the close of the next annual meeting of the shareholders following his
election and until the election of his successor. No executive officer of the
Corporation was selected to his position pursuant to any arrangement or
understanding with any other person.
STATISTICAL DISCLOSURE
The statistical disclosures of the Corporation on a consolidated basis,
included on pages 21 to 39 and 64 to 65 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 1995, are hereby incorporated by
reference herein.
ITEM 2. PROPERTIES
Citizens owns a modern, 15-story office building which houses the
Corporation's principal offices and the main banking offices of Citizens. The
building is located at 20 Northwest Third Street, Evansville, Indiana, and is
in excellent condition. The Corporation and Citizens presently occupy
approximately three-fourths of the building and the remainder is leased to
various tenants. The Corporation and Citizens also utilize four other
buildings in close proximity to the main banking office in downtown Evansville
which are also owned and are available for future office needs of the bank and
the Corporation. A portion of this space is also currently being leased by
various tenants. The financial subsidiaries own 75 of the 120 remaining full-
service offices in which they conduct their businesses. Additionally, two
other properties are utilized as office space which are owned by the
Corporation's subsidiaries. The net investment, as of December 31, 1995, of
the Corporation and its subsidiaries in property and equipment was
$66,224,000. Three properties are security for real estate mortgages payable
which balances totaled $2,966,000 at December 31, 1995. None of the other
properties are subject to material liens or other encumbrances.
Management of the Corporation believes that, as a group, the facilities are
in satisfactory condition and repair and will be adequate to meet its
foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS
The Corporation presently is engaged in routine litigation incidental to its
business and management does not believe such litigation will materially
adversely affect the Corporation's consolidated financial position or
operations.
ITEM 4. SUBMISSION MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND STOCKHOLDER MATTERS
Pages 1 and 69 of the Corporation's Annual Report to Shareholders for the
year ended December 31, 1995, are hereby incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
Page 20 of the Corporation's Annual Report to Shareholders for the year
ended December 31, 1995, is hereby incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Pages 21 to 39 of the Corporation's Annual Report to Shareholders for the
year ended December 31, 1995, are hereby incorporated by reference herein.
8
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 23 and 40 to 63 of the Corporation's Annual Report to Shareholders for
the year ended December 31, 1995, are hereby incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the headings "Information Regarding Nominees" and
"Information Regarding Directors Continuing in Office" in the Corporation's
Proxy Statement for its Annual Meeting of Shareholders to be held April 16,
1996, is hereby incorporated by reference herein. The information on Executive
Officers is included in Part I, Item 1 of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information under the heading "Executive Compensation" on pages 7 to 13
of the Corporation's Proxy Statement for its Annual Meeting Shareholders to be
held April 16, 1996, is hereby incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding beneficial ownership of the Common Stock of the
Corporation set forth under the headings "Certain Beneficial Ownership,"
"Information Regarding Nominees," "Information Regarding Directors Continuing
in Office" and "Security Ownership of Management," on pages 3 through 6 of the
Corporation's Proxy Statement for its Annual Meeting of Shareholders to be
held April 16, 1996, is hereby incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Transactions with Directors, Officers and
Associates" on page 14 of the Corporation's Proxy Statement for its Annual
Meeting of Shareholders to be held April 16, 1996, is hereby incorporated by
reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
(1) The following consolidated financial statements of the Corporation,
included on pages 40 through 62 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 1995, are hereby incorporated by
reference herein:
. Consolidated Balance Sheets at December 31, 1995 and 1994.
. Consolidated Statements of Income, years ended December 31, 1995, 1994,
and 1993.
. Consolidated Statements of Changes in Shareholders' Equity, years ended
December 31, 1995, 1994 and 1993.
. Consolidated Statements of Cash Flows, years ended December 31, 1995,
1994 and 1993.
. Notes to Consolidated Financial Statements.
. Independent Auditor's Report.
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(2) All schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or related notes.
(B) REPORTS ON FORM 8-K
None.
(C) EXHIBITS
(1) Exhibits required to be filed by Item 601(a) of Regulation S-K are
included as exhibits to, or incorporated by reference in, this Report as
follows:
3(i)--
Articles of Incorporation of the Corporation, filed as Exhibit 3(i) to
the Corporation's 1994 Annual Report on Form 10-K, is incorporated
herein by reference.
3(ii)--
Bylaws of the Corporation, as amended.
4--
No long-term debt instrument issued by the Corporation exceeds 10% of
the consolidated total assets of the Corporation and its subsidiaries.
In accordance with paragraph 4 (iii) of Item 601(b) of Regulation S-K,
the Corporation will furnish to the Securities and Exchange Commission
upon request copies of long-term debt instruments and related
agreements.
10*--
(1) The following Executive Compensation Plans and Arrangements, filed
as Exhibits 10(1)(c) and (d) to the Corporation's 1992 Annual Report
on Form 10-K, are incorporated herein by reference:
(a) CNB Bancshares, Inc. 1992 Incentive Stock Option Plan; and
(b) Citizens Incentive Savings Plan.
(2) The following Management Contracts, filed as Exhibits 10(2)(a)
through (e) to the Corporation's 1992 Annual Report on Form 10-K,
are incorporated herein by reference:
(a) Change of control agreement between the Corporation and H. Lee
Cooper dated December 20, 1988;
(b) Change of control agreement between the Corporation and William
E. Vieth dated December 20, 1988;
(c) Change of control agreement between the Corporation and James
J. Giancola dated June 6, 1992;
(d) Change of control agreement between the Corporation and David
L. Knapp dated December 20, 1988; and
(e) Change of control agreement between the Corporation and Jerry
W. Cecil dated December 20, 1988.
(3) The following Management Contract and Executive Compensation Plans
filed as exhibits 10 (3)(a) through (c) to the Corporation's 1994
Annual Report on Form 10-K, are incorporated herein by reference.
(a) Change of control agreement between the Corporation and M. Lynn
Cooper dated May 19, 1992.
(b) CNB Bancshares, Inc. Savings Equalization Plan, dated May 1,
1994.
(c) CNB Bancshares, Inc. Pension Equalization Plan, dated May 1,
1994.
(4)--
The CNB Bancshares Inc. 1995 Incentive Stock Option Plan is
incorporated herein by reference to Corporation's filing with the
Securities and Exchange Commission as an exhibit to a Registration
Statement on Form S-8, Registration No. 33-60431.
10
<PAGE>
(5) (a) Change of control agreement between the Corporation and James
R. Dodd dated December 10, 1993;
(b) Change of control agreement between the Corporation and Marvin
Huff, Jr. dated December 20, 1988;
(c) Change of control agreement between the Corporation and David
M. Viar dated October 18, 1993; and
(d) Change of control agreement between the Corporation and John R.
Spruill dated October 3, 1995.
11--
Statement regarding computation of per share earnings.
13--
Annual Report to Shareholders for the year ended December 31, 1995.
21--
Subsidiaries of the Corporation.
23--
Consent of Geo. S. Olive & Co. LLC.
27--
Financial Data Schedule
(2) The following exhibit will be submitted at a later date:
The annual financial statements and independent auditor's report thereon
for Citizens Incentive Savings Plan for the year ending December 31, 1995,
will be filed as an amendment to the 1995 Annual Report on Form 10-K no
later than June 28, 1996.
- --------
*The documents identified herein as 10-(1)(a) and 10-(1)(b), 10-(2)(a) through
10-(2)(e), 10-(3)(a) through 10-(3)(c), 10-(4) and 10-(5)(a) through 10-
(5)(d) constitute all management contracts and compensatory plans and
arrangements required to be filed as an exhibit to this form, pursuant to
Item 14(c) of this report.
11
<PAGE>
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, ON THIS 19TH DAY
OF MARCH, 1996.
CNB Bancshares, Inc.
/s/ James J. Giancola
By___________________________________
James J. Giancola, President and
Chief Executive Officer (chief
executive officer)
/s/ John R. Spruill
By: _________________________________
John R. Spruill, Executive Vice
President and Chief Financial
Officer
(principal financial officer)
/s/ Ralph L. Alley
By: _________________________________
Ralph L. Alley, Senior Vice
President, Controller and
Treasurer
(principal accounting officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT ON FORM 10-K HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ H. Lee Cooper Director March 19, 1996
____________________________________
H. Lee Cooper
/s/ John D. Engelbrecht Director March 19, 1996
____________________________________
John D. Engelbrecht
/s/ James J. Giancola Director March 19, 1996
____________________________________
James J. Giancola
/s/ Robert L. Koch, II Director March 19, 1996
____________________________________
Robert L. Koch, II
/s/ Larry J. Kremer Director March 19, 1996
____________________________________
Larry J. Kremer
/s/ Jerry A. Lamb Director March 19, 1996
____________________________________
Jerry A. Lamb
/s/ Burkley F. McCarthy Director March 19, 1996
____________________________________
Burkley F. McCarthy
____________________________________ Director March 19, 1996
Robert K. Ruxer
/s/ Thomas W. Traylor Director March 19, 1996
____________________________________
Thomas W. Traylor
/s/ Paul G. Wade Director March 19, 1996
____________________________________
Paul G. Wade
</TABLE>
12
<PAGE>
EXHIBIT INDEX
Reg. S-K
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ----
<C> <S> <C>
3(i) Articles of Incorporation of the Corporation filed as Exhibit
3(i) to the Corporation's 1994 Annual Report on Form 10-K is
incorporated by reference.
3(ii) Bylaws of the Corporation, as Amended..........................
10(1) The following Executive Compensation Plans and Arrangements,
filed as Exhibits 10(1)(c) and (d) to the Corporation's 1992
Annual Report on Form 10-K, are incorporated herein by
reference:
(a) CNB Bancshares, Inc. 1992 Incentive Stock Option Plan; and
(b) Citizens Incentive Savings Plan.
10(2) The following Management Contracts, filed as Exhibits 10(2)(a)
through (e) to the Corporation's 1992 Annual Report on Form 10-
K, are incorporated herein by reference:
(a) Change of control agreement between the Corporation and H.
Lee Cooper dated December 20, 1988.
(b) Change of control agreement between the Corporation and
William E. Vieth dated December 20, 1988.
(c) Change of control agreement between the Corporation and
James J. Giancola dated June 6, 1992.
(d) Change of control agreement between the Corporation and
David L. Knapp dated December 20, 1988.
(e) Change of control agreement between the Corporation and
Jerry W. Cecil dated December 20, 1988.
10(3) The following Management Contract and Executive Compensation
Plans filed as Exhibits 10(3)(a) through (c) to the
Corporation's 1994 Annual Report on Form 10-K are incorporated
herein by reference:
(a) Change of control agreement between the Corporation and M.
Lynn Cooper dated May 19, 1992.
(b) CNB Bancshares, Inc. Savings Equalization Plan dated May 1,
1994.
(c) CNB Bancshares, Inc. Pension Equalization Plan dated May 1,
1994.
10(4) The CNB Bancshares, Inc. 1995 Incentive Stock Option Plan is
incorporated by reference to the Corporation's filing with the
Securities and Exchange Commission as an exhibit to a
Registration Statement on Form S-8, Registration No. 33-60431.
10(5) (a) Change of control agreement between the Corporation and
James R. Dodd dated December 10, 1993......................
(b) Change of control agreement between the Corporation and
Marvin Huff, Jr. dated December 20, 1988...................
(c) Change of control agreement between the Corporation and
David M. Viar dated October 18, 1993.......................
(d) Change of control agreement between the Corporation and
John R. Spruill dated October 3, 1995......................
11 Statement regarding computation of per share earnings..........
13 Annual Report to Shareholders for the Year Ended December 31,
1995...........................................................
21 Subsidiaries of the Corporation................................
23 Consent of Geo. S. Olive & Co. LLC.............................
27 Financial Data Schedule........................................
</TABLE>
13
<PAGE>
Exhibit 3(ii)
AMENDED BY-LAWS OF CNB BANCSHARES, INC.
(ADOPTED AND APPROVED FEBRUARY 12, 1985)
(AS AMENDED ON APRIL 19, 1995)
(Incorporated under the laws of the State of Indiana)
ARTICLE I
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of CNB
Bancshares, Inc. ("Corporation") for the election of Directors and for the
transaction of such other business as may properly come before the meeting shall
be held within five (5) months after the close of each fiscal year at such place
within the State of Indiana and on such date and at such time as may be
determined from time to time by resolution of the Board of Directors, which
place, date, and time shall be designated in the notice of the meeting.
Nominations for election to the Board of Directors may be made by the Board of
Directors or by any shareholder of any outstanding class of capital stock
entitled to vote for the election of Directors. Nominations, other than those
made by or on behalf of the existing management, shall be made in writing and
shall be delivered or mailed to the Chairman of the Board of the Corporation not
less than fourteen (14) days nor more than fifty (50) days prior to any meeting
of shareholders called for the election of Directors, provided however, that if
less than twenty-one (21) days notice of the meeting is given to shareholders,
such nominations shall be mailed or delivered to the Chairman of the Board not
later than the close of business on the seventh day following the day on which
the notice of meeting was mailed.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders shall
be held at such place within the State of Indiana and on such date and at such
time as is designated in the notice of the meeting, and may be called by the
Chairman of the Board ("Chairman"), President, a majority of the Board of
Directors, or by the holders of
<PAGE>
not less than eighty percent (80%) of all the shares outstanding and entitled to
vote on business proposed to be transacted at such meeting.
SECTION 3. NOTICE OF MEETINGS. Written or printed notice of each meeting
of the shareholders shall be delivered or mailed at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote at the
meeting. Each such notice shall state the date, time, and place of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called. Each such notice shall be prepared and delivered by or at
the direction of the Chairman of the Board, the President, the Secretary, the
Board of Directors, or the persons calling the meeting. Any notice of a
shareholders' meeting sent by mail shall be deemed delivered when deposited in
the United States mail, postage prepaid, addressed to the shareholder at his
address as it appears on the records of the Corporation. Attendance by a
shareholder at any meeting shall constitute a waiver of notice of the meeting,
except when a shareholder attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Any notice required by this section may also be waived as provided in
Article VIII below.
SECTION 4. ORGANIZATION OF MEETINGS. Each regular and special meeting of
the shareholders of the Corporation shall be convened by the Chairman of the
Board, or in the absence of the Chairman, the President, at the time and place
on the date specified in the notice of the meeting. If the Chairman, or in the
absence of the Chairman, the President, fails or refuses to do so, the Secretary
shall so convene the meeting, or in case of a special meeting when all of them
fail or refuse to do so, one of the persons calling the meeting by notice given
as provided above shall so convene the meeting. If the Chairman, or in the
absence of the Chairman, the President, is present at the meeting, he shall act
as its chairman, but if he fails or refuses to so act, a chairman for the
meeting shall be elected. If the Secretary is present at the meeting, he shall
act as
2
<PAGE>
its secretary, but if he fails or refuses to so act, the Chairman shall appoint
the secretary for the meeting.
SECTION 5. QUORUM. A majority of the outstanding shares entitled to vote
at any meeting of the shareholders, represented in person or by proxy, shall
constitute a quorum for the transaction of business (except as otherwise
provided in or required by the Articles of Incorporation) at the meeting, but if
the holders of a majority of the outstanding shares entitled to vote at a
meeting are not represented in person or by proxy at the time and place fixed
for such meeting, then a majority of the shares actually represented in person
or by proxy at such meeting may adjourn the meeting successively to a specified
date not more than ninety (90) days after the adjournment, and no notice need be
given of the adjournment to shareholders not present at the meeting.
SECTION 6. PROXIES. Each shareholder entitled to vote at a meeting of the
shareholders may vote either in person or by proxy executed in writing by the
shareholder or his duly authorized attorney-in-fact and filed with the Secretary
at or before the meeting. A telecopied proxy, which on its face purports to be
properly dated and signed, shall be a valid proxy.
SECTION 7. VOTING AND REQUISITE VOTE. In voting on all matters, each
outstanding share entitled to vote shall be entitled to one vote on each matter
submitted to a vote at any meeting of the shareholders; and every decision of
the majority of a quorum shall be valid as a corporate act unless a larger vote
is required at any time by law, by the Articles of Incorporation, or by these
By-Laws.
SECTION 8. LIST OF SHAREHOLDERS. At least five (5) days before each
meeting of the shareholders at which Directors are to be elected, the Officer
having charge of the transfer book for shares of the Corporation shall make a
complete list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, with the address of each shareholder and the number of
shares held by each shareholder. The
3
<PAGE>
list shall be kept on file at the registered office of the Corporation for five
(5) days prior to the meeting and shall be subject to inspection by any
shareholder at any time during usual business hours. The list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to inspection by any shareholder during the meeting.
ARTICLE II
DIRECTORS
SECTION 1. POWERS AND NUMBER. The property and business of the
Corporation shall be managed by the Board of Directors. The number of Directors
to constitute the Board of Directors shall not be less than six (6) nor more
than twenty (20), with the number of Directors to be fixed or changed from time
to time, within the minimum and maximum of the foregoing range, by resolution of
the Board of Directors. No person may be elected to the Board of Directors at a
time when he has reached the age of seventy (70) years.
SECTION 2. ELECTION AND TERMS OF DIRECTORS AND FILLING OF VACANCIES.
Directors shall be classified and shall serve for terms as more particularly set
forth in Article VII of the Articles of Incorporation. Vacancies upon the Board
of Directors shall be filled in the manner set forth in said Article VII of the
Articles of Incorporation.
SECTION 3. REMOVAL OF DIRECTORS. Directors shall be subject to removal
from office in accordance with applicable provisions of law and the provisions
of Section 2 of Article VII of the Articles of Incorporation of the Corporation.
SECTION 4. REGULAR MEETINGS. Immediately following each annual meeting of
the shareholders, a regular meeting of the Board of Directors shall be held for
the election of Officers and for such other business as may properly come before
the meeting. Other regular meetings of the Board of Directors shall be held,
without notice, on the third Tuesday of each month at the principal business
office of the Corporation
4
<PAGE>
or at any other convenient place duly authorized by the Board, except that no
regular meetings of the Board of Directors shall be held in the months of
February and August. When any regular meeting of the Board falls upon a holiday,
the meeting shall be held on the next banking business day unless the Board
shall designate some other day.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be held at any date, time, and place upon the call of the Chairman of the
Board or the President or twenty-five percent (25%) of the members of the Board
of Directors. Written notice of the date, time, place, and purposes of each
special meeting shall be delivered personally to each Director by or at the
direction of the Chairman, the President, or the Secretary at least forty-eight
(48) hours before the time set for the meeting, or shall be sent by mail at
least ninety-six (96) hours before the time set for the meeting or by telegraph
forty-eight (48) hours before the time set for the meeting, to the last known
address of each Director.
SECTION 6. NOTICES AND WAIVER THEREOF. Any notice of a regular or special
meeting of the Board of Directors sent by mail or telegraph shall be deemed to
be delivered: (i) in the case of notice by mail, when deposited in the United
States mail, postage prepaid, addressed to the Director at his last known
address; or (ii) in the case of notice by telegraph, when delivered in written
form, cost prepaid, addressed to the Director at his last known address, to a
telegraph office for transmission. Any required notice of a regular or special
meeting of the Board of Directors shall be deemed to have been waived by any
Director who attends the meeting, except when a Director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Any required notice of a regular or
special meeting of the Board of Directors also may be waived as provided in
Article VIII below.
SECTION 7. QUORUM AND POWERS OF THE MAJORITY. A majority of the Board of
Directors shall constitute a quorum for the transaction of business. The action
of a
5
<PAGE>
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 8. ACTION OF THE BOARD OF DIRECTORS WITHOUT A MEETING. Any action
which is required to be or may be taken at a meeting of the Directors may be
taken without a meeting if consents in writing, setting forth the action so
taken, are signed by all of the Directors. The consents shall have the same
force and effect as a unanimous vote of all the Directors at a meeting duly
held, and may be stated as such in any certificate or document filed under the
Indiana General Corporation Act. The Secretary shall file the consents with the
minutes of the meetings of the Board of Directors.
ARTICLE III
OFFICERS
SECTION 1. ELECTION. The Board of Directors shall elect a Chairman of the
Board and a Chief Executive Officer, both of whom shall be members of the Board
of Directors (the same person may hold both positions) and shall elect a
Secretary. In addition, the Board of Directors may elect a President, a
Treasurer and such number of Vice Presidents, Assistant Secretaries, Assistant
Treasurers, and other Officers as the Board of Directors may from time to time
deem necessary.
SECTION 2. TENURE. Each Officer shall hold his office for the term of one
year and until his successor is duly elected and qualified, unless sooner
removed by the Board of Directors. Any Officer elected by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation will be served by the Officer's removal, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. A vacancy in any office for any reason may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman shall preside at each
meeting of the shareholders and the Board of Directors. He shall be an ex
officio member of all committees established by the Board of Directors with the
exception of
6
<PAGE>
the Audit Committee and the Compensation and Corporate Structure Committee. He
may sign and execute in the name of the Corporation deeds, mortgages, bonds,
contracts, and other instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by the By-Laws to
some other Officer or agent of the Corporation, or shall be required by law
otherwise to be signed or executed; and, in general, he shall perform all duties
incident to the office of the Chairman and other such duties as from time to
time may be assigned to him by the Board.
SECTION 4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
have general executive powers in conducting the affairs of the Corporation as
well as the specific powers conferred by these By-Laws. The Chief Executive
Officer shall be the principal officer of the Corporation and shall have all
powers of the Board of Directors pertaining to the management of the business of
the Corporation between meetings of the Board and the Executive Committee and
such further powers as may be conferred upon him by these By-Laws or the Board
of Directors or the Executive Committee, from time to time. The Chief Executive
Officer, in the absence of the Chairman of the Board, shall perform the duties
and exercise the powers of the Chairman.
SECTION 5. PRESIDENT. The President of the Corporation, in the absence of
the Chairman of the Board, shall preside at each meeting of the shareholders and
the Board of Directors. He shall also serve the Association in such capacities
and perform such duties as may be assigned to him, from time to time, by the
Board of Directors or the Chief Executive Officer.
SECTION 6. VICE PRESIDENT. If the President is unable to act, then the
Vice Presidents in order of their election to office, or if there is no Vice
President, the
7
<PAGE>
Secretary, shall become Acting President and in that capacity perform all of the
duties of the President, unless some other Officer is designated by the Board of
Directors to perform those duties. The Vice Presidents shall perform such other
duties as may from time to time be prescribed by the Board of Directors or by
the Chairman.
SECTION 7. THE SECRETARY. The Secretary shall be secretary of all
meetings of the shareholders. The Secretary shall also be secretary of all
meetings of the Board of Directors when he is present. The Secretary shall keep
the minutes of meetings of the shareholders and the Board of Directors, and all
shareholders' and Directors' consents to action, in books maintained for that
purpose. The Secretary shall have custody of the seal of the Corporation (if
any), shall have custody of all books, instruments, documents, and papers of the
Corporation entrusted to the Secretary by the Board of Directors or other
Officers, and shall perform such other duties as are provided elsewhere in these
By-Laws and as may from time to time be prescribed by the Board of Directors or
by the Chairman. If the Secretary is unable to act, then the Assistant
Secretaries (if any) in order of their election to office shall perform the
Secretary's duties. The Secretary or any Assistant Secretary may affix the seal
(if any) to all instruments, documents, and papers required to be sealed and may
attest the seal and the signature of other Officers when necessary.
SECTION 8. THE TREASURER. The Treasurer, under the supervision and
control at all times of the Board of Directors or the Chairman, shall have
custody of the funds and securities of the Corporation, shall keep such funds
and securities deposited in such financial institutions or in such other manner
as the Board of Directors may from time to time direct, shall keep full and
accurate account of the income and expenses of the Corporation in books kept for
that purpose, and shall perform such other duties as may from time to time be
prescribed by the Board of Directors or by the Chairman. If the Treasurer is
unable to act, then the Assistant Treasurers (if any) in the order of their
election to office shall perform the Treasurer's duties.
8
<PAGE>
SECTION 9. EXECUTION OF INSTRUMENTS, DOCUMENTS, AND PAPERS. All
instruments, documents, and papers required to be executed by the Corporation
shall be signed by such Officer or Officers or such other person or persons and
in such manner as the Board of Directors may from time to time prescribe, except
that all instruments, documents, and papers required to be executed in the
ordinary course of business of the Corporation, and all instruments, documents,
and papers which the Board of Directors have determined shall be executed by the
Corporation but have not required to be executed by any particular Officer or
Officers or other person or persons, may be signed by the Chairman of the Board
or the President, and the seal (if any) and the Chairman of the Board's or
President's signature thereto may be attested by the Secretary or any Assistant
Secretary, without prior authorization by the Board of Directors.
ARTICLE IV
FISCAL YEAR
The fiscal year of the Corporation shall be as established from time to
time by the Board of Directors.
ARTICLE V
STOCK
SECTION 1. CERTIFICATES. The shares of stock of the Corporation shall be
represented by certificates (except fractional shares, which may be represented
by certificates or, in the discretion of the Board of Directors, scrip) in such
form, not inconsistent with the Articles of Incorporation, as are approved by
the Board of Directors. Each certificate shall be signed by the Chairman,
President or a Vice President and also by the Secretary, an Assistant Secretary
or such other officer as designated by the Board and sealed with the seal of the
Corporation (if any). Each certificate shall designate the name of the person
to whom issued and shall have
9
<PAGE>
plainly stated upon its face the number and class of shares which it represents
and the par value of each share or a statement that such shares have no par
value. No share of stock of the Corporation shall be issued until the entire
consideration for the share has been received by the Corporation. When issued,
all shares of stock of the Corporation shall be deemed full-paid and are non
assessable.
SECTION 2. REGISTERED OWNERS. Except as otherwise provided by law, only
the persons whose names are registered on the books of the Corporation as
shareholders shall have the right to vote and to receive dividends.
SECTION 3. TRANSFER. Transfer of shares of stock of the Corporation shall
be registered on the books of the Corporation only when the certificates
representing the shares are presented for transfer at the principal office of
the Corporation by the owner of the certificates or the owner's attorney-in-
fact. The Board of Directors may adopt such rulings and regulations not
inconsistent with law or these By-Laws as it deems expedient concerning the
issuance, transfer, and registration of certificates.
SECTION 4. CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATES. The
Board of Directors shall have power to close the share transfer books of the
Corporation for a period not exceeding fifty (50) days prior to the date of any
meeting of the shareholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change, conversion, or
exchange of shares will become effective; provided, however, that instead of
closing the share transfer books the Board of Directors may fix in advance a
date, not exceeding fifty (50) days prior to the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change, conversion, or exchange of
shares becomes effective, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, the meeting and any
adjournment of the meeting, or entitled to receive payment of the dividend, or
entitled to the allotment of rights, or entitled to exercise rights in respect
of the change,
10
<PAGE>
conversion, or exchange of shares, as the case may be. Only the shareholders who
are shareholders of record on the date of closing the share transfer books, or
on the record date so fixed, shall be entitled to notice of, and to vote at, the
meeting and any adjournment of the meeting, or to receive payment of the
dividend, or to receive the allotment of rights, or to exercise rights in
respect of the change, conversion, or exchange of shares, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation after
the date of closing of the share transfer books or the record date so fixed. If
the Board of Directors does not close the share transfer book or so fix a record
date, the twentieth (20th) day prior to the date of the meeting, or the date the
dividend is declared, or the date the other right is announced, as the case may
be, shall be the record date.
