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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
/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
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________to________________
Commission file Number: 0-19028
CCFNB BANCORP, INC.
(Name of small business issuer in its charter)
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PENNSYLVANIA 23-2254643
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
232 East Street, Bloomsburg, Pennsylvania 17815
(Address of principal executive offices) (Zip Code)
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Issuer's telephone number, including area code: (717) 784-4400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $1.25 per share.
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of issuer's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. /X/
Issuer's revenues for its most recent fiscal year were
$12,158,585.
The aggregate market value of the voting stock held by
non-affiliates of the issuer based on a closing sale price of $16.88 at March
15, 1996, was $21,824,523.36.
As of March 15, 1996, the issuer had outstanding 1,372,658
shares of its common stock, par value $1.25 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the issuer's 1996 definitive Proxy Statement are
incorporated by reference in Part III of this Annual Report. In addition,
portions of the Annual Report to stockholders of the issuer for the year ended
December 31, 1995, are incorporated by reference in Part II of this Annual
Report.
Transitional Small Business Disclosure Format (check one).
Yes No X
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Page 1 of ____
Exhibit Index on Page 25
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CCFNB BANCORP, INC.
FORM 10-KSB
Index
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Part I Page
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Item 1. Description of the Business . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . Not Applicable
Part II
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Item 5. Market for Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 6. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . Not Applicable
Part III
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Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 11. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 12. Certain Relationships and Related Transactions . . . . . . . . . . . . . . 21
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 22
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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CCFNB BANCORP, INC.
FORM 10-KSB
PART I
ITEM 1. DESCRIPTION OF THE BUSINESS
General
CCFNB Bancorp, Inc. ("Bancorp"), a Pennsylvania business
corporation, is a bank holding company, registered with and supervised by the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
Bancorp was organized on June 20, 1983, and commenced operations on March 31,
1984. Bancorp has one wholly-owned subsidiary, the Columbia County Farmers
National Bank (the "Bank"). Bancorp's business has consisted primarily of
managing and supervising the Bank, and its principal source of income has been
dividends paid by the Bank. At December 31, 1995, Bancorp had total
consolidated assets, deposits and stockholders' equity of approximately $162
million, $129 million and $20 million, respectively.
The Bank was organized in 1917. The Bank is a national
banking association that is a member of the Federal Reserve System and the
deposits of which are insured by the Federal Deposit Insurance Corporation (the
"FDIC") under the Bank Insurance Fund ("BIF"). As of December 31, 1995, the
Bank has 6 branch locations, including its main office in Bloomsburg,
Pennsylvania. All of the Bank's offices are located in Columbia County,
Pennsylvania. The Bank is a full service commercial bank providing a wide
range of services to individuals and small to medium sized businesses in its
north eastern Pennsylvania market area, including accepting time, demand, and
savings deposits and making secured and unsecured commercial, real estate and
consumer loans. In addition, the Bank has a trust department.
Supervision and Regulation - Bancorp
Bancorp is subject to the jurisdiction of the Securities and
Exchange Commission ("SEC") and of state securities laws administrators for
matters relating to the offering and sale of its securities. Bancorp is
currently subject to the SEC's rules and regulations relating to periodic
reporting, insider trading reports and proxy solicitation material in
accordance with the Securities Exchange Act of 1934 (the "Exchange Act").
Furthermore, Bancorp qualifies as a "small business issuer" as that term is
defined under Item 10 of Regulation S-B of the SEC, and has elected to make its
SEC filings under the disclosure requirements afforded to small business
issuers.
Bancorp is also subject to the provisions of the Bank Holding
Company Act of 1956, as amended ("Bank Holding Company Act"), and to
supervision by the Federal Reserve Board. The Bank Holding Company Act will
require Bancorp to secure the prior approval of the Federal Reserve Board
before it owns or controls, directly or indirectly, more than 5% of the voting
shares of substantially all of the assets of any institution, including another
bank. The Bank Holding Company Act prohibits acquisition by Bancorp of more
than 5% of the voting
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shares of, or interest in, or substantially all of the assets of, any bank
located outside Pennsylvania unless such an acquisition is specifically
authorized by laws of the state in which such bank is located.
A bank holding company is prohibited from engaging in or
acquiring direct or indirect control of more than 5% of the voting shares of
any company engaged in non-banking activities unless the Federal Reserve Board,
by order or regulation, has found such activities to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
In making this determination, the Federal Reserve Board considers whether the
performance of these activities by a bank holding company would offer benefits
to the public that outweigh possible adverse effects.
The Bank Holding Company Act also prohibits acquisitions of
control of a bank holding company, such as Bancorp, without prior notice to the
Federal Reserve Board. Control is defined for this purpose as the power,
directly or indirectly, to direct the management or policies of a bank holding
company or to vote twenty-five percent (25%) (or ten percent (10%), if no other
person or persons acting on concert, holds a greater percentage of the Common
Stock) or more of Bancorp's Common Stock.
Bancorp is required to file an annual report with the Federal
Reserve Board and any additional information that the Federal Reserve Board may
require pursuant to the Bank Holding Company Act. The Federal Reserve Board
may also make examinations of Bancorp and any or all of its subsidiaries.
Further, under Section 106 of the 1970 amendments to the Bank Holding Company
Act and the Federal Reserve Board's regulations, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit or provision of credit or provision of
any property or services. The so-called "Anti-tie-in" provisions state
generally that a bank may not extend credit, lease, sell property or furnish
any service to a customer on the condition that the customer provide additional
credit or service to the bank, to its bank holding company or to any other
subsidiary of its bank holding company or on the condition that the customer
not obtain other credit or service from a competitor of the bank, its bank
holding company or any subsidiary of its bank holding company.
Subsidiary banks of a bank holding company are 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, on investments
in the stock or other securities of the bank holding company and on taking of
such stock or securities as collateral for loans to any borrower.
Permitted Non-Banking Activities
The Federal Reserve Board permits bank holding companies to
engage in non-banking activities so closely related to banking, managing or
controlling banks as to be a proper incident thereto. While the types of
permissible activities are subject to change by the Federal Reserve Board, the
principal non-banking activities that presently may be conducted by a bank
holding company are:
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1. Making, acquiring or servicing loans and other
extensions of credit for its own account or for the account of others, such as
would be made by the following types of companies: consumer finance, credit
card, mortgage, commercial finance and factoring.
2. Operating as an industrial bank, Morris Plan bank or
industrial loan company in the manner authorized by state law so long as the
institution does not accept demand deposits or make commercial loans.
3. Operating as a trust company in the manner authorized
by federal or state law so long as the institution does not make certain types
of loans or investments or accept deposits, except as may be permitted by the
Federal Reserve Board.
4. Subject to certain limitations, acting as an
investment or financial advisor to investment companies and other persons.
5. Leasing personal and real property or acting as
agent, broker, or advisor in leasing property, provided that it is reasonably
anticipated that the transaction will compensate the lessor for not less than
the lessor's full investment in the property and provided further that the
lessor may rely on estimated residual values of up to 100% of the acquisition
cost of the leased property.
6. Making equity and debt investments in corporations or
projects designed primarily to promote community welfare, such as the economic
rehabilitation and development of low-income areas by providing housing,
services or jobs for residents.
7. Providing to others financially oriented data
processing or bookkeeping services.
8. Subject to certain limitations, acting as an
insurance principal, agent or broker in relation to insurance for itself and
its subsidiaries or for insurance directly related to extensions of credit by
the bank holding company system.
9. Owning, controlling or operating a savings
association, if the savings association engages only in deposit taking
activities and lending, and other activities permissible for bank holding
companies.
10. Providing courier services of a limited character.
11. Subject to certain limitations, providing management
consulting advice to nonaffiliated banks and nonbank depository institutions.
12. Selling money orders having a face value of $1,000 or
less, travelers' checks and United States savings bonds.
13. Performing appraisals of real estate and personal
property, including securities.
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14. Subject to certain conditions, acting as intermediary
for the financing of commercial or industrial income-producing real estate by
arranging for the transfer of the title, control and risk of such a real estate
project to one or more investors.
15. Subject to certain limitations, providing
full-service brokerage and financial advisory activities; and selling, solely
as an agent or broker for customers, shares of investment companies advised by
an affiliate of the bank holding company or providing investment advice to
customers about the purchase and sale of shares of investment companies advised
by an affiliate of the bank holding company.
16. Underwriting and dealing in obligations of the United
States, general obligations of states and their political subdivisions and
other obligations such as bankers' acceptances and certificates of deposits.
17. Subject to certain limitations, providing by any
means, general information and statistical forecasting with respect to foreign
exchange markets; advisory services designed to assist customers in monitoring,
evaluating and managing their foreign exchange exposures; and certain
transactional services with respect to foreign exchange.
18. Subject to certain limitations, acting as a futures
commission merchant in the execution and clearance on major commodity exchanges
of futures contracts and options on futures contracts for bullion, foreign
exchange, government securities, certificates of deposit and other money market
instruments.
19. Subject to certain limitations, providing commodity
trading and futures commission merchant advice, including counsel,
publications, written analysis and reports.
20. Providing consumer financial counseling that involves
counseling, educational courses and distribution of instructional materials to
individuals on consumer-oriented financial management matters, including debt
consolidation, mortgage applications, bankruptcy, budget management, real
estate tax shelters, tax planning, retirement and estate planning, insurance
and general investment management, so long as this activity does not include
the sale of specific products or investments.
21. Providing tax planning and preparation advice such as
strategies designed to minimize tax liabilities and includes, for individuals,
analysis of the tax implications of retirement plans, estate planning and
family trusts. For a corporation, tax planning includes the analysis of the
tax implications of mergers and acquisitions, portfolio mix, specific
investments, previous tax payments and year-end tax planning. Tax preparation
involves the preparation of tax forms and advice concerning liability based on
records and receipts supplied by the client.
22. Providing check guaranty services to subscribing
merchants.
23. Subject to certain limitations, operating a
collection agency.
24. Operating a credit bureau that maintains files on the
past credit history of consumers and providing such information to a lender
that is considering a borrower's application
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for credit, provided that the credit bureau does not grant preferential
treatment to an affiliated bank in the bank holding company system.
Pennsylvania Banking Law
Under the Pennsylvania Banking Code of 1965, as amended (the
"Code"), Bancorp is permitted to control an unlimited number of banks.
However, Bancorp would be required, under the Bank Holding Company Act, to
obtain the prior approval of the Federal Reserve Board before it could acquire
all or substantially all of the assets of any bank, or acquire ownership or
control of any voting shares of any bank other than the Bank, if, after such
acquisition, it would own or control more than five percent (5%) of the voting
shares of such bank.
Interstate Banking and Branching
On September 29, 1994, the President signed into law the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"). The following discussion describes those provisions
of the Interstate Banking Act that would pertain to Bancorp. It is not an
exhaustive description of all provisions of the Interstate Banking Act.
In general, the Federal Reserve Board may approve an
application by Bancorp to acquire control of, or acquire all or substantially
all of the assets of, a bank located outside of the Commonwealth of
Pennsylvania without regard to whether such acquisition is prohibited under the
law of any state. The Federal Reserve Board may approve such application if it
finds, among other things, that Bancorp is "adequately capitalized" and
"adequately managed." Moreover, the Federal Reserve Board may not approve such
acquisition if the target bank has not been in existence for the minimum period
of time, if any, required by such target bank's "host" state. The Federal
Reserve Board may, however, approve the acquisition of the target bank that has
been in existence for at least five years without regard to any longer minimum
period of time required under the law of the "host" state of the target bank.
These above provisions took effect on September 30, 1995.
Furthermore, the Interstate Banking Law provides that,
beginning June 1, 1997, appropriate federal supervisory agencies may approve a
merger of the Bank with another bank located in a different state or the
establishment by the Bank of a new branch office either by acquisition or de
novo, unless the Commonwealth of Pennsylvania enacts a law prior to June 1,
1997, allowing an interstate merger or expressly prohibiting merger with an
out-of-state bank. The Commonwealth of Pennsylvania has enacted a law to
"opt-in" early of interstate mergers.
Moreover, the Interstate Banking Law provides that the Bank
may establish and operate a de novo branch in any state that "opts-in" to de
novo branching. A "de novo branch" is a branch office that is originally
established as a branch and does not become a branch as a result of an
acquisition or merger. The Commonwealth of Pennsylvania has enacted a law to
"opt-in" early to de novo interstate branching.
On December 13, 1995, the Banking Commissioners of the states
of Delaware, Maryland, Pennsylvania and Virginia executed a Cooperative
Agreement which governs the manner in which state-chartered banks with branches
in multiple states will be supervised. This
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Cooperative Agreement was necessitated by the Interstate Banking Law and was
drafted to create a level playing field for state-chartered banks with respect
to supervision and regulation of branch offices in a multiple state setting.
Specifically, this agreement outlines general principles for determining
whether home or host state law applies, including the following: (1) host
state law applies to operational issues relating to a branch located in a host
state, including antitrust, community reinvestment, consumer protection, usury
and fair lending laws; (2) the state law of the home state will apply to
corporate structure issues, such as, charter, by-laws, incorporation,
liquidation, stockholders and directors, capital and investments; and (3) bank
powers issues will be resolved with reference to both home and host state laws.
The Bank is a national association and is governed by, among other laws and
regulations, the National Bank Act and regulations promulgated by the
Comptroller of the Currency. Therefore, the Cooperative Agreement does not
apply to the Bank.
As of the filing date of this report, Bancorp and the Bank
have no plans to engage in interstate banking or branching.
Legislation and Regulatory Changes
From time to time, legislation is enacted which has the effect
of increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other
financial institutions are frequently made in Congress, and before various bank
regulatory agencies. No prediction can be made as to the likelihood of any
major changes or the impact such changes might have on Bancorp and its
subsidiary bank. Certain changes of potential significance to Bancorp which
have been enacted or promulgated, as the case may be, by Congress or various
regulatory agencies, respectively, are discussed below.
Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA")
On August 9, 1989, major reform and financing legislation,
i.e., FIRREA, was enacted into law in order to restructure the regulation of
the thrift industry, to address the financial condition of the Federal Savings
and Loan Insurance Corporation and to enhance the supervisory and enforcement
powers of the Federal bank and thrift regulatory agencies. The Office of the
Comptroller of the Currency ("OCC"), as the primary Federal regulator of the
Bank, is primarily responsible for supervision of the Bank. The OCC and FDIC
have far greater flexibility to impose supervisory agreements on an institution
that fails to comply with its regulatory requirements, particularly with
respect to the capital requirements. Possible enforcement actions include the
imposition of a capital plan, termination of deposit insurance and removal or
temporary suspension of an officer, director or other institution-affiliated
party.
Under FIRREA, civil penalties are classified into three
levels, with amounts increasing with the severity of the violation. The first
tier provides for civil penalties of up to $5,000 per day for any violation of
law or regulation. A civil penalty of up to $25,000 per day may be assessed if
more than a minimal loss or a pattern of misconduct is involved. Finally, a
civil penalty of up to $1.0 million per day may be assessed for knowingly or
recklessly causing
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a substantial loss to an institution or taking action that results in a
substantial pecuniary gain or other benefit. Criminal penalties are increased
to $1.0 million per violation, up to $5.0 million for continuing violations or
for the actual amount of gain or loss. These monetary penalties may be
combined with prison sentences for up to five years.
Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA")
General. The FDICIA was enacted in December, 1991, and
reformed a variety of bank regulatory laws. Some of these reforms have a
direct impact on the Bank. Certain of these provisions are discussed below.
Examinations and Audits. Annual full-scope, on-site
examinations are required for all FDIC-insured institutions with assets of $500
million or more. For bank holding companies with $500 million or more in
assets, the independent accountants of such companies shall attest to the
accuracy of management's report. Such accountants shall also monitor
management's compliance with governing laws and regulations. Such companies
are also required to select an independent audit committee composed of outside
directors who are independent of management, to review with management and the
independent accountants the reports that must be submitted to the appropriate
bank regulatory agencies. If the independent accountants resign or are
dismissed, written notification must be given to the FDIC and to the
appropriate federal and state bank regulatory agency.
Prompt Corrective Action. In order to reduce losses to the
deposit insurance funds, the FDICIA established a format to more closely
monitor FDIC-insured institutions and to enable prompt corrective action by the
appropriate federal supervisory agency if an institution begins to experience
any difficulty. The FDICIA established five "Capital" categories. They are:
(1) well-capitalized; (2) adequately capitalized; (3) undercapitalized; (4)
significantly undercapitalized; and (5) critically undercapitalized. The
overall goal of these new capital measures is to impose more scrutiny and
operational restrictions on depository institutions as they descend the capital
categories from well capitalized to critically undercapitalized.
The FDIC, the OCC, the Federal Reserve Board and the Office of
Thrift Supervision have issued jointly final regulations relating to these
capital categories and prompt corrective action. These capital measures for
prompt corrective action are defined as follows:
A "well-capitalized" institution would be one that has at
least a 10% total risk-based capital ratio, a 6% or greater Tier I risk-based
capital ratio, a 5% or greater Tier I leverage capital ratio, and is not
subject to any written order or final directive by the FDIC to meet and
maintain a specific capital level.
An "adequately capitalized" institution would be one that
meets the required minimum capital levels, but does not meet the definition of
a "well-capitalized" institution. The existing capital rules generally require
banks to maintain a Tier I leverage capital ratio of at least 4% and an 8% or
greater total risk-based capital ratio. Since the risk-based standards also
require at least half of the total risk-based capital requirement to be in the
form of Tier I capital, this also will mean that an institution would need to
maintain at least a 4% Tier I risk-based capital ratio.
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Thus, an institution would need to meet each of the required minimum capital
levels in order to be deemed "adequately capitalized."
An "undercapitalized" institution would fail to meet one or
more of the required minimum capital levels for an "adequately capitalized"
institution. An "undercapitalized" institution must file a capital restoration
plan and is automatically subject to restrictions on dividends, management fees
and asset growth. In addition, the institution is prohibited from making
acquisitions, opening new branches or engaging in new lines of business without
the prior approval of its primary federal regulator. A number of other
discretionary restrictions also may be imposed on a case-by-case basis, and
harsher restrictions that otherwise would apply to "significantly
undercapitalized" institutions may be imposed on an "undercapitalized"
institution that fails to file or implement an acceptable capital restoration
plan.
A "significantly undercapitalized" institution would have a
total risk-based capital ratio of less than 6%, a Tier I risk-based capital
ratio of less than 3%, or a Tier I leverage capital ratio of less than 3%, as
the case may be. Institutions in this category would be subject to all the
restrictions that apply to "undercapitalized" institutions. Certain other
mandatory prohibitions also would apply, such as restrictions against the
payment of bonuses or raises to senior executive officers without the prior
approval of the institution's primary federal regulator. A number of other
restrictions may be imposed.
A "critically undercapitalized" institution would be one with
a tangible equity (Tier I capital) ratio of 2% or less. In addition to the
same restrictions and prohibitions that apply to "undercapitalized" and
"significantly undercapitalized" institutions, the FDIC's rule implementing
this provision of FDICIA also addresses certain other provisions for which the
FDIC has been accorded responsibility as the insurer of depository
institutions.
At a minimum, any institution that becomes "critically undercapitalized" is
prohibited from taking the following actions without the prior written approval
of its primary federal supervisory agency: engaging in any material
transactions other than in the usual course of business; extending credit for
highly leveraged transactions ("HLTs"); amending its charter or bylaws; making
any material changes in accounting methods; engaging in certain transactions
with affiliates; paying excessive compensation or bonuses; and paying interest
on liabilities exceeding the prevailing rates in the institution's market area.
In addition, a "critically undercapitalized" institution is prohibited from
paying interest or principal on its subordinated debt and is subject to being
placed in conservatorship or receivership if its tangible equity capital level
is not increased within certain mandated time frames.
At any time, an institution's primary federal supervisory
agency may reclassify it into a lower capital category. All institutions are
prohibited from declaring any dividends, making any other capital distribution,
or paying a management fee if it would result in downward movement into any of
the three undercapitalized categories. The FDICIA provides an exception to
this requirement for stock redemptions that do not lower an institution's
capital and would improve its financial condition, if the appropriate federal
supervisory agency has consulted with the FDIC and approved the redemption.
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The regulation requires institutions to notify the FDIC
following any material event that would cause such institution to be placed in
a lower category. Additionally, the FDIC monitors capital levels through call
reports and examination reports.
Deposit Insurance. On January 1, 1994, the FDIC implemented
the permanent Risk Related Premium System (the "RRPS") with respect to the
assessments and payment of deposit insurance premiums.
Under the RRPS, the FDIC, on a semiannual basis, will assign
each institution to one of three capital groups (well-capitalized, adequately
capitalized or undercapitalized, in each case as these terms are defined for
purposes of prompt corrective action rules described above) and further assign
such institution to one of three subgroups within a capital group corresponding
to the FDIC's judgment of its strength based on supervisory evaluations,
including examination reports, statistical analysis and other information
relevant to gauging the risk posed by the institution. Only institutions with
a total capital to risk-adjusted assets ratio of 10.00% or greater, a Tier I
capital to risk-adjusted assets ratio of 5% or a greater and a Tier I leverage
ratio of 5% or greater, are assigned to the well-capitalized group.
Effective January 1, 1996, the FDIC board of directors has
further reduced BIF premiums. Highly-rated institutions will pay only the
statutory minimum of $2,000 annually for FDIC insurance. The remaining
institutions will pay on a scale ranging from 3 to 30 cents per every $100 of
insured deposits, which is down from the scale in the latter half of 1995 of 4
to 31 cents. If such lower FDIC insurance premium rates were to have been in
effect for all of 1995, then the Bank would have paid $24,039 less in such
premiums based upon current deposit levels.
Real Estate Lending Standards. Pursuant to the FDICIA, the
OCC and other federal banking agencies adopted real estate lending guidelines
which would set loan-to-value ("LTV") ratios for different types of real estate
loans. A LTV ratio is generally defined as the total loan amount divided by
the appraised value of the property at the time the loan is originated. If the
institution does not hold a first lien position, the total loan amount would be
combined with the amount of all senior liens when calculating the ratio. In
addition to establishing the LTV ratios, the guidelines require all real estate
loans to be based upon proper loan documentation and a recent appraisal of the
property.
Bank Enterprise Act of 1991. Within the overall FDICIA is a
separate subtitle called the "Bank Enterprise Act of 1991." The purpose of
this Act is to encourage banking institutions to establish "basic transaction
services for consumers" or so-called "lifeline accounts." The FDIC assessment
rate is reduced for all lifeline depository accounts. This Act establishes ten
(10) factors which are the minimum requirements to qualify as a lifeline
depository account. Some of these factors relate to minimum opening and
balance amounts, minimum number of monthly withdrawals, the absence of
discriminatory practices against low-income individuals and minimum service
charges and fees. Moreover, the Housing and Community Development Act of 1972
requires that the FDIC's risk-based assessment system include provisions
regarding life-line accounts. Assessment rates applicable to life-line
accounts are to be established by FDIC rule.
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Truth in Savings Act. The FDICIA also contains the Truth in
Savings Act ("TSA"). The Federal Reserve Board has adopted regulations
("Regulation DD") under the TSA. The purpose of TSA is to require the clear
and uniform disclosure of the rates of interest which are payable on deposit
accounts by depository institutions and the fees that are assessable against
deposit accounts, so that consumers can make a meaningful comparison between
the competing claims of banks with regard to deposit accounts and products. In
addition to disclosures to be provided when a customer establishes a deposit
account, TSA requires the depository institution to include, in a clear and
conspicuous manner, the following information with each periodic statement of a
deposit account: (1) the annual percentage yield earned; (2) the amount of
interest earned; (3) the amount of any fees and charges imposed; and (4) the
number of days in the reporting period. TSA allows for civil lawsuits to be
initiated by customers if the depository institution violates any provision or
regulation under TSA.
Regulatory Capital Requirements
The following table presents Bancorp's consolidated capital
ratios at December 31, 1995.
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
Tier I Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,227
Tier II Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,080
Total Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,512
Adjusted Total Average Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Adjusted Risk-Weighted Assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . 68,147
Tier I Risk-Based Capital Ratio(2) . . . . . . . . . . . . . . . . . . . . . . . . 28.21%
Required Tier I Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . . 4.00%
Excess Tier I Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 24.21%
Total Risk-Based Capital Ratio(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.46%
Required Total Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 8.00%
Excess Total Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 21.46%
Tier I Leverage Ratio(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.88%
Required Tier I Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.00%
Excess Tier I Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.88%
- ------------------------------
</TABLE>
(1) Includes off-balance sheet items at credit-equivalent values less
intangible assets.
