<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1996
REGISTRATION STATEMENT NO.333-04640
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
CNB, INC.
(Name of small business issuer as specified in its charter)
FLORIDA 6712 59-2958616
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
210 NORTH MARION STREET
LAKE CITY, FLORIDA 32056
(904) 755-3240
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
----------------
K.C. TROWELL
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
CNB, INC.
201 NORTH MARION STREET
LAKE CITY, FLORIDA 32058
(904) 755-3240
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
COPIES TO:
HALCYON E. SKINNER, ESQ. RODERICK N. JONES, ESQ.
MAHONEY ADAMS & CRISER, P.A. SHUTTS & BOWEN, L.L.P.
50 NORTH LAURA STREET 20 N. ORANGE AVE., SUITE 1000
JACKSONVILLE, FLORIDA 32202 ORLANDO, FLORIDA 32801-4626
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon the effective date of merger described in this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and and there is compliance
with General Instruction G, please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED (1) PRICE PER UNIT (1) PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par
value $.01 per share
(including preferred
stock purchase rights) 483,886 $9.00 $4,354,974 $1,501.71
</TABLE>
- --------------
(1) Based upon an assumed number of shares that may be issued in the merger
described herein. Such assumed maximum number is based upon the maximum
number of shares of common stock, $.0067 par value ("Riherd Common Stock"),
of Riherd Bank Holding Company ("Riherd") that may be outstanding
immediately prior to the merger. See "THE MERGER -- Description of CNB
Capital Stock."
(2) Estimated solely for the purpose of determining the registration fee.
Pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended
(the "Securities Act"), the maximum aggregate offering price is based on
the book value as of December 31, 1995, of the securities to be
registered.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
RIHERD BANK HOLDING COMPANY
300 West Main Street
Lake Butler, FL 32054
Paul M. Riherd
Chairman of the Board
_________________, 1996
Dear Fellow Shareholder:
You are cordially invited to attend a special meeting (the "Special
Meeting") of shareholders of Riherd Bank Holding Company ("Riherd") to be
held at the principal office of Riherd at 300 West Main Street, Lake Butler,
Florida 32054, at _______ p.m. local time on _______________, 1996.
On February 26, 1996, Riherd and CNB, Inc. ("CNB") entered into an
agreement to combine Riherd with CNB by merging Riherd with and into CNB (the
"Merger"). The Merger, which has been approved by the Boards of Directors of
CNB and Riherd, would result in Farmers and Dealers Bank, currently a
wholly-owned subsidiary of Riherd ("F&D Bank"), becoming a wholly-owned
subsidiary of CNB. F&D Bank would then merge with and into CNB National
Bank, a wholly-owned banking subsidiary of CNB.
The purpose of the meeting is to consider and vote on the approval of
the proposed Merger pursuant to the Agreement and Plan of Merger, dated
February 26, 1996, between CNB and Riherd (the "Merger Agreement"). Under
the terms of the Merger Agreement, upon consummation of the Merger, each
outstanding share of common stock of Riherd, par value $.0067 per share
("Riherd Common Stock") (other than Dissenting Shares, as defined in the
attached Proxy Statement-Prospectus) will be converted into cash in the
amount of $79.07 or, at the election of the shareholder in accordance with
the terms and conditions of the Merger Agreement, 5.4909 shares of common
stock of CNB, $.01 par value per share (the "CNB Common Stock"), provided,
however, that in no event shall CNB issue less than 246,782 shares of CNB
Common Stock in connection with the Merger (the "Merger Consideration")
<PAGE>
Shareholders are entitled to vote all of the shares of Riherd Common
Stock held by them on _______________, 1996, which is the record date for the
Special Meeting.
Approval of the Merger requires the affirmative vote of holders of a
majority of the outstanding shares of Riherd Common Stock as of the record
date.