SECTION 5. DIVIDENDS. Subject to limitations upon the payment of
dividends as may from time to time be imposed by law, the Articles of
Incorporation, or these By-Laws, the Board of Directors in its discretion may
from time to time declare and cause the Corporation to pay dividends on its
outstanding shares in cash, property, or shares of stock of the Corporation.
ARTICLE VI
INDEMNIFICATION
SECTION 1. Every person (and the heirs, executors and administrators of
such person) who is or was a Director or Officer of this Corporation or who, at
the request of this Corporation, served in any position or capacity or on any
committee for this Corporation or in any other corporation, partnership,
association, trust, foundation, not-for-profit corporation, employee benefit
plan or other organization or entity, shall be indemnified by the Corporation
against any and all liability and reasonable expense that may be incurred by him
in connection with or resulting from any claim, action, suit or proceeding in
which either (i) such person is wholly successful, thereby entitling such person
to Mandatory Indemnification, or (ii) such person is not wholly successful
11
<PAGE>
but it is nevertheless determined, pursuant to the procedures set forth below in
Section 2 of this Article VI of these By-Laws, that such person acted in good
faith and that such person reasonably believed that (a) in the case of conduct
in his official capacity, his conduct was in the Corporation's best interests,
or (b) in all other cases, his conduct was at least not opposed to the best
interests of such Corporation, entity or organization, and, in addition with
respect to any criminal action or proceeding, either had reasonable cause to
believe his conduct was lawful or had no reasonable cause to believe his conduct
was unlawful, thereby entitling such person to Permissive Indemnification. The
terms "claim," "action," "suit" or "proceeding" shall mean and include any
claim, action, suit or proceeding (whether brought by or in the right of the
Corporation or any other corporation or otherwise), civil, criminal,
administrative or investigative action, or threat thereof, in which a Director
or Officer of the Corporation (or his heirs, executors or administrators) may
become involved as a party or otherwise:
(a) by reason of his being or having been a Director or Officer of the
Corporation, or of any subsidiary corporation of the Corporation, or
of any other corporation where he served as such at the request of the
Corporation, or
(b) by reason of his acting or having acted in any position or capacity or
on any committee for this Corporation or any subsidiary corporation of
the Corporation, or in any position or capacity in or for a
partnership, association, trust, foundation, not-for-profit
corporation, employee benefit plan or other organization or entity
where he served as such at the request of the Corporation, or
(c) by reason of any action taken or not taken by him in any such
capacity, whether or not he continues in such capacity at the time
such liability or expense shall have been incurred.
12
<PAGE>
The terms "liability" and "expenses" shall include, but shall not be limited to,
counsel fees and disbursements and amounts of judgments, fines or penalties
against, and amounts paid in settlement by or on behalf of, a person, and excise
taxes assessed with respect to an employee benefit plan, but shall not in any
event include any liability or expenses on account of profits realized by him in
the purchase or sale of securities of the Corporation. The term "wholly
successful" shall mean termination of any action, suit or proceeding against the
person in question without any finding of liability or guilt against him or the
expiration of a reasonable period of time after the making of any claim or
threat of an action, suit or proceeding without the institution of the same,
without any payment or promise made to induce a settlement.
SECTION 2. With regard to Permissive Indemnification, the determination
that a person acted in good faith and that such person reasonably believed that
(a) in the case of conduct in his official capacity, his conduct was in the
Corporation's best interests, or (b) in all other cases, his conduct was at
least not opposed to the best interests of the Corporation, and, in addition,
with respect to any criminal action or proceeding, either had reasonable cause
to believe that his conduct was lawful or had no reasonable cause to believe
that his conduct was unlawful with regard to a specific claim, action, suit or
proceeding in or as to which such person is not wholly successful shall be made
by or for the Board of Directors of the Corporation in the manner hereinafter
described. Any request for such indemnification must first be proposed to the
Board of Directors of the Corporation, and a motion for such indemnification may
be made by any Director of the Corporation, including a Director who is seeking
such indemnification for himself. If a quorum of Directors eligible to decide
the matter exists with the limitations and requirements of I.C. 23-1-37-
12(b)(1), such Directors may either (i) decide the question themselves; (ii)
refer the matter to Special Legal Counsel for decision pursuant to I.C. 23-1-37-
12(b)(3)(A); or (iii) decline to take any action to either decide the question
of such indemnification or refer the matter for decision to Special
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Legal Counsel. If there does not exist a quorum of Directors eligible to decide
the matter within the limitations and requirements of I.C. 23-1-37-12(b)(1), a
majority of the entire Board of Directors may either (i) refer the matter to a
committee of two or more Directors who are eligible to vote thereon pursuant to
I.C. 23-1-37-12(b)(2) who may either decide the matter themselves or refer the
matter to Special Legal Counsel for decision pursuant to I.C. 23-1-37-
12(b)(3)(A); (ii) if such a committee cannot be appointed, refer the matter to
Special Legal Counsel pursuant to the procedures described in I.C. 23-1-37-
12(b)(3)(B); or (iii) decline to take any action to refer the matter of such
indemnification to a committee or to Special Legal Counsel. Any decision on the
question of entitlement to such Permissive Indemnification by a majority of a
quorum of the Board of Directors eligible to vote pursuant to I.C. 23-1-37-
12(b)(1); by a special committee of eligible Directors pursuant to I.C. 23-1-37-
12(b)(2); or by Special Legal Counsel duly appointed pursuant to the provisions
of I.C. 23-1-37-12(b)(3), shall be in the sole and absolute discretion of such
person or persons who are to make such determination. If it is determined and
decided that such Permissive Indemnification should be given in a specific
situation, the authorization for such indemnification and a determination of the
amount thereof shall be made in accordance with the procedures and requirements
of I.C. 23-1-37-12(c). For purposes of this Section 2, Permissive
Indemnification shall be deemed to have been denied (i) if a majority of any
group of persons who are to decide the question do not vote in favor of the
proposed indemnification; (ii) if the Board of Directors or any committee
thereof declines to take any permitted action to either decide the question,
refer it to a committee, or refer it to Special Legal Counsel; (iii) if no
decision is made by the person or persons who were to decide such question
within a period of six (6) months after such indemnification was first proposed
to the Board of Directors of the Corporation; or (iv) to the extent that the
dollar amount of any indemnification to be made by the Corporation is less than
the total dollar amount of indemnification proposed or
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requested to be made. If proposed Permissive Indemnification is denied, the
question may not be reconsidered at any subsequent time by the Corporation.
SECTION 3. Expenses incurred with respect to any claim, action, suit or
proceeding may be advanced by the Corporation (by action of the Board of
Directors, whether or not a disinterested quorum exists) prior to the final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount unless he is entitled to indemnification under
this Article of these By-Laws.
SECTION 4. The rights of Mandatory and Permissive Indemnification provided
in this Article of the By-Laws shall be in addition to any rights to which any
such person may otherwise be entitled by contract, as matter of law, or pursuant
to I.C. 23-1-37. Any person claiming the right to indemnification pursuant to
any provisions of these By-Laws may at any time apply for indemnification to or
seek review of any decision denying indemnification or determining the amount
thereof by a court pursuant to I.C. 23-1-37-11. Persons who are not Directors
or Officers of the Corporation but who are Directors or Officers of any
subsidiary may be indemnified to the extent authorized at any time or from time
to time by the Board of Directors.
SECTION 5. Irrespective of the provisions of this Article of the By-Laws,
the Board of Directors may, at any time or from time to time, approve
indemnification of Directors and Officers or other persons to the full extent
permitted by the provisions of the Indiana Business Corporation Law at the time
in effect, whether on account of past or future transactions.
SECTION 6. To the extent not inconsistent with Indiana law as in effect
from time to time, the Board of Directors may, at any time or from time to time,
approve the purchase and maintenance of insurance on behalf of any such
Director, Officer or other person arising out of his status as a Director,
Officer, Employee or agent of the Corporation or any corporation, partnership,
association, employee benefit plan, trust, foundation, not-for-profit
corporation or other organization or entity in which he served
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as such at the request of the Corporation, whether or not the Corporation would
have the power to indemnify him under the provisions of this Article of the By-
Laws. In the event that any expense or liability otherwise subject to
indemnification hereunder is covered entirely or in part by any insurance, the
indemnification provided for by this Article of these By-Laws shall only be
available, if at all, as to any uninsured liability or expense or that portion
which is in excess of the amount of all available insurance coverage. Under no
circumstances shall any insurer or other person making payment under such an
insurance policy or contract be subrogated to the rights of any person entitled
to indemnification under this Article of these By-Laws.
SECTION 7. Any and all references contained in Article VI of these By-Laws
to any provision, section, sub-section or portion of the Indiana Code (I.C.)
shall mean the Indiana Code as the same existed on January 1, 1987, and no
subsequent amendment, repeal, modification, change, or judicial invalidation of
any provision of the Indiana Code subsequent to January 1, 1987, shall alter,
modify, or otherwise affect these By-Laws, and these By-Laws shall be construed
and interpreted under the statutory law of the State of Indiana as it existed as
of the date of adoption of these By-Laws.
SECTION 8. The indemnification herein required or permitted by these
amended indemnification By-Laws shall be a contractual obligation, undertaking
and commitment of the Corporation as to any person who either continued to serve
or commenced to serve, following the date of the adoption of these amended
indemnification By-Laws, as a Director or Officer of this Corporation or any
subsidiary of this Corporation, or in any other position or capacity, at the
request of this Corporation or any subsidiary corporation, on any committee,
partnership, association, trust, foundation, not-for-profit corporation,
employee benefit plan, or other organization or entity, and no subsequent
amendment or repeal of these By-Laws and no judicial decision invalidating the
legislation authorizing the indemnification provided for by these By-Laws or
invalidating all or any part of these indemnification By-Laws shall in any
manner deny, diminish,
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limit, restrict, or qualify the indemnification herein provided for any such
person who so continued to serve or commenced to serve with regard to any claim
concerning any matter which occurred, which commenced to occur, or which
continued to occur subsequent to the adoption of these amended indemnification
By-Laws and prior to any such amendment, repeal, or judicial invalidation.
ARTICLE VII
SEAL
If the Board of Directors so determines, the Corporation shall adopt as a
seal a circular device with the name of the Corporation around the border.
ARTICLE VIII
WAIVER OF NOTICE
Whenever any notice of a meeting is required to be given by law, the
Articles of Incorporation, or these By-Laws, a waiver of the notice in writing,
signed by the person or persons entitled to the notice, whether before or after
the meeting for which the notice would otherwise be required, and filed with the
Chairman of the Board, the President or Secretary, shall be deemed equivalent to
the giving of the notice.
ARTICLE IX
ADOPTION AND AMENDMENT OF BY-LAWS
The Board of Directors shall have the power to make, alter, amend, or
repeal the By-Laws of the Corporation and to adopt new or additional By-Laws
which are not inconsistent with applicable law and the Articles of
Incorporation; provided, however, that notice of each proposed amendment of or
other change in the By-Laws shall be given to each Director at least ten (10)
days prior to the date of the meeting at which the proposed amendment or other
change will be submitted for consideration and action by the Board of Directors.
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ARTICLE X
COMMITTEES
SECTION 1. COMMITTEES. The Board of Directors may, upon the
recommendation of the Chairman of the Board, by resolution designate two or more
Directors to constitute such committee or committees as the Board shall deem
advisable and shall designate Directors to constitute the committees provided
for in the following Sections of this Article X. Each such committee, to the
extent provided in these By-Laws or any such resolution, shall have and exercise
all of the authority of the Board of Directors in the management of the
Corporation; provided that the designation of such committee or committees and
the delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or him
by law. The Board of Directors may designate officers, employees or other
persons who are not Directors of the Corporation to serve as ex officio members
of any committee.
SECTION 2. EXECUTIVE COMMITTEE. The Board of Directors shall designate
three or more Directors to constitute an Executive Committee, which Committee
shall have and may exercise all of the authority of the Board of Directors in
the management of the Corporation, except such as the Board only, by law, is
authorized to perform. The Chairman of the Board shall be a member of such
Committee and shall act as Chairman thereof; a majority of the members of such
Committee shall be Directors who are not officers or employees of the
Corporation. The Committee shall report its actions in writing at each regular
meeting of the Board of Directors, which shall approve or disapprove the report
and record such action in the minutes of the meeting.
SECTION 3. AUDIT COMMITTEE. The Board of Directors shall designate three
or more Directors to constitute an Audit Committee. Audit Committee members
shall be appointed by the Board annually or more often. The membership,
structure and responsibilities of the Audit Committee shall be such as to be in
compliance with
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Section 36 of the Federal Deposit Insurance Act, as amended, 12 CFR Part 363,
the official Guidelines and Interpretations thereto, and any other related
implementing regulations, as the same are applicable to a holding company
performing for its subsidiaries comparable services and functions as are
required of the subsidiaries under such laws and regulations.
The Audit Committee shall have and may exercise all of the authority of the
Board of Directors with respect to the review and examination of the financial
affairs and the accounting and control matters of the Corporation and its
subsidiaries. The results of such examinations shall be reported, in writing,
to the Board at the regular meeting thereafter.
It shall also be the duty of the Audit Committee to oversee and review the
Corporation's annual internal audit; to nominate the independent auditors of the
Corporation for appointment by the Board of Directors; to ratify all
accountants' fees rendered during the year; and to recommend to the Board such
changes in the manner of doing business, etc., as shall be deemed advisable.
It shall also be the duty of the Audit Committee to review and discuss with
the Board of Directors and the Corporation's independent public accountant:
management's reports concerning compliance with safety and soundness laws,
internal control structures and procedures for financial reporting; the
independent public accountant's reports and attestations; the resolution of
identified material weaknesses and reportable conditions in internal controls,
including the prevention or detection of management override or compromise of
the internal control system; the scope of the audit services; significant audit
policies; audit conclusions regarding significant accounting estimates; the
selection and termination and resolution of any significant disagreements with
the independent public accountant.
The Audit Committee shall also be authorized to engage independent legal
counsel at its discretion. The Audit Committee shall further be authorized to,
at its sole
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discretion, consult and consider the advice of a panel of advisors made up of
members of the Board of Directors of The Citizens National Bank of Evansville as
to the discharge of any of its responsibilities hereunder.
SECTION 4. COMPENSATION AND CORPORATE STRUCTURE COMMITTEE. The Board of
Directors shall designate three or more Directors to constitute a Compensation
and Corporate Structure Committee. Compensation and Corporate Structure
Committee members shall be appointed by the Board annually or more often. The
Compensation and Corporate Structure Committee shall review the competency and
effectiveness of management of the Corporation and its subsidiaries; the
soundness and adequacy of compensation programs, including fringe benefit plans
and programs, compliance with regulations and the like; the approval of salaries
of Corporation officers and salaries of senior management of its subsidiaries;
the formulation of policy on and administration of special Corporation programs
such as stock option plans, executive incentive plans, stock purchase plans for
employees and the like. It shall also be the duty of the Compensation and
Corporate Structure Committee to formulate and adopt overall management
structure and organization policies, including selection, recruiting, management
development and succession of the senior management of the Corporation and its
subsidiaries. The Compensation and Corporate Governance Committee shall report
all of its findings and recommendations to the Board of Directors for its action
thereon.
SECTION 5. NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Board of
Directors shall designate three or more Directors to constitute a Nominating and
Corporate Governance Committee. Nominating and Corporate Governance Committee
members shall be appointed by the Board annually or more often. The Nominating
and Corporate Governance Committee shall recommend to the Board a slate of
nominees for directors to be presented on behalf of the Board for election by
shareholders at each annual meeting of the Corporation and shall recommend to
the Board persons to
20
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fill vacancies on the Board. It shall also be the duty of the Nominating and
Corporate Governance Committee to review the procedures and other matters
related to the governance of the Corporation and its subsidiaries generally,
including, but not limited to, the composition, size and committee structure of
the boards of directors of the Corporation's subsidiaries and the background and
qualifications of the members of the boards of directors of the Corporation's
subsidiaries and to submit to the full Board of Directors any recommended
actions to be taken with respect to matters within the Committee's jurisdiction.
SECTION 6. LOAN COMMITTEE. The Board of Directors may designate three or
more Directors to constitute a Loan Committee. Loan Committee members shall be
appointed by the Board annually or more often. In the absence of the
appointment of a Loan Committee, the Executive Committee shall perform the
functions of the Loan Committee. The Loan Committee shall have and may exercise
all of the authority of the Board of Directors with respect to the adequacy of
credit policies and procedures adopted by the Corporation and its subsidiaries;
the monitoring of trends in the loan portfolio of the Corporation and its
subsidiaries; and the approval of loans, and review of loans previously
approved, that exceed an amount specified by resolution of the Board of
Directors of the Corporation or its subsidiaries.
SECTION 7. SHAREHOLDER VALUE COMMITTEE. The Board of Directors shall
designate three or more Directors to constitute a Shareholder Value Committee.
Shareholder Value Committee members shall be appointed by the Board annually or
more often. The Shareholder Value Committee shall review and consider the
Corporation's ongoing long-range strategic plans, with specific emphasis on the
expansion of the Corporation's business in both existing and new market areas,
and the maximization of the long-term value of the Corporation's franchise,
including merger and acquisition activity. The Shareholder Value Committee
shall report all of its findings and recommendations to the Board of Directors
for its action thereon.
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SECTION 8. APPOINTMENT OF COMMITTEES. The Board of Directors may appoint,
from time to time, other committees for such purposes and with such powers and
tenure as the Board may determine to be advisable.
ARTICLE XI
REDEMPTION OF CONTROL SHARES
SECTION 1. CORPORATE SHARE ACQUISITIONS. The Indiana Business
Corporation Law (Indiana Code (S)(S)23-1-42-1 et seq.) contains a "control share
acquisition" provision which is designed to increase the protection of dispersed
shareholders when a prospective acquirer seeks to obtain a dominant position in
an Indiana corporation which has stock registered under the federal securities
laws. The provision permits disinterested shareholders (defined in Indiana Code
(S)23-1-42-3 as essentially all shareholders other than the acquiror, officers
of the corporation or employees who are also directors of the corporation) to
decide whether voting power should be given to an acquirer's "control shares."
Control shares are not all shares owned by an acquiring person, but only shares
acquired in a control share acquisition (which can be acquired in separate
purchases over a considerable period of time, see Indiana Code (S)23-1-42-2)
that, when added to the acquiring person's pre-acquisition holdings, put the
acquirer over any one of three thresholds of corporate voting power -- one-
fifth, one-third or one-half. If any person proposing to make or who has made a
control share acquisition does not file an "acquiring person statement" with the
issuing corporation or if the control shares are not accorded full voting rights
by disinterested shareholders, the control shares are subject to redemption at
the option of the corporation; provided that the articles of incorporation or
bylaws of the corporation whose shares are acquired authorize such redemption.
By virtue of this Article XI, the Corporation is authorized to redeem control
shares as permitted under Indiana Code
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(S)(S)23-1-42-1 et seq. in accordance with the procedures set forth in Section 3
of this Article XI. All capitalized terms used in Sections 2 through 4 of this
Article XI have the meanings set forth in Section 4 of this Article XI.
SECTION 2. RIGHT OF REDEMPTION. The Corporation may redeem, at any
time during the Redemption Period, Control Shares from an Acquiring Person for
an amount equal to the Fair Value of the Control Shares.
SECTION 3. REDEMPTION PROCEDURE. In the event that the Corporation
shall desire to exercise its right to redeem Control Shares as provided in this
Article XI, it shall give notice of such redemption to the Acquiring Person by
mailing first class, postage prepaid, a notice of such redemption to the
Acquiring Person's address as it shall appear upon the Corporation's books. The
notice of redemption shall (i) describe the Control Shares to be redeemed, (ii)
state the date fixed for redemption, (iii) indicate the Fair Value of the
Control Shares, and (iv) state that payment of the Fair Value of the Control
Shares to be redeemed shall be made at the principal offices of the Corporation
upon presentation and surrender of the certificate or certificates representing
such Control Shares (duly endorsed to the Corporation or in blank). Any notice
of redemption which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Acquiring
Person receives such notice. If the notice of redemption shall have been given
as above provided, the Fair Value of the Control Shares shall become due and
payable on the date and at the place stated in such notice upon presentation and
surrender of the certificate or certificates representing such Control Shares
(duly endorsed to the Corporation or in blank). From and after the date of the
notice of redemption, the Control Shares shall no longer be deemed issued and
outstanding and all rights of the Acquiring Person with respect to such Control
Shares shall cease and terminate, except for the Acquiring Person's right to
receive Fair Value for such Control Shares as herein provided.
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SECTION 4. DEFINITIONS. As used in Section 2 through 4 of this
Article XI, the following terms shall have the respective meanings set forth
below:
"Acquiring Person" shall mean any Person (or two or more Persons
acting cooperatively or in concert) that acquires Control Shares.
"Acquiring Person Statement" shall mean a written notice from an
Acquiring Person to the Corporation which satisfies the requirements of Indiana
Code (S)23-1-42-6.
"Control Shares" shall have the meaning provided therefor in Indiana
Code (S)23-1-42-1.
"Fair Value" shall mean the mean average per share closing price for
shares of the same class as the Control Shares on the principal exchange on
which such shares are listed for trading or, if not traded on an exchange, then
the average of the closing bid and asked prices quoted over-the-counter or the
average closing price reported on the NASDAQ National Market System, if admitted
for quotation thereon, for the 20 business days immediately preceding the
earlier of the public announcement or the commencement of the Control Share
acquisition by the Acquiring Person (as such prices are reported in the Wall
Street Journal or, if not so reported, in any nationally recognized financial
journal or newspaper).
"Person" shall have the meaning provided therefor in Indiana Code
(S)23-1-20-18.
"Redemption Period" shall mean the period commencing on the date that
an Acquiring Person first acquires Control Shares and ending on the earlier to
occur of (i) the date sixty (60) days after the last acquisition of Control
Shares by such Acquiring Person, or (ii) the date that the Corporation receives
an Acquiring Person Statement from such Acquiring Person; provided, however,
that in the event that, pursuant to Indiana Code (S)23-1-42-9, the Control
Shares are not accorded full voting rights by the shareholders of the
Corporation, the Redemption Period shall also include the period
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from and after the date of the shareholder meeting (referred to in Indiana Code
(S)23-1-42-7) at which the shareholders determined not to grant full voting
rights to the Control Shares.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 1. PRIOR BY-LAWS SUPERSEDED. All present and existing By-Laws of
this Corporation are hereby expressly repealed and superseded by these By-Laws.
SECTION 2. GENDER. As used herein, all references to the masculine, all
masculine pronouns and masculine forms of other words or phrases shall be
construed as also meaning and including the feminine.
* * * * * * * * * * * * * * * * *
CERTIFICATION
Certified to be a true copy of the By-Laws, now in force and effect, of CNB
Bancshares, Inc., Evansville, Indiana.
Dated this 28th day of April, 1995.
(SEAL)
/s/ David L. Knapp
-----------------------------------
Secretary of the Board
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CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT entered into between CNB BANCSHARES, INC. (hereinafter
sometimes referred to as "Company") and JAMES R. DODD (hereinafter sometimes
referred to as "Executive"), this 10th day of December, 1993.
WITNESSETH:
WHEREAS:
A. Executive is an officer of Company and important to its management and
to the well being of Company, its stockholders and customers.
B. Company desires to assure both itself and Executive of continuity of
Company management and operations in the event of a change in control
of Company.
C. Executive is willing to remain in the employ of Company following a
change in control of Company upon the terms and conditions mutually
agreed upon by Executive and Company as hereinafter set forth.
NOW, THEREFORE, in order to achieve the aforesaid purposes it is hereby
agreed by and between the parties as follows:
1. OPERATION OF AGREEMENT
----------------------
This Agreement shall be effective immediately upon its execution
by the parties, but, anything in this Agreement to the contrary
notwithstanding, neither the Agreement nor any provision of it shall
be operative unless and until there has been a change in control of
Company as defined in paragraph 2 below. Upon the occurrence of a
change in control of Company, this Agreement and all provisions
thereof shall become operative immediately.
2. DEFINITIONS
-----------
The following words and phrases as used herein shall have the
following meanings:
"Cause" means any action or inaction that is materially contrary
to the best interests of Company.
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the following:
(a) When any "person", as that term is used in Section 13(d) and
14(d) (2) of the Securities Exchange Act of 1934, becomes a
beneficial owner directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of
the Company's then outstanding securities.
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(b) When at any time less than fifty-one per cent (51%) of the
members of the Board of Directors shall be persons who were
either nominated for election by the Board of Directors as
constituted on the date of this Agreement or were elected by said
Board of Directors.
(c) Upon ownership by any corporation or group of associated persons
(excluding affiliates of the Company itself), acting in concert,
of any aggregate of more than 25% of the outstanding shares of
voting stock of the Company coupled with or followed by the
exercise of the voting power of such shares by the election of
two (2) or more directors of the Company in any one election
either at the instance of such corporation or group of associated
persons acting in concert or by the management of the Company in
a proxy solicitation.
"Effective date" means the date of a change in control.
"Term" means the period of time commencing on the "effective
date" and terminating on July 31, 1998.
"Employed in Same Capacity" means a) After "Effective Date and
until July 31, 1998, Executive continues to perform the same or
similar job duties as he performed immediately prior to the "Effective
Date" and b) Executive can reasonably continue to reside in the same
city of residence after the "Effective Date:, as he did immediately
before the "Effective Date" and until July 31, 1998, and perform his
job.
3. EXECUTIVE'S COMPENSATION DURING TERM
------------------------------------
Executive shall be entitled to the following compensation from
the Company throughout the "term".
(a) base salary at no less than that in effect immediately prior to
the "Effective Date," but with adjustments subsequent to the
"Effective Date" as may be made from time to time as warranted;
(b) continuing participation in any corporate compensation plans,
pension plans, insurance, medical and hospitalization programs,
employment contracts and any other employee benefit plans,
practices or arrangements in effect immediately prior to the
"Effective Date: and as same may be modified, supplemented or
replaced without material reduction in value and benefits to
Executive;
(c) all benefits contractually provided or agreed to be provided by
Company to Executive pursuant to any contract or agreement
entered into prior to "Effective Date."
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In the event of Executive's termination without cause after the
"Effective Date" and before July 31, 1998, Executive shall receive twelve
(12) months salary (payable in 12 equal monthly installments) at his then
current salary or his salary immediately prior to the Effective Date,
whichever is higher; in addition, Executive will receive benefits, as
defined in Paragraph 3, for a twelve (12) month period, provided, however,
that Executive will not receive this salary and benefits if he either (1)
works in any capacity for another bank or bank holding company that
competes with the Company at a location within a sixty (60) mile radius of
Evansville, Indiana within a twelve (12) month period after termination
without cause, or (2) works in any capacity for any bank or bank holding
company outside of a sixty (60) mile radius of Evansville Indiana, and
solicits trust department customers of the Company within a twelve (12)
month period after termination without cause. The twelve (12) month period
commences on the date of termination without cause.
