<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
X AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
-------- --------
Commission File No: 33-29695-A
CNB, INC.
-------------------------------
(Name of Small Business Issuer)
FLORIDA 59-2958616
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Post Office Box 3239
201 North Marion Street
Lake City, Florida 32056
---------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 755-3240
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK
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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
---
The Registrant's revenues for the fiscal year ended December 31, 1995, totaled
$14,223,789.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $6,269,040, as of the most recent date on which stock was sold,
March 19, 1996.
The number of shares of the registrant's common stock outstanding as of March
15, 1996 was 1,639,733 shares, $0.01 par value per share.
<PAGE>
Item 7 of the Form 10-KSB for CNB, Inc., File No. 33-29695, is hereby amended
and restated in its entirety to provide the information required by Item 310(a)
of Regulation S-B in accordance with the response letter dated July 11, 1996
from the Securities and Exchange Commission, Division of Corporation Finance, to
CNB, Inc. regarding the Pre-effective Amendment No. 1 filed on June 25, 1996 to
the Registration Statement on Form S-4 filed on May 3, 1996, File No. 333-4640.
<PAGE>
FINANCIAL STATEMENTS
CNB, INC. AND SUBSIDIARY
LAKE CITY, FLORIDA
DECEMBER 31, 1995
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants . . . . . . . . . . .Page 1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations. . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Shareholders' Equity. . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders
CNB, Inc. and Subsidiary
Lake City, Florida
We have audited the accompanying consolidated balance sheets of CNB, Inc.
and Subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CNB, Inc.
and Subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
OSBURN, HENNING AND COMPANY
January 19, 1996
- 1 -
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1995 1994
------------ ------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 7,898,690 $ 8,830,528
Federal funds sold 4,660,000 3,050,000
Interest bearing deposits in other banks 413,072 385,152
------------ ------------
Total Cash and Cash Equivalents 12,971,762 12,265,680
Securities available for sale 39,838,485 21,770,605
Securities held to maturity 13,246,806 40,679,401
Loans:
Commercial, financial and agricultural 48,948,386 37,165,303
Real estate - construction 2,158,705 1,701,204
Real estate - mortgage 34,911,476 32,913,712
Installment and consumer lines 16,330,111 14,267,161
------------ ------------
Total loans net of unearned discount 102,348,678 86,047,380
Less: Allowance for loan losses (945,770) (827,052)
------------ ------------
Net Loans 101,402,908 85,220,328
Premises and equipment, net 6,432,547 6,165,568
Other assets 2,840,797 2,410,090
------------ ------------
TOTAL ASSETS $176,733,305 $168,511,672
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Noninterest-bearing deposits $ 19,110,965 $ 17,977,382
Interest-bearing deposits:
Savings, time and demand 126,922,045 122,001,056
Time, $100,000 and over 12,969,601 12,633,810
------------ ------------
Total Deposits 159,002,611 152,612,248
Note payable 950,000 1,700,000
Other liabilities 1,752,548 998,068
------------ ------------
Total Liabilities 161,705,159 155,310,316
------------ ------------
MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES 274,250 274,250
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 14)
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares authorized;
no shares issued or outstanding
Common stock, $.01 par value, 10,000,000 shares authorized;
1,639,733 shares issued and outstanding 16,397 16,397
Additional paid-in capital 9,784,369 9,784,369
Retained earnings 4,966,357 3,420,252
Net unrealized loss on securities available
for sale (13,227) (293,912)
------------ ------------
Total Shareholders' Equity 14,753,896 12,927,106
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $176,733,305 $168,511,672
------------ ------------
------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
- 2 -
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
----------- -----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 9,161,123 $ 6,919,277
Interest on securities held to maturity
2,291,192 1,930,626
Interest on securities available for sale 837,321 1,144,476
Interest on federal funds sold 435,955 294,478
Interest on interest bearing deposits 20,091 14,207
----------- -----------
Total Interest Income 12,745,682 10,303,064
