FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
___________________
For Quarter Ended June 30, 2000 Commission file number: 2-96350
CNB Corporation
(Exact name of registrant as specified in its charter)
South Carolina 57-0792402
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
P.O. Box 320, Conway, South Carolina 29528
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (803) 248-5721
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d)of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X . No .
The number of shares outstanding of the issuer's $10.00 par value common
stock as of June 30, 2000 was 595,772.
<PAGE>
CNB Corporation
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 2000, 1
December 31, 1999 and June 30, 1999
Consolidated Statement of Income for the Three Months 2
and Six Months Ended June 30, 2000 and 1999
Consolidated Statement of Comprehensive Income 3
for the Three Months and Six Months Ended
June 30, 2000 and 1999
Consolidated Statement of Changes in Stockholders' 4
Equity for the Six Months Ended June 30, 2000
and 1999
Consolidated Statement of Cash Flows for the Six Months 5
Ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements 6-13
Item 2. Management's Discussion and Analysis of Financial 14-23
Condition and Results of Operations
Item 4. Submission of Matters to a Vote of Security Holders 23
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURE 24
<PAGE>
CNB Corporation and Subsidiary
Consolidated Balance Sheets
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
ASSETS:
<S> <C> <C> <C>
Cash and due from banks $ 23,182 $ 20,259 $ 16,962
Interest bearing deposits with banks 0 0 0
Investment Securities 46,865 54,868 59,216
(Fair values of $46,285 at
June 30, 2000, $54,430 at
December 31, 1999, and $59,323
at June 30, 1999)
Securities Available for Sale 86,389 89,151 92,261
(Amortized cost of $88,272 at
June 30, 2000, $90,834 at
December 31, 1999, and $93,303
at June 30, 1999)
Federal Funds sold and securities
purchased under agreement
to resell 13,625 11,150 32,950
Loans:
Gross Loans 290,529 267,416 252,321
Less unearned income (122) (275) (586)
Loans, net of unearned income 290,407 267,141 251,735
Less reserve for possible
loan losses (3,828) (3,451) (3,377)
Net loans 286,579 263,690 248,358
Bank premises and equipment 8,886 8,504 8,203
Other assets 8,798 8,080 7,900
Total assets 474,324 455,702 465,850
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing 85,890 72,728 76,852
Interest-bearing 297,510 302,775 310,060
Total deposits 383,400 375,503 386,912
Federal funds purchased and
securities sold under agreement
to repurchase 29,716 27,477 29,647
Other short-term borrowings 11,667 3,809 3,496
Other liabilities 2,705 5,201 2,601
Total liabilities 427,488 411,990 422,656
Stockholders' equity:
Common stock, par value $10 per
share: Authorized 1,500,000 in
2000 and 1999; issued 598,687
in 2000 and 1999 5,987 5,987 5,987
Surplus 24,557 24,546 24,546
Undivided Profits 17,733 14,467 13,414
Net Unrealized Holding (1,130) (1,011) (625)
Gains (Losses) on
Available-For-Sale Securities
Less: Treasury stock (311) (277) (128)
Total stockholders' equity 46,836 43,712 43,194
Total liabilities
and stockholders' equity 474,324 455,702 465,850
</TABLE>
1
<PAGE>
CNB Corporation and Subsidiary
Consolidated Statement of Income
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Interest Income:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 6,448 $ 5,362 $12,581 $ 10,459
Interest on investment securities:
Taxable investment securities 1,758 1,918 3,623 3,847
Tax-exempt investment securities 192 174 385 354
Other securities 50 3 50 3
Interest on federal funds sold and securities
purchased under agreement to resell 43 343 153 625
Total interest income 8,491 7,800 16,792 15,288
Interest Expense:
Interest on deposits 3,045 2,852 6,110 5,661
Interest on federal funds purchased and
securities sold under agreement to
repurchase 343 335 672 672
Interest on other short-term borrowings 113 16 139 30
Total interest expense 3,501 3,203 6,921 6,363
Net interest income 4,990 4,597 9,871 8,925
Provision for possible loan losses 240 180 480 330
Net interest income after provision for
possible loan losses 4,750 4,417 9,391 8,595
Other income:
Service charges on deposit accounts 685 627 1,368 1,239
Gains/(Losses) on securities 0 0 0 0
Other operating income 459 389 803 683
Total other income 1,144 1,016 2,171 1,922
Other expenses:
Salaries and employee benefits 2,015 1,866 4,046 3,709
Occupancy expense 474 446 925 835
Other operating expenses 890 812 1,740 1,542
Total operating expenses 3,379 3,124 6,711 6,086
Income before income taxes 2,515 2,309 4,851 4,431
Income tax provision 814 771 1,585 1,465
Net Income 1,701 1,538 3,266 2,966
Per share data:
Net income per weighted average shares
outstanding $ 2.86 $ 2.58 $ 5.48 $ 4.97
Cash dividend paid per share $ 0 $ 0 $ 0 $ 0
Book value per actual number of shares
outstanding $ 78.61 $ 72.31 $ 78.61 $ 72.31
Weighted average number of shares outstanding 596,427 597,275 596,427 597,275
Actual number of shares outstanding 595,772 597,386 595,772 597,386
</TABLE>
2
<PAGE>
CNB Corporation and Subsidiary
Consolidated Statement of Comprehensive Income
(All Dollar Amounts, Except Per Share Data, in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Income $1,701 $1,538 $3,266 $2,966
Other comprehensive income, net of tax
Unrealized gains/(losses)
on securities:
Unrealized holding gains/(losses) 91 (647) (119) (1,050)
during period
Net Comprehensive Income $1,792 $ 891 $3,147 $1,916
</TABLE>
3
<PAGE>
CNB Corporation and Subsidiary
Consolidated Statement of Changes in Stockholders' Equity
(All Dollar Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
<S> <C> <C>
Common Stock:
($10 par value; 500,000 shares authorized)
Balance, January 1 5,987 5,987
Issuance of Common Stock None None
Balance at end of period 5,987 5,987
Surplus:
Balance, January 1 24,546 24,538
Issuance of Common Stock None None
Gain on sale of treasury stock 11 8
Balance at end of period 24,557 24,546
Undivided profits:
Balance, January 1 14,467 10,448
Net Income 3,266 2,966
Cash dividends declared None None
Balance at end of period 17,733 13,414
Net unrealized holding gains/(losses) on
Available-for-sale securities:
Balance, January 1 (1,011) 425
Change in net unrealized gains/(Losses) (119) (1,050)
Balance at end of period (1,130) (625)
Treasury stock:
Balance, January 1 (277) (197)
Purchase of treasury stock (127) (70)
Reissue of treasury stock 93 139
Balance at end of period (311) (128)
Total stockholders' equity 46,836 43,194
</TABLE>
Note: Columns may not add due to rounding.