In the event Executive continues to be employed but not "employed
in the same capacity" at any time after the "Effective Date: but before
July 31, 1998, Executive, at his option, shall receive twelve (12) months
salary (payable in 12 equal monthly installments) at his then current
salary or his salary immediately prior to the Effective Date, whichever is
higher; in addition, Executive will receive benefits, as defined in
Paragraph 3, for a twelve (12) month period, provided, however, that
Executive will not receive this salary and benefits if he either (1) works
in any capacity for another bank or bank holding company that competes with
the Company at a location within a sixty (60) mile radius of Evansville,
Indiana within a twelve (12) month period after termination without cause,
or (2) works in any capacity for any bank or bank holding company outside
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of a sixty (60) mile radius of Evansville Indiana, and solicits trust
department customers of the Company within a twelve (12) month period
after termination without cause. The twelve (12) month period
commences on the date Executive is no longer "employed in the same
capacity." Executive may waive his "employed in the same capacity"
rights in writing. Further, if Executive intends to claim he is no
longer "employed in the same capacity," he must provide ten (10) days
notice, in writing, of the specific conduct which constitutes the
alleged breach. Further, the Company shall have thirty (30) days in
which to cure the alleged breach.
4. COVENANT NOT TO COMPETE
-----------------------
Executive agrees that, as Senior Vice-President and Executive
Trust Officer, he will have access to confidential trust department
information such as investment strategies, marketing plans, customer
trust assets and information, and other confidential information such
as overall marketing strategy and business plans for other Company
departments. Executive also agrees that he has full access to trust
department customer lists, will have a continuing relationship with
trust department customers while discharging his responsibility for
maintaining and developing trust department business, will be
responsible for soliciting new customers, and participate in
formulating company strategy and business plans for other company
departments in his capacity as an officer. Executive therefore agrees
for the consideration set out in Paragraph 3, and his employment, that
after the Effective Date of this Agreement, he will not become an
officer, director, or employee of any bank or bank holding company at
any location within a sixty (60) mile radius of Evansville that
competes with the Company, its subsidiaries or successors for a period
of one (1) year after his termination with cause. Executive further
agrees not to disclose confidential information to such competitor at
any time.
5. BINDING EFFECT AND ASSIGNMENT
-----------------------------
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective executors,
administrators, heirs, personal representatives, successors and
assigns but neither this Agreement nor any right hereunder may be
assigned or transferred by either party hereto. Notwithstanding the
foregoing, the Company shall assign this Agreement to any person or
entity succeeding to substantially all of the business and assets of
Company upon a "change in control" and upon such change in control
Company shall obtain the assumption of this Agreement by any such
successor.
6. NOTICES
-------
Any notice to a party required or permitted to be given hereunder
shall be in writing and shall be deemed given when mailed by
registered or certified mail to such party at such party's address as
specified below:
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If to the Company, to:
CNB Bancshares, Inc.
Attention: Corporate Secretary
20 N.W. Third Street
Evansville, Indiana 47739-0001
If to Executive, to:
His last known address shown on the records of Company.
7. SEVERABILITY
------------
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
8. AMENDMENTS
----------
This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
9. GOVERNING LAW
-------------
This Agreement shall be construed in accordance with the law of
the State of Indiana.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
CNB BANCSHARES, INC.
By: /s/ John M. Oberhelman
-----------------------------
Title: Senior Vice President Human
Resources
ATTEST: "COMPANY"
/s/ Kenneth J. Ellspermann
- --------------------------------
Title: Vice President Investment
Services James R. Dodd
By: /s/ James R. Dodd
----------------------------
"EXECUTIVE"
5
<PAGE>
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT entered into between CNB BANCSHARES, INC. (hereinafter
sometimes referred to as "Company") and MARVIN HUFF (hereinafter sometimes
referred to as "Executive"), this 28th day of December, 1988.
WITNESSETH:
WHEREAS:
A. Executive is an officer of Company and important to its management and
to the well being of Company, its stockholders and customers.
B. Company desires to assure both itself and Executive of continuity of
Company management and operations in the event of a change in control
of Company.
C. This Agreement is not intended to and shall not materially alter the
compensation and benefits that Executive could reasonably expect in
the absence of a change in control of Company and therefore this
Agreement, though taking effect upon execution hereof, will be
operative only upon a "change in control" of the Company, as that
phrase is hereinafter defined.
D. Executive is willing to remain in the employ of Company following a
change in control of Company upon the terms and conditions mutually
agreed upon by Executive and Company as hereinafter set forth.
NOW, THEREFORE, in order to achieve the aforesaid purposes it is hereby
agreed by and between the parties as follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution
by the parties, but, anything in this Agreement to the contrary
notwithstanding, neither the Agreement nor any provision of it shall
be operative unless and until there has been a change in control of
Company as defined in paragraph 2 below. Upon the occurrence of a
change in control of Company, this Agreement and all provisions
thereof shall become operative immediately.
2. DEFINITIONS
The following words and phrases as used herein shall have the
following meanings:
"Cause" means any action or inaction that is materially contrary
to the best interests of Company.
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the following:
1
<PAGE>
(a) When any "person", as that term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, becomes a
beneficial owner directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of
the Company's then outstanding securities.
(b) When at any time less than fifty-one per cent (51%) of the
members of the Board of Directors shall be persons who were
either nominated for election by the Board of Directors as
constituted on the date of this Agreement or were elected by said
Board of Directors.
(c) Upon ownership by any corporation or group of associated persons
(excluding affiliates of the Company itself), acting in concert,
of any aggregate of more than 25% of the outstanding shares of
voting stock of the Company coupled with or followed by the
exercise of the voting power of such shares by the election of
two (2) or more directors of the Company in any one election
either at the instance of such corporation or group of associated
persons acting in concert or by the management of the Company in
a proxy solicitation.
"Disability" shall mean and be deemed to have occurred six (6)
months after Executive shall have become totally and permanently
disabled by bodily or mental injury or disease, so that Executive is
prevented from actively engaging in any full time executive employment
or occupation for remuneration or profit, as determined and certified
by any active full time practicing physician who is a member in good
standing of the Vanderburgh County Medical Society or any successor
organization.
"Effective date" means the date of a change in control.
"Term" means the period of time commencing on the "effective
date" and expiring on the earliest to occur of (i) the third
anniversary of the "effective date", (ii) Executive's potential date
of retirement as an officer/employee of Company on September 1, 1998,
(iii) Executive's death, (iv) the voluntary termination of Executive's
employment by Executive pursuant to Paragraph 5 below, or (v)
termination of Executive's employment by Company for "cause" pursuant
to Paragraph 5 below.
3. EXECUTIVE'S EMPLOYMENT WITH COMPANY
Throughout the "Term" of this Agreement, Executive shall be
employed at no lesser level position than that of Senior Vice
President of Company or such other entity as shall then be the
principal successor to the business, assets and properties of Company.
During the term:
(a) Executive shall devote his full business time and efforts to the
business and affairs of Company or the successor to the Company
by which
2
<PAGE>
Executive is then employed pursuant to this Agreement; provided,
however, that Executive shall not be precluded from serving as a
Director or member of a committee or board of any other entity
which involves no conflict of interest with Company or its
successor.
(b) Executive shall have duties, responsibilities and authority
consistent with those that normally attend the position of Senior
Vice President of a banking business comparable to that of
Company.
(c) The business, assets and properties of Company or its successor,
by whom Executive is employed pursuant to this Agreement, as well
as the support services and facilities available to Executive,
shall not differ materially from those of Company as existent one
(1) year prior to the "Effective Date."
(d) Executive shall not be required to change the situs of his
employment or residence as existent immediately prior to the
"Effective Date" unless agreed to by Executive.
4. EXECUTIVE'S COMPENSATION DURING TERM
Executive shall be entitled to the following compensation from
Company throughout the "term".
(a) base salary at no less than that in effect immediately prior to
the "Effective Date," but with adjustments subsequent to the
"Effective Date" as may be made from time to time as warranted;
(b) continuing participation in any corporate compensation plans,
pension plans, insurance, medical and hospitalization programs,
employment contracts and any other employee benefit plans,
practices or arrangements in effect immediately prior to the
"Effective Date" and as same may be modified, supplemented or
replaced without material reduction in value and benefits to
Executive;
(c) all benefits contractually provided or agreed to be provided by
Company to Executive pursuant to any contract or agreement
entered into prior to "Effective Date."
In the event of Executive's termination of employment after the
"Effective Date" by reason of disability or his voluntary termination
of employment with Company, or termination of Executive's employment
for any reason other than "cause" after the Effective Date or within
365 days prior to the Effective Date, then Company shall pay to
Executive, at Executive's option, either in annual payments or in a
lump sum not later than thirty (30) days after such termination, an
amount equal to Executive's then current annual authorized base
salary, multiplied by the number of years (computed to the nearest
month) by which his age, at the time of such termination of
Executive's employment, is less than age
3
<PAGE>
65; however, in no event shall said lump sum payment or annual
payments be more than three times the Executive's then current annual
authorized base salary. The payment of such lump sum amount or annual
payments to Executive shall not affect the obligations of Company, or
its successor, under any plan, other agreement or arrangement pursuant
to which Executive is entitled to any retirement, pension, stock and
insurance, benefits, payments and welfare contributions applicable to
retired management employees of Company, generally.
The Company shall provide for continuation in the medical and
hospitalization plan, or any successor program made available to
employees without a requirement of evidence of insurability, at a cost
equivalent to 105 percent of the combined amount paid by employees
plus the amount contributed by the Company for the employee for a
"family plan" or, if Executive should so elect, for a "single plan."
5. TERMINATION OF EXECUTIVE'S EMPLOYMENT AFTER EFFECTIVE DATE
Executive may at his election and upon ninety (90) days' prior
written notice to Company, or its successor, terminate his employment
in the event that Executive shall determine in his absolute judgment
that due to changed circumstances that occurred on or after the
"Effective Date," he is unable to continue to effectively carry out
his employment duties.
The Executive may be terminated for "cause" only pursuant to the
decision of an arbitrator appointed and acting pursuant to the Rules
and Regulations of the American Arbitration Association.
6. NON-COMPETITION
Upon Executive's receipt of a payment pursuant to Paragraph 4
hereof, Executive shall not, prior to attaining age 65, or within
three (3) years of the Effective Date, whichever occurs first, become
an officer, director or employee of, consultant to or majority
shareholder in any bank or bank holding company that substantially
competes with Company, its subsidiaries or its successor or successors
within a 60 mile radius of Evansville, Indiana.
7. COMPANY REQUIRED TO PAY LEGAL EXPENSES FOR ENFORCEMENT
If Executive is required, in his sole judgment, to incur
reasonable legal expense, including but not limited to reasonable
attorney's fees, in order to obtain full and effective enforcement of
Executive's rights under this Agreement, then in such event Company or
its successor shall be required to reimburse Executive for all such
reasonable expenses and costs.
4
<PAGE>
8. BINDING EFFECT AND ASSIGNMENT
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective executors,
administrators, heirs, personal representatives, successors and
assigns but neither this Agreement nor any right hereunder may be
assigned or transferred by either party hereto. Notwithstanding the
foregoing, the Company shall assign this Agreement to any person or
entity succeeding to substantially all of the business and assets of
Company upon a "change in control" and upon such a change in control
Company shall obtain the assumption of this Agreement by any such
successor.
9. NOTICES
Any notice to a party required or permitted to be given hereunder
shall be in writing and shall be deemed given when mailed by
registered or certified mail to such party at such party's address as
specified below:
If to the Company, to:
CNB Bancshares, Inc.
Attention: Corporate Secretary
20 N.W. Third Street
Evansville, Indiana 47739-0001
If to Executive, to:
His last known address shown on the records of Company.
10. SEVERABILITY
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
11. AMENDMENTS
This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
12. GOVERNING LAW
This Agreement shall be construed in accordance with the law of
the State of Indiana.
5
<PAGE>
13. EFFECT OF HEADINGS
The paragraph headings herein are for convenience only and shall
not affect the construction hereof.
14. Notwithstanding anything in the foregoing provisions of this
Agreement to the contrary, Company shall not be required to pay any
portion of any amount otherwise payable to Executive pursuant to this
Agreement if the Company cannot deduct such portion of any amount
payable to Executive pursuant to this Agreement solely due to
operation or application of Section 280G of the Internal Revenue Code
of 1954, as amended by the Tax Reform Act of 1984.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
CNB BANCSHARES, INC.
By: /s/ H. Lee Cooper
---------------------
Chairman of the Board
ATTEST: "COMPANY"
/s/ William E. Vieth
- ---------------------
Its: President
---------
By: /s/ Marvin Huff
-----------------
Marvin Huff
"EXECUTIVE"
6
<PAGE>
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT entered into between CNB BANCSHARES, INC. (hereinafter
sometimes referred to as "Company") and JOHN R. SPRUILL (hereinafter sometimes
referred to as "Executive"), this 3rd day of
October, 1995.
WITNESSETH:
WHEREAS:
A. Executive is an officer of Company and important to its management and
to the well being of Company, its stockholders and customers.
B. Company desires to assure both itself and Executive of continuity of
Company management and operations in the event of a change in control
of Company.
C. This Agreement is not intended to and shall not materially alter the
compensation and benefits that Executive could reasonably expect in
the absence of a change in control of Company and therefore this
Agreement, though taking effect upon execution hereof, will be
operative only upon a "change in control" of the Company, as that
phrase is hereinafter defined.
D. Executive is willing to remain in the employ of Company following a
change in control of Company upon the terms and conditions mutually
agreed upon by Executive and Company as hereinafter set forth.
NOW, THEREFORE, in order to achieve the aforesaid purposes it is hereby
agreed by and between the parties as follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution
by the parties, but, anything in this Agreement to the contrary
notwithstanding, neither the Agreement nor any provision of it shall
be operative unless and until there has been a change in control of
Company as defined in paragraph 2 below. Upon the occurrence of a
change in control of Company, this Agreement and all provisions
thereof shall become operative immediately.
2. DEFINITIONS
The following words and phrases as used herein shall have the
following meanings:
"Cause" means any action or inaction that is materially contrary
to the best interests of Company.
"Change in Control" shall mean and shall be deemed to have
occurred upon the happening of any one or more of the following:
1
<PAGE>
(a) When any "person", as that term is used in Section 13(d) and
14(d) (2) of the Securities Exchange Act of 1934, becomes a
beneficial owner directly or indirectly of securities of the
Company representing 20% or more of the combined voting power of
the Company's then outstanding securities.
(b) When at any time less than fifty-one per cent (51%) of the
members of the Board of Directors shall be persons who were
either nominated for election by the Board of Directors as
constituted on the date of this Agreement or were elected by said
Board of Directors.
(c) Upon ownership by any corporation or group of associated persons
(excluding affiliates of the Company itself), acting in concert,
of any aggregate of more than 25% of the outstanding shares of
voting stock of the Company coupled with or followed by the
exercise of the voting power of such shares by the election of
two (2) or more directors of the Company in any one election
either at the instance of such corporation or group of associated
persons acting in concert or by the management of the Company in
a proxy solicitation.
"Disability" shall mean and be deemed to have occurred six (6)
months after Executive shall have become totally and permanently
disabled by bodily or mental injury or disease, so that Executive is
prevented from actively engaging in any full time executive employment
or occupation for remuneration or profit, as determined and certified
by any active full time practicing physician who is a member in good
standing of the Vanderburgh County Medical Society or any successor
organization.
"Effective date" means the date of a change in control.
"Term" means the period of time commencing on the "effective
date" and expiring on the earliest to occur of (i) the third
anniversary of the "effective date", (ii) Executive's potential date
of retirement as an officer/employee of Company on June 1, 2007, (iii)
Executive's death, (iv) the voluntary termination of Executive's
employment by Executive pursuant to Paragraph 5 below, or (v)
termination of Executive's employment by Company for "cause" pursuant
to Paragraph 5 below.
3. EXECUTIVE'S EMPLOYMENT WITH COMPANY
Throughout the "Term" of this Agreement, Executive shall be
employed at no lesser level position than that of Executive Vice
President and Chief Financial Officer of Company or such other entity
as shall then be the principal successor to the business, assets and
properties of Company.
2
<PAGE>
During the term:
(a) Executive shall devote his full business time and efforts to the
business and affairs of Company or the successor to the Company
by which Executive is
then employed pursuant to this Agreement; provided, however, that
Executive shall not be precluded from serving as a Director or
member of a committee or board of any other entity which involves
no conflict of interest with Company or its successor.
(b) Executive shall have duties, responsibilities and authority
consistent with those that normally attend the position of Chief
Financial Officer of a banking business comparable to that of
Company.
(c) The business, assets and properties of Company or its successor,
by whom Executive is employed pursuant to this Agreement, as well
as the support services and facilities available to Executive,
shall not differ materially from those of Company as existent one
(1) year prior to the "Effective Date."
(d) Executive shall not be required to change the situs of his
employment or residence as existent immediately prior to the
"Effective Date" unless agreed to by Executive.
4. EXECUTIVE'S COMPENSATION DURING TERM
Executive shall be entitled to the following compensation from
Company throughout the "term".
(a) base salary at no less than that in effect immediately prior to
the "Effective Date," but with adjustments subsequent to the
"Effective Date" as may be made from time to time as warranted;
(b) continuing participation in any corporate compensation plans,
pension plans, insurance, medical and hospitalization programs,
employment contracts and any other employee benefit plans,
practices or arrangements in effect immediately prior to the
"Effective Date" and as same may be modified, supplemented or
replaced without material reduction in value and benefits to
Executive;
(c) all benefits contractually provided or agreed to be provided by
Company to Executive pursuant to any contract or agreement
entered into prior to "Effective Date."
In the event of Executive's termination of employment after the
"Effective Date" by reason of disability or his voluntary termination
of employment with Company, or termination of Executive's employment
for any reason other than "cause" after the Effective Date or within
365 days prior to the Effective Date, then Company shall pay to
Executive, at Executive's option, either in annual
3
<PAGE>
payments or in a lump sum not later than thirty (30) days after such
termination, an amount equal to Executive's then current annual
authorized base salary, multiplied by the number of years (computed to
the nearest month) by which his age, at the time of such termination
of Executive's employment, is less than age 65; however, in no event
shall said lump sum payment or annual payments be more than three
times the Executive's then current annual authorized base salary. The
payment of such lump sum amount or annual payments to Executive shall
not affect the obligations of Company, or its successor, under any
plan, other agreement or arrangement pursuant to which Executive is
entitled to any retirement, pension, stock and insurance, benefits,
payments and welfare contributions applicable to retired management
employees of Company, generally.
The Company shall provide for continuation in the medical and
hospitalization plan, or any successor program made available to
employees without a requirement of evidence of insurability, at a cost
equivalent to 105 percent of the combined amount paid by employees
plus the amount contributed by the Company for the employee for a
"family plan" or, if Executive should so elect, for a "single plan."
5. TERMINATION OF EXECUTIVE'S EMPLOYMENT AFTER EFFECTIVE DATE
Executive may at his election and upon ninety (90) days' prior
written notice to Company, or its successor, terminate his employment
in the event that Executive shall determine in his absolute judgment
that due to changed circumstances that occurred on or after the
"Effective Date," he is unable to continue to effectively carry out
his employment duties.
The Executive may be terminated for "cause" only pursuant to the
decision of an arbitrator appointed and acting pursuant to the Rules
and Regulations of the American Arbitration Association.
6. NON-COMPETITION
Upon Executive's receipt of a payment pursuant to Paragraph 4
hereof, Executive shall not, prior to attaining age 65, or within
three (3) years of the Effective Date, whichever occurs first, become
an officer, director or employee of, consultant to or majority
shareholder in any bank or bank holding company that substantially
competes with Company, its subsidiaries or its successor or successors
within a 60 mile radius of Evansville, Indiana.
4
<PAGE>
7. COMPANY REQUIRED TO PAY LEGAL EXPENSES FOR ENFORCEMENT
If Executive is required, in his sole judgment, to incur
reasonable legal expense, including but not limited to reasonable
attorney's fees, in order to obtain full and effective enforcement of
Executive's rights under this Agreement, then in such event Company or
its successor shall be required to reimburse Executive for all such
reasonable expenses and costs.
8. BINDING EFFECT AND ASSIGNMENT
This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective executors,
administrators, heirs, personal representatives, successors and
assigns but neither this Agreement nor any right hereunder may be
assigned or transferred by either party hereto. Notwithstanding the
foregoing, the Company shall assign this Agreement to any person or
entity succeeding to substantially all of the business and assets of
Company upon a "change in control" and upon such a change in control
Company shall obtain the assumption of this Agreement by any such
successor.
9. NOTICES
Any notice to a party required or permitted to be given hereunder
shall be in writing and shall be deemed given when mailed by
registered or certified mail to such party at such party's address as
specified below:
If to the Company, to:
CNB Bancshares, Inc.
Attention: Corporate Secretary
20 N.W. Third Street
Evansville, Indiana 47739-0001
If to Executive, to:
His last known address shown on the records of Company.
10. SEVERABILITY
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
11. AMENDMENTS
This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
5
<PAGE>
12. GOVERNING LAW
This Agreement shall be construed in accordance with the law of
the State of Indiana.
13. EFFECT OF HEADINGS
The paragraph headings herein are for convenience only and shall
not affect the construction hereof.
14. Notwithstanding anything in the foregoing provisions of this
Agreement to the contrary, Company shall not be required to pay any
portion of any amount otherwise payable to Executive pursuant to this
Agreement if the Company cannot deduct such portion of any amount
payable to Executive pursuant to this Agreement solely due to
operation or application of Section 280G of the Internal Revenue Code
of 1954, as amended by the Tax Reform Act of 1984.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
CNB BANCSHARES, INC.
By: /s/ H. Lee Cooper
-----------------------------------
Chairman and CEO
ATTEST:
/s/ Roxanne VanBibber
- -------------------------------------
Its: Assistant Secretary
-------------------------------
"COMPANY"
By: /s/ John R. Spruill
-----------------------------------
John R. Spruill
"EXECUTIVE"
6
<PAGE>
Exhibit 11
CNB BANCSHARES, INC.
Computation of Consolidated Net Income Per Share
(In thousands, except for per share data)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Primary:
Net income $35,651 $30,512 $32,784
------- ------- -------
Weighted average number of shares outstanding 17,933 17,773 17,575
Add - common stock equivalents 279 363 139
------- ------- -------
Weighted average number of shares outstanding, as adjusted 18,212 18,136 17,714
------- ------- -------
Net income per share $ 1.96 $ 1.68 $ 1.85
======= ======= =======
Fully Diluted:
Net income $35,651 $30,512 $32,784
Add - Interest and amortization of expenses
on 7.5% subordinated convertible debentures
due 2001, net of applicable taxes 307 354 620
------- ------- -------
Net income, as adjusted 35,958 30,866 33,404
------- ------- -------
Weighted average number of shares outstanding 17,933 17,773 17,575
Add - common stock equivalents 279 363 139
Add - shares issued assuming conversion of
7.5% subordinated debentures, due 2001 352 420 716
------- ------- -------
Weighted average number of shares outstanding, as adjusted 18,564 18,556 18,430
------- ------- -------
Net income per share $ 1.94 (1) $ 1.66 $ 1.81
======= ======= =======
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
<PAGE>
Financial Highlights
CNB Bancshares, Inc.
<TABLE>
<CAPTION>
1995 1994 change
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share
Fully diluted net income $ 1.96 $ 1.66 18.1%
Cash dividends paid .78 .74 5.4
Book value at year-end 16.64 15.16 9.8
Tangible book value at year-end 15.31 14.08 8.7
Market price (close) at year-end 28.50 28.21 1.0
============================================================================================
For the year (in thousands)
Net interest income $ 133,435 $ 121,273 10.0%
Provision for loan losses 6,939 7,234 (4.1)
Non-interest income 46,669 46,805 (0.3)
Non-interest expense 116,804 113,539 2.9
Net income 35,651 30,512 16.8
============================================================================================
Averages (in thousands)
Total assets $3,529,507 $3,278,950 7.6%
Total earning assets 3,308,300 3,055,115 8.3
Loans, net of unearned interest 2,139,427 1,950,233 9.7
Deposits 2,683,087 2,614,802 2.6
Shareholders' equity 285,894 277,146 3.2
============================================================================================
Financial ratios
Return on average assets 1.01% 0.93%
Return on average shareholders' equity 12.47 11.01
Net interest margin 4.13 4.07
Efficiency ratio 64 66
Allowance for loan losses to loans at year-end 1.46 1.35
Net charge-offs to average loans .35 .20
Equity to assets at year-end 8.20 7.91
Tangible equity to assets at year-end 7.60 7.39
Risk-based capital ratios at year-end
Tier 1 capital 12.21 12.22
Total capital 13.86 13.89
============================================================================================
Other Data at year-end
Common shares outstanding 17,894,770 17,204,746
Average common and equivalent shares outstanding 18,212,244 18,136,017
Common shareholders of record 8,423 8,173
Full-time equivalent associates 1,817 1,799
Offices 122 120
============================================================================================
</TABLE>
Notes: The above information has been restated for pooling transactions, except
for cash dividends per share declared by CNB Bancshares, Inc. Ratios and
average balances do not include the effect of net unrealized gains/losses
on investment securities available for sale. Efficiency ratio excludes
foreclosed property expenses, securities gains/losses, and other non-
recurring items, as originally reported, not restated for poolings of
interests.
1
<PAGE>
Selected Statistical Information
CNB Bancshares, Inc.
(Dollars in thousands, except for share information)
<TABLE>
<CAPTION>
Earnings 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 273,785 $ 227,050 $ 212,887 $ 227,540 $ 253,014
Interest expense 140,350 105,777 101,493 122,307 155,570
Net interest income 133,435 121,273 111,394 105,233 97,444
Provision for loan losses 6,939 7,234 3,890 9,191 15,431
Non-interest income 46,669 46,805 43,113 37,809 30,059
Non-interest expense 116,804 113,539 103,662 96,457 89,405
Income taxes 20,710 16,793 16,039 11,273 6,629
Income before change in accounting 35,651 30,512 30,916 26,121 16,038
Change in accounting for income taxes 1,868
Net income 35,651 30,512 32,784 26,121 16,038
Per Share Data (1)
- -----------------------------------------------------------------------------------------------------------------
Primary net income (2) $ 1.96 $ 1.68 $ 1.74 $ 1.49 $ 0.92
Fully diluted net income (2) 1.96 1.66 1.71 1.47 0.92
Cash dividends declared (3)(4) 0.59 0.75 0.70 0.68 0.65
Cash dividends paid (3) 0.78 0.74 0.68 0.65 0.64
Book value at year-end 16.64 15.16 15.48 13.83 11.89
Tangible book value at year-end 15.31 14.08 14.31 12.65 10.64
Market price (close) at year-end 28.50 28.21 27.27 22.88 17.62
At Year-end
- -----------------------------------------------------------------------------------------------------------------
Total assets $3,628,682 $3,461,339 $3,145,264 $2,918,357 $2,887,952
Earning assets 3,372,717 3,226,142 2,914,302 2,683,226 2,652,591
Loans, net of unearned interest (5) 1,971,454 2,118,126 1,841,457 1,596,427 1,725,186
Less: Allowance for loan losses 28,806 28,502 23,443 22,335 20,711
Net loans 1,942,648 2,089,624 1,818,014 1,574,092 1,704,475
Total deposits 2,789,989 2,595,456 2,590,790 2,454,234 2,431,887
Long-term debt 158,046 210,061 108,111 91,477 107,731
Shareholders' equity 297,693 273,828 271,778 238,759 207,331
Common shares outstanding 17,894,770 17,204,746 15,201,525 14,234,996 11,084,770
Average Balances (6)
- -----------------------------------------------------------------------------------------------------------------
Total assets $3,529,507 $3,278,950 $3,036,961 $2,908,545 $2,856,714
Earning assets 3,308,300 3,055,115 2,814,727 2,692,932 2,631,982
Loans, net of unearned interest (5) 2,139,427 1,950,233 1,717,139 1,670,135 1,751,130
Less: Allowance for loan losses 28,811 25,897 23,466 22,069 18,359
Net loans 2,110,616 1,924,336 1,693,673 1,648,066 1,732,771
Total deposits 2,683,087 2,614,802 2,530,831 2,438,924 2,414,726
Long-term debt 193,784 109,977 112,986 104,208 92,724
Shareholders' equity 285,894 277,146 251,276 225,612 206,334
Common and equivalent shares
outstanding 18,212,244 18,136,017 17,714,069 17,484,510 17,470,720
Financial Ratios (based on averages) (1)(6)
- -----------------------------------------------------------------------------------------------------------------
Return on assets 1.01% 0.93% 1.02% 0.90% 0.56%
Return on shareholders' equity 12.47 11.01 12.30 11.58 7.77
Net interest margin 4.13 4.07 4.08 4.05 3.87
Efficiency ratio (7) 64 66 67 65 64
Equity to assets 8.10 8.45 8.27 7.76 7.22
Tangible equity to assets 7.55 7.89 7.65 7.08 6.48
Cash dividend payout (4) 28 40 36 36 51
</TABLE>
1) Per share income and financial ratios are based on income before the
accounting change in 1993.
