<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, 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 July 31, 1997 there were outstanding 977,104 shares of the issuer's
common stock, $2.50 par value.
<PAGE> 2
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION PAGE NO.
- -------- ----------- --------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Condensed)
(a) Consolidated Balance Sheets 2
(b) Consolidated Statements of Income 4
(c) Consolidated Statements of Changes in Shareholders' Equity 4
(d) Consolidated Statements 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 10
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 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
Page 1
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PART I
FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
(a) CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
June 30, December 31,
1997 1996
In thousands of dollars (unaudited)
==============================================================================================
<S> <C> <C>
ASSETS
Cash and demand balances in other banks $7,915 $6,054
Federal funds sold 6,500 4,050
- ----------------------------------------------------------------------------------------------
Total cash and cash equivalents 14,415 10,104
Securities available for sale 12,415 8,165
Securities held to maturity (fair value of
$48,985 $53,416 and $52,442 respectively) 48,795 53,085
- ----------------------------------------------------------------------------------------------
Total securities 61,210 61,250
Total loans 103,468 96,741
Less: allowance for loan losses (1,415) (1,361)
- ----------------------------------------------------------------------------------------------
102,053 95,380
Premises and equipment, net 2,600 2,679
Accrued interest receivable and other assets 4,045 3,672
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS $184,323 $173,085
==============================================================================================
LIABILITIES
Deposits
Noninterest bearing $23,259 $22,419
Interest bearing 141,395 131,449
- ----------------------------------------------------------------------------------------------
Total deposits 164,654 153,868
Accrued interest payable and other liabilities 1,961 2,164
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 166,615 156,032
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value; 1,000,000 shares authorized;
977,104 shares issued and outstanding 2,443 2,327
Capital surplus 6,578 4,979
Retained earnings 8,661 9,749
Unrealized gain (loss) on securities available for sale,
net of tax of $14, ($1) and ($18) respectively 26 (2)
- ----------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 17,708 17,053
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $184,323 $173,085
==============================================================================================
</TABLE>
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(a) All per share statistics have been retroactively adjusted to reflect the 5%
stock dividend of June 25, 1997.
See Notes to consolidated financial statements.
Page 3
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(b) CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
In thousands of dollars 1997 1996 1997 1996
===========================================================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,384 $ 2,219 $ 4,632 $ 4,383
Interest on securities
Taxable 779 832 1,572 1,606
Tax exempt 86 98 184 199
Interest on federal funds sold 123 49 188 165
- -----------------------------------------------------------------------------------------------------------
Total interest income 3,372 3,198 6,576 6,353
INTEREST ON DEPOSITS 1,495 1,407 2,904 2,812
NET INTEREST INCOME 1,877 1,791 3,672 3,541
Provision for loan losses 25 25 50 50
- -----------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,852 1,766 3,622 3,491
OTHER INCOME
Service charges on deposit accounts 175 164 325 314
Other service charges 22 18 30 49
Other income 95 83 193 138
- -----------------------------------------------------------------------------------------------------------
Total other income 292 265 548 501
OTHER EXPENSE
Salaries and employee benefits 700 671 1,394 1,286
Occupancy and equipment expense 63 48 124 106
Federal deposit insurance premiums 5 - 9 1
Furniture & equipment expense 79 82 155 161
Supplies and printing expense 44 34 88 70
Other expense 300 275 530 587
- -----------------------------------------------------------------------------------------------------------
Total other expense 1,191 1,110 2,300 2,211
- -----------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 953 921 1,870 1,781
Income tax expense 292 280 568 536
- -----------------------------------------------------------------------------------------------------------
NET INCOME $ 661 $ 641 $ 1,302 $ 1,245
===========================================================================================================
Net income per share of common stock (a) $ 0.68 $ 0.66 $ 1.33 $ 1.27
Cash dividends declared per share of
common stock (a) $ 0.350 $ 0.333 $ 0.683 $ 0.643
Return on average assets (annualized) 1.48% 1.51% 1.49% 1.50%
Return on average equity (annualized) 14.95% 15.27% 14.89% 15.28%
</TABLE>
(a) All per share statistics have been retroactively adjusted to reflect the 5%
stock dividend of June 25, 1997.
See Notes to consolidated financial statements.
Page 4
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(c) 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, January 1, 1996 $ 2,327 $ 4,979 $ 8,893 $ 52 $ 16,251
Net income, 1996 2,601 2,601
Cash dividends declared, $1.79 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 1,302 1,302
5% stock dividend, declared 116 1599 (1,715) -
Cash dividends declared, $0.684 per share (b) (668) (668)
Cash paid for fractional shares (7) (7)
Net change in unrealized gain (loss)
on securities available for sale 28 28
- ---------------------------------------------------------------------------------------------------------
Balance, June 30, 1997 $ 2,443 $ 6,578 $ 8,661 $ 26 $ 17,708
=========================================================================================================
</TABLE>
(a) Unrealized gain (loss) on securities available for sale.