(2) Tier I Risk-Based Capital Ratio is defined as the ratio of Tier I
Capital to Total Adjusted Risk-Weighted Assets.
(3) Total Risk-Based Capital Ratio is defined as the ratio of Tier I and
Tier II Capital to Total Adjusted Risk-Weighted Assets.
(4) Tier I Leverage Ratio is defined as the ratio of Tier I Capital to
Adjusted Total Average Assets.
Bancorp was required to implement, on January 1, 1994,
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity
12
<PAGE> 13
Securities" ("FASB 115"). For regulatory capital reporting purposes, FASB 115
changed the composition of stockholders' equity in financial statements
prepared in accordance with generally accepted accounting principles by
including as a separate component of equity the amount of net unrealized
holding gains or losses on debt and equity securities that are deemed to be
available-for-sale. The implementation of FASB 115 did not have a material
effect during 1995 on the regulatory capital ratios of Bancorp.
Effective January 27, 1995, the FDIC has issued a final rule
with respect to the implementation of FASB 115 for regulatory capital reporting
purposes. Under this final rule, net unrealized holding losses on
available-for-sale equity securities (but not debt securities) with readily
determinable fair values will be included (i.e., deducted) when calculating
Bancorp's consolidated Tier 1 capital. All other unrealized holding gains and
losses on available-for-sale securities will be excluded (i.e., not deducted)
from Bancorp's consolidated Tier 1 capital. Such final rule had no material
effect on Bancorp's consolidated Tier 1 capital.
Bancorp's ability to maintain the required levels of capital
is substantially dependent upon the success of Bancorp's capital and business
plans; the impact of future economic events on Bancorp's loan customers; and
Bancorp's ability to manage its interest rate risk and investment portfolio and
control its growth and other operating expenses.
Effect of Government Monetary Policies
The earnings of Bancorp are and will be affected by domestic
economic conditions and the monetary and fiscal policies of the United States
government and its agencies.
The monetary policies of the Federal Reserve Board have had,
and will likely continue to have, an important impact on the operating results
of commercial banks through its power to implement national monetary policy in
order, among other things, to curb inflation or combat a recession. The
Federal Reserve Board has a major effect upon the levels of bank loans,
investments and deposits through its open market operations in United States
government securities and through its regulations of, among other things, the
discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature and
impact of future changes in monetary and fiscal policies.
History and Business - Bank
The Bank's legal headquarters are located at 232 East Street,
Bloomsburg, Pennsylvania.
As of December 31, 1995, the Bank had total assets of $162
million, total shareholders' equity of $19 million and total deposits and other
liabilities of $143 million.
The Bank is a community bank which seeks to provide personal
attention and professional financial assistance to its customers. The Bank is
a locally managed and locally oriented financial institution established to
serve the needs of individuals and small and medium-sized businesses. The
Bank's business philosophy includes offering direct access to its President and
other officers and providing friendly, informed and courteous service, local
and timely
13
<PAGE> 14
decision making, flexible and reasonable operating procedures, and
consistently-applied credit policies.
The Bank is a full-service commercial bank offering a range of
commercial and retail banking services to its clients. These include personal
and business checking and savings accounts, certificates of deposit, and
mortgage, home equity and commercial loans. In addition, the Bank provides
safe deposit boxes, traveler's checks, wire transfers of funds, and certain
personal, corporate and pension trust services. The Bank is a member of the
MAC system and provides clients with access to this automated teller machine
network. The Bank also makes credit cards available to its customers. In
addition, the Bank has a trust department that provides traditional fiduciary
services to its clients.
The Bank solicits small and medium-sized businesses located
primarily within the Bank's market area that typically borrow in the $25,000 to
$1.0 million range. In the event that certain loan requests may exceed the
Bank's lending limit to any one customer, the Bank seeks to arrange such loans
on a participation basis with other financial institutions.
Market Area
The Bank's primary market area is Columbia County, a 484
square mile area located in north eastern Pennsylvania with a population of
approximately 63,200 based on 1990 census data. The Town of Bloomsburg is the
County's largest municipality and its center of industry and commerce.
Bloomsburg has a population of approximately 12,400 based on 1990 census data,
and is the county seat. Berwick, located on the eastern boundary of the
County, is the second largest municipality, with a 1990 population of
approximately 11,000. The Bank currently serves its market area through six
branch offices located in Bloomsburg, Benton, Lightstreet, Millville,
Orangeville and South Centre, Columbia County.
The Bank competes with six other commercial banks and two
thrift institutions in Columbia County. The Bank's major competitors are:
First National Bank of Berwick, First Eastern Bank, N.A., which has been
acquired by PNC Bank, N.A., the largest commercial bank in Pennsylvania, and
First Columbia Bank and Trust Company of Bloomsburg, Pennsylvania. Both PNC
Bank, N.A. and First National Bank of Berwick have greater financial resources
than the Bank.
The Bank's extended market area includes the adjacent
Pennsylvania counties of Luzerne, Montour, Northumberland, Schuylkill and
Sullivan.
Supervision and Regulation - Bank
The operations of the Bank are subject to federal and state
statutes applicable to banks chartered under the banking laws of the United
States, to members of the Federal Reserve System and to banks whose deposits
are insured by the FDIC. Bank operations are also subject to regulations of
the OCC, the Federal Reserve Board and the FDIC.
14
<PAGE> 15
The primary supervisory authority of the Bank is the OCC, that
regularly examines the Bank. The OCC has the authority under the Financial
Institutions Supervisory Act to prevent a national bank from engaging in an
unsafe or unsound practice in conducting its business.
Federal and state banking laws and regulations govern, among
other things, the scope of a bank's business, the investments a bank may make,
the reserves against deposits a bank must maintain, loans a bank makes and
collateral it takes, the activities of a bank with respect to mergers and
consolidations and the establishment of branches. All banks in Pennsylvania
are permitted to maintain branch offices in any county of the state. Branches
of national banks may be established only after approval by the OCC. The OCC
is required to grant approval only if it finds that there is a need for banking
services or facilities such as are contemplated by the proposed branch. The
OCC may disapprove the application if the bank does not have the capital and
surplus deemed necessary by the OCC, or if the application relates to the
establishment of a branch in a county contiguous to the county in which the
applicant's principal place of business is located, and another banking
institution that has its principal place of business in the county in which the
proposed branch would be located, has in good faith, notified the OCC of its
intention to establish a branch in the same municipal location in which the
proposed branch would be located.
Multi-bank holding companies are permitted in Pennsylvania
within certain limitations. See sections entitled "Pennsylvania Banking Law"
and "Interstate Banking and Branching."
A subsidiary bank of a bank holding company is subject to
certain restrictions imposed by the Federal Reserve Act on any extensions of
credit to the bank holding company or its subsidiaries, on investments in the
stock or other securities of the bank holding company or its subsidiaries and
on taking such stock or securities as collateral for loans. The Federal
Reserve Act and Federal Reserve Board regulations also place certain
limitations and reporting requirements on extensions of credit by a bank to
principal shareholders of its parent holding company, among others, and to
related interests of such principal shareholders. In addition, such
legislation and regulations may affect the terms upon which any person becoming
a principal shareholder of a holding company may obtain credit from banks with
which the subsidiary bank maintains a correspondent relationship.
Federal law also prohibits acquisitions of control of a bank
holding company without prior notice to certain federal bank regulators.
Control is defined for this purpose as the power, directly or indirectly, to
influence the management or policies of the bank or bank holding company or to
vote twenty-five percent (25%) or more of any class of voting securities of the
bank holding company.
From time to time, various types of federal and state
legislation have been proposed that could result in additional regulations of,
and restrictions on, the business of the Bank. It cannot be predicted whether
any such legislation will be adopted or how such legislation would affect the
business of the Bank. As a consequence of the extensive regulation of
commercial banking activities in the United States, the Bank's business is
particularly susceptible to being affected by federal legislation and
regulations that may increase the costs of doing business.
15
<PAGE> 16
Under the Federal Deposit Insurance Act, the OCC possesses the
power to prohibit institutions regulated by it (such as the Bank) from engaging
in any activity that would be an unsafe and unsound banking practice and in
violation of the law. Moreover, the Financial Institutions and Interest Rate
Control Act of 1987 ("FIRA") generally expands the circumstances under which
officers or directors of a bank may be removed by the institution's federal
supervisory agency; restricts lending by a bank to its executive officers,
directors, principal shareholders or related interests thereof; restricts
management personnel of a bank from serving as directors in other management
positions with certain depository institutions whose assets exceed a specified
amount or which have an office within a specified geographic area; and
restricts management personnel from borrowing from another institution that has
a correspondent relationship with their bank. Additionally, FIRA requires that
no person may acquire control of a bank unless the appropriate federal
supervisory agency has been given 60-days prior written notice and within that
time has not disapproved the acquisition or extended the period for
disapproval.
Under the Bank Secrecy Act ("BSA"), the Bank is required to
report to the Internal Revenue Service currency transactions of more than
$10,000 or multiple transactions of which the Bank is aware in any one day that
aggregate in excess of $10,000. Civil and criminal penalties are provided
under the BSA for failure to file a required report, for failure to supply
information required by the BSA or for filing a false or fraudulent report.
The Garn-St Germain Depository Institutions Act of 1982 ("1982
Act"), removes certain restrictions on the lending powers and liberalizes the
depository abilities of the Bank. The 1982 Act also amends FIRA (see above) by
eliminating certain statutory limits on lending of a bank to its executive
officers, directors, principal shareholders or related interests thereof and by
relaxing certain reporting requirements. However, the 1982 Act strengthened
FIRA provisions respecting management interlocks and correspondent bank
relationships by management personnel.
Community Reinvestment Act
The Community Reinvestment Act of 1977, as amended (the
"CRA"), and the regulations promulgated to implement the CRA are designed to
create a system for bank regulatory agencies to evaluate a depository
institution's record in meeting the credit needs of its community. Until May
1995, a depository institution was evaluated for CRA compliance based upon 12
assessment factors.
The CRA regulations were completely revised as of May 4, 1995,
to establish new performance-based standards for use in examining a depository
institution's compliance with the CRA (the "revised CRA regulations"). The
revised CRA regulations establish new tests for evaluating both small and large
depository institutions' investment in the community. A "small bank" is
defined as a bank which has total assets of less than $250 million and is
independent or is an affiliate of a holding company with less than $1 billion
in assets. Pursuant to the revised CRA regulations, a depository institution
which qualifies as a "small bank" will be examined under a streamlined
procedure which emphasizes lending activities. The streamlined examination
procedures for a small bank became effective on January 1, 1996.
16
<PAGE> 17
A large retail institution is one which does not meet the
"small bank" definition, above. A large retail institution can be evaluated
under one of two tests: (1) a three-part test evaluating the institution's
lending, service and investment performance; or (2) a "strategic plan" designed
by the institution with community involvement and approved by the appropriate
federal bank regulator. A large institution must choose one of these options
prior to July 1997, but may opt to be examined under one of these two options
prior to that time. Effective January 1, 1996, a large retail institution that
opts to be examined pursuant to a strategic plan may submit its strategic plan
to the bank regulators for approval.
In addition, the revised CRA regulations include separate
rules regarding the manner in which "wholesale banks" and "limited purpose
banks" will be evaluated for compliance.
The new CRA regulations will be phased in over a two-year
period, beginning July 1, 1995, with a final effective date of July 1, 1997.
Until the applicable test is phased in, institutions may be examined under the
prior CRA regulations.
On December 27, 1995, the federal banking regulators issued a
joint final rule containing technical amendments to the revised CRA
regulations. Specifically, the recent technical amendments clarify the various
effective dates in the revised CRA regulations, correct certain cross
references and state that once an institution becomes subject to the
requirements of the revised CRA regulations, it must comply with all aspects of
the revised CRA regulations, regardless of the effective date of certain
provisions. Similarly, once an institution is subject to the revised CRA
regulations, the prior CRA regulations do not apply to that institution.
For the purposes of the revised CRA regulations, the Bank is
deemed to be a small depository institution, based upon financial information
as of December 31, 1995. In the future, the Bank will be evaluated for CRA
compliance using the streamlined procedures for a small bank. Under the 12
assessment factors contained in the prior CRA regulations, the Bank received a
"satisfactory" rating in 1995. The Bank expects to receive a rating under the
revised CRA regulations which is consistent with its rating last year.
Concentration
Bancorp and the Bank are not dependent for deposits nor
exposed by loan concentrations to a single customer or to a small group of
customers the loss of any one or more of which would have a materially adverse
effect on the financial condition of Bancorp or the Bank.
ITEM 2. DESCRIPTION OF PROPERTY
Bancorp owns no property other than through the Bank as
follows:
17
<PAGE> 18
<TABLE>
<CAPTION>
Type of Square
Property Location Ownership Footage Use
- -------- -------- --------- ------- ---
<S> <C> <C> <C> <C>
1 Orangeville, PA Owned 2,259 Banking services.
2 Benton, PA Owned 4,672 Banking services.
3 South Centre, PA Owned 3,868 Banking services.
4 Bloomsburg, PA Owned 7,493 Banking services.
5 Bloomsburg, PA Owned 8,186 Held for expansion.
6 Scott Township, PA Owned 16,500 Banking services, corporate,
credit and operations.
7 Millville, PA Owned 1,325 Banking services.
</TABLE>
It is management's opinion that the facilities currently
utilized are suitable and adequate for current and immediate future purposes.
ITEM 3. LEGAL PROCEEDINGS
General
The nature of Bancorp's and the Bank's business generates a
certain amount of litigation involving matters arising in the ordinary course
of business. However, in the opinion of management of Bancorp and the Bank,
there are no proceedings pending to which Bancorp and the Bank is a party or to
which their property is subject, which, if determined adversely to Bancorp and
the Bank, would be material in relation to Bancorp's and the Bank's undivided
profits or financial condition, nor are there any proceedings pending other
than ordinary routine litigation incident to the business of Bancorp and the
Bank. In addition, no material proceedings are pending or are known to be
threatened or contemplated against Bancorp and the Bank by government
authorities or others.
Environmental Issues
There are several federal and state statutes that govern the
obligations of financial institutions with respect to environmental issues.
Besides being responsible under such statutes for its own conduct, a bank also
may be held liable under certain circumstances for actions of borrowers or
other third parties on properties that collateralize loans held by the bank.
Such potential liability may far exceed the original amount of the loan made by
the bank. Currently, the Bank is not a party to any pending legal proceedings
under any environmental statue nor is the Bank aware of any circumstances that
may give rise to liability of the Bank under any such statute.
18
<PAGE> 19
PART II
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Shares of Bancorp's Common Stock are traded in the
over-the-counter market and "bid" and "asked" quotations regularly appear on
the Over-the-Counter Bulletin Board system under the symbol "CCFN." As of
March 15, 1996, eight firms were listed on the Over-the-Counter Bulletin Board
system as market makers for Bancorp's Common Stock. The following table sets
forth: (1) the quarterly average bid and asked prices for a share of Bancorp's
Common Stock during the periods indicated as reported by Hopper Soliday & Co.,
Inc. of Lancaster, Pennsylvania, one of the market makers of Bancorp's Common
Stock, and (2) quarterly dividends on a share of the Common Stock with respect
to each quarter since January 1, 1994. The following quotations represent
prices between buyers and sellers and do not include retail markup, markdown or
commission. They may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Average Stock Prices
-------------------- Dividends
Bid Asked Declared
--- ----- ---------
<S> <C> <C> <C> <C>
1994:
First quarter . . . . . . . . . . . . . . $15.50 $15.00 $.10
Second quarter . . . . . . . . . . . . . . $15.50 $15.50 $.10
Third quarter . . . . . . . . . . . . . . $15.50 $15.00 $.10
Fourth quarter . . . . . . . . . . . . . . $15.50 $14.50 $.12
1995:
First quarter . . . . . . . . . . . . . . $14.25 $15.00 $.10
Second quarter . . . . . . . . . . . . . . $14.25 $14.75 $.10
Third quarter . . . . . . . . . . . . . . $14.50 $15.00 $.10
Fourth quarter . . . . . . . . . . . . . . $15.50 $16.50 $.15
</TABLE>
As of March 15, 1996, Bancorp had approximately 759
shareholders of record.
Since its formation in 1983 as the parent holding company of
the Bank, Bancorp has paid cash dividends. It is the present intention of
Bancorp's Board of Directors to continue the dividend payment policy, although
the payment of future dividends must necessarily depend upon earnings,
financial condition, appropriate restrictions under applicable law and other
factors relevant at the time the Board of Directors considers any declaration
of dividends. Cash available for the payment of dividends must initially come
from dividends paid by the Bank to Bancorp. Therefore, the restrictions on the
Bank's dividend payments are directly applicable to Bancorp.
Dividend Restrictions on the Bank
The OCC has issued rules governing the payment of dividends by
national banks. Consequently, the Bank (which is subject to these rules) may
not pay dividends from capital
19
<PAGE> 20
(unimpaired common and preferred stock outstanding) but only from retained
earnings after deducting losses and bad debts therefrom. "Bad debts" are
defined as matured obligations in which interest is past due and unpaid for
ninety (90) days, but do not include well-secured obligations that are in the
process of collection.
Previously, the Bank was permitted to add the balances in its
allowance for possible credit and lease losses in determining retained
earnings, but the OCC's new regulations prohibit that practice. However, to
the extent that (1) the Bank has capital surplus in an amount in excess of
common capital and (2) if the Bank can prove that such surplus resulted from
prior period earnings, the Bank, upon approval of the OCC, may transfer earned
surplus to retained earnings and thereby increase its dividend paying capacity.
If, however, the Bank has insufficient retained earnings to
pay a dividend, the OCC's regulations allow the Bank to reduce its capital to a
specified level and to pay dividends upon receipt of the approval of the OCC as
well as that of the holders of two thirds of the outstanding shares of the
Common Stock.
The Bank is allowed to pay dividends no more frequently than
quarterly. Moreover, the Bank must obtain the OCC's approval before paying a
dividend if the total of all dividends declared by the Bank in any calendar
year would exceed the total of (1) the Bank's net profits for that year plus
(2) its retained net profits for the immediately preceding two years less (3)
any required transfers to surplus or a fund for the retirement of preferred
stock.
The Bank may not pay any dividends on its capital stock during
the period in which it may be in default in the payment of its assessment for
deposit insurance premium due to the FDIC, nor may it pay dividends on Common
Stock until any cumulative dividends on the Bank's preferred stock (if any)
have been paid in full. The Bank has never been in default in the payments of
its assessments to the FDIC; and, moreover, the Bank has no outstanding
preferred stock. In addition, under the Federal Deposit Insurance Act,
dividends cannot be declared and paid if the OCC obtains a cease and desist
order because such payment would constitute an unsafe and unsound banking
practice. As of December 31, 1995, there was $2 million in unrestricted
retained earnings and net income available at the Bank that could be paid as a
dividend to Bancorp under the current OCC regulations.
Dividend Restrictions on Bancorp
Under the Pennsylvania Business Corporation Law of 1988, as
amended (the "BCL"), Bancorp may not pay a dividend if, after giving effect
thereto, either (a) Bancorp would be unable to pay its debts as they become due
in the usual course of business or (b) Bancorp's total assets would be less
than its total liabilities. The determination of total assets and liabilities
may be based upon: (i) financial statements prepared on the basis of generally
accepted accounting principles, (ii) financial statements that are prepared on
the basis of other accounting practices and principles that are reasonable
under the circumstances, or (iii) a fair valuation or other method that is
reasonable under the circumstances.
20
<PAGE> 21
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Bancorp's Annual Report (at
page 20 thereto) filed at Exhibit 13 hereto is incorporated in its entirety by
reference under this Item 6.
ITEM 7. FINANCIAL STATEMENTS
Bancorp's Consolidated Financial Statements and notes thereto
contained in the Annual Report (beginning at page 4 thereto) filed at Exhibit
13 hereto are incorporated in their entirety by reference under this Item 7.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The captions "Information As To Nominees, Directors and
Executive Officers," "Principal Officers of the Corporation," "Principal
Officers of the Bank" and "Compliance with Section 16(a) of the Securities Act
of 1934" contained in Bancorp's Proxy Statement (at pages 5, 11, 12 and 4
thereto, respectively) filed at Exhibit 99A hereto is incorporated in their
entirety by reference under this Item 9.
ITEM 10. EXECUTIVE COMPENSATION
The captions "Executive Compensation" and "Directors
Compensation" contained in Bancorp's Proxy Statement (at pages 8 and 10
thereto) filed at Exhibit 99A hereto is incorporated in its entirety by
reference under this Item 10.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The caption "Principal Beneficial Owners of the Corporation's
Stock" contained in Bancorp's Proxy Statement (at page 3 thereto) filed at
Exhibit 99A hereto is incorporated in its entirety by reference under this Item
11.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions and
Related Transactions" contained in Bancorp's Proxy Statement (at page 11
thereto) filed at Exhibit 99A hereto is incorporated in its entirety by
reference under this Item 12.
21
<PAGE> 22
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
Exhibit Number Referred to
Item 601 of Regulation S-B Description of Exhibit
- -------------------------- ----------------------
<S> <C>
2 None.
3 None.
4 None.
9 None.
10 None.
11 None.
13 Annual Report to Shareholders for Fiscal Year Ended December 31, 1995.
16 None.
18 None.
21 List of Subsidiaries of Bancorp.
22 None.
23 None.
24 None.
27 None.
28 None.
99A Proxy Statement, Notice of Annual Meeting and Form of Proxy for the Annual
Meeting of Shareholders to be held April 22, 1996.
</TABLE>
(b) Reports on Form 8-K.
Bancorp filed no reports on Form 8-K for the quarter ended
December 31, 1995.
22
<PAGE> 23
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CCFNB BANCORP, INC.
(Bancorp)
By: /s/ Paul E. Reichart
----------------------------
Paul E. Reichart
President
Date: March 27, 1996
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Don E. Bangs
--------------------------
Don E. Bangs
Director and Secretary
Date: March 27, 1996
By: /s/ Elwood R. Harding, Jr.
----------------------------
Elwood R. Harding, Jr.
Director
Date: March 27, 1996
By: /s/ William F. Hess
-----------------------------
William F. Hess
Director
Date: March 27, 1996
23
<PAGE> 24
By: /s/ John I. Mather
------------------------------
John I. Mather
Director and Vice Chairman
of the Board
Date: March 27, 1996
By: /s/ Paul E. Reichart
-----------------------------
Paul E. Reichart
Director, President and
Chief Executive Officer
(Chief Executive Officer)
Date: March 27, 1996
By: /s/ Virginia D. Kocher
---------------------------
Virginia D. Kocher
Treasurer
(Principal Financial and
Accounting Officer)
Date: March 27, 1996
24
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Item Number Description Page
- ----------- ----------- ----
<S> <C>
13 Annual Report to Shareholders
for the Fiscal Year Ended
December 31, 1995 . . . . . . . . . . . . . . . . . .
21 List of Subsidiaries of Bancorp . . . . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . . .
99A Proxy Statement, Notice of Annual
Meeting and Form of Proxy for
the Annual Meeting of Shareholders
to be held April 22, 1996 . . . . . . . . . . . . . .
</TABLE>
25
<PAGE> 1
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
FOR FISCAL YEAR ENDED DECEMBER 31, 1995
26
<PAGE> 2
[PHOTO]
CCFNB BANCORP, INC. AND SUBSIDIARY CORPORATION
[PHOTO]
[CCFNB BANCORP, INC. AND SUBSIDIARY CORPORATION LOGO]
[PHOTO]
ANNUAL REPORT 1995
[PHOTO]
<PAGE> 3
[PHOTO]
CCFNB BANCORP, INC. AND SUBSIDIARY
CCFNB Bancorp, Inc. is a bank holding company organized under the
Pennsylvania Business Corporation Law of 1988. The assets are primarily those
of its wholly-owned subsidiary, Columbia County Farmers National Bank (the
"Bank").
The Bank is a full-service nationally chartered financial institution
serving customers from six locations in Columbia County; namely Orangeville,
Bloomsburg, Benton, South Centre, Millville and Lightstreet. The deposits of
the Bank are insured by the Federal Deposit Insurance Corporation to the
maximum extent provided by law.
A copy of the Corporation's Annual Report for the year ended December 31,
1995, on Form 10-KSB as filed with the Securities and Exchange Commission will
be furnished without charge upon written request to Paul E. Reichart,
President, Columbia County Farmers National Bank, 232 East Street, Bloomsburg,
PA 17815.