4
<PAGE>
CNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the six-month period ended June 30,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,266 $ 2,966
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 262 263
Provision for loan losses 480 330
Provision for deferred income taxes (231) (1,088)
Loss (gain) on sale of investment
securities 0 0
(Increase) decrease in accrued interest
receivable (524) (537)
(Increase) decrease in other assets 37 18
(Decrease) increase in other liabilities (655) (1,130)
Net cash provided by operating
activities 2,635 822
INVESTING ACTIVITIES
Proceeds from sale of investment securities
available for sale 0 0
Proceeds from maturities of investment
securities held to maturity 7,873 4,742
Proceeds from maturities of investment
securities available for sale 5,000 8,321
Purchase of investment securities held to
maturity 0 (3,310)
Purchase of investment securities
available for sale (2,108) (20,000)
Decrease (increase) in interest-bearing
deposits in banks 0 0
(Increase) decrease in federal funds sold (2,475) (5,850)
(Increase) decrease in loans (23,266) (22,606)
Premises and equipment expenditures (644) (1,208)
Net cash provided by (used for)
investing activities (15,620) (39,911)
FINANCING ACTIVITIES
Dividends paid (2,086) (2,090)
Increase (Decrease) in deposits 7,897 40,800
(Decrease) increase in securities sold
under repurchase agreement 2,239 (2,871)
(Decrease) increase in other
short-term borrowings 7,858 2,348
Net cash provided by (used for)
financing activities 15,908 38,187
Net increase (decrease) in cash
and due from banks 2,923 (902)
CASH AND DUE FROM BANKS, BEGINNING OF YEAR 20,259 17,864
CASH AND DUE FROM BANKS, JUNE 30, 2000 AND 1999 $23,182 $16,962
CASH PAID (RECEIVED) FOR:
Interest $ 7,415 $ 6,506
Income taxes $ 1,550 $ 1,431
</TABLE>
5
<PAGE>
CNB CORPORATION AND SUBSIDIARY (The "Corporation")
CNB CORPORATION (The "Parent")
THE CONWAY NATIONAL BANK (The "Bank")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Dollar Amounts in Thousands)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net income per share - Net income per share is computed on the basis of the
weighted average number of common shares outstanding, 596,427 for the
six-month period ended June 30, 2000 and 597,275 for the six-month period
ended June 30, 1999.
NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances either at the Bank
or on deposit with the Federal Reserve Bank. The average amount of these
reserve balances for the six-month period ended June 30, 2000 and for the
years ended December 31, 1999 and 1998 were approximately $8,772, $8,300,
and $6,839, respectively.
6
<PAGE>
NOTE 3 - INVESTMENT SECURITIES
Investment securities with a par value of approximately $74,045 at June 30,
2000 and $82,325 at December 31, 1999 were pledged to secure public deposits
and for other purposes required by law.
The following summaries reflect the book value, unrealized gains and losses,
approximate market value, and tax-equivalent yields of investment securities
at June 30, 2000 and at December 31, 1999.
<TABLE>
<CAPTION>
June 30, 2000
Book Unrealized Holding Fair
Value Gains Losses Value Yield(1)
<S> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE
United States Treasury
Within one year $ 4,992 $ 2 $ 9 $ 4,985 6.38%
One to five years 11,091 - 151 10,940 6.05
16,083 2 160 15,925 6.15
Federal agencies
Within one year 19,464 - 122 19,342 5.86%
One to five years 48,650 - 1,611 47,039 5.77
68,114 - 1,733 66,381 5.80
State, county and
Municipal
One to five years 259 - - 259 6.81%
Six to ten years 1,320 6 3 1,323 6.84
After ten years 1,102 7 2 1,107 7.54
2,681 13 5 2,689 7.12
Other Securities(Equity) 1,394 - - 1,394 -
Total available for sale $88,272 $ 15 $1,898 $86,389 5.90%
HELD TO MATURITY
United States Treasury
Within one year 1,009 - 16 993 5.76%
One to five years 1,009 - 16 993 5.76
Federal agencies
Within one year 9,985 2 31 9,956 6.47%
One to five years 22,167 1 436 21,732 6.30
32,152 3 467 31,688 6.35
State, county and
municipal
Within one year 2,106 8 2 2,112 7.58%
One to five years 7,053 16 61 7,008 6.40
Six to ten years 4,545 21 82 4,484 6.56
13,704 45 145 13,604 6.63
Total held to maturity $46,865 $ 48 $ 628 $46,285 6.42%
</TABLE>
(1) Tax equivalent adjustment based on a 34% tax rate.
As of the quarter ended June 30, 2000, the Bank did not hold any
securities of an issuer that exceeded 10% of stockholders' equity.
The net unrealized holding gains/(losses) on available-for-sale securities
component of capital is $(1,130) as of June 30, 2000.
