<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
---------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File # 0-28388
CNB CORPORATION
(Exact name of small business issuer as specified in its charter)
MICHIGAN 38-2662386
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
303 NORTH MAIN STREET, CHEBOYGAN, MI 49721
(Address of principal executive offices, including Zip code)
(616) 627-7111
Issuer's telephone number, including area code
Check whether the issuer (1) filed all reports required to be filed by Section
13 o 15(d) of the Exchange Act during the past 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 ____ NO ____
As of August 9, 1996, there were outstanding 930,772 shares of the issuer's
common stock, $2.50 par value.
<PAGE> 2
CROSS REFERENCE TABLE
ITEM NO. DESCRIPTION PAGE NO.
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Condensed)
(a) Consolidated Balance Sheet 2
(b) Consolidated Statement of Income 3
(c) Consolidated Statement of Changes in Shareholder
Equity 4
(d) Consolidated Statement of Cash Flows 5
(e) Notes to Financial Statements 6
Item 2. Managements Discussion and Analysis
Financial Condition 8
Liquidity and Funds management 9
Results of Operations 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Signatures 15
Page 1
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(A) CONSOLIDATED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------------------
June 30 December 31
1996 1995
In thousands of dollars
============================================================================================
<S> <C> <C>
ASSETS
Cash and demand balances in other banks $ 5,444 $ 7,340
Federal funds sold 3,950 7,950
-------- --------
Total cash and cash equivalents 9,394 15,290
Securities available for sale 11,417 11,821
Securities held to maturity (fair value of
$51,429 and $47,325 respectively) 51,577 47,011
-------- --------
Total securities 62,994 58,832
Total loans 94,988 88,147
Less: allowance for loan losses (1,326) (1,306)
-------- --------
93,662 86,841
Premises and equipment, net 1,958 1,945
Accrued interest receivable and other assets 4,146 3,652
-------- --------
TOTAL ASSETS $172,154 $166,560
======== ========
LIABILITIES
Deposits
Noninterest bearing $ 20,843 $ 20,778
Interest bearing 132,702 127,371
-------- --------
Total deposits 153,545 148,149
Accrued interest payable and other liabilities 1,828 2,160
-------- --------
TOTAL LIABILITIES 155,373 150,309
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value; 1,000,000 shares authorized;
930,772 shares issued and outstanding 2,327 2,327
Capital surplus 4,979 4,979
Retained earnings 9,510 8,893
Unrealized gain (loss) on securities available for sale,
net of tax of ($18) and $27 respectively (35) 52
-------- --------
TOTAL SHAREHOLDERS' EQUITY 16,781 16,251
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $172,154 $166,560
======== ========
</TABLE>
(a) All per share statistics have been retroactively adjusted to reflect the 2
for 1 stock split of May 31, 1996.
See Notes to consolidated financial statements.
Page 2
<PAGE> 4
<TABLE>
<CAPTION>
(B) CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- ------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
In thousands of dollars 1996 1995 1996 1995
======================================================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,219 $2,118 $4,383 $4,111
Interest on securities
Taxable 832 644 1,606 1,293
Tax exempt 98 91 199 147
Interest on federal funds sold 49 110 165 216
------ ------ ------ ------
Total interest income 3,198 2,963 6,353 5,767
INTEREST ON DEPOSITS 1,407 1,257 2,812 2,410
NET INTEREST INCOME 1,791 1,706 3,541 3,357
Provision for loan losses 25 25 50 50
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,766 1,681 3,491 3,307
OTHER INCOME
Service charges on deposit accounts 163 163 314 301
Other service charges 33 20 49 36
Other income 70 73 138 136
------ ------ ------ ------
Total other income 266 256 501 473
OTHER EXPENSE
Salaries and employee benefits 599 566 1,286 1,229
Occupancy and equipment expense 48 49 106 109
Federal deposit insurance premiums 1 77 1 153
Furniture & equipment expense 82 78 161 155
Other expense 381 372 657 664
------ ------ ------ ------
Total other expense 1,111 1,142 2,211 2,310
------ ------ ------ ------
INCOME BEFORE FEDERAL INCOME TAX 921 795 1,781 1,470
Federal income tax 280 242 536 442
------ ------ ------ ------
NET INCOME $ 641 $ 553 $1,245 $1,028
====== ====== ====== ======
Net income per share of common stock (a) $ 0.69 $ 0.59 $ 1.34 $ 1.10
Cash dividends declared per share of
common stock (a) $0.675 $0.550 $0.350 $0.275
Return on average assets (annualized) 1.48% 1.32% 1.50% 1.41%
Return on average equity (annualized) 14.95% 13.14% 15.28% 13.42%
</TABLE>
(a) All per share statistics have been retroactively adjusted to reflect the 2
for 1 stock split of May 31, 1996.
