UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1997 Commission File Number: 0-17501
CNB BANCORP, INC.
-----------------
(Exact Name of Registrant as Specified in its Charter)
New York 14-1709485
- ------------------------------ ---------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
10-24 North Main Street, P.O. Box 873, Gloversville, New York, 12078
- -------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 773-7911
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding in each Issuer's classes
of common stock, as of the latest practicable date:
Number of Shares Outstanding
Class of Common Stock as of October 27, 1997
- --------------------- ----------------------------
$2.50 par value 1,600,000
<TABLE>
CNB BANCORP, INC. AND SUBSIDIARY
INDEX
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
- -------
Item 1 Consolidated interim financial statements (unaudited):
Consolidated statements of income for the three months ending September 30, 1997 and 1996 1
and the six months ending September 30, 1997 and 1996
Consolidated statements of financial condition as of September 30, 1997 and December 31, 1996 2
Consolidated statements of cash flows for the six months ending September 30, 1997 and 1996 3
Notes to consolidated financial statements 4
Item 2 Management's discussion and analysis
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 (a) Exhibits - not applicable
(b) Reports on Form 8-K - none
</TABLE>
<TABLE>
CNB BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
3 MONTHS ENDED 9 MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $2,496,175 $2,330,582 $7,444,396 $7,168,550
Interest on federal funds sold 116,987 121,551 236,595 291,039
Interest on balances due from depository institutions 333 199 960 2,806
Interest on securities available for sale 803,486 872,442 2,554,961 2,446,350
Interest on investment securities 499,549 531,030 1,493,607 1,499,896
Dividends on FRB and FHLB stock 14,562 12,522 41,399 26,549
Total interest and dividend income 3,931,092 3,868,326 11,771,918 11,435,190
INTEREST EXPENSE:
Interest on deposits:
Certificates and time deposits of $100,000 or more 469,114 557,056 1,400,254 1,469,255
Regular savings, N.O.W. and money market accounts 476,845 519,786 1,455,537 1,562,864
Other time deposits 786,750 699,405 2,295,585 2,148,027
Interest on securities sold under agreements to repurchase 687 2,181 3,320 9,004
Interest on other borrowed money 0 0 1,246 0
Total interest expense 1,733,396 1,778,428 5,155,942 5,189,150
Net interest income 2,197,696 2,089,898 6,615,976 6,246,040
Provision for loan losses 45,000 80,000 150,000 140,000
Net interest income after provision for loan losses 2,152,696 2,009,898 6,465,976 6,106,040
OTHER INCOME:
Income from fiduciary activities 32,455 26,725 92,601 81,052
Service charges on deposit accounts 83,085 93,718 256,830 264,453
Other income 101,785 83,409 251,108 197,083
Total other income 217,325 203,852 600,539 542,588
OTHER EXPENSES:
Salaries and employee benefits 634,540 573,902 1,900,039 1,666,932
Occupancy expense, net 75,022 63,710 237,300 208,850
Furniture and equipment expense 78,900 66,494 239,350 216,832
External data processing expense 124,988 102,163 351,356 312,870
F.D.I.C. insurance expense 5,784 500 17,122 1,500
Printing, stationery and supplies 27,324 28,978 110,967 105,005
Other expenses 265,173 227,297 856,058 710,623
Total other expenses 1,211,731 1,063,044 3,712,192 3,222,612
Income before income taxes 1,158,290 1,150,706 3,354,323 3,426,016
Applicable income taxes 355,421 340,813 1,013,052 1,022,137
NET INCOME $ 802,869 $ 809,893 $2,341,271 $2,403,879
Net income and dividends per common share
(1,600,000 shares):<F1>
Net income $ 0.50 $ 0.51 $ 1.46 $ 1.50
Dividends 0.20 0.185 0.60 0.555
See accompanying notes to consolidated interim financial statements
<FN>
<F1> Per share figures have been adjusted to reflect the 2 for 1 stock split
effected through the 100% stock dividend declared in January 1997.