7
<PAGE>
NOTE 3 - INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
December 31, 1999
Book Unrealized Holding Fair
Value Gains Losses Value Yield(1)
<S> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE
United States Treasury
Within one year $ 4,984 $ 11 $ 10 $ 4,985 6.38%
One to five years 10,117 - 114 10,003 5.99%
15,101 11 124 14,988 6.12%
Federal agencies
Within one year 11,461 - 38 11,423 5.96%
One to five years 61,746 5 1,533 60,218 5.79%
73,207 5 1,571 71,641 5.82%
State, county and
municipal
One to five years 1,132 1 5 1,128 6.96%
Other - restricted
Federal Reserve
Bank Stock 1,394 - - 1,394 6.96%
Total available for sale $90,834 $ 17 $ 1,700 $89,151 5.80%
HELD TO MATURITY
United States Treasury
Within one year 3,000 5 - 3,005 6.54%
One to five years 1,012 - 14 998 5.76%
4,012 5 14 4,003 6.35%
Federal agencies
Within one year 7,613 - 11 7,602 6.30%
One to five years 28,188 25 368 27,845 6.36%
35,801 25 379 35,447 6.35%
State, county and
municipal
Within one year 1,759 12 - 1,771 8.60%
One to five years 8,342 42 49 8,335 6.50%
Six to ten years 4,315 17 78 4,254 6.69%
After ten years 639 1 20 620 5.56%
15,055 72 147 14,980 6.76%
Total held to maturity $54,868 $ 102 $ 540 $54,430 6.46%
</TABLE>
(1) Tax equivalent adjustment based on a 34% tax rate
As of the quarter ended December 31, 1999, the Bank did
not hold any securities of an issuer that exceeded 10% of
stockholders' equity. The net unrealized holding
gains/(losses) on available-for-sale securities component
of capital is $(1,011) as of December 31, 1999.
8
<PAGE>
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES
The following is a summary of loans at June 30, 2000 and December 31,
1999 by major classification:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
Real estate loans - mortgage $ 183,235 $ 163,614
- construction 22,272 21,013
Commercial and industrial loans 47,222 45,742
Loans to individuals for household,
family and other consumer expenditures 34,084 33,864
Agriculture 2,074 1,447
All other loans, including overdrafts 1,642 1,736
Gross loans 290,529 267,416
Less unearned income (122) (275)
Less reserve for loan losses (3,828) (3,451)
Net loans 286,579 263,690
</TABLE>
9
<PAGE>
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES, continued
Changes in the reserve for loan losses for the quarter
ended and six-month period ended June 30, 2000 and 1999 and
the year ended December 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30, December 31,
2000 1999 2000 1999 1999
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $ 3,675 $ 3,199 $ 3,451 $ 3,132 $ 3,132
Charge-offs:
Commercial, financial,
and agricultural 16 61 30 84 254
Real Estate - construction
and mortgage 47 0 49 0 3
Loans to individuals 100 77 179 220 559
Total charge-offs $ 163 $ 138 $ 258 $ 304 $ 816
Recoveries:
Commercial, financial, and
Agricultural $ 49 $ 48 $ 67 $ 82 $ 103
Real Estate - construction
and mortgage 9 11 19 11 21
Loans to individuals 18 77 69 126 216
Total recoveries $ 76 $ 136 $ 155 $ 219 $ 340
Net charge-offs/(recoveries) $ 87 $ 2 $ 103 $ 85 $ 476
Additions charge to operations $ 240 $ 180 $ 480 $ 330 $ 795
Balance, end of period $ 3,828 $ 3,377 $ 3,828 $ 3,377 $ 3,451
Ratio of net charge-offs during
the period to average loans
outstanding during the period .03% .00% .04% .04% .19%
</TABLE>
The entire balance is available to absorb future loan losses.
At June 30, 2000 and December 31, 1999 loans on which no interest was
being accrued totalled approximately $200 and $527, respectively and
foreclosed real estate totalled $0 and $0, respectively; and loans 90 days
past due and still accruing totalled $182 and $142, respectively.
OTHER INTEREST-BEARING ASSETS
As of June 30, 2000, the Company does not have any interest-bearing assets that
would be required to be disclosed under Item III.C.1. or 2. if such assets
were loans.
10
<PAGE>
NOTE 5 - PREMISES AND EQUIPMENT
Property at June 30, 2000 and December 31, 1999 is
summarized as follows:
June 30, December 31,
2000 1999
Land and buildings $ 10,464 $ 10,460
Furniture, fixtures and equipment 5,766 5,635
Construction in progress 978 469
$ 17,208 $ 16,564
Less accumulated depreciation and
amortization 8,322 8,060
$ 8,886 $ 8,504
Depreciation and amortization of bank premises and equipment
charged to operating expense was $131 and $262 for the quarter ended
and the six month period ended June 30, 2000, respectively and $576 for
the year ended December 31, 1999.
NOTE 6 - CERTIFICATES OF DEPOSIT IN EXCESS OF $100,000
At June 30, 2000 and December 31, 1999, certificates of deposit of
$100,000 or more included in time deposits totaled approximately $65,924
and $71,309 respectively. Interest expense on these deposits was
approximately $847 and $1,771 for the quarter ended and the six-month
period ended June 30, 2000 and $3,513 for the year ended December 31, 1999.
NOTE 7 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
At June 30, 2000 and December 31, 1999, securities sold under
repurchase agreements totaled approximately $29,716 and $27,477. U.S.
Government securities with a book value of $34,577 ($33,814 market
value) and $34,588 ($34,121 market value), respectively, are used as
collateral for the agreements. The weighted-average interest rate of
these agreements was 4.56 percent and 4.34 percent at June 30, 2000 and
December 31, 1999.
NOTE 8 - LINES OF CREDIT
At June 30, 2000, the Bank had unused short-term lines of credit to
purchase Federal Funds from unrelated banks totaling $23,000. These lines
of credit are available on a one to seven day basis for general
corporate purposes of the Bank. All of the lenders have reserved the right
to withdraw these lines at their option.
The Bank has a demand note through the U.S. Treasury, Tax and Loan
system with the Federal Reserve Bank of Richmond. The Bank may borrow up
to $7,000 under the arrangement at a variable interest rate. The note is
secured by U.S. Treasury and Agency Notes with a market value of $7,757 at
June 30, 2000. The amount outstanding under the note totaled $5,667
and $3,809 at June 30, 2000 and December 31, 1999, respectively.
The Bank also has a line of credit from the Federal Home Loan Bank of
Atlanta for $67 million secured by a lien on the Bank's 1-4 family mortgages.