----------- -----------
INTEREST EXPENSE
Interest on deposits 5,804,836 4,454,234
Other interest expense 161,467 178,185
----------- -----------
Total Interest Expense 5,966,303 4,632,419
----------- -----------
Net Interest Income 6,779,379 5,670,645
PROVISION FOR LOAN LOSS 230,000 125,000
----------- -----------
Net Interest Income After
Loan Loss Provision 6,549,379 5,545,645
NON-INTEREST INCOME
Service charges 1,187,036 1,106,904
Other fees and charges 291,071 223,106
----------- -----------
Total Non-interest Income 1,478,107 1,330,010
----------- -----------
NON-INTEREST EXPENSE
Salaries and employee benefits 2,704,200 2,430,633
Occupancy and equipment expenses 809,223 698,283
Other operating expenses 1,658,877 1,690,075
----------- -----------
Total Non-interest Expense 5,172,300 4,818,991
----------- -----------
Income Before Income Taxes 2,855,186 2,056,664
INCOME TAXES 1,013,930 730,498
----------- -----------
NET INCOME $ 1,841,256 $ 1,326,166
----------- -----------
----------- -----------
EARNINGS PER SHARE:
NET INCOME PER COMMON SHARE $ 1.12 $ .92
----------- -----------
----------- -----------
Weighted average common shares outstanding 1,639,733 1,436,024
----------- -----------
----------- -----------
</TABLE>
- 3 -
See Notes to Consolidated Financial Statements.
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------------ Paid-in Retained Shareholders'
Shares Par Value Capital Earnings Equity
------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 813,578 $ 8,136 $6,995,839 $2,225,265 $ 9,229,240
Acquisition of Bradford
Bankshares, Inc.,
effective April 1, 1994 826,155 (1) 8,261 2,788,530 - 2,796,791
Net income for year ended
December 31, 1994 - - - 1,326,166 1,326,166
Cash dividends - - - (131,179) (131,179)
Unrealized loss on securities
available for sale, net of
tax effect of $174,847 - - - - (293,912)
--------- ---------- ---------- ---------- -----------
BALANCE, DECEMBER 31, 1994 1,639,733 16,397 9,784,369 3,420,252 12,927,106
Net income for year ended
December 31, 1995 - - - 1,841,256 1,841,256
Cash dividends - - - (295,151) (295,151)
Change in unrealized loss on
securities available for
sale, net of tax effect of
$166,979 - - - - 280,685
--------- ---------- ---------- ---------- -----------
BALANCE DECEMBER 31, 1995 1,639,733 $ 16,397 $9,784,369 $4,966,357 $14,753,896
--------- ---------- ---------- ---------- -----------
--------- ---------- ---------- ---------- -----------
</TABLE>
(1) Consists of 388,172 shares issued to the former Bradford Bankshares, Inc.
shareholders and 437,983 shares issued to CNB, Inc. shareholders to give
effect to the exchange ratio.
See Notes to Consolidated Financial Statements.
- 4 -
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,841,256 $ 1,326,166
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 504,784 496,471
Provision for loan losses 230,000 125,000
Security amortization - net 259,214 321,833
Proceeds from sale of other real estate 104,021 -
Deferred income taxes 124,129 -
Changes in period-end balances of:
Other assets (552,613) 245,246
Other liabilities 495,960 (243,658)
----------- -----------
Net Cash Provided By Operating Activities 3,006,751 2,271,058
----------- -----------
INVESTING ACTIVITIES
Purchases of securities available for sale (3,635,985) (2,276,972)
Maturities of securities available for sale 11,750,000 6,350,000
Sales of securities available for sale 3,086,221 -
Purchases of securities held to maturity (14,547,968) (7,496,660)
Maturities of securities held to maturity 500,000 600,000
Securities held to maturity called by issuer 9,098,568 2,000,000
Mortgage backed securities - principal payments 3,315,687 4,348,758
Net increase in loans (16,580,374) (13,155,142)
Net increase in premises and equipment (632,030) (554,919)
Cash and cash equivalents from acquisition - 2,059,100
Cash used in acquisition - (23,178)
----------- -----------
Net Cash Used In Investing Activities (7,645,881) (8,149,013)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits 6,390,363 3,808,205
Repayment of note payable (750,000) (300,000)
Cash dividends (295,151) (131,179)
----------- -----------
Net Cash Provided By Financing Activities 5,345,212 3,377,026
----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents 706,082 (2,500,929)
Cash and Cash Equivalents:
Beginning of Year 12,265,680 14,766,609
----------- -----------
End of Year $12,971,762 $12,265,680
----------- -----------
----------- -----------
SUPPLEMENTAL INFORMATION:
In addition to receipt of net cash of $2,035,922, the Company acquired
loans and securities of $11,514,193 and premises, equipment and other
assets of $1,235,000, and assumed deposits and other liabilities of
$11,988,324 in the April 1, 1994 acquisition discussed in Note 3.
