SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported)
June 1, 1999
CNB Bancorp, Inc.
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(Exact Name of Registrant as Specified in its Charter)
New York 0-17501 14-1709485
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
10-24 N. Main Street, PO Box 873, Gloversville, New York 12078
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 518-773-7911
N/A
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
As previously reported on Form 8-K filed June 15, 1999, on June 1,
1999, CNB Bancorp, Inc. ("CNB" and "Registrant") acquired all of the capital
stock of Gloversville Federal Savings and Loan Association, a federal savings
bank ("Gloversville") through the merger of its parent, Adirondack Financial
Services Bancorp, Inc. ("Adirondack" or "AFSB") into Registrant's wholly
owned subsidiary, CNB Acquisition Corp. Gloversville was then merged into
Registrant's wholly owned subsidiary bank, City National Bank and Trust
Company (the "Bank"). The assets acquired consisted principally of loans and
securities. The consideration paid was $21.92 per Adirondack common stock
outstanding (664,017 shares) plus the issuance of CNB stock options for
certain unvested stock options which had existed at Adirondack just prior to
the Merger. The total cash consideration paid in the acquisition was
approximately $14.6 million. The source of the cash consideration paid in the
acquisition was a special dividend paid by the Bank to the Registrant. The
consideration paid was determined through negotiation with the Board of
Directors of Adirondack. A fairness opinion was rendered by the investment
bankers for Adirondack.
Forward-Looking Statements
When used in this Current Report on Form 8-K and in future filings by
CNB with the Securities and Exchange Commission, in CNB's press releases or
other public or shareholder communications, and in oral statements made with
the approval of an authorized officer, the words or phrases "will likely
result," "are expected to," "will continue," "is anticipated," estimate,"
"project" or similar expressions are intended to identify "forward-looking
statements" within the meaning of Private Securities Litigation Reform Act of
1995. Such statements are subject to certain risks and uncertainties,
including, among other things, the possibility that the expected cost savings
from the acquisition of AFSB cannot be fully realized or realized within the
expected timeframe, the possibility of unexpected difficulties in integrating
the two organizations, the possibility that revenues following the
acquisition of AFSB may be lower than expected, changes in economic
conditions in CNB's market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in CNB's market area and
competition, and the effect of certain customers and vendors of critical
systems or services failing to adequately address issues related to becoming
year 2000 compliant, that could cause actual results to differ materially
from historical results and those presently anticipated or projected. CNB
wishes to caution readers not to place undo reliance on any such
forward-looking statements, which speak only as of the date made. CNB whishes
to advise readers that the factors listed above, as well as others, could
effect CNB's financial performance and could cause CNB's actual results to
differ materially from any opinions or statements expressed with respect to
future periods in any current statements.
CNB does not undertake and specifically declines any obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated
events.
Item 7. Financial Statement Exhibits
(a) Financial statements of business acquired.
The consolidated financial statements of AFSB (Commission File No.
333-43697) required by this item have been previously reported with the
Commission and are contained in AFSB's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 and Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1999.
(b) Pro forma financial information
The following unaudited pro forma condensed combined financial
statements ("pro forma financial statements") are based on the historical
financial statements of CNB Bancorp, Inc. and subsidiaries ("CNB") and
Adirondack Financial Services Bancorp, Inc. and subsidiary ("Adirondack" or
"AFSB") and have been prepared to illustrate the effect of the Merger.
The following unaudited pro forma condensed combined statement of
financial condition as of March 31, 1999 is based on the unaudited historical
consolidated statement of financial conditions of CNB and AFSB at that date,
assuming that the Merger had been consummated on March 31, 1999 and accounted
for using the purchase method of accounting.
<PAGE>
The following unaudited pro forma condensed combined statements of
income reflect the combination of historical results of operations of CNB for
the year ended December 31, 1998 and Adirondack for the year ended September
30, 1998, as well as the results of operations for CNB and Adirondack for the
three months ended March 31, 1999. The unaudited condensed combined
statements of income give effect to the Merger using the purchase method of
accounting and assume that (1) the Merger occurred as of the beginning of the
respective periods presented, and (2) the amount of initial goodwill equaled
the amount reflected in the following unaudited pro forma condensed combined
statement of financial condition as of March 31, 1999.