Allowable terms range from overnight to 20 years at varying rates set daily
by the FHLB. An advance of $6,000 and $0 was outstanding at June 30, 2000
and December 31, 1999, respectively.
NOTE 9 - INCOME TAXES
Income tax expense for the quarter ended June 30, 2000 and June 30, 1999
on pretax income of $2,515 and $2,309 totalled $814 and $771 respectively.
Income tax expense for the six-month period ended June 30, 2000 and June 30,
1999 on pretax income of $4,851 and $4,431 totalled $1,585 and $1,465
respectively. The provision for federal income taxes is calculated by
applying the 34% statutory federal income tax rate and increasing or
reducing this amount due to any tax-exempt interest, state bank tax (net
of federal benefit), business credits, surtax exemption,tax preferences,
alternative minimum tax calculations, or other factor. A summary of
income tax components and a reconciliation of income taxes to the
federal statutory rate are included in fiscal year-end reports.
11
<PAGE>
NOTE 9 - INCOME TAXES (Continued)
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES
From time to time the bank subsidiary is a party to various
litigation, both as plaintiff and as defendant, arising from its normal
operations. No material losses are anticipated in connection with any of
these matters at June 30, 2000.
Also, in the normal course of business, the bank subsidiary has
outstanding commitments to extend credit and other contingent liabilities,
which are not reflected in the accompanying financial statements. At June 30,
2000, commitments to extend credit totalled $24,287; financial standby letters
of credit totalled $546; and performance standby letters of credit totalled
$515. In the opinion of management, no material losses or liabilities are
expected as a result of these transactions.
NOTE 11 - EMPLOYEE BENEFIT PLAN
The Bank has a defined contribution pension plan covering all employees
who have attained age twenty-one and have a minimum of one year of service.
Upon ongoing approval of the Board of Directors, the Bank matches one hundred
percent of employee contributions up to three percent of employee salary
deferred and fifty percent of employee contributions in excess of three
percent and up to five percent of salary deferred. The Board of Directors
may also make discretionary contributions to the Plan. For the three-month
and six month period ended June 30, 2000 and years ended December 31, 1999,
1998 and 1997, $115, $227, $423, $378, and $361, respectively, was charged to
operations under the plan.
NOTE 12 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary - actions by regulators that, if undertaken, could have a direct
material effect on the financial statements. The regulations require the
Bank to meet specific capital adequacy guidelines that involve quantitative
measures of assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The capital classification
is also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the maintenance of minimum amounts and ratios (set forth
in the table below) of Tier I capital to adjusted total assets (Leverage
Capital ratio) and minimum ratios of Tier I and total capital to
risk-weighted assets. To be considered adequately capitalized under the
regulatory framework for prompt corrective action, the Bank must maintain
minimum Tier I leverage, Tier I risk-based and total risked-based ratios
as set forth in the table. The Bank's actual capital ratios are presented
in the table below as of June 30, 2000:
To be
well capitalized
For under prompt
capital adequacy corrective action
purposes provisions
Actual Minimum Minimum
Amount Ratio Amount Ratio Amount Ratio
Total Capital (to risk $48,791 16.29% $23,955 8.0% $29,944 10.0%
weighted assets)
Tier I Capital (to risk 45,048 15.04 11,977 4.0 17,966 6.0
weighted assets)
Tier I Capital (to avg. 45,048 9.82 18,356 4.0 22,944 5.0
assets)
12
<PAGE>
NOTE 13 - CONDENSED FINANCIAL INFORMATION
Following is condensed financial information of CNB Corporation
(parent company only):
CONDENSED BALANCE SHEET
JUNE 30, 2000
(Unaudited)
ASSETS
Cash $ 2,095
Investment in subsidiary 43,917
Fixed assets 786
Other assets 37
$ 46,835
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liability $ 0
Stockholders' equity 46,835
$ 46,835
CONDENSED STATEMENT OF INCOME
For the six-month period ended June 30, 2000
(Unaudited)
EQUITY IN NET INCOME OF SUBSIDIARY $ 3,303
OTHER INCOME 1
OTHER EXPENSES (38)
Net Income $ 3,266
DISCUSSION OF FORWARD-LOOKING STATEMENTS
Information in the enclosed report, other than historical information,
may contain forward-looking statements that involve risks and
uncertainties, including, but not limited to, timing of certain business
initiatives of the Company, the Company's interest rate risk condition, and
future regulatory actions of the Comptroller of the Currency and Federal
Reserve System. It is important to note that the Company's actual
results may differ materially and adversely from those discussed in
forward-looking statements.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis is provided to afford a clearer
understanding of the major elements of the corporation's results
of operations, financial condition, liquidity, and capital resources.
The following discussion should be read in conjunction with the
corporation's financial statements and notes thereto and other detailed
information appearing elsewhere in this report. In addition, the results
of operations for the interim periods shown in this report are not necessarily
indicative of results to be expected for the fiscal year. In the opinion of
management, the information contained herein reflects all adjustments
necessary to make the results of operations for the interim periods a
fair statement of such operations. All such adjustments are of a normal
and recurring nature.
DISTRIBUTION OF ASSETS AND LIABILITIES
The Company maintains a conservative approach in determining the
distribution of assets and liabilities. Loans, net of unearned income,
have increased 15.4% from $251,735 at June 30, 1999 to $290,407 at June 30,
2000 and have increased as a percentage of total assets from 54.0% to 61.2%
over the same period as loan demand remains strong in our market. Securities
and federal funds sold have decreased as a percentage of total assets from
39.6% at June 30, 1999 to 31.0% at June 30, 2000 as we have utilized funds
in the lending area. This level of investments and federal funds sold provides
for a more than adequate supply of secondary liquidity. Management has sought
to build the deposit base with stable, relatively non-interest-sensitive
deposits by offering the small to medium deposit account holders a wide
array of deposit instruments at competitive rates. Non-interest-bearing
demand deposits increased as a percentage of total assets from 16.5% at June
30, 1999 to 18.1% at June 30, 2000. However, as more customers, both
business and personal, are attracted to interest-bearing deposit accounts,
we expect the percentage of demand deposits to decline over the long-term.