2) Change in accounting for income taxes (SFAS 109) increased primary and fully
diluted income per share by $.11 and $.10, respectively, in 1993.
3) Dividends per share is for CNB Bancshares, Inc. only, not restated for
pooling transactions.
4) Declaration date for fourth quarter 1995 dividend was changed from December
1995 to January 1996.
5) Excludes loans held for sale.
6) Average balances and financial ratios exclude net unrealized gains/losses on
securities available for sale.
7) Excludes foreclosed property expenses, securities gains/losses, and other
non-recurring items, as originally reported, not restated for poolings of
interests.
20
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
This section presents management's review of the operating results and financial
condition of CNB Bancshares, Inc. (the Corporation) and its subsidiaries. It
provides information which is not otherwise apparent from the consolidated
financial statements and related footnotes and is intended to assist readers in
evaluating the Corporation's performance. The following analysis should be read
in conjunction with the consolidated financial statements and accompanying
notes, as well as the average balance sheet and selected statistical information
presented in other sections of the report. All dollar amounts in tables
throughout this discussion and report are presented in thousands, except for per
share data, and all share data has been adjusted for common stock dividends.
The Corporation's financial data for periods prior to mergers accounted for as
poolings of interests, and having a material impact on the Corporation's
financial results, has been restated. This included 1995 mergers with UF
Bancorp, Inc., King City Federal Savings Bank and Harrisburg Bancshares, Inc.
Results of Operations
Net income for the twelve months ended December 31, 1995, was $35,651,000, an
increase of 16.8 percent over the $30,512,000 earned in 1994. Primary and fully
diluted net income per share of $1.96 in 1995 represented increases of 16.7
percent and 18.1 percent, respectively, over 1994 amounts. The improved 1995
operating performance was primarily due to increased net interest income. Growth
in earning assets, particularly loans, and an improved net interest margin
resulted in increased net interest income on a fully taxable equivalent basis of
$12,250,000 from 1994. Non-interest income was decreased by $136,000 while non-
interest expenses increased by $3,265,000 during 1995. Operating expenses as a
percentage of revenues, commonly referred to as the efficiency ratio, improved
from 66 percent in 1994 to 64 percent in 1995. The provision for loan losses was
decreased in 1995 by $295,000 from 1994. Net income declined in 1994 from the
$32,784,000 earned in 1993 when the benefits of adopting Financial Accounting
Standard No. 109, "Accounting for Income Taxes," increased 1993 net income by
$1,868,000 and added $.11 to primary and $.10 to fully diluted net income per
share. Net income per share in 1993 was $1.85 and $1.81 on a primary and fully-
diluted basis, respectively. Net income before the change in accounting was
$30,916,000 in 1993. The decrease in earnings before the accounting change,
restated for poolings of interests, was principally due to an increased
provision for loan losses and increased non-interest expenses at UF Bancorp. The
1994 provision for loan losses was increased by $3,344,000 from 1993 and
represented .37 percent of average loans as compared to .23 percent in 1993 and
.32 percent in 1995. The increased provision in 1994 was primarily the result of
pre-merger additions to reserves at recently acquired banks, to conform to the
Corporation's policy for credit risk.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
NET INCOME
(in millions)
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
X $12.7 $19.1 $24.3 $26.9
Y $16.0 $26.1 $32.8 $30.5 $35.7
X = As originally reported
Y = As restated
</TABLE>
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
AVERAGE TOTAL ASSETS
(in billions)
1991 1992 1993 1994 1995
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
$2.86 $2.91 $3.04 $3.28 $3.53
</TABLE>
21
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
The following table reconciles the changes in fully diluted income per share,
before changes in accounting, from 1993 to 1995 by major income statement
components which are further discussed below.
Changes in Fully Diluted Income Per Share
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Income per share, previous year $1.66 $1.71
Increase (decrease) attributable to:
Taxable equivalent net interest income .64 .50
Provision for loan losses .02 (.18)
Non-interest income (.01) .20
Non-interest expense (.18) (.53)
Income tax effect (.21) (.03)
(Increase) decrease in common shares and common equivalent
shares outstanding, net of convertible debenture expenses .04 (.01)
-------------
Net change .30 (.05)
-------------
Income per share, current year $1.96 $1.66
=============
</TABLE>
The current year's quarterly income and income per share increased throughout
1995, except for the quarter ended December 31, 1995. The third quarter of 1995
included a $1,843,000 gain on the sale of a $220 million mortgage servicing
portfolio and a $1,159,000 FDIC rebate due to a reduction in the assessment rate
effective June 1, 1995. The results of each 1995 quarter were increased from the
corresponding period of the prior year. The third quarter of 1994 included a
$1,450,000 gain on the sale of an inactive bank charter. Fourth quarter 1994
results included $256,000 of investment security losses, increased provisions
for loan losses and warranty losses on loans sold and other non-recurring
charges recorded by acquired companies prior to the mergers.
The Corporation's earnings in 1995 resulted in returns on average assets and
shareholders' equity of 1.01 percent and 12.47 percent, respectively, compared
with a return on assets of .93 percent and a return on equity of 11.01 percent
in 1994.
Return on Average Assets* Return on Average Equity*
0.56% 0.90% 1.02% 0.93% 1.01% 7.77% 11.58% 12.30% 11.01% 12.47%
(Chart) (Chart)
1991 1992 1993 1994 1995 1991 1992 1993 1994 1995
*Based on operating income before *Based on operating income before
cumulative effect of a change in cumulative effect of a change in
accounting for income taxes in accounting for income taxes in
1993. 1993.
22
<PAGE>
<TABLE>
<CAPTION>
Quarterly Results of Operations
Mar. 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Interest income $65,566 $67,339 $70,083 $70,797
Interest expense 32,675 34,554 36,572 36,549
Net interest income 32,891 32,785 33,511 34,248
Provision for loan losses 1,554 1,497 979 2,909
Net securities gains 130 1,072 86 877
Non-interest income 10,127 10,734 12,412 11,231
Non-interest expense 29,162 29,800 29,068 28,774
Income before income taxes 12,432 13,294 15,962 14,673
Income taxes 4,518 4,963 5,926 5,303
-----------------------------------
Net income $ 7,914 $ 8,331 $10,036 $ 9,370
===================================
Net income per share:
Primary net income per share $ .43 $ .46 $ .55 $ .52
===================================
Fully diluted net income per share $ .43 $ .46 $ .55 $ .52
===================================
1994
Interest income $52,445 $55,860 $58,100 $60,645
Interest expense 24,565 25,972 26,860 28,380
Net interest income 27,880 29,888 31,240 32,265
Provision for loan losses 1,520 1,708 1,997 2,009
Net securities gains (losses) 622 717 157 (809)
Non-interest income 12,057 11,061 12,098 10,902
Non-interest expense 27,533 27,955 28,265 29,786
Income before income taxes 11,506 12,003 13,233 10,563
Income taxes 3,886 4,276 4,663 3,968
-----------------------------------
Net income $ 7,620 $ 7,727 $ 8,570 $ 6,595
===================================
Net income per share:
Primary net income per share $ .43 $ .43 $ .47 $ .35
===================================
Fully diluted net income per share $ .42 $ .43 $ .46 $ .35
===================================
</TABLE>
23
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
Net Interest Income
Net interest income is the Corporation's largest component of income and
represents the difference between interest and fees earned on loans and
investments and the interest paid on interest bearing liabilities. In this
discussion, net interest income is presented on a "fully taxable equivalent"
basis whereby tax exempt income, such as interest on securities of state and
political subdivisions, has been increased to an amount that would have been
earned had it been taxable. This adjustment places taxable and nontaxable income
on a common basis and permits comparisons of rates and yields. A complete
analysis of net interest income, with average balances and related interest
rates for the past five years, appears on pages 64 and 65 of this report and has
been summarized in the following table.
<TABLE>
<CAPTION>
Net Interest and Net Interest Margin*
1995 1994 1993
Amount Rate Amount Rate Amount Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $277,060 8.37% $230,237 7.53% $216,199 7.68%
Interest expense 140,350 4.24 105,777 3.46 101,493 3.60
-----------------------------------------------------------------------
Net interest income $136,710 4.13% $124,460 4.07% $114,706 4.08%
=======================================================================
</TABLE>
*Fully taxable equivalent
Net interest income was $136,710,000 in 1995 compared to $124,460,000 in 1994,
an increase of $12,250,000 or 9.8 percent, due to an increased level of earning
assets and an improved net interest margin. Net interest income in 1994 was
increased by $9,754,000 or 8.5 percent over the $114,706,000 recorded in 1993.
The amount of net interest income is affected by changes in the volume and mix
of earning assets and interest bearing deposits and liabilities, and the
interest rates on these assets and liabilities. An analysis of how changes in
volumes and rates have affected net interest income since 1993 is presented
below.
<TABLE>
<CAPTION>
Analysis of Changes in Net Interest Income*
1995 over 1994 1994 over 1993
Volume Rate Total Volume Rate Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Federal funds sold and other
short-term money market
investments $ (970) $ 583 $ (387) $(1,748) $ 173 $(1,575)
Real estate loans held for sale (828) 125 (703) (2,102) 256 (1,846)
Investment securities 6,174 8,368 14,542 5,913 (3,939) 1,974
Loans 15,911 17,460 33,371 20,163 (4,678) 15,485
----------------------------------------------------------------------
Total interest income 20,287 26,536 46,823 22,226 (8,188) 14,038
----------------------------------------------------------------------
Interest Expense:
Interest bearing transaction
accounts (637) 298 (339) 962 (630) 332
Money market investment
accounts (400) 2,810 2,410 359 (389) (30)
Savings deposits (1,045) 105 (940) 422 (871) (449)
Certificates of deposit and
other time 6,660 13,837 20,497 (188) (2,683) (2,871)
Short-term borrowings 3,789 3,257 7,046 4,025 4,071 8,096
Long-term debt 5,473 426 5,899 (212) (582) (794)
----------------------------------------------------------------------
Total interest expense 13,840 20,733 34,573 5,368 (1,084) 4,284
----------------------------------------------------------------------
Changes in net interest income $ 6,447 $ 5,803 $12,250 $16,858 $(7,104) $ 9,754
======================================================================
</TABLE>
* Fully taxable equivalent
Note: The change in interest which cannot be attributed to only a change in
rate or a change in volume, but instead represents a combination of the
two factors, has been allocated to the rate variance.
24
<PAGE>
Net Interest Income
(taxable equivalents basis in millions)
[BAR CHART APPEARS HERE]
1991.................$102
1992.................$109
1993.................$115
1994.................$124
1995.................$137
Average earning assets, which includes loans, investment securities and
other assets that earn interest, increased by $253,185,000 during 1995 to
$3,308,300,000, while interest bearing liabilities increased by only
$228,882,000. Consequently, a greater portion of the Corporation's earning
assets was funded in 1995 by non-interest bearing sources such as demand
deposits, which contributed to the increased net interest income and an improved
net interest margin. Average loans increased by $189,194,000 to $2,139,427,000
during 1995 and represented 64.7 percent of earning assets compared to 63.8
percent in 1994. Average earning assets were $3,055,115,000 and interest bearing
liabilities were $2,688,081,000 in 1994, increases of $240,388,000 and
$194,751,000, respectively, from 1993. As the preceding analysis indicates, this
increased volume resulted in $6,447,000 and $16,858,000 of additional net
interest income in 1995 and 1994, respectively, over the previous years'.
The net interest margin is a percentage computed by dividing net interest
income (on a fully taxable equivalent basis) by average earning assets and
represents a basic measure of interest earned on interest bearing assets held by
the Corporation, less the interest expense to fund such assets. The net interest
margin increased by 6 basis points to 4.13 percent in 1995 from 4.07 percent in
1994, which declined by 1 basis point from 1993. The prime lending rate has
increased by 250 basis points since the beginning of 1994, resulting in loans,
particularly commercial loans, repricing to a greater extent than deposits and
borrowed funds. However, the prime rate has been less volatile during the
current year, increasing by 50 basis points during the first half of 1995 and
decreasing by this same amount during the second half of the year. Interest
income as a percentage of average earning assets increased by 84 basis points
from 1994 to 8.37 percent as a result of the changes in the prime and other
market interest rates and a reallocation in the mix of earning assets from money
market investments and investment securities to higher yielding loans. Interest
expense as a percentage of average earning assets increased by 78 basis points
to 4.24 percent. To reduce the impact of changing interest rates on its costs to
acquire liabilities that fund certain loans and investment securities, the
Corporation has entered into interest rate contracts. During 1994 and 1995, the
purchase of certain mortgage-backed investment securities and the origination of
certain fixed rate loans were funded with repurchase agreements and variable
rate FHLB advances, the interest cost of which was hedged by the purchase of
interest rate swaps and caps. The Corporation has entered into an interest rate
swap agreement to better match the origination of fixed rate loans with variable
rate borrowings. This agreement represents an exchange of interest payments and
requires the Corporation to pay a fixed rate and receive a LIBOR-based variable
rate payment. Amortization of premiums paid for interest rate caps totaled
$1,286,000 and $963,000 in 1995 and 1994, respectively. This expense was offset
by counterparty reimbursements of $1,335,000 and $133,000, respectively, during
the same periods.
Provision for Loan Losses
The provision for loan losses represents a charge against income and a
corresponding increase to the allowance for possible future loan losses. This
provision was $6,939,000 in 1995 as compared to $7,234,000 and $3,890,000 in
1994 and 1993, respectively. Net loans charged-off represented .35 percent of
average loans in 1995 as compared to .20 percent in 1994 and .22 percent in
1993. The growth in the loan portfolio, increase in net loans charged-off and
Net Interest Margin
(taxable equivalents basis)
[BAR CHART APPEARS HERE]
1991.................3.87%
1992.................4.05%
1993.................4.08%
1994.................4.07%
1995.................4.13%
25
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
an increase of $7,932,000 in non-accrual loans resulted in the Corporation
maintaining the current year provision at a level consistent with the prior
year, decreasing by only $295,000 to $6,939,000. The 1994 provision was
increased by $3,344,000 compared to 1993 due in part to the growth in the loan
portfolio, to provide for a portion of a $3.4 million credit that was placed on
nonaccrual status in June 1994 and increased provisions at recently acquired
banks prior to their mergers with the Corporation. Further analysis of loan
losses as well as the allowance for loan losses is contained in the Loans and
Risk Management section of this discussion.
Non-Interest Income
Non-interest income was decreased by $136,000, or 0.3 percent, to $46,669,000 in
1995, after increasing by $3,692,000, or 8.6 percent in 1994 from 1993. Non-
interest income represented 25.4 percent of net revenues in 1995 as compared to
27.3 percent and 27.3 percent in 1994 and 1993, respectively as the Corporation
exited certain out-of-market mortgage origination activities previously
conducted by UF Bancorp. The following table summarizes non-interest income for
the three years ending December 31, 1995.
<TABLE>
<CAPTION>
Change from Prior Year
Amount 1995 1994
1995 1994 1993 Amount Percent Amount Percent
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts $10,908 $ 9,500 $ 8,607 $ 1,408 14.8% $ 893 10.4%
Mortgage loan origination
and servicing 7,662 9,113 10,721 (1,451) (15.9) (1,608) (15.0)
Insurance premiums
and commissions 6,009 6,746 5,546 (737) (10.9) 1,200 21.6
Trust fees 5,169 4,538 4,195 631 13.9 343 8.2
Credit card and other non-interest
fees on loans 5,142 4,986 4,219 156 3.1 767 18.2
Investment products fees 3,035 2,816 2,611 219 7.8 205 7.9
Net securities gains 2,165 687 1,221 1,478 215.1 (534) (43.7)
Other 6,579 8,419 5,993 (1,840) (21.9) 2,426 40.5
-------------------------------------------------------------
Total non-interest income $46,669 $46,805 $43,113 $ (136) (0.3)% $ 3,692 8.6%
=============================================================
</TABLE>
Service charges on deposit accounts increased by 14.8 percent or $1,408,000
in 1995 to $10,908,000, compared with $9,500,000 in 1994 and $8,607,000 in 1993.
Growth in these fees is the result of an increased number of deposit accounts,
chargeable services and higher activity fees.
Mortgage loan origination and servicing fees totaled $7,662,000 in 1995 and
have declined since 1993 as residential mortgage loan originations and related
sales declined during the rising interest rate environment. The volume of
mortgage originations increased during the third and fourth quarters of 1995 as
interest rates fell. Residential real estate loans are originated by the
Corporation's subsidiary banks, some of which are sold in the secondary market.
The Corporation continues to service most of the sold loans, particularly those
originated in its primary markets. The sale of fixed rate loans in the secondary
market enables the Corporation to generate fee income and limit its long-term
interest rate exposure. Two wholly-owned mortgage banking subsidiaries
discontinued loan originations, one during the fourth quarter of 1993, and the
second during the third quarter of 1995. These UF Bancorp subsidiaries, based on
the East and West Coasts did not coincide with Corporation's strategic plans and
generated only marginal net operating results. Net gains from the sale of
mortgage loans fell by $2,038,000 in 1995 as a result of closing the mortgage
banking subsidiaries and as higher interest rates during 1994 and the first part
of 1995 resulted in fewer mortgage loan closings and related sales as compared
to prior years. Loans are generally priced to generate gains on sales, and no
material losses were recorded during 1993 through 1995. The Corporation also
held in its portfolio a greater number of mortgage loans originated during 1995
as customer preference shifted to fixed rate 15 year and shorter term balloon
mortgages which are generally not sold in the secondary market. Income of
$2,299,000 and $3,639,000 in 1995 and 1994, respectively, related to the on-
going servicing of sold loans. During the third quarter of 1995, the Corporation
sold mortgage servicing rights on a $220 million servicing portfolio at a net
gain of $1,843,000. These loans had been generated by the West Coast subsidiary
discussed above and were not in the Corporation's primary market. At year-end,
the Corporation was servicing $710,634,000 of residential real estate loans
which had been sold.
26
<PAGE>
Revenues from insurance premiums and commissions decreased by $737,000 in
1995 to $6,009,000. Profit sharing bonuses received during 1995, which are
experience related and associated with prior year property and casualty policies
written, were $389,000 lower than payments received in 1994. In addition, life
and health insurance premiums also decreased from 1994 by $557,000 as Citizens
Insurance of Evansville has been regulatorily restricted from writing such
policies since being acquired by the Corporation during the fourth quarter of
1994. Insurance premiums and commissions were $6,746,000 in 1994 compared to
$5,546,000 in 1993. Of the 1994 increase, $790,000 related to credit life and
credit disability revenues generated by Citizens Life Assurance Company which
was formed during the first quarter of 1994.
Fees from trust and fiduciary services increased by 13.9 percent to
$5,169,000 in 1995, after increasing 8.2 percent in 1994. Trust fee income is
based primarily on the market value of assets under management or custody, which
totaled $1,212,017,000 at December 31, 1995, compared to $1,028,795,000 and
$1,026,939,000 at December 31, 1994 and 1993, respectively. Trust assets are
maintained separate and apart from the assets of the banks and are not included
in the consolidated asset totals of CNB Bancshares presented in this report.
Credit card and other non-interest fees on loans, which consist of credit
card membership and processing fees and origination fees net of amortized costs,
increased by $156,000 to $5,142,000 in 1995. Credit card and other non-interest
fees on loans were $4,986,000 in 1994 compared to $4,219,000 in 1993. These
increases were substantially due to increased credit card transaction volumes
and loan application and processing fees.
Investment product fees increased by 7.8 percent to $3,035,000 in 1995 as
the Corporation continued to place greater emphasis on the sale of annuities,
mutual funds and other non-traditional banking products. These fees increased by
7.9 percent to $2,816,000 in 1994 from $2,611,000 in 1993.
Net securities gains equaled $2,165,000 in 1995 as compared to $687,000 in
1994 and $1,221,000 in 1993. Investment security gains were generated in 1995 as
the Corporation chose to minimize the increased prepayment risks by selling
certain higher coupon 15 year and balloon mortgage backed securities. During
1994, the Corporation took advantage of a steep yield curve early in the year by
selling certain U.S. Treasury notes at gains and reinvesting the proceeds in
mortgage-backed securities with higher current yields and only slightly longer
estimated average lives. Of the 1993 net securities gains, $361,000 can be
attributed to the restructuring of the investment portfolios of acquired
institutions to conform to the Corporation's investment strategies and policies.
Additionally, U.S. Treasury securities that had been classified as held for sale
were sold at net gains of $362,000 during the third quarter of 1993, and were
replaced with mortgage-backed securities to improve the portfolio's yield and
expected cash flows. The remaining net securities gains in 1993 were recorded
during the fourth quarter as the portfolio was restructured in anticipation of
adopting FAS 115 and to further improve yields.
Trust Assets Under Management at Year-End
(in billions)
[BAR CHART APPEARS HERE]
1991.................$.870
1992.................$.950
1993.................$1.03
1994.................$1.03
1995.................$1.21
Other income totaled $6,579,000 in 1995, a decrease of $1,840,000 from
1994. During the third quarter of 1994, the Corporation sold an inactive charter
of a wholly-owned subsidiary, resulting in a gain of $1,450,000. After the
charter sale, the Corporation's five Kentucky banks were merged into a single
bank operating in four separate regions. Also included in 1994 other income were
gains of $364,000 and $479,000, respectively, associated with the sale and
change in market value of interest rate caps in accordance with hedge accounting
rules where the hedged liabilities were terminated. During the fourth quarter of
1995, the Corporation sold the deposits and premises of a branch located in Mt.
Carmel, Illinois, which generated a gain of $302,000. This office had only a
small market share in Mt. Carmel and did not match the Corporation's strategic
plan. Included in other income, data processing fees declined by $353,000 during
1994 to $1,253,000, the result of increased competition and lost business due to
continued consolidations within the banking industry. Data processing fees
equaled $1,226,000 in 1995.
27
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
Non-Interest Expense
Operating expenses, other than interest and provision for loan losses, were
$116,804,000 in 1995, compared to $113,539,000 and $103,662,000 in 1994 and
1993, respectively. The increase in operating expenses of $3,265,000 or 2.9
percent from 1994 was largely due to expenses associated with merger activities,
expanded business activities and expenses associated with the continuing
conversion to new data processing systems offset by the positive results of
continued cost containment efforts, particularly in periods subsequent to
mergers. The Corporation continues its efforts to maintain control over its
operating costs and has implemented several strategies to further improve
operating efficiencies, including installing operationally efficient data
processing systems, consolidating certain backoffice operations and merging
subsidiary banks which are located in common markets. Various subsidiary banks
have been merged during the last two years, including the three Illinois banks
(two of which were acquired during February 1995) that were merged during the
second quarter of 1995, where continued operational efficiencies and operating
cost reductions are expected. The Corporation has been able to leverage its data
processing system which has capacity to absorb additional volumes at only
minimal increased costs. In August 1995, the Corporation completed the mergers
of UF Bancorp, The Bank of Orleans and the Indiana operations of Household Bank.
All systems were converted, signage changed and operations transferred on merger
date. These acquisitions generally were in markets previously served by the
Corporation which allowed for the closing of ten offices. Non-interest expenses
increased by $9,877,000, or 9.5 percent from 1993 to 1994.
Salaries and employee benefits (personnel expenses) comprise the largest
component of non-interest expense, equaling $57,604,000 or 49.3 percent of the
total in 1995 compared with $55,682,000 and 49.0 percent in 1994. Personnel
expenses increased by $1,922,000 in 1995, or 3.5 percent from 1994. Employee
incentive commissions were increased by $1,850,000 from 1994 as the Corporation
continued to expand its product line and sales of fee-based services and shift
to other performance-based awards. This was partially offset by a decline in
health and other insurance costs of $160,000 as the more expensive health plans
of acquired institutions were replaced with the Corporation's plan. Salaries and
benefits expense increased by $2,511,000 in 1994 to $55,682,000. Employee
incentive commissions were increased by $617,000 in 1994 while health and other
insurance costs increased by $354,000. The remaining increase was due to
training and related costs associated with the data processing system conversion
discussed above, normal salary increases and expenses associated with increased
business activity.
Data processing and other services increased by $4,380,000 to $11,648,000
in 1995. This increase was due primarily to the agreement with ALLTEL
Information Services, Inc. (ALLTEL), whereby ALLTEL provides data processing
software systems and computer equipment and operates the Corporation's data
processing facility. This agreement was effective December 1992 but provided for
a transition to the full contracted service over a period which ended December
31, 1994. There was no material change in total operating expense as a result of
the agreement but changes in individual expense categories occurred from 1994 to
1995. Increased data processing expenses have been partially offset by
reductions in personnel, equipment and other expenses as the agreement became
fully effective January 1, 1995, and as operating savings through the
consolidation of backoffice functions and other efficiencies have been achieved.
The increase in 1994 from 1993 was $1,110,000. The 1994 increase was due to
increased credit card transaction volumes and higher expenses for computer
software.
Occupancy expenses increased by $121,000 from 1994 to $8,044,000 due to
additional offices acquired during 1995. Occupancy expense was increased by
$271,000 from 1993 to $7,923,000 as the Corporation was operating six additional
banking offices at year-end 1994, as compared to year-end 1993. Rental income
from office space available for future expansion, reported as a reduction of
occupancy expense, was $368,000 lower in 1994 compared to 1993, due primarily to
the termination of a lease agreement during the fourth quarter of 1993.
Equipment expense increased by only $18,000 over 1994 to $6,850,000 as
responsibility for most data processing equipment expenses were contractually
transferred from the Corporation to our service provider, as previously
discussed. Equipment expense increased in 1994 from 1993 by $871,000 principally
due to higher data processing equipment expense and the additional banking
locations as previously discussed.
Federal Deposit Insurance Corporation (FDIC) assessments decreased in 1995
by $2,261,000 to $3,996,000. The FDIC assessment rate was reduced from $.23 to
$.04 per $100 of deposits insured by the Bank Insurance Fund (BIF) effective
June 1, 1995. Excess prepaid premiums were refunded in September. In December
the FDIC set the BIF premium for the six months ended June 30, 1996, at zero.
