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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000 Commission File Number 0-13396
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
CNB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1450605
------------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
County National Bank
1 South Second Street
P.O. Box 42
Clearfield, Pennsylvania 16830
(Address of principal executive offices)
Registrant's telephone number, including area code, (814) 765-9621
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock: $1.00 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
-----
The number of shares outstanding of the issuer's common stock as of March
31, 2000:
COMMON STOCK: $1.00 PAR VALUE - 3,664,768 SHARES
1
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INDEX
PART I.
FINANCIAL INFORMATION
Sequential
Page Number
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PAGE 3. Notes to Consolidated Financial Statements
PAGE 4. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PAGE 11. Table 1 - Consolidated Balance Sheets - March 31, 2000
PAGE 12. Table 2 - Consolidated Statements of Income - Quarter ending
March 31, 2000
PAGE 13. Table 3 - Consolidated Statements of Cash Flows - Quarter ending
March 31, 2000
PAGE 14. Table 4 - Consolidated Yield Comparisons
PART II.
OTHER INFORMATION
PAGE 15. ITEM 4 Submission of Matters for Security Holders Vote
PAGE 15. ITEM 5 Other Information
PAGE 15. ITEM 6 Exhibits and Reports on Form 8-K
PAGE 15. Signatures
2
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CNB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
pursuant to rules and regulations of the Securities and Exchange Commission
(SEC) and in compliance with generally accepted accounting principles. Because
this report is based on an interim period, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
The registrant believes that the disclosures made are adequate to make the
information presented a fair representation of the Corporation's financial
status.
In the opinion of Management of the registrant, the accompanying
consolidated financial statements for the three month periods ended March 31,
2000 and 1999 include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the financial condition and
the results of operations for the period. The financial performance reported
for the Corporation for the three-month period ended March 31, 2000 is not
necessarily indicative of the result to be expected for the full year. This
information should be read in conjunction with the Corporation's Annual Report
to shareholders and Form 10-K for the period ended December 31, 1999.
COMMON STOCK PLAN
The Corporation has a common stock plan for key employees and independent
directors. The Stock Incentive Plan, which is administered by a disinterested
committee of the Board of Directors, provides for 250,000 shares of common stock
in the form of qualified options, nonqualified options, stock appreciation
rights or restrictive stock. The Corporation applies Accounting Principles
Board Opinion 25 and related interpretations in accounting for its common stock
plan. Accordingly, no compensation expense has been recognized for the plans.
COMPREHENSIVE INCOME
Total comprehensive income for the periods ended March 31, 2000 and 1999
were $660,000 and $753,000.
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting for Derivative Instruments
- -------------------------------------
The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This statement provides for potential of investment
reclassification out of the held-to-maturity category. As amended by FAS No.
137, the standard is effective for fiscal years beginning after June 15, 2000
with earlier adoption permitted. The effect of this standard will depend upon
the nature and extent of derivative instruments in place at the time of
adoption. The Corporation had no derivative instruments as of March 31, 2000.
3
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The following discussion and analysis of the consolidated financial
statements of the Corporation is presented to provide insight into management's
assessment of financial results. The Corporation's subsidiary County National
Bank (the "Bank") provides financial services to individuals and businesses
within the Bank's market area made up of the west central Pennsylvania counties
of Clearfield, Cambria, Centre, Elk, Jefferson, and McKean. County National
Bank is a member of the Federal Reserve System and subject to regulation,
supervision and examination by the Office of the Comptroller of the Currency
("OCC").
The market area that County National Bank operates in is generally rural
in nature. The customer makeup consists of small business and individuals. The
health of the economy in the region is mixed with unemployment rates running
high in most of our market areas except Centre County. Actual ratings (as of
December 1999) by county are as follows: Cameron 6.4%; Centre 2.4%; Clearfield
6.8%; Elk 5.2% Jefferson 5.7%; and McKean 4.5%.
OVERVIEW OF BALANCE SHEET
Total assets (shown in Table 1 "Consolidated Balance Sheet") have grown
-------
0.4% since year-end 1999 to $563.6 million. The growth has occurred primarily
in the loan portfolio. The following comments will further explain the details
of asset growth.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents totaled $15,572,000 at March 31, 2000 compared
to $21,214,000 on December 31, 1999. This decrease resulted from a reduction of
cash build up at year-end for the year 2000 contingency. In addition the Bank
has focused on growth of earning assets by reducing the nonearning assets on the
balance sheet.