Interest-bearing deposits have decreased slightly from 66.5% of total assets
at June 30, 1999 to 62.7% at June 30, 2000 while securities sold under
agreement to repurchase have decreased from 6.4% to 6.3% over the same
period. Other short-term borrowings have increased from .8% of total assets
at June 30, 1999 to 2.4% at June 30, 2000 due primarily to a $6,000 FHLB
advance outstanding at June 30, 2000.
The following table sets forth the percentage relationship to total assets
of significant components of the corporation's balance sheet as of June 30,
2000 and 1999:
<TABLE>
<CAPTION>
June 30,
<S> <C> <C>
Assets: 2000 1999
Earning assets:
Loans, net of unearned income 61.2% 54.0%
Investment securities 9.9 12.7
Securities Available for Sale 18.2 19.8
Federal funds sold and securities purchased
under agreement to resell 2.9 7.1
Other earning assets - -
Total earning assets 92.2 93.6
Other assets 7.8 6.4
Total assets 100.0% 100.0%
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits 62.7% 66.5%
Federal funds purchased and securities sold
under agreement to repurchase 6.3 6.4
Other short-term borrowings 2.4 .8
Total interest-bearing liabilities 71.4 73.7
Noninterest-bearing deposits 18.1 16.5
Other liabilities .6 .5
Stockholders' equity 9.9 9.3
Total liabilities and stockholders' equity 100.0% 100.0%
</TABLE>
14
<PAGE>
RESULTS OF OPERATION
CNB Corporation experienced earnings for the three-month period ended
June 30, 2000 and 1999 of $1,701 and $1,538, respectively, resulting in a
return on average assets of 1.48% and 1.37% and a return on average
stockholders' equity of 14.83% and 14.35%.
CNB Corporation experienced earnings for the six-month period ended June 30,
2000 and 1999 of $3,266 and $2,966, respectively, resulting in a return on
average assets of 1.43% and 1.35% and a return on average stockholders' equity
of 14.44% and 14.01%.
The earnings were primarily attributable to net interest margins in
each period (see Net Income-Net Interest Income). Other factors include
management's ongoing effort to maintain other income at adequate levels
(see Net Income - Other Income) and to control other expenses (see Net
Income - Other Expenses). This level of earnings, coupled with
a conservative dividend policy, have supplied the necessary capital
funds to support the growth in total assets. Total assets have increased
$8,474 or 1.8% from $465,850 at June 30, 1999 to $474,324 at June 30, 2000.
The following table sets forth the financial highlights for the three-month
and six-month periods ending June 30, 2000 and June 30, 1999:
CNB Corporation
CNB Corporation and Subsidiary
FINANCIAL HIGHLIGHTS
(All Dollar Amounts, Except Per Share Data, in Thousands)
<TABLE>
<CAPTION>
Three-Month Period Six-Month Period
Ended June 30, Ended June 30,
Percent Percent
Increase Increase
2000 1999 (Decrease) 2000 1999 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Net interest income after
provision for loan losses 4,750 4,417 7.5% 9,391 8,595 9.3%
Income before income taxes 2,515 2,309 8.9 4,851 4,431 9.5
Net Income 1,701 1,538 10.6 3,266 2,966 10.1
Per Share 2.86 2.58 10.9 5.48 4.97 10.3
Cash dividends declared 0 0 - 0 0 -
Per Share 0 0 - 0 0 -
Total assets 474,324 465,850 1.8% 474,324 465,850 1.8%
Total deposits 383,400 386,912 (.9) 383,400 386,912 (.9)
Loans, net of unearned income 290,407 251,735 15.4 290,407 251,735 15.4
Investment securities and
securities available for
sale 133,254 151,477 (12.0) 133,254 151,477 (12.0)
Stockholders' equity 46,836 43,194 8.4 46,836 43,194 8.4
Book value per share 78.61 72.31 8.7 78.61 72.31 8.7
Ratios (1):
Annualized return on average
total assets 1.48% 1.37% 8.0% 1.43% 1.35% 5.9%
Annualized return on average
stockholders' equity 14.83% 14.35% 3.3% 14.44% 14.01% 3.1%
</TABLE>
(1) For the three-month period ended June 30, 2000 and June 30, 1999,
average total assets amounted to $459,712 and $448,423 with average
stockholders' equity totaling $45,871 and $42,880, respectively. For
the six-month period ended June 30, 2000 and June 30, 1999, average
total assets amounted to $456,148 and $440,680 with average
stockholders' equity totaling $45,229 and $42,317 respectively.
15
<PAGE>
NET INCOME
Net Interest Income - Earnings are dependent to a large degree on net
interest income, defined as the difference between gross interest and
fees earned on earning assets, primarily loans and securities, and interest
paid on deposits and borrowed funds. Net interest income is effected
by the interest rates earned or paid and by volume changes in loans,
securities, deposits, and borrowed funds.
Interest rates paid on deposits and borrowed funds and earned on loans and
investments have generally followed the fluctuations in market interest
rates in 2000 and 1999. However, fluctuations in market interest rates
do not necessarily have a significant impact on net interest income, depending
on the bank's rate sensitivity position. A rate sensitive asset (RSA) is
any loan or investment that can be repriced either up or down in interest
rate within a certain time interval. A rate sensitive liability (RSL) is an
interest paying deposit or other liability that can be repriced either
up or down in interest rate within a certain time interval. When a proper
balance between RSA and RSL exists, market interest rate fluctuations
should not have a significant impact on earnings. The larger the imbalance,
the greater the interest rate risk assumed by the bank and the greater
the positive or negative impact of interest rate fluctuations on earnings.
The bank seeks to manage its assets and liabilities in a manner that will limit
interest rate risk and thus stabilize longrun-earning power. Management
believes that a rise or fall in interest rates will not materially effect
earnings.
The Bank has maintained adequate net interest margins for the three-month and
six-month periods ended June 30, 2000 and 1999 by earning satisfactory yields
on loans and securities and funding these assets with a favorable deposit mix
containing a significant level of noninterest-bearing demand deposits.