We urge you to consider carefully these important matters, which are
described in the attached Proxy Statement-Prospectus. In order to ensure that
your shares are represented at the Special Meeting, please indicate your vote
on the enclosed form of proxy, date and sign it, and return it in the
enclosed envelope. A prompt response will be appreciated. If you are able to
attend the Special Meeting, you may revoke your proxy and vote in person if
you wish.
We look forward to seeing you at the Special Meeting.
Paul M. Riherd
Chairman of the Board
- 2 -
<PAGE>
RIHERD BANK HOLDING COMPANY
300 West Main Street
Lake Butler, FL 32054
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Riherd Bank Holding Company:
Notice is hereby given that a special meeting of shareholders of Riherd
Bank Holding Company, a Florida corporation ("Riherd"), will be held on
________________, ________________, 1996, at ______ p.m., local time, at the
principal office of Riherd at 300 West Main Street, Lake Butler, Florida
32054, for the following purposes:
1. To consider and vote upon an Agreement and Plan of
Merger dated as of February 26, 1996, between
Riherd and CNB, Inc., a Florida corporation
("CNB"), pursuant to which Riherd will be merged
with and into CNB, and providing for CNB to be the
surviving corporation (the "Merger"). If the
Merger is consummated, Farmers and Dealers Bank
("F&D Bank") will become a wholly-owned subsidiary
of CNB and each outstanding share of Riherd common
stock, par value $.0067 per share, will be
converted into the right to receive cash in the
amount of $79.07 or, at the election of the
shareholder, 5.4909 shares of CNB Common Stock,
$.01 par value, provided, however, that in no
event shall CNB issue less than 246,782 shares of
CNB Common Stock in connection with the Merger, on
the terms and conditions described in the
accompanying Proxy Statement-Prospectus.
2. To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
Holders of record of Riherd Common Stock at the close of business on
_________________, 1996, are entitled to notice of and to vote at the special
meeting and any adjournments thereof.
- 3 -
<PAGE>
Pursuant to Section 607.1302 of the Florida Business Corporation Act,
shareholders of Riherd are entitled to dissent from the Merger and to receive
the full value of their shares. A copy of the provisions of the Florida
Business Corporation Act regarding dissenters' rights is attached as ANNEX C
to the accompanying Proxy Statement-Prospectus.
BY ORDER OF THE BOARD OF DIRECTORS
Martha C. Riherd, Corporate Secretary
Lake Butler, Florida
_____________, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE
THE ENCLOSED FORM OF PROXY AND RETURN IT TO RIHERD IN ORDER TO ASSURE THAT
YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING. A STAMPED, RETURN
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF YOU ATTEND THE MEETING, YOU
MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
- 4 -
<PAGE>
PROXY STATEMENT
RIHERD BANK HOLDING COMPANY
FOR SPECIAL MEETING
OF SHAREHOLDERS TO
BE HELD ON ______________, 1996
______________________________________
PROSPECTUS
CNB, INC.
______________________________________
This Proxy Statement-Prospectus serves as the Prospectus of CNB, Inc.
("CNB") with respect to the issuance of up to 483,886 shares of common stock
of CNB, par value $.01 per share ("CNB Common Stock"), issuable to
shareholders of Riherd Bank Holding Company ("Riherd") upon consummation of
the proposed merger of Riherd with and into CNB (the "Merger") pursuant to
the terms and subject to the conditions of the Agreement and Plan of Merger
(the "Merger Agreement"), dated February 26, 1996, by and between CNB and
Riherd. The Merger Agreement is attached as APPENDIX A and is incorporated
herein by reference.