These pro forma financial statements should be read in conjunction with
the historical consolidated financial statements and related notes contained
in CNB's March 31, 1999 Form 10-Q and December 31, 1998 Form 10-K; and in
AFSB's March 31, 1999 Form 10-Q and September 30, 1998 Form 10-K.
As noted above, the Merger will be accounted for using the purchase
method of accounting. Accordingly the pro forma adjustments made for the
purpose of preparing the pro forma financial statements are based on current
estimates regarding the amount of goodwill (which represents the excess of
the total acquisition cost over the fair value of net assets acquired) which
will arise from the Merger and the period over which such goodwill will be
amortized. The amount of goodwill to be recorded as of the Merger date is
expected to be approximately $4.7 million and represents the excess of the
total acquisition cost over the fair value of net assets acquired based on
information available as of this date. In the opinion of CNB's management,
the estimates used in the preparation of these pro forma financial statements
are reasonable under the circumstances.
The combined company expects to achieve benefits from the Merger
including operating cost savings and revenue enhancements. These pro forma
financial statements do not reflect any potential cost savings and revenue
enhancements which are expected to result from the combination of operations
of CNB and AFSB and, accordingly, may not be indicative of the results of
future operations. No assurances can be given with respect to the ultimate
level of cost savings and revenue enhancements to be realized. As a result,
these pro forma financial statements are not necessarily indicative of either
the results of operations or financial condition that would have been
achieved had the Merger in fact occurred on the dates indicated, nor do they
purport to be indicative of results of operations or financial condition that
may be achieved in the future by the combined company.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
CNB BANCORP, INC. AND ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
<TABLE>
<CAPTION>
At March 31, 1999
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Pro Forma Pro Forma
CNB AFSB Adjustments Notes Combined
------- ------- ----------- ----- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash and due from banks 6,593 2,681 (15,693) 1 A, D, 9 (6,419)
Federal funds sold 11,000 - 11,000
Interest bearing deposits 98 962 - 1,060
------- ------- ------- -------
Cash and cash equivalents 17,691 3,643 (15,693) 5,641
Securities available for sale, at fair value 87,656 12,621 (4) 1 F 100,273
Investment securities held to maturity 14,656 461 - 15,117
Investments required by law, stock held in Federal
Home Loan Bank and Federal Reserve Bank of NY,
at cost 1,075 1,075
Loans receivable, net of unamortized fees 123,747 50,074 430 1 F 174,251
Allowance for loan losses (1,592) (1,244) - (2,836)
------- ------- ------- -------
Loans receivable, net 122,155 48,830 430 171,415
Accrued interest receivable 1,673 354 - 2,027
Premises and equipment, net 2,560 1,148 83 1 F 3,791
Other assets 3,701 851 1,103 1 C, D, F, H 5,655
Goodwill - - 4,538 1 I 4,538
------- ------- ------- -------
Total assets 251,167 67,908 (9,543) 309,532
======= ======= ======= =======
Liabilities:
Deposits 199,536 56,098 (770) 9 254,864
Securities sold under agreements to repurchase 12,878 - - 12,878
Notes payable - Federal Home Loan Bank 6,000 2,386 - 8,386
Accrued expenses and other liabilities 1,105 332 (74) 1 G 1,363
------- ------- ------- -------
Total liabilities 219,519 58,816 (844) 277,491
Shareholders' equity:
Preferred stock - - -
Common stock 4,000 7 (7) 2 4,000
Surplus 4,000 6,327 393 1 E
(267) 3
(6,060) 2 4,393
Retained earnings 23,644 3,558 (3,558) 2 23,644
Unearned ESOP shares - (476) 476 1 C -
Unearned RRP shares - (267) 267 3 -
Accumulated other comprehensive income (loss) 4 (57) 57 2 4
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Total shareholders' equity 31,648 9,092 (8,699) 32,041
------- ------- ------- -------
Total liabilities and shareholders' equity 251,167 67,908 (9,543) 309,532
======= ======= ======= =======
</TABLE>
See "Notes to the Unaudited Pro Forma Condensed Combined Financial Statements"
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
CNB BANCORP, INC. AND ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
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Pro Forma Pro Forma
CNB AFSB Adjustments Notes Combined
----- ----- ----------- ----- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest and dividend income 4,315 1,270 - 5,585
Interest expense 1,917 617 - 2,534
----- ----- ---- -----
Net interest income 2,398 653 - 3,051
Provision for loan losses 60 - - 60
----- ----- ---- -----
Net interest income after provision for loan losses 2,338 653 - 2,991
Non-interest income 280 66 - 346
Non-interest expense:
Compensation and benefits 659 263 (26) 4 896
Occupancy expense 94 54 - 148
Equipment and data processing 182 49 - 231
Other expense 505 419 76 5 1,000
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Total non-interest expense 1,440 785 50 8 2,275
----- ----- ---- -----
Income before income taxes 1,178 (66) (50) 1,062
Income tax expense 347 15 10 4 372
----- ----- ---- -----
Net income 831 (81) (60) 7 690
===== ===== ==== =====
Earnings per share
Basic 0.52 (0.12) 7 0.43
Diluted 0.52 (0.13) 7 0.43
Average shares outstanding
Basic 1,600 649 (649) 6 1,600
Diluted 1,608 644 (644) 6 1,608
</TABLE>
See "Notes to the Unaudited Pro Forma Condensed Combined Financial Statements"
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
CNB BANCORP, INC. AND ADIRONDACK FINANCIAL SERVICES BANCORP, INC.