CONSOLIDATED SELECTED FINANCIAL DATA
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
EARNINGS
Interest income $ 11,481 $ 10,459 $ 9,914
Interest expense 5,557 4,785 4,634
Provision for loan losses 42 160 105
Investment securities gains 83 55 61
Income before cumulative effect of a change
in accounting principle $ 1,625 $ 1,565 $ 1,483
Cumulative effect of a change in accounting
principle 0 0 196
-------- -------- --------
Net income $ 1,625 $ 1,565 $ 1,679
-------- -------- --------
PER SHARE
Income before cumulative effect of a change
in accounting principle $ 1.19 $ 1.35 $ 1.34
Cumulative effect of a change in accounting
principle relating to income taxes .00 .00 .17
-------- -------- --------
Net income $ 1.19 $ 1.35 $ 1.51
-------- -------- --------
Cash dividends $ .45 $ .42 $ .40
BALANCES AT DECEMBER 31
Assets $162,066 $157,124 $152,386
Investment securities 40,384 39,323 44,542
Net loans 110,919 108,857 95,502
Deposits 128,985 126,864 124,023
Stockholders' equity 19,512 17,650 13,452
RATIOS
Return on average assets 1.03% 1.03% 1.18%
Return on average equity 8.99% 11.39% 13.18%
Dividend payout ratio 34.35% 31.74% 26.44%
</TABLE>
CONTENTS
<TABLE>
<S> <C>
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 1
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . 2
Message to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholders' Equity . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 8-18
Report of Independent Certified Public Accountants . . . . . . . . . . 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . 20-29
Ten Years in Review (Graphs) . . . . . . . . . . . . . . . . . . . . . 30-31
CCFNB Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Market Makers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
CCFNB Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
1
<PAGE> 4
[PHOTO]
CCFNB BANCORP, INC.
BOARD OF DIRECTORS
[PHOTO]
Don E. Bangs, Willard H. Kile, Sr.,
Paul E. Reichart
[PHOTO]
Stanley Barchik, William F. Hess,
John I. Mather
[PHOTO]
Charles E. Long, Edward L. Campbell,
Elwood R. Harding, Jr.
CCFNB BANCORP, INC. OFFICERS
Willard H. Kile, Sr.
Chairman of the Board
John I. Mather
Vice-Chairman of the Board
Paul E. Reichart
President and Chief Executive Officer
Don E. Bangs
Secretary of the Board
Virginia D. Kocher
Treasurer and Assistant Secretary
COLUMBIA COUNTY FARMERS
NATIONAL BANK OFFICERS
Willard H. Kile, Sr.
Chairman of the Board
John I. Mather
Vice-Chairman of the Board
Don E. Bangs
Secretary of the Board
Paul E. Reichart
President and Chief Executive Officer
J. Jan Girton
Executive Vice-President,
Chief Operating Officer
and Assistant Secretary
Jacob S. Trump
Sr. Vice-President and
Financial Planning Officer
Linda A. Huttenstine
Sr. Vice-President and Cashier
Lance O. Diehl
Vice-President
Elaine M. Edwards
Vice-President
Dean R. Kelchner
Vice-President
Virginia D. Kocher
Vice-President, Controller
and Assistant Secretary
Edwin A. Wenner
Vice-President
Lily M. Boudman
Assistant Vice-President
Florence H. Martz
Assistant Vice-President
Gloria M. Miller
Assistant Vice-President
Karen Z. Wenner
Mortgage Loan Officer
Luanne Bittenbender
Training Director and
Security Officer
Scott R. Temple
Assistant Cashier
Dolores M. Bennett
Community Office Manager
Connie L. Earnest
Community Office Manager
Kimberly I. Young
Trust Administrator
2
<PAGE> 5
[PHOTO]
TO OUR SHAREHOLDERS:
Looking back over the road traveled in 1995, I am reminded of the couple
which greets the birth of each child by knocking out a wall or adding a room.
Before long, their bungalow has become a much larger hive of activity, full of
life and promise. Since our birth as The Farmers National Bank of Orangeville
in 1917, we have knocked out many walls and added numerous rooms to reach our
current status as the six-office Columbia County Farmers National Bank - and,
thankfully, our collective "house" is bustling with the customers who have made
this renovation possible. Meanwhile, we step around the loose mortar, tending
to business as usual and keeping our operation on a path toward even more
exciting growth in the future.
Extending Our Financial Growth
Our growth in 1995 was consistent with past patterns. Net assets rose from
$157,124,000 in 1994 to $162,066,060 in 1995, and increase of 3.15%. Net income
grew by 3.83%, from $1,564,954 to $1,624,871. Net income per share dropped
slightly from $1.35 in 1995 to $1.19 in 1996. Our income figures were attained
despite a one-time $200,000 expense for total conversion of our bookkeeping
system, a move which will reduce our accounting cost over time.
On another financial note, our FDIC Insurance cost, which in the past has
comprised our profits, continues to fall. After paying $279,000 in 1994 and
$148,000 in 1995, we anticipate no cost beyond a $2000 flat fee for FDIC
Insurance in 1996.
Dividends for our stockholders rose from $.42 per share in 1994 to $.45 per
share in 1995. A dividend reinvestment plan, begun in 1995, was well received
by our shareholders. The dividend reinvested was $57,431.41; cash investments
were $46,572.00 for a total of $104,003.41. Total shares were 7,036.
Loan growth presented a mixed picture in 1995. Reflecting the dramatic
slowing of the national economy, our loans grew by a tiny 1.85% in the past
year, compared to the robust 13% of 1994. Nevertheless, home mortgages
continued strong in 1995 at $96,233,223, a 16.54% increase over the 1994 figure
of $82,577,587. Mortgages constitute 85% of the loan portfolio. A small part of
the 1995 mortgage increase is paper growth attributed to a redefining of loan
categories, made to attain a more accurate picture of our loan
collateralization.
Adding Walls and Rooms
The past year saw us continuing to build and expand our county-wide
"quarters." A doublewide module, our Millville office since 1990, gave way to a
larger permanent office, which opened on December 14, 1995. This building
enables Millville to become a full-service branch with new lobby, more space,
two drive-up lanes and an ATM lane.
Growth was also the reason for expanding our main office on East Street in
Bloomsburg. Using space gained from the razing of the Phillips Building, the $1
million dollar project will give us an expanded lobby with eight teller
stations, more space for customer services offices, and corporate offices on
the second floor. It is anticipated that the project will be completed in the
second quarter of 1996.
[PHOTO]
Moving Ahead in Other Ways
A number of other events and developments have marked the passing of
another year at CCFNB. Here are some of the highlights:
Mr. John M. Mather, Vice Chairman of our Board, will retire as of the
annual meeting in 1996. Mr. Mather has served very capably as a director of
CCFNB since 1962. We wish him well in his retirement.
Education and training continues throughout our organization. In 1995, our
employees attended programs such as Premium Teller, Personal Banker, Personnel
and the Law, and Consumer Loan Training.
We are progressing through our Strategic Plan for 1995-97, focusing
currently on these items:
- - Improving home equity lines of credit.
- - Developing additional products and services.
- - Upgrading our marketing programs.
- - Establishing a quality assurance committee.
- - Coordinating functions with branch offices.
- - Promoting trust department services.
An Encouraging Future
In an era of corporate takeovers and business consolidation, CCFNB Bancorp,
Inc., remains firmly rooted in the communities of Columbia County. When we
knock down a wall, we do it to make room for more customers. When we add a
room, we create more opportunities to serve the families who have trusted us
for nearly eighty years. Our "house" continues to grow, as do our products,
services, and commitment to our customers. As we look to another busy year in
1996, our customers, old and new, can be sure that CCFNB Bancorp is a place
they can call home.
/s/ PAUL E. REICHART
- --------------------
Paul E. Reichart
President
3
<PAGE> 6
[PHOTO]
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,086,509 $ 4,169,958
Interest-bearing deposits with other banks 384,684 4,000
Investment securities:
Securities available for sale carried at
estimated fair value 39,338,728 13,429,353
Securities to be held to maturity, estimated
fair value 1995, $1,062,433; 1994,
$25,566,218 1,045,000 25,893,601
Loans, net of unearned income 111,831,596 109,800,074
Allowance for loan losses 912,253 943,371
------------ ------------
Net loans $110,919,343 $108,856,703
Premises and equipment 5,081,884 3,290,143
Accrued interest receivable 849,736 843,075
Other assets 360,176 637,266
------------ ------------
Total Assets $162,066,060 $157,124,099
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing $ 12,050,780 $ 11,677,753
Interest bearing 116,934,492 115,186,190
------------ ------------
Total Deposits $128,985,272 $126,863,943
Short-term borrowings 12,065,571 11,909,548
Long-term borrowings 364,565 0
Accrued interest and other expenses 906,675 677,958
Other liabilities 232,232 22,432
------------ ------------
Total Liabilities $142,554,315 $139,473,881
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, par value $1.25 per share; authorized
5,000,000 shares; issued 1,372,658 shares 1995
and 1,365,622 shares 1994 $ 1,715,823 $ 1,707,028
Surplus 5,693,849 5,625,607
Retained earnings 11,817,277 10,807,910
Unrealized gain (loss) on investment securities
available for sale, net of taxes 284,796 (490,327)
------------ ------------
Total Stockholders' Equity $ 19,511,745 $ 17,650,218
------------ ------------
Total Liabilities and Stockholders' Equity $162,066,060 $157,124,099
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[PHOTO]
Preparing the foundation on East Street in Bloomsburg.
4
<PAGE> 7
[PHOTO]
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans:
Taxable $ 8,898,002 $ 8,116,598 $7,506,534
Tax exempt 132,875 82,406 121,241
Interest and dividends on investment securities:
Taxable interest 1,725,565 1,641,062 1,634,570
Tax exempt interest 492,878 472,244 478,109
Dividends 56,605 40,262 38,963
Interest on federal funds sold 60,201 20,959 26,258
Interest on deposits in other banks 114,372 85,064 108,971
----------- ----------- ----------
Total Interest Income $11,480,498 $10,458,595 $9,914,646
----------- ----------- ----------
INTEREST EXPENSE
Interest on deposits $ 4,916,162 $ 4,343,644 $4,231,752
Interest on short-term borrowings 633,902 441,161 402,774
Interest on long-term borrowings 6,872 0 0
----------- ----------- ----------
Total Interest Expense $ 5,556,936 $ 4,784,805 $4,634,526
----------- ----------- ----------
Net interest income $ 5,923,562 $ 5,673,790 $5,280,120
Provision for loan losses 42,000 160,000 105,000
----------- ----------- ----------
Net Interest Income After Provision For
Loan Losses $ 5,881,562 $ 5,513,790 $5,175,120
----------- ----------- ----------
NON-INTEREST INCOME
Service charges and fees $ 505,457 $ 427,836 $ 409,465
Trust department income 50,905 50,231 49,735
Other income 38,771 35,983 47,762
Investment securities gains, net 82,954 55,013 60,546
----------- ----------- ----------
Total Non-Interest Income $ 678,087 $ 569,063 $ 567,508
----------- ----------- ----------
NON-INTEREST EXPENSE
Salaries $ 1,592,790 $ 1,447,930 $1,370,625
Pensions and other employee benefits 528,596 424,411 397,558
Occupancy expense, net 258,514 277,553 251,204
Equipment expense 348,921 306,100 283,522
FDIC insurance 148,418 277,953 251,965
Other operating expense 1,496,417 1,223,760 1,207,715
----------- ----------- ----------
Total Non-Interest Expense $ 4,373,656 $ 3,957,707 $3,762,589
----------- ----------- ----------
Income before income taxes and cumulative
effect of a change in accounting principle $ 2,185,993 $ 2,125,146 $1,980,039
Income tax expense 561,122 560,192 496,726
----------- ----------- ----------
Income before cumulative effect of a change
in accounting principle $ 1,624,871 $ 1,564,954 $1,483,313
Cumulative effect of a change in accounting
principle relating to income taxes 0 0 196,222
----------- ----------- ----------
Net Income $ 1,624,871 $ 1,564,954 $1,679,535
=========== =========== ==========
PER SHARE DATA
Income before cumulative effect of a change
in accounting principle $ 1.19 $ 1.35 $ 1.34
Cumulative effect of a change in accounting
principle relating to income taxes .00 .00 .17
----------- ----------- ----------
Net income $ 1.19 $ 1.35 $ 1.51
----------- ----------- ----------
Cash dividends $.45 $ .42 $ .40
Weighted average shares outstanding 1,367,595 1,163,199 1,109,837
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 8
[PHOTO]
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss)
On Investment
Securities
Common Retained Treasury Available
Stock Surplus Earnings Stock For Sale Total
------------ ---------- ----------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance At December 31, 1992 $1,387,828 $2,323,563 $ 8,504,202 $ (7,169) $ 0 $12,208,424
Net income 0 0 1,679,535 0 0 1,679,535
Cash dividends $.40 per share 0 0 (443,996) 0 0 (443,996)
Sale of treasury stock - 660
shares resulting in
a gain of $665 0 665 0 7,169 0 7,834
---------- ---------- ----------- -------- --------- -----------
Balance At December 31, 1993 $1,387,828 $2,324,228 $ 9,739,741 $ 0 $ 0 $13,451,797
Cumulative effect as of January
1, 1994 relating to change in
accounting principle
applicable to investment
securities available for sale,
net of taxes 0 0 0 0 221,032 221,032
Net income 0 0 1,564,954 0 0 1,564,954
Issuance of 255,360 shares of
common stock 319,200 3,301,379 0 0 0 3,620,579
Cash dividends $.42 per share 0 0 (496,785) 0 0 (496,785)
Treasury stock purchased -
1150 shares 0 0 0 (17,825) 0 (17,825)
Sales of treasury stock -
1150 shares 0 0 0 17,825 0 17,825
Change in unrealized gain (loss)
on investment securities
available for sale, net of
taxes 0 0 0 0 (711,359) (711,359)
---------- ---------- ----------- -------- --------- -----------
Balance At December 31, 1994 $1,707,028 $5,625,607 $10,807,910 $ 0 $(490,327) $17,650,218
Net income 0 0 1,624,871 0 0 1,624,871
Issuance of 7036 shares of
common stock under dividend
reinvestment plan 8,795 68,242 0 0 0 77,037
Cash dividends $.45 per share 0 0 (615,504) 0 0 (615,504)
Change in unrealized gain
(loss) on investment
securities available for
sale, net of taxes 0 0 0 0 775,123 775,123
---------- ---------- ----------- -------- --------- -----------
Balance At December 31, 1995 $1,715,823 $5,693,849 $11,817,277 $ 0 $ 284,796 $19,511,745
========== ========== =========== ======== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
[PHOTO]
The Millville Branch as it nears completion.
6
<PAGE> 9
[PHOTO]
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,624,871 $ 1,564,954 $ 1,679,535
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 42,000 160,000 105,000
Depreciation 293,305 249,173 240,163
Premium amortization on investment securities 8,657 22,289 36,198
Discount accretion on investment securities (10,345) (9,507) (7,364)
Deferred income taxes (benefit) 49,392 62,664 1,199
Cumulative effect of a change in accounting principle
relating to income taxes 0 0 (196,222)
Gain on sales of investment securities available for sale (82,954) (55,013) (60,546)
(Gain) loss on sale of premises and equipment 71,669 (1,298) 765
Loss on sale of other real estate 0 0 35,263
(Increase) in accrued interest receivable (6,661) (62,267) (92,087)
(Increase) in other assets - net (69,412) (31,305) (89,838)
Increase in accrued interest and other expenses 228,717 107,807 11,310
Increase (decrease) in other liabilities - net 107,604 (1,501) 8,340
------------ ------------ ------------
Net Cash Provided By Operating Activities $ 2,256,843 $ 2,005,996 $ 1,671,716
------------ ------------ ------------
INVESTMENT ACTIVITIES
Purchases of investment securities available for sale $(30,378,156) $ (4,938,430) $ 0
Proceeds from sales of investment securities available for sale 16,535,237 2,025,863 0
Purchases of investment securities held to maturity (887,660) (14,473,863) (35,846,132)
Proceeds from maturities and redemptions of investment securities
held to maturity 14,928,876 21,905,098 29,081,349
Proceeds from sale of investment securities 0 0 1,702,049
Net increase in loans (2,104,640) (13,514,817) (14,428,168)
Purchases of premises and equipment (2,156,715) (163,043) (191,234)
Proceeds from sale of premises and equipment 0 5,800 700
Proceeds from sale of other real estate 0 0 24,737
------------ ------------ ------------
Net Cash Used In Investing Activities $ (4,063,058) $ (9,153,392) $(19,656,699)
------------ ------------ ------------
FINANCING ACTIVITIES
Net increase in deposits $ 2,121,329 $ 2,841,173 $ 10,731,343
Net increase (decrease) in short-term borrowings 156,023 (2,407,818) 1,118,234
Net increase in long-term borrowings 364,565 0 0
Proceeds from sale of treasury stock 0 17,825 7,834
Acquisition of treasury stock 0 (17,825) 0
Proceeds from issuance of common stock 77,037 3,620,579 0
Cash dividends paid (615,504) (496,785) (443,996)
------------ ------------ ------------
Net Cash Provided By Financing Activities $ 2,103,450 $ 3,557,149 $ 11,413,415
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 297,235 $ (3,590,247) $ (6,571,568)
Cash And Cash Equivalents At Beginning Of Year 4,173,958 7,764,205 14,335,773
------------ ------------ ------------
Cash And Cash Equivalents At End Of Year $ 4,471,193 $ 4,173,958 $ 7,764,205
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 5,447,107 $ 4,754,742 $ 4,694,116
Income taxes $ 557,937 $ 472,600 $ 493,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 10
[PHOTO]
CCFNB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of CCFNB Bancorp, Inc. and Subsidiary
(the "Corporation") conform to generally accepted accounting principles and to
general practices within the banking industry. The more significant policies
follow:
Principles Of Consolidation
The consolidated financial statements include the accounts of CCFNB
Bancorp, Inc. and its wholly-owned subsidiary, Columbia County Farmers National
Bank (the "Bank"). All significant inter-company balances and transactions
have been eliminated in consolidation.
Nature Of Operation
The Corporation provides full banking services, including trust services,
through the Bank, to individuals and corporate customers. The Bank has six
offices covering an area of approximately 484 square miles in Northeastern
Pennsylvania. The Corporation and the Bank are subject to regulation of the
Office of the Comptroller of the Currency, The Federal Deposit Insurance
Corporation and the Federal Reserve Bank of Philadelphia.
Use Of Estimates
The preparation of these consolidated 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
these consolidated financial statements and the reported amounts of income and
expenses during the reporting periods. Actual results could differ from those
estimates.
Investment Securities
The Corporation adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" (the
"Statement") as required on January 1, 1994. As a result of adopting Statement
No. 115, the Corporation classified investment securities into two categories:
those to be held to maturity and those available for sale. In accordance with
the Statement, prior period consolidated financial statements have not been
restated to reflect the change in accounting principle. The cumulative effect
as of January 1, 1994 of adopting the Statement increased Stockholders' Equity
in the amount of $221,032 (net of deferred income tax of $113,865) to reflect
the net unrealized gain on investment securities classified as available for
sale.
The classification of investment securities into categories held to
maturity or available for sale is initially determined at the time of purchase
and is reevaluated at each balance sheet date. Debt securities are classified
as held to maturity when the Corporation has the ability and positive intent to
hold the securities to maturity. Investment securities held to maturity are
carried at cost adjusted for amortization of premium and accretion of discount
to maturity.
Debt securities not classified as held to maturity and equity securities
included in the available for sale category, are carried at fair value, and the
amount of any unrealized gain or loss is reported as a separate component of
Stockholders' Equity, net of the effect of deferred income tax. Management's
decision to sell available for sale securities is based on changes in economic
conditions controlling the sources and uses of funds, terms, availability of
and yield of alternative investments, interest rate risk, and the need for
liquidity.
On November 15, 1995, the Financial Accounting Standards Board (FASB)
published a special report, "A Guide to Implementation of Statement No. 115 on
Accounting for Certain Investments in Debt and Equity Securities" (the
"Report"). The report included a provision that allowed banks a one-time
opportunity to reclassify (at fair value) held-to-maturity securities without
calling into question their intent to hold other debt securities to maturity in
the future. The reclassifications had to be made in conjunction with
implementation of the supplemental guidance by December 31, 1995. In accordance
with provisions in the Report, the Corporation did make transfers during
December, details of which are disclosed in Note 4.
The cost of debt securities classified as held to maturity or available for
sale is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization and accretion, as well as interest and dividends,
is included in interest from investments. Realized gains and losses are
included in net investment securities gains. The cost of investment securities
sold, redeemed or matured is based on the specific identification method.
Loans
Loans are stated at their outstanding principal balances, net of any
deferred fees or costs, unearned income, and the allowance for loan losses.
Interest on loans is accrued on the principal amount outstanding, primarily on
an actual day basis. Non-refundable loan fees and certain direct costs are
deferred and amortized over the life of the loans using the interest method.
The amortization is reflected as an interest yield adjustment, and the deferred
portion of the net fees and costs is reflected as a part of the loan balance.
Non-Accrual Loans - Generally, a loan (including a loan impaired under
Statement of Financial Accounting Standards No. 114) is classified as
non-accrual, and the accrual of interest on such a loan is discontinued when
the contractual payment of principal or interest has become 90 days past due or
management has serious doubts about further collectibility of principal or
interest, even though the loan currently is performing. A loan may remain on
accrual status, if it is in the process of collection and is either guaranteed
or well secured. When a loan is placed on non-accrual status, unpaid interest
credited to income in the current year is reversed, and unpaid interest accrued
in prior years is charged against the allowance for loan losses. Potential
problem loans are identified by management as a part of its loan review
process.
8
<PAGE> 11
[PHOTO]
Income recognition is in accordance with Statement of Financial Accounting
Standards No. 118. Certain non-accrual loans may continue to perform, that is,
payments are still being received. Generally, the payments are applied to
principal. These loans remain under constant scrutiny and if performance
continues, interest income may be recorded on a cash basis based on
management's judgement as to collectibility of principal.
Allowance for Loan Losses - The allowance for loan losses is established
through provisions for loan losses charged against income. Loans deemed to be
uncollectible are charged against the allowance for loan losses, and subsequent
recoveries, if any, are credited to the allowance.
As of January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan
as amended by Statement of Financial Accounting Standards No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosure."
Under these new standards, the 1995 allowance for loan losses related to loans
that are identified for evaluation in accordance with Statement No. 114 and is
based on discounted cash flows using the loan's initial effective interest rate
or the fair value of the collateral for certain collateral dependent loans.
Prior to 1995, the allowance for loan losses related to these loans was based
on undiscounted cash flows or the fair value of the collateral for collateral
dependent loans. Statement No. 118 allows the continued use of existing methods
for income recognition on impaired loans and amends disclosure requirements to
require information about the recorded investment in certain impaired loans and
related income recognition on those loans. The allowance for loan losses is
maintained at a level by management to be adequate to absorb estimated
potential loan losses. Management's periodic evaluation of the adequacy of the
allowance for loan losses is based on the Corporation's past loan loss
experience; known and inherent risks in the portfolio; adverse situations that
may affect the borrower's ability to repay (including the timing of future
payments); the estimated value of any underlying collateral; composition of the
loan portfolio; current economic conditions; and other relevant factors. This
evaluation is inherently subjective as it requires material estimates,
including the amounts and timing of future cash flows expected to be received
on impaired loans that may be susceptible to significant change.
Premises And Equipment
Premises and equipment are stated at cost less accumulated depreciation
computed principally on the straight-line method over the estimated useful
lives of the assets. Maintenance and minor repairs are charged to operations as
incurred. The cost and accumulated depreciation of the premises and equipment
retired or sold are eliminated from the property accounts at the time of
retirement or sale, and the resulting gain or loss is reflected in current
operations.
Other Real Estate Owned
Other real estate owned is comprised of property acquired through a
foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure and loans
classified as in-substance foreclosure. In accordance with Statement No. 114, a
loan is classified as in-substance foreclosure when the Corporation has taken
possession of the collateral regardless of whether formal foreclosure
proceedings took place. Other real estate owned is recorded at fair value at
the date of foreclosure, establishing a new cost basis. After foreclosure,
valuations are periodically performed by management, and the real estate is
carried at the lower of (1) cost or (2) fair value less estimated costs to
sell. Income and expenses from operations of other real estate owned and
changes in the valuation allowance are included in loss on other real estate
owned.