See Notes to consolidated financial statements.
Page 3
<PAGE> 5
<TABLE>
<CAPTION>
(C) STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
Common Capital Retained
In thousands of dollars Stock Surplus Earnings (a) Total
====================================================================================================
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $2,327 $4,979 $8,110 $(115) $15,301
Net income, 1995 2,365 2,365
Cash dividends declared, $1.70 per share (b) (1,582) (1,582)
Net change in unrealized gain (loss)
on securities available for sale 167 167
---- -------
Balance, December 31, 1995 2,327 4,979 8,893 52 $16,251
Net Income YTD 1996 1,245 1,245
Cash dividends declared, $0.675 per share (b) (628) (628)
Net change in unrealized gain (loss)
on securities available for sale (87) (87)
------ ------ ------ --- -------
Balance, June 30, 1996 $2,327 $4,979 $9,510 $(35) $16,781
====== ====== ====== === =======
</TABLE>
(a) All per share statistics have been retroactively adjusted to reflect the 2
for 1 stock split of May 31, 1996.
See Notes to consolidated financial statements.
Page 4
<PAGE> 6
<TABLE>
<CAPTION>
(d) YEAR TO DATE CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Year to date June 30,
----------------------------------------------------------------------------------------------------
In thousands of dollars 1996 1995
====================================================================================================
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 1,245 $ 1,028
------- -------
Adjustments to Reconcile Net Income to Net Cash from Operating Activities
Depreciation 120 125
Accretion/amortization on securities 407 409
Provision for loan losses 50 50
Loans originated for sale (320) (1,417)
Proceeds from sales of loans originated for sale 328 1,432
Gain on sales of loans (8) (15)
Change in income taxes receivable (52) 24
Change in interest receivable (175) (87)
Change in interest payable (6) 30
Change in other assets (223) (127)
Change in other liabilities 117 178
------- -------
Total adjustments 238 602
------- -------
Net cash from operating activities 1,483 1,630
------- -------
Cash Flows from Investing Activities
Proceeds from maturities of securities available for sale 3,485
Purchase of securities available for sale (3,049) (1,977)
Proceeds from maturities of securities held to maturity 20,540 15,262
Purchase of securities held to maturity (25,677) (8,617)
Net increase in portfolio loans (6,870) (3,442)
Premises and equipment expenditures, net (133) (70)
------- -------
Net cash from investing activities (11,704) 1,156
------- -------
Cash Flows from Financing Activities
Net change in deposits 5,395 5,193
Cash dividends paid (1,070) (721)
------- -------
Net cash from financing activities 4,325 4,472
------- -------
Net change in cash and cash equivalents (5,896) 7,258
------- -------
Cash and cash equivalents at beginning of year 15,290 9,298
------- -------
Cash and cash equivalents at end of period $ 9,394 $16,556
======= =======
Cash Paid During the Period for
Interest $ 2,819 $ 2,380
Income taxes $ 484 $ 466
======= =======
</TABLE>
See Notes to consolidated financial statements.
Page 5
<PAGE> 7
(E) NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of CNB Corporation
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial statements. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ending June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Registration of Securities on
Form 10-SB/X Amendment #1 as of March 31, 1996.
NOTE 2 - SECURITIES
The amortized cost and fair value of securities at June 30, 1996 are shown
below in thousands of dollars.