</TABLE>
<TABLE>
CNB BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<CAPTION>
9/30/97 12/31/96
<S> <C> <C>
Cash and cash equivalents:
Non-interest bearing $ 6,905,431 $ 8,323,677
Interest bearing 40,344 38,296
Federal funds sold 5,300,000 8,000,000
Total cash and cash equivalents 12,245,775 16,361,973
Securities available for sale, at fair value 50,121,780 56,120,310
Investment securities (approximate fair value at 9/30/97-
$32,877,380; at 12/31/96 - $31,477,028) 32,196,253 30,930,765
Investments required by law, stock in Federal Home Loan
Bank of New York and Federal Reserve Bank of New York,
at cost 884,300 834,800
Loans 122,576,271 115,048,050
Unearned income (9,335,923) (8,062,831)
Allowance for loan losses (1,495,479) (1,620,078)
Net loans 111,744,869 105,365,141
Premises and equipment 2,575,610 2,747,681
Accrued interest receivable 1,572,247 1,403,082
Other assets 982,527 998,001
Total assets $212,323,361 $214,761,753
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand (non interest bearing) $ 19,459,741 $ 18,616,607
Regular savings, N.O.W. and money market accounts 72,429,161 84,212,947
Certificates and time deposits of $100,000 or more 33,142,840 28,305,295
Other time deposits 57,330,971 55,287,632
Total deposits 182,362,713 186,422,481
Securities sold under agreements to repurchase 0 593
Other liabilities 699,238 591,858
Total liabilities 183,061,951 187,014,932
STOCKHOLDERS' EQUITY
Common stock, $2.50 par value, 5,000,000 shares authorized, 1,600,000
shares issued and outstanding in 1997 - $5.00 par value, 2,000,000
shares authorized, 800,000 shares issued and outstanding in 1996<F1> 4,000,000 4,000,000
Surplus 8,000,000 4,000,000
Undivided profits 16,847,091 19,465,820
Net unrealized gain on available for sale securities (net of tax effect) 414,319 281,001
Total stockholders' equity 29,261,410 27,746,821
Total liabilities and stockholders' equity $212,323,361 $214,761,753
<FN>
<F1> On April 15, 1997 the stockholders approved a reduction in the par value of the common stock to $2.50 per share.
See accompanying notes to consolidated interim financial statements
</TABLE>
<TABLE>
CNB BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
9 MONTHS ENDED
SEPTEMBER 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,341,271 $ 2,403,879
Adjustments to reconcile net income to cash and cash
equivalents provided by operating activities:
Increase in interest receivable (169,165) (293,085)
Decrease in other assets 36,441 194,233
Increase in other liabilities 66,127 237,307
(Benefit) expense for deferred taxes 77,229 (45,014)
Depreciation 227,367 201,041
Amortization of premiums/discounts on securities, net 95,806 121,390
Provision for loan losses 150,000 140,000
Total adjustments 483,805 555,872
Net cash provided by operating activities 2,825,076 2,959,751
Cash flows from investing activities:
Purchase of investment securities (5,700,811) (12,670,535)
Purchase of securities available for sale (7,487,111) (17,916,435)
Purchase of FRB and FHLB stock (49,500) (684,800)
Proceeds from matured investment securities 4,390,834 5,560,315
Proceeds from matured securities available for sale 13,655,138 11,916,546
Net increase in loans (6,674,168) (1,436,318)
Capital expenditures (55,295) (726,832)
Net cash used by investing activities (1,920,913) (15,958,059)
Cash flows from financing activities:
Net increase (decrease) in deposits (4,059,768) 13,121,197
Decrease in securities sold under agreement to repurchase (593) (686,910)
Payment of dividends (960,000) (888,000)
Net cash provided (used) by financing activities (5,020,361) 11,546,287
Net decrease in cash and cash equivalents (4,116,198) (1,452,021)
Cash and cash equivalents beginning of period 16,361,973 16,390,358
Cash and cash equivalents end of period $12,245,775 $14,938,337
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest $ 5,263,987 $ 5,033,789
Income taxes 878,576 1,054,622
Supplemental schedule of noncash investing activities:
Net reduction in loans resulting from the transfer to real estate owned 144,440 165,957
Change in net unrealized gain on securities available for sale (net of a
deferred tax increase of $87,497 at 9/30/97 and a reduction of $149,878
at 9/30/96) 133,318 (219,334)
See accompanying notes to consolidated interim financial statements
</TABLE>
CNB BANCORP, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENT PRESENTATION
--------------------------------
The accounting and reporting policies of CNB Bancorp, Inc. (the
Company) and City National Bank and Trust Company (subsidiary
Bank) conform to generally accepted accounting principles in a
consistent manner and are in accordance with the general
practices within the banking field. Amounts in the prior period's
consolidated financial statements are reclassified,
whenever necessary, to conform to the presentation in the current
period's consolidated financial statements.