Advertising Costs
Advertising costs are expensed as the costs are incurred. Advertising
expenses amounted to $56,039, $62,520 and $64,377 for 1995, 1994 and 1993,
respectively.
Contributions (Charitable)
The Corporation adopted Statement of Financial Accounting Standard No. 116,
"Accounting for Contributions Received and Contributions Made." Under Statement
No. 116, the entire contributions in the form of unconditional promises to pay
(bona fide pledges) must be accrued and reflected as a contribution expense in
the year of the pledge. The measurement of the accrual required is based on the
present value of future cash flows using a current market discount rate. A
prospective change is permitted. The Corporation has elected not to reflect the
cumulative effect of the change due to implementation of Statement No. 116 at
January 1, 1995, because the amount at that date was not significant.
Charitable pledges payable at December 31, 1995, calculated as required under
Statement No. 116 are $56,481.
Income Taxes
The Corporation adopted Statement of Accounting Standards No. 109,
"Accounting for Income Taxes" as required on January 1, 1993. As permitted by
Statement No. 109, prior years' consolidated financial statements have not been
restated to reflect the change in accounting method. The cumulative effect as
of January 1, 1993 of adopting Statement No. 109 increased consolidated net
income by $196,222, or $.17 per share.
Under Statement No. 109, deferred tax assets and liabilities are determined
based on the differences between the consolidated financial statement and
income tax bases of assets and liabilities measured by using the enacted tax
rates and laws expected to be in effect when the timing differences are
expected to reverse. Deferred tax expense or benefit is based on the difference
between the deferred tax asset or liability from period to period. Further,
Statement No. 109 requires that a valuation allowance be provided in an amount
sufficient to reduce the deferred tax asset to the amount that is more likely
than not to be realized. Previously, deferred income taxes were accounted for
using the deferred method.
Net Income Per Share
Net income per share on common stock is calculated by dividing net income
by the weighted average number of shares of common stock outstanding during
each period.
Statements Of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and due from banks, interest-bearing deposits in other banks and
federal funds sold. The Corporation considers cash classified as
interest-bearing deposits with other banks as a cash equivalent, because such
deposits are represented by cash accounts essentially on a
9
<PAGE> 12
[PHOTO]
demand basis. Federal funds are also included as a cash equivalent, because
such funds are generally purchased and sold for one-day periods.
Derivative Financial Instruments
The Corporation has no derivative financial instruments requiring
disclosure under Statement of Financial Accounting Standards No. 119,
"Disclosures about Derivative Financial Instruments and Fair Value of Financial
Instruments."
Trust Assets And Income
Property held by the Corporation in a fiduciary or agency capacity for its
customers is not included in the accompanying consolidated financial
statements, because such items are not assets of the Corporation. Trust
Department income is recognized on a cash basis and is not materially different
than if it was reported on an accrual basis.
Reporting Format
Certain amounts in the financial statements of the prior periods have been
reclassified to conform with the presentation used in the 1995 financial
statements. Such classifications have no effect on the Corporation's
consolidated financial condition or net income.
2. CHANGES IN ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." Statement No. 121 requires that long-lived assets
and certain identifiable intangibles are to be classified into two categories
for the purpose of accounting for an impairment of assets: those to be held and
used and those to be disposed of. Assets to be held and used must be reviewed
whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. An impairment loss is indicated if the sum of the
expected future cash flows, undiscounted and without interest charges, is less
than the carrying amount of the assets. An impairment loss must be recognized
as the amount by which the carrying amount of the asset exceeds the fair value
of the asset so determined. The Corporation intends to adopt Statement No. 121,
as required, in its fiscal year beginning January 1, 1996. Implementation of
this Statement is not expected to have a material effect on the consolidated
financial condition or results of operations of the Corporation.
3. RESTRICTED CASH BALANCES
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. The amount required at December 31, 1995 was $733,000 and was
satisfied by vault cash. Additionally, as compensation for check clearing and
other services, compensating balances are required to be maintained with the
Federal Reserve System and other correspondent banks. At December 31, 1995,
these balances were $325,000.
4. INVESTMENT SECURITIES
The amortized cost, related estimated fair value, and unrealized gains and
losses for investment securities classified as "Available for Sale" or "Held to
Maturity" were as follows at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Available For Sale Securities
-------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1995: Cost Gains Losses Value
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $14,913,983 $119,982 $ 0 $ 15,033,965
U.S. government corporations and agencies 13,098,912 21,688 0 13,120,600
Obligations of state and political subdivisions 7,453,384 231,929 0 7,685,313
Corporate debt securities 2,498,639 57,911 0 2,556,550
Equity securities 942,300 0 0 942,300
------------ ---------- ---------- ------------
Total $38,907,218 $431,510 $ 0 $ 39,338,728
============ ========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
Held to Maturity Securities
-----------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1995: Cost Gains Losses Value
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 0 $ 0 $ 0 $ 0
U.S. government corporations and agencies 0 0 0 0
Obligations of state and political subdivisions 1,045,000 17,433 0 1,062,433
Corporate debt securities 0 0 0 0
------------ ---------- ---------- -----------
Total $ 1,045,000 $ 17,433 $ 0 $ 1,062,433
============ ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Available For Sale Securities
-------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1994: Cost Gains Losses Value
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 9,965,816 $ 63,179 $433,220 $ 9,595,775
U.S. government corporations and agencies 2,000,000 0 193,750 1,806,250
Obligations of state and political subdivisions 0 0 0 0
Corporate debt securities 1,495,306 0 179,128 1,316,178
Equity securities 711,150 0 0 711,150
------------ ---------- ---------- -----------
Total $14,172,272 $ 63,179 $806,098 $13,429,353
============ ========== ========== ===========
</TABLE>
10
<PAGE> 13
[PHOTO]
<TABLE>
<CAPTION>
Held to Maturity Securities
-----------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1994: Cost Gains Losses Value
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $13,832,369 $ 0 $ 96,329 $13,736,040
U.S. government corporations and agencies 2,097,541 0 56,226 2,041,315
Obligations of state and political subdivisions 8,458,167 0 178,223 8,279,944
Corporate debt securities 1,505,524 3,395 0 1,508,919
----------- ------ -------- ----------
Total $25,893,601 $3,395 $330,778 $25,566,218
=========== ====== ======== ===========
</TABLE>
The Corporation held no mortgage-backed securities on December 31, 1995 and
1994. Securities available for sale with an aggregate fair value of $21,679,824
in 1995; $9,867,837 in 1994 and securities held to maturity with an aggregate
unamortized cost of $0 in 1995; $12,787,990 in 1994, respectively, were pledged
to secure public funds, trust funds, securities sold under agreements to
repurchase and other balances of $18,022,753 in 1995 and $16,681,323 in 1994 as
required by law. The amortized cost and estimated fair value of debt
securities, by contractual maturity, are shown below at December 31, 1995.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Held to Maturity Available for Sale
------------------- --------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
------------- ------------ ------------ ------------
<S> <C> <C>
Due in one year or less $ 0 $ 0 $10,553,587 $10,595,514
Due after one year through five years 1,045,000 1,062,433 19,553,678 19,733,050
Due after five years through ten years 0 0 3,997,118 4,041,429
Due after ten years 0 0 4,802,835 4,968,734
---------- ---------- ----------- -----------
Total $1,045,000 $1,062,433 $38,907,218 $39,338,727
========== ========== =========== ===========
</TABLE>
The quality rating of all obligations of state and political subdivisions
are "A" or higher, as rated by Moody's or Standard and Poors. The only
exceptions are local issues which are not rated, but are secured by the full
faith and credit obligations of the communities that issued these securities.
All of the state and political subdivision investments are actively traded in a
liquid market.
Proceeds from sale of investments in debt and equity securities during
1995, 1994 and 1993 were $2,535,237, $2,025,863 and $1,702,049, respectively.
Gross gains realized on these sales were $82,954, $63,180 and $60,546,
respectively. Gross losses on these sales were $8,167 in 1994. There were no
gross losses on the 1995 and 1993 sales. Net unrealized gains (losses) on
securities available for sale included as a separate component of consolidated
stockholders' equity net of tax was $284,796 and $(490,327) in 1995 and 1994
respectively.
As permitted by the one-time transfer allowed by the Financial Accounting
Standards Board as described in Note 1, the Corporation elected to transfer
investment securities classified as held to maturity to the classification
available for sale as follows:
<TABLE>
<S> <C>
Amortized cost at date of transfer $10,822,271
Unrealized gain (loss) 327,119
-----------
Fair value at date of transfer $11,149,390
===========
</TABLE>
5. Loans
Major classifications of loans at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial $ 5,990,247 $ 5,471,766
Tax exempt 1,520,495 2,398,314
Qualified municipal leases 130,517 277,515
Real estate - construction 941,455 994,351
Real estate 95,291,768 94,029,617
Personal 8,058,280 6,577,096
Credit cards 447,168 467,719
------------ ------------
Total gross loans $112,379,930 $110,216,378
Less: Unearned discount 359,731 143,322
Unamortized loan fees net of costs 188,603 272,982
------------ ------------
Loans, net of unearned income $111,831,596 $109,800,074
============ ============
</TABLE>
At December 31, 1995, the recorded investment in loans that was considered
to be impaired under Statement No. 114 was $13,343, which consisted of all
non-accrual loans. The related allowance for loan losses utilizing standards
provided in Statement No. 114 is $13,343. No additional charge to operations is
required since the total allowance for loan losses is estimated by management
to be adequate to provide for the loan loss allowance under Statement #114 as
well as any other potential loan losses. The average recorded investment in
impaired loans during the year ended December 31, 1995, was approximately
$18,647. For the year ended December 31, 1995, the Corporation recognized
interest income on those impaired loans of $111, which included $111 of
interest income recognized using the cash basis method of income recognition.
At December 31, 1994, the Corporation had non-accrual loans of $23,952 that
would be considered impaired under Statement No. 114. The Corporation recorded
$28,083 of interest income on non-accrual loans in 1994.
Interest income in the amounts of $2,266 in 1995 and $47,437 in 1994 would
have been recorded on non-accrual
11
<PAGE> 14
[PHOTO]
loans according to their original terms.
At December 31, 1995, there were no significant commitments to lend
additional funds with respect to non-accrual and restructured loans.
Changes in the allowance for loan losses for the years ended December 31,
1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 943,371 $ 920,873 $ 876,423
Provision charged to operations 42,000 160,000 105,000
Loans charged-off (107,190) (195,853) (105,371)
Recoveries 34,072 58,351 44,821
--------- --------- ---------
Balance, end of year $ 912,253 $ 943,371 $ 920,873
========= ========= =========
</TABLE>
6. PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 435,174 $ 435,174
Buildings and improvements 3,176,192 2,668,848
Furniture and equipment 2,402,528 2,094,997
Capitalized leases - equipment 287,837 0
Construction in progress 968,150 75,274
---------- ----------
$7,269,881 $5,274,293
Less: Accumulated depreciation 2,187,997 1,984,150
---------- ----------
$5,081,884 $3,290,143
========== ==========
</TABLE>
Depreciation amounted to $293,305 for 1995, $249,173 for 1994 and $240,163 for
1993.
7. DEPOSITS
Major classifications of deposits at December 31, 1995 and 1994 follow:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Demand - non-interest bearing $ 12,050,780 $ 11,677,753
Demand - interest bearing 19,199,306 19,320,204
Savings 38,856,589 49,283,762
Time $100,000 and over 11,033,846 7,011,223
Other time 47,844,751 39,571,001
------------ ------------
$128,985,272 $126,863,943
============ ============
</TABLE>
The following is a schedule reflecting classification and remaining
maturities of time deposits of $100,000 and over at December 31, 1995:
<TABLE>
<S> <C>
Three months or less $ 4,170,472
Over three months to six months 1,401,374
Over six months to twelve months 1,372,000
Over twelve months 4,090,000
-----------
Total $11,033,846
===========
</TABLE>
Interest expense related to time deposits of $100,000 or more was $513,290 in
1995, $270,335 in 1994 and $227,369 in 1993.
8. SHORT-TERM BORROWINGS
Federal funds purchased, securities sold under agreements to repurchase,
and Federal Home Loan Bank advances generally represent overnight or less than
30-day borrowings. Federal discount window borrowings generally cannot extend
beyond 14 days and are normally overnight borrowings. U.S. Treasury tax and
loan notes for collections made by the Bank are payable on demand. Short-term
borrowings consisted of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
Maximum Maximum
Month Month
Ending Average End Average Ending Average End Average
Balance Balance Balance Rate Balance Balance Balance Rate
--------- --------- --------- -------- --------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds
purchased and
securities sold
under agreements
to repurchase $11,810,602 $10,573,000 $13,903,473 5.50% $ 9,769,335 $10,423,283 $11,545,760 3.99%
Federal Home
Loan Bank 0 400,000 3,250,000 5.75% 1,600,000 79,452 3,025,000 3.80%
U.S. Treasury
tax and
loan notes 254,969 793,000 1,000,000 4.04% 540,213 512,242 1,000,000 4.49%
----------- ----------- ----------- ----- ----------- ----------- ----------- -----
Total $12,065,571 $11,766,000 $18,153,473 5.39% $11,909,548 $11,014,977 $15,570,760 4.01%
</TABLE>
9. LONG-TERM BORROWINGS
Long-term borrowings are represented by capital lease obligations. The
obligations were incurred as a result of acquiring computer and related
equipment.
12
<PAGE> 15
[PHOTO]
Minimum future lease payments under capital leases as of December 31, 1995
for each of the next five years and in the aggregate are:
<TABLE>
<CAPTION>
Amount
<S> <C>
1996 $ 89,741
1997 88,847
1998 88,847
1999 88,847
2000 66,635
--------
Total minimum lease payments $422,917
Less: Amount representing interest 58,352
--------
Present value of net minimum lease payments $364,565
========
</TABLE>
The interest rate on capitalized leases is imputed at 6.30% which was based
on the lower of Corporation's incremental borrowing rate at the inception of
the leases.
10. STOCKHOLDERS' EQUITY AND STOCK OPTIONS
The Amended Articles of Incorporation contain a provision that permits the
Corporation to issue warrants for the purchase of shares of common stock, par
value $1.25 per share (the "Common Stock"), at below market prices in the event
any person or entity acquires 25% or more of the Common Stock.
On September 6, 1994, the Corporation offered up to 222,052 shares of the
Common Stock, at a price of $15.50 per share, to certain shareholders of record
(the "Rights Offering") at the close of business on August 31, 1994 (the
"Record Date"). The Board of Directors granted to these certain shareholders on
the Record Date ("Record Date Holders") the right (the "Right") to purchase one
share of the Common Stock offered for each five shares of the Common Stock held
of record on the Record Date. The Rights and the Rights Offering terminated on
October 6, 1994.
Concurrently with the Rights Offering, the Corporation offered the shares
of Common Stock not subscribed for in the Rights Offering for sale to the
general public in a direct community offering with preference given to persons
residing in the counties of Columbia, Luzerne, Montour, Northumberland,
Schuylkill and Sullivan, Pennsylvania (the "Community Offering"). The
Corporation exercised its right to increase the number of shares to be sold by
33,308 to 255,360 pursuant to an oversubscription reserve, because there was an
oversubscription in the Community Offering. The gross proceeds from the sale of
255,360 shares was $3,958,080. The net amount realized from the Rights and
Community Offerings, after deducting expenses of $337,501, was $3,620,579.
On April 25, 1995, the Shareholders approved an Employee Stock Purchase
Plan. The maximum number of shares of the Common Stock to be issued under this
plan shall be 20,000. In addition, the Corporation may choose to purchase
shares on the open market to facilitate this plan. A participating employee
shall elect deductions of at least 1% of base pay, but not more than 10% of
base pay, to cover purchases of shares under this plan. A participating
employee shall be deemed to have been granted an option to purchase a number of
shares of the Common Stock equal to the annual aggregate amount of payroll
deductions elected by the employee divided by 90% of the fair market value of
Common Stock on the first day of January in each year. The first activity under
this plan occurred in January 1996 whereby 195 shares were obtained at $16.00
per share on the open market and issued to the participating employees at
$14.40 per share.
On February 2, 1995, the Corporation registered with the Securities and
Exchange Commission 500,000 shares of the Common Stock to be sold pursuant to a
Dividend Reinvestment and Stock Purchase Plan. The price per share for
purchases under this plan is determined at each quarterly dividend payment date
by the reported average mean between the bid and asked prices in the
over-the-counter market for ten consecutive trading days preceding each
quarterly dividend payment date. Participation in this plan by Shareholders
began in June 1995. 7,036 shares were issued in 1995 with proceeds totalling
$77,037 net of initial cost to establish the plan.
11. INCOME TAXES
The current and deferred components of the income tax provision (benefit)
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal
Current $511,730 $496,743 $495,527
Deferred 49,392 62,664 1,199
-------- -------- --------
$561,122 $559,407 $496,726
State
Current 0 785 0
-------- -------- --------
Total provision for income taxes $561,122 $560,192 $496,726
======== ======== ========
</TABLE>
The following is a reconciliation between the actual provision for federal
income taxes and the amount of federal income taxes which would have been
provided at the statutory rates of 34%:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory rate $ 743,238 34.0% $722,550 34.0% $673,213 34.0%
Tax exempt income (212,756) (9.7) (188,581) (8.9) (203,779) (10.3)
Non-deductible expenses 26,473 1.2 20,543 1.0 27,369 1.4
Other 4,167 .2 4,895 .2 (77) .0
---------- ----- -------- ----- -------- -----
Actual federal income tax
and rate $ 561,122 25.7% $559,407 26.3% $496,726 25.1%
========== ===== ======== ===== ======== =====
</TABLE>
13
<PAGE> 16
[PHOTO]
Income taxes applicable to realized security gains included in the
provision for income taxes totalled $28,204 in 1995, $18,704 in 1994 and
$20,586 in 1993.
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 109 as more fully explained in Note 1 to the
consolidated Financial Statements which required the Corporation to change its
method of accounting for income taxes. Statement No. 109 was adopted on a
prospective basis and amounts attributable to prior years were not required to
be reflected or restated. Application of Statement No. 109 resulted in a
cumulative tax benefit of $196,222 for the year 1993.
The deferred tax assets and liabilities resulting from temporary timing
differences have been netted to reflect a net deferred tax asset, which is
included in other assets in these consolidated financial statements. The
components of the net deferred tax asset at December 31, 1995, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Loan loss reserve $ 208,404 $ 218,984 $ 211,335
Loan origination fees and costs 0 7,890 155,050
Unrealized investment securities losses 0 252,593 0
Deferred compensation 75,885 56,481 35,851
Contributions 13,140 0 0
--------- --------- ---------
Total $ 297,429 $ 535,948 $ 402,236
--------- --------- ---------
Deferred tax liabilities:
Loan origination fees and costs $ (53,950) $ 0 $ 0
Accretion (7,870) (5,208) (2,892)
Unrealized investment securities gains (146,713) 0 0
Depreciation (191,092) (184,238) (181,865)
--------- --------- ---------
Total $ 399,625 $(189,446) $(184,757)
--------- --------- ---------
Net deferred tax asset (liability) $(102,196) $ 346,502 $ 217,479
========= ========= =========
</TABLE>
It is anticipated that all tax assets will be realized, accordingly, no
valuation allowance has been provided.
12. BENEFIT AND DEFERRED COMPENSATION PLANS
The Bank had a non-contributory profit sharing plan covering substantially
all employees who attained specified age and length of service requirements.
The Bank's contributions were discretionary and were 100% vested upon an
employee's entrance to the plan. This plan was in effect through December 31,
1994.
The Bank adopted an amendment to this Profit Sharing Plan to include a
401K component effective January 1, 1995. Under this 401K component, employees
may contribute up to 10% of their compensation with the possibility that the
Bank will make a matching contribution based on the profits for each year.
Existing employees who were participating in the Profit Sharing Plan as of
December 31, 1994 are at all times 100% vested. New eligible participants after
January 1, 1995 are 100% vested at the end of five full years of participation.
In addition, the length of service requirements were reduced from two 1,000
hour years to one 1,000 hour year.
There was no matching contribution for 1995. Discretionary contributions
amounted to $86,755, $82,166 and $78,388 in 1995, 1994 and 1993, respectively.
Certain directors and executive officers are participants in non-qualified
deferred compensation plans. A summary of each plan follows:
Directors
The Bank has entered into agreements with three directors to establish
non-qualified deferred compensation plans for each of these directors. These
plans are limited to 4-year terms. The Bank may, however, enter into subsequent
similar plans with its directors. Each of the participating directors is
deferring the payment to him of certain directors fees to which he is entitled.
Each director's future payment is based upon the cumulative amount of deferred
fees together with interest currently accruing thereon at the rate of 8% per
annum, subject to change by the Board of Directors. The Bank has obtained life
insurance (designating the Bank as the beneficiary) on the lives of certain
directors in face amounts which are intended to cover the Bank's obligations
and related costs under the Director's Deferred Compensation Plan in aggregate.
As of December 31, 1995 and 1994, the net cash value of insurance policies was
$46,750 and $36,338, respectively, and the total accrued liability was $119,491
and $88,720, respectively, relating to these directors' deferred compensation
agreements.
Executive Officers
The Bank entered into agreements with two executive officers to establish
non-qualified deferred compensation plans. Each officer is deferring
compensation in order to participate in this Deferred Compensation Plan. If the
officer continues to serve as an officer of the Bank until he attains
sixty-five (65) years of age, the Bank has agreed to pay him 120 guaranteed
consecutive monthly payments commencing on the first day of the month following
the officer's 65th birthday. Each officer's guaranteed monthly payment is based
upon the future value of life insurance purchased with the compensation the
officer has deferred. The Bank has obtained life insurance (designating the
Bank as the beneficiary) on the life of each participating officer in an amount
which is intended to cover the Bank's obligations under the Deferred
Compensation Plan, based upon certain actuarial assumptions. As of December 31,
1995 and 1994, the net cash value of insurance policies was $86,201 and
$60,326, respectively, and the total accrued liability was $103,200 and
$77,400, respectively, relating to these executive officers' deferred
compensation agreements.
13. LEASE COMMITMENTS AND CONTINGENCY
At December 31, 1995, the Bank was contracting outside data processing
services, as well as leasing some minor office equipment.
14
<PAGE> 17
[PHOTO]
The expense for all operating leases and contracted data processing
services for the years ended December 31, 1995, 1994 and 1993 was $253,626,
$243,108 and $226,814, respectively. The Bank's operating leases and the
outside Data Processing Center services were on a month-to-month basis through
December 31, 1994.
In November 1994, the Bank signed an 8-year agreement with Electronic Data
Systems for data processing, leasing of equipment, and related services.
Conversion to the new system was completed during the third quarter of 1995.
The agreement calls for the minimum payments to be adjusted for cost of living
index increases.
The minimum future non-cancellable payments required under this new
agreement, for each of the next five years follows:
<TABLE>
<S> <C>
1996 $ 253,042
1997 254,293
1998 259,297
1999 263,050
2000 273,049
Thereafter 854,996
----------
Total $2,157,727
==========
</TABLE>
In addition, there are capital leases reflected as long-term borrowing -
see Note 9.
14. LEGAL MATTERS
In the normal course of business, there are various pending legal actions
and proceedings which are not reflected in the consolidated financial
statements. In the opinion of management, the consolidated financial statements
will not be affected materially by the outcome of such actions and proceedings.
15. RELATED PARTY TRANSACTIONS
Certain directors and executive officers of the Corporation and the Bank
and companies in which they are principal owners (i.e., hold at least 10% of
the stock), as well as their immediate families, were indebted to the Bank at
December 31, 1995 and 1994. These loans were made on substantially the same
terms and conditions, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated parties.
A summary of the activity on the related party loans, comprised of 8
directors, 7 executive officers, their related companies and immediate
families, consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance, beginning of year $ 3,551,989 $3,191,031
New loan advances 1,749,296 991,797
Repayments (1,348,829) (630,839)
----------- ----------
Balance, end of year $ 3,952,456 $3,551,989
=========== ==========
</TABLE>
The above loans represent funds drawn and outstanding at the date of this
consolidated financial statement. Commitments by the Bank on lines of credit
and credit card agreements present an additional off-balance sheet risk to the
extent of undisbursed funds in the amount of $796,869 and $347,333,
respectively, on the above loans. Additionally, the presented loans include
credit card accounts totalling $22,515 and $19,456, respectively, with no
single account balance exceeding $10,000.
These loans do not present more than the normal risk of collectibility nor
present other unfavorable features.
16. REGULATORY MATTERS
Dividends are paid by the Corporation to stockholders from its assets
which are mainly provided by the Bank.