(b) All per share statistics have been retroactively adjusted to reflect the 5%
stock dividend of June 25, 1997.
See Notes to consolidated financial statements.
Page 4
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(d) YEAR TO DATE CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
- ---------------------------------------------------------------------------------------------------------------------------------
In thousands of dollars 1997 1996
=================================================================================================================================
<S> <C> <C>
Cash flows from operating activities
Net Income $ 1,302 $ 1,245
- ---------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash from operating activities
Depreciation 134 120
Accretion/amortization on securities, net 71 407
Provision for loan losses 50 50
Loans originated for sale (2,040) (320)
Proceeds from sales of loans originated for sale 2,042 328
Gain on sales of loans (2) (8)
(Increase) decrease in other assets (372) (456)
Increase (decrease) in other liabilities 252 117
- ---------------------------------------------------------------------------------------------------------------------------------
Total adjustments 135 238
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 1,437 1,483
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from maturities of securities available for sale 2,000 3,485
Purchase of securities available for sale (6,202) (3,049)
Proceeds from maturities of securities held to maturity 11,942 20,540
Purchase of securities held to maturity (7,728) (25,677)
Net increase in portfolio loans (6,745) (6,870)
Premises and equipment expenditures (56) (133)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash from investing activities (6,789) (11,704)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net change in deposits 10,786 5,395
Dividends paid (1,116) (1,070)
Cash paid with fractional shares (7) -
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash from financing activities 9,663 4,325
- ---------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 4,311 (5,896)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 10,104 15,290
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 14,415 $ 9,394
=================================================================================================================================
Cash Paid During the Period for
Interest $ 2,527 $ 2,819
Income taxes $ 680 $ 484
=================================================================================================================================
</TABLE>
See Notes to consolidated financial statements.
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(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 information and with the
instructions to Form 10-QSB 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 six month period ending June 30, 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,
1997.
NOTE 2 - SECURITIES
The amortized cost and fair value of securities at June 30, 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 $ 10,022 $ 17 $ 20 10,019
Tax-exempt obligations of states and political
subdivisions 886 5 - 891
Other 1,466 39 - 1,505
-------------------------------------------------------------
Total $12,374 $ 61 $ 20 $ 12,415
=============================================================
Securities Held to Maturity
U.S. Treasury and agency securities $37,554 $ 149 $ 59 $ 37,644
Tax-exempt obligations of states and
political subdivisions 5,465 50 8 5,507
Other securities 5,776 58 - 5,834
-------------------------------------------------------------
Total $48,795 $ 257 $ 67 $ 48,985
=============================================================
</TABLE>
The amortized cost and fair value of securities by contractual maturity at June
30, 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 $ 4,103 $ 4,089 $ 22,028 $ 22,067
Due after one year through five years 8,271 8,326 25,609 25,744
Due after five years through ten years - - 1,158 1,174
Due after ten years - -
------------------------------------------------------------
Total $ 12,374 $ 12,415 $ 48,795 $ 48,985
============================================================
</TABLE>
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The Company had no security holdings the value of which individually exceeds
ten percent of stockholders' equity at June 30, 1997, other than those issued
by the U.S. Government, its agencies and other political subdivisions.
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.
There were no sales of securities for the period ending June 30, 1997 and 1996.
Securities carried at $ 992,679 as of June 30, 1997 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, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
-----------------------
<S> <C> <C>
Balance at beginning of period $1,361 $1,306
Loans charged off (9) (37)
Recoveries credited to allowance 13 7
Provision charged to operations 50 50
-----------------------
Balance at end of period $1,415 $1,326
=======================
</TABLE>
The Company had no impaired loans during 1996, nor during the first half 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 June 30, 1997.
<TABLE>
<S> <C>
Commitments to extend credit $ 14,014
Standby letters of credit 29
----------
$ 14,043
==========
</TABLE>
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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,
1997.
FINANCIAL CONDITION
SECURITIES
Investment securities are classified into held to maturity and available for
sale categories. Held to maturity securities are those which the Company has
the positive intent and ability to hold to maturity. These securities are
reported at amortized cost. Available for sale securities are those which the
Company may decide to sell if needed for liquidity, asset-liability management,
tax planning or other reasons. Available for sale securities are reported at
fair value, with unrealized gains or losses included as a separate component of
equity net of tax.
LOANS
Loans at June 30, 1997 increased $ 6.73 million compared to December 31, 1996
and increased $ 4.88 million for the calendar quarter. An increase of $ 2.3
million for the period 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 period by $ 2.98 million 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 will help to
maintain the Bank's net interest margin.