The portion of the Corporation's deposits acquired from thrifts over the years
remains insured by the Savings Association Insurance Fund (SAIF) of the FDIC
which continues to be assessed at $.23 per $100 of deposits. Congress is
currently considering a special, one-time assessment on SAIF-insured deposits.
If enacted, this
28
<PAGE>
assessment could result in a one-time, pre-tax charge of up to $7,300,000,
which could be offset by lower ongoing insurance costs in the future. Based on
the current rates, the Corporation estimates its 1996 FDIC assessments will be
approximately $2,200,000. FDIC assessments were $6,257,000 and $5,444,000 in
1994 and 1993, respectively.
Professional fees, printing and supplies, advertising, and postage and freight
increased from 1994 due to the acquisitions and generally higher levels of
business activity. Other expense was reduced in 1995 by $3,074,000. Charges of
$1,482,000 for warranty losses on sold loans were recognized during 1994 and
were required due to representations and warranties made to purchasers of loans
and mortgage servicing rights of loans originated by the two UF Bancorp mortgage
banking companies. Expenses related to the management of foreclosed properties
were $653,000 in 1995 compared to $1,088,000 in 1994. The remaining decrease in
1995 other expense was due to more accurate classification of expense at banks
subsequent to merger with the Corporation. Other expense increased by $3,941,000
to $17,833,000 in 1994. In addition to the 1994 warranty reserve expense,
expenses related to the newly formed life insurance subsidiary, including ceding
fees and policy reserves, accounted for $539,000 of the increase. The remaining
increase was generally due to the Corporation's expanded business activities.
Non-Interest Expense
<TABLE>
<CAPTION>
Change from Prior Year
Amount 1995 1994
1995 1994 1993 Amount Percent Amount Percent
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits $ 57,604 $ 55,682 $ 53,171 $ 1,922 3.5% $2,511 4.7%
Data processing and other services 11,648 7,268 6,158 4,380 60.3 1,110 18.0
Occupancy expense 8,044 7,923 7,652 121 1.5 271 3.5
Equipment expense 6,850 6,832 5,961 18 0.3 871 14.6
FDIC assessments 3,996 6,257 5,444 (2,261) (36.1) 813 14.9
Professional fees 3,787 3,106 3,118 681 21.9 (12) (0.4)
Printing and supplies 3,667 3,080 2,770 587 19.1 310 11.2
Advertising and promotion 3,444 2,832 2,772 612 21.6 60 2.2
Postage and freight 3,005 2,726 2,724 279 10.2 2 0.1
Other 14,759 17,833 13,892 (3,074) (17.2) 3,941 28.4
-------------------------------------------------------------------------
Total non-interest expense $116,804 $113,539 $103,662 $ 3,265 2.9% $9,877 9.5%
=========================================================================
</TABLE>
Income Taxes
Income tax expense for 1995 was $20,710,000, as compared to $16,793,000 recorded
in 1994 and $16,039,000 in 1993. The effective tax rate for the current year
increased to 36.7 percent from 35.5 percent and 34.2 percent in 1994 and 1993,
respectively, primarily due to the acquisition of Citizens Realty and Insurance,
Inc., which did not pay corporate income tax in 1993 and 1994 as the former
shareholders elected to be treated as an S Corporation for income tax purposes.
As such, corporate income was passed directly to the shareholders and combined
with their taxable income on their personal returns. Additionally, a higher
percentage of the Corporation's income is now derived from taxable sources. Tax
exempt interest income in 1995 increased by $390,000, or 6.0 percent, after
declining by $138,000 in 1994 from 1993. Taxable income, however, has increased
at a greater rate than tax exempt interest during these periods. Income tax
expense does not necessarily indicate the amount of taxes currently payable,
which the Corporation estimates to be $22,044,000 for 1995 compared to
$19,282,000 for 1994. Income taxes are also discussed in Note 11 of the
consolidated financial statements.
Financial Condition
At year-end, the Corporation's assets were increased to $3,628,682,000 compared
to $3,461,339,000 at December 31, 1994. Average assets were $3,529,507,000
during 1995, which represented an increase of 7.6 percent over 1994 averages.
The financial condition of CNB Bancshares at December 31, 1995, is presented
in the comparative balance sheet of the consolidated financial statements. The
following discussion addresses loans and other components of earning assets,
sources of funds, capital resources, and liquidity and interest rate
sensitivity.
Loans and Risk Management
Loans at December 31, 1995, excluding real estate loans held for sale, totaled
$1,971,454,000 as compared to $2,118,126,000 the previous year-end, a decline of
$146,672,000. As subsequently discussed, the Corporation reclassified
$209,000,000 in residential mortgage loans to real estate loans held for sale.
The reclassification of these loans at December 31, 1995, had only minimal
effect on
29
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
1995 average loan balances which were $2,139,427,000, an increase of
$189,194,000 or 9.7 percent from 1994. Strong growth was experienced in all loan
categories during 1995 except for tax exempt loans. Few tax exempt loans have
been made since the Tax Reform Act of 1986. Average loans were $1,950,233,000 in
1994, which represented a 13.6 percent increase from 1993.
Commercial loans totaled $555,571,000 at December 31, 1995. As of December 31,
1995, the Corporation reclassified $214,550,000 of real estate mortgage loans
secured by owner-occupied commercial or service related businesses. Management
believes that classifying such loans as commercial loans is more consistent with
their underwriting criteria and also more accurately reflects the credit risk
associated with such loans. Prior years' loan balances in the accompanying
tables have not been reclassified using the new criteria. Therefore, the
$237,613,000 increase in commercial loans from December 31, 1994 to December 31,
1995 must be viewed in the context of the reclassification. Average commercial
loan balances were not materially affected by the reclassification, and were
increased by $34,571,000 over 1994 amounts. Tax exempt loans, which include
economic development bonds, declined to $23,354,000 at December 31, 1995. The
Corporation expects these and other nontaxable loans to decline in the future
because the Tax Reform Act of 1986 generally reduced their availability.
Real estate mortgage loans, which consist of residential, commercial and
agricultural loans secured by real estate, and construction loans, totaled
$851,617,000 at December 31, 1995, compared to $1,238,416,000 one year ago.
Residential real estate loans were decreased by $162,681,000 at year-end as the
Corporation reclassified $209,000,000 of fixed rate residential first mortgage
loans from the loan portfolio into real estate loans held for sale. Initiated to
provide more flexibility in balance sheet management, the Corporation plans to
securitize these mortgages and place the securities into the investments
available for sale classification. At year-end 1995, real estate loans held for
sale totaled $222,157,000 and had an estimated fair value of $224,000,000. The
Corporation has experienced demand for new residential real estate mortgage
loans, particularly since mid-year 1995 as interest rates have fallen. Customer
preference in the current rate environment has shifted from adjustable rate real
estate loans, to fixed rate 15-year and shorter term balloon loans which the
Corporation may hold rather than sell in the secondary market. Current asset-
liability management policy dictates that all 30-year fixed rate loans are sold.
While the Corporation may sell certain 15-year and longer term loans in the
secondary market, servicing rights are generally retained. At year-end,
$710,634,000 of residential real estate loans originated by the Corporation's
banks and subsequently sold in the secondary market were being serviced. At
December 31, 1995, owner-occupied residential loans, excluding the loans held
for sale, were 33.8 percent of total loans as compared to 39.1 percent at the
end of the prior year. The aggregate of commercial and agricultural mortgage,
and construction loans represented 9.4 percent of total loans at year-end as
compared to 19.3 percent at the end of last year. The decrease is due to the
reclassification of $214,550,000 of real estate mortgage loans to commercial
loans, as previously discussed.
Consumer loans increased to $540,912,000 at December 31, 1995, and included
installment loans, home equity and personal lines of credit, student loans and
credit card loans. These loans totaled $536,504,000 and $476,421,000 at December
31, 1994 and 1993, respectively. Strong growth was experienced during 1993 and
early 1994 in installment loans for the purchase of automobiles and other
consumer goods. The granting of indirect consumer loans through automobile
dealers was much lower in 1994 compared to 1993, as the Corporation elected not
to match what management considered to be low rates by competitors in certain
markets. Direct consumer loan demand continued through 1995 due to direct mail,
in-office promotions, and a "loan by phone" program for both fixed and variable
rate installment loans and home equity loans, with the latter increasing by
$8,351,000 or 13.4 percent during 1995. Cash flows from the scheduled repayments
and early payoff of 1993 and 1994 indirect loan production has exceeded 1995 new
production. Consequently, indirect loan balances have declined since 1993 which
has offset increased levels of direct loans. Credit card loan balances averaged
$37,097,000 during 1995, which represented an increase of 10.2 percent over 1994
as the number of cardholders increased due to various marketing programs.
CNB Bancshares' loan portfolio contains no loans to foreign governments,
foreign enterprises, foreign operations of domestic companies, or highly
leveraged transactions, nor any concentrations to borrowers engaged in the same
or similar industries that exceed 10 percent of total loans.
30
<PAGE>
Loans Outstanding at December 31,
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, industrial and
agricultural production loans $ 555,571 $ 317,958 $ 284,981 $ 224,680 $ 259,386
Tax exempt loans 23,354 25,248 26,788 34,722 44,502
Real estate mortgage loans:
Commercial and agricultural 136,941 340,792 307,516 305,981 301,081
Construction 48,690 68,957 43,006 31,554 35,544
Residential 665,986 828,667 702,745 620,052 730,777
----------------------------------------------------------
851,617 1,238,416 1,053,267 957,587 1,067,402
Consumer loans 540,912 536,504 476,421 379,438 353,896
----------------------------------------------------------
Total loans $1,971,454 $2,118,126 $1,841,457 $1,596,427 $1,725,186
==========================================================
</TABLE>
Note: Owner-occupied commercial real estate loans were reclassified to
commercial, industrial and agricultural production loans at December 31, 1995.
Loan Maturities at December 31, 1995
<TABLE>
<CAPTION>
Within 1-5 Over 5
1 Year Years Years Total
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loan Type:
Commercial and industrial, agricultural
and tax exempt loans $270,243 $186,139 $122,543 $ 578,925
Real estate mortgage loans 132,186 229,788 489,643 851,617
Consumer loans 172,732 354,390 13,790 540,912
----------------------------------------
Total $575,161 $770,317 $625,976 $1,971,454
========================================
</TABLE>
In the previous table, loans with maturities of over one year totaled
$1,396,293,000. Of this total, $960,045,000 had floating interest rates and the
remainder had fixed interest rates.
An allowance for loan losses is maintained at a level considered adequate by
management to absorb potential loan losses as determined by evaluations of the
loan portfolio on a continuing basis. This evaluation by management includes
consideration of past loan loss experience, changes in the composition of the
loan portfolio, the volume and condition of the loan portfolio, expected cash
flows or the observable market price of the loans or the fair value of the
collateral for impaired loans, as well as the financial condition of specific
borrowers and current economic conditions.
Loans with principal or interest payments contractually due but not yet paid
are reviewed weekly by senior management and are placed on nonaccrual status
when scheduled payments remain unpaid for 90 days or more, unless the loan is
both well secured and in the process of collection. Interest income on
nonaccrual loans is recorded
[BAR GRAPHS APPEAR HERE]
Average Loans Allowance for Loan Losses to Loans
(in billions) at Year-End
$1.75 $1.67 $1.72 $1.95 $2.14 1.20% 1.40% 1.27% 1.35% 1.46%
(Chart) (Chart)
1991 1992 1993 1994 1995 1991 1992 1993 1994 1995
31
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
when actually received (cash basis) in contrast to the accrual basis, which
records income over the period in which it is earned, regardless of when it is
received. Loans are charged to the allowance for loan losses when deemed
uncollectible by management, unless sufficient collateral exists to adequately
secure the loan.
The provision for loan losses charged to expense was $6,939,000 in 1995 and
$7,234,000 in 1994. Loan losses, net of recoveries, charged against the
allowance were $7,404,000 in 1995, compared to $3,854,000 in 1994. The allowance
for loan losses averaged $28,811,000 in 1995 and was $28,806,000 at December 31,
1995, which represented 1.46 percent of loans on that date. In the previous
year, the allowance for loan losses averaged $25,897,000 and was $28,502,000 at
December 31, 1994, which was 1.35 percent of loans. The allowance for loan
losses equaled 124.8 percent and 178.4 percent of total non-performing loans,
including loans 90 days or more past due and accruing, at December 31, 1995 and
1994, respectively.
A summary of loan loss experience and management's allocation of the
allowance for loan losses to the various loan categories for the years indicated
follow.
Summary of Loan Loss Experience
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses
Balance at January 1, $28,502 $23,443 $2,335 $20,711 $17,296
Allowance of subsidiaries at acquisition date 769 1,118 924
Adjustment to conform year-ends 561
Loan charge-offs:
Commercial, agricultural and tax exempt 2,839 1,698 1,958 3,684 8,050
Real estate mortgage 208 535 1,393 3,464 1,295
Consumer 6,447 3,400 2,779 3,853 4,096
---------------------------------------------------------
Total loan charge-offs 9,494 5,633 6,130 11,001 13,441
---------------------------------------------------------
Loan recoveries:
Commercial, agricultural and tax exempt 915 638 902 2,275 378
Real estate mortgage 136 216 484 151 177
Consumer 1,039 925 1,038 1,008 870
---------------------------------------------------------
Total loan recoveries 2,090 1,779 2,424 3,434 1,425
---------------------------------------------------------
Net charge-offs 7,404 3,854 3,706 7,567 12,016
---------------------------------------------------------
Provision for loan losses 6,939 7,234 3,890 9,191 15,431
---------------------------------------------------------
Balance at December 31, $28,806 $28,502 $23,443 $22,335 $20,711
=========================================================
Ratio of net charge-offs to average
loans outstanding .35% .20% .22% .45% .69%
=========================================================
Ratio of provision for loan losses to average
loans outstanding .32% .37% .23% .55% .88%
=========================================================
Ratio of allowance for loan losses to total loans
outstanding at year-end 1.46% 1.35% 1.27% 1.40% 1.20%
=========================================================
</TABLE>
Management's Allocation of Allowance for Loan Losses
<TABLE>
<CAPTION>
Allowance Amount Percent of Loans to Total Loans
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, agricultural
and tax exempt $ 9,872 $ 7,879 $ 6,979 $ 8,206 $ 7,630 29% 16% 17% 16% 18%
Real estate mortgage 8,712 9,831 6,720 5,991 6,222 43 59 57 60 62
Consumer 8,523 9,060 7,821 6,222 5,517 28 25 26 24 20
Unallocated 1,699 1,732 1,923 1,916 1,342
-----------------------------------------------------------------------------------------------
Total $28,806 $28,502 $23,443 $22,335 $20,711 100% 100% 100% 100% 100%
===============================================================================================
</TABLE>
Note: Owner-occupied commercial real estate loans were reclassified to
commercial, industrial and agricultural production loans at December 31, 1995.
32
<PAGE>
Non-performing loans consist of loans past due 90 days or more, loans
classified as troubled debt restructurings, and loans on nonaccrual status.
Although these loans have more than a normal risk of loss, they will not
necessarily result in a higher level of charge-offs in the future. The following
table presents non-performing loans and assets for the past five years. As
indicated below, the Corporation's non-performing loans as of December 31, 1995,
totaled $23,088,000, an increase of $7,109,000 from the previous year. The non-
performing loans to total loans ratio was 1.17 percent at December 31, 1995
compared to .75 percent at December 31, 1994. During the third quarter of 1995,
a $4,500,000 commercial loan was placed on non-accrual status as the borrower
filed for protection under Chapter 11 of bankruptcy laws. The balance of this
loan was charged down to $3,600,000 at December 31, 1995. Management is closely
monitoring this loan and does not expect to incur any material additional loss.
Non-accrual real estate mortgage loans include two loans with balances totaling
$5,400,000. Based on collateral value on these loans, the loss is not expected
to exceed $1,000,000. In addition to the loans classified as non-performing,
there were other loans totaling $8,330,000 at December 31, 1995, where the
borrowers were experiencing difficulties, and where management was closely
monitoring the borrowers' abilities to comply with payment terms. However,
conditions at this time do not warrant their classification as non-performing
loans. Management is not aware of any loans that have not been disclosed that
represent or result from trends or uncertainties which may have a material
impact on the Corporation's future operating results, liquidity or capital
resources.
Non-Performing Assets at December 31,
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial, agricultural, and tax exempt $10,393 $ 3,945 $ 3,849 $ 2,681 $ 6,507
Real estate mortgage 6,326 6,053 3,750 5,221 7,182
Consumer 3,194 1,983 1,706 3,273 2,047
-----------------------------------------------
Total nonaccrual 19,913 11,981 9,305 11,175 15,736
Restructured:
Commercial, agricultural, and tax exempt 479 892 4,218 857 1,234
Real estate mortgage 464 168 261 281 163
Consumer 5 5
-----------------------------------------------
Total restructured 948 1,065 4,479 1,138 1,397
90 days or more past due and accruing:
Commercial, agricultural, and tax exempt 344 241 371 304 673
Real estate mortgage 1,285 1,488 1,113 1,189 2,407
Consumer 598 1,204 925 471 1,085
-----------------------------------------------
Total 90 days or more past due and accruing 2,227 2,933 2,409 1,964 4,165
-----------------------------------------------
Total non-performing loans 23,088 15,979 16,193 14,277 21,298
Foreclosed properties 1,727 3,849 6,991 8,361 7,224
-----------------------------------------------
Total non-performing assets $24,815 $19,828 $23,184 $22,638 $28,522
===============================================
Non-performing loans to loans 1.17% .75% .88% .89% 1.23%
===============================================
Non-performing assets to loan-related assets 1.26% .93% 1.25% 1.41% 1.65%
===============================================
</TABLE>
Investment Securities
Total investment securities available for sale and held to maturity represented
33.9 percent of average earning assets in 1995 compared to 33.4 percent in 1994
and comprise the largest component of earning assets after loans. The portfolio
has continued to shift toward investment in fixed and floating rate mortgage-
backed securities, predominantly underwritten to the standards of, and
guaranteed by government sponsored agencies. These securities generally yield
70-100 basis points more than comparable U.S. Treasury securities. Mortgage-
backed securities differ primarily from traditional debt securities in that they
have uncertain maturity dates and are priced based on estimated prepayment rates
on the underlying mortgages. Prepayment rates generally can be expected to
increase during periods of lower interest rates as some of the underlying
mortgages are
33
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
refinanced at lower rates. Conversely, the average lives of these
securities generally are extended as interest rates increase. The estimated
average lives of these securities and the overall portfolio were 3.6 years and
4.0 years, respectively, at year-end based on current prepayment expectations.
On November 15, 1995, the Financial Accounting Standards Board issued a
special report, "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities," which permitted a one-time
reallocation of debt securities from the held to maturity category to the
available for sale category. On December 1, 1995, the Corporation reclassified
certain securities with a carrying value of $375,027,000 and a fair value of
$374,716,000 from held to maturity to available for sale. The reclassification
of securities to the available for sale category provides for increased
flexibility in managing interest rate sensitivity and liquidity.
Investment Securities Available for Sale at December 31,
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury $ 23,005 $ 69,671 $210,550
Federal agencies:
Bonds and notes 161,463 42,108 33,166
Mortgage-backed securities 615,201 253,752 264,219
Collateralized mortgage obligations 108,130 121,479 177,156
State and municipal 41,704 4,656
Other securities 22,817 17,781 20,423
----------------------------
Total $972,320 $509,447 $705,514
============================
</TABLE>
Investment Securities Held to Maturity at December 31,
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury $ 12,132 $ 15,261
Federal agencies:
Bonds and notes $ 4 10,626 16,346
Mortgage-backed securities 116,522 445,647 146,878
Collateralized mortgage obligations 3,203
State and municipal 78,511 81,290 75,610
Other securities 166 10
----------------------------
Total $198,240 $549,861 $254,105
============================
</TABLE>
Maturities and Average Yields of Investment Securities Available for Sale at
December 31, 1995*
<TABLE>
<CAPTION>
1 Year or Less 1-5 Years 5-10 Years Over 10 Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 15,472 6.90% $ 7,533 5.36% $ 23,005 6.40%
Federal agencies:
Bonds and notes 1,844 6.94 154,264 7.12 $ 709 6.24% $ 4,646 7.35% 161,463 7.12
Mortgage-backed securities 89,293 6.73 334,944 6.79 189,899 6.83 1,065 7.45 615,201 6.79
Collateralized mortgage
obligations 18,307 7.37 72,416 7.39 16,760 7.39 647 7.15 108,130 7.39
State and municipal 8,793 9.86 26,913 10.11 2,314 10.57 3,684 7.97 41,704 9.89
Other securities 568 8.41 244 5.87 22,005 6.24 22,817 6.29
-------------------------------------------------------------------------------------
Total $133,709 7.05% $596,638 7.08% $209,926 6.91% $ 32,047 6.66% $972,320 7.03%
=====================================================================================
Percent of Total 14% 61% 22% 3% 100%
=====================================================================================
</TABLE>
34
<PAGE>
Maturities and Average Yields of Investment Securities Held to Maturity at
December 31, 1995*
<TABLE>
<CAPTION>
1 Year or Less 1-5 Years 5-10 Years Over 10 Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal agencies:
Bonds and notes $ 4 6.17% $ 4 6.17%
Mortgage-backed securities 16,093 5.96 $ 60,607 6.01% $ 39,418 6.12% $ 404 5.67% 116,522 6.04
Collateralized mortgage
obligations 364 5.68 1,422 5.67 1,417 5.65 3,203 5.66
State and municipal 7,648 9.96 33,364 8.71 37,499 8.19 78,511 8.58
----------------------------------------------------------------------------------
Total $16,461 5.95% $ 69,677 6.44% $ 74,199 7.28% $37,903 8.16% $198,240 7.04%
==================================================================================
Percent of Total 8% 35% 38% 19% 100%
==================================================================================
</TABLE>
*Fully taxable equivalent yields. The above maturity analyses are based on
contractual maturities except for the maturity of mortgage-backed securities
which are based on estimated average lives.
Sources of Funds
The Corporation generally relies on customers' deposits, securities sold under
repurchase agreements and federal funds purchased, along with shareholders'
equity, to fund its earning assets. Certain of the Corporation's banks are
members of the Federal Home Loan Bank (FHLB). As members, the banks may obtain
FHLB advances with various maturities and interest rate options by pledging
qualifying mortgage loans. These advances totaled $115,794,000 and $166,920,000
at December 31, 1995, and 1994, respectively, as described in Note 7 of the
consolidated financial statements. UF Bancorp, which was merged into the
Corporation during 1995, utilized FHLB advances as a significant source of its
funding. As more cost-effective sources of funds became available, a portion of
these advances was repaid. The Corporation expects to continue utilizing the
FHLB as a funding source for its banks as circumstances may warrant.
Average Deposits
<TABLE>
<CAPTION>
1995 1994 1993
Amount Rate Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing checking $ 293,051 $ 287,963 $ 264,788
Interest bearing checking 395,874 2.47% 422,396 2.40% 384,664 2.55%
Money market investment 255,875 3.81 270,585 2.72 258,034 2.86
Savings 250,449 2.67 290,173 2.63 275,762 2.93
Certificates of deposit and
other time 1,487,838 5.55 1,343,685 4.62 1,347,583 4.82
-------------------------------------------------------
Total $2,683,087 4.05% $2,614,802 3.33% $2,530,831 3.56%
=======================================================
</TABLE>
Maturities of Certificates of Deposit of $100,000 or More at December 31,
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
3 months or less $ 53,653 $ 74,359
3-6 months 28,144 13,874
6-12 months 19,682 14,397
Over 12 months 8,349 8,003
-------------------
Total $109,828 $110,633
===================
</TABLE>
35
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
Average total deposits increased by 2.6 percent to $2,683,087,000 in 1995
compared to $2,614,802,000 during 1994. Average non-interest bearing checking
deposits increased by 1.8 percent in 1995 and 8.8 percent in 1994 while interest
bearing deposits grew by 2.7 percent during both 1995 and 1994. During 1995, the
mix of interest bearing deposits shifted to certificates of deposit as
competitive pricing on these products modified customers' previous preferences
of interest bearing checking, savings and money market deposit accounts. Total
deposits were $2,789,989,000 at December 31, 1995, compared to $2,595,456,000 at
year-end 1994.
Securities sold under repurchase agreements are acquired in national markets
as well as from the Corporation's commercial customers as a part of a cash
management service. Repurchase agreements were $325,271,000 at December 31,
1995, compared to $319,965,000 at year-end 1994, and play a key role in funding
earning assets. A portion of these repos, acquired to fund certain fixed rate
earning assets, is being hedged by interest rate caps. Securities sold under
repurchase agreements averaged $302,004,000 in 1995 compared to $213,963,000 in
1994. Federal funds purchased are overnight funds acquired from other banks, and
represent a service performed for smaller area banks while providing an
additional source of funding for the Corporation. Federal funds purchased
totaled $18,370,000 at December 31, 1995, compared to $27,000,000 one year
prior.
[GRAPH APPEARS HERE]
Average Deposits
(in billions)
$2.41 $2.44 $2.53 $2.61 $2.68
1991 1992 1993 1994 1995
Other short-term borrowings, principally U.S. Treasury demand notes, totaled
$7,441,000 at December 31, 1995, which represented a decrease of $2,497,000
since December 31, 1994. These demand notes are subject to call by the Federal
Reserve and carry a variable interest rate.
<TABLE>
<CAPTION>
Short-Term Borrowings
Securities
Sold Under Federal
Repurchase Funds Other
1995 Agreements Purchased Borrowings Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31 $325,271 $18,370 $ 7,441 $351,082
Average amount outstanding 302,004 23,539 7,600 333,143
Maximum amount outstanding at any month-end 338,174 42,790 14,136
Weighted average interest rate:
During year 5.52% 5.92% 5.57% 5.55%
End of year 5.15 5.50 4.88 5.16
1994
- -------------------------------------------------------------------------------------------------------
Balance at December 31 $319,965 $27,000 $ 9,938 $356,903
Average amount outstanding 213,963 30,669 6,633 251,265
Maximum amount outstanding at any month-end 329,249 50,335 13,520
Weighted average interest rate:
During year 4.61% 4.33% 3.95% 4.56%
End of year 5.48 6.23 5.14 5.53
1993
- -------------------------------------------------------------------------------------------------------
Balance at December 31 $ 94,095 $49,125 $ 2,734 $145,954
Average amount outstanding 97,032 15,872 1,397 114,301
Maximum amount outstanding at any month-end 116,435 49,125 2,734
Weighted average interest rate:
During year 2.96% 2.80% 2.79% 2.93%
End of year 2.81 2.92 2.60 2.84
</TABLE>
36
<PAGE>
Capital Resources
The Corporation continues to maintain a strong capital position which supports
its current needs and provides a sound foundation to support further expansion.