In the opinion of CNB Bancorp, Inc., the accompanying unaudited
consolidated financial statements contain all adjustments
necessary to present fairly the consolidated financial position
as of September 30, 1997 and December 31, 1996, and the results
of operations and the changes in cash flows for the nine months
ended September 30, 1997 and 1996. All accounting adjustments
made for these periods were of a normal recurring nature. The
accompanying interim consolidated financial statements
should be read in conjunction with CNB Bancorp, Inc.'s consolidated
year-end financial statements including notes thereto,
which are included in CNB Bancorp, Inc.'s 1996 Annual Report and
Form 10-K.
2. CHANGES IN FINANCIAL DISCLOSURE
-------------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS No. 128), which establishes standards
for computing and presenting earnings per share (EPS).
This Statement simplifies the standards for computing EPS making
them comparable to international EPS standards and supersedes
Accounting Principals Board Opinion No. 15, "Earnings per Share"
and related interpretations. SFAS No. 128 replaces the
presentation of primary EPS with the presentation of basic EPS.
It also requires dual presentation of basic and diluted
EPS on the face of the consolidated income statement for all entities
with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted
EPS computation.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity. This Statement
is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. Earlier application
is not permitted. This Statement requires restatement
of all prior-period EPS data presented.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" (SFAS No. 130). SFAS No. 130 establishes
standards for the reporting and displaying of comprehensive
income. SFAS No. 130 states that comprehensive income includes
the reported net income of a company for the items that are
currently accounted for as direct entries to equity, such as the
mark to market adjustment on securities available for sale,
foreign currency items and minimum pension liability adjustments.
This statement is effective for fiscal years beginning
after December 15, 1997. Management anticipates developing the
required information for inclusion in the 1998 annual
consolidated financial statements.
Management does not anticipate that the adoption of SFAS No. 128
and SFAS No. 130 will be material.
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 duly authorized.
CNB BANCORP, INC.
October 27, 1997 By /s/ William N. Smith
- ---------------- -----------------------------------
Date William N. Smith
Chairman of the Board, President
and Chief Executive Officer
October 27, 1997 By /s/ George A. Morgan
- ---------------- -----------------------------------
Date George A. Morgan
Vice President and Secretary
(Principal Financial Officer)
CNB BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL REVIEW:
- -----------------
Liquidity:
There have been no trends or demands that have affected the Company's
or the subsidiary Bank's liquidity position in any
material way during the first nine months of 1997. Funds from repayment
of loans, maturing investment securities and securities
available for sale are available to satisfy any normal needs that
may arise.
Capital Resources:
Stockholder's equity to total assets increased slightly during
the first nine months of 1997 from 12.9% at December 31, 1996 to
13.8% at September 30, 1997. The subsidiary Bank has experienced
loan growth of approximately $6.7 million during the first nine
months of 1997. This growth in loans was partially funded by a reduction
in the securities available for sale and a reduction in
federal funds sold.
As of December 31, 1990, banks were required to report new risk-based
capital ratios that require bank holding companies to
meet a ratio of qualifying total capital to risk-weighted assets.
The table below shows the Companys' current ratios, December
31, 1996 ratios and the current regulatory guideline ratios as established
by the Federal Reserve Board.
<TABLE>
<CAPTION>
Regulatory
9/30/97 12/31/96 Guidelines
<S> <C> <C> <C>
Tier 1 risk based capital to net risk weighted assets 25.4% 25.0% 4.0%
Total risk based capital to net risk weighted assets 26.7 26.2 8.0
Leverage ratio (Tier 1/adjusted total assets) 13.5 12.9 3.0
No significant events have occurred during the first
nine months of 1997 to materially impact the
Companys' capital.
</TABLE>
Results of Operations:
Most Recent Quarter and Same Quarter in Preceding Year:
Total interest and dividend income for the third quarter of
1997 increased $62,766 or 1.6% from the corresponding period of
1996, while total interest expense decreased $45,032 or 2.5% from
the corresponding period of 1996. Net interest income increased
$107,798 or 5.2% from the prior year period reflecting an improvement
in the net interest margin for the quarter ending September
30, 1997 as compared to the corresponding period of 1996. The provision
for loan losses was down $35,000 or 43.8% from the prior
year period. Net charge-offs increased $146,235 to $181,964 from
the prior year period, an increase of 409.3%. The allowance for
loan losses as a percent of loans outstanding at September 30, 1997
was 1.32% as compared to 1.51% at December 31, 1996. Non-
interest income increased $13,473 or 6.6% from the corresponding
period of 1996. This increase was primarily due to increases in
fiduciary income and merchant income on credit cards. Non-interest
expense increased $148,687 or 14.0% from the corresponding
period of 1996 due primarily to higher salaries and employee benefits.