See Notes to Consolidated Financial Statements.
</TABLE>
- 5 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND FINANCIAL STATEMENT PRESENTATION
ORGANIZATION
CNB, Inc. (the "Company") is a registered bank holding company incorporated
in Florida. The Company operates a wholly-owned banking subsidiary, CNB
National Bank (the "Bank"), formerly Community National Bank, which is
chartered as a national bank in Lake City, Florida. The Bank is a member
of the Federal Reserve System and conducts business from a total of seven
offices in North Florida.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and the Bank. All significant intercompany accounts and transactions have
been eliminated in consolidation.
RECLASSIFICATION
Certain amounts and captions presented in the 1994 financial statements
have been reclassified to conform to the 1995 presentation. These
reclassifications had no effect on total assets, liabilities, equity or
operations as previously reported.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITIES
SECURITIES AVAILABLE FOR SALE
Securities which are used for asset/liability, liquidity, and other
funds management purposes are deemed to have indefinite holding
periods (securities available for sale). These securities are
accounted for on a fair value basis with market adjustments charged or
credited directly to shareholders' equity, net of any associated
income tax effect.
SECURITIES HELD TO MATURITY
Securities where the Company's intent and ability is to hold to
maturity (securities held to maturity) are stated at cost, adjusted
for amortization of premiums and accretion of discounts.
-6-
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As permitted by applicable accounting standards, in December, 1995 the
Company transferred securities held to maturity with an amortized
cost of $30,141,854 to its securities available for sale portfolio.
The estimated fair value and corresponding unrealized loss on the
transferred securities were $30,097,711 and $44,143, respectively, on
the date of transfer. The Company's policy as to the acquisition,
maintenance and accounting for its securities is otherwise unchanged.
Amortization and accretion of premiums and discounts are recognized as
adjustments to interest income. Realized gains and losses are
recognized using the specific identification method.
LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the amount of unpaid principal, reduced by an
allowance for loan losses and any unearned loan income. Interest on
substantially all loans other than installment loans is calculated by
using the simple interest method on daily balances of the principal
amounts outstanding except for those classified as nonaccrual loans.
The accrual of interest is discontinued when future collection of
principal or interest in accordance with the contractual terms may be
doubtful. Interest on some installment loans is recognized under the
rule-of-78s method, the results of which are not materially different
than the interest method.
Loan fees and loan origination costs are recognized as income at the
time loans are funded rather than deferred over the life of the loan
in view of the relative insignificance of the amount by which loan
fees exceed loan origination costs. For 1995 and 1994, loan fees
included in interest and fees on loans amounted to $400,602 and
$425,118, respectively.
The allowance for loan losses is established through a provision for
loan losses charged to operations. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance is an
amount that management believes will be adequate to absorb possible
losses on existing loans that may become uncollectible based on
evaluations of the collectibility of loans. The evaluations take into
consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific problem
loans and current economic conditions that may affect the borrowers'
ability to pay. Accrual of interest is discontinued on loans that are
past due 90 days or more as to principal or interest unless
substantially collateralized and in process of collection, or sooner,
if in the opinion of management the borrowers' financial condition is
such that collection of principal or interest is doubtful.