THIS PROXY STATEMENT-PROSPECTUS ALSO SERVES AS THE PROXY STATEMENT OF
RIHERD FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON ____________,
1996. SEE "THE SPECIAL MEETING."
Upon consummation of the Merger, except as described herein, each
outstanding share of common stock of Riherd, par value $.0067 per share
("Riherd Common Stock") (excluding Dissenting Shares) will be converted into
cash in the amount of $79.07 or, at the election of the shareholder in
accordance with the terms and conditions of the Merger Agreement, 5.4909
shares of CNB Common Stock provided, however, that in no event shall CNB
issue less than 246,782 shares of CNB Common Stock in connection with the
Merger. Except as provided below, Riherd shareholders who do not timely
elect, in the manner described on the letter of transmittal, to receive
shares of CNB Common Stock in exchange for their shares of Riherd Common
Stock (except the dissenting shareholders) will receive cash in the amount
of $79.07 in exchange for each share of Riherd Common Stock registered in
their names. If the Riherd Shareholders do not timely elect to receive at
least 246,782 shares of CNB Common Stock, then additional shares of CNB
Common Stock shall be allocated pro rata to all Riherd shareholders, to the
extent they have not timely elected to receive CNB Common Stock, so that a
minimum of 246,782 shares of CNB Common Stock will be issued as a result of
the Merger; provided, however, that no additional shares of CNB Common Stock
will be allocated with respect to any Dissenting Shares. Riherd shareholders
will receive cash (without interest), in lieu of fractional shares. For a
more complete description of the Merger Agreement and the terms of the
Merger, see "THE MERGER."
This Proxy Statement-Prospectus and the form of proxy are first being
mailed to shareholders of Riherd on or about _____________, 1996.
_____________________________________________
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT-PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. THE SHARES OF CNB COMMON STOCK
OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS ___________, 1996.
<PAGE>
AVAILABLE INFORMATION
CNB is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information can be inspected and copied at the SEC's
public reference room located at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the public reference facilities in the SEC's regional offices
located at: Northwestern CitiCorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such materials can be obtained at prescribed
rates by writing to the Securities and Exchange Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
CNB has filed with the SEC a Registration Statement on Form S-4 (together
with any amendments and exhibits thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares of CNB Common Stock to be issued pursuant to the Merger. This Proxy
Statement-Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Such additional information may be
obtained from the public reference room of the SEC, 450 Fifth Street, N.W., in
Washington, D.C. 20549. Statements contained in this Proxy Statement-Prospectus
or in any document incorporated by reference in this Proxy Statement-Prospectus
as to the contents of any contract or other document referred to herein or
therein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement-Prospectus incorporates by reference documents
relating to CNB, which documents are not presented herein or delivered
herewith. Such documents, excluding exhibits unless specifically incorporated
herein, are available without charge upon request to K.C. Trowell, Chief
Executive Officer, CNB, Inc., 201 North Marion Street, Lake City, Florida
32055. Telephone requests may be directed to (904) 755-3240.
The following documents filed with the SEC by CNB are incorporated herein,
as of their respective filing dates, by reference in this Proxy Statement-
Prospectus: (i) CNB's Annual Report on Form 10-KSB for the year ended December
31, 1995, (ii) CNB's Quarterly Report on Form 10-QSB for the three months ended
March 31, 1996, will be filed with the amendment and (iii) CNB's Form 8-K filed
on July 14, 1994, and Form 8-K filed on April 22, 1994. In addition, a copy of
CNB's Annual Report on Form 10-KSB for the year ended December 31, 1995, will
accompany this Prospectus.
- 2 -
<PAGE>
All documents filed by CNB pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date hereof and prior to the date of the
Special Meeting (as defined in "SUMMARY -- The Special Meeting") shall be deemed
to be incorporated herein by reference and to be a part of such filing. Any
statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part hereof, except as so modified or superseded.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY CNB OR RIHERD. THIS PROXY STATEMENT-PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE CNB
COMMON STOCK OFFERED BY THIS PROXY STATEMENT-PROSPECTUS, NOR DOES IT CONSTITUTE
THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM
OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF CNB OR RIHERD SINCE THE DATE HEREOF OR THAT
INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS OR IN THE DOCUMENTS INCORPORATED
HEREIN BY REFERENCE IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THE DATES THEREOF.