<TABLE>
<CAPTION>
------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
--------------------------------------------------
<S> <C> <C> <C> <C>
Securities Available for Sale
U.S. Treasury and agency securities $ 9,982 $ 23 $ 77 $ 9,928
Tax-exempt obligations of states and
political subdivisions 1,308 1 1,309
Other securities 180 180
------- ---- ---- -------
Total $11,470 $ 24 $ 77 $11,417
======= ==== ==== =======
Securities Held to Maturity
U.S. Treasury and agency securities $39,616 $ 94 $263 $39,447
Tax-exempt obligations of states and
political subdivisions 6,779 35 69 6,745
Other securities 5,182 55 5,237
------- ---- ---- -------
Total $51,577 $184 $332 $51,429
======= ==== ==== =======
</TABLE>
The amortized cost and fair value of securities by contractual maturity at June
30, 1996 are shown below, in thousands of dollars
<TABLE>
<CAPTION>
--------------------------------------------------
Available for Sale Held to Maturity
------------------ ----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 4,492 $ 4,474 $17,331 $17,399
Due after one year through five years 6,978 6,943 31,677 31,549
Due after five years through ten years 2,051 1,983
Due after ten years 518 498
------- ------- ------- -------
Total $11,470 $11,417 $51,577 $51,429
======= ======= ======= =======
</TABLE>
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. Equity securities are included with securities available
for sale due in one year or less.
Page 6
<PAGE> 8
There were no sales of securities for the period ending June 30, 1996 and 1995.
Securities carried at $983,524 as of June 30, 1996 were pledged to secure
deposits of public funds and for other purposes as required by law.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses, in thousands of dollars, for the
six months ended June 30, 1996 and 1995, follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------
<S> <C> <C>
Balance at beginning of period $1,306 $1,246
Loans charged off (37) (7)
Recoveries credited to allowance 7 8
Provision charged to operations 50 50
------ ------
Balance at end of period $1,326 $1,297
====== ======
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," ("SFAS No. 114") at January
1, 1995. Under this standard, the carrying value of loans considered to be
impaired is reduced to the present value of expected future cash flows or to
the fair value of the collateral by allocating a portion of the allowance for
loan losses to such loans. If these allocations cause the allowance for loan
losses to require an increase, such increase is reported as bad debt expense.
There was no increase in the allowance for loan losses due to the adoption of
SFAS No. 114 at January 1, 1995.
The Company had no impaired loans during 1996 or 1995.
NOTE 4 - PER SHARE CALCULATIONS
Earnings per share is calculated on the weighted average number of shares
outstanding during the period, giving retroactive effect for the 2 for 1 stock
split to shareholders of record as of May 31, 1996.
NOTE 5 - COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS
The following table shows the commitments to make loans and the unused lines of
credit, in thousands of dollars, available to Bank customers at June 30.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Outstanding commitments to make fixed rate loans $ 2,571 $ 5,999
Outstanding commitments to make variable rate loans 6,695 2,634
Unused lines of credit - variable rate 2,762 2,995
Standby letters of credit - variable rate 29 39
------- -------
$12,057 $11,667
======= =======
</TABLE>
Page 7
<PAGE> 9
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion provides information about the consolidated financial condition
and results of operations of CNB Corporation and its subsidiary, Citizens
National Bank of Cheboygan ("Bank") for the six month period ending June 30,
1996.
FINANCIAL CONDITION
SECURITIES
Investment balances remained flat during the second quarter as deposit growth
was used to fund increased loan demand. Securities available-for-sale
represent 17.83% of the portfolio. Since the Bank maintains a short term
securities portfolio, not many securities are needed in the available-for-sale
portfolio to meet anticipated liquidity needs. The Asset/Liability committee
has decided to purchase longer term securities in an attempt to increase the
overall investment yield. As the amount of securities maturing on a regular
monthly basis decreases, liquidity will be gained by adding more to the
available-for-sale portfolio.
LOANS
Total loans increased $3.9 million during the second quarter. Of this
increase, $655,000 was in commercial loans as our business customers get ready
for the summer season. Consumer mortgages increased by $3,283,000 as the Bank
continues to retain, rather than sell on the secondary market, residential
mortgages of 15 years or less. This pattern is expected to continue throughout
the year. As the yield on these loans is greater than the yield available on
the types of security that the Bank typically invests in, this increase in
mortgages will help to increase the Bank's net interest margin.
The table below shows total portfolio loans outstanding, in thousands of
dollars, at December 31 and June 30, and their percentage of the total loan
portfolio. All loans are domestic. A review for loan concentrations at June
30, 1996 indicates that the pattern of loans in our portfolio has not changed.
There is no individual industry with more than a 10% concentration. However,
all tourism related businesses, when combined, total 13.67% of total loans.