- 7 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less allowances for
depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets. Maintenance and
repairs are charged to expenses as incurred. Gains and losses on
dispositions are reflected in operations.
INTANGIBLES
The Company has intangible assets with a carrying amount of $928,058
and $1,070,116 at December 31, 1995 and 1994, respectively.
Substantially all of these intangibles relate to core deposits
acquired in prior years' acquisitions. Core deposit intangibles are
being amortized over a ten year period using the straight-line method.
Amortization charged against operations for all intangibles was
$150,862 and $160,099 for 1995 and 1994, respectively.
INCOME TAXES
The Company uses the liability method of accounting for income taxes.
This method requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
The Company and the Bank file consolidated federal and state income
tax returns. Under a tax-sharing arrangement, income tax charges or
credits are generally allocated to the Company and the Bank on the
basis of their respective taxable income or loss included in the
consolidated income tax return as determined by the separate return
method.
CASH FLOW INFORMATION
For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks, interest-bearing deposits in other
banks, and federal funds sold. Cash paid for interest and income
taxes was approximately $5,479,743 and $930,047, respectively, during
1995, and $4,381,000 and $561,000, respectively, during 1994.
- 8 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- 1994 ACQUISITION
On April 1, 1994, the Company acquired Bradford Bankshares, Inc. (BBI), a
registered one bank holding company headquartered in Starke, Florida. The
combination was accounted for by the Company as a purchase transaction, and
resulted in the Company's issuance of 388,172 of its Common shares.
Approximately $266,000 in goodwill was recorded in the transaction. Of
this amount, $226,000 was written off in 1994 through the elimination of a
deferred tax valuation allowance previously recorded by BBI. The remaining
goodwill is being amortized over ten years using the straight-line method.
NOTE 4 -- SECURITIES
Amortized cost and estimated fair value of securities available for sale at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
U. S. U. S.
TREASURY GOVERNMENT
SECURITIES AGENCIES OTHER TOTAL
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Amortized cost $13,701,198 $25,210,782 $947,600 $39,859,580
Gross unrealized:
Gains 26,846 179,038 104 205,988
Losses (95,204) (124,272) (7,607) (227,083)
----------- ----------- ---------- -----------
Estimated fair value $13,632,840 $25,265,548 $940,097 $39,838,485
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Amortized cost and estimated fair value of securities available for sale at
December 31, 1994 are as follows:
U. S. U. S.
TREASURY GOVERNMENT
SECURITIES AGENCIES OTHER TOTAL
----------- ----------- ---------- -----------
Amortized cost $12,871,151 $ 8,436,113 $932,100 $22,239,364
Gross unrealized:
Gains 3,976 532 -- 4,508
Losses (147,466) (325,801) -- (473,267)
----------- ----------- ---------- -----------
Estimated fair value $12,727,661 $ 8,110,844 $932,100 $21,770,605
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
</TABLE>
- 9 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- SECURITIES (CONTINUED)
Amortized cost and estimated fair value of securities held to maturity are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------
1995 1994
------------------------------------- --------------------------------------
U. S. U. S. U. S. U. S.
TREASURY GOVERNMENT TREASURY GOVERNMENT
SECURITIES AGENCIES TOTAL SECURITIES AGENCIES TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amortized cost $ -- $13,246,806 $13,246,806 $14,335,299 $26,344,101 $40,679,400
Gross unrealized:
Gains -- 34,666 34,666 -- 2,422 2,422
Losses -- (228,927) (228,927) (804,489) (1,618,124) (2,422,613)
----------- ----------- ----------- ----------- ----------- -----------
Estimated fair value $ -- $13,052,545 $13,052,545 $13,530,810 $24,728,399 $38,259,209
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
Securities available for sale with a carrying amount of $3,083,383 were sold for
$3,086,221 during 1995, resulting in gross realized gains of $6,146 and losses
of $3,308. There were no securities sales during the year ended December 31,
1994.