National banking laws place certain restrictions on the amount of
dividends allowed to be paid by the Bank to the Corporation. Generally, the
limitation provides that dividend payments may not exceed the Bank's current
year's retained income plus retained net income for the preceding two years.
Accordingly, in 1996, without prior regulatory approval, the Bank may declare
dividends to the Corporation in the amount of $2,022,049 plus additional
amounts equal to the net income earned in 1996 for the period January 1, 1996
through the date of declaration, less any dividends which may be paid in 1996.
Federal regulations provide standards which require that U.S. banking
organizations meet certain minimum capital ratios as a measure of capital
adequacy. In general, the standards require banks and bank holding companies to
maintain capital based on "risk-adjusted" assets so that categories of assets
with potentially higher credit risk will require more capital backing than
assets with lower risk. In addition, banks and bank holding companies are
required to maintain capital to support, on a "risk-adjusted" basis, certain
off-balance sheet activities, such as loan commitments and letters of credit.
The Federal regulations provide specific guidelines which classify capital
into two Tiers, referred to as Tier 1 and Tier 2. Under these guidelines the
Corporation's Tier 1 Capital consists of common stockholders' equity and Tier 2
Capital consists of the allowance for loan losses. Total qualifying capital
consists of the total of Tier 1 Capital plus Tier 2 Capital with Tier 2 Capital
being limited to 100% of Tier 1 Capital. At December 31, 1995, the Corporation
exceeded all minimum capital requirements as reflected in the following table:
<TABLE>
<CAPTION>
Minimum
Calculated Standard
Risk Based Ratios: Ratios Ratios
------ ------
<S> <C> <C>
Tier 1 Capital to Risk-Weighted Assets 28.21% 4.00%
Total Qualifying Capital to Risk-Weighted Assets 29.46% 8.00%
</TABLE>
17. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
The Corporation is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
stand-
15
<PAGE> 18
[PHOTO]
by letters of credit and commercial letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the consolidated balance sheets. The
contract or notional amounts of those instruments reflect the extent of
involvement the Corporation has in particular classes of financial instruments.
The Corporation does not engage in trading activities with respect to any of
its financial instruments with off-balance sheet risk.
The Corporation's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend credit
and letters of credit is represented by the contractual notional amount of
those instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.
The Corporation may require collateral or other security to support
financial instruments with off-balance sheet credit risk. The contract or
notional amounts at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $7,123,672 $8,465,815
Credit card arrangements 1,306,522 1,336,168
Standby letters of credit 378,600 287,000
Performance standby letters of credit 233,767 373,024
</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 creditworthiness 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 of the counter-party. Collateral held
varies but may include accounts receivable, inventory, property, plant,
equipment, and income-producing commercial properties.
Standby letters of credit, commercial letters of credit, and performance
standby letters of credit are conditional commitments issued by the Corporation
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Corporation holds collateral
supporting those commitments for which collateral is deemed necessary. The
extent of collateral held for those commitments at December 31, 1995 varies
from 0 percent to 100 percent; the average amount collateralized is 64.3%.
The Corporation grants commercial, consumer and residential loans to
customers within the state. Of the total loan portfolio 86% is for real estate
loans, principally residential. It is the opinion of management that this high
concentration does not pose any adverse credit risk. Further, it is
management's opinion that the remainder of the loan portfolio is balanced and
diversified to the extent necessary to avoid any significant concentration of
credit.
18. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Corporation is required, as of January 1, 1995, to adopt Statement of
Accounting Standards Board No. 107, "Disclosures about Fair Value of Financial
Instruments." The Statement requires disclosure of fair value information about
financial instruments, whether or not required to be recognized in the
consolidated balance sheet, for which it is practicable to estimate such value.
In cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. These techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. Fair value estimates derived through these
techniques cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
Statement No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the
Corporation.
The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:
Cash And Other Short-Term Instruments
Cash and due from banks, interest bearing deposits with other banks, and
Federal Funds sold have carrying values which are a reasonable estimate of fair
value. Accordingly, fair values regarding these instruments are provided by
reference to carrying values reflected on the consolidated balance sheet.
Investment Securities
The fair value of investment securities which include mortgage-backed
securities, except certain state and municipal securities, is estimated based
on bid prices published in financial newspapers or bid quotations received from
securities dealers. The fair value of certain state and municipal securities
is not readily available through market sources other than dealer quotations,
thus fair value estimates are based on quoted market prices of similar
instruments, adjusted for differences between the quoted instruments and the
instruments being valued.
Loans
Fair values are estimated for categories of loans with similar financial
characteristics. Loans were segregated by type such as commercial, tax exempt,
real estate mortgages and consumer. For estimation purposes, each loan category
was further segmented into fixed and adjustable rate interest terms and also
into performing and non-performing classifications.
The fair value of each category of performing loans is calculated by
discounting future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for the same
remaining maturities.
16
<PAGE> 19
[PHOTO]
Fair value for non-performing loans is based on management's estimate of
future cash flows discounted using a rate commensurate with the risk associated
with the estimated future cash flows. The assumptions used by management are
judgmentally determined using specific borrower information.
Deposits
Under Statement No. 107, the fair value of deposits with no stated
maturity, such as Demand Deposits, Savings Accounts, and Money Market Accounts,
is equal to the amount payable on demand at December 31, 1995 and 1994.
Fair values for fixed rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly maturities
on time deposits.
Short-Term Borrowings
The carrying amounts of federal funds purchased and securities sold under
agreements to repurchase and other short-term borrowings approximate their fair
values.
Long-Term Borrowings
The carrying amounts of capitalized leases approximate their fair values,
since the incremental borrowing rate used in the carrying amount calculation is
at market rate.
Commitments To Extend Credit And Stand-By Letters Of Credit
Management estimates that there are no material differences between the
notional amount and the estimated fair value of those off-balance sheet items,
because they are primarily composed of unfunded loan commitments which are
generally priced at market at the time of funding.
At December 31, 1995, the carrying values and estimated fair values of
financial instruments of the Corporation are presented in the table below:
<TABLE>
<CAPTION>
1995
----
Carrying Estimated
Amount Fair Value
------------ ------------
<S> <C> <C>
Financial Assets:
Cash and short-term investments $ 4,471,193 $ 4,471,193
Investment securities 40,383,728 40,401,161
Loans:
Commercial $ 5,990,247 $ 5,990,247
Tax exempt 1,520,495 1,561,548
Qualified municipal leases 130,517 130,517
Real estate - construction 941,455 950,870
Real estate 95,291,768 96,288,663
Personal 8,058,280 8,085,580
Credit cards 447,168 447,168
------------ ------------
Gross loans $112,379,930 $113,454,593
less: Unearned discount 359,731 0
Unamortized loan fees net of costs 188,603 0
------------ ------------
Loans net of unearned income $111,831,596 $113,454,593
Less allowance for losses 912,253 0
------------ ------------
Net Loans $110,919,343 $113,454,593
------------ ------------
Financial Liabilities:
Deposits:
Demand - non-interest bearing $ 12,050,780 $ 12,050,780
Demand - interest bearing 19,199,306 19,199,306
Savings 38,856,589 38,856,589
Time - $100,000 and over 11,033,846 10,529,480
Other time 47,844,751 49,058,718
------------ ------------
Total Deposits $128,985,272 $129,694,873
------------ ------------
Short-Term Borrowings $ 12,065,571 $ 12,065,571
Long-Term Borrowings 364,565 364,565
Off-Balance Sheet Assets (Liabilities):
Commitments to extend credit $ 7,123,672
Credit card arrangements 1,306,522
Standby letters of credit 378,600
Performance standby letters of credit 233,767
</TABLE>
17
<PAGE> 20
[PHOTO]
19. PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information for CCFNB Bancorp, Inc. (Parent Company
only) was as follows:
<TABLE>
<CAPTION>
December 31,
------------
Balance Sheets 1995 1994
---- ----
<S> <C> <C>
Assets
Cash in subsidiary Bank $ 287,345 $ 247,533
Investment in subsidiary Bank 19,200,430 17,392,459
Prepayments and other assets 44,543 60,905
----------- -----------
Total Assets $19,532,318 $17,700,897
=========== ===========
Liabilities and Stockholders' Equity
Payable to subsidiary $ 20,173 $ 36,522
Income taxes and accrued expenses 400 14,157
----------- -----------
Total Liabilities $ 20,573 $ 50,679
----------- -----------
Stockholders' Equity
Common stock $ 1,715,823 $ 1,707,028
Surplus 5,693,849 5,625,607
Retained earnings 11,817,277 10,807,910
Unrealized gain (loss) on investment
securities available for sale 284,796 (490,327)
----------- -----------
Total Stockholders' Equity $19,511,745 $17,650,218
----------- -----------
Total Liabilities and Stockholders'
Equity $19,532,318 $17,700,897
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
Income Statements 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income
Interest $ 12,918 $ 25,113 $ 6,989
Dividends from subsidiary 615,504 571,953 444,105
----------- ----------- -----------
Total Income $ 628,422 $ 597,066 $ 451,094
Operating Expenses 48,496 18,570 15,841
----------- ----------- -----------
Income Before Taxes and Equity in Undistributed
Net Income of Subsidiary $ 579,926 $ 578,496 $ 435,253
Applicable income tax (benefit) (12,097) 2,743 (2,799)
----------- ----------- -----------
Income Before Equity in Undistributed Net Income
of Subsidiary $ 592,023 $ 575,753 $ 438,052
Equity in undistributed income of subsidiary 1,032,848 989,201 1,241,483
----------- ----------- -----------
Net Income $ 1,624,871 $ 1,564,954 $ 1,679,535
=========== =========== ===========
Statements Of Cash Flows
Operating Activities
Net income $ 1,624,871 $ 1,564,954 $ 1,679,535
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed net income of subsidiary (1,032,848) (989,201) (1,241,483)
(Increase) decrease in prepaid expenses and
other assets 16,362 (49,729) 3,157
(Increase) decrease in receivable from subsidiary 0 2,198 (2,198)
Increase (decrease) in advances payable to
subsidiary (16,349) 36,522 (3,447)
Increase (decrease) in income taxes and accrued
expenses payable (13,757) 14,157 0
----------- ----------- -----------
Net Cash Provided By Operating Activities $ 578,279 $ 578,901 $ 435,564
----------- ----------- -----------
Investing Activities
Investment in subsidiary $ 0 $(3,638,012) $ 0
----------- ----------- -----------
Net Cash Provided (Used) in Investing
Activities $ 0 $(3,638,012) $ 0
----------- ----------- -----------
Financing Activities
Proceeds from sale of treasury stock $ 0 $17,825 $ 7,834
Acquisition of treasury stock 0 (17,825) 0
Proceeds from issuance of common stock 77,037 3,620,579 0
Cash dividends (615,504) (496,785) (443,996)
----------- ----------- -----------
Net Cash Provided (Used) By Financing
Activities $ (538,467) $ 3,123,794 $ (436,162)
----------- ----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents $ 39,812 $64,683 $ (598)
Cash and Cash Equivalents at Beginning of Year 247,533 182,850 183,448
----------- ----------- -----------
Cash and Cash Equivalents at End of Year $ 287,345 $ 247,533 $ 182,850
=========== =========== ===========
</TABLE>
18
<PAGE> 21
[PHOTO]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders of CCFNB Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of CCFNB Bancorp,
Inc. and Subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CCFNB
Bancorp, Inc. and Subsidiary as of December 31, 1995 and 1994, and the
consolidated results of their operations and their 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 Note 1 to the consolidated financial statements, the
Corporation changed its method of accounting for impaired loans and
contributions in 1995, investments in debt and equity securities in 1994 and
income taxes in 1993.
/s/ J.H. WILLIAMS & CO., LLP
- ----------------------------
J.H. Williams & Co., LLP
Kingston, Pennsylvania
January 16, 1996
[PHOTO]
Workers examine the concrete floor of CCFNB's new East Street Branch.
19
<PAGE> 22
[PHOTO]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED SUMMARY OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
INCOME AND EXPENSE: 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest income $ 11,481 $ 10,459 $ 9,914 $ 9,768 $ 10,016
Interest expense 5,557 4,785 4,634 5,053 5,707
---------- ---------- ---------- ----------- ----------
Net interest income 5,924 5,674 5,280 4,715 4,309
Loan loss provision 42 160 105 167 190
---------- ---------- ---------- ----------- ----------
Net interest income after
loan loss provision 5,882 5,514 5,175 4,548 4,119
Non-interest income 678 569 568 547 484
Non-interest expense 4,374 3,958 3,763 3,468 3,228
---------- ---------- ---------- ----------- ----------
Income before income taxes 2,186 2,125 1,980 1,627 1,375
Income taxes 561 560 497 414 346
Change in accounting principle 0 0 196 0 0
---------- ---------- ---------- ----------- ----------
Net income 1,625 1,565 1,679 1,213 1,029
========== ========== ========== =========== ==========
PER SHARE:
Net income after change in
accounting principle $ 1.19 $ 1.35 $ 1.51 $ 1.09 $ 0.93
Cash dividends paid 0.45 0.42 0.40 0.33 0.30
Average shares outstanding 1,367,595 1,163,199 1,109,837 1,109,602 1,109,382
AVERAGE BALANCE SHEET:
Loans 111,980 100,628 88,347 77,354 73,185
Investments 37,063 41,410 42,083 38,534 31,459
Other earning assets 1,727 2,696 3,659 1,360 2,288
Total assets 157,957 151,752 143,096 129,045 114,488
Deposits 116,495 115,071 117,105 103,500 93,228
Other interest-bearing liabilities 11,766 11,014 12,332 12,390 9,744
Shareholders' equity 18,067 13,736 12,739 11,972 10,873
BALANCE SHEET AT YEAR-END:
Loans 111,832 109,800 96,423 82,055 74,155
Investments 40,384 39,323 44,542 39,448 34,489
Other earning assets 385 4,174 3,491 9,885 2,534
Total assets 162,066 157,124 152,386 139,273 118,558
Deposits 128,985 126,864 124,023 113,291 95,334
Other interest-bearing liabilities 12,430 11,910 14,317 13,199 10,197
Shareholders' equity 19,512 17,650 13,452 12,208 11,361
RATIOS:
Return on average assets 1.03% 1.03% 1.17% .94% .90%
Return on average equity 8.99% 11.39% 13.18% 10.13% 9.47%
Dividend payout ratio 34.35% 36.54% 26.44% 30.17% 32.34%
Average equity to average
assets ratio 11.44% 9.05% 8.90% 9.28% 9.50%
</TABLE>
The following discussion and analysis should be read in conjunction with
the detailed information and financial statements, including notes thereto,
included elsewhere in this report. The consolidated financial condition and
results of operations of the Corporation are essentially those of its
subsidiary, the Bank. Therefore, the analysis that follows is directed to the
performance of the Bank.
RESULTS OF OPERATIONS
The Corporation's net income increased 3.8% to $1,625,000 for 1995,
compared to $1,565,000 for 1994. Earnings per common share were $1.19 compared
to $1.35 per common share in 1994. In late 1994 a stock offering was
successfully implemented which increased the number of shares outstanding by
222,052. Beginning in June, 1995, a dividend reinvestment plan went into effect
for the Corporation with the additional option to purchase up to $1,500 in
additional stock. These factors have effected the earnings per share by
increasing the number of shares outstanding. Average shares outstanding for
1994 were 1,163,199 and were increased to 1,367,595 for 1995.
Loan demand continued at a low pace throughout 1995. The Bank continued
to expend funds for capital purposes which included two projects improving bank
premises along with a complete revision to the data processing, hardware and
software equipment. These factors impacted earnings; however, they will prepare
us for future years.
Net income increased 5.5% before the effect of change in accounting
principle from 1993 to 1994. In 1993 net income, before the effect of the
change in accounting principle, was $1,483,000 in 1993 and increased to
$1,565,000 in 1994.
20
<PAGE> 23
[PHOTO]
Return on average assets ("ROA") remained at 1.03% for 1994 and 1995. The
return on average equity ("ROE") was 8.99% for 1995, down from 11.39% for 1994.
The decline in ROE was attributable to the stock offering that occurred in the
last quarter of 1994 and the increase in the equity due to unrealized gains on
investment securities. ROE and ROA, before the effect of change in accounting
principle, were 11.64% and 1.04% in 1993.
A 4.8% increase in tax-equivalent net interest income from 1994 to 1995
was realized. Average earning assets increased in 1995 4.0% to $150,505,000
from $144,734,000 in 1994. This modest increase was attributable to a shift in
investment instruments from U. S. Treasuries to Agencies and a higher yield on
the loan portfolio.
NON-INTEREST INCOME
Table of Non-Interest Income
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service charges and fees $505 $428 $409
Trust department income 51 50 50
Investment securities gain (losses)-net 83 55 61
Other 39 36 48
---- ---- ----
Total non-interest income $678 $569 $568
==== ==== ====
</TABLE>
Total non-interest income increased $109,000 in 1995 from $569,000 in 1994
to $678,000 in 1995. This increase was primarily attributed to service fees
which increased by $78,000 and realized gains on sales of securities which
increased by $28,000.
NON-INTEREST EXPENSE
Table Of Non-Interest Expense
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Salaries and wages $1,593 $1,448 $1,371
Employee benefits 529 424 397
Net occupancy expense 259 278 251
Furniture and equipment expense 349 306 284
State shares tax 115 104 95
FDIC insurance 148 278 252
Other expense 1,381 1,120 1,113
------ ------ ------
Total non-interest expense $4,374 $3,958 $3,763
====== ====== ======
</TABLE>
Total non-interest expense increased to $4,374,000 in 1995 from $3,958,000
in 1994 or 10.51%. Major components of this increase included an increase of
6.29% in salaries and benefits; an increase of 1.18% in equipment expense
primarily due to increased depreciation on furniture and fixtures resulting
from fixed asset acquisitions; a decrease of 3.27% in FDIC insurance; and an
increase in other operating expenses of 6.89%. The aggregate increase of
$273,000 in these other operating expenses from 1994 to 1995 were principally
attributable to a $130,000 one time termination fee payable to Lun Data, the
former outside data processing supplier; $72,000 loss on fixed assets resulting
from conversion to a new data processing system and a write off of a certain
portion of the Millville branch which could not be utilized in the new building
project; and a $60,000 increase in donations resulting from required
implementation of Statement of Financial Accounting Standard No. 116.
The benchmark in measuring non-interest expense is to express this
non-interest expense as a percentage of average total assets. In 1994, this
percentage was 2.61% compared to 2.77% in 1995. Therefore, the Corporation has
improved this benchmark.
High credit quality, low delinquencies and net charge-offs resulted in a
provision for loan losses for 1995 of $42,000 compared to $160,000 in 1994.
NET INTEREST INCOME
The Asset/Liability Committee, along with senior management, is
continually monitoring the gap position, interest rate risk and new income
producers in order to position ourselves for profit growth today and into the
future.
A shift in investment vehicles from U. S. Treasuries to higher-yielding
U.S. Agencies, along with monitoring required rate changes on deposits were
strategies used to manage the net interest income.
Tax-equivalent net interest income for 1995 equaled $6,246,000 compared to
$5,960,000 in 1994, an increase of 4.8%. Average cost of funds for 1995 was
4.33% compared to 3.80% in 1994. The yield on overall average interest earning
assets was 7.63% for 1995 compared to 7.23% for 1994. Average interest bearing
deposits with other financial institutions yielded 6.60% return in 1995
compared to 3.92% in 1994.
Tax Equivalent Net Interest Income
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income $11,481 $10,459 $9,938
Interest expense 5,557 4,785 4,634
------- ------- -------
Net interest income 5,924 5,674 5,304
Tax equivalent adjustment 322 286 308
------- ------- -------
Net interest income (fully taxable equivalent) $6,246 $5,960 $5,612
======= ======= =======
</TABLE>
21
<PAGE> 24
[PHOTO]
The net interest margin, which is the total tax-equivalent net interest
income as a percentage of total average interest-earning assets, increased in
1995 to 4.15% compared to 4.12% in 1994. The following Average Balance Sheet
and Rate Analysis table presents the average assets, actual income or expense
and the average yield on assets, liabilities and stockholders' equity for the
years 1993, 1994 and 1995:
Average Balance Sheet And Rate AnalysisThree Years Ended December 31
(Dollars in Thousands)
<TABLE>
<CAPTION>
DECEMBER 1995 December 1994 December 1993
------------- ------------- -------------
INTEREST AVERAGE Interest Average Interest Average
AVERAGE INCOME/ YIELD/ Average Income/ Yield/ Average Income/ Yield/
BALANCE(1) EXPENSE(2) RATE Balance(1) Expense(2) Rate Balance(1) Expense(2) Rate
---------------------------- ---------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest Bearing Deposits With
Other Financial Institutions $1,727 $ 114 6.60% $ 2,168 $ 85 3.92% $ 3,659 $ 109 2.98%
Investment Securities:
U.S. Government Securities 24,817 1,526 6.15% 29,086 1,396 4.80% 29,153 1,319 4.52%
State and Municipal Obligations (3) 8,680 493 8.57% 8,364 472 8.55% 8,198 478 8.83%
Other Securities 3,566 256 7.18% 3,960 285 7.20% 4,732 355 7.50%
-------- ------ ------ -------- ------ ------ -------- ------ ------
Total Investment Securities $ 37,063 $2,275 6.14% $ 41,410 $2,153 5.20% $ 42,083 $2,152 5.11%
Federal Funds Sold 735 60 8.16% 528 21 3.98% 899 26 2.89%
Consumer 8,271 788 9.53% 9,056 916 10.11% 8,715 906 10.40%
Mortgage 95,165 7,674 8.06% 77,410 5,973 7.72% 63,750 5,602 8.79%
Commercial 5,348 437 8.17% 12,874 1,228 9.54% 13,942 998 7.16%
Tax Free (3) 2,196 133 9.11% 1,288 83 9.76% 1,940 121 9.45%
-------- ------ ------ -------- ------ ------ -------- ------ ------
Total Loans $110,980 $9,032 8.14% $100,628 $8,200 8.15% $ 88,347 $7,627 8.63%
Total Interest Earning Assets 150,505 11,481 7.63% 144,734 10,459 7.23% 134,988 9,914 7.34%
-------- ------ ------ -------- ------ ------ -------- ------ ------
Reserve for Loan Losses ($936) ($886) ($890)
Cash and Due from Banks 1,961 1,237 3,868
Other Assets 6,427 6,667 5,130
-------- -------- --------
Total Assets $157,957 $151,752 $143,096
======== ======== ========
Liabilities And Capital:
SUPER NOW Deposits $ 19,128 $ 534 2.79% $ 18,259 $529 2.90% $ 16,035 $472 2.94%
IRA 8,249 413 5.01% 8,068 403 5.00% 7,214 393 5.45%
Money Market Deposits 18,229 562 3.08% 27,459 912 3.32% 27,605 971 3.52%
Savings Deposits 25,378 818 3.22% 25,835 881 3.41% 20,477 705 3.44%
Time Deposits over $100,000 9,031 513 5.68% 5,920 270 4.56% 4,949 227 4.59%
Other Time Deposits 36,480 2,076 5.69% 29,530 1,349 4.57% 31,086 1,464 4.71%
-------- ------ ------ -------- ------ ------ -------- ------ ------
Total Interest Bearing Deposits $116,495 $4,916 4.22% $115,071 $4,344 3.78% $107,366 $4,232 3.94%
-------- ------ ------ -------- ------ ------ -------- ------ ------
FHLB 400 23 5.75% 79 3 3.80% 0 0 0.00%
Other Borrowed Funds 793 32 4.04% 512 22 4.30% 564 16 2.84%
Long-Term Borrowings 123 5 4.07% 0 0 0.00% 0 0 0.00%
Repurchase Agreements 10,573 581 5.50% 10,423 416 3.99% 11,768 386 3.28%
-------- ------ ------ -------- ------ ------ -------- ------ ------
Total Interest Bearing
Liabilities $128,384 $5,557 4.33% $126,085 $4,785 3.80% $119,698 $4,634 3.87%
-------- ------ ------ -------- ------ ------ -------- ------ ------
Demand Deposits $10,602 $ 10,937 $ 9,739
Other Liabilities 904 994 920
Stockholders' Equity 18,067 13,736 12,739
-------- -------- --------
Total Liabilities and Capital $157,957 $151,752 $143,096
======== ======== ========
Net Interest Income/Net
Interest Margin (4) $5,924 3.94% $5,674 3.92% $5,280 3.91%
====== ====== ====== ====== ====== ======
Tax Equivalent Net Interest Income/
Net Interest Margin (5) $6,246 4.15% $5,960 4.12% $5,588 4.14%
====== ====== ====== ====== ====== ======
</TABLE>
(1) Average volume information was computed using daily (or monthly) averages.