The higher staff expenses were due to higher insurance
expenses, normal salary adjustments and the staffing of the new branch
office in Perth. Increases in occupancy expense, furniture
and equipment expense, and data processing were attributable to the
new office in Perth and the new platform automation system
being installed in all offices. Net income decreased $7,024 or 0.9%
as compared to the same period of 1996. This decrease was
due to the increase in total other expenses more than offsetting
the increase in the net interest income, the reduction in the
provision for loan losses and the increase in other income.
Most Recent Year to Date and Corresponding Year to Date Period:
Total interest and dividend income for the first nine months
of 1997 increased $336,728 or 2.9% from the corresponding period
of 1996, while total interest expense decreased $33,208 or 0.6% from
the corresponding period of 1996. Net interest income
increased $369,936 or 5.9% from the prior year period reflecting
the effect of improved net margins being earned on higher volumes
of interest earning assets and interest bearing liabilities. The
provision for loan losses was up $10,000 or 7.1% from the prior
year period. Net charge-offs increased $214,876 to $274,599 from
the prior year period, an increase of 359.8%. Non-interest
income increased $57,951 or 10.7% from the corresponding period of
1996. This increase was primarily due to increases in fiduciary
income and merchant income on credit cards. Non-interest expense
increased $489,580 or 15.2% from the corresponding period of
1996. This increase was primarily due to higher salaries and employee
benefits, higher occupancy expense, higher furniture and
equipment expense, higher data processing expense and higher stationery
and supplies expense associated with the opening of the new
branch office in Perth in October of 1996. Normal salary adjustments
and increases in insurance expense also increased the salaries
and employee benefits expense. Net income decreased $62,608 or 2.6%
as compared to the same period of 1996. This decrease was due
to the increase in the provision for loan losses and total other expenses
more than offsetting the increase in the net interest
income increase and the increase in other income.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
CNB BANCORP, INC.
FINANCIAL DATA SCHEDULE
(UNAUDITED)
SEPTEMBER 30, 1997
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,905,431
<INT-BEARING-DEPOSITS> 40,344
<FED-FUNDS-SOLD> 5,300,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 50,121,780
<INVESTMENTS-CARRYING> 32,196,253
<INVESTMENTS-MARKET> 32,877,380
<LOANS> 113,240,348
<ALLOWANCE> 1,495,479
<TOTAL-ASSETS> 212,282,108
<DEPOSITS> 182,362,713
<SHORT-TERM> 0
<LIABILITIES-OTHER> 657,985
<LONG-TERM> 0
0
0
<COMMON> 4,000,000
<OTHER-SE> 25,261,410
<TOTAL-LIABILITIES-AND-EQUITY> 212,282,108
<INTEREST-LOAN> 2,496,175 7,444,396
<INTEREST-INVEST> 1,317,597 4,089,967
<INTEREST-OTHER> 117,320 237,555
<INTEREST-TOTAL> 3,931,092 11,771,918
<INTEREST-DEPOSIT> 1,732,709 5,151,376
<INTEREST-EXPENSE> 1,733,396 5,155,942
<INTEREST-INCOME-NET> 2,197,696 6,615,976
<LOAN-LOSSES> 45,000 150,000
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 1,211,731 3,712,192
<INCOME-PRETAX> 1,158,290 3,354,323
<INCOME-PRE-EXTRAORDINARY> 1,158,290 3,354,323
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 802,869 2,341,271
<EPS-PRIMARY> 0.50 1.46
<EPS-DILUTED> 0.50 1.46
<YIELD-ACTUAL> 4.32
<LOANS-NON> 192
<LOANS-PAST> 328
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,833
<ALLOWANCE-OPEN> 1,620,078
<CHARGE-OFFS> 292,472
<RECOVERIES> 17,873
<ALLOWANCE-CLOSE> 1,495,479
<ALLOWANCE-DOMESTIC> 1,459,542
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 35,937
</TABLE>