Management believes the liquidity needs of the Corporation are satisfied
by the current balance of cash and cash equivalents, readily available access to
traditional funding sources, and the portion of the investment and loan
portfolios that matures within one year. These sources of funds will enable the
Corporation to meet cash obligations and off-balance sheet commitments as they
come due.
INVESTMENT SECURITIES
Investment securities decreased $1,623,000 since December 31, 1999. Of
the Corporation's total investment portfolio of $141,940,000 as of March 31,
2000, $135,628,000 (or 95.6%) is classified as available for sale with the
balance of $6,312,000 classified as held to maturity.
The decrease is mainly a result of the fair market valuation of the bond
portfolio. In a rising interest rate environment, bond prices generally decline
giving the Corporation an increase in unrealized loss of $892,000. Also adding
to the decrease are payments received on mortgage-backed investments. The
Corporation generally buys into the market over time and does not attempt to
"time" it. In doing this the highs and lows of the market are averaged into the
portfolio and minimizes the overall effect of different rate environments.
Management monitors the earnings performance and the effectiveness of the
liquidity of the investment portfolio on a regular basis through Asset /
Liability Committee ("ALCO') meetings. The ALCO also reviews and manages
interest rate risk for the Corporation. Through active balance sheet management
and analysis of the investment securities portfolio, the Corporation maintains
sufficient liquidity to satisfy depositor requirements and various credit needs
of its customers.
4
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LOANS
The Corporation's loan volume was good through the first quarter of 2000.
The Corporation's lending is focused in the west central Pennsylvania market and
consists principally of retail lending, which includes single-family residential
mortgages and other consumer lending, and commercial lending primarily to
locally owned small businesses.
At March 31, 2000, the Corporation had $373,273,000 in loans and leases
outstanding up $10,509,000 (or 2.9%) since December 31, 1999. This growth
pattern is the result of our increased penetration into the commercial lending
opportunities within our market. Our focus on commercial lending has expanded
over the past year with additional staff increases to handle more small business
loans. This focus has resulted in an increase in commercial loans of 5.2% since
December 31, 1999, primarily in commercial mortgages.
ALLOWANCE FOR LOAN AND LEASE LOSSES
The Allowance for Loan and Lease Losses as a percentage of loans
decreased from 1.07% at December 31, 1999 to 1.03% at March 31, 2000. The
dollar amount of the reserve also decreased $35,000 since year-end 1999. The
decrease is a result of charge-offs exceeding the reserve expensed during the
quarter. The gross charge-offs for the first quarter of 2000 were $240,000
while recoveries were $25,000. This level of charge-offs is an increase when
compared to the first quarter of 1999 when charge-offs were $143,000 with
recoveries of $44,000. While charge-offs in the first quarter were historically
high in dollars, the Corporation is not expecting charge-offs for the year to
continue at this rate. Charges are expected to slightly exceed prior year
percentages, when compared to outstanding loans, for 2000. In addition, the
dollar amount of the reserve is expected to increase over the remainder of the
year as the expensed reserve should exceed net charge-offs.
This trend is consistent with the financial services industry nationwide.
It is the result of increased consumer credit problems often resulting in
bankruptcies. Management of the Corporation is confident of the loan collection
activities it has in place, which has resulted in lower overall levels of loan
delinquency.
Management continues to closely monitor loan delinquency and losses.
Non-performing assets, which include loans 90 or more days past due, non-accrual
loans and other real estate owned were $1,830,000 or 0.32% of total assets on
March 31, 2000 compared to $2,142,000 or 0.59% on December 31, 1999.
The adequacy of the allowance for loan and lease losses is subject to a
formal analysis by the loan review staff of the Bank and is deemed to be
adequate to absorb inherent losses in the portfolio as of March 31, 2000.
Review the 1999 annual report, SEC form 10K, for the process and methodology
supporting the loan loss provision.
