<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File # 0-28388
CNB Corporation
(Exact name of small business issuer as specified in its charter)
MICHIGAN 38-2662386
(State or 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 or 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 X No
As of March 31, 1997, there were outstanding 930,772 shares of the
issuer's common stock, $2.50 par value.
<PAGE> 2
<TABLE>
<CAPTION>
INDEX
ITEM NO. DESCRIPTION PAGE NO.
- -------------------------------------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Financial Statements (unaudited) 2
(a) Consolidated Balance Sheets 3
(b) Consolidated Statements of Income 4
(c) Consolidated Statements of Changes in Shareholders' Equity 5
(d) Consolidated Statements of Cash Flows 6
(e) Notes to Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
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 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS, MARCH 31, 1997
(a) CONSOLIDATED BALANCE SHEET (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31 December 31 March 31
1997 1996 1996
In thousands of dollars
====================================================================================================================================
<S> <C> <C> <C>
ASSETS
Cash and demand balances in other banks $ 5,481 $ 6,054 $ 5,340
Federal funds sold 4,900 4,050 2,750
- ------------------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 10,381 10,104 8,090
Securities available for sale 8,186 8,165 10,455
Securities held to maturity (fair value of
$50,047 and $53,416 and $52,821 respectively) 49,981 53,085 52,325
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities 58,167 61,250 62,780
Total loans 98,588 96,741 91,055
Less: allowance for loan losses (1,394) (1,361) (1,332)
- ------------------------------------------------------------------------------------------------------------------------------------
97,194 95,380 89,723
Premises and equipment, net 2,615 2,679 1,942
Accrued interest receivable and other assets 3,838 3,672 3,753
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $172,195 $173,085 $166,288
====================================================================================================================================
LIABILITIES
Deposits
Noninterest bearing $ 19,112 $ 22,419 $ 16,801
Interest bearing 133,966 131,449 131,299
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits 153,078 153,868 148,100
Accrued interest payable and other liabilities 1,763 2,164 1,689
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 154,841 156,032 149,789
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value; 1,000,000 shares
authorized; 465,386 shares issued and outstanding 2,327 2,327 2,327
Capital surplus 4,979 4,979 4,979
Retained earnings 10,063 9,749 9,194
Unrealized gain (loss) on securities available for sale,
net of tax of ($8) and ($1), and $0 respectively (15) (2) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 17,354 17,053 16,499
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $172,195 $173,085 $166,288
====================================================================================================================================
</TABLE>
See Notes to consolidated financial statements.
Page 2
<PAGE> 4
(b) CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31,
In thousands of dollars 1997 1996
====================================================================================================================================
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,248 $2,164
Interest on securities
Taxable 793 779
Tax exempt 98 101
Interest on federal funds sold 65 111
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income 3,204 3,155
INTEREST ON DEPOSITS 1,409 1,405
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 1,795 1,750
Provision for loan losses 25 25
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,770 1,725
OTHER INCOME
Service charges on deposit accounts 150 151
Other service charges 9 17
Other income 97 68
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income 256 236
OTHER EXPENSE
Salaries and employee benefits 694 687
Occupancy and equipment expense 61 58
Supplies and Printing 44 36
Furniture & equipment expense 76 79
Other expense 235 241
- ------------------------------------------------------------------------------------------------------------------------------------
Total other expense 1,110 1,101
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAX 916 860
Federal income tax 276 256
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 640 $ 604
====================================================================================================================================
Net income per share of common stock $ 0.69 $ 0.65
Cash dividends declared per share of common stock $ 0.35 $ 0.33
Return on average assets (annualized) 1.49% 1.45%
Return on average equity (annualized) 14.78% 14.63%
</TABLE>
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.