(2) Interest on loans includes fee income.
(3) Yield on tax-exempt obligations has been computed on a tax-equivalent
basis.
(4) Net interest margin is computed by dividing net interest income by total
interest earning assets.
(5) Interest and yield are presented on a tax equivalent basis using 34% for
1995, 1994 & 1993.
22
<PAGE> 25
[PHOTO]
COMPONENTS OF NET INTEREST INCOME
To enhance the understanding of the effects of volumes (the average
balance of earning assets and costing liabilities) and average interest rate
fluctuations on the balance sheet as it pertains to net interest income, the
table below reflects these changes for 1995 versus 1994.
For the Twelve Months Ended December 31, 1995
<TABLE>
<CAPTION>
1995 VERSUS 1994 1994 Versus 1993
---------------- ----------------
INCREASE (DECREASE) Increase (Decrease)
DUE TO CHANGES IN Due to Changes In
----------------- -----------------
AVERAGE AVERAGE Average Average
VOLUME RATE TOTAL Volume Rate Total
------ ---- ----- ------ ---- -----
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Interest Bearing Deposits With Other
Financial Institutions (17) 58 41 (44) 34 (10)
U.S. Government Securities (205) 393 188 (3) 82 79
State & Municipal Obligations 27 2 29 15 (23) (8)
Other Securities (28) (1) (29) (58) (14) (72)
Federal Funds Sold 8 22 30 (11) 10 (1)
Consumer Loans (79) (53) (132) 35 (25) 10
Mortgage Loans (1) 1,371 263 1,634 1,201 (682) 519
Commercial Loans (718) (176) (894) (76) 332 256
Tax Free Loans 89 (8) 81 (62) 6 (56)
----- ----- ----- ----- ----- -----
Total Earning Assets 448 500 948 997 (280) 717
Interest Expense:
SUPER NOW Deposits 25 (20) 5 65 (6) 59
IRA 9 1 10 47 (32) 15
Money Market Deposits (306) (66) (372) (5) (55) (60)
Savings Deposits (2) (44) (46) 184 (6) 178
Time Deposits over $100,000 124 70 194 45 (1) 44
Other Time Deposits 318 331 649 (73) (44) (117)
FHLB 0 5 5 0 0 0
Other Borrowed Funds 13 (2) 11 (1) 9 8
Long-Term Borrowings 0 0 0 0 0 0
Repurchase Agreements 6 155 161 (44) 86 42
----- ----- ----- ----- ----- -----
Total Interest Bearing Deposits 187 430 617 218 (49) 169
Net Interest Income 261 70 331 779 (231) 548
===== ===== ===== ===== ===== =====
</TABLE>
(1) Includes non-accrual loans.
With the adoption of a new long range plan for the Corporation, senior
management is meeting biweekly to review strategies, many of which effect
non-interest income and non-interest expense. To date in 1996 they are viewing
service and other bank fees as a more integral part of the Bank's net income.
Additionally, they have researched and implemented some of the strategies to
curtail the increase in non-interest expense.
FINANCIAL CONDITION
The Corporation's total consolidated assets at year-end 1995 equaled $162
million which represented an increase of $5 million of 3.2% over $157 million
at year-end 1994. This growth rate of assets is equal to the growth rate
experienced in 1994. Several mergers in our market area during 1993 and 1994
caused a larger growth rate than projected. Consequently, 1995 reflects a true
growth rate due to competition and related strategies for managing and
increasing our market share.
Capital growth of 10.5% for 1995 due to the sale of offered stock,
dividend reinvestment and the increase provided by unrealized security gains
positions the Corporation for increased asset growth during the next decade.
Total average assets grew 4.1% from 1994 at $152 million to 1995 at $158
million as did earning assets from $145 million in 1994 to $151 million in
1995. This increase in assets, along with our new state of the art computer
system, positions the Corporation for future growth and rapid expansion.
Loans increased 1.87% from $110 million in 1994 to $112 million in 1995.
As previously discussed this growth reflects more truly the competition for
market share in 1995. It is expected, however, that loan growth will be built
upon by new loan products currently available to us to offer our customers in
1996. These new loan products include home equity lines of credit, consumer
loans for retirement savings or college savings and enhanced overdraft
protection.
The shift of savings deposits to time deposits, namely certificates of
deposit, are indicative of the rising interest rates experienced in 1995 with
customers reacting to the "wait and see" approach of investing from late 1993
through 1994.
Core deposits remain strong at 44.9% of the average deposits in 1995 with
$52 million compared to 53.3% of the average deposits in 1994 with $61 million.
These core deposits, along with non-interest bearing demand deposits and
stockholders' equity provide stability in the interest-rate risk environment.
A key measurement of liquidity is the loan-to-deposit ratio. The
loan-to-deposit ratio at the Bank remains high with 86.7% ratio year end 1995
and 86.5% at year end 1994.
It is management's opinion that the balance sheet mix and the interest
rate risk associated with the balance sheet is within manageable parameters to
remain a strong, viable independent institution and will allow us to shift
strategies as new trends occur. Strategies include changes in rates, changes
in fees, and changes in other service-related costs.
23
<PAGE> 26
[PHOTO]
INVESTMENTS
<TABLE>
<CAPTION>
Outstanding Balance at December 31,
1995 1994 1993
---- ---- ----
AVAILABLE HELD Available Held
FOR SALE TO MATURITY For Sale To Maturity
-------- ----------- -------- -----------
(2) (1) (2) (1) (1)
<S> <C> <C> <C> <C>
U. S. Treasury Securities $15,034 $0 $9,596 $13,832 $29,785
Federal Agency Obligations 13,121 0 1,806 2,098 2,000
Obligations of State and
Political Subdivisions 7,685 1,045 0 8,458 8,185
Other Securities 3,499 0 2,027 1,506 4,572
------- ------ ------- ------- -------
Total Investment Securities $39,339 $1,045 $13,429 $25,894 $44,542
======= ====== ======= ======= =======
</TABLE>
1) Carried at amortized cost.
2) Carried at estimated fair value.
The following table sets forth the maturity distribution of the investment
portfolio's held to maturity and available for sale securities, the weighted
average yield for each type of held to maturity and available for sale
securities and ranges of maturity at December 31, 1995. Yields are presented
on a tax-equivalent basis, are based upon carrying value and are weighted for
the scheduled maturity. At December 31, 1995 the Corporation's investment
securities portfolio had an average maturity of approximately 4.2 years.
<TABLE>
<CAPTION>
(Dollars in Thousands)
----------------------
After One After Five
Year But Years But
Within Within Within After
One Year Five Years Ten Years Ten Years Total
-------- ---------- --------- --------- -----
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held to Maturity Securities
At Amortized Cost
U. S. Treasury Securities $ 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 0.00%
Federal Agency
Obligations 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Obligations of State and
Political Subdivisions 0 0.00% 1,045 7.37% 0 0.00% 0 0.00% 1,045 7.37%
Other Securities 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
------- ----- ------- ----- ------ ----- ------ ----- ------- -----
Total $ 0 0.00% $ 1,045 7.37% $ 0 0.00% $ 0 0.00% $ 1,045 7.37%
======= ===== ======= ===== ====== ===== ====== ===== ======= =====
Available for Sale
Securities At Fair Value
U.S. Treasury Securities $ 8,957 5.83% $ 6,077 6.17% $ 0 0.00% $ 0 0.00% $15,034 5.97%
Federal Agency
Obligations 1,000 5.87% 11,120 5.66% 1,001 6.38% 0 0.00% 13,121 5.73%
Obligations of State and
Political Subdivisions 135 6.96% 1,504 7.46% 2,020 8.15% 4,026 9.06% 7,685 8.47%
Other Securities 503 7.92% 1,033 7.22% 1,021 6.39% 942 6.50% 3,499 6.88%
------- ----- ------- ----- ------ ----- ------ ----- ------- -----
Total $10,595 5.95% $19,734 6.04% $4,042 7.27% $4,968 8.57% $39,339 6.46%
======= ===== ======= ===== ====== ===== ====== ===== ======= =====
</TABLE>
During 1995 the Financial Accounting Standards Board (FASB), under SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
allowed securities to be moved from the two categories established in January
1994. This one-time opportunity to reclassify securities was utilized by the
Corporation during the latter part of 1995.
Accordingly, the Corporation restructured its Held to Maturity and
Available for Sale securities to allow for more flexibility in the future in
the investment portfolio by transferring more securities to Available for Sale
from Held to Maturity. A few local municipal securities were retained in Held
to Maturity with the balance of the portfolio now Available for Sale.
The Available for Sale securities are reported on the balance sheet at
fair value. An adjustment to capital, net of deferred taxes, is the offset for
this entry. Although these Available for Sale securities could create material
price volatility in a rising interest rate environment, they provide the
Corporation with a profitable avenue to restructure its' gap position through
the sale and reinvestment of these securities.
Securities held to maturity comprised 34.2% of the portfolio at year end
1994 at $25,894,000 compared to 2.6% of the portfolio at year end 1995 at
$1,045,000.
Available for Sale securities totaled $39,339,000 at December 31, 1995
compared to $13,429,000 at December 31, 1994. The shift, as mentioned above,
to Available for Sale securities was viewed as advantageous by the Corporation.
The impact of the fair value accounting was an unrealized gain, net of tax, on
December 31, 1995 of $284,796 compared to an unrealized loss, net of tax, on
December 31, 1994 of ($490,327).
Overall, the securities portfolio grew 2.7% during 1995 from $39,323,000
at year-end 1994 to $40,384,000 at year-end 1995. The mix of securities in the
portfolio is 37.3% U.S. Treasuries, 32.5% U.S. Agencies, 21.6% municipals and
.86% other. This mix is structured differently from 1994 when 59.6% were U.S.
Treasuries, 9.9% U.S. Agencies, 21.5% municipal and 9% other. The shift from
U.S. Treasuries to U.S. Agencies created a 94 basis point increase in yield on
the portfolio from 5.20% in 1994 to 6.14% in 1995. These U.S. Agencies were
callable U.S. Agencies with additional call dates each interest period.
24
<PAGE> 27
[PHOTO]
The Corporation does not have any mortgage-backed securities nor does it
engage in derivative investment products. The overall average maturity of the
portfolio at December 31, 1995 was 4.2 years.
LOANS
Loans Outstanding
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Commercial and Easy Access $ 5,990 $ 5,472 $ 5,880
Tax Exempt 1,520 2,398 530
Lease Financing Receivables 131 277 597
Real Estate-Construction 941 994 1,452
Real Estate-Mortgage 95,293 94,030 83,863
Consumer 8,058 6,577 4,107
Credit Cards 447 468 514
-------- -------- -------
$112,380 $110,216 $96,943
Unamortized loan fees net of costs 188 273 64
Unearned Income 360 143 489
-------- -------- -------
Loans, Net $111,832 $109,800 $96,390
======== ======== =======
</TABLE>
During 1995, the Corporation's loan growth increased 1.9% from
$110,216,000 at December 31, 1994 to $112,380,000 at December 31, 1995. The
Bank established a data processing and software system during 1995. As a
result, more concise information is available to monitor the loan portfolio.
The distribution of the loan portfolio as a result of the new system reflected
85.6% real estate loans at $96,234,000; 5.3% commercial loans at $5,990,000;
1.5% tax exempt loans at $1,651,000 and 7.6% consumer loans at $8,505,000. Real
estate loans were comprised of 68.8% with variable rates of which a majority of
these variable rates were 3-year adjustable rate with a biweekly payment
schedule.
DEPOSITS AND BORROWED FUNDS
Table Of Distribution Of Average Deposits (Dollars In Thousands)
<TABLE>
<CAPTION>
December 31,
------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Demand deposits $ 29,730 $ 29,196 $ 25,774
Savings deposits 43,607 53,294 48,082
Time deposits 44,729 37,598 38,300
Time deposits over $100,000 9,031 5,920 4,949
-------- -------- --------
Total $127,097 $126,008 $117,105
======== ======== ========
</TABLE>
Table of Maturity Distribution Of Time Deposits Over $100,000
(Dollars In Thousands)
<TABLE>
<CAPTION>
December 31,
------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Three months or less $ 4,171 $ 2,751 $ 2,673
Over three months to six months 1,401 1,134 200
Over six months to twelve months 1,372 1,610 1,033
Over twelve months 4,090 1,516 1,321
------- ------- -------
Total $11,034 $ 7,011 $ 5,227
======= ======= =======
</TABLE>
Total average deposits increased .86% during 1995 from $126,008,000 at
year-end 1994 to $127,097,000 at year-end 1995. A shift from savings, mainly
money market accounts to certificates of deposit was evident throughout 1995.
The "wait and see" attitude of the investors during a declining interest rate
environment changed throughout this year as rates rose on the certificates of
deposit. A 57.4% increase in Time Deposits over $100,000 occurred during 1995,
from $7,011,000 at year-end 1994 to $11,034,000 at year-end 1995. Average time
deposits increased 19% from $37,598,000 to $44,729,000. Offsetting this
increase was a decline in average savings of 18.2% from $53,294,000 at year-end
1994 to $43,607,000 at year-end 1995.
Short-term borrowings, mainly securities sold under agreements to
repurchase, increased 1.9% during 1995 from $11,910,000 at December 31, 1994 to
$12,066,000 at December 31, 1995. Long-term borrowings, in the form of
equipment and related software purchased over a 5-year period for the data
processing and software conversion in 1995, was $364,565 at year end. Very
little 1-day borrowing occurred during 1995, the average being $400,000.
25
<PAGE> 28
[PHOTO]
NONPERFORMING ASSETS
Past Due And Non-Accrual Loans (In Thousands of Dollars)
<TABLE>
<CAPTION>
Lease
Real Installment Credit Financing
1995 Estate Loans Commercial Cards Receivables Total
------ ----- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Days 30-89 $ 1,022 $ 213 $ 93 $ 2 $ 0 $ 1,330
Days 90 Plus 332 31 0 3 31 397
Non-accrual 13 0 0 0 0 13
-------- ------- ------- ------- ------- -------
Total $ 1,367 $ 244 $ 93 $ 5 $ 31 $ 1,740
1994
Days 30-89 $ 586 $ 133 $ 152 $ 4 $ 0 $ 875
Days 90 Plus 131 47 69 2 55 304
Non-accrual 15 1 8 0 0 24
-------- ------- ------- ------- ------- -------
Total $ 732 $ 181 $ 229 $ 6 $ 55 $ 1,203
1993
Days 30-89 $ 373 $ 83 $ 31 $ 1 $ 67 $ 555
Days 90 Plus 200 27 161 3 0 391
Non-accrual 411 3 80 0 0 494
-------- ------- ------- ------- ------- -------
Total $ 984 $ 113 $ 272 $ 4 $ 67 $ 1,440
</TABLE>
At year-end 1995, loans 30-89 days past due totaled $1,022,000 compared to
$586,000 at year-end 1994. The past due loans 90 days and over totaled $332,000
at December 31, 1995 compared to $131,000 at December 31, 1994. Non-accrual
loans totaled $13,000 at year-end 1995 compared to $15,000 at year-end 1994.
Overall, the past due and non-accrual loans at December 31, 1995 totaled
$1,367,000 compared to $732,000 at December 31, 1994 or an increase of 86.7% .
Although this increase seems significant it actually is not when the low volume
of nonperforming loans is considered. The Corporation continued to experience
very low past due and non-accrual ratios to total loans, with this ratio being
1.2% for December 31, 1995 and .7% for December 31, 1994. The high quality of
loans and the highly collateralized mortgage portfolio effected these positive
trends.
Loans were stated at their outstanding principal balances, net of any
deferred fees or costs, unearned income, and the allowance for loan losses.
Interest on loans was accrued on the principal amount outstanding, primarily on
the actual day basis. Non-renewable loan fees and certain direct costs were
deferred and amortized over the life of the loans using the interest method.
The amortization was reflected as an interest yield adjustment, and the
deferred portion of the net fees and costs was reflected as a part of the loan
balance.
Non-Accrual loans - Generally, a loan (including a loan impaired under
Statement of Financial Accounting Standards No. 114) was classified as
non-accrual, and the accrual of interest on such a loan was discontinued when
the contractual payment of principal or interest became 90 days past due or
management had serious doubts about further collectability of principal or
interest, even though the loan currently was performing.
A loan may remain on accrual status if it is in the process of collection
and is either guaranteed or well secured. When a loan is placed on non-accrual
status, unpaid interest credited to income in the current year is reversed, and
unpaid interest accrued in prior years is charged against the allowance for
credit losses. Potential problem loans are identified by management as part of
its loan review process.
Income recognition was in accordance with Statement of Financial
Accounting Standards No. 118. Certain non-accrual loans may have continued to
perform that is, payments were still being received. Generally, the payments
were applied to principal. These loans remained under constant scrutiny and if
performance continued, interest income may be recorded on a cash basis based on
management's judgment as to collectability of principal.
There was no impact on implementing Statement No. 114 nor Statement No.
118, because the amount of impaired loans reflected by these accounting
statements was relatively insignificant at $13,000.
Management does not believe that there are any trends or uncertainties
which will materially impact future operation results, liquidity or capital
resources. Management is not aware of any information which causes it to have
serious doubts as to the ability of its borrowers to comply with loan repayment
terms.
ALLOWANCE FOR LOAN LOSSES AND RELATED PROVISION
Allocation Of Allowance For Loan Losses
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
% of Loans % of Loans % of Loans
in Category in Category in Category
Amount to Total Loans Amount to Total Loans Amount to Total Loans
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 73 7% $133 14% $179 14%
Real estate mortgages 513 86% 447 75% 390 76%
Consumer 53 7% 203 9% 59 8%
Credit cards 25 0% 27 1% 36 1%
Lease financing receivables 2 0% 7 1% 7 1%
Unallocated 253 0% 126 N/A 250 N/A
---- ---- ---- ---- ---- ----
$919 100% $943 100% $921 100%
==== ==== ==== ==== ==== ====
</TABLE>
The allowance for loan losses was $919,000 at December 31, 1995, compared
to $943,000 at December 31, 1994. The allowance equaled .08% of total loans,
net of unearned income, at the end of 1995, compared to .09% at the
26
<PAGE> 29
[PHOTO]
end of the prior year. The allowance was considered adequate based on
delinquency trends and loan growth.
The loan loss reserve was analyzed quarterly and reviewed by the Board of
Directors. The assessment of the loan policies and procedures during 1995
revealed no anticipated loss on any loans considered "significant". No
concentration or apparent deterioration in classes of loans or pledged
collateral was evident. Monthly loan meetings with the Board Credit
Administration committee reviewed new loans, delinquent loans and loan
exceptions to determine compliance with policies.
The schedule below presents a history of actual charge-offs and recoveries
by category and related balances and ratios.
Summary Of Loan Loss Experience (Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Loans outstanding at end of period $111,832 $109,800 $96,423
======== ======== =======
Average loans outstanding $110,980 $100,628 $88,347
======== ======== =======
Allowance for loan losses:
Balance, beginning of year $ 943 $ 921 $ 876
Loans charged-off:
Commercial and industrial (65) (21) (2)
Real estate mortgages 0 (147) (60)
Consumer (38) (23) (22)
Lease financing receivables 0 0 (16)
Credit cards (4) (5) (5)
-------- -------- -------
Total loans charged-off (107) (196) (105)
Recoveries:
Commercial and industrial 13 4 1
Real estate mortgages 0 1 17
Consumer 6 17 25
Lease financing receivables 12 32 0
Credit cards 3 4 2
-------- -------- -------
34 58 45
-------- -------- -------
(73) (138) (60)
-------- -------- -------
42 160 105
-------- -------- -------
$ 912 $ 943 $ 921
======== ======== =======
Ratio of net charge-offs during the period to average
loans outstanding during period 0.04% 0.14% 0.07%
</TABLE>
The allowance for loan losses was established through provisions for loan
losses charged against income. Loans deemed to be uncollectible were charged
against the allowance for loan losses, and subsequent recoveries, if any, were
credited to the allowance.
As of January 1, 1995 the Corporation adopted Statement of Financial
Accounting Standards No. 114. "Accounting for Creditors for Impairment of a
Loan - Income Recognition and Disclosure." Under the new standards, the 1995
allowance for loan losses related to loans that were identified for evaluation
in accordance the Statement No. 114 which was based on discounted cash flows
using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans. Prior to 1995, the allowance
for loan losses related to these loans was based on undiscounted cash flows or
the fair value of the collateral for collateral dependent loans. Statement No.
118 allowed the continued use of existing methods for income recognition on
impaired loans and amends disclosure requirements to require information about
the recorded investment in certain impaired loans and related income
recognition on those loans. The allowance for loan losses was maintained at a
level by management to be adequate to absorb estimated potential loan losses.
Management's periodic revaluation of the adequacy of the allowance for loan
losses was based on the Corporation's past loan loss experience; known and
inherent risks in the portfolio; adverse situations that may affect the
borrower's ability to repay (including the timing of future payments); the
estimated value of any underlying collateral; composition of the loan
portfolio; current economic conditions; and other relevant factors. This
evaluation was inherently subjective as it required material estimates,
including the amounts and timing of future cash flows expected to be received
on impaired loans that may be susceptible to significant change.
Lastly, no additions to the Reserve for Loan losses was required as a
result of implementation of Statement No. 114 or Statement No. 118 since the
amount of impaired loans was considered to be insignificant and the existing
reserve was more than adequate to provide for those impaired loans.
LIQUIDITY
Liquidity management is required to ensure that adequate funds will be
available to meet anticipated and unanticipated deposit withdrawals, debt
service payments, investment commitments, commercial and consumer loan demand,
and ongoing operating expenses. Funding sources include principal repayments
on loans, sales of assets, growth in core deposits, short and long-term
borrowings, investment securities coming due, loan prepayments and repurchase
agreements. Regular loan payments are a dependable source of funds, while the
sale of investment securities, deposit growth, and loan prepayments are
significantly influenced by general economic conditions and the level of
interest rates.
Liquidity is managed on a daily basis at the Corporation. Management
believes that liquidity is sufficient to meet present and future financial
obligations and commitments on a timely basis.
At December 31, 1995, cash and cash equivalents totaled $4,471,193
compared to $4,173,958 at December 31, 1994. Changes in cash were measured by
changes in the three major classifications of cash flows known as operating,
investing and financing activities.
27
<PAGE> 30
[PHOTO]
At December 31, 1995, net cash provided by operating activities equaled
$2,256,843 which consisted mainly of net income adjusted for non-cash items
such as depreciation, provision for loan losses, amortization and accretion and
deferred taxes.
Net cash used for investing activities totaled $4,063,058 which was the
result of a net increase in loans of $2,104,640 and purchases of premises and
equipment of $2,156,715 less $198,297 excess of proceeds on sale and redemption
of Available for Sale and Held to Maturity investment securities over purchases
of Available for Sale and Held to Maturity Investment Securities.
Net cash provided by financing activities totaled $2,103,450 at December
31, 1995 and consisted mostly of an increase in deposits and other borrowings
less dividends paid.
CAPITAL RESOURCES
Capital continued to be a strength of the Corporation. As a result of the
stock offering in 1994, $3,621,000 was added to capital.
Capital is critical as it must provide growth, payment to shareholders,
and absorption of unforeseen losses. The federal regulators provide standards
that must be met. These standards measure "risk-adjusted" assets against
different categories of capital. The "risk-adjusted" assets reflect off balance
sheet items, such as commitments to make loans, and also place balance sheet
assets on a "risk" basis for collectability. The adjusted assets are measured
against Tier I Capital and Total Qualifying Capital. Tier I Capital is common
stockholders' equity and Tier II Capital includes the allowance for loan
losses. Allowance for loan losses must be lower than or equal to common
stockholders equity to be eligible for Total Qualifying Capital.
The following table reflects the Corporation's position with these capital
ratios:
<TABLE>
<CAPTION>
1995 1994
---- ----
MINIMUM Minimum
CALCULATED STANDARD Calculated Standard
Risk Based Ratios RATIOS RATIOS Ratios Ratios
------ ------ ------ ------
<S> <C> <C> <C> <C>
Tier I Capital to Risk-Weighted Assets 28.21% 4.00% 12.28% 4.00%
Total Qualifying Capital to Risk-Weighted Assets 29.46% 8.00% 13.45% 8.00%
1995 1994
---- ----
Tier I Capital to Total Assets 11.86% 11.55%
Tier II Capital to Total Assets 12.39% 12.15%
</TABLE>
Management believes that the Corporation's current capital position is
strong and adequate to support its operations.