FUNDING SOURCES
The Corporation considers deposits, short-term borrowings, and term debt
when evaluating funding sources. Traditional deposits continue to be the most
significant source of funds for the Corporation reaching $483,302,000 at March
31, 2000. Deposit decline of 3.5% since year-end 1999 primarily resulted from a
runoff of jumbo CD's that were acquired recently, but were excluded from the
premium paid at the time of purchase. This runoff was expected, as the
interest rate being paid on these deposits was higher than the Corporation
generally offers.
The Corporation utilizes term borrowings from the Federal Home Loan Bank
(FHLB) to meet funding needs not accommodated by deposit growth. During the
first three months of 2000, the Corporation borrowed $20 million to accommodate
loan growth and to take advantage of opportunities existing in the bond market.
Management plans to maintain access to short and long-term FHLB borrowings as an
appropriate funding source.
5
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SHAREHOLDERS' EQUITY
The Corporation's capital continues to provide a strong base for
profitable growth. Total Shareholders' Equity was $47,543,000 at March 31, 2000
compared to $47,643,000 at December 31, 1999 a decrease of $100,000 (or 0.21%).
In the first three months of 2000, the Corporation earned $1,247,000 and
declared dividends of $770,000, a dividend payout ratio of 61.7% of net income.
Approximately 96% of the investment securities in the Corporation's
portfolio are classified as available-for-sale making the Corporation's balance
sheet more sensitive to the changing market value of investments. Interest
rates in the first quarter of 2000 have increased, causing the Bank's bond
portfolio to experience a decrease in its market value gains. Also, the
financial services sector of the equity market has declined giving the
Corporation some depreciation in value, during the period, in equity holdings.
The combination of these two market forces has caused a decline in the
accumulated other comprehensive income of $587,000.
The Corporation has also complied with the standards of capital adequacy
mandated by the banking regulators. Bank regulators have established "risk-
based" capital requirements designed to measure capital adequacy. Risk-based
capital ratios reflect the relative risks of various assets banks hold in their
portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, or 100%
(highest risk assets), is assigned to each asset on the balance sheet. The
Corporation's total risk-based capital ratio of 10.42% at March 31, 2000 is
above the well-capitalized standard of 10%. The Corporation's Tier 1 capital
ratio of 9.41% is above the regulatory well-capitalized minimum of 6%. The
leverage ratio at March 31, 2000 was 6.42%, also above the well-capitalized
minimum standard of 5%. The ratios provide quantitative data demonstrating the
strength and future opportunities for use of the Corporation's capital base.
Management continues to evaluate risk-based capital ratios and the capital
position of the Corporation as part of its strategic decision making process.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity measures an organizations' ability to meet cash obligations as
they come due. The Consolidated Statement of Cash Flows presented on page 11 of
the accompanying financial statements provides analysis of the Corporation's
cash and cash equivalents. Additionally, management considers that portion of
the loan and investment portfolio that matures within one year as part of the
Corporation's liquid assets. The Corporation's liquidity is monitored by the
Asset/Liability Committee (ALCO), which establishes and monitors ranges of
acceptable liquidity. Management feels the Corporation's current liquidity
position is acceptable.
In the course of conducting business activities, the Corporation is
exposed to market risk, principally interest rate risk, through the operation of
the Bank. Interest rate risk arises from market driven fluctuations in interest
rates, which affect cash flows, income, expense and values of all financial
instruments. Management and the ALCO Committee of the Board monitor interest
rate risk. No material changes have occurred during the period in the Bank's
market risk strategy, a discussion of which can be found in the SEC Form-10K
filed for the period ended December 31, 1999.
RESULTS OF OPERATIONS
OVERVIEW OF THE INCOME STATEMENT
For the three months ended March 31, 2000, the Corporation earned
$1,247,000 in net income, an increase of 17.4% from $1,062,000 in net income in
the same period last year. Net income in the first quarter has been affected by
the acquisitions that occurred during 1999. Those acquisitions provided the
Corporation with a significant growth in earning assets, which have resulted in
increased overall earnings.
INTEREST INCOME AND EXPENSE
Net interest income totaled $5,287,000 in the first quarter, an increase
of 23.3% over the first quarter of 1999. The Bank experienced an increase in
earning assets in the past twelve months of 12.7%, which came primarily through
the acquisitions that occurred in 1999. However, the interest rate
6
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environment the Bank is operating in currently will adversely affect the net
interest margin. The competition that is prevalent in our market is causing the
cost of funds to increase at a faster pace than the yield on earning assets.