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
Portfolio loans: Balance % of total Balance % of total
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Commercial & Agriculture $34,392 36.21% $30,017 34.05%
Real estate - mortgage 48,663 51.23% 46,506 52.76%
Real estate -construction 2,448 2.58% 2,229 2.53%
Installment loans to
individuals 9,485 9.99% 9,395 10.66%
------- ------ ------- ------
$94,988 100.00% $88,147 100.00%
======= ====== ======= ======
</TABLE>
CREDIT QUALITY
The Company continues to maintain a high level of asset quality as a result of
actively monitoring delinquencies, nonperforming assets and potential problem
loans. The Bank performs ongoing review of all large credits to watch for any
deterioration in quality. Nonperforming loans are comprised of (1) loans
accounted for on a nonaccrual basis; (2) loans contractually past due 90 days
or more as to interest or principal payments (but not included in the
nonaccrual loans in (1) above); and (3) other loans whose terms have been
renegotiated to provide a reduction or deferral of interest or principal
because of a deterioration in the financial position of the borrower (exclusive
Page 8
<PAGE> 10
of loans in (1) or (2) above). The aggregate amount of nonperforming loans, in
thousands of dollars, is shown in the table below.
<TABLE>
<CAPTION>
6/30/96 12/31/95 6/30/95
---------------------------------
<S> <C> <C> <C>
Nonaccrual loans $ -- $ -- $ 158
Loans past due 90 days or more 184 80 92
Troubled debt restructurings 0 0 0
----- ----- -----
Total nonperforming loans $ 184 $ 80 $ 250
===== ===== =====
Percent of total loans 0.19% 0.09% 0.29%
===== ===== =====
</TABLE>
DEPOSITS
Typically our deposit activity starts to pick up late in the second quarter as
summer businesses in the area prepare to reopen for the season. As compared to
March 31, 1996, our deposits at June 30, 1996 were up by $5.4 million. Growth
was in demand deposits and money market savings accounts. Time deposits during
the quarter were down approximately 1%.
This increase in noninterest bearing deposits will help our net interest margin
over the summer months, but is not expected to continue past fall.
Management anticipates that deposit growth during the balance of 1996 will
continue to be steady with part of this growth coming through increased market
share.
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
Both loan and deposit growth continued during the second quarter of 1996.
Since part of the growth was in demand deposits, the Bank continued to carry a
larger balance in Federal Funds sold to provide for the anticipated decline in
these deposits at the end of the summer season. The security portfolio
continues with short maturities, adding to available liquidity.
The loan to deposit ratio was 61.86% at June 30, 1996. Management would like
to continue to increase loans until the Bank reaches a loan to deposit ratio of
at least 65%. This change in the mix from investments to loans will help to
increase the net interest margin over time.
FUNDS MANAGEMENT
The Funds Management Policy of the Bank provides for a cumulative gap ratio
between .80 and 1.10 to one at the six and twelve month time periods. The
interest sensitivity of the Bank has remained relatively unchanged during the
second quarter, with cumulative gap ratios at the six and twelve month time
frame of .81 and 1.00 respectively.
Page 9
<PAGE> 11
The following chart shows the Bank's interest rate sensitivity as of June 30,
1996 in thousands of dollars
<TABLE>
<CAPTION>
up to 4 to 12 1 to 5 over
3 months months years 5 years
---------------------------------------------
<S> <C> <C> <C> <C>
Federal funds sold $ 3,950
Taxable investment securities 5,879 12,982 $30,685
Non-taxable investment securities 3,170 2,525 5,903 $ 1,673
Loans 33,967 30,556 24,386 5,349
------- ------- ------- -------
Total Rate Sensitive Assets 46,966 46,063 60,974 7,022
Interest bearing demand deposits 13,728
Money market savings 36,106
Other time deposits 16,426 26,627 14,441
------- ------- -------
Total Rate Sensitive Liabilities $66,260 $26,627 $14,441
------- ------- -------
Gap ($19,294) $19,436 $46,533 $ 7,022
------- ------- ------- -------
Cumulative gap ($19,294) $ 142 $46,675 $53,697
======= ======= ======= =======
Cumulative Ratio 70.88% 100.15%
======= =======
</TABLE>
CAPITAL RESOURCES
The capital ratios of the Company exceed the regulatory guidelines for well
capitalized institutions. The following table shows the Company's capital
ratios and ratio calculations at June 30, 1996 and 1995 and December 31, 1995.