At December 31, 1995, shareholders' equity had increased to $297,693,000,
primarily as a result of net income of $35,651,000, offset in part by dividends
paid. The amount of net earnings retained after the payment of dividends was
$25,511,000 for 1995 compared to $18,297,000 in the prior year. The dividend
payout ratio was 28 percent in 1995 compared to 40 percent in 1994 and was
consistent with management's policy of maintaining an appropriate balance
between earnings distributed to shareholders in the form of dividends and
earnings retained to provide for internal capital growth. The Corporation's
Board of Directors changed the declaration date of the fourth quarter dividend
from December 1995 to January 2, 1996. Consequently, only three quarterly
dividends were declared in 1995. This change resulted in 1995 dividends declared
being reduced by $3,753,000. The payout ratio would have been 39 percent in 1995
excluding the one-time effect of this change. Book value per share at year-end
advanced to $16.64 from $15.16 one year earlier, an increase of 9.8 percent
after decreasing 2.1 percent in 1994. Shareholders' equity averaged $285,894,000
during 1995, an increase of 3.2 percent from 1994.
Average Shareholders' Equity
(in millions)
[GRAPH APPEARS HERE]
$206 $226 $251 $277 $286
1991 1992 1993 1994 1995
Book Value Per Share at Year-End
[GRAPH APPEARS HERE]
$11.89 $13.83 $15.48 $15.16 $16.64
1991 1992 1993 1994 1995
The Federal Reserve Board has established a minimum leverage ratio of 3
percent for the most highly-rated bank holding companies that do not anticipate
significant growth. All other institutions are required to maintain a ratio of 4
to 5 percent depending on their particular circumstances and risk profile. This
ratio is defined as shareholders' equity less non-qualifying intangible assets,
as a percentage of the sum of quarter to date total average assets less non-
qualifying intangible assets. The Corporation's leverage ratio was 7.6 percent
and 7.8 percent at December 31, 1995 and 1994, respectively. The tangible equity
to tangible assets ratio was 7.6 percent at year-end 1995 and 7.4 percent one
year prior. Total equity to assets at year-end was 8.2 percent and 7.9 percent
at December 31, 1995 and 1994, respectively. The Federal Reserve Board has also
adopted risk-based capital guidelines which assign various risk weightings to
assets and off-balance sheet items and set minimum capital requirements. Under
current rules, banks are required to have core capital (Tier 1) of at least 4
percent of risk weighted assets and total capital of 8 percent of risk weighted
assets. Tier 1 capital consists primarily of shareholders' equity less
intangible assets; and total capital consists of Tier 1 capital, certain long-
term debt and convertible debentures and a portion of the allowance for loan
losses. The Federal Reserve Board and other regulatory agencies have released
regulations for the implementation of various provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991. Under these rules, institutions
must have a leverage ratio of 5 percent or above, Tier 1 capital of 6 percent or
above, and total capital to risk-based assets of 10 percent or above in order to
qualify as well capitalized. The Federal Reserve Board has proposed regulations
which would revise the current risk-based capital guidelines to include a
measurement of interest rate risk. The proposed change is not expected to have a
material impact to the Corporation's capital ratios based on its interest rate
sensitivity position. At December 31, 1995, the Corporation's leverage, Tier 1
and total capital ratios were 7.6 percent, 12.2 percent, and 13.9 percent,
respectively, all well above regulatory minimums. Furthermore, each of the
Corporation's subsidiary banks was rated as "well capitalized"
37
<PAGE>
Management's Discussion and Analysis
CNB Bancshares, Inc.
by the Federal Deposit Insurance Corporation at year-end 1995. The Corporation
is not aware of any current recommendations by its regulatory authorities or any
other known trends, events, or uncertainties that will have or that are
reasonably likely to have a material effect on its liquidity, capital resources,
or operations.
After adjusting for stock dividends, dividends paid per share were $.74 for
1994 and were increased by 5.4 percent in 1995 to $.78. The indicated annual
dividend rate is currently $.84 per share.
The Corporation's return on equity was 12.47 percent for 1995 compared to
11.01 percent in 1994 and 12.30 in 1993, excluding net unrealized gains/losses
on investment securities available for sale.
Liquidity and Interest Rate Sensitivity
Liquidity is a measure of the Corporation's ability to meet its customers'
present and future deposit withdrawals and/or increased loan demand without
unduly penalizing earnings. Interest rate sensitivity involves the relationship
between rate sensitive assets and liabilities and is an indication of the
probable effects of interest rate movements on the Corporation's net interest
income. CNB Bancshares manages both its liquidity and interest sensitivity
through a coordinated asset/liability management program directed by the Funds
Management and Investment Committee.
Liquidity is provided by projecting credit demand and other financial needs
and then maintaining sufficient cash and assets readily convertible into cash to
meet these requirements. The Corporation has provided for its liquidity needs
through growth in core deposits, maturing loans and investments in its
securities portfolio, and by maintaining adequate balances in other short-term
securities and money market assets. At December 31, 1995, the Corporation had
$150,170,000 or 4.1 percent of total assets in investment securities maturing
within one year. Management believes that maturing investment securities and
unused borrowing sources will be adequate to meet the banks' and the
Corporation's liquidity needs for the foreseeable future.
The Parent Company's liquidity includes its cash and short-term investments
and is generally provided by dividends and management fees received from the
subsidiary banks. As explained in Note 16 of the consolidated financial
statements, approximately $27,335,000 was available to the Parent at December
31, 1995, from dividends by subsidiaries without prior regulatory approval. Cash
dividends received from the subsidiaries in 1995 were $46,003,000 compared to
$32,057,000 in 1994. The Parent Company also has available a $15,000,000 bank
line of credit which was not being utilized at year-end.
Cash Dividends Paid*
(per share)
[GRAPH APPEARS HERE]
$0.64 $0.65 $0.68 $0.74 $0.78
1991 1992 1993 1994 1995
*For CNB Bancshares, Inc. only, not restated for pooling transactions.
Interest rate sensitive assets and liabilities are those which have yields or
rates subject to change within a future time period due to maturity or changes
in market rates. An ongoing objective of the Corporation's asset/liability
policy is to match rate-adjustable assets and liabilities at similar maturity
horizons so that changes in interest rates will not result in wide fluctuations
in net interest income. CNB Bancshares manages its rate sensitivity position
through the use of floating-rate loans and by matching funds acquired having a
specific maturity with loans, securities or money market investments with
similar maturities. The Corporation supplements this approach through the use of
interest rate contracts to reduce the impact of changing interest rates on its
cost to acquire certain variable rate funds. The Corporation employs a variety
of measurement techniques to identify and manage its exposure to changing
interest rates. A computer-based simulation model is used to measure the
Corporation's net interest income volatility to changes in the level of interest
rates, interest rate spreads, the shape of the yield curve and changing product
growth patterns and investment strategies. The rate sensitivity position is
computed for various repricing intervals by calculating rate sensitivity gaps.
The following table shows the Corporation's
38
<PAGE>
interest rate sensitivity analysis as of December 31, 1995. Interest earning
assets and interest bearing liabilities have been distributed based on their
repricing opportunities. The maturities of certain investments, loans and
deposits have been adjusted based on projected prepayment patterns or historical
relationships to changes in market interest rates. The repricing of certain
liabilities has been adjusted to reflect the expected benefit of interest rate
contracts in place at year-end. Although rate sensitivity gaps constantly change
as funds are acquired and invested, the Corporation's positive gap of
$229,920,000 at one year or less as of December 31, 1995, was approximately 6.3
percent of total assets. This, in the opinion of management, represented a
relatively balanced position. Net interest income at financial institutions with
positive gaps tends to decline as interest rates fall, and generally increase in
periods of rising interest rates.
Interest Rate Sensitivity at December 31, 1995
<TABLE>
<CAPTION>
Maturing or Repricing
---------------------------------------------------------------------------------
Non-sensitive
1-90 91-180 181-270 271 Days Over 1 Year and Over
Days Days Days to 1 Year to 5 Years 5 Years Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold and
other short-term money
market investments $ 8,546 $ 8,546
Real estate loans held for
sale* 16,774 $ 6,171 $ 9,119 $ 9,119 $125,750 $ 55,224 222,157
Investment securities
available for sale 117,575 80,080 89,344 87,454 426,609 171,258 972,320
Investment securities held
to maturity 6,402 6,109 6,205 6,205 69,678 103,641 198,240
Loans, net of unearned
interest 816,058 185,786 182,526 180,629 563,941 42,514 1,971,454
Non-earning assets 255,965 255,965
---------------------------------------------------------------------------------
Total assets 965,355 278,146 287,194 283,407 1,185,978 628,602 3,628,682
Liabilities and shareholders'
equity
Interest bearing deposits:
Interest bearing
transaction accounts 82,862 331,453 414,315
Money market and
other savings 240,091 298,655 538,746
Certificates of deposit
and other time 375,069 238,302 139,147 139,148 585,193 37,363 1,514,222
---------------------------------------------------------------------------------
Total interest bearing
deposits 698,022 238,302 139,147 139,148 585,193 667,471 2,467,283
Securities sold under
repurchase agreements 189,543 6,267 4,461 125,000 325,271
Federal funds purchased 18,370 18,370
Other short-term borrowings 7,441 7,441
Long-term debt 143,380 34 67 1,780 12,785 158,046
Non-interest bearing deposits 322,706 322,706
Non-interest bearing liabilities
and shareholders' equity 329,565 329,565
---------------------------------------------------------------------------------
Total liabilities and
equity 1,056,756 244,603 143,675 139,148 711,973 1,332,527 $3,628,682
---------------------------------------------------------------------------------
Interest sensitivity gap $ (91,401) $ 33,543 $143,519 $144,259 $474,005 $ (703,925)
===================================================================
Cumulative interest sensitivity
gap $ (91,401) $(57,858) $ 85,661 $229,920 $703,925
====================================================
Cumulative gap as a percentage
of total assets (2.5)% (1.6)% 2.4% 6.3% 19.4%
====================================================
</TABLE>
* Management intends to securitize certain real estate loans held for sale. The
assumed maturity and repricing of the expected mortgage-backed securities have
been noted above.
39
<PAGE>
Consolidated Balance Sheet
CNB Bancshares, Inc.
<TABLE>
<CAPTION>
December 31,
(In thousands, except for share data) 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 130,239 $ 120,331
Federal funds sold and other short-term money market investments 8,546 37,042
----------------------
Total cash and cash equivalents 138,785 157,373
Real estate loans held for sale 222,157 11,666
Investment securities available for sale 972,320 509,447
Investment securities held to maturity (market value $199,966 and $520,873) 198,240 549,861
Loans, net of unearned interest 1,971,454 2,118,126
Less: Allowance for loan losses 28,806 28,502
----------------------
Net loans 1,942,648 2,089,624
Premises and equipment 66,224 68,503
Foreclosed properties 1,727 3,849
Intangible assets 23,741 19,475
Interest receivable and other assets 62,840 51,541
----------------------
Total assets $3,628,682 $3,461,339
======================
Liabilities
Deposits:
Non-interest bearing $ 322,706 $ 307,809
Interest bearing 2,467,283 2,287,647
----------------------
Total deposits 2,789,989 2,595,456
Securities sold under repurchase agreements 325,271 319,965
Federal funds purchased 18,370 27,000
Other short-term borrowings 7,441 9,938
Long-term debt 158,046 210,061
Interest payable and other liabilities 31,872 25,091
----------------------
Total liabilities 3,330,989 3,187,511
Shareholders' Equity
Preferred stock, no par or stated value
Shares authorized and unissued: 2,000,000
Common stock, $1 stated value
Shares authorized: 50,000,000
Shares issued: 17,894,770 in 1995 and 17,204,746 in 1994 17,895 17,205
Capital surplus 246,492 239,533
Retained earnings 29,672 25,024
Net unrealized gains (losses) on investment securities available for sale 3,634 (7,934)
----------------------
Total shareholders' equity 297,693 273,828
----------------------
Total liabilities and shareholders' equity $3,628,682 $3,461,339
======================
</TABLE>
See notes to consolidated financial statements.
40
<PAGE>
Consolidated Statement of Income
CNB Bancshares, Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except for share data) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Loans, including fees:
Taxable $ 194,816 $ 161,554 $ 145,832
Tax exempt 1,708 1,628 1,782
Investment securities:
Taxable 68,743 54,570 52,570
Tax exempt 5,201 4,891 4,875
Real estate loans held for sale 1,899 2,602 4,448
Federal funds sold and other short-term money market investments 1,418 1,805 3,380
-----------------------------------------
Total interest income 273,785 227,050 212,887
-----------------------------------------
Interest Expense
Deposits 108,778 87,150 90,168
Short-term borrowings 18,494 11,448 3,352
Long-term debt 13,078 7,179 7,973
-----------------------------------------
Total interest expense 140,350 105,777 101,493
-----------------------------------------
Net Interest Income 133,435 121,273 111,394
Provision for loan losses 6,939 7,234 3,890
-----------------------------------------
Net Interest Income After Provision for Loan Losses 126,496 114,039 107,504
-----------------------------------------
Non-Interest Income
Net securities gains 2,165 687 1,221
Other non-interest income 44,504 46,118 41,892
-----------------------------------------
Total non-interest income 46,669 46,805 43,113
-----------------------------------------
Non-Interest Expense
Salaries and employee benefits 57,604 55,682 53,171
Occupancy expense 8,044 7,923 7,652
Equipment expense 6,850 6,832 5,961
Other 44,306 43,102 36,878
-----------------------------------------
Total non-interest expense 116,804 113,539 103,662
-----------------------------------------
Income Before Income Taxes and Cumulative
Effect of Accounting Change 56,361 47,305 46,955
Income taxes 20,710 16,793 16,039
-----------------------------------------
Income Before Cumulative Effect of Accounting Change 35,651 30,512 30,916
Cumulative Effect of Change in Accounting for Income Taxes 1,868
-----------------------------------------
Net Income $ 35,651 $ 30,512 $ 32,784
=========================================
Per Share:
Primary:
Income before cumulative effect of accounting change $ 1.96 $ 1.68 $ 1.74
Cumulative effect of change in accounting for income taxes .11
-----------------------------------------
Primary net income per share $ 1.96 $ 1.68 $ 1.85
=========================================
Fully diluted:
Income before cumulative effect of accounting change $ 1.96 $ 1.66 $ 1.71
Cumulative effect of change in accounting for income taxes .10
-----------------------------------------
Fully diluted net income per share $ 1.96 $ 1.66 $ 1.81
=========================================
Average Common and Equivalent Shares Outstanding 18,212,244 18,136,017 17,714,069
=========================================
</TABLE>
See notes to consolidated financial statements.
41
<PAGE>
Consolidated Statement of Changes in Shareholders' Equity
CNB Bancshares, Inc.
<TABLE>
<CAPTION>
Common Stock Capital Retained Unrealized
(In thousands, except for share data) Shares Amount Surplus Earnings Gains/Losses Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1993 14,234,996 $14,235 $151,379 $ 73,145 $238,759
Net income for 1993 32,784 32,784
Cash dividends (11,186) (11,186)
Stock dividend ($46 paid in lieu
of fractional shares) 728,635 729 22,772 (23,547) (46)
Purchase and retirement of stock (229,777) (229) (3,397) (2,323) (5,949)
Shares issued for dividend
reinvestment plan 80,187 80 2,316 2,396
Stock options exercised 29,404 29 322 351
Exercise and conversion of stock
purchase contracts and debentures 220,695 221 4,520 4,741
Issuance of stock related to acquisition 115,088 115 2,606 2,721
Other shares issued 22,297 22 725 747
Effect of change in accounting for
investment securities available for sale $ 6,460 6,460
---------------------------------------------------------------------
Balances, December 31, 1993 15,201,525 15,202 181,243 68,873 6,460 271,778
Net income for 1994 30,512 30,512
Cash dividends (12,215) (12,215)
Stock dividend ($46 paid in lieu
of fractional shares) 1,563,658 1,564 52,685 (54,295) (46)
Purchase and retirement of stock (392,981) (393) (5,061) (6,239) (11,693)
Shares issued for dividend
reinvestment plan 84,446 84 2,649 2,733
Stock options exercised 19,477 19 306 325
Exercise and conversion of stock
purchase contracts and debentures 149,380 149 2,916 3,065
Issuance of stock related to acquisitions 548,471 549 3,794 5,626 9,969
Other shares issued 11,646 12 467 479
Adjustment to conform year-ends 19,124 19 534 (7,238) (6,685)
Change in unrealized gains/losses on
investment securities available for sale (14,394) (14,394)
---------------------------------------------------------------------
Balances, December 31, 1994 17,204,746 17,205 239,533 25,024 (7,934) 273,828
Net income for 1995 35,651 35,651
Cash dividends (10,140) (10,140)
Stock dividend ($54 paid in lieu
of fractional shares) 846,215 846 24,141 (25,041) (54)
Purchase and retirement of stock (870,233) (870) (24,419) (25,289)
Shares issued for dividend
reinvestment plan 108,984 109 2,984 3,093
Stock options exercised 193,037 193 1,552 1,745
Exercise and conversion of stock
purchase contracts and debentures 17,538 18 295 313
Issuance of stock related to acquisitions 387,491 387 2,053 4,178 6,618
Other shares issued 6,992 7 353 360
Change in unrealized gains/losses on
investment securities available for sale 11,568 11,568
---------------------------------------------------------------------
Balances, December 31, 1995 17,894,770 $17,895 $246,492 $ 29,672 $ 3,634 $ 297,693
=====================================================================
</TABLE>
See notes to consolidated financial statements.
42
<PAGE>
Consolidated Statement of Cash Flows
CNB Bancshares, Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net income $ 35,651 $ 30,512 $ 32,784
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 11,044 9,694 8,284
Provision for loan losses 6,939 7,234 3,890
Amortization of securities' premiums and discounts 1,441 1,424 1,763
Deferred income tax benefit (1,334) (2,489) (179)
Cumulative effect of change in accounting for income taxes (1,868)
Net gains on securities sold (2,165) (687) (1,221)
Loans originated for sale (162,121) (452,576) (689,171)
Proceeds from sale of loans 161,482 480,260 713,832
(Increase) decrease in interest receivable
and other assets, net of amortization (16,346) 13 (5,201)
Increase (decrease) in interest payable and other liabilities 8,474 (569) (1,323)
--------------------------------------
Net Cash Provided by Operating Activities 43,065 72,816 61,590
--------------------------------------
Investing Activities:
Cash and cash equivalents of subsidiaries acquired, net of purchase price 4,050 5,708 3,832
Proceeds from the maturity of investment securities available for sale 154,227 235,310 49,592
Proceeds from the sale of investment securities available for sale 282,804 178,774 91,433
Purchase of investment securities available for sale (469,552) (197,065) (121,898)
Proceeds from the maturity of investment securities held to maturity 47,680 57,170 277,347
Purchase of investment securities held to maturity (81,339) (346,840) (415,529)
Net increase in loans (38,554) (203,128) (250,189)
Purchase of premises and equipment (7,064) (4,937) (9,420)
--------------------------------------
Net Cash Used by Investing Activities (107,748) (275,008) (374,832)
--------------------------------------
Financing Activities:
Net increase (decrease) in deposits 141,787 (46,396) 136,556
Net increase (decrease) in short-term borrowings (6,988) 217,994 38,444
Payment of long-term debt (199,830) (111,086) (131,320)
Proceeds from long-term borrowings 144,549 131,551 152,990
Proceeds from exercise of stock options 1,745 325 351
Payment of cash dividends (12,972) (11,777) (11,105)
Proceeds from common stock issued for dividend reinvestment plan 3,093 2,733 2,396
Purchase and retirement of common stock (25,289) (11,693) (5,949)
--------------------------------------
Net Cash Provided by Financing Activities 46,095 171,651 182,363
--------------------------------------
Net Decrease in Cash and Cash Equivalents (18,588) (30,541) (130,879)
Adjustment to conform year-ends 2,311
Cash and Cash Equivalents at January 1, 157,373 185,603 316,482
--------------------------------------
Cash and Cash Equivalents at December 31, $ 138,785 $ 157,373 $ 185,603
======================================
Supplemental disclosure:
Cash paid for:
Interest $ 134,914 $ 104,704 $ 102,787
Income taxes 21,601 19,075 14,809
Non-cash investing and financing activities:
Common stock issued for acquisitions 6,618 9,969 2,721
Stock issued in exchange of debentures and equity contracts and
pursuant to employee benefit plans 545 3,637 5,680
</TABLE>
See notes to consolidated financial statements.
43
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
(Table dollar amounts in thousands, except for share data.)
1. Summary of Significant Accounting Policies
Description of business. CNB Bancshares, Inc. (Corporation) is a regional,
interstate bank holding company based in Evansville, Indiana. The Corporation's
banking subsidiaries are engaged in commercial and retail banking, consumer
lending, mortgage lending and servicing, trust services and cash management
services for corporate accounts and other banks. The Corporation also has non-
banking subsidiaries which provide data processing services, credit insurance
and the sale of property and casualty insurance. CNB Bancshares, Inc. and its
subsidiaries are subject to regulations by various federal and state agencies.
Through its subsidiaries, the Corporation has 122 offices throughout its primary
market areas of Indiana, Illinois, Kentucky, and portions of Tennessee.
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 at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accounting and reporting policies of CNB Bancshares, Inc. and its
subsidiaries conform to generally accepted accounting principles and reporting
practices followed by the banking industry. The more significant policies are
described below.
Consolidation. The consolidated financial statements include the accounts of the
Corporation and its subsidiaries, after elimination of all material inter-
company accounts and transactions. Certain prior year amounts have been
reclassified to conform with current classifications.
Real estate loans held for sale. Real estate loans held for sale are carried at
the lower of aggregate cost or market value. Net unrealized losses, if any, are
recognized through a valuation allowance by a charge to income. Gains and losses
on real estate loans sold, which represents the premium or discount paid by the
purchaser, are recorded at the time of the cash sale. Servicing fee income
subsequent to the sales is included in non-interest income and represents a
normal servicing fee on each loan sold.
Investment securities. Debt securities that the Corporation has the positive
intent and ability to hold to maturity are classified as "held to maturity" and
reported at amortized cost. Other investment securities are classified as
"available for sale" or "trading" and reported at fair value with unrealized
gains and losses included in shareholders' equity, net of related taxes, or
income, respectively.
Amortization of premiums and accretion of discounts are recorded as
adjustments to interest income using the level-yield method over the estimated
remaining period until maturity, adjusted for estimated prepayments. Gains and
losses on the sale of investment securities are determined on the specific
identification method at the time of sale.
Loans. Loans are reported net of unearned interest and unamortized deferred fees
and costs. Interest income on loans is accrued on the principal amount of such
loans outstanding, except for discounted installment loans which is computed
using a method that approximates a level yield. Certain nonrefundable loan fees
and related direct loan costs are deferred and amortized over the life of the
loan as an adjustment to interest income. Loans are placed on nonaccrual status
when the collection of the interest becomes doubtful. Interest previously
accrued but not deemed collectible is reversed and charged against current
income. Interest income on nonaccrual loans is then recognized only when
collected. Loans are considered impaired when it becomes probable that the
Corporation will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Interest income on these loans is
recognized as described above depending on the accrual status of the loan.
Allowance for loan losses. An allowance for loan losses is maintained at a level
considered adequate to absorb potential loan losses determined on the basis of
management's continuing review and evaluation of the loan portfolio and its
judgment as to the impact of economic conditions on the portfolio. The
evaluation by management includes consideration of past loan loss experience and
trends, changes in the composition of the loan portfolio, the current volume and
condition of loans outstanding and the probability of collecting all amounts
due. Impaired loans are measured by the present value of expected future cash
flows or the fair value of collateral if the loan is collateral dependent.
Premises and equipment. Premises and equipment are carried at cost less
accumulated depreciation. Depreciation
44
<PAGE>
is computed principally by the straight-line method based on estimated useful
lives. Maintenance and repairs are expensed as incurred, while major additions
and improvements are capitalized. Gains and losses on dispositions are included
in current operations.
Foreclosed properties. Foreclosed properties represent properties acquired
through foreclosure or deed in lieu of foreclosure and are recorded at the lower
of the related loan amount or fair value minus estimated costs to sell. Any
excess of the loan amount over the estimated fair value less selling costs of
such property when acquired is charged to the allowance for loan losses.
Subsequent write-downs and gains or losses on sales are included in current
operations. Any rental income and costs of maintaining the properties are also
included in current operations.
Intangible assets. The excess of cost over the fair value of net assets acquired
in acquisitions accounted for as purchases is amortized using the straight-line
method over estimated lives ranging from 15 to 25 years. Core deposit intangible
assets are amortized using the interest method over estimated lives of 10 years.
Such assets are periodically evaluated as to the recoverability of their
carrying value.
The Corporation's subsidiaries originate mortgage loans for sale in the
secondary market and generally sell the loans with servicing retained. Effective
January 1, 1995, the Corporation adopted Financial Accounting Standards Board
Statement No. 122, "Accounting for Mortgage Servicing Rights" which requires the
recognition of originated mortgage servicing rights as assets for loans
originated with the intent to sell by allocating total costs incurred between
the loan and the servicing rights based on their relative fair values. The
capitalized cost of loan servicing rights is amortized in proportion to, and
over the period of, estimated net future servicing revenue. Capitalized mortgage
servicing rights are evaluated for impairment periodically by stratifying the
underlying serviced loans on the basis of loan type, term and interest rate.
Fair values for the individual stratum are based on quoted market prices or the
present value of estimated future cash flows. Impairment represents the excess
of the aggregate carrying values over estimated fair values and is recognized
through a valuation allowance by a charge to income.
The Financial Accounting Standards Board has issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," which requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of these assets may not be
recoverable. This statement is effective January 1, 1996 and is not expected to
have a material effect on the consolidated financial statements.
Interest rate contracts. The Corporation reduces the potential impact of
changing interest rates on its costs to acquire liabilities that fund certain
loans and investments through interest rate contracts, including interest rate
swaps, interest rate caps and optional forward purchase contracts.
The net settlements received or paid on interest rate swaps are reported as
adjustments to interest expense of the related liabilities being hedged.
Premiums paid for interest rate caps are included in the carrying amounts of
those liabilities being hedged. These amounts are amortized as an adjustment to
interest expense of the related liabilities on a straight-line method over the
contractual terms of the caps. Interest expense is reduced on a current basis as
amounts are earned from counterparties when the index rate exceeds the rate
contractually specified in the cap agreements.
Optional forward purchase contracts provide the option buyer with the right to
sell to, or purchase from, another party some financial instrument at a stated
price on a specified future date. Fees received from the sale of written options
are deferred until the option expires, is terminated, or is exercised, at which
point the fees are included in current operations.
Gains or losses on the termination of interest rate contracts used to hedge
changes in interest rates are included in the carrying amounts of those
liabilities being hedged and are amortized as an adjustment to the yield of the
hedged liability over its remaining life. Gains or losses on the early
termination of a hedged transaction are included in current operations.
Income taxes. Income taxes provided in the consolidated statement of income
include deferred income tax provisions or benefits for all significant temporary
differences in recognizing income and expenses for financial reporting and
income tax purposes. The Corporation and its subsidiaries file consolidated
income tax returns.
45
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
1. Summary of Significant Accounting Policies, continued
Net income per share. Primary net income per share has been computed by dividing
net income by the weighted average number of common and common equivalent shares
outstanding during each period. Fully diluted net income per share has been
computed based on the weighted average number of common and common equivalent
shares outstanding during each period assuming conversion of the convertible
subordinated debentures into common shares and the elimination from net income
of the related interest expense, less income tax effect. All share data included
in the notes to the financial statements has been adjusted for stock dividends.