The table below shows total loans outstanding by type, in thousands of dollars,
at June 30, 1997 and December 31, 1996, and their percentage of the total loan
portfolio. All loans are domestic. A quarterly review of loan concentrations
at June 30, 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 12.31% of total
loans.
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
Portfolio loans: Balance % of total Balance % of total
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Residential real estate $ 59,681 57.69% $ 56,699 58.61%
Commercial real estate 18,648 18.02% 18,110 18.72%
Construction 3,861 3.73% 3,221 3.33%
Consumer loans 10,069 9.73% 9,239 9.55%
Commercial loans 11,362 10.98% 9,632 9.96%
Net deferred fees and costs (153) -0.15% (160) -0.17%
----------------------------------------------------
$ 103,468 100.00% $ 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 an 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)
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<PAGE> 11
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 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>
6/30/97 12/31/96
------------------------
<S> <C> <C>
Nonaccrual loans $ 37 $ 70
Loans past due 90 days or more 12 61
Troubled debt restructurings - -
----------------------
Total nonperforming loans $ 49 $ 131
======================
Percent of total loans 0.05% 0.14%
======================
</TABLE>
DEPOSITS
Deposits at June 30, 1997 increased $ 10.8 million as compared to December 31,
1996 and up $ 11.6 million for the calendar quarter. Management anticipates
continued deposit growth for the balance of the year.
LIQUIDITY AND FUNDS MANAGEMENT
LIQUIDITY
Total deposits increased $ 10.79 million or 7.01% compared to December 31, 1996
while loans increased $ 6.73 million or 6.95% for the same period. In order to
meet anticipated seasonal needs the bank maintains and monitors an investment
security maturity schedule.
The loan to deposit ratio was 62.84% as of June 30, 1997 compared to 62.87% at
December 31, 1996. Management continues to emphasize loan growth and would like
to see this ratio at a minimum of 65%. This change in the mix from investments
to loans will help to increase net interest income over time.
FUNDS MANAGEMENT
The following chart shows the Bank's interest rate sensitivity as of June 30,
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 $ 6,500
Taxable investment securities 8,406 17,178 $ 28,554 717
Non-taxable investment securities 80 1,245 3,951 $ 1,079
Loans 35,599 31,843 28,104 7,922
----------------------------------------------------
Total rate sensitive assets 50,585 50,266 60,609 9,718
----------------------------------------------------
Interest bearing demand deposits 1,329 3,589 8,372
Savings 5,892 5,302 12,372
Money market savings 19,072 6,130 14,305
Other time deposits 22,974 23,382 18,676
------------------------------------------
Total rate sensitive liabilities $ 49,267 $ 38,403 $ 53,725
------------------------------------------
Gap $ 1,318 $ 11,863 $ 6,884 $ 9,718
----------------------------------------------------
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
Cumulative gap $ 1,318 $ 13,181 $ 20,065 $ 29,783
=================================================================
Cumulative ratio 102.68% 115.03%
=================================
</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.
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, 1997 and December 31, 1996. Dollars
are shown in millions.
<TABLE>
<CAPTION>
Minimum Required
To Be Well
Minimum Required Capitalized Under
For Capital Adequacy Prompt Corrective
Actual Purposes Action Regulations
----------------------------------------------------------------
June 30, 1997 Amt Ratio Amt Ratio Amt Ratio
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total capital to risk weighted assets $ 18.9 19.0% $8.0 8.0% $ 10.0 10.00%
Tier I capital to risk weighted assets 17.7 17.7% 4.0 4.0% 6.0 6.0%
Tier I capital to average assets 17.7 9.9% 7.1 4.0% 8.9 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 half of 1997 due to
the increase in interest earning assets and despite a slight decrease in the
net interest spread compared to the first half of 1996. The net spread at June
30, 1997 was 3.70% compared to 3.72% at June 30, 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 effective rate or yield for the period
ending June 30,1997 and 1996.
YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES
in thousands of dollars
<TABLE>
<CAPTION>
Six months ended 6/30/97 Six months ended 6/30/96
-------------------------------------------- ----------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Federal funds sold 7,015 188 5.36% 5,653 165 5.84%
Taxable securities 50,887 1,572 6.18% 54,266 1,606 5.92%
Tax exempt securities 7,625 184 4.83% 8,236 199 4.83%
Loans 99,105 4,632 9.35% 90,525 4,383 9.68%
-------------------------------------------------------
Total int. earning assets 164,632 $ 6,576 7.99% 158,680 $ 6,353 8.01%
-------------------------------------------------------
Cash and due from banks 5,442 5,113
Premises and equipment, net 2,635 1,947
Other assets 2,460 2,414
---------- ----------
TOTAL ASSETS $ 175,169 $ 168,154
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
Interest bearing demand
deposits $ 13,575 $ 161 2.37% $ 13,807 $ 165 2.39%
Savings deposits 23,463 334 2.85% 25,239 362 2.87%
CDs $100,000 and over 12,760 327 5.13% 11,823 303 5.13%
Other time deposits 85,718 2,082 4.86% 80,094 1,982 4.95%
-------------------------------------------------------
Total int bearing deposits 135,516 2,904 4.29% 130,963 2,812 4.29%
-------------------------------------------------------
Noninterest bearing deposits 20,503 18,925
Other liabilities 1,658 1,612
Shareholders' equity 17,492 16,654
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 175,169 $ 168,154
========== ==========
Net interest income $ 3,672 $ 3,541
======= =======
Net spread 3.70% 3.72%
==== ====
Net yield on interest earning assets 4.46% 4.46%
==== ====
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 six months ended June 30, 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 38 (15) 23 (37) (14) (51)
Taxable securities (104) 70 (34) 133 139 272
Tax exempt securities (15) - (15) 105 (13) 92
Loans 408 (159) 249 255 (16) 239
------------------------------------------------------
Total interest income $ 327 ($104) $ 223 $ 456 $96 $ 552
------------------------------------------------------
Interest bearing demand
deposits $ (3) $ (1) $ (4) $ 7 $- $ 7
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Savings deposits (25) (2) (27) (23) 2 (21)
CDs $100,000 and over 24 - 24 84 (14) 70
Other interest bearing deposits 138 (39) 99 616 (270) 346
-----------------------------------------------
Total interest expense $ 134 $ (42) $ 92 $684 ($282) $ 402
-----------------------------------------------
Net change in net interest
income (a) $ 193 $ (62) $ 131 ($228) $378 $ 150
===============================================
</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 9.38%,
while income increased 10.19% for the quarter ended June 30, 1997 compared to
the same period last year. 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
Other expenses as of June 30, 1997 increased $ 89 thousand or 4.03% compared to
the same period last year. For the quarter ended June 30, 1997 other expenses
increased $ 81 thousand or 7.30% compared to the same time period last year.
There were slight increases in salaries, occupancy, FDIC premiums, supplies and
other expenses while furniture and equipment expense decreased.
FEDERAL INCOME TAX
There was no significant change in the income tax position of the Company
during the first half of 1997 with the increase corresponding to an increase in
pre-tax income.
NET INCOME
Year to date consolidated net income for the first half was $ 1,302,017
compared to $ 1,245,062 for 1996. For the quarter ended June 30, 1997 net
income increased $ 20 thousand or 3.12% for the same time period last year.
The increase in earnings was a result of loan growth and an overall improvement
in net interest income. Return on average assets for six months ended June 30,
1997 was 1.49% compared to 1.50% from last year. The quarter end return on
average assets was 1.48% compared to 1.51% for the same period last year. The
return on average equity was 14.89 % compared to 15.28% for the six month
period ended June 30, 1997 and the quarter ended return on average equity was
14.95% compared to 15.27% for the same period last year.
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 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
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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
Following the shareholders meeting, the Board of Directors declared a 5% stock
dividend to shareholders of record as of May 20, 1997. This increased the
number of shares outstanding from 930,772 to 977,104. All per share statistics
have been adjusted to reflect this stock dividend.
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 June
30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly
Page 13
<PAGE> 16
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CNB Corporation
DATE
/s/ Robert E. Churchill /s/ John P. Ward
- ----------------------- ---------------------------
Robert E. Churchill John P. Ward
President and Chief Executive Officer Secretary/Treasurer (Chief
Accounting Officer)
Page 14
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,915
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,415
<INVESTMENTS-CARRYING> 48,795
<INVESTMENTS-MARKET> 48,985
<LOANS> 103,468
<ALLOWANCE> 1,415
<TOTAL-ASSETS> 184,323
<DEPOSITS> 164,654
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,961
<LONG-TERM> 0
0
0
<COMMON> 2,443
<OTHER-SE> 15,265
<TOTAL-LIABILITIES-AND-EQUITY> 184,323
<INTEREST-LOAN> 4,632
<INTEREST-INVEST> 1,756
<INTEREST-OTHER> 188
<INTEREST-TOTAL> 6,576
<INTEREST-DEPOSIT> 2,904
<INTEREST-EXPENSE> 2,904
<INTEREST-INCOME-NET> 3,672
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,300
<INCOME-PRETAX> 1,870
<INCOME-PRE-EXTRAORDINARY> 1,870
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,302
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
<YIELD-ACTUAL> 7.99
<LOANS-NON> 37
<LOANS-PAST> 12
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,361
<CHARGE-OFFS> 9
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 1,415
<ALLOWANCE-DOMESTIC> 1,415
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