Dollars are shown in thousands.
<TABLE>
<CAPTION>
Regulatory guidelines CNB Corporation
Adequate Well 6/30/96 12/31/95 6/30/95
-------- ---- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Tier 1 leverage ratio 4.00% 5.00% 9.74% 9.76% 10.02%
Tier 1 risk adjusted capital ratio 4.00% 6.00% 18.45% 18.88% 18.78%
Total risk adjusted capital ratio 8.00% 10.00% 19.70% 20.13% 20.39%
Total shareholders' equity $16,773 $16,251 $15,927
Unrealized gain (loss) on securities available
for sale, net of tax (35) 52 (11)
------- ------- -------
Tier 1 capital 16,808 16,199 15,938
Qualifying loan loss reserves 1,140 1,075 1,062
------- ------- -------
Tier 2 capital $17,948 $17,274 $17,000
======= ======= =======
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income continued to show improvement during the second quarter of
1996. This reflects the growth in deposits, improved loan to deposit ratio and
the gradual extension of security maturities. The net spread at June 30, 1996
was 3.46% compared to 3.44% at June 30, 1995. Management expects the net
interest margin to improve during the last quarter of the year when
approximately $2,000,000 in CDs on which the Bank is paying 8% will roll off.
Page 10
<PAGE> 12
The table below shows the year to date daily average Consolidated Balance
Sheet, revenue on earning assets,(on a pre-tax basis) or expense of interest
bearing liabilities, and the annualized effective rate or yield for the period
ending June 30,1996 and 1995.
YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES
in thousands of dollars
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Six Months Ended June 30, 1996 | Six Months Ended June 30, 1995
--------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Time deposits in other banks $ 500 $ 16 6.40% $ 177 $ 5 5.65%
Federal funds sold 5,653 165 5.84% 6,884 216 6.28%
Taxable securities 53,766 1,590 5.91% 49,403 1,329 5.38%
Tax exempt securities 8,236 199 4.83% 4,075 107 5.25%
Taxable loans 89,299 4,151 9.30% 83,692 3,906 9.33%
Tax exempt loans 1,226 35 5.71% 1,423 41 5.76%
-------- ------ ------- ------ ----
Total int. earning assets 158,680 $6,156 7.76% 145,654 $5,604 7.69%
-------- ------ ------- ------
Cash and due from banks 5,113 4,790
Premises and equipment, net 1,947 2,001
Other assets 3,694 3,694
Unrealized gain securities-AFS 45 (110)
Loss allowance for loan losses (1,325) (1,273)
-------- --------
TOTAL ASSETS $168,154 $154,756
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
Interest bearing demand
deposits $13,807 $ 165 2.39% $ 13,181 $ 158 2.40%
Savings deposits 25,239 362 2.87% 26,853 383 2.85%
CDs $100,000 and over 11,823 255 4.31% 8,047 185 4.60%
Other interest bearing deposits 99,014 2,030 4.10% 71,135 1,684 4.73%
-------- ------ ------ ----
Total int bearing deposits 130,963 2,812 4.29% 119,216 2,410 4.04%
Noninterest bearing deposits 18,925 18,388
Other liabilities 1,612 1,512
Shareholders' equity 16,654 15,640
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $168,154 $154,756
======== ========
Net interest income $3,344 $3,194
Net spread 3.46% 3.65%
Net yield on interest earning assets 3.54% 3.31%
Ratio of interest earning assets to
interest bearing liabilities 1.21 1.22
</TABLE>
Page 11
<PAGE> 13
The table below shows the effect of volume and rate changes on net interest
income for the six months ended June 30, on a pre tax basis, in thousands of
dollars.
<TABLE>
<CAPTION>
-----------------------------------------------------------------
1996 Compared to 1995 | 1995 Compared to 1994
-----------------------------------------------------------------
Volume Rate Net Volume Rate Net
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Time deposits in other banks $ 10 $ 1 $ 11 $ 5 $ 0 $ 5
Federal funds sold (37) (14) (51) 96 61 157
Taxable securities 123 138 261 (26) 217 191
Tax exempt securities 105 (13) 92 8 0 8
Taxable loans 261 (16) 245 110 464 574
Tax exempt loans (6) (0) (6) (41) 15 (26)
---- ---- ---- ---- ---- ----
Total interest income $456 $ 96 $552 $152 $757 $909
==== ==== ==== ==== ==== ====
Interest bearing demand
deposits $ 7 ($0) $7 ($2) $ 0 ($2)
Savings deposits (23) 2 (21) (36) 1 (35)
CDs $100,000 and over 84 (14) 70 45 42 87
Other interest bearing deposits 616 (270) 346 65 434 499
---- ---- ---- ---- ---- ----
Total interest expense $684 ($282) $402 $ 72 $477 $549
==== ==== ==== ==== ==== ====
Net change in net interest
income (a) ($228) $378 $150 $ 80 $280 $360
</TABLE>
(a) The net change in interest due to both rate and volume has been allocated
to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the change in each.