Trust assets. Assets held by the Corporation's subsidiaries in fiduciary or
agency capacity for customers are not included in the consolidated financial
statements as such items are not assets of the Corporation or its subsidiaries.
2. Business Combinations
Information relating to mergers and acquisitions for which stock was issued for
the three year period ended December 31, 1995 includes:
<TABLE>
<CAPTION>
Merger Common Shares Method of
Date Issued Accounting
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Southern Finance Co., Inc.,
Madisonville, Kentucky December 1, 1995 31,932 Pooling*
Service Financial, Inc., Harriman, Tennessee December 1, 1995 37,064 Pooling*
UF Bancorp, Inc., Evansville, Indiana August 4, 1995 2,370,208 Pooling
Bank of Orleans, Indiana August 4, 1995 334,420 Pooling*
Harrisburg Bancshares, Inc.
Harrisburg, Illinois February 10, 1995 504,351 Pooling
King City Federal Savings Bank
Mt. Vernon, Illinois February 1, 1995 685,069 Pooling
Citizens Realty & Insurance, Inc.
Evansville, Indiana December 1, 1994 437,614 Pooling
Oakland City Bancshares Corp.
Oakland City, Indiana August 30, 1994 165,769 Pooling*
Union Bank & Trust Co.
Morganfield, Kentucky July 1, 1994 467,715 Pooling*
First Corporation, Henderson, Kentucky June 18, 1993 787,315 Pooling
South Central Illinois Bancorp, Inc.
Effingham, Illinois May 3, 1993 664,182 Pooling
First Federal Savings Bank of Kentucky
Madisonville, Kentucky January 4, 1993 139,572 Purchase
</TABLE>
* Accounted for as a pooling of interests without restatement of prior
periods as the amounts involved were not material to the Corporation's
financial results.
The First Federal Savings Bank merger on January 4, 1993 was valued at
$3,590,000 including $869,000 of cash and liabilities assumed. Goodwill of
$583,000 is being amortized on a straight-line basis over 25 years.
Certain of the above entities have had their name changed and/or have been
merged into other subsidiaries of the Corporation.
Separate operating results of UF Bancorp, Harrisburg Bancshares, and King City
Federal Savings Bank for the periods prior to the mergers were as follows:
46
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Net interest income:
CNB Bancshares $125,881 $ 99,725 $ 87,635
UF Bancorp 7,554 13,061 14,952
Harrisburg Bancshares - 3,507 3,431
King City Federal Savings Bank - 4,980 5,376
-----------------------------
Combined $133,435 $121,273 $111,394
=============================
Net income:
CNB Bancshares $ 34,279 $ 26,917 $ 25,569
UF Bancorp 1,372 3,679 5,250
Harrisburg Bancshares - (916) 216
King City Federal Savings Bank - 832 1,749
-----------------------------
Combined $ 35,651 $ 30,512 $ 32,784
=============================
</TABLE>
UF Bancorp's and King City's results of operations and cash flows included in
the financial statements are for the years ended June 30, 1994 and 1993,
respectively, since these entities were on a June 30 fiscal year. As a result of
changing fiscal years from June 30 to December 31, retained earnings have been
reduced by $6,800,000 attributable to their net losses for the six months ended
December 31, 1994, and by an additional $438,000 for dividends paid by UF
Bancorp during this same period. Revenues and expenses for this six-month period
totaled $18,719,000 and $22,971,000, respectively, for UF Bancorp, and
$5,451,000 and $7,999,000, respectively for King City. Also as a result of the
change in fiscal years, common stock and surplus were increased by $19,000 and
$534,000 due to the exercise of stock options.
On August 4, 1995, a subsidiary of the Corporation, Citizens Bank of Western
Indiana, acquired the four Indiana offices of Household Bank, f.s.b., a
subsidiary of Household International and assumed deposit liabilities of
$78,897,000. Goodwill of $5,345,000 is being amortized on a straight-line basis
over 15 years. The acquisition was accounted for under the purchase method of
accounting and, accordingly, the consolidated financial statements include the
assets and liabilities from the August 4, 1995, transaction date forward.
On November 17, 1995, the Corporation announced the signing of a definitive
agreement to acquire all of the outstanding shares of DuQuoin Bancorp, Inc.,
parent company for DuQuoin National Bank, DuQuoin, Illinois. Under terms of the
agreement, the Corporation will issue approximately 499,000 shares of its common
stock. The transaction will be accounted for under the pooling of interests
method of accounting and is subject to approval by shareholders and appropriate
regulatory agencies. Although the Corporation anticipates that the merger will
be consummated during the second quarter of 1996, there can be no assurance that
the acquisition will be completed. At December 31, 1995, DuQuoin Bancorp, Inc.
had total assets and shareholders' equity of $83,279,000 and $6,570,000,
respectively.
47
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
3. Investment Securities Available For Sale and Held to Maturity
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale at December 31, 1995:
U.S. Treasury $ 22,832 $ 215 $ (42) $ 23,005
Federal agencies:
Bonds and notes 159,834 1,673 (44) 161,463
Mortgage-backed securities 611,290 5,456 (1,545) 615,201
Collateralized mortgage obligations 109,050 2,093 (3,013) 108,130
State and municipal 40,523 1,259 (78) 41,704
Other securities 22,918 57 (158) 22,817
--------------------------------------------
Total $966,447 $10,753 $ (4,880) $972,320
============================================
Held to Maturity at December 31, 1995:
Federal agencies:
Bonds and notes $ 4 $ 4
Mortgage-backed securities 116,522 $ 144 $ (1,387) 115,279
Collateralized mortgage obligations 3,203 7 (28) 3,182
State and municipal 78,511 3,488 (498) 81,501
--------------------------------------------
Total $198,240 $ 3,639 $ (1,913) $199,966
============================================
Available for Sale at December 31, 1994:
U.S. Treasury $ 70,874 $ 96 $ (1,299) $ 69,671
Federal agencies:
Bonds and notes 42,578 50 (520) 42,108
Mortgage-backed securities 259,036 892 (6,176) 253,752
Collateralized mortgage obligations 127,489 166 (6,176) 121,479
State and municipal 4,661 90 (95) 4,656
Other securities 17,918 11 (148) 17,781
--------------------------------------------
Total $522,556 $ 1,305 $(14,414) $509,447
============================================
Held to Maturity at December 31, 1994:
U.S. Treasury $ 12,132 $ (386) $ 11,746
Federal agencies:
Bonds and notes 10,626 $ 13 (412) 10,227
Mortgage-backed securities 445,647 122 (28,320) 417,449
State and municipal 81,290 1,859 (1,851) 81,298
Other securities 166 (13) 153
--------------------------------------------
Total $549,861 $ 1,994 $(30,982) $520,873
============================================
</TABLE>
Net unrealized gains or (losses) on investment securities available for sale,
net of tax, at December 31, 1995 and 1994, were $3,634,000 and ($7,934,000),
respectively. The amortized cost and estimated market value of investment
securities at December 31, 1995, by contractual maturity, are shown in the
following table. Expected maturities will differ from contractual maturities
because issuers may have the right to call or prepay obligations with or without
call or prepayment penalties.
48
<PAGE>
<TABLE>
<CAPTION>
Investment Securities Investment Securities
Available for Sale Held to Maturity
Amortized Market Amortized Market
Cost Value Cost Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maturity distribution at December 31, 1995:
Due in one year or less $ 25,920 $ 26,109 $ 4 $ 4
Due after one year through five years 186,851 189,278 7,648 8,138
Due after five years through ten years 3,122 3,267 33,364 34,946
Due after ten years 8,652 8,735 37,499 38,417
Mortgage-backed securities 611,290 615,201 116,522 115,279
Collateralized mortgage obligations 109,050 108,130 3,203 3,182
------------------------------------------
Total debt securities 944,885 950,720 198,240 199,966
Equity securities 21,562 21,600
------------------------------------------
Total $966,447 $972,320 $198,240 $199,966
==========================================
</TABLE>
Various investment securities with a carrying value of $523,265,000 and
$494,502,000 were pledged at December 31, 1995 and 1994, respectively, to secure
securities sold under repurchase agreements, public deposits, trust funds and
for other purposes as required or permitted by law.
Proceeds from the sales of investment securities available for sale during
1995, 1994 and 1993 were $282,804,000, $178,774,000 and $91,433,000,
respectively. All proceeds generating gains during the three years ended
December 31, 1995 from held to maturity securities were from early prepayments
and calls. Gross gains and losses realized on those transactions for the
respective portfolios and years were as follows:
<TABLE>
<CAPTION>
Investment Investment
Securities Securities
Available Held to
for Sale Maturity Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1995
Gross gains from sales and called bonds $ 3,548 $60 $ 3,608
Gross losses from sales (1,443) (1,443)
-------------------------------
Net securities gains $ 2,105 $60 $ 2,165
===============================
1994
Gross gains from sales and called bonds $ 1,888 $31 $ 1,919
Gross losses from sales (1,232) (1,232)
-------------------------------
Net securities gains $ 656 $31 $ 687
===============================
1993
Gross gains from sales and called bonds $ 1,306 $61 $ 1,367
Gross losses from sales (146) (146)
-------------------------------
Net securities gains $ 1,160 $61 $ 1,221
===============================
</TABLE>
On December 1, 1995, the Corporation transferred certain securities from held
to maturity to available for sale in accordance with a transition
reclassification allowed by the Financial Accounting Standards Board. Such
securities had a carrying value of $375,027,000 and a fair value of
$374,716,000. In February 1995, $22,492,000 of investment securities were
transferred from held to maturity to available for sale. This reclassification
was necessitated to conform the investment portfolios of the acquired
institutions, King City and Harrisburg, to the Corporation's policy for credit
risk and interest rate risk.
49
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
4. Loans, Credit Risk and Allowance for Loan Losses
Through its subsidiaries, the Corporation generates commercial, mortgage and
consumer loans and receives deposits from customers located in its primary
market areas of Indiana, Illinois, Kentucky, and portions of Tennessee.
Collateral, if deemed necessary, is based on management's credit evaluation and
may include business assets of commercial borrowers as well as personal property
and real estate of individual borrowers or guarantors. The Corporation's loan
portfolio is diversified with no concentration related to any one industry.
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
Loans at December 31:
Commercial, industrial and agricultural production loans $ 555,571 $ 317,958
Tax exempt loans 23,354 25,248
Real estate mortgage loans:
Commercial and agricultural 136,941 340,792
Construction 48,690 68,957
Residential 665,986 828,667
----------------------
851,617 1,238,416
Consumer loans 555,896 551,840
----------------------
1,986,438 2,133,462
Less: Unearned interest on loans 14,984 15,336
----------------------
Total loans, net of unearned interest $1,971,454 $2,118,126
======================
</TABLE>
As of December 31, 1995, the Corporation reclassified $214,550,000 of loans
previously classified as commercial real estate mortgage loans to the
commercial, industrial, and agricultural production loan category. The
reclassification represents real estate loans which are secured by owner-
occupied commercial or service related businesses. Management believes that
classifying such loans as commercial loans is more consistent with their
underwriting criteria and also more accurately reflects the credit risk
associated with such loans. Prior year amounts have not been reclassified using
the new criteria.
The above table does not include real estate loans held for sale which totaled
$222,157,000 and $11,666,000 at December 31, 1995 and 1994, respectively.
The Corporation has sold certain loans to the Federal Home Loan Mortgage
Corporation (FHLMC) and other investors while retaining servicing rights. Loans
serviced for others totaled $710,634,000 and $972,790,000 at December 31, 1995
and 1994, respectively, and are not included in the accompanying consolidated
financial statements.
The Corporation adopted Financial Accounting Standards Board Statements No.
114, and No. 118, "Accounting by Creditors for Impairment of a Loan" and
"Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures" effective January 1, 1995. The adoption of these statements did not
have a material impact on the Corporation's financial position or results of
operations since the method prescribed by the standards was not significantly
different from that historically used by the Corporation. Impaired loans totaled
$14,149,000 at December 31, 1995 and are included in the following non-
performing loan table. An allowance for losses at that date was not deemed
necessary for impaired loans totaling $6,701,000, but an allowance of $1,212,000
was recorded for the remaining balance of impaired loans of $7,448,000. The
average balance of impaired loans for 1995 was $13,566,000. Interest income and
cash receipts of interest totaled $76,000 and $102,000, respectively, during the
period in 1995 that the loans were impaired. Interest foregone on non-accrual
and restructured loans was not material to the Corporation's financial
statements.
50
<PAGE>
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-performing loans and assets at December 31:
Nonaccrual loans $ 19,913 $ 11,981
Restructured loans 948 1,065
90 days or more past due and accruing 2,227 2,933
-----------------------
Total non-performing loans 23,088 15,979
Foreclosed properties 1,727 3,849
-----------------------
Total non-performing assets $ 24,815 $ 19,828
=======================
1995 1994 1993
- -------------------------------------------------------------------------------------
Allowance for loan losses:
Balance at January 1, $28,502 $ 23,443 $ 22,335
Allowance of subsidiaries at acquisition date 769 1,118 924
Adjustment to conform year-ends 561
Loans charged-off (9,494) (5,633) (6,130)
Recoveries 2,090 1,779 2,424
Provision for loan losses 6,939 7,234 3,890
---------------------------------
Balance at December 31, $28,806 $ 28,502 $ 23,443
=================================
5. Premises and Equipment
1995 1994
- -------------------------------------------------------------------------------------
Cost at December 31:
Land $ 8,742 $ 9,996
Buildings and leasehold improvements 71,651 74,254
Equipment 42,700 43,152
-----------------------
Total cost 123,093 127,402
Accumulated depreciation (56,869) (58,899)
-----------------------
Net $ 66,224 $ 68,503
=======================
6. Deposits
1995 1994
- -------------------------------------------------------------------------------------
Deposits at December 31:
Non-interest bearing checking $ 322,706 $ 307,809
Interest bearing checking 414,315 433,242
Money market investment 301,637 244,137
Savings 237,109 273,952
Certificates of $100,000 or more 109,828 110,633
Certificates of deposit and other time 1,404,394 1,225,683
-----------------------
Total $2,789,989 $2,595,456
=======================
</TABLE>
The Corporation generally does not accept brokered deposits and has no
significant concentrations of deposits from any one customer or industry. The
maturity distribution of certificates and other time deposits at December 31,
1995, is as follows: 1996 -- $891,666,000; 1997 -- $336,443,000; 1998 --
$164,815,000; 1999 -- $42,946,000; 2000 -- $40,989,000; 2001 and after --
$37,363,000.
51
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
<TABLE>
<CAPTION>
7. Long-Term Debt
1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long-term debt of the parent company and its subsidiaries as of December 31:
Parent Company:
Convertible subordinated debentures, 7.50%, redemptions of $1,125
annually beginning in 2001, balance due 2011 $ 6,538 $ 6,785
Redeemable subordinated debentures, 9.50% due 1997 2,187 2,266
Notes payable, unsecured:
9.81%, payable $600 annually through 1996, balance due in 1997 3,000 3,600
10.00%, paid in 1995 3,250
Variable rate adjusted with changes in LIBOR, payable $250 quarterly through
2000 (6.69% and 6.25% at December 31, 1995 and 1994, respectively) 5,500 6,000
Subsidiaries:
Federal Home Loan Bank advances, due at various dates through 2014 (weighted
average rates of 5.89% and 6.13% at December 31, 1995 and 1994, respectively) 115,794 166,920
Notes payable, revolving credit agreement, secured by finance receivables:
Variable rate adjusted with changes in LIBOR in 1995 and the prime interest
rate in 1994 (6.63% and 8.50% at December 31, 1995 and 1994, respectively) 19,851 9,102
Fixed rate borrowings at 7.50% to 8.20%, paid in 1995 6,500
Other, including capitalized leases 5,176 5,638
------------------
Total $158,046 $210,061
==================
</TABLE>
The scheduled principal reduction of long-term debt at December 31, 1995, is
approximately as follows: 1996 - $69,788,000; 1997 - $15,860,000; 1998 -
$21,826,000; 1999 - $26,221,000; 2000 - $11,641,000; 2001 and after -
$12,710,000. Certain notes payable permit earlier principal payments without
penalty.
The Corporation sold $15,000,000 of 7.5 percent convertible subordinated
debentures on August 29, 1991. The debentures are convertible into shares of
common stock of the Corporation at a conversion price of $18.89 per share,
subject to certain adjustments, any time prior to maturity. The debentures are
subject to equal annual redemptions of $1,125,000 commencing in 2001 with final
maturity on September 1, 2011. The Corporation has the option to redeem the
debentures in whole or in part under certain conditions prior to maturity.
The redeemable subordinated debentures were issued in tandem with a like face
amount of cancelable mandatory stock purchase contracts as described in Note 8.
Qualifying unencumbered mortgage loans held in the loan portfolio equal to at
least 170 percent of the aggregate amount of advances have been pledged as
collateral for the Federal Home Loan Bank advances.
The Corporation and its subsidiaries have lines of credit available which
permit borrowings totaling $35,000,000 at variable rates adjusted with changes
in LIBOR through February 8, 1998. At December 31, 1995, $15,149,000 remained
available for future use.
52
<PAGE>
8. Shareholders' Equity
The Corporation is authorized to issue 2,000,000 shares of preferred stock, no
par value, which remain unissued at December 31, 1995. In the event any
preferred shares are issued, specific voting powers, dividend preferences, and
other rights and restrictions of the preferred stock will be designated by the
Board of Directors.
Shareholders' equity has been adjusted to record the one-for-twenty stock
dividend declared on November 16, 1993, the one-for-ten stock dividend declared
on October 18, 1994, and the one-for-twenty stock dividend declared on October
18, 1995. All share data has been adjusted to reflect the stock dividends.
The Corporation offers a Dividend Reinvestment and Stock Purchase Plan (the
Plan), which provides shareholders of the Corporation with a convenient method
of purchasing additional shares of common stock without the payment of any
brokerage commissions or fees. At December 31, 1995, there were 109,833 shares
of common stock reserved for issuance under the Plan. Shares distributed
pursuant to the Plan totaled 114,155, 97,323, and 97,247 for 1995, 1994 and
1993, respectively.
In connection with its merger with Indiana Bancshares, Inc., the Corporation
reserved 164,183 shares of its common stock effective May 1, 1992, for issuance
pursuant to Indiana Bancshares' $2,500,000 cancelable mandatory stock purchase
contracts, which were assumed by the Corporation. The cancelable mandatory stock
purchase contracts outstanding at December 31, 1995, require the purchase of
144,415 shares of the Corporation's common stock at a price of approximately
$15.23 per share on or before January 1, 1997. The Corporation issued 5,252
shares in 1995, 394 shares in 1994, and 4,595 shares in 1993 in connection with
the exercise of stock purchase contracts.
The Corporation has Incentive Stock Option Plans (Plans), whereby up to
735,000 shares of common stock can be granted to directors, certain key officers
or employees of the Corporation or its subsidiaries. Under terms of the Plans,
options may be granted to purchase the Corporation's common stock at a price not
less than the fair market value of the common stock at the date of the grant,
for a period of up to 10 years. Options granted pursuant to the Plans are
intended to qualify as incentive stock options; however, certain conditions may
be waived which would result in the options being treated as non-qualified stock
options. Unless earlier terminated by the Board of Directors, the Plans will
terminate on or before March 20, 2005.
The following table presents share data related to the Plans and other options
assumed by the Corporation as a result of certain mergers.
<TABLE>
<CAPTION>
1995 1994 1993
Option Average Option Average Option Average
Shares Option Price Shares Option Price Shares Option Price
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, January 1, 572,911 $15.35 441,916 $12.88 391,061 $10.09
Granted or assumed 126,014 28.25 167,143 20.98 86,451 24.26
Exercised (199,988) 8.73 (36,148) 11.15 (35,596) 9.86
Expired (2,657) 27.60
-------- ------- -------
Outstanding, December 31, 496,280 $21.22 572,911 $15.35 441,916 $12.88
=======================================================================
</TABLE>
At December 31, 1995, options for 389,851 shares were exercisable and 608,986
shares were available for the granting of additional options.
The Corporation had also reserved 346,170 shares of its common stock at
December 31, 1995, for its convertible subordinated debentures as described in
Note 7.
The Financial Accounting Standards Board has issued Statement No. 123
"Accounting for Stock-Based Compensation" which defines a "fair value method" of
accounting for stock options. The statement is effective for fiscal years
beginning after December 15, 1995, and encourages the use of the fair value
method but permits the current method with additional pro forma disclosures. The
Corporation intends to continue the current practice with pro forma disclosures
of net income and net income per share as if the "fair value method" had been
applied.
53
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
9. Employee Benefit Plans
The Corporation and its subsidiaries maintain noncontributory, defined-benefit
pension plans covering substantially all employees. Pension benefits are
generally based on years of service and compensation, as defined. Pension
expense was $327,000, $288,000 and $508,000 for 1995, 1994 and 1993,
respectively, and included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs-benefits earned during the period $ 1,339 $ 1,282 $ 1,275
Interest costs on projected benefit obligation 2,096 1,980 1,913
Return on plan assets (2,884) (2,750) (2,501)
Net amortization and deferral (224) (224) (179)
---------------------------
Net pension expense $ 327 $ 288 $ 508
===========================
</TABLE>
It is the Corporation's policy to make contributions to the plans sufficient
to meet the minimum funding requirements of applicable laws and regulations,
plus additional amounts, if any, that the Corporation may determine to be
appropriate.
The following table sets forth the plans' funded status and the amounts
recognized in the Corporation's consolidated balance sheet at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested $ 24,771 $ 20,993 $ 21,237
Nonvested 1,861 725 829
------------------------------
Total $ 26,632 $ 21,718 $ 22,066
==============================
Plan assets at fair value, primarily marketable securities $ 37,477 $ 30,082 $ 31,121
Actuarial present value of projected benefit obligation (31,679) (26,108) (27,621)
------------------------------
Excess of plan assets over projected benefit obligation 5,798 3,974 3,500
Unrecognized net transition asset (1,778) (1,966) (2,163)
Unrecognized net loss 1,750 2,308 1,585
Unrecognized prior service cost (981) (1,005) 151
------------------------------
Prepaid pension expense included in other assets $ 4,789 $ 3,311 $ 3,073
==============================
Assumptions used in determining the projected benefit
obligations and net pension expense were:
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.50% 8.25% 7.50%
Rate of increase in compensation levels 4.25 4.25 4.25
Expected long-term rate of return on plan assets 9.00 9.00 9.00
</TABLE>
The discount rates used to compute the projected benefit obligations were
increased in 1994 and reduced during 1995 as noted above due to changes in
market interest rates. The projected benefit obligations were reduced by
approximately $2,909,000 in 1994 and increased by approximately $2,850,000 in
1995 as a result of these changes.
UF Bancorp employees participated in a multi-employer defined benefit pension
plan until merger with the Corporation. In 1995, the Corporation incurred
expenses of $220,000 in connection with this plan. The Corporation has no
remaining liabilities with respect to this plan, and no plan assets were
transferred to the Corporation's defined benefit plan, as summarized in the
above tables.
54
<PAGE>
The Corporation and its subsidiaries also have a deferred income savings plan
(Savings Plan) with substantially all employees eligible to participate. At the
discretion of the Board of Directors, the subsidiaries match a percentage of
employee contributions and may make an additional contribution based on earnings
performance. The Corporation's expense for the Savings Plan was $842,000,
$1,052,000 and $1,133,000 for 1995, 1994 and 1993, respectively.
The Corporation does not provide postretirement benefits as defined by
Financial Accounting Standards Board Statement No. 106, "Employers Accounting
for Postretirement Benefits Other Than Pensions," nor does it have any material
liabilities for postemployment benefits provided to former and inactive
employees.
10. Other Non-Interest Income and Expense
Components of other non-interest income and expense that exceeded one percent of
total revenue in any of the years presented are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Other non-interest income:
Service charges on deposit accounts $10,908 $ 9,500 $ 8,607
Mortgage loan origination and servicing 7,662 9,113 10,721
Insurance premiums and commissions 6,009 6,746 5,546
Trust fees 5,169 4,538 4,195
Credit card and other non-interest fees on loans 5,142 4,986 4,219
Investment products fees 3,035 2,816 2,611
Other 6,579 8,419 5,993
-------------------------------------
Total other non-interest income 44,504 $46,118 $41,892
=====================================
Other non-interest expense:
Data processing and other services $11,648 $ 7,268 $ 6,158
FDIC assessments 3,996 6,257 5,444
Professional fees 3,787 3,106 3,118
Printing and supplies 3,667 3,080 2,770
Advertising and promotion 3,444 2,832 2,772
Postage and freight 3,005 2,726 2,724
Other 14,759 17,833 13,892
-------------------------------------
Total other non-interest expense $44,306 $43,102 $36,878
=====================================
</TABLE>
55
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
<TABLE>
<CAPTION>
11. Income Taxes
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes:
Currently payable:
Federal $17,926 $15,504 $12,904
State 4,118 3,778 3,314
Deferred (benefit):
Federal (1,149) (2,206) (131)
State (185) (283) (48)
---------------------------------
Total income taxes $20,710 $16,793 $16,039
=================================
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of federal statutory tax to actual income tax expense:
Federal income tax at applicable statutory rate (35%) $19,726 $16,557 $16,434
Tax exempt interest (2,094) (2,070) (2,153)
State franchise tax, net of federal tax benefit 2,556 2,271 2,130
Other 522 35 (372)
-------------------------------------
Income tax expense $20,710 $16,793 $16,039
=====================================
Effective rate 37% 35% 34%
=====================================
</TABLE>
A cumulative net deferred tax asset of $1,680,000 and $7,760,000 for 1995 and
1994, respectively, is included in other assets. The components of the asset at
December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Unrealized (gains) losses on securities available for sale $(2,239) $ 5,175
Differences in depreciation methods (2,902) (2,507)
Differences in accounting for loan losses 6,553 5,010
Deferred compensation and pension (1,506) (738)
Difference in accounting for warranty losses on sold loans 1,108 1,002
Other 666 (182)
-----------------
Net deferred tax asset $ 1,680 $ 7,760
=================
Assets $10,878 $11,468
Liabilities (9,198) (3,708)
-----------------
Net deferred tax asset $ 1,680 $ 7,760
=================
</TABLE>
During 1993, the Corporation adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." As a result, the beginning
deferred tax asset was increased by $1,868,000, which is reported as the
cumulative effect of a change in accounting method. A valuation allowance was
not required at any time during 1995 or 1994.
Income tax expense attributable to securities gains was $877,000, $279,000 and
$496,000 for 1995, 1994 and 1993, respectively.
56
<PAGE>
12. Lease Commitments
The Corporation is committed under various operating leases that have initial or
remaining non-cancelable lease periods in excess of one year as of December 31,
1995. Lease rental expense was $1,545,000 in 1995, $1,439,000 in 1994 and
$1,342,000 in 1993. Minimum rentals for lease commitments in succeeding years
totaled $7,422,000 at December 31, 1995.
13. Commitments and Contingent Liabilities
In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby letters
of credit, which are not included in the accompanying financial statements. The
Corporation's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments for commitments to extend credit and
standby letters of credit is represented by the contractual or notional amount
of those instruments. The Corporation uses the same credit policies in making
such commitments as it does for instruments that are included in the
consolidated balance sheet.