Fully-tax-equivalent net interest income showed an 8.6% increase from
$4,686 for the three-month period ended June 30, 1999 to $5,089 for the
three-month period ended June 30, 2000. During the same period, total
fully-tax-equivalent interest income increased by 8.9% from $7,889 to
$8,590 and total interest expense increased by 9.3% from $3,203 to
$3,501. Fully-tax-equivalent net interest income as a percentage of total
earning assets has shown an increase of .33% from 4.46% for the three-month
period ended June 30, 1999 to 4.79% for the three-month period ended June
30, 2000.
Fully-tax-equivalent net interest income showed a 10.6% increase from
$9,107 for the six-month period ended June 30, 1999 to $10,069 for the
six-month period ended June 30, 2000. During the same period, total
fully-tax-equivalent interest income increased by 9.8% from $15,470 to $16,990
and total interest expense increased by 8.8% from $6,363 to $6,921.
Fully-tax-equivalent net interest income as a percentage of total earning
assets has shown an increase of .32% from 4.42% for the six-month period ended
June 30, 1999 to 4.74% for the six-month period ended June 30, 2000.
The tables on the following four pages present selected financial data
and an analysis of net interest income.
16
<PAGE>
CNB Corporation and Subsidiary
Selected Financial Data
<TABLE>
<CAPTION>
Three Months Ended 6/30/00 Three Months Ended 6/30/99
Avg. Interest Avg. Ann. Avg. Interest Avg.Ann
Balance Income/ Yield or Balance Income/ Yield or
Expense(1) Rate Expense(1) Rate
<S> <C> <C> <C> <C> <C> <C>
Assets:
Earning assets:
Loans, net of unearned income $285,963 $ 6,448 9.02% $245,927 $ 5,362 8.72%
Securities:
Taxable 119,929 1,808 6.03 131,552 1,921 5.84
Tax-exempt 16,203 291 7.18 14,568 263 7.22
Federal funds sold and
securities purchased under
agreement to resell 2,803 43 6.14 28,216 343 4.86
Other earning assets 0 0 - 0 0 -
Total earning assets 424,898 8,590 8.09 420,263 7,889 7.51
Other assets 34,814 28,160
Total assets $459,712 $448,423
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits $291,881 3,045 4.17 $296,121 $ 2,852 3.85
Federal funds purchased and
securities sold under
agreement to repurchase 28,716 343 4.78 32,479 335 4.13
Other short-term borrowings 8,545 113 5.29 1,5581 6 4.11
Total interest-bearing
Liabilities $329,142 $ 3,501 4.25 $330,158 $ 3,203 3.88
Noninterest-bearing deposits 81,233 74,829
Other liabilities 3,466 556
Stockholders' equity 45,871 42,880
Total liabilities and
stockholders' equity $459,712 $448,423
Net interest income as a percent
of total earning assets $424,898 $ 5,089 4.79 $420,263$ 4,686 4.46
(1) Tax-equivalent adjustment
based on a 34% tax rate $ 99 $ 89
</TABLE>
<TABLE>
<S> <C> <C>
Ratios:
Annualized return on average total assets 1.48 1.37
Annualized return on average stockholders' equity 14.83 14.35
Cash dividends declared as a percent of net income 0 0
Average stockholders' equity as a percent of:
Average total assets 9.98 9.56
Average total deposits 12.29 11.56
Average loans, net of unearned income 16.04 17.44
Average earning assets as a percent of
average total assets 92.43 93.72
</TABLE>
17
<PAGE>
CNB Corporation and Subsidiary
Selected Financial Data
<TABLE>
<CAPTION>
Six Months Ended 6/30/00 Six Months Ended 6/30/99
Avg. Interest Avg. Ann. Avg. Interest Avg.Ann.
Balance Income/ Yield or Balance Income/ Yield or
Expense(1) Rate Expense(1) Rate
<S> <C> <C> <C> <C> <C> <C>
Assets:
Earning assets:
Loans, net of unearned income $278,918 $12,581 9.02% $239,738 $10,459 8.73%
Securities:
Taxable 123,951 3,673 5.93 131,621 3,850 5.85
Tax-exempt 16,203 583 7.20 14,657 536 7.31
Federal funds sold and
securities purchased under
agreement to resell 5,398 153 5.67 26,145 625 4.78
Other earning assets 0 0 - 0 0 -
Total earning assets 424,470 16,990 8.01 412,161 15,470 7.51
Other assets 31,678 28,519
Total assets $456,148 $440,680
Liabilities and stockholders equity
Interest-bearing liabilities:
Interest-bearing deposits $296,540 6,110 4.12 $291,218 5,661 3.89
Federal funds purchased and
securities sold under
agreement to repurchase 28,864 672 4.66 32,803 672 4.10
Other short-term borrowings 5,070 139 5.48 1,311 30 4.58
Total interest-bearing
liabilities $330,474 $ 6,921 4.19 $325,332 $ 6,363 3.91
Noninterest-bearing deposits 77,064 70,650
Other liabilities 3,381 2,381
Stockholders' equity 45,229 42,317
Total liabilities and
stockholders' equity $456,148 $440,680
Net interest income as a percent
of total earning assets $424,470 $10,069 4.74 $412,161 $ 9,107 4.42
(1) Tax-equivalent adjustment
based on a 34% tax rate $ 198 $ 182
</TABLE>
<TABLE>
<S> <C> <C>
Ratios:
Annualized return on average total assets 1.43 1.35
Annualized return on average stockholders' equity 14.44 14.01
Cash dividends declared as a percent of net income 0 0
Average stockholders' equity as a percent of:
Average total assets 9.92 9.60
Average total deposits 12.11 11.69
Average loans, net of unearned income 16.22 17.65
Average earning assets as a percent of
average total assets 93.06 93.53
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Three Months Ended June 30, 2000 and 1999
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Change
Average Average Interest Interest Change Change Due To
Volume Volume Yield/Rate Yield/Rate Earned/Paid Earned/Paid Due to Due To Rate X
2000 1999 2000 (1) 1999 (1) 2000 (1) 1999 (1) Variance Rate Volume Volume
Earning Assets:
Loans, Net of unearned
income (2) 285,963 245,927 9.02% 8.72% 6,448 5,362 1,086 184 873 29
Investment securities:
Taxable 119,929 131,552 6.03% 5.84% 1,808 1,921 (113) 62 (170) (5)
Tax-exempt 16,203 14,568 7.18% 7.22% 291 263 28 (1) 29 -
Federal funds sold and
securities purchased under
agreement to resell 2,803 28,216 6.14% 4.86% 43 343 (300) 90 (309) (81)
Other earning assets 0 0 - - 0 0 - - - -
Total Earning Assets 424,898 420,263 8.09% 7.51% 8,590 7,889 701 335 423 (57)
Interest-bearing Liabilities:
Interest-bearing deposits 291,881 296,121 4.17% 3.85% 3,045 2,852 193 237 (41) (3)
Federal funds purchased and
securities sold under
agreement to repurchase 28,716 32,479 4.78% 4.13% 343 335 8 53 (39) (6)
Other short-term borrowings 8,545 1,558 5.29% 4.11% 113 16 97 6 721 9
Total Interest-bearing
Liabilities 329,142 330,158 4.25% 3.88% 3,501 3,203 298 296 (8) 10
Interest-free Funds
Supporting Earning Assets 95,756 90,105
Total Funds Supporting
Earning Assets 424,898 420,263 3.30% 3.05% 3,501 3,203 298 296 (8) 10
Interest Rate Spread 3.84% 3.63%
Impact of Non-interest-bearing
Funds on Net Yield on Earning
Assets .95% .83%
Net Yield on Earning Assets 4.79% 4.46% 5,089 4,686
</TABLE>
(1) Tax-equivalent adjustment based on a 34% tax rate.