OTHER INCOME
Noninterest income continues to improve, although at a slower rate than in
previous periods. Year to date figures are up 5.91%. The Company continues to
search for new opportunities for noninterest income.
OTHER EXPENSES
Most categories of other expense showed very minimal from last year. All
noninterest expenses, exclusive of FDIC premiums paid, increased just 2.45%
from June 30, 1995 to June 30, 1996. A change in the FDIC premium rates
reduced this expense from $153 thousand to $1 thousand during this same six
month period leaving the Company with a net reduction in noninterest expense of
4.28%.
FEDERAL INCOME TAX
There was no significant change in the income tax position of the Company
during the first six months of 1996.
NET INCOME
Year to date consolidated net income for the second quarter was $641,000
compared to $553,000 for 1995. Improved net interest income, combined with
improved noninterest income and a reduction in noninterest expense have
contributed to this improvement. Net income for the quarter is up 15.91%
compared to the same period one year ago while year to date net income is up
21.58%. Return on consolidated average assets for the quarter was 1.50%,
compared to 1.48 for 1995 and 1.41 for the second quarter in 1995.
Page 12
<PAGE> 14
PROSPECTIVE ACCOUNTING CHANGES
Effective January 1, 1996, the Company adopted Financial Accounting Standards
Board Statement 122, Accounting for Mortgage Servicing Rights. The Statement
requires that the Company recognize mortgage servicing rights on loans it
purchases or originates with the intent to sell as an asset. Capitalized
mortgage servicing rights are included in other assets and are not material at
June 30, 1996.
PART II
Other Information
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
At the shareholders annual meeting on May 21, 1996, the shareholders approved a
2 for 1 stock split to shareholders of record of May 31, 1996. This
transaction increased the number of shares outstanding from 465,386 to 930,772.
All per share statistics in this report have been adjusted to reflect this
stock split.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
Page 13
<PAGE> 15
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Four matters were submitted to a vote of security holders at the annual meeting
held on May 21, 1996.
a. To fix the number of directors to be elected at nine.
Votes cast for 389,983
Votes cast against 0
b. Election of the following Director nominees listed in the Proxy Statement
dated April 29, 1996,
Robert E. Churchill Vincent J. Hillesheim
James C. Conboy, Jr John L. Ormsbee
Kathleen M. Darrow Francis J. VanAntwerp, Jr.
Thomas J. Ellenberger John P Ward
Thomas J. Fisher
Votes cast for 389,900
Votes cast against 0
Votes withheld 83
c. Amendment of the Articles of Incorporation to increase the authorized
common stock of the Corporation from 500,000 shares to 1,000,000 shares
and change the par value to $2.50 per share to effect a 2 for 1 split of
the outstanding shares.
Votes cast for 381,324
Votes cast against 8,659
d. Approval of CNB Corporation 1996 Stock Option Plan
Votes cast for 378,653
Votes cast against 11,330
ITEM 5 - OTHER INFORMATION
Options for 12,500 shares of stock at $32.00 per share were granted by action
of the Board of Directors on July 11, 1996.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits (numbered as in Item 601 of Regulation S-B):
3(i) Amendment to Articles of Incorporation dated June 4, 1996.
27. Financial Data Schedule
(b) The Company has filed no reports on Form 8-K during the quarter ended
June 30, 1996.
Page 14
<PAGE> 16
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 Corporation
August 9, 1996
/S/ Jean K. Hunt
--------------------------------------
Jean K. Hunt
Treasurer (Chief Accounting Officer)
Page 15
<PAGE> 17
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
3(i) Amendment to Articles of Incorporation dated June 4, 1996.