Total interest income increased during the quarter by $1,705,000 or 20.6% while
interest expense increased by $706,000 or 17.8% when compared to the first
quarter of 1999.
The Corporation recorded a provision for loan and lease losses in the
first quarter of $180,000 compared to $154,000 from the first quarter of 1999.
NON-INTEREST INCOME
Non-interest income increased $209,000 or 29.7% in the first quarter of
2000 when compared to the first quarter of 1999. Increased deposit account
service charges have been the primary source of the growth in non-interest
income. In the first quarter, account service charges totaled $531,000 up
$213,000 (or 67%) over last year's first quarter. These increases in fee income
were the result of the growth in the number of customers and related deposit
accounts as well as some increases in certain charges over the past twelve
months. Also, trust and asset management fees have increased 25.4% over the
first quarter of 1999 to $232,000. This increase results from an increase in
the market values of our customer accounts and overall growth of the assets held
under management.
NON-INTEREST EXPENSE
Non-interest expense increased $824,000 or 23.5% during the first quarter
when compared to the first quarter of 1999. This increased level of non-
interest expense is partly attributable to the acquisitions that occurred in
1999, which increased our number of locations by five. The associated
amortization expense increased $989,000 in the first quarter of 2000 over 1999.
RETURN ON ASSETS
For the quarter ended March 31, 2000, the Corporation's return on average
assets ("ROA") totaled 0.90% down from the 0.95% recorded in the first quarter
of 1999. Operating cash earnings ROA, which represents earnings excluding one-
time merger related costs and amortization expense, for the first quarter of
2000 was 1.12% as compared to 1.06% in the same period for 1999.
Decreased ROA can be attributed to the increase in non-interest expenses,
mainly the additional amortization expense as noted above. Management expects
operating cash earnings ROA to increase throughout the remaining three quarters
of 2000 resulting from enhanced net interest income and operating efficiencies
when compared to the first quarter.
RETURN ON EQUITY
The Corporation's return on average shareholder's equity ("ROE") in the
first quarter was 10.6% compared to 9.92% for the first quarter of 1999. The
increase can be attributed to the Corporations plan in the previous year to
leverage its capital through acquisition. The increase in assets without adding
additional capital will provide the shareholders more earnings from the same
capital base. Operating cash earnings ROE for the first quarter was 13.19%
compared to 10.98% in 1999.
Management expects improvement in ROE during 2000 and anticipates further
increases with earnings growth. The Corporation is currently well capitalized
under regulatory industry standards.
FEDERAL INCOME TAX EXPENSE
Federal income taxes increased to $440,000 in the first quarter of 2000
compared to $267,000 in the first quarter of 1999. The increase in the first
quarter primarily reflects higher pre-tax income in the period when compared to
the same quarter of the prior year.
FUTURE OUTLOOK
First quarter results improved when compared to the prior year's first
quarter and were consistent with management's expectations. Management
continues to focus on asset growth from increased market
7
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share. The goal of asset growth is to increase shareholder value as well as
provide favorable results in long-term profitability of the Corporation.
Loan demand was favorable during the first quarter. Loan growth is
expected to continue at a moderate pace throughout the remainder of the year.
The Corporation's loan to deposit ratio has increased through the first quarter
at 76.4% compared to 71.7% at year-end 1999 as funds from the acquisition are
being deployed into the market in consumer and small commercial loans.
Management expects the loan to deposit ratio to remain constant throughout 2000.
Consumer loan charge-offs in the first quarter continued to comprise the
majority of the Corporation's recent charge-offs. In the first quarter, total
net charge-offs were $215,000 of which consumer net charge-offs totaled
$214,000. The charge-off level for the next three quarters is expected to
decline somewhat when compared to the first quarter. Management believes that
the increased efforts of loan review and collections and our high underwriting
standards will give the Bank good charge-off experience when compared to peer
institutions.