At December 31, those financial instruments whose contract amount represents
credit and/or interest rate risk are summarized in the following table:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit $510,824 $448,920
Commitments to purchase investment securities 1,650 19,175
Standby letters of credit 25,205 19,675
</TABLE>
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 Corporation evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Corporation upon extension of credit, is based on
management's credit evaluation. Collateral held varies but may include accounts
receivable, inventory, real property, plant and equipment, and income-producing
commercial properties.
Commitments to purchase investment securities were related to the purchase of
municipal securities at December 31, 1995, and U.S. Government Agency securities
at December 31, 1994. These transactions settled in January 1996 and 1995,
respectively.
Standby letters of credit are conditional commitments issued by the
Corporation to guarantee the performance of a customer to a third party.
The Corporation and its subsidiaries are also subject to claims and lawsuits
which arise primarily in the ordinary course of business. Based on information
presently available and advice received from legal counsel representing the
Corporation in connection with such claims and lawsuits, it is the opinion of
management that the disposition or ultimate determination of such claims and
lawsuits will not have a material adverse effect on the consolidated financial
position of the Corporation.
The Corporation has entered into employment contracts which provide for the
continuation of salary and certain benefits for a specified period of time under
certain conditions. Under the terms of the agreements, these payments could
occur in the event of a change in control of the Corporation, as defined, along
with certain other specified conditions. The contingent liability under these
agreements in the event of a change in control is approximately $3,784,000. The
Corporation is not required to pay any amounts under these agreements which
cannot be deducted for federal income tax purposes.
The Corporation has entered into an agreement with ALLTEL Information
Services, Inc. (ALLTEL) whereby ALLTEL will provide the Corporation with certain
services, including software, specified computer equipment and the overall
management and operations of its data processing through November 1999. The
agreement provides for minimum annual payments as follows: 1996 - $4,545,000;
1997 - $4,663,000; 1998 - $4,687,000; and 1999 - $4,483,000.
57
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
14. Interest Rate Contracts
Through the purchase of interest rate cap agreements, (caps) the Corporation has
reduced the impact of increased interest rates on its costs to acquire certain
repurchase agreements and long-term borrowings being hedged. These caps entitle
the Corporation to receive periodic payments from counterparties based upon the
notional amount of the caps and the excess of the index rate over the strike
price.
At December 31, 1995 and 1994, the notional amount of the interest rate caps
was $135,000,000 and $125,000,000, respectively. The caps are indexed to LIBOR
with contract strike prices ranging from 4 percent to 7 percent and mature in
1997. The caps had carrying values of $1,495,000 and $2,576,000 at December 31,
1995 and 1994, respectively, and related market values of $753,000 and
$7,217,000.
The Corporation has entered into interest rate swaps as a hedge against
certain long-term borrowings to manage its interest rate sensitivity. The
contracts represent an exchange of interest payments and the underlying
principal balances of the liabilities are not affected. At December 31, 1995,
the Corporation had a swap with a notional value of $10,000,000. The agreement
requires the Corporation to pay a fixed rate of interest of 5.93% and receive a
variable rate based on three-month LIBOR. The agreement terminates in November
2000.
The Corporation is exposed to credit losses in the event of nonperformance by
the counterparties but has no off-balance sheet credit risk of accounting loss.
Although collateral or other security is not obtained, the Corporation minimizes
its credit risk by monitoring the credit standing of the counterparties and
anticipates that the counterparties will be able to fully satisfy their
obligation under the agreements.
At December 31, 1995, option forward contracts outstanding committed the
Corporation to sell $34,300,000 par value of mortgage-backed securities during
1996. Fees received from these contracts have been deferred until completion of
the transaction.
15. Related Party Transactions
In the ordinary course of business, the Corporation has loan, deposit and other
transactions with officers, directors, and principal shareholders, and with
organizations and individuals with which they are financially or otherwise
closely associated. All of the transactions were entered into on substantially
the same terms as those prevailing at the time for comparable transactions with
other parties. These loans do not involve more than normal risk of
collectability or present other unfavorable features. As defined, total loans to
executive officers, directors, and principal shareholders were as follows:
<TABLE>
<S> <C>
Balance, January 1, 1995 (all current) $34,594
New loans, including renewals 8,025
Director and officer changes 2,026
Payments, including renewals (8,014)
-------
Balance, December 31, 1995 (all current) $36,631
=======
</TABLE>
16. Regulations on Bank Dividends and Cash
The principal source of income and funds for the Corporation (Parent Company) is
dividends from its banking subsidiaries. During the year 1996, the amount of
dividends that the banking subsidiaries can pay to the Corporation without
obtaining prior regulatory approval is limited to the total of their 1996 net
income and $27,335,000 (the amount available at December 31, 1995). As a
practical matter, the banks may restrict dividends to a lesser amount because of
the need to maintain adequate capital structures.
The bank subsidiaries are required by the Federal Reserve Bank to maintain
non-interest bearing cash reserve balances which are dependent on the amounts
and types of deposits held by the banks. The reserves required at December 31,
1995, were $46,882,000.
58
<PAGE>
17. Fair Values of Financial Instruments
The estimated fair values of the Corporation's financial instruments are
provided in the following table. A financial instrument is defined as cash,
evidence of an ownership interest in an entity, or a contract that both: a)
Imposes on one entity a contractual obligation to deliver cash or another
financial instrument to a second entity or, b) Conveys to a second entity a
contractual right to receive cash or another financial instrument from the first
entity. All of the Corporation's assets and liabilities are not financial
instruments, as defined, and are therefore not included in the table.
The estimated fair values of the Corporation's financial instruments at
December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 138,785 $ 138,785 $ 157,373 $ 157,373
Investment securities available for sale 972,320 972,320 509,447 509,447
Investment securities held to maturity 198,240 199,966 549,861 520,873
Net loans (including loans held for sale) 2,164,805 2,221,413 2,101,290 2,087,568
Interest receivable 29,353 29,353 23,982 23,982
Financial liabilities:
Deposits (2,789,989) (2,791,651) (2,595,456) (2,585,002)
Short-term borrowings (352,466) (352,466) (359,479) (359,479)
Interest rate contracts 1,495 753 2,576 7,217
Long-term debt (158,157) (158,209) (210,061) (210,762)
Interest payable (15,624) (15,624) (10,240) (10,240)
Off-balance sheet financial assets (liabilities):
Commitments to extend credit 2,402 1,998
Interest rate swaps (134)
</TABLE>
The carrying amounts of cash and short-term investments were reasonable
estimates of their fair values. Fair values for investment securities were based
on quoted market prices or dealer quotes where available. The fair values of
investment securities, where market values or dealer quotes were not available,
and loans were calculated by discounting expected cash flows to average
maturities. The discount rate was adjusted to allow for varying repricing
opportunities, credit risks and carrying costs, as deemed appropriate by
management. The fair values of demand deposits, savings accounts, money market
deposits and short-term borrowings were the carrying amounts which were payable
on December 31, 1995, and December 31, 1994, respectively. Fair values of
interest rate contracts, including interest rate swaps, were based on dealer
quotes. The fair values of fixed-maturity certificates of deposit and long-term
debt were estimated using current interest rates for similar remaining
maturities. Commitments to make loans and standby letters of credit are not
recorded on the balance sheet. The fair values of commitments to extend credit
were based on fees currently charged to enter into similar agreements with
similar maturities and interest rates.
Because no active market exists for a significant portion of the Corporation's
financial instruments, fair value estimates were based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other such factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
59
<PAGE>
Notes to Consolidated Financial Statements
CNB Bancshares, Inc.
18. Condensed Financial Information of Parent Company
Presented below is condensed financial information as to financial position,
results of operations and cash flows of the Corporation (Parent Company only).
<TABLE>
<CAPTION>
December 31,
CONDENSED BALANCE SHEET 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash on deposit $ 2,236 $ 3,210
Securities purchased under repurchase agreements
with subsidiaries 10,000 16,000
-------------------
Total cash and cash equivalents 12,236 19,210
Investment in subsidiaries 287,958 264,974
Premises and equipment 732 334
Receivables from subsidiaries 11,107 9,554
Other assets 2,508 633
-------------------
Total assets $314,541 $294,705
===================
Liabilities
Accrued expenses $ 1,810 $ 1,679
Dividends payable 2,813
Long-term debt 15,038 16,385
-------------------
Total liabilities 16,848 20,877
Shareholders' equity 297,693 273,828
-------------------
Total liabilities and shareholders' equity $314,541 $294,705
===================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
CONDENSED STATEMENT OF INCOME 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Dividends from subsidiaries $ 46,003 $ 32,057 $ 29,779
Management fees from subsidiaries 5,998 5,673
Other income 1,151 1,817 197
-------- ------- -------
Total income 53,152 39,547 29,976
Expenses
Personnel expense 6,894 5,731
Interest expense 1,433 1,426 1,882
Other expenses 3,859 3,166 2,726
-------- ------- -------
Total expenses 12,186 10,323 4,608
-------- ------- -------
Income before income tax and equity
in undistributed earnings of subsidiaries 40,966 29,224 25,368
Income tax benefit 1,737 938 634
-------- ------- -------
Income before equity in undistributed earnings
of subsidiaries 42,703 30,162 26,002
Equity in undistributed earnings of
subsidiaries (7,052) 350 6,782
-------- ------- -------
Net income $ 35,651 $ 30,512 $ 32,784
============================
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
Condensed Statement of Cash Flows 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 35,651 $ 30,512 $ 32,784
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 143 97 68
(Increase) decrease in undistributed net income of subsidiaries 7,052 (350) (6,782)
(Increase) decrease in other assets (1,900) (123) 1,288
Increase in other liabilities 96 523 181
------------------------------
Net cash provided by operating activities 41,042 30,659 27,539
------------------------------
Investing activities:
Principal payments received on notes from subsidiaries 89 1,650 456
Purchase of subsidiaries (688)
Advances on notes to subsidiaries (1,642) (3,077) (7,154)
Capital distributions (to) from subsidiaries (11,652) 1,952 186
Purchase of premises and equipment (507) (321) (94)
------------------------------
Net cash provided (used) by investing activities (13,712) 204 (7,294)
------------------------------
Financing activities:
Payment of long-term debt (19,100) (3,911) (4,711)
Proceeds from long-term borrowings 18,000 7,000
Proceeds from common stock issued for dividend reinvestment plan 3,093 2,733 2,396
Proceeds from exercise of stock options and stock purchase contracts 1,964 804 1,098
Payment of cash dividends (12,972) (11,777) (11,105)
Purchase and retirement of common stock (25,289) (11,693) (5,949)
------------------------------
Net cash used by financing activities (34,304) (23,844) (11,271)
------------------------------
Net increase (decrease) in cash and cash equivalents (6,974) 7,019 8,974
Cash and cash equivalents at January 1, 19,210 12,191 3,217
------------------------------
Cash and cash equivalents at December 31, $ 12,236 $ 19,210 $ 12,191
==============================
Supplemental disclosure:
Non-cash investing and financing activities:
Stock issued in exchange of debentures and equity contracts $ 247 $ 3,252 $ 5,037
Common stock issued for acquisitions 6,618 9,969 2,721
</TABLE>
61
<PAGE>
Independent Auditor's Report
CNB Bancshares, Inc.
To the Shareholders and Board of Directors
CNB Bancshares, Inc.
Evansville, Indiana
We have audited the consolidated balance sheet of CNB Bancshares, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1995. 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 consolidated financial statements described above present
fairly, in all material respects, the consolidated financial position of CNB
Bancshares, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in the notes to consolidated financial statements, effective
January 1, 1993, and December 31, 1993, respectively, the Corporation adopted
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, and Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities.
/s/ Geo. S. Olive & Co.
GEO. S. OLIVE & CO. LLC
Evansville, Indiana
January 26, 1996
62
<PAGE>
Management's Statement of Financial Reporting
CNB Bancshares, Inc.
The consolidated financial statements of CNB Bancshares, Inc. were prepared by
management of the Corporation, which is responsible for their integrity and
objectivity. The statements were prepared in accordance with generally accepted
accounting principles appropriate in the circumstances and properly include
amounts that are based on management's best judgements and estimates. The other
financial information included in this report is consistent with that in the
financial statements.
In meeting its responsibility, management has established and maintains
systems of internal control which are designed to provide reasonable assurance
that assets are safeguarded and that the financial records reflect the
authorized transactions of the Corporation and that its policies and procedures
are followed. These systems are augmented by the careful selection and training
of qualified personnel and a continuous program of internal audits.
Geo. S. Olive & Co., LLC, independent auditors, were engaged to audit the
consolidated financial statements of CNB Bancshares, Inc. and to express an
opinion thereon. The audit was conducted in accordance with generally accepted
auditing standards which included a review of the Corporation's systems of
internal controls and such tests and related procedures as they deemed necessary
to express an opinion on the fairness of the consolidated financial statements.
The Board of Directors pursues its responsibility for the Corporation's
financial statements through its Audit Committee. The Audit Committee, comprised
solely of directors who are not officers or employees of the Corporation, is
responsible for monitoring the accounting, auditing and financial reporting
practices of the Corporation and its subsidiaries. The Committee recommends to
the Board of Directors the appointment of the independent auditors and meets
regularly with them, the internal auditors, and management. To further assure
their independence, the internal auditors and the independent auditors have
direct access to the Audit Committee and the Board of Directors.
CNB BANCSHARES, INC.
63
<PAGE>
Average Balance Sheet and Net Interest Income Analysis
CNB Bancshares, Inc.
(In thousands on fully taxable equivalent basis)
<TABLE>
<CAPTION>
1995 1994
Average Average Average Average
Balances Interest Rates Balances Interest Rates
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold and other short-term money market
investments $ 23,319 $ 1,418 6.08% $ 50,416 $ 1,805 3.58%
Real estate loans held for sale 23,113 1,899 8.22 33,913 2,602 7.67
Investment securities (1)
Taxable 1,037,083 68,743 6.63 946,048 54,570 5.77
Tax exempt (2) 85,358 7,648 8.96 74,505 7,279 9.77
----------------------------------------------------------
Total investment securities 1,122,441 76,391 6.81 1,020,553 61,849 6.06
Loans: (3) (4)
Commercial and industrial 335,598 32,641 9.73 301,027 24,692 8.20
Tax exempt (2) 23,982 2,536 10.57 25,778 2,427 9.42
Real estate mortgage 1,243,944 106,455 8.56 1,110,410 89,527 8.06
Consumer 535,903 55,720 10.40 513,018 47,335 9.23
----------------------------------------------------------
Total loans 2,139,427 197,352 9.22 1,950,233 163,981 8.41
----------------------------------------------------------
Total earning assets 3,308,300 277,060 8.37 3,055,115 230,237 7.53
Less: Allowance for loan losses 28,811 25,897
Cash and due from banks 99,687 104,917
Premises and equipment 68,187 70,122
Other assets 82,144 74,693
----------------------------------------------------------
Total assets $3,529,507 $3,278,950
==========================================================
Liabilities
Interest bearing deposits:
Interest bearing checking $ 395,874 $ 9,783 2.47% $ 422,396 $ 10,122 2.40%
Money market investment 255,875 9,758 3.81 270,585 7,348 2.72
Savings 250,449 6,678 2.67 290,173 7,618 2.63
Certificates of deposit and other time 1,487,838 82,559 5.55 1,343,685 62,062 4.62
----------------------------------------------------------
Total interest bearing deposits 2,390,036 108,778 4.55 2,326,839 87,150 3.75
Securities sold under repurchase agreements 302,004 16,678 5.52 213,963 9,857 4.61
Federal funds purchased 23,539 1,393 5.92 30,669 1,329 4.33
Other short-term borrowings 7,600 423 5.57 6,633 262 3.95
Long-term debt (5) 193,784 13,078 6.75 109,977 7,179 6.53
----------------------------------------------------------
Total interest bearing
liabilities 2,916,963 140,350 4.81 2,688,081 105,777 3.94
Non-interest bearing checking 293,051 287,963
Other liabilities 33,599 25,760
----------------------------------------------------------
Total liabilities 3,243,613 3,001,804
Shareholders' equity (1) 285,894 277,146
----------------------------------------------------------
Total liabilities and shareholders' equity $3,529,507 $3,278,950
==========================================================
Recap (6)
Interest income $277,060 8.37% $230,237 7.53%
Interest expense 140,350 4.24 105,777 3.46
----------------------------------------------------------
Net interest income/margin $136,710 4.13% $124,460 4.07%
==========================================================
</TABLE>
(1) Average balances exclude net unrealized gains/losses on securities available
for sale.
(2) Tax exempt securities and loans have been adjusted to a fully tax equivalent
basis using a marginal tax rate of 35% for 1993 forward and 34% for previous
years.
(3) Nonaccrual loans have been included in the average balances.
(4) Loan income includes interest and fees on loans.
(5) Interest expense includes a one-time prepayment penalty of $453,000 in 1992.
Rate excluding penalty would have been 8.48%.
(6) Average rates have been computed by dividing by total earning assets.
64
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991
Average Average Average Average Average Average
Balances Interest Rates Balances Interest Rates Balances Interest Rates
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 104,369 $ 3,380 3.24% $ 167,003 $ 6,474 3.88% $ 185,725 $ 11,111 5.98%
64,333 4,448 6.91 59,644 4,445 7.45 16,510 1,536 9.30
859,807 52,570 6.11 716,046 53,177 7.43 589,386 49,896 8.47
69,079 7,305 10.57 80,104 8,410 10.50 89,231 9,660 10.83
- -------------------------------------------------------------------------------------------------------------------------------
928,886 59,875 6.45 796,150 61,587 7.74 678,617 59,556 8.78
236,475 18,149 7.67 267,582 22,007 8.22 294,453 29,225 9.93
30,710 2,664 8.67 37,640 3,353 8.91 43,439 4,698 10.82
1,023,013 85,725 8.38 999,976 92,278 9.23 1,066,733 108,907 10.21
426,941 41,958 9.83 364,937 41,179 11.28 346,505 42,491 12.26
- -------------------------------------------------------------------------------------------------------------------------------
1,717,139 148,496 8.65 1,670,135 158,817 9.51 1,751,130 185,321 10.58
- -------------------------------------------------------------------------------------------------------------------------------
2,814,727 216,199 7.68 2,692,932 231,323 8.59 2,631,982 257,524 9.78
23,466 22,069 18,359
109,852 104,919 102,617
68,540 66,018 64,088
67,308 66,745 76,386
- -------------------------------------------------------------------------------------------------------------------------------
$3,036,961 $2,908,545 $2,856,714
===============================================================================================================================
$ 384,664 $ 9,790 2.55% $ 343,848 $ 10,678 3.11% $ 291,775 $ 12,963 4.44%
258,034 7,378 2.86 240,514 8,639 3.59 228,751 11,693 5.11
275,762 8,067 2.93 224,446 7,998 3.56 186,727 9,604 5.14
1,347,583 64,933 4.82 1,393,601 81,835 5.87 1,487,538 106,673 7.17
- -------------------------------------------------------------------------------------------------------------------------------
2,266,043 90,168 3.98 2,202,409 109,150 4.96 2,194,791 140,933 6.42
97,032 2,868 2.96 95,906 3,345 3.49 82,019 4,502 5.49
15,872 445 2.80 9,693 296 3.05 12,107 655 5.41
1,397 39 2.79 3,948 230 5.83 8,990 738 8.21
112,986 7,973 7.06 104,208 9,286 8.91 92,724 8,742 9.43
- -------------------------------------------------------------------------------------------------------------------------------
2,493,330 101,493 4.07 2,416,164 122,307 5.06 2,390,631 155,570 6.51
264,788 236,515 219,935
27,567 30,254 39,814
- -------------------------------------------------------------------------------------------------------------------------------
2,785,685 2,682,933 2,650,380
251,276 225,612 206,334
- -------------------------------------------------------------------------------------------------------------------------------
$3,036,961 $2,908,545 $2,856,714
===============================================================================================================================
$216,199 7.68% $231,323 8.59% $257,524 9.78%
101,493 3.60 122,307 4.54 155,570 5.91
- -------------------------------------------------------------------------------------------------------------------------------
$114,706 4.08% $109,016 4.05% $101,954 3.87%
===============================================================================================================================
</TABLE>
65
<PAGE>
Shareholder Information
CNB Bancshares, Inc.
Corporate Offices
The corporate offices of CNB Bancshares are located at: 20 N. W. Third Street,
Evansville, Indiana 47739-0001
812-464-3400.
Annual Meeting
The annual meeting of shareholders of CNB Bancshares will be held at 5:00 p.m.
on April 16, 1996, at the Vanderburgh Auditorium, 715 Locust Street, Evansville,
Indiana.
Stock Prices and Dividends
The common stock of CNB trades on The Nasdaq Stock Market under the symbol CNBE.
The table below lists the range of the closing stock price and dividend
information on a quarterly basis over the last two years. All amounts have been
adjusted for stock dividends.
<TABLE>
<CAPTION>
1995
Range of Dividends
Stock Price Declared Paid
---------------------------------
<S> <C> <C> <C> <C>
First Quarter $ 27.79 -- $30.52 $.19 $.19
Second Quarter 27.79 -- 28.74 .20 .19
Third Quarter 26.60 -- 28.50 .20 .20
Fourth Quarter 25.00 -- 28.50 .20
</TABLE>
<TABLE>
<CAPTION>
1994
Range of Dividends
Stock Price Declared Paid
---------------------------------
<S> <C> <C> <C> <C>
First Quarter $ 26.51 -- $29.07 $.18 $.18
Second Quarter 26.93 -- 29.28 .19 .18
Third Quarter 28.64 -- 30.14 .19 .19
Fourth Quarter 26.84 -- 30.16 .19 .19
</TABLE>
Quarterly Dividend Programs
CNB offers a Dividend Reinvestment and Stock Purchase Plan to shareholders,
administered by Citizens National Bank. The Plan provides a convenient means of
purchasing additional stock without the payment of any brokerage commission or
service charges. In addition, shareholders participating in the Plan receive a
three percent discount from the current market price (as measured during a five-
day trading period) on shares of CNB purchased with reinvested dividends.
The Corporation also offers Direct Deposit of cash dividends, whereby
quarterly dividend payments can be automatically deposited to the shareholder's
designated bank.
For information regarding CNB Bancshares' convenient dividend programs,
contact Jayne Hilt, Shareholder Relations Officer.
Transfer Agent
Shareholders should direct inquiries concerning dividend checks or their
shareholder records to: Citizens National Bank of Evansville
Attention: Jayne Hilt, P.O. Box 778, Evansville, Indiana 47705-0778, 812-464-
3416.
Market Makers
The following firms make a market in the shares of CNB Bancshares:
William Blair & Company
Herzog, Heine, Geduld, Inc.
J. J. B. Hilliard, W. L. Lyons, Inc.
Keefe, Bruyette & Woods, Inc.
Merrill Lynch, Pierce, Fenner & Smith, Inc.
NatCity Investments, Inc.
David A. Noyes & Company
Olde Discount Corporation
Oppenheimer & Co., Inc.
Smith Barney Inc.
Internet
Information on CNB is available on the Internet at:
http://www.cnbe.com
Availability of Form 10-K
CNB's annual report to the Securities and Exchange Commission on Form 10-K is
available without charge upon written request. Address such request to Jayne
Hilt, Shareholders Relations Officer, at the corporate office address listed
above.
69
<PAGE>
EXHIBIT NO. 21 - SIGNIFICANT SUBSIDIARIES OF THE REGISTRANT
Name Jurisdiction of Incorporation
---- -----------------------------
Citizens Bancshares, Inc. State of Indiana
The Citizens National Bank of Evansville, Indiana United States
UNIFIN, Inc. State of Indiana
Union Financial Corp. State of Virginia
Citizens Bank of Kentucky, Madisonville, Kentucky State of Kentucky
CNB of Central Indiana State of Indiana
Citizens Bank of Central Indiana, Greenwood, Indiana State of Indiana
IBI & Associates** General Partnership
HBI Acquisition Company State of Indiana
Citizens Bank of Illinois, N.A., Mt. Vernon, Illinois United States
Citizens Bank of Western Indiana, Terre Haute, Indiana State of Indiana
Citizens Bank of Jasper, Indiana State of Indiana
Citizens Realty and Insurance, Inc. State of Indiana
Peoples Security Finance Company, Inc. State of Kentucky
Citizens Information Systems, Inc. State of Indiana
Citizens Life Assurance Company State of Arizona
*The indention of an entity's name in the table above signifies its ownership by
the entity preceding it.
**IBI & Associates is a general a partnership of which CNB of Central Indiana
has a 75% interest.
<PAGE>
Exhibit 23
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the below scheduled Form S-8
registration statements of our report dated January 26, 1996, and appearing on
page 62 of the Annual Report to Shareholders, on the consolidated financial
statements of CNB Bancshares, Inc. incorporated by reference in the Annual
Report on Form 10-K for the year ended December 31, 1995.
Commission
File
Number
-------------
Indiana Bancshares, Inc. 1985 Non-Qualified
Stock Option Plan and Indiana Bancshares, Inc.
1990 Stock Option Plan 33-47898
CNB Bancshares, Inc. 1992 Incentive Stock
Option Plan 33-45929
Citizens Incentive Savings Plan 33-41514
Valley Bank Stock Option Plan 33-38651
King City Federal Savings Bank 1986 Stock Option and
Incentive Plan 33-89658
King City Federal Savings Bank 1993 Stock Option and
Incentive Plan 33-89722
UF Bancorp, Inc. 1991 Stock Option and Incentive Plan 33-61685
CNB Bancshares, Inc. 1995 Stock Incentive Plan 33-60431
/s/ Geo. S. Olive & Co. LLC
- ---------------------------
Evansville, Indiana
March 26, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from CNB
Bancshares Inc.'s consolidated balance sheet as of December 31, 1995 and the
consolidated statement of income for the year ended December 31, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 130,239
<INT-BEARING-DEPOSITS> 296
<FED-FUNDS-SOLD> 8,250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 972,320
<INVESTMENTS-CARRYING> 198,240
<INVESTMENTS-MARKET> 199,966
<LOANS> 2,193,611
<ALLOWANCE> 28,806
<TOTAL-ASSETS> 3,628,682
<DEPOSITS> 2,789,989
<SHORT-TERM> 351,082
<LIABILITIES-OTHER> 31,872
<LONG-TERM> 158,046
<COMMON> 17,895
0
0
<OTHER-SE> 279,798
<TOTAL-LIABILITIES-AND-EQUITY> 3,628,682
<INTEREST-LOAN> 198,423
<INTEREST-INVEST> 73,944
<INTEREST-OTHER> 1,418
<INTEREST-TOTAL> 273,785
<INTEREST-DEPOSIT> 108,778
<INTEREST-EXPENSE> 140,350
<INTEREST-INCOME-NET> 133,435
<LOAN-LOSSES> 6,939
<SECURITIES-GAINS> 2,165
<EXPENSE-OTHER> 116,804
<INCOME-PRETAX> 56,361
<INCOME-PRE-EXTRAORDINARY> 56,361
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,651
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
<YIELD-ACTUAL> 4.13
<LOANS-NON> 19,913
<LOANS-PAST> 2,227
<LOANS-TROUBLED> 948
<LOANS-PROBLEM> 8,330
<ALLOWANCE-OPEN> 28,502
<CHARGE-OFFS> 9,494
<RECOVERIES> 2,090
<ALLOWANCE-CLOSE> 28,806
<ALLOWANCE-DOMESTIC> 27,107
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,699
</TABLE>