27. Financial Data Schedule
<PAGE> 1
EXHIBIT 3(i)
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
(FOR BUREAU USE ONLY)
Date Received FILED
JUN 06 1996
JUN 07 1996
Administrator
MI DEPT. OF CONSUMER & INDUSTRY SERVICES
Corporation & Securities Bureau
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------
Name
Lloyd C. Fell, Esq.
- ------------------------------------------------------------------------------------------
Address
229 Court Street, P.O. Box 405
- ------------------------------------------------------------------------------------------
City State Zip Code
Cheboygan Michigan 48091-0405 EFFECTIVE DATE:
- ------------------------------------------------------------------------------------------
</TABLE>
Document will be returned to the name and address you enter above
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT AND NONPROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
- --------------------------------------------------------------------------------
1. The present name of the corporation is: CNB Corporation
2. The identification number assigned by the Bureau is: 253-853
3. The location of the registered office is:
303 North Main Street, Cheboygan ,Michigan 49721
- ----------------------------------------------------- -----------------
(Street Address) (City) (ZIP Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Article III of the Articles of Incorporation is hereby amended
----------------
to read as follows:
The total authorized capital stock is:
1,000,000 Common Shares, with a Par Value of $2.50 per share.
- --------------------------------------------------------------------------------
<PAGE> 2
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS OR
TRUSTEES; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH.
a. / / The foregoing amendment to the Articles of Incorporation was duly
adopted on the ____________ day of _______________, 19________, in
accordance with the provisions of the Act by the unanimous consent
of the incorporator(s) before the first meeting of the Board of
Directors or Trustees.
Signed this ____________ day of ___________________, 19 ______________.
___________________________________ _________________________________
(Signature) (Signature)
___________________________________ _________________________________
(Type or Print Name) (Type or Print Name)
___________________________________ _________________________________
(Signature) (Signature)
___________________________________ _________________________________
(Type or Print Name) (Type or Print Name)
b. /X/ The foregoing amendment to the Articles of Incorporation was duly
adopted on the 21st day of May, 1996. The amendment: (check one of
the following)
/X/ was duly adopted in accordance with Section 611(2) of the
Act by the vote of the shareholders if a profit corporation,
or by the vote of the shareholders or members if a nonprofit
corporation, or by the vote of the directors if a nonprofit
corporation organized on a nonstock directorship basis. The
necessary votes were cast in favor of the amendment.
/ / was duly adopted by the written consent of all directors
pursuant to Section 525 of the Act and the corporation is a
nonprofit corporation organized on a nonstock directorship
basis.
/ / was duly adopted by the written consent of the shareholders
or members having not less than the minimum number of votes
required by statute in accordance with Section 407(1) and (2)
of the Act if a nonprofit corporation, or Section 407(1) of
the Act if a profit corporation. Written notice to
shareholders who have not consented in writing has been given.
(Note: Written consent by less than all of the shareholders
or members is permitted only if such provision appears in the
Articles of Incorporation.)
/ / was duly adopted by the written consent of all the
shareholders or members entitled to vote in accordance with
Section 407(3) of the Act if a nonprofit corporation, or
Section 407(2) of the Act if a profit corporation.
Signed this 4th day of June, 1996
By John P. Ward
----------------------------------------------
(Only Signature of President,
Vice-President, Chairperson, or
Vice-Chairperson)
John P. Ward, Senior Vice President and Secretary
-------------------------------------------------
(Type or Print Name) (Type or Print Title)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,444
<INT-BEARING-DEPOSITS> 0
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<LOANS> 94,988
<ALLOWANCE> 1,326
<TOTAL-ASSETS> 172,154
<DEPOSITS> 153,545
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<LIABILITIES-OTHER> 1,828
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0
0
<COMMON> 2,327
<OTHER-SE> 14,454
<TOTAL-LIABILITIES-AND-EQUITY> 172,154
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<INTEREST-TOTAL> 6,353
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<INTEREST-INCOME-NET> 3,541
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<EXPENSE-OTHER> 2,211
<INCOME-PRETAX> 1,781
<INCOME-PRE-EXTRAORDINARY> 1,781
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,245
<EPS-PRIMARY> $1.34
<EPS-DILUTED> $1.34
<YIELD-ACTUAL> 7.76
<LOANS-NON> 0
<LOANS-PAST> 184
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 1,306
<CHARGE-OFFS> 37
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