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<PAGE> 5
(c) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Capital Retained
In thousands of dollars Stock Surplus Earnings (a) Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 2,327 $4,979 $8,893 $52 $16,251
Net income, 1996 2,601 2,601
Cash dividends declared, $1.875 per share (1,745) (1,745)
Net change in unrealized gain (loss)
on securities available for sale (54) (54)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 2,327 4,979 9,749 (2) 17,053
Net income YTD 1997 640 640
Cash dividends declared, $0.35 per share (326) (326)
Net change in unrealized gain (loss)
on securities available for sale (13) (13)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1997 $ 2,327 $4,979 $10,063 ($15) $17,354
====================================================================================================================================
</TABLE>
(a) Unrealized Gain (Loss) on Securities Available for Sale
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
(d) YEAR TO DATE CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands of dollars 1997 1996
====================================================================================================================================
Cash flows from operating activities
- ------------------------------------
<S> <C> <C>
Net income $640 $604
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash from operating activities
- -------------------------------------------------------------------------
Depreciation 65 69
Amortization and accretion of investment securities (net) 45 316
Provision for loan losses 25 25
Loans originated for sale (1,028) (1,459)
Proceeds from sales of loans 1,030 1,463
Gain on sales of loans (2) (4)
Increase in other assets (166) (65)
Increase (decrease) in other liabilities 71 (15)
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjustments 40 330
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 680 934
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
- ------------------------------------
Proceeds from maturities of securities available for sale 1,000 3,485
Proceeds from maturities of securities held to maturity 4,305 9,769
Purchase of securities available for sale (1,038) (2,029)
Purchase of securities held to maturity (1,250) (15,569)
Net increase in loans (1,837) (2,907)
Property and equipment expenditures (1) (66)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash from investing activities 1,179 (7,317)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
- ------------------------------------
Net change in deposits (790) (49)
Dividends paid (792) (768)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash from financing activities (1,582) (817)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 277 (7,200)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 10,104 15,290
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 10,381 $8,090
====================================================================================================================================
Cash paid during the period for
- -------------------------------
Interest $ 1,405 $1,397
Income taxes $ 507 $ 512
====================================================================================================================================
</TABLE>
See Notes to consolidated financial statements.
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<PAGE> 7
(e) NOTES TO CONSOLIDATED 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 information and with the
instructions to Form 10 Q-SB and Rule 310 of Regulation S-B. 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 three month period ending March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's filing
with the Securities and Exchange Commission on Form 10-KSB as of December 31,
1996.
NOTE 2 - SECURITIES
The amortized cost and fair value of securities at March 31, 1997 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 $6,991 $ 6 $ 31 6,966
Tax-exempt obligations of states and political
subdivisions 1,038 2 - 1,040
Other 180 - - 180
-----------------------------------------------------------------
Total $8,209 $8 $ 31 $8,186
=================================================================
Securities Held to Maturity
U.S. Treasury and agency securities $38,519 $100 $ 122 $38,497
Tax-exempt obligations of states and
political subdivisions 11,462 105 17 11,550
Other securities - - - -
-----------------------------------------------------------------
Total $49,981 $205 $ 139 $50,047
=================================================================
</TABLE>
The amortized cost and fair value of securities by contractual maturity at
March 31, 1997 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 $4,168 $4,159 $18,751 $18,801
Due after one year through five years 4,041 4,027 29,766 29,788
Due after five years through ten years - - 1,014 1,011
Due after ten years - - 450 447
-----------------------------------------------------------------
Total $8,209 $8,186 $49,981 $50,047
=================================================================
</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.
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<PAGE> 8
There were no sales of securities for the periods ending March 31, 1997 and
1996.
Securities carried at $1,000,000 as of March 31, 1997 were pledged to secure
deposits of public funds and for other purposes as required by law.
The Company had no security holdings the value of which individually exceeds
ten percent of stockholders' equity at March 31, 1997, other than those issued
by the U.S. Government, its agencies and other political subdivisions.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses, in thousands of dollars, for the
three months ended March 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
-------------------
<S> <C> <C>
Balance at beginning of period $1,361 $1,306
Loans charged off (1) (3)
Recoveries credited to allowance 9 4
Provision charged to operations 25 25
--------------------
Balance at end of period $1,394 $1,332
====================
</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 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, nor during the first quarter of
1997.
NOTE 4 - 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 March 31, 1997.
<TABLE>
<S> <C>
Commitments to extend credit $15,889
Standby letters of credit 29
-------
$15,918
=======
</TABLE>
Page 7
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
OR PLAN OF OPERATION
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 three month period ending March 31,
1997.