The amortized cost and estimated fair value of securities at December 31, 1995,
by contractual maturity, are shown below:
<TABLE>
<CAPTION>
SECURITIES SECURITIES
AVAILABLE FOR SALE HELD TO MATURITY
----------------------------- -----------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Due in:
One year or less $ 5,015,488 $ 5,029,660 $ -- $ --
After one through five years 23,357,364 23,332,365 -- --
After five through ten years 1,489,380 1,540,635 -- --
Mortgage-backed securities
and other 9,997,348 9,935,825 13,246,806 13,052,545
----------- ------------ ----------- -----------
$39,859,580 $ 39,838,485 $13,246,806 $13,052,545
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
At December 31, 1995, U. S. Treasury and Government agency securities with an
amortized cost of $6,938,009 and estimated fair value of $6,929,615 were pledged
to secure public funds and treasury tax and loan deposits.
- 10 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS
Activity in the allowance for loan losses account was as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Balance beginning of year $ 827,052 $ 690,038
Acquired in BBI acquisition -- 169,418
Provision 230,000 125,000
Recoveries 59,196 24,513
Charge-offs (170,478) (181,917)
---------- ----------
Balance At End Of Year $ 945,770 $ 827,052
---------- ----------
---------- ----------
</TABLE>
Loans on a nonaccrual basis totaled approximately $372,000 and $645,000 at
December 31, 1995 and 1994, respectively. Foregone interest which would
have otherwise been recorded on nonaccrual loans, including those loans
that were nonaccrual at sometime during the year and later paid, reinstated
or charged off, was approximately $47,897 and $31,000 in 1995 and 1994,
respectively. In addition to nonaccrual loans, non-performing assets
include Other Real Estate, property acquired by foreclosure in settlement
of debt. Other Real Estate was $125,994 and $62,220 at December 31, 1995
and 1994, and is included in the caption "Other Assets" on the accompanying
balance sheets.
NOTE 6 -- PREMISES AND EQUIPMENT
Premises and equipment were comprised of the following components at
December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Buildings and improvements $5,159,376 $5,027,489
Equipment and furnishings 1,598,842 1,498,133
Land 1,480,177 1,108,577
---------- ----------
8,238,395 7,634,199
Less accumulated depreciation (1,805,848) (1,468,631)
---------- ----------
$6,432,547 $6,165,568
---------- ----------
---------- ----------
</TABLE>
Depreciation charged against operations was $365,041 and $336,372 for 1995
and 1994, respectively.
- 11 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- NOTE PAYABLE
<TABLE>
<CAPTION>
December 31,
1995 1994
---------- ----------
<S> <C> <C>
Note payable, secured by all issued and
outstanding common stock of the Bank, at
prime plus .75%, interest only payable
monthly through 1994, principal and
interest payable monthly through 1998 $ 950,000 $1,700,000
---------- ----------
---------- ----------
</TABLE>
The note agreement contains certain restrictions on the Company and the
Bank including: maintaining a correspondent relationship; ability to
borrow additional funds; the minimum level of capitalization; return on
assets; and the maximum level of nonperforming assets.
Principal payments required under the note at December 31, 1995 are as
follows:
1996 $ 242,857
1997 242,857
1998 464,286
The Company has voluntarily accelerated principal payments in both 1995 and
1994. It is management's intention to continue accelerated liquidation of
this note.
NOTE 8 -- MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES
The Company has issued $274,250 of ten-year $10 Series A Mandatory
Convertible Subordinated Debentures (the "Debentures") callable on or after
November 1, 1992. The Debentures are convertible into Company common stock
at a rate of one share of Company stock for the greater of each $15.60 face
amount of Debentures or book value of the Company stock at the time of
conversion. The Debentures mature on November 1, 2000, and all outstanding
Debentures at that time will be converted into common stock. Interest on
the Debentures is paid at a variable rate adjusted semi-annually. The rate
is computed at the greater of nine percent or the applicable federal rate
under Internal Revenue Code Section 1274. As of December 31, 1995 and
1994, the interest rate was nine percent.