Enhanced non-interest income and controlled non-interest expense are
important factors in the success of the Corporation and is measured in the
financial services industry by the efficiency ratio, calculated according to the
following: non-interest expense (less amortization of intangibles) as a
percentage of fully tax equivalent net interest income and non-interest income
(less non-recurring income). For the three months ended March 31, 2000, the
Corporation's efficiency ratio was 58.16% compared to 63.38% for the same period
last year.
The efficiency ratio improved as the level of non-interest income has
increased over the quarter. Management believes controlling the operating
costs of the Corporation is also imperative to the future increased
profitability derived from core earnings. A strong focus by management
continues to be placed on noninterest expenses during the remainder of 2000, as
the Bank is in the process of a profitability enhancement program and a formal
review of our operational processes. The effects of these two procedures will
streamline our operations and result in reduced expenses.
The interest rate environment will continue to play an important role in
the future earnings of the Corporation. The net interest margin has tightened
as the interest rate cycle we are in causes competitive pressures in the form of
reduced lending rates compared to prime, while the cost of funding is
increasing. Overall net interest income continues to increase due to growth in
interest earning assets. Management expects further growth in net interest
income for the remainder of 2000.
Management concentrates on return on average equity and earnings per
share evaluations, plus other methods, to measure and direct the performance of
the Corporation. While past results are not an indication of future earnings,
management feels the Corporation is positioned to enhance performance of normal
operations through the remainder of 2000.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The statements in this Form 10-Q which are not historical fact are
forward looking statements that involve risks and uncertainties, including, but
not limited to, the interest rate environment, the effect of federal and state
banking and tax regulations, the effect of economic conditions, the impact of
competitive products and pricing, and other risks detailed in the Corporation's
Securities and Exchange Commission filings.
8
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TABLE 1
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
CNB FINANCIAL CORPORATION
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
March 31, Dec. 31
ASSETS 2000 1999
------------- -------------
<S> <C> <C>
Cash and Due from Banks............................................ $ 15,220 $ 20,893
Interest bearing deposits with other banks......................... 352 321
Federal Funds Sold................................................. - -
Investment Securities Available for sale........................... 135,628 136,945
Investment Securities Held to Maturity, fair value of $6,328
at March 31, 2000 and $6,652 at December 31, 1999.................. 6,312 6,618
Loans and Leases................................................... 378,155 367,711
Less: Unearned Discount......................................... 4,882 4,947
Less: Allowance for Loan Losses................................. 3,855 3,890
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NET LOANS........................................................ 369,418 358,874
Premises and Equipment............................................. 12,907 12,854
Accrued Interest Receivable........................................ 3,438 3,463
Loans held for sale................................................ 2,818 2,381
Intangible, net.................................................... 15,703 15,899
Other Assets....................................................... 1,816 2,914
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TOTAL ASSETS..................................................... $563,612 $561,162
LIABILITIES
Deposits:
Non-interest bearing deposits.................................... $ 52,897 $ 54,891
Interest bearing deposits........................................ 430,405 445,860
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TOTAL DEPOSITS................................................... 483,302 500,751
Other Borrowings................................................... 27,565 6,750
Accrued Interest and Other Liabilities............................. 5,202 6,018
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TOTAL LIABILITIES................................................ $516,069 $513,519
SHAREHOLDERS' EQUITY
Common Stock $1.00 Par Value
Authorized 10,000,000 Shares
Issued 3,693,500 Shares.......................................... $ 3,694 $ 3,694
Additional paid in Capital....................................... 3,723 3,717
Retained Earnings................................................ 42,754 42,278
Treasury Stock, At Cost.......................................... (710) (715)
(28,732 Shares for March 2000, 29,191 for December 1999)
Accumulated other comprehensive income........................... (1,918) (1,331)
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TOTAL SHAREHOLDERS' EQUITY....................................... 47,543 47,643
------------ -------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY......................... $563,612 $561,162
</TABLE>
9
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TABLE 2
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C>