FINANCIAL CONDITION
SECURITIES
Investment balances decreased $3.1 million during the first quarter as
available funds were used to fund seasonal loan demand. Securities
available-for-sale represent 14.07% 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 maintained by
adding to the available-for-sale portfolio.
LOANS
Total loans increased $1.8 million during the first quarter. An increase of
$1.6 million for the quarter in commercial loans and commercial mortgages is
typical for this time of year as businesses prepare for the summer season.
Residential mortgages increased for the quarter by $920 thousand 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 securities 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 loans outstanding by type, in thousands of dollars,
at March 31, 1997 and December 31, 1996, and their percentage of the total loan
portfolio. All loans are domestic. A quarterly review of loan concentrations
at March 31, 1997 indicates that the pattern of loans in the portfolio has not
changed. There is no individual industry with more than a 10% concentration.
However, all tourism related businesses, when combined, total 12.58% of total
loans.
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
Portfolio loans: Balance % of total Balance % of total
------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Residential real estate $57,619 58.44% $56,699 58.61%
Commercial real estate 18,786 19.06% 18,110 18.72%
Construction 2,556 2.59% 3,221 3.33%
Consumer loans 9,233 9.37% 9,239 9.55%
Commercial loans 10,555 10.71% 9,632 9.96%
Net deferred fees and costs (161) -0.16% (160) -0.17%
------------------------------------------------------------------
$98,588 100.00% $96,741 100.00%
==================================================================
</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 in an attempt to
detect 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
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<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>
3/31/97 12/31/96
----------------------------------
<S> <C> <C>
Nonaccrual loans $ 44 $ 70
Loans past due 90 days or more 144 72
Troubled debt restructurings - -
-------------------------------
Total nonperforming loans $ 188 $ 142
===============================
Percent of total loans 0.19% 0.15%
===============================
</TABLE>
DEPOSITS
Typically the Bank's deposit activity is slow in the first quarter of the year
as many seasonal businesses in the area are closed. Deposits at March 31,
1997 were down by $790 thousand as compared to December 31, 1996 but up $5.0
million from one year ago. The decline of $5.2 million in demand deposits and
NOW accounts is typical during the first quarter of the year. Municipal money
market deposits increased $4.5 million during the same period due to the tax
collection season. Management anticipates that deposit growth during the
balance of 1997 will continue to be steady with part of this growth coming
through increased market share.
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
Loan growth continued steady during the first quarter of 1997. Typically,
March deposit balances represent a near low for the year. The Bank maintains a
steady schedule of investment securities maturing each month to meet the
anticipated decline in deposits through spring when deposits are again expected
to increase. The security portfolio continues to have short maturities, adding
to available liquidity.
The loan to deposit ratio was 64.40% at March 31, 1997, an increase from 61.47%
one year ago. Management would like to see this trend continue. The change in
the mix from investments to loans will help to increase net interest income
over time.
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<PAGE> 11
Funds Management
The following chart shows the Bank's interest rate sensitivity as of March 31,
1997 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 $ 4,900
Taxable investment securities 5,473 17,027 $ 27,346
Non-taxable investment securities 2,565 727 3,485 $ 1,544
Loans 31,019 33,606 26,629 7,334
--------------------------------------------------
Total rate sensitive assets 43,957 51,360 57,460 8,878
Interest bearing demand deposits 1,329 3,591 8,379
Savings 5,907 5,317 12,405
Money market savings 19,263 5,940 13,862
Other time deposits 14,635 24,238 19,100
--------------------------------------------------
Total rate sensitive liabilities $ 41,134 $39,086 $53,746
--------------------------------------------------
Gap $ 2,823 $12,274 $ 3,714 $8,878
--------------------------------------------------
Cumulative gap $ 2,823 $15,097 $18,811 $27,689
==================================================
Cumulative ratio 106.86% 118.82%
========================
</TABLE>
The asset and liability portfolios are managed to ensure adequate liquidity and
to control interest rate risk exposure. Management seeks to minimize the risk
of a reduction in net interest income that could result from fluctuations in
market interest rates. This process is carried out through regular meetings of
executive and senior management representing various areas of the Company
including finance, lending, investment and deposit gathering areas.