- 12 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- OTHER OPERATING EXPENSES
Components of other operating expenses that equal or exceed $80,000 in
either year are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Regulatory fees $ 302,187 $ 364,351
Data processing 212,789 203,035
Advertising and promotion 166,190 148,494
Amortization of intangible assets 150,862 160,099
Postage and delivery 134,893 171,864
Supplies 94,103 111,628
Telephone 93,981 76,959
Legal and professional 84,087 108,263
</TABLE>
The Company follows the policy of expensing advertising costs as incurred.
NOTE 10 -- INCOME TAXES
The income tax provision for the years ended December 31, 1995 and 1994
consisted of the following components:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- --------------------------------
FEDERAL STATE TOTAL FEDERAL STATE TOTAL
-------- -------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Current $789,801 $100,000 $ 889,801 $630,313 $66,187 $696,500
Deferred 111,719 12,410 124,129 30,598 3,400 33,998
-------- -------- ---------- -------- ------- --------
Total $901,520 $112,410 $1,013,930 $660,911 $69,587 $730,498
-------- -------- ---------- -------- ------- --------
-------- -------- ---------- -------- ------- --------
</TABLE>
- 13 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- INCOME TAXES (CONTINUED)
Deferred income tax assets and liabilities reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities and their respective tax bases. Significant components of and
the resultant deferred tax assets and liabilities at December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Basis difference of property and equipment $ 510,458 $ 544,817
Unearned loan fees 84,548 44,650
---------- ----------
595,006 589,467
---------- ----------
Deferred tax assets:
Loan loss provisions 220,426 214,150
Unrealized loss on securities available
for sale 7,868 174,847
Net operating loss carryover of acquiree 87,338 151,300
Intangible assets 21,017 84,100
Reserve for possible OREO losses -- 7,250
Other items 10,980 1,550
---------- ----------
347,629 633,197
---------- ----------
NET DEFERRED TAX ASSET (LIABILITY) $ (247,377) $ 43,730
---------- ----------
---------- ----------
</TABLE>
The Company and the Bank have entered into a tax-sharing agreement under
which intercompany settlements are made on an "as though separate" basis.
NOTE 11 -- LOANS TO RELATED PARTIES
Certain officers and directors, and companies in which they held a 10
percent or more beneficial ownership, were indebted (or, in some cases,
guaranteed loans) to the Bank as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Balance January 1 $1,955,014 $2,655,661
New loans and advances 2,025,274 1,150,436
Repayments (excluding renewals) (2,168,494) (1,851,083)
---------- ----------
Balance December 31 $1,811,794 $1,955,014
---------- ----------
---------- ----------
</TABLE>
The loans summarized above were made in the normal course of business at
prevailing interest rates and terms.
- 14 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- REGULATORY LIMITATIONS
The Company's primary source of funds is dividends it receives from the
Bank. The payment of dividends by the Bank, in turn, is subject to the
regulations of the Comptroller of the Currency which require, among other
things, that dividends be paid only from net profits of the current and
immediately preceding two years. At December 31, 1995, the Bank had
approximately $2,420,000 of retained earnings available for dividend to the
Company without being required to seek special regulatory approvals.
NOTE 13 -- STOCK OPTIONS
The Company's President has been granted options to purchase up to 53,558
shares of common stock at prices ranging from $6.11 to $10.40 per share.
Of the options outstanding, 35,653 are currently exercisable, all of which
have option prices less than $9.00 per share (estimated fair value per
share). Of the remaining options that are not yet exercisable, 7,905 have
option prices less than $9.00 per share, and 10,000 have option prices in
excess of $9.00 per share. The options are exercisable for ten years from
the date they first become exercisable.
Several key employees have also been granted options totalling 11,350. Of
this amount, 4,540 are exercisable. All of these options, exercisable and
nonexercisable, have option prices less than $9.00 per share.
No options were granted or exercised during 1995.