Dividend payouts are restricted by the Pennsylvania Business Corporation
Law of 1988, as amended (the "BCL"). The BCL operates generally to preclude
dividend payments if the effect thereof would render the Corporation insolvent,
as defined. As a practical matter, the Corporation's payment of dividends is
contingent upon its ability to obtain funding in the form of dividends from the
Bank. Payment of dividends to the Corporation by the Bank is subject to the
restrictions set forth in the National Bank Act. Generally, the National Bank
Act would permit the Bank to declare dividends in 1996 of approximately
$2,022,049 plus additional amounts equal to the net income earned in 1996 for
the period January 1, 1996 through the date of declaration, less any dividends
which may be paid in 1996.
Common stock issued by the Corporation is traded on a limited basis in the
local over-the-counter market using the symbol CCFN. The prices below are
actual transactions and reflect information from one of the Corporation's
market-makers:
<TABLE>
<CAPTION>
Per Share Price
---------------
Highest Lowest Quarter of the Lowest Price
------- ------ ---------------------------
<S> <C> <C> <C>
1995 $16.00 $14.38 Second Quarter
1994 $15.50 $14.88 Fourth Quarter
1993 $16.50 $11.00 First Quarter
</TABLE>
INTEREST RATE SENSITIVITY
Interest rate sensitivity is the relationship between market interest
rates and earnings volatility due to the repricing characteristics of assets
and liabilities. The Corporation's net interest income is affected by changes
in the level of market interest rates. In order to maintain consistent earnings
performance, the Corporation seeks to manage, to the extent possible, the
repricing characteristics of its assets and liabilities.
The ratio between assets and liabilities repricing in specific time
intervals is referred to as an interest rate sensitivity gap. Interest rate
sensitivity gaps can be managed to take advantage of the slope of the yield
curve as well as forecasted changes in the level of interest rate changes.
One major objective of the Corporation when managing the rate sensitivity
of its assets and liabilities is to stabilize net interest income. The
management of and authority to assume interest rate risk is the responsibility
of senior management. The process to review interest rate risk is a regular
part of the Corporation's management of the Bank. Consistent policies and
practices of measuring and reporting interest rate risk exposure, particularly
regarding the treatment of noncontractual assets and liabilities, are in
effect. In addition, there is an annual process to review the interest rate
risk policy which includes limits on the impact to earnings from shifts in
interest rates.
The Corporation presently is researching ways to upgrade its "dollars at
risk" monitoring in order to provide greater efficiencies and control in
managing interest rate risk.
The Corporation's management is presently using a computerized net
interest income simulation model to assist in quantifying interest rate risk
exposure. This process measures and quantifies the impact on net interest
income through varying interest rate changes and balance sheet compositions.
28
<PAGE> 31
[PHOTO]
At December 31, 1995 the Corporation maintained cumulative liability
sensitive gap positions in the 90 days or less and the over ten year
categories. Positive gap positions were reflected in the over 90 days but less
than one year, the one to five year and the five to ten year categories. The
contributing factors in the 90 day or less area are the repurchase agreements
which are repricable at all times. The liability sensitive position in the over
ten year category reflects the $37,334,000 core savings deposits which are
presently fixed rate. It is contemplated in 1996 that the savings deposits will
become variable rate which will allow management to respond to interest rate
fluctuations on a more timely basis.
The level of dollars at risk due to varying interest rate movements at
December 31, 1995 are within internal risk tolerance guidelines. These
guidelines restrict the impact on net interest income to less than ten percent
assuming a 200 basis point increase or decrease in market interest rates.
The following schedule reflects the Corporation's consolidated gap
position at December 31, 1995:
Statement Of Interest Sensitivity Gap
December 31, 1995
<TABLE>
<CAPTION>
Amounts in Thousands 90 Days >90 Days 1 to 5 5 to 10 >10
(Except Percentages) or less but <1 Year Years Years Years Total
------- ----------- ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Short-term investments $ 385 $ 0 $ 0 $ 0 $ 0 $ 385
Securities available for sale (1) 0 0 1,045 0 0 1,045
Securities held to maturity (1) 3,678 6,917 19,734 4,042 4,968 39,339
Loans (1) 12,274 24,309 34,269 23,592 17,388 111,832
------- ------- ------- ------- ------- --------
Rate Sensitive Assets $16,337 $31,226 $55,048 $27,634 $22,356 $152,601
------- ------- ------- ------- ------- --------
Deposits:
Interest-bearing demand deposits (2) 0 0 0 19,199 0 $ 19,199
Savings (2)(3) 0 212 1,311 0 37,334 38,857
Time 9,807 14,869 34,202 0 0 58,878
Borrowed funds 12,134 0 0 0 0 12,134
Long-term debt 22 67 207 0 0 296
Shareholders' Equity 0 0 0 0 19,512 19,512
------- ------- ------- ------- ------- --------
Rate Sensitive Liabilities
and Shareholders' Equity $21,963 $15,148 $35,720 $19,199 $56,846 $148,876
------- ------- ------- ------- ------- --------
Interest Sensitivity Gap (5,626) 16,078 19,328 8,435 (34,490) 3,725
Cumulative Gap (5,626) 10,452 29,780 38,215 3,725
Cumulative Gap to Total Assets -3.47% 6.45% 18.38% 23.58% 2.30%
======= ======= ======= ======= ======= ========
</TABLE>
(1) Investments and loans are included in the earlier of the period in which
interest rates are next scheduled to adjust or the period in which they are
due.
(2) CCFNB's interest-bearing demand and savings accounts are generally subject
to immediate withdrawal. However, management considers these amounts of
such accounts to be core accounts having significantly longer effective
maturities based on the retention experience of such deposits in changing
interest rate environments. Accordingly, these deposits are assumed to be
withdrawn according to proposed guidelines outlined by the Federal Reserve
Board which management considers reasonable at this time. The withdrawal rates
used are considered by management to be indicative of expected withdrawal rates.
(3) The preceding table contains savings accounts that total approximately
$38.9 million, which consist of approximately $13.9 million of variable rate
savings accounts, $17.2 million of fixed rate statement savings accounts and
$7.8 million of passbook savings accounts which generally have the same terms
and conditions as fixed rate statement savings accounts.
Certain shortcomings are inherent in the method of analysis presented in
the above table. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in market interest rates. The interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest rates,
while interest rates on other types of assets and liabilities may lag behind
changes in market interest rates. Certain assets, such as adjustable-rate
mortgages, have features which restrict changes in interest rates on a
short-term basis and over the life of the assets. In the event of a change in
interest rates, prepayment and early withdrawal levels may deviate
significantly from those assumed in calculating the table. The ability of many
borrowers to service their adjustable-rate debt may decrease in the event of an
interest rate increase.
EFFECTS OF INFLATION
The impact of inflation on banks and bank holding companies is different
from the inflationary impact on nonfinancial institutions. Banks have assets
and liabilities which are primarily monetary in nature and which tend to
reflect changes in inflation. This is especially true for banks with a high
percentage of rate-sensitive interest-earning assets and interest-bearing
liabilities. A bank can further reduce the impact of inflation by managing its
rate sensitivity gap position.
Management monitors and seeks to mitigate the impact of interest rate
changes by attempting to match the maturities of interest-earning assets and
interest bearing liabilities.
29
<PAGE> 32
TEN YEARS IN REVIEW
[PHOTO]
ASSETS - Millions
[FIGURE 1]
DEPOSITS - Millions
[FIGURE 2]
30
<PAGE> 33
TEN YEARS IN REVIEW
[PHOTO]
STOCKHOLDERS EQUITY - Millions
[FIGURE 3]
LOANS - Millions
[FIGURE 4]
NET INCOME - Thousands
[FIGURE 5]
31
<PAGE> 34
[PHOTO]
EMPLOYEES OF COLUMBIA COUNTY FARMERS NATIONAL BANK
BENTON:
Marlene Baudendisztl
Carla M. Emery
Judith A. Fink
Mary I. Hess
Tracy L. Hess
Dean R. Kelchner
Joyce E. Letteer
Jean E. MacDermott
Gloria M. Miller
Anna M. Moyer
Lisa L. Remley
Sally B. Tucker
Teresa E. Vincent
BLOOMSBURG:
Sue Ann Carl
Elaine M. Edwards
Elmer O. Frantz, III
Barbara M. Hess
Nancy H. Lindenmuth
Denise A. Long
Carol J. Martin
Florence H. Martz
Lou Ann Neaus
Charity A. Puterbaugh
Grace I. Shuman
Darlene L. Tappe
Karen Z. Wenner
Theresa R. Whitmire
LIGHTSTREET:
Dolores M. Bennett
Mary H. Crawford
Deborah B. Deitterick
Lorraine R. George
Nancy L. Harris
Candace L. Kesler
Karen M. Murdock
Theresa A. Valencik
MILLVILLE:
Linda M. Boudman
Betsy L. Fought
Ruth E. Hunter
Martie J. Johnson
Rachel E. Kressler
Gloria J. Mensch
Lori A. Reese
Jennifer L. Ross
Scott R. Temple
ORANGEVILLE:
Lynn Z. Fritz
Heather L. Hausman
Sheila L. Kile
Betty J. Kline
LouAnn P. Megargell
SOUTH CENTRE:
Trevor A. Barnhart
Pamela D. Berman
Linda L. Curio
Connie L. Earnest
Carey A. Jurbala
Sandra J. Noss
CORPORATE:
Sandra J. Boyer
Lance O. Diehl
Nancy R. Diehl
Joyce F. Dohl
Nancy K. Fought
Kay M. Gerasimoff
J. Jan Girton
Virginia D. Kocher
Paul E. Reichart
CREDIT:
Andrea S. Bartlett
Lily Mae Boudman
Diana L. Chamberlin
Patty J. Dinelli
Gloria Y. Harvey
Ruth E. Mott
Vickie S. Reifendifer
M. Ernest Underwood
Edwin A. Wenner
MARKETING:
Michelle M. Karas
OPERATIONS:
Glenda J. Baran
Anne E. DeFrain
Charles W. Dyer
Jennifer L. Fester
Linda A. Huttenstine
Brenda E. Kalie
Phillip J. Karas
Kathleen J. Marzari
Susan K. McGreevy
Jay L. Oman
Faith R. Smith
Dale E. Thomas
Tracey L. Travelpiece
Christy M. Vought
Carol L. Wiggin
TRAINING:
Luanne Bittenbender
TRUST:
Jamie S. Keller
Jacob S. Trump
Kimberly I. Young
32
<PAGE> 35
[PHOTO]
CCFNB BANCORP, INC. MARKET MAKERS
Ryan Beck & Co.
80 Main Street
West Orange, NJ 07052
(800) 342-2325
(201) 325-3000
Hopper Soliday & Co., Inc.
1703 Oregon Pike
Lancaster, PA 17601-4201
(717) 560-3042
Janney Montgomery Scott, Inc.
1801 Market Street
Philadelphia, PA 19103
(215) 665-6000
F. J. Morrissey
Tom Morrissey
1700 Market Street, Suite 1420
Philadelphia, PA 19103
(800) 842-8928
REGISTRAR & TRANSFER AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
CCFNB LOCATIONS
[MAP]
Market Street
Benton, PA 17814
(717) 925-6181
232 East Street
Bloomsburg, PA 17815
(717) 784-4400
4242 Old Berwick Road
Bloomsburg, PA 17815
(717) 784-8474
Route 487, Lightstreet Road
Bloomsburg, PA 17815
(717) 784-5600
State Street
Millville, PA 17846
(717) 458-5650
Main Street
Orangeville, PA 17859
(717) 683-5200
PHOTO CAPTIONS
Front Cover:
(left) The new East St. facility as it nears
completion
(right) CCFNB President, Paul Reichart, at
the Millville ground breaking ceremony.
(bottom) The new Millville branch under
construction.
Back Cover:
(left) South Centre's new interior.
(right) Installing the new vault at East St.
33
<PAGE> 36
[PHOTO]
[PHOTO]
[PHOTO]
[CCFNB COLUMBIA COUNTY LOGO]
Columbia County
Farmers National Bank
Banking for people like you.
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF BANCORP
Direct Subsidiary: Columbia County Farmers National Bank, chartered
under the laws of the United States of America, a
national banking association.
27
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,002
<SECURITIES> 40,719
<RECEIVABLES> 112,283
<ALLOWANCES> (920)
<INVENTORY> 0
<CURRENT-ASSETS> 158,084
<PP&E> 3,902
<DEPRECIATION> 0
<TOTAL-ASSETS> 161,986
<CURRENT-LIABILITIES> 142,985
<BONDS> 0
0
0
<COMMON> 1,713
<OTHER-SE> 17,288
<TOTAL-LIABILITY-AND-EQUITY> 161,986
<SALES> 8,498
<TOTAL-REVENUES> 8,961
<CGS> 4,117
<TOTAL-COSTS> 4,117
<OTHER-EXPENSES> 3,172
<LOSS-PROVISION> 32
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,640
<INCOME-TAX> 412
<INCOME-CONTINUING> 1,228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,228
<EPS-PRIMARY> .90
<EPS-DILUTED> .90
</TABLE>
<PAGE> 1
EXHIBIT 99A
PROXY STATEMENT, NOTICE OF ANNUAL MEETING AND
FORM OF PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 22, 1996
28
<PAGE> 2
[INSERT LOGO]
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 30, 1996
GENERAL
INTRODUCTION, DATE, PLACE AND TIME OF MEETING
This Proxy Statement is being furnished for the solicitation
by the Board of Directors of CCFNB Bancorp, Inc. (the "Corporation"), a
Pennsylvania business corporation, of proxies to be voted at the Annual Meeting
of Shareholders of the Corporation to be held at the CCFNB Operations Center,
Lightstreet Road, Bloomsburg, Pennsylvania 17815, on Tuesday, April 30, 1996,
at 10:30 a.m., prevailing time, or at any adjournment or postponement of the
Annual Meeting.
The principal executive offices of the Corporation are located
at Columbia County Farmers National Bank (the "Bank"), 232 East Street,
Bloomsburg, Pennsylvania 17815. The telephone number for the Corporation is
(717) 784-4400. All inquiries should be directed to Paul E. Reichart,
President of the Corporation. The Bank is a wholly-owned subsidiary of the
Corporation.
SOLICITATION
This Proxy Statement and the enclosed form of proxy (the
"Proxy") are first being sent to shareholders of the Corporation on or about
March 29, 1996.
Shares represented by proxies on the accompanying Proxy, if
properly signed and returned, will be voted in accordance with the
specifications made thereon by the shareholders. Any Proxy not specifying to
the contrary will be voted for the election of the three nominees for Class 1
Director named below and for the ratification of the selection of J. H.
Williams & Co., LLP, Certified Public Accountants, of Kingston, Pennsylvania,
as the independent auditors for the Corporation for the year ending December
31, 1996. Execution and return of the enclosed Proxy will not affect a
shareholder's right to attend the Annual Meeting and vote in person, after
giving written notice to the Secretary of the Corporation.
The cost of preparing, assembling, printing, mailing and
soliciting Proxies, and any additional material which the Corporation may
furnish shareholders in connection with the Annual Meeting, will be borne by
the Corporation. In addition to the use of the mails, certain directors,
officers and employees of the Corporation and the Bank may solicit Proxies
personally, by telephone and by telefacsimile. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to forward
proxy solicitation material to the beneficial owners of stock held of record by
these persons, and, upon request therefor, the Corporation will reimburse them
for their reasonable forwarding expenses.
29
<PAGE> 3
RIGHT OF REVOCATION
A shareholder who returns a Proxy may revoke the Proxy at any
time before it is voted only: (1) by giving written notice of revocation to Don
E. Bangs, Secretary, CCFNB Bancorp, Inc., 232 East Street, Bloomsburg,
Pennsylvania 17815; (2) by executing a later-dated Proxy and giving written
notice thereof to the Secretary of the Corporation; or (3) by voting in person
at the Annual Meeting after giving written notice to the Secretary of the
Corporation.
VOTING SECURITIES, RECORD DATE AND QUORUM
At the close of business on March 22, 1996, the Corporation
had 5,000,000 shares of common stock, par value $1.25 per share, the only
authorized class of stock, of which 1,372,658 shares of common stock were
issued and outstanding (the "Common Stock").
Only holders of common stock of record at the close of
business on March 22, 1996, will be entitled to notice of and to vote at the
Annual Meeting. Cumulative voting rights do not exist with respect to the
election of directors. On all matters to come before the Annual Meeting, each
share of common stock is entitled to one vote.
Under Pennsylvania law and the By-laws of the Corporation, the
presence of a quorum is required for each matter to be acted upon at the Annual
Meeting. Pursuant to the By-laws of the Corporation, the presence, in person
or by proxy, of shareholders entitled to cast at least a majority of the votes
which all shareholders are entitled to cast shall constitute a quorum for the
transaction of business at the Annual Meeting. Votes withheld and abstentions
will be counted in determining the presence of a quorum for the particular
matter. Broker non-votes will not be counted in determining the presence of a
quorum for the particular matter as to which the broker withheld authority.
Assuming the presence of a quorum, the three nominees for
director receiving the highest number of votes cast by shareholders entitled to
vote for the election of directors shall be elected. Votes withheld from a
nominee and broker non-votes will not be cast for such nominee.
Assuming the presence of a quorum, the affirmative vote of a
majority of all votes cast by shareholders is required for the approval of the
ratification of the selection of independent auditors. Abstentions and broker
non-votes are not votes cast and therefore do not count either for or against
such respective approval and ratification. Abstentions and broker non-votes,
however, have the practical effect of reducing the number of affirmative votes
required to achieve a majority for each such matter by reducing the total
number of shares voted from which the required majority is calculated.
30
<PAGE> 4
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK
PRINCIPAL OWNER
As of March 22, 1996, to the best of the Corporation's
information and belief, no person holds beneficially or of record, directly or
indirectly, five percent (5%) or more of the outstanding shares of Common
Stock.
BENEFICIAL OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES
The following table sets forth information concerning the
number of shares of Common Stock beneficially owned, directly or indirectly, as
of March 22, 1996, by (i) each director and nominee, (ii) each executive
officer of the Corporation, and (iii) the directors and the executive officers
of the Corporation as a group.
<TABLE>
<CAPTION>
Name of Individual Amount and Nature of Percent
or Identity of Group Beneficial Ownership(1)(2) of Class(3)
- -------------------- -------------------------- -----------
<S> <C> <C>
Don E. Bangs(4) 7,694.076 (9) ----
Stanley Barchik(5) 11,445.000 (10) ----
Robert M. Brewington, Jr.(6) 3,273.091 (11)
Edward L. Campbell(4) 4,898.536 (12) ----
Elwood R. Harding, Jr.(4) 16,019.546 (13) 1.17%
William F. Hess(5) 3,890.163 (14) ----
Willard H. Kile, Sr.(7) 17,540.715 (15) 1.28%
Virginia D. Kocher 1,286.000 (16) ----
Charles E. Long(7) 4,094.909 (17) ----
John I. Mather(8) 2,400.000 (17) ----
Paul E. Reichart(5) 7,194.000 (18) ----
All Officers and Directors
as a Group (9 directors,
9 nominees, 5 officers,
11 persons in total) 79,736.036 5.81%
</TABLE>
- ------------------------------
(1) Information furnished by the directors and the Corporation.
(2) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set
forth in the General Rules and Regulations of the Securities and
Exchange Commission ("SEC") and may include securities owned by or for
the individual's spouse and minor children and any other relative who
has the same home, as well as securities to which the individual has
or shares voting or investment power or has the right to acquire
beneficial ownership within sixty (60) days after March 22, 1996.
Beneficial ownership may be disclaimed as to certain of the
securities.
(3) Less than one percent unless otherwise indicated.
(4) A Class 3 Director whose term expires in 1997.
(5) A Class 2 Director whose term expires in 1998.
(6) Nominee for Class 1 Director whose term expires in 1999.
31
<PAGE> 5
(7) A Class 1 Director whose term expires in 1996 and a nominee for Class
1 Director whose term expires in 1999.
(8) A Class 1 Director whose term expires in 1996 and who has reached the
mandatory retirement age.
(9) Includes 4,913.890 shares of Common Stock held individually by Mr.
Bangs; 51.186 shares of Common Stock held jointly with his spouse;
and 2,729.000 shares of Common Stock held in a SEP retirement account.
(10) Includes 2,970.000 shares of Common Stock held individually by Mr.
Barchik and 8,475.000 shares of Common Stock held jointly with his
spouse.
(11) Includes 2,474.584 shares of Common Stock held individually by Mr.
Brewington and 798.507 shares of Common Stock held jointly with his
spouse.
(12) Includes 3,040.471 shares of Common Stock held individually by Mr.
Campbell and 1,858.065 shares of Common Stock held jointly with his
spouse.
(13) Includes 7,891.610 shares of Common Stock held individually by Mr.
Harding; 7,308.954 shares of Common Stock held individually by his
spouse; and 818.982 shares of Common Stock held in trust for Mr.
Harding's daughter.
(14) Includes 3,378.300 shares of Common Stock held individually by Mr.
Hess and 511.863 shares of Common Stock held individually by his
spouse.
(15) Includes 8,284.000 shares of Common Stock held individually by Mr.
Kile; 7,500.000 shares of Common Stock held jointly with his spouse;
and 1,756.715 shares held by the Bank's Trust Department for the
benefit of Mr. Kile.
(16) Includes 786.000 shares of Common Stock held individually by Mrs.
Kocher and 500.000 shares of Common Stock held f/b/o her husband in an
IRA trust.
(17) All shares of Common Stock held by the named person are held as an
individual.
(18) Includes 2,500.000 shares of Common Stock held individually by Mr.
Reichart and 4,694.000 shares of Common Stock held jointly with his
spouse.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Corporation's officers and directors, and persons who own
more than ten percent (10%) of the registered class of the Corporation's equity
securities, to file reports of ownership and changes in ownership with the SEC.
Officers, directors and greater than ten-percent (10%) shareholders are
required by SEC regulation to furnish the Corporation with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Corporation believes that
during the period January 1, 1995 through December 31, 1995, its officers and
directors were in compliance with all filing requirements applicable to them.
ELECTION OF DIRECTORS
(ITEM 1)
The Corporation has a classified Board of Directors with
staggered three-year terms of office. In a classified board, the directors are
generally divided into separate classes of equal number. The terms of the
separate classes expire in successive years. Thus, at each Annual Meeting of
Shareholders successors to the class of directors whose term shall then expire
shall
32
<PAGE> 6
be elected to hold office for a term of three years, so that the term of office
of one class of directors shall expire in each year.
In addition, there is no cumulative voting for the election of
directors. Each share of common stock is entitled to cast only one vote for
each nominee. For example, if a shareholder owns 100 shares of common stock,
he or she may cast up to 100 votes for each of the nominees for director in the
class to be elected.
Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the election of the three nominees for Class 1
Director named below. If any nominee should become unavailable for any reason,
proxies will be voted in favor of a substitute nominee as the Board of
Directors of the Corporation shall determine. The Board of Directors has no
reason to believe the nominees named will be unable to serve if elected. Any
vacancy occurring on the Board of Directors of the Corporation for any reason
may be filled by a majority of the directors then in office until the
expiration of the term of vacancy. Election of a nominee to the office of
director will require an affirmative vote of a majority of the shares of Common
Stock represented at the Annual Meeting.