Page 10
<PAGE> 12
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 March 31, 1997 and December 31, 1996. Dollars
are shown in millions.
<TABLE>
<CAPTION>
Minimum Required
To Be Well
(Adequately)
Minimum Required Capitalized Under
For Capital Adequacy Prompt Corrective
Actual Purposes Action Regulations
---------------------------------------------------------------------------------------
March 31, 1997 Amt Ratio Amt Ratio Amt Ratio
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total capital to risk weighted assets $ 18.5 19.6% $ 7.6 8.0% $9.5 10.00%
Tier I capital to risk weighted assets 17.3 18.3% 3.8 4.0% 5.7 6.0%
Tier I capital to average assets 17.3 10.1% 6.9 4.0% 8.6 5.0%
December 31, 1996
Total capital to risk weighted assets $ 18.2 19.6% $ 7.4 8.0% $9.2 10.0%
Tier I capital to risk weighted assets 17.1 18.3% 3.7 4.0% 5.6 6.0%
Tier I capital to average assets 17.1 9.9% 6.9 4.0% 8.6 5.0%
</TABLE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income continued to increase during the first quarter of 1997 due
to the increase in interest earning assets and despite a slight decrease in the
net interest spread compared to the first quarter of 1996. The Bank continues
to experience pressure for lower interest rates on loan products and higher
interest rates on deposit products as competition increases. The net spread at
March 31, 1997 was 3.69% compared to 3.70% at March 31, 1996.
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
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<PAGE> 13
effective rate or yield for the period ending March 31,1997 and 1996.
YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES
in thousands of dollars
<TABLE>
<CAPTION>
THREE MONTHS ENDED 3/31/97 THREE MONTHS ENDED 3/31/96
------------------------------------------------------------------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Federal funds sold 5,026 65 5.17% 8,161 111 5.44%
Taxable securities 51,210 793 6.19% 52,260 779 5.96%
Tax exempt securities 8,135 98 4.82% 8,562 101 4.72%
Loans 97,488 2,248 9.22% 88,718 2,164 9.76%
Total int. earning assets ------------------------------------------------------------------------------------------
161,859 $3,204 7.92% 157,701 $3,155 8.00%
------------------------------------------------------------------------------------------
Cash and due from banks 5,347 4,841
Premises and equipment, net 2,647 1,929
Other assets 2,381 2,198
---------- --------
TOTAL ASSETS $172,234 $166,669
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
Interest bearing demand
deposits $13,898 $82 2.36% $14,077 $ 84 2.39%
Savings deposits 23,788 169 2.84% 25,302 181 2.86%
CDs $100,000 and over 11,124 137 4.93% 12,011 155 5.16%
Other time deposits 84,583 1,021 4.83% 79,251 985 4.97%
------------------------------------------------------------------------------------------
Total int bearing deposits 133,393 1,409 4.23% 130,641 1,405 4.30%
------------------------------------------------------------------------------------------
Noninterest bearing deposits 19,893 17,913
Other liabilities 1,623 1,598
Shareholders' equity 17,325 16,517
---------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $172,234 $166,669
========== ========
Net interest income $1,795 $1,750
====== ======
Net spread 3.69% 3.70%
===== =====
Net yield on interest earning assets 4.44% 4.44%
===== =====
Ratio of interest earning assets to
interest bearing liabilities 1.21 1.21
========== ========
</TABLE>
The table below shows the effect of volume and rate changes on net interest
income for the
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<PAGE> 14
three months ended March 31, on a pre-tax basis, in thousands of dollars.