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-------------------------------------------------------
Pro Forma Pro Forma
CNB AFSB<F1> Adjustments Notes Combined
--- ----- ----------- ----- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest and dividend income 16,843 5,005 - 21,848
Interest expense 7,917 2,525 - 10,442
------ ----- ---- ------
Net interest income 8,926 2,480 - 11,406
Provision for loan losses 220 120 - 340
------ ----- ---- ------
Net interest income after provision for loan losses 8,706 2,360 - 11,066
Non-interest income 1,121 176 - 1,297
Non-interest expense:
Compensation and benefits 2,628 940 (67) 4 3,501
Occupancy expense 297 213 - 510
Equipment and data processing 1,012 298 - 1,310
Other expense 1,287 762 303 5 2,352
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Total non-interest expense 5,224 2,213 236 8 7,673
------ ----- ---- ------
Income (loss) before income taxes 4,603 323 (236) 4,690
Income tax expense 1,381 89 21 4 1,491
------ ----- ---- ------
Net income (loss) 3,222 234 (257) 7 3,199
====== ===== ==== ======
Earnings (loss) per share<F2>
Basic 2.01 0.19 7 2.00
Diluted 2.01 0.19 7 2.00
Average shares outstanding
Basic 1,600 609 (609) 6 1,600
Diluted 1,608 609 (609) 6 1,601
<FN>
<F1> Represents Adirondack's fiscal year ended September 30, 1998.
<F2> Adirondack EPS is calculated using post-conversion income.
</FN>
</TABLE>
See "Notes to the Unaudited Pro Forma Condensed Combined Financial Statements"
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1: The estimate of goodwill used in the preparation of the unaudited pro
forma condensed combined financial statements is summarized below:
(in thousands)
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Total cash paid to Adirondack shareholders 14,555 A
Historical net assets acquired (9,092) B
Effect of AFSB ESOP termination (666) C
Estimated direct costs of acquisition 301 D
Issuance of CNB stock options 393 E
Estimated net fair value adjustments (304) F
Elimination of Adirondack ESOP and RRP
accruals (74) G
Effect of elimination of AFSB deferred
tax valuation allowance (575) H
------
Estimated goodwill (excess of total
acquisition cost over the estimated
fair value of assets acquired) 4,538 I
======
A Represents total cash paid to Adirondack shareholders as of the
acquisition date at June 1, 1999, representing a purchase price of
$21.92 paid for 664,017 shares outstanding.
B Represents AFSB's total shareholders' equity as of March 31, 1999.
C In accordance with the Merger Agreement, AFSB's ESOP terminated at the
time of the Merger. The AFSB ESOP loan was repaid by the ESOP to AFSB
and all remaining assets within the ESOP were allocated and released to
the participants. AFSB recorded an expense equal to the fair value of
the shares allocated to participants. AFSB will receive a tax deduction
equal to the shares allocated based on the original cost to the AFSB
ESOP of $10.00 per share.