INFORMATION AS TO NOMINEES,
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains certain information with respect
to the executive officers, nominees for Class 1 Director whose term expires in
1999, current Class 1 Directors whose term expires in 1996, and the Class 2
Directors and Class 3 Directors whose terms of office expire in 1998 and 1997,
respectively:
<TABLE>
<CAPTION>
Age as of Principal Occupation During Past
March 22, Five Years and/or Position(s) Director
Name 1996 Held With The Corporation Since(1)
- ---- ------------ -------------------------------- --------
CURRENT CLASS 1 DIRECTORS WHOSE TERM EXPIRES IN 1996 AND
NOMINEES FOR CLASS 1 DIRECTOR WHOSE TERM EXPIRES IN 1999
<S> <C> <C> <C>
Willard H. Kile, Sr. 68 Chairman and Director of the 1974
Corporation and the Bank; real
estate broker, Kile and Kile Real
Estate and Rentals
Charles E. Long 60 Retired; former President, Long 1993
Supply Co., Inc., wholesaler and
retailer of hardware and masonry
products
</TABLE>
33
<PAGE> 7
<TABLE>
<CAPTION>
Age as of Principal Occupation During Past
March 22, Five Years and/or Position(s) Director
Name 1996 Held With The Corporation Since(1)
- ---- ------------ -------------------------------- --------
NOMINEE FOR CLASS 1 DIRECTOR WHOSE TERM EXPIRES IN 1999
<S> <C> <C> <C>
Robert M. Brewington, Jr. 45 Owner, Sutliff Motors; selling and ______
(2) servicing cars and trucks; school
bus contractor
</TABLE>
<TABLE>
<CAPTION>
CURRENT CLASS 1 DIRECTOR WHOSE TERM EXPIRES IN 1996
<S> <C> <C> <C>
John I. Mather 72 Vice Chairman and Director of the 1962
(3) Corporation and the Bank; retired
operator of a grain mill
</TABLE>
<TABLE>
<CAPTION>
CLASS 2 DIRECTORS WHOSE TERM EXPIRES IN 1998
<S> <C> <C> <C>
Stanley Barchik 62 President, Stan & Sons, Inc., 1985
commercial leasing and retail
gasoline sales
William F. Hess 62 Dairy farmer 1982
Paul E. Reichart 58 President, Chief Executive Officer 1983
and Director of the Corporation
and the Bank
</TABLE>
<TABLE>
<CAPTION>
CLASS 3 DIRECTORS WHOSE TERM EXPIRES IN 1997
<S> <C> <C> <C>
Don E. Bangs 64 Secretary of the Corporation and 1985
the Bank; former owner of Bangs
Insurance Agency and agent for
The Thrush Insurance Agency
Edward L. Campbell 57 President, ELC Enterprises, Inc. 1985
d/b/a The Heritage House Family
Restaurant and the sole proprietor of
Heritage Acres Christmas tree sales
Elwood R. Harding, Jr. 49 Attorney, Harding & Warren, 1984
Bloomsburg; President, Inter-County
Land Abstract Co., Inc.
</TABLE>
- --------------
(1) Includes period prior to June 20, 1983, when such persons, except for
Messrs. Bangs, Barchik, Campbell, Harding, Long and Brewington, served
as directors of the Bank, which became a wholly-owned subsidiary of
the Corporation on that date. All directors of the Corporation are
currently also directors of the Bank.
34
<PAGE> 8
(2) Mr. Brewington is replacing Mr. Mather.
(3) Mr. Mather will be retiring due to the mandatory retirement age.
The Board of Directors of the Bank has established the
following committees for 1996:
Executive Committee. This Committee exercises the authority
of the Board of Directors in the management of the business of the Bank between
the dates of regular meetings of the Board of Directors. Messrs. Bangs, Kile,
Mather and Reichart are members of the Executive Committee. Mr. Mather will
not serve on this committee after his successor is elected and qualified.
Long Range Planning Committee. This Committee studies the
future growth, capital development and corporate structure of the Bank.
Messrs. Bangs, Hess, Kile and Reichart are members of the Long Range Planning
Committee.
Human Resource Committee. This Committee recommends to the
Board of Directors the amount to be considered for contribution to the Bank's
Profit Sharing Plan and reviews the proposed salary increases of the officers
before they are presented to the Board of Directors for approval. Messrs.
Bangs, Hess, Kile and Reichart are members of the Human Resource Committee.
Audit Committee. This Committee supervises the audit of the
books of account of the Bank and recommends for approval by the Board of
Directors the services of an independent certified public accountant to examine
the financial matters of the Bank. Messrs. Bangs, Harding, Hess and Mather are
members of the Audit Committee. Mr. Mather will not serve on this committee
after his successor is elected and qualified.
Credit Administration Committee. This Committee reviews all
new loans, past due loans, loan compliance, loan review and other pertinent
matters. Messrs. Barchik, Kile, Long and Reichart are members of the Credit
Administration Committee.
Asset-Liability Committee. This Committee reviews the
asset-liability positions of the Bank and provides support and direction in
managing net interest margins and liquidity. Messrs. Campbell, Harding, Kile
and Reichart are members of the Asset-Liability Committee.
Trust Committee. This Committee is responsible for oversight
of the Bank's Trust Department, including the Department's investments and
operations. Messrs. Campbell, Kile and Reichart are members of the Trust
Committee.
Deferred Compensation Committee. This Committee is
responsible for the administration and review of the Bank's Deferred
Compensation Plans. Messrs. Hess, Kile and Reichart are members of the
Deferred Compensation Committee.
35
<PAGE> 9
Employee Stock Purchase Plan Committee. This Committee is
responsible for the administration and review of the Employee Stock Purchase
Plan. Messrs. Bangs, Hess, Kile and Reichart are members of the Employee Stock
Purchase Plan Committee.
During 1995, the Corporation's Board of Directors held nine
(9) meetings and the Bank's Board of Directors held twenty-six (26) meetings.
Each Director of the Corporation who is also a Director of the Bank attended at
least 75% of the combined total number of meetings of the Boards of Directors
of the Corporation and the Bank and of the committees of the Bank of which he
is a member.
The Corporation does not have a nominating committee. A
shareholder who desires to propose an individual for consideration by the Board
of Directors as a nominee for director should submit a proposal in writing to
the Secretary of the Corporation in accordance with Section 202 of the By-laws
of the Corporation.
EXECUTIVE COMPENSATION
COMPENSATION PAID TO EXECUTIVE OFFICERS
The following table sets forth the total compensation for
services in all capacities paid by the Corporation and the Bank during 1995,
1994 and 1993, to the Corporation's and the Bank's President and Chief
Executive Officer. No other executive officer's annual salary and bonus
exceeded $100,000 during 1995 and therefore is not required to be presented.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------------------------------
Name and Principal Fiscal Other Annual All Other
Position Year Salary Bonus Compensation(2) Compensation(3)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul E. Reichart 1995 $80,826 $23,307(4) $7,800 $3,528
(President and Chief 1994 $76,978 $24,074(5) $7,500 $2,387
Executive Officer) 1993 $72,621 $24,382(6) $6,875 $1,344
</TABLE>
- ----------------------
(1) From January 1, 1993 through December 31, 1995, the Corporation did
not pay any long-term compensation in the form of stock options, stock
appreciation rights, restricted stock or any other long-term
compensation, nor did it make any long-term incentive plan payments.
Accordingly, no such information is presented in the Summary
Compensation Table set forth above. No such arrangements are
currently in effect.
(2) Represents the payment of directors' fees by the Bank for the years
presented. Mr. Reichart did not receive perquisites and other
personal benefits, securities and property that totaled in the
aggregate for the years presented either $50,000 or 10% of the total
of the amounts reported under the salary and bonus columns.
Therefore, the amounts for such perquisites and other personal
benefits, securities and property are not reported.
(3) These figures represent annual term insurance premium payments on the
life of Mr. Reichart.
36
<PAGE> 10
(4) Includes $15,000 as a life insurance premium payment for a deferred
compensation plan; $3,233 as a cash bonus representing 4% of base
salary; and $5,074 as a contribution to the Bank's profit sharing
plan.
(5) Includes $15,000 as a life insurance premium payment for a deferred
compensation plan (see discussion below); $3,849 as a cash bonus
representing 5% of base salary; and $5,225 as a contribution to the
Bank's profit sharing plan.
(6) Includes $15,000 as a life insurance premium payment for a deferred
compensation plan; $4,357 as a cash bonus representing 6% of base
salary; and $5,025 as a contribution to the Bank's profit sharing plan
(see discussion below).
DEFERRED COMPENSATION AGREEMENTS FOR EXECUTIVE OFFICERS
Paul E. Reichart has served as the Corporation's and the
Bank's President and Chief Executive Officer since 1985. J. Jan Girton has
served as the Executive Vice President, Chief Operating Officer and Assistant
Secretary of the Bank since 1987. As a result of Messrs. Reichart's and
Girton's active involvement and experience in the affairs of the Bank, the Bank
has depended upon, and continues to depend upon, their continued employment.
The Bank does not maintain employment agreements or key man insurance, other
than the deferred compensation agreements described below, with respect to
Messrs. Reichart and Girton. However, in 1992, the Bank entered into
agreements with Paul E. Reichart, President and Chief Executive Officer of the
Corporation and the Bank, and J. Jan Girton, Executive Vice President, Chief
Operating Officer and Assistant Secretary of the Bank, to establish a
non-qualified deferred compensation plan (the "Deferred Compensation Plan") for
these officers.
Each officer is deferring compensation in order to participate
in his Deferred Compensation Plan. If the officer continues to serve as an
officer of the Bank until he attains sixty-five (65) years of age, the Bank has
agreed to pay him 120 guaranteed consecutive monthly payments commencing on the
first day of the month following the officer's 65th birthday. Each officer's
guaranteed monthly payment is based upon the future value of life insurance
purchased with the compensation the officer has deferred. If the officer
attains sixty-five (65) years of age but dies before receiving all of the
guaranteed monthly payments, then the Bank will make the remaining payments to
the officer's designated beneficiary or to the representative of his estate.
In the event that the officer dies while serving as an officer, but prior to
age sixty-five (65), then the Bank will remit the guaranteed monthly payments
to the officer's designated beneficiary or to the representative of his estate.
The Bank has obtained life insurance (designating the Bank as the beneficiary)
on the life of each participating officer in an amount which is intended to
cover the Bank's obligations under the Deferred Compensation Plan, based upon
certain actuarial assumptions. In 1995, the Bank accrued $25,800 as an expense
for the Deferred Compensation Plan.
PROFIT SHARING PLAN
The Corporation and the Bank do not have a pension plan. The
Bank, however, does maintain a non-contributory profit sharing plan (the
"Plan") for its employees. To be eligible, an employee must be 21 years of
age, have been employed by the Bank on the last day of the Plan year and
generally completed at least 1,000 hours of service during the Plan year
(except in the case of death, disability or retirement).
37
<PAGE> 11
In addition, effective January 1, 1995, the Bank amended the
Plan to include a 401K Savings Plan feature. An employee may elect to
contribute up to ten percent of his or her annual aggregate compensation into
the 401K Savings Plan. The Bank may contribute a matching contribution to an
employee's account, if management deems the income (profits) to be adequate to
justify this expense. Employees who participated in the Plan as of December
31, 1994, will be 100% vested. However, employees who began participation in
the Plan on or after January 1, 1995, will have any Bank contributions 100%
vested after five years of service. Under the 401K Savings Plan, an employee
must complete at least 1,000 hours of service during the year in order to be
eligible to participate in the 401K Savings Plan.
Contributions reflected as expense under the Plan for 1995,
1994 and 1993 were $86,755, $82,166 and $78,388, respectively. The Bank made
no matching contribution in 1995 under the 401K Savings Plan feature.
COMPENSATION OF DIRECTORS
During 1995, each member of the Bank's Board of Directors
received $300 for each meeting of the Board and $225 for each committee meeting
attended. In addition, in 1995, the Chairman of the Board of Directors and the
Secretary each received an additional fee of $1,200 for additional services
provided to the Bank. Members of the Corporation's Board of Directors are not
compensated for attending meetings of the Corporation's Board of Directors.
Such meetings usually occur immediately after meetings of the Bank's Board of
Directors.
DEFERRED COMPENSATION AGREEMENTS FOR DIRECTORS
The Bank has entered into agreements with three directors to
establish non-qualified deferred compensation plans (the "Director Deferred
Compensation Plans") for each of these directors. These plans are limited to
4-year terms. The Bank may, however, enter into subsequent similar plans with
its directors. Each of the participating directors is deferring the payment to
him of the directors' fees described above. If the director continues to serve
as a director of the Bank until he attains generally 70 or 72 years of age, as
the case may be, the Bank has agreed to pay him ten equal annual payments
commencing on the first day of the month following such director's 70th or 72nd
birthday, as the case may be. Each director's guaranteed annual payment is
based upon the cumulative amount of deferred fees together with interest
currently accruing thereon at the rate of 8% per annum, subject to change by
the Board of Directors. If the director attains 70 or 72 years of age, as the
case may be, but dies before receiving all ten annual payments, then the Bank
will make the remaining payments to the director's designated beneficiary or to
the representative of his estate. In the event that the director dies while
serving as a director, but prior to age 70 or 72, as the case may be, then the
Bank will remit the annual payments to such director's designated beneficiary
or to the representative of his estate. The Bank has obtained life insurance
(designating the Bank as the beneficiary) on the lives of Messrs. Kile and
Harding in face amounts which are intended to cover the Bank's obligations
under those director's Deferred Compensation Plans. In 1995, the Bank accrued
$23,200 as an expense for the Director Deferred Compensation Plans. As of
December 31, 1995, Messrs. Kile, Harding and Barchik were participating in such
Plans.
38
<PAGE> 12
CERTAIN TRANSACTIONS
There have been no material transactions between the
Corporation and the Bank, nor any material transactions proposed, with any
director or executive officer of the Corporation and the Bank, or any associate
of any of the foregoing persons. The Corporation and the Bank have had and
intend to continue to have banking and financial transactions in the ordinary
course of business with directors and executive officers of the Corporation and
the Bank and their associates on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons.
Total loans outstanding from the Corporation and the Bank as
of December 31, 1995, to the Corporation's and the Bank's executive officers
and directors as a group and members of their immediate families and companies
in which they had an ownership interest of 10% or more was $3,952,456, or
approximately 20.59% of the total equity capital of the Bank. Loans to such
persons were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not involve more than the normal risk of collectibility or present other
unfavorable features.
PRINCIPAL OFFICERS OF THE CORPORATION
The following table sets forth selected information about the
principal officers of the Corporation, each of whom is selected by the Board of
Directors and each of whom holds office at the discretion of the Board of
Directors:
<TABLE>
<CAPTION>
Bank
Office and Held Employee Number of Shares Age as of
Name Position Held Since Since Beneficially Owned March 22, 1996
- ---- ------------- ----- ---------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Willard H. Chairman of 1985 (1) 17,540.715 (2) 68
Kile, Sr. the Board
John I. Vice Chairman 1985 (1) 2,400.000 (2) 72(3)
Mather of the Board
Paul E. President 1985 1960 7,194.000 (2) 58
Reichart and CEO
Don E. Secretary 1993 (1) 7,694.076 (2) 64
Bangs
Virginia D. Treasurer 1991 1972 1,286.000 (2) 48
Kocher
</TABLE>
- ----------------------------
(1) Messrs. Kile, Mather and Bangs are not employees of the Bank.
(2) See footnotes under "Beneficial Ownership by Officers, Directors and
Nominees" with respect to the stockholdings for this officer.
39
<PAGE> 13
(3) Mr. Mather has reached the mandatory retirement age to serve as a
director, and, therefore, will not continue to serve in this capacity
after his successor is selected.
PRINCIPAL OFFICERS OF THE BANK
The following table sets forth selected information about the
principal officers of the Bank, each of whom is elected by the Board of
Directors of the Bank and each of whom holds office at the discretion of the
Board of Directors of the Bank:
<TABLE>
<CAPTION>
Bank
Office and Held Employee Number of Shares Age as of
Name Position Held Since Since Beneficially Owned March 22, 1996
- ---- ------------- ----- ---------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Willard H. Chairman of 1985 (1) 17,540.715 (2) 68
Kile, Sr. the Board
John I. Vice Chairman 1985 (1) 2,400.000 (2) 72(7)
Mather of the Board
Don E. Secretary 1993 (1) 7,694.076 (2) 64
Bangs
Paul E. President 1985 1960 7,194.000 (2) 58
Reichart and CEO
J. Jan Executive Vice 1987 1985 1,146.575 (3) 55
Girton President, Chief
Operating Officer
and Assistant 1992
Secretary
Linda A. Senior Vice 1991 1963 262.000 (4) 51
Huttenstine President and
Cashier 1985
Jacob S. Senior Vice 1989 1989 201.309 (4) 48
Trump President and
Financial
Planning Officer
Lance O. Vice President 1995 1995 -0- 30(5)
Diehl
Virginia D. Vice President, 1987 1972 1,286.000 (2) 48
Kocher Controller and 1982
Assistant Secretary 1991
Edwin A. Vice President 1991 1974 325.000 (6) 42
Wenner
</TABLE>
- ----------------------------
(1) Messrs. Kile, Mather and Bangs are not employees of the Bank.
40
<PAGE> 14
(2) See footnotes under "Beneficial Ownership by Officers, Directors and
Nominees" with respect to the stockholdings for this officer.
(3) Includes 122.848 shares of Common Stock held individually by Mr.
Girton and 1,023.727 shares of Common Stock held jointly with his
spouse.
(4) All shares of Common Stock held by the named person are held as an
individual.
(5) Mr. Diehl is the nephew of Mr. Kile, the Chairman of the Board of the
Corporation and the Bank.
(6) The 325 shares of Common Stock beneficially owned by Mr. Wenner are
jointly held with his spouse.
(7) See footnote (3) under "Principal Officers of the Corporation."
LEGAL PROCEEDINGS
GENERAL
The nature of the Corporation's and the Bank's business
generates a certain amount of litigation involving matters arising in the
ordinary course of business. However, in the opinion of management of the
Corporation and the Bank, there are no proceedings pending to which the
Corporation and the Bank is a party or to which their property is subject,
which, if determined adversely to the Corporation and the Bank, would be
material in relation to the Corporation's and the Bank's undivided profits or
financial condition, nor are there any proceedings pending other than ordinary
routine litigation incident to the business of the Corporation and the Bank.
In addition, no material proceedings are pending or are known to be threatened
or contemplated against the Corporation and the Bank by government authorities
or others.
ENVIRONMENTAL ISSUES
There are several federal and state statutes that govern the
obligations of financial institutions with respect to environmental issues.
Besides being responsible under such statutes for its own conduct, a bank also
may be held liable under certain circumstances for actions of borrowers or
other third parties on properties that collateralize loans held by the bank.
Such potential liability may far exceed the original amount of the loan made by
the bank. Currently, the Bank is not a party to any pending legal proceedings
under any environmental statute nor is the Bank aware of any circumstances that
may give rise to liability of the Bank under any such statute.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
Unless instructed to the contrary, it is intended that votes
will be cast pursuant to the proxies for the ratification of the selection of
J. H. Williams & Co., LLP, Certified Public Accountants, of Kingston,
Pennsylvania ("J. H. Williams"), as the Corporation's independent public
accountants for its fiscal year ending December 31, 1996. The Corporation has
been advised by J. H. Williams that none of its members has any financial
interest in the Corporation. Ratification of J. H. Williams will require an
affirmative vote of a majority of the shares of
41
<PAGE> 15
Common Stock represented at the Annual Meeting. J. H. Williams served as the
Corporation's independent public accountants for the Corporation's 1995 fiscal
year.
In addition to performing customary audit services, J. H.
Williams assisted the Corporation with the preparation of its federal and state
tax returns, and provided assistance in connection with regulatory matters,
charging the Corporation for such services at its customary hourly billing
rates. These non-audit services were approved by the Corporation's and the
Bank's Board of Directors, after due consideration of the effect of the
performance thereof on the independence of the accountants and after the
conclusion by the Corporation's and the Bank's Board of Directors that there
was no effect on the independence of the accountants.
In the event that the shareholders do not ratify the selection
of J. H. Williams as the Corporation's independent public accountants for the
1996 fiscal year, another accounting firm will be chosen to provide independent
public accountant audit services for the 1996 fiscal year. The Board of
Directors recommends that the shareholders vote FOR the ratification of the
selection of J. H. Williams as the auditors for the Corporation for the year
ending December 31, 1996.
It is understood that even if the selection of J. H. Williams
is ratified, the Board of Directors, in its discretion, may direct the
appointment of a new independent auditing firm at any time during the year if
the Board of Directors determines that such a change would be in the best
interests of the Corporation and its shareholders.
ANNUAL REPORT
A copy of the Corporation's Annual Report for its fiscal year
ended December 31, 1995, is being mailed with this Proxy Statement. A
representative of J. H. Williams, the accounting firm which examined the
financial statements in the Annual Report, will attend the Annual Meeting.
This representative of J. H. Williams will have the opportunity to make a
statement, if he or she desires to do so, and will be available to respond to
any appropriate questions presented by shareholders at the Annual Meeting.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the
provisions of the proxy rules of the SEC, wishes to submit a proposal for
inclusion in the Corporation's proxy statement for its 1997 Annual Meeting of
Shareholders must deliver such proposal in writing to the Secretary of CCFNB
Bancorp, Inc. at the principal executive offices of the Corporation at 232 East
Street, Bloomsburg, Pennsylvania 17815, not later than Friday, November 29,
1996.
42
<PAGE> 16
OTHER MATTERS
The Board of Directors does not know of any matters to be
presented for consideration other than the matters described in the Notice of
Annual Meeting of Shareholders, but if any matters are properly presented, it
is the intention of the persons named in the accompanying Proxy to vote on such
matters in accordance with their judgment.
ADDITIONAL INFORMATION
Upon written request of any shareholder, a copy of the
Corporation's report on Form 10-KSB for its fiscal year ended December 31,
1995, including the financial statements and the schedules thereto, required to
be filed with the SEC, may be obtained, without charge, from Paul E. Reichart,
President CCFNB Bancorp, Inc., 232 East Street, Bloomsburg, Pennsylvania 17815;
telephone: (717) 784-4400.
In addition, a copy of the Annual Disclosure Statement of
Columbia County Farmers National Bank may be also obtained, without charge,
from Mr. Reichart.
43
<PAGE> 17
[INSERT LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF CCFNB BANCORP, INC.:
Notice is hereby given that the Annual Meeting of Shareholders
of CCFNB Bancorp, Inc. (the "Corporation") will be held at 10:30 a.m.,
prevailing time, on Tuesday, April 30, 1996, at the CCFNB Operations Center,
Lightstreet Road, Bloomsburg, Pennsylvania 17815, for the following purposes:
1. To elect three (3) Class 1 directors
to serve for a three-year term and until their successors are
duly elected and qualified;
2. To ratify the selection of J. H.
Williams & Co., LLP, Certified Public Accountants, of
Kingston, Pennsylvania, as the independent auditors for the
Corporation for the year ending December 31, 1996; and
3. To transact such other business as
may properly come before the Annual Meeting and any
adjournment or postponement thereof.
Only those shareholders of record at the close of business, at
5:00 p.m., on Friday, March 22, 1996, will be entitled to notice of and to vote
at the Annual Meeting.
A copy of the Corporation's Annual Report for the fiscal year
ended December 31, 1995, is being mailed with this notice.
You are urged to mark, sign, date and promptly return your
proxy in the enclosed envelope so that your shares may be voted in accordance
with your wishes and in order that the presence of a quorum may be assured.
The prompt return of your dated and signed proxy, regardless of the number of
shares you hold, will aid the Corporation in reducing the expense of additional
proxy solicitation. The giving of such proxy does not affect your right to
vote in person if you attend the meeting.
By Order of the Board of Directors
Paul E. Reichart, President
March 29, 1996
44
<PAGE> 18
CCFNB BANCORP, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 30, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints E.L. Carson
and Roy Buck and each and any of them, proxies of the undersigned, with full
power of substitution, to vote all of the shares of CCFNB Bancorp, Inc. (the
"Corporation") that the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of the Corporation to be held at the CCFNB Operations
Center, Lightstreet Road, Bloomsburg, Pennsylvania 17815, on Tuesday, April 30,
1996 at 10:30 a.m., prevailing time, and at any adjournment or postponement
thereof as follows:
1. ELECTION OF CLASS 1 DIRECTORS TO SERVE FOR A THREE-YEAR TERM
<TABLE>
<S> <C>
/ / For all nominees listed / / WITHHOLD AUTHORITY
below (except as marked to vote on all nominees
to the contrary below) listed below
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
Willard H. Kile, Sr., Charles E. Long and Robert M. Brewington, Jr.
-----------------------------------------------------------
2. Proposal to ratify the selection of J.H. Williams & Co., LLP,
Certified Public Accountants, of Kingston, Pennsylvania, as the
independent auditors for the Corporation for the year ending December
31, 1996.
/ / FOR / / AGAINST
The Board of Directors recommends a vote FOR this proposal.
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the annual meeting and any
adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSAL 2.
Dated , 1996
---------------------------
---------------------------------------
---------------------------------------
Signature(s)
Number of Shares Held of
Record on March 22, 1996:
---------------
THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER AND
RETURNED PROMPTLY TO THE CORPORATION IN THE ENCLOSED ENVELOPE. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE.
IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. IF STOCK IS HELD JOINTLY, EACH
OWNER MUST SIGN.
45