Loans including Fees.............................................. $7,874 $6,608
Deposits with Other Banks......................................... 19 3
Federal Funds Sold................................................ 6 158
Investment Securities:
Taxable........................................................ 1,520 960
Tax-Exempt..................................................... 466 476
Dividends...................................................... 84 59
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TOTAL INTEREST INCOME.......................................... $9,969 $8,264
INTEREST EXPENSE
Deposits.......................................................... $4,474 $3,705
Borrowed Funds.................................................... 208 271
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TOTAL INTEREST EXPENSE......................................... $4,682 $3,976
Net Interest Income............................................ $5,287 $4,288
Provision for possible loan losses............................. 180 154
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NET INTEREST INCOME AFTER PROVISION............................... $5,107 $4,134
OTHER INCOME
Trust & Asset Management Fees..................................... $ 232 $ 185
Service charges on deposit accounts............................... 531 318
Other service charges and fees.................................... 132 89
Securities gains.................................................. (41) -
Gains on Sale of Loans............................................ 7 26
Other income...................................................... 51 85
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TOTAL OTHER INCOME............................................. $ 912 $ 703
OTHER EXPENSES
Salaries.......................................................... $1,495 $1,370
Employee benefits................................................. 574 465
Net occupancy expense............................................. 640 481
Amortization...................................................... 463 171
Other............................................................. 1,160 1,021
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TOTAL OTHER EXPENSES........................................... $4,332 $3,508
Income Before Income Taxes........................................ $1,687 $1,329
Applicable Income Taxes........................................... 440 267
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NET INCOME..................................................... $1,247 $1,062
========== ===========
Per Share Data
- --------------
Net income, basic................................................. $ 0.34 $ 0.29
Net income, fully diluted......................................... $ 0.34 $ 0.29
Cash Dividends Per Share.......................................... $ 0.21 $ 0.20
</TABLE>
10
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TABLE 3
CONSOLIDATED STATEMENTS OF CASHFLOWS
<TABLE>
<CAPTION>
CNB FINANCIAL CORPORATION
Consolidated Statements Of Cash Flows (Unaudited)
(Dollars In Thousands)
Three Months ended March 31,
Cash flows from operating activities: 2000 1999
----------------- ------------------
<S> <C> <C>
Net Income.................................................................. $ 1,247 $ 1,062
Adjustments to reconcile net income to
net cash provided by operations:
Provision for loan losses................................................ 180 154
Depreciation and amortization........................................... 733 405
Amortization and accretion and deferred loan fees....................... (100) 172
Deferred Taxes.......................................................... (219) (166)
Security ( Gains) Losses................................................ 41 -
Gain on sale of loans................................................... (7) (26)
Net losses on dispositions of acquired property.......................... - 30
Changes in:
Proceeds from sale of loans.............................................. 1,926 6,471
Origination of loans for sale............................................ (2,356) (6,025)
Interest receivable..................................................... 25 (220)
Other assets and intangibles............................................ 667 (5,777)
Interest payable........................................................ (67) 279
Other liabilities....................................................... (226) 548
----------------- ------------------
Net cash provided by operating activities................................... 1,844 (3,093)
Cash flows from investing activities:
Proceeds from maturities of:
Securities held to maturity............................................. 305 -
Securities available for sale........................................... 3,876 7,008
Proceeds from sales of securities available for sale...................... 2,475 154
Purchase of:.............................................................. (6,004) (17,295)
Securities available for sale........................................... (10,586) (9,809)
Net principal disbursed on loans.......................................... - -
(Purchase) of Federal Home Loan Bank Stock................................ - -
Purchase of premises and equipment........................................ (323) (134)
Proceeds from the sale of foreclosed assets............................... 165 124
----------------- ------------------
Net cash used in investing activities....................................... (10,092) (19,952)