NOTE 14 -- COMMITMENTS AND CONTINGENCIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The financial statements do not reflect various commitments and
contingent liabilities that arise in the normal course of business to
meet the financing needs of customers. These include commitments to
extend credit and honor stand-by letters of credit. These instruments
involve, to varying degrees, elements of credit, interest rate and
liquidity risks in excess of amounts reflected in the balance sheets.
The extent of the Bank's involvement in these commitments or
contingent liabilities is expressed by the contractual, or notional,
amounts of the instruments.
Commitments to extend credit, which amount to $10,029,608 and
$8,297,000 at December 31, 1995 and 1994, respectively, represent
legally binding agreements to lend to customers with fixed expiration
dates or other termination clauses. Since many commitments are
expected to expire without being funded, committed amounts do not
necessarily represent future liquidity requirements. The amount of
collateral obtained, if any, is based on management's credit
evaluation in the same manner as though an immediate credit extension
were to be granted.
- 15 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
Stand-by letters of credit are conditional commitments issued by the
Bank guaranteeing the performance of a customer to a third party. The
decision whether to guarantee such performance and the extent of
collateral requirements are made considering the same factors as are
considered in credit extension. The Company had $598,000 and $484,000
outstanding on stand-by letters of credit at December 31, 1995 and
1994, respectively.
The Company expects no significant losses to be realized in the
performance of its obligations under any of the above instruments.
CONCENTRATIONS OF CREDIT RISK
The Bank originates residential and commercial real estate loans, and
other consumer and commercial loans primarily in the north-central
Florida area. In addition, the Bank occasionally purchases loans,
primarily in Florida. Although the Bank has a diversified loan
portfolio, a substantial portion of its borrowers' ability to repay
their loans is dependent upon economic conditions in the Bank's market
area.
USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates
and assumptions regarding certain types of assets, liabilities,
revenues and expenses. For the Company, such estimates significantly
affect the amount at which the allowance for loan losses is carried,
the amount of the deferred tax assets that are dependent upon future
taxable income and the likelihood and timing of realization of such
assets, the factors and amounts entering into the estimate of fair
value of financial instruments disclosed in Note 15, and other
accounts. All such estimates relate to unsettled transactions and
events as of the date of the financial statements and, accordingly,
upon settlement it is likely that actual amounts will differ from
currently estimated amounts.
FEDERAL RESERVE REQUIREMENT
The Federal Reserve Board requires that certain banks maintain
reserves, based on their average deposits, in the form of vault cash
and average deposit balances at a Federal Reserve Bank. The
requirement as of December 31, 1995 was $1,211,000.
- 16 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
POTENTIAL ACQUISITION
As of January 19, 1996, the Company had reached an agreement in
principle with Riherd Bank Holding Company (RBHC) to acquire RBHC and
its banking subsidiary in Lake Butler, Florida. The terms of the
agreement would give RBHC shareholders the option of receiving CNB,
Inc. common stock or cash, although management of both companies
expects the majority of RBHC shareholders will become CNB
shareholders. Negotiations are ongoing as to the details of the
potential transaction.
NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The table which follows shows the estimated fair value and the related
carrying amounts of the Company's financial instruments at December 31,
1995.
For purposes of this disclosure, the estimated fair value for cash and cash
equivalents is considered to approximate their carrying amounts. The
estimated fair value for securities is based on quoted market values for
the individual or equivalent securities. The estimated fair value for
loans is based on interest rates the Company would have charged borrowers
at December 31, 1995 for similar loans, maturities and terms.
The estimated fair value for demand and savings deposits is based on their
carrying amount. The estimated fair value for time deposits is based on
rates the Company offered at December 31, 1995 for deposits of similar
remaining maturities. The estimated fair value for other financial
instruments and off-balance-sheet loan commitments are considered to
approximate carrying amount at December 31, 1995. Assets and liabilities
of the Company that are not defined as financial instruments, such as
premises and equipment, are excluded from these disclosures.