<TABLE>
<CAPTION>
1997 Compared to 1996 1996 Compared to 1995
--------------------------------------------------------------------------------------
Volume Rate Net Volume Rate Net
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold (42) (5) (47) 48 (37) 11
Taxable securities (78) 92 14 41 82 123
Tax exempt securities (14) 12 (2) 69 (23) 46
Loans 663 (579) 84 111 60 171
--------------------------------------------------------------------------------------
Total interest income $529 $(480) $49 $269 $82 $351
--------------------------------------------------------------------------------------
Interest bearing demand
deposits $(1) $(1) $(2) $6 $(2) $ 4
Savings deposits (11) (1) (12) (24) 10 (14)
CDs $100,000 and over (11) (7) (18) 59 18 77
Other interest bearing deposits 184 (148) 36 110 75 185
--------------------------------------------------------------------------------------
Total interest expense $161 $(157) $4 $151 $101 $252
--------------------------------------------------------------------------------------
Net change in net interest
income (a) $368 $(323) $45 $118 $(19) $ 99
======================================================================================
</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 with year to date figures up 8.47%.
The Bank continues to search for new opportunities for noninterest income to
replace a decline in the traditional sources of bank fee income.
OTHER EXPENSES
Most categories of other expense showed minimal change from last year. Total
noninterest expenses increased less than one percent for the quarter ended
March 31, 1997 compared to the same quarter last year.
FEDERAL INCOME TAX
There was no significant change in the income tax position of the Company
during the first quarter of 1997 with the increase corresponding to an increase
in pre-tax income.
NET INCOME
Year to date consolidated net income for the first quarter was $640,000
compared to $604,000 for 1996. Improved net interest income, combined with
improved noninterest income with a less than 1% increase in noninterest expense
have contributed to this improvement. Net income for the quarter is up 6.0%
compared to the same period one year ago. Return on consolidated average
assets for the quarter was 1.49%, compared to 1.45% for the first quarter of
1996.
ACCOUNTING CHANGES
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities". This pronouncement
revises the accounting for transfers of financial assets, such as loans and
securities, and for distinguishing between sales and secured borrowings. SFAS
No. 125, as amended by SFAS No. 127, is effective for some transactions in
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<PAGE> 15
1997 and others in 1998. The effect of adopting this standard was not
material to the consolidated financial statements of the Company.
In March of 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
revises the accounting requirements for calculating earnings per share.
Effective beginning with year-end 1997, basic earnings per share will be
calculated solely on average common shares outstanding. Diluted earnings per
share will reflect the potential dilution of stock options and other common
stock equivalents. All prior calculations will be restated to be comparable to
the new methods. As the Company has not had significant dilution from stock
options, the new calculation methods will not significantly affect future basic
earnings per share and diluted earnings per share.
PART II
Other Information
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits (numbered as in Item 601 of Regulation S-B):
None
(b) The Company has filed no reports on Form 8-K during the quarter ended March
31, 1997.
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
May 13, 1997
/s/ Robert E. Churchill /s/ Jean K. Hunt
----------------------------- ----------------------------
Robert E. Churchill Jean K. Hunt
President and Chief Executive Treasurer (Chief Accounting
Officer Officer)
Page 15
<PAGE> 17
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<CASH> 5,481
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,186
<INVESTMENTS-CARRYING> 49,981
<INVESTMENTS-MARKET> 50,047
<LOANS> 98,588
<ALLOWANCE> 1,394
<TOTAL-ASSETS> 172,195
<DEPOSITS> 153,078
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,763
<LONG-TERM> 0
0
0
<COMMON> 2,327
<OTHER-SE> 15,027
<TOTAL-LIABILITIES-AND-EQUITY> 172,195
<INTEREST-LOAN> 2,248
<INTEREST-INVEST> 891
<INTEREST-OTHER> 65
<INTEREST-TOTAL> 3,204
<INTEREST-DEPOSIT> 1,409
<INTEREST-EXPENSE> 1,409
<INTEREST-INCOME-NET> 1,795
<LOAN-LOSSES> 25
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,110
<INCOME-PRETAX> 916
<INCOME-PRE-EXTRAORDINARY> 916
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 640
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
<YIELD-ACTUAL> 7.92
<LOANS-NON> 44
<LOANS-PAST> 144
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,361
<CHARGE-OFFS> 1
<RECOVERIES> 9
<ALLOWANCE-CLOSE> 1,394
<ALLOWANCE-DOMESTIC> 1,394
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