The following entry would have been recorded by AFSB to reflect the AFSB
ESOP termination if the merger had been completed on March 31, 1999
using the fair value of AFSB common stock immediately prior to the
merger of $21.92 per share. The income tax benefit is computed at an
assumed marginal effective tax rate of 40%. The result is an increase in
AFSB's shareholders' equity of $666 as of March 31, 1999 as follows:
Other assets 476
Compensation expense (retained earnings) 533
Current tax receivable (other assets) 190
Common stock acquired by ESOP 476
Additional paid in capital 533
Current tax benefit (retained earnings) 190
D Represents $368 thousand of direct acquisition costs for investment
banking, legal and accounting fees, as well as payments associated with
the AFSB CEO's employment agreement (net of the $67 thousand tax benefit
for this payment assuming a marginal effective tax rate of 40%). As
these costs were paid out in cash prior to or within a short period of
time following consummation of the Merger, the pro forma financial
statements reflect the cash outlay.
E In accordance with the Merger Agreement 41,302 unvested stock options
held by AFSB employees (that remained employees of CNB following the
Merger date of June 1, 1999) were converted into 23,749 unvested stock
options of CNB using a conversion rate of .575. The estimated fair value
of the CNB options as of the measurement date for the purchase
transaction was recorded as a component of goodwill and a corresponding
increase to Surplus. The estimated fair value of CNB stock options
granted was determined by using the Black-Scholes option-pricing model
with the following assumptions: dividend yield of 2.25%; expected rate
of volatility 25.0%; risk free interest rate 5.15%; an expected life of
5 years. Based on the aforementioned assumptions the value of the
options granted was $17.06 F Represents the estimated fair value
adjustments of the assets acquired and liabilities assumed. The total
fair value adjustment, net of taxes is $304 thousand. The net deferred
tax liability associated with these adjustments is $205 thousand, and
the gross of tax adjustment is $509 thousand which is comprised of
premium on loans ($430 thousand), fixed assets write-up ($83 thousand)
and decrease in the value of AFS securities ($4 thousand). The fair
value of deposits is estimated to approximate their carrying amounts
given the current rate environment.
<PAGE>
G Represents recorded accruals related to the recognition of normal
expenses for restricted stock awards and ESOP stock average value in
excess of cost. These accruals are ultimately reflected as increases in
Adirondack's capital, and therefore should be reflected as a reduction
in goodwill.
H Represents elimination of the valuation allowance recorded by AFSB
related to the AFSB's deferred tax assets. The valuation allowance was
not considered necessary for CNB based in its strong history of
generating taxable income and the expectation for generation of future
taxable income in amounts sufficient to conclude that CNB's net deferred
tax asset is more likely than not realizable.
I Represents the current estimate of the excess of the total acquisition
cost over the estimated fair value of net assets acquired based on the
information available at this date. Goodwill is expected to be amortized
on a straight-line basis over 15 years. No assurance can be given that
this estimate of goodwill will not change as fair values and transaction
costs are finalized.
Note 2: Represents the elimination of AFSB's equity accounts as of March 31,
1999, after giving effect to the pro forma adjustments in Note 1 and Note 3.
Note 3: Represents the elimination of the AFSB unearned RRP, which were all
terminated as of the Merger date.
Note 4: Represents the elimination of expense related to AFSB's ESOP and RRP,
net of related tax effects. See also Note 1 and Note 3, respectively.
Note 5: This adjustment reflects the amortization of non-tax deductible
goodwill, estimated in Note 1, on a straight-line basis over 15 years.
Note 6: The adjustments made to average shares outstanding (both basic and
diluted) reflect the elimination of AFSB stock as a result of the Merger.
Note 7: The net income and earnings per share reflected herein do not purport
to be indicative of actual results that would have been realized had the
Merger in fact occurred on the dates indicated, nor do they purport to be
indicative of the results of operations that may be achieved in the future.
In addition, no adjustments have been made to non-interest expenses for
expected cost savings described in Note 8, below, or for revenue enhancements
expected to result from the Merger.
Note 8: No pro forma adjustments have been made to non-interest expense for
one-time costs associated with facilitating the integration of the two
companies, or for expected costs savings which CNB and AFSB believe will be
derived from the elimination of duplicative administration functions and
other operating efficiencies. However, there can be no assurance that any
such cost savings will in fact be realized.
Note 9: Represents the elimination of $770 thousand of non-interest bearing
deposits held by Adirondack in CNB.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused the Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 12, 1999 By: /s/ George A. Morgan
George A. Morgan, Executive Vice President