Cash flows from financing activities:
Net change in:
Checking, money market and savings accounts............................. (6,899) (13,506)
Certificates of deposit................................................. (10,550) 30,347
Acquisition of treasury stock........................................... 5 (615)
Sale of treasury stock.................................................. 5 6
Cash dividends paid..................................................... (770) (685)
Net advances (repayments) from other borrowings........................... 20,815 5,356
----------------- ------------------
Net cash provided by financing activities................................... 2,606 20,903
Net increase (decrease) in cash and cash equivalents....................... (5,642) (2,142)
Cash and cash equivalents at beginning of year.............................. 21,214 26,093
----------------- ------------------
Cash and cash equivalents at end of period.................................. $ 15,572 $ 23,951
================= ==================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (including amount credited directly to certificate accounts)... $ 4,615 $ 4,255
Income Taxes............................................................ - $ 125
Noncash Investing Activities:
(Dec.) in net unrealized gain on securities available for sale......... - ($317)
(Inc.) in net unrealized gain on securities available for sale......... ($587) -
</TABLE>
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TABLE 4
CONSOLIDATED YIELD COMPARISONS
<TABLE>
<CAPTION>
CNB Financial Corporation
Average Balances and Net Interest Margin
(Dollars in thousands)
March 31, 2000 March 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Average Annual Interest Average Annual Interest
Balance Rate Inc./Exp. Balance Rate Inc./Exp.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-bearing deposits with banks $ 1,340 5.67% $ 19 $ 282 4.26% $ 3
Federal funds sold and securities
purchased under agreements to resell 445 5.39% 6 13,332 4.08% 136
Investment Securities:
Taxable 98,496 6.17% 1,520 72,924 4.96% 905
Tax-Exempt (1) 37,485 6.88% 645 37,948 7.00% 664
Equity Investments (1) 6,755 5.86% 99 5,706 4.70% 67
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments 144,521 6.34% 2,289 130,192 5.45% 1,775
Loans
Commercial (1) 75,262 8.72% 1,640 64,790 7.87% 1,274
Mortgage (1) 214,701 8.58% 4,603 186,184 8.02% 3,732
Installment 48,233 9.29% 1,120 41,121 8.44% 868
Leasing 31,118 7.30% 568 26,437 7.60% 502
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans (2) 369,314 8.59% 7,931 318,532 8.01% 6,376
Total earning assets 513,835 7.96% 10,220 448,724 7.27% 8,151
Non Interest Bearing Assets
Cash & Due From Banks 13,040 - 10,649 -
Premises & Equipment 12,939 - 10,643 -
Other Assets 20,998 - 11,103 -
Allowance for Possible Loan Losses (3,735) - (3,365) -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Non-interest earning assets 43,242 - - 29,030 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $557,077 $10,220 $477,754 $8,151
=================================================================================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - interest-bearing $118,526 2.46% $ 730 $114,071 2.78% $ 793
Savings 72,610 3.64% 660 63,605 3.03% 482
Time 246,617 5.00% 3,083 184,913 4.86% 2,246
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 437,753 4.09% 4,473 362,589 3.88% 3,521
Short-term borrowings 8,546 5.90% 126 1,453 4.96% 18
Long-term borrowings 5,769 5.75% 83 19,906 5.08% 253
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 452,068 4.14% 4,682 383,948 3.95% 3,792
Demand - non-interest-bearing 49,822 - 38,490 -
Other liabilities 5,114 - 6,348 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 507,004 4,682 428,786 3,792
Shareholders' equity 50,073 - - 48,968 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $557,077 $ 4,682 $477,754 $3,792
=================================================================================
Interest income/earning assets 7.96% 10,220 7.27% 8,151
Interest expense/interest bearing liabilities 4.14% 4,682 3.95% 3,792
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Spread 3.81% $ 5,538 3.32% $4,359
====================== =====================
Interest Income/Interest Earning Assets 7.96% $10,220 7.27% $8,151
Interest expense/Interest Earning Assets 3.64% 4,682 3.38% 3,792
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin 4.31% $ 5,538 3.89% $4,359
====================== =====================
</TABLE>
(1) The amounts are reflected on a fully tax equivalent basis using the federal
statutory rate of 34% in 2000 and 1999, adjusted for certain tax
preferences.
(2) Average outstanding includes the average balance outstanding of all non-
accrual loans. Loans consist of the average of total loans less average
unearned income. The amount of loan fees included in the interest income on
loans is not material.
12
<PAGE>
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS FOR SECURITY HOLDERS VOTE
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports for the period ended March 31, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CNB FINANCIAL CORPORATION
(Registrant)
DATE: May 5, 2000 /s/ James P. Moore
-------------------- --------------------------
James P. Moore
President and Director
(Principal Executive Officer)
DATE: May 5, 2000 /s/ Joseph B. Bower, Jr.
--------------------- ---------------------------
Joseph B. Bower, Jr.
Treasurer
(Principal Financial Officer)
(Principal Accounting Officer)
13
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