(2) Includes non-accruing loans which does not have a material effect on the
Net Yield on Earning Assets.
19
<PAGE>
<TABLE>
<CAPTION>
CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Six Months Ended June 30, 2000 and 1999
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Change
Average Average Interest Interest Change Change Due To
Volume Volume Yield/Rate Yield/Rate Earned/Paid Earned/Paid Due to Due To Rate X
2000 1999 2000 (1) 1999 (1) 2000 (1) 1999 (1) Variance Rate Volume Volume
Earning Assets:
Loans, Net of unearned
income (2) 278,918 239,738 9.02% 8.73% 12,581 10,459 2,122 347 1,710 65
Investment securities:
Taxable 123,951 131,621 5.93% 5.85% 3,673 3,850 (177) 52 (224) (5)
Tax-exempt 16,203 14,657 7.20% 7.31% 583 536 47 (8) 56 (1)
Federal funds sold and
securities purchased under
agreement to resell 5,398 26,145 5.67% 4.78% 153 625 (472) 116 (496) (92)
Other earning assets 0 0 - - 0 0 - - - -
Total Earning Assets 424,470 412,161 8.01% 7.51% 16,990 15,470 1,520 507 1,046 (33)
Interest-bearing Liabilities:
Interest-bearing deposits 296,540 291,218 4.12% 3.89% 6,110 5,661 449 335 104 10
Federal funds purchased and
securities sold under
agreement to repurchase 28,864 32,803 4.66% 4.10% 672 672 0 92 (81) (11)
Other short-term borrowings 5,070 1,311 5.48% 4.58% 139 30 109 6 86 17
Total Interest-bearing
Liabilities 330,474 325,332 4.19% 3.91% 6,921 6,363 558 433 109 16
Interest-free Funds
Supporting Earning Assets 93,996 86,829
Total Funds Supporting
Earning Assets 424,470 412,161 3.27% 3.09% 6,921 6,363 558 433 109 16
Interest Rate Spread 3.82% 3.60%
Impact of Non-interest-bearing
Funds on Net Yield on Earning
Assets .92% .82%
Net Yield on Earning Assets 4.74% 4.42% 10,069 9,107
</TABLE>
(1) Tax-equivalent adjustment based on a 34% tax rate.
(2) Includes non-accruing loans which does not have a material effect on the
Net Yield on Earning Assets.
20
<PAGE>
NET INCOME (continued)
Provision for Possible Loan Losses - It is the policy of the bank to
maintain the reserve for possible loan losses at the greater of 1.20% of net
loans or the percentage based on the actual loan loss experience over the
previous five years. In addition, management may increase the reserve to a
level above these guidelines to cover potential losses identified in the
portfolio.
The provision for possible loan losses was $240 for the three-month period ended
June 30, 2000 and $180 for the three-month period ended June 30, 1999. Net loan
charge-offs/(recoveries) totaled $87 for the three-month period ended June 30,
2000 and $2 for the same period in 1999.
The provision for possible loan losses was $480 for the six-month period ended
June 30, 2000 and $330 for the six-month period ended June 30, 1999. Net loan
charge-offs/(recoveries) totaled $103 for the six-month period ended June 30,
2000 and $85 for the same period in 1999.
The reserve for possible loan losses as a percentage of net loans was 1.34%
at June 30, 2000 and 1.36% at June 30, 1999. The increased provision during
the six-month period ended June 30, 2000 was due to continued strong loan growth
during 2000.
Securities Transactions - The Bank had no security sales during the
first half of 2000 or 1999. At June 30, 2000, December 31, 1999, and
June 30, 1999 market value appreciation/(depreciation) in the securities
portfolio totaled $(2,463), $(2,121), and $(935). As indicated, market value
has decreased in 1999 and 2000 due to rising market interest rates.
Other Income - Other income, net of any gains/losses on security
transactions, increased by 12.6% from $1,016 for the three-month period ended
June 30, 1999 to $1,144 for the three-month period ended June 30, 2000.
Other income, net of any gains/losses on security transactions,
increased by 13.0% from $1,922 for the six-month period ended June 30, 1999
to $2,171 for the six-month period ended June 30, 2000.
This increase in the three-month and six-month period ended June 30, 2000
was due to an increase in deposit account volumes and higher merchant
discount income.
Other Expenses - Other expenses increased by 8.2% from $3,124 for the
three-month period ended June 30, 1999 to $3,379 for the three-month period
ended June 30, 2000. The major components of other expenses are salaries
and employee benefits which increased 8.0% from $1,866 to $2,015; occupancy
expense which increased 6.3% from $446 to $474; and other operating expenses
which increased by 9.6% from $812 to $890.