<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
---------- ----------
(In Thousands)
<S> <C> <C>
Financial Assets
Cash and cash equivalents $ 12,972 $ 12,972
Securities available for sale 39,860 39,838
Securities held to maturity 13,247 13,053
Net loans 101,403 101,673
Financial Liabilities
Demand and Savings Deposits 74,592 74,592
Time Deposits 84,411 84,855
</TABLE>
- 17 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Non-financial instruments typically not recognized in the financial
statements nevertheless may have value but are not included in the above
disclosures. These include, among other items, the estimated earnings
power of core deposit accounts, the earnings potential of loan servicing
rights, customer goodwill, and similar items.
While these estimates of fair value are based on management's judgment of
the most appropriate factors, there is no assurance that, were the Company
to have disposed of such items at December 31, 1995, the estimated fair
values would necessarily have been achieved at that date, since market
values may differ depending on various circumstances. The estimated fair
values at December 31, 1995 should not necessarily be considered to apply
at subsequent dates.
NOTE 16 -- CONDENSED FINANCIAL DATA (PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
December 31,
1995 1994
----------- -----------
<S> <C> <C>
BALANCE SHEETS
ASSETS
Cash and due from banks $ 317,620 $ 102,602
Investment in CNB National Bank 15,653,382 14,741,682
Other assets 31,105 60,158
----------- -----------
TOTAL ASSETS $16,002,107 $14,904,442
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Note payable $950,000 $ 1,700,000
Other liabilities 23,961 3,086
----------- -----------
Total Liabilities 973,961 1,703,086
----------- -----------
----------- -----------
MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES 274,250 274,250
----------- -----------
SHAREHOLDERS' EQUITY
Common stock 16,397 16,397
Additional paid-in capital 9,784,369 9,784,369
Retained earnings 4,966,357 3,420,252
Unrealized loss on securities (13,227) (293,912)
----------- -----------
Total Shareholders' Equity 14,753,896 12,927,106
----------- -----------
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $16,002,107 $14,904,442
----------- -----------
----------- -----------
</TABLE>
- 18 -
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16 -- CONDENSED FINANCIAL DATA (PARENT COMPANY ONLY) (CONTINUED)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
----------- -----------
<S> <C> <C>
STATEMENTS OF OPERATIONS
Equity in undistributed Bank earnings $ 625,904 $ 1,047,816
Dividend income 1,315,266 597,848
Interest income 12,088 3,273
Interest expense (161,467) (178,185)
Non-interest income 16,594 2,855
Non-interest expense (26,568) (189,252)
Income tax benefits 59,439 41,811
----------- -----------
Net income $ 1,841,256 $ 1,326,166
----------- -----------
----------- -----------
STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Net income $ 1,841,255 $ 1,326,166
Adjustments to reconcile net income to cash
provided by operating activities:
Undistributed earnings of subsidiary (625,904) (1,047,816)
Changes in year-end balances of:
Other assets 29,053 53,215
Other liabilities 15,765 (39,517)
----------- -----------
Net Cash Provided By Operating Activities 1,260,169 292,048
----------- -----------
INVESTING ACTIVITIES
Cash received in Bradford acquisition -- 173,019
Cash used in Bradford acquisition -- (23,178)
----------- -----------
Net Cash Provided by Investing Activities -- 149,841
----------- -----------
FINANCING ACTIVITIES
Payments on note payable (750,000) (300,000)
Cash dividends (295,151) (131,179)
----------- -----------
Net Cash Used In Investing Activities (1,045,151) (431,179)
----------- -----------
Net Increase in Cash and Cash Equivalents 215,018 10,710
Cash and Cash Equivalents:
Beginning of Year 102,602 91,892
----------- -----------
----------- -----------
End of Year $ 317,620 $ 102,602
----------- -----------
----------- -----------
</TABLE>
- 19 -
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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, INC.
--------------------------------
(Registrant)
By: /s/
--------------------------------
K.C. Trowell
President, Principal Executive
Officer, and Chief Financial
Officer
Date: July 16, 1996