Other expenses increased by 10.3% from $6,086 for the six-month period
ended June 30, 1999 to $6,711 for the six-month period ended June 30, 2000.
The major components of other expenses are salaries and employee benefits
which increased 9.1% from $3,709 to $4,046; occupancy expense which increased
10.8% from $835 to $925; and other operating expense which increased by 12.8%
from $1,542 to $1,740.
21
<PAGE>
The increase in the three-month and six-month period ended June 30, 2000
salaries and employee benefits and occupancy expense was due to the opening
of the new "Murrells Inlet Office" in the spring of 2000 and increases in
the cost to provide employee benefits - particularly health insurance
coverage. Other operating expenses have shown an increase due to higher credit
card department related costs to support the strong growth in merchant discount
income.
Income Taxes - Provisions for income taxes increased 5.6% from $771 for the
three-month period ended June 30, 1999 to $814 for the three-month period
ended June 30, 2000. Income before income taxes less interest on tax-exempt
investment securities increased by 8.8% from $2,135 for the three-month period
ended June 30, 1999 to $2,323 for the same period in 2000. State tax liability
increased as income before income taxes increased 8.9% from $2,309 to $2,515
during the same period.
Provisions for income taxes increased 8.2% from $1,465 for the six-month period
ended June 30, 1999 to $1,585 for the six-month period ended June 30, 2000.
Income before income taxes less interest on tax-exempt investment securities
increased by 9.5% from $4,077 for the six-month period ended June 30, 1999
to $4,466 for the same period in 2000 and state tax liability increased as
income before income taxes increased 9.5% from $4,431 to $4,851 during the same
period.
LIQUIDITY
The bank's liquidity position is primarily dependent on short-term demands for
funds caused by customer credit needs and deposit withdrawals and upon the
liquidity of bank assets to meet these needs. The bank's liquidity sources
include cash and due from banks, federal funds sold and short-term
investments. In addition, the bank has established federal funds lines of
credit from correspondent banks and has the ability to borrow funds from the
Federal Reserve System and the Federal Home Loan Bank of Atlanta. Management
feels that short-term and long-term liquidity sources are more than adequate
to meet funding needs.
CAPITAL RESOURCES
Total stockholders' equity was $46,836, $43,712, $41,201 and $37,717 at June
30, 2000, December 31, 1999, December 31, 1998, and December 31, 1997,
representing 9.87%, 9.59%, 9.66%, and 9.90% of total assets, respectively. At
June 30, 2000, the Bank exceeds quantitative measures established by
regulation to ensure capital adequacy (see NOTE 12 - REGULATORY MATTERS).
Capital is considered sufficient by management to meet current and prospective
capital requirements and to support anticipated growth in bank operations.
The Company paid an approximate 25% stock dividend on September 12, 1997. The
Board increased the $3.00 per share annual cash dividend paid at year-end 1997
to $3.50 per share at year-end 1998 which increased the cash dividend payout
ratio and cash dividend yield.
22
<PAGE>
EFFECTS OF REGULATORY ACTION
The Federal Deposit Insurance Corporation (FDIC) reduced FDIC insurance premium
rates during the third quarter of 1995 which has had a positive effect on
subsequent earnings and should favorably impact future year's income.
Effective March 11, 2000, the Gramm-Leach-Bliley Act of 1999 allows bank
holding companies to elect to be treated as financial holding companies which
may engage in a broad range of securities, insurance, and other financial
activities. At this time, neither the Company nor the Bank plan to enter
these new lines of business. The management of the Company and the Bank is
not aware of any current recommendations by the regulatory authorities which,
if they were to be implemented, would have a material effect on liquidity,
capital resources, or operations.
ACCOUNTING ISSUES
In June 1998, the FASB issued SFAS 133 as amended, "Accounting for Derivative
Instrument and Hedging Activities". All derivatives are to be measured at fair
value and recognized in the balance sheet as assets or liabilities. The
statement is effective for fiscal years and quarters beginning after June 15,
2000. Because the Company does not use derivative transactions at this time,
management does not expect that this standard will have a significant effect
on the Company.
YEAR 2000
The Year 2000 date change posed a unique challenge to the banking industry.
This technical problem posed not only a physical system threat but also
a threat to the public's confidence in the banking industry. The Conway
National Bank's investment of its staff and financial resources to address
operational issues and to maintain the confidence of our customers resulted in
an uneventful but successful Year 2000 date change.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An Annual Meeting of shareholders of CNB Corporation was held in the mainoffice
building of The Conway National Bank at 1400 Third Avenue, Conway, South
Carolina, at 4:15 p.m., Conway, South Carolina time, on May 9, 2000.
The purpose of the Annual Meeting was to: (1) elect four Directors; and
(2) ratify the appointment of Elliott, Davis, and Company, Certified Public
Accountants, as the Company's independent public accountant for the fiscal
year ending December 31, 2000.
Proxies for the meeting were solicited pursuant to Regulation 14 under the Act;
there was no solicitation in opposition to the management's nominees as listed
in the proxy statement; and all of such nominees were elected.
There were 400,861 of the 596,494 shares issued present or represented by
proxy and all shares were voted for the election of the four Directors
listed as management's nominees in the proxy statement; and for the ratification
of Elliott, Davis, and Company as the Company's 2000 independent public
accountant.
23
<PAGE>
EXHIBITS AND REPORTS ON FORM 8-K
See Exhibit Index appearing below.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter covered by this report.
EXHIBIT INDEX
Exhibit
Number
27 Financial Data Schedule - Article 9 Financial Data Schedule
for 10-Q for electronic filers (pages 25 and 26).
All other exhibits, the filing of which are required with this Form, are not
applicable.
CNB Corporation
SIGNATURE
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 Corporation
(Registrant)
Paul R. Dusenbury
_________________________________________
Paul R. Dusenbury
Treasurer
(Chief Financial and Accounting Officer)
Date: August 11, 2000
24
<PAGE>