- 3 -
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE. . . . . . . . . . . . . . 2
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Recommendation of Riherd's Board of Directors
Reasons for the Merger. . . . . . . . . . . . . . . . . . . . . . . . . 8
Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . 8
Conditions to the Merger. . . . . . . . . . . . . . . . . . . . . . . . 9
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . 9
Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Management and Operations After the Merger. . . . . . . . . . . . . . . 10
Interests of Certain Persons in the Merger. . . . . . . . . . . . . . . 11
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . 11
Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Markets and Market Prices . . . . . . . . . . . . . . . . . . . . . . . 12
COMPARATIVE UNAUDITED PER SHARE INFORMATION. . . . . . . . . . . . . . . . . 12
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 14
SPECIAL MEETING OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . 16
Purpose, Date, Place and Time . . . . . . . . . . . . . . . . . . . . . 16
Shares Entitled to Vote; Shareholder Approval Required. . . . . . . . . 17
Votes Required; Quorum. . . . . . . . . . . . . . . . . . . . . . . . . 17
Voting and Revocation of Proxies. . . . . . . . . . . . . . . . . . . . 17
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . 18
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Background of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 19
Riherd's Reasons for the Merger . . . . . . . . . . . . . . . . . . . . 21
Valuation of CNB Common Stock . . . . . . . . . . . . . . . . . . . . . 22
Opinion of Riherd's Financial Advisor . . . . . . . . . . . . . . . . . 23
Comparable Transaction Analysis . . . . . . . . . . . . . . . . . . . . 24
Discounted Cash Flow Analysis . . . . . . . . . . . . . . . . . . . . . 27
Contribution Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 27
CNB Financial Review. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . 31
Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . 31
Conditions to the Merger. . . . . . . . . . . . . . . . . . . . . . . . 32
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . 37
Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Management and Operations After the Merger. . . . . . . . . . . . . . . 40
Interests of Certain Persons in the Merger. . . . . . . . . . . . . . . 40
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 42
- 4 -
<PAGE>
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . 42
Resale of CNB Common Stock. . . . . . . . . . . . . . . . . . . . . . . 44
Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . . . . . . 45
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Description of CNB Capital Stock. . . . . . . . . . . . . . . . . . . . 45
Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Certain Differences in Rights of Shareholders . . . . . . . . . . . . . 49
INFORMATION ABOUT RIHERD . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Business of Riherd. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Market and Dividend Information Regarding Riherd. . . . . . . . . . . . 52
Security Ownership of Riherd's Management and Principal Shareholders. . 52
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 54
FINANCIAL INFORMATION REGARDING RIHERD . . . . . . . . . . . . . . . . . . . 55
UNAUDITED PRO FORMA FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 72
Unaudited Pro Forma Condensed Income Statement. . . . . . . . . . . . . 73
Unaudited Pro Forma Condensed Balance Sheet . . . . . . . . . . . . . . 74
Pro Forma Equity Capital and Pro Forma Capital
Ratio Computation . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Adjusted Capital, Assets and Capital Ratios Computation . . . . . . . . 77
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF RIHERD. . . . . . . . . . . . . . . . . . . . . 78
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 78
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Investment Securities Gains . . . . . . . . . . . . . . . . . . . . . . 81
Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . 81
Noninterest Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 82
Provision for Income Taxes. . . . . . . . . . . . . . . . . . . . . . . 82
Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . 83
Asset Quality and Credit Risk . . . . . . . . . . . . . . . . . . . . . 83
NonPerforming Assets & Past Due Loans . . . . . . . . . . . . . . . . . 87
Allowance and Provision for Loan Losses . . . . . . . . . . . . . . . . 88
Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Liquidity and Rate Sensitivity. . . . . . . . . . . . . . . . . . . . . 92
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Federal Depositor Preference Legislation. . . . . . . . . . . . . . . . 96
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
FDICIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Interstate Banking Legislation. . . . . . . . . . . . . . . . . . . . . 100
Anticompetitive Effects of the Merger . . . . . . . . . . . . . . . . . 100
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
APPENDIX A -- AGREEMENT AND PLAN OF MERGER
APPENDIX B -- OPINION OF MERCER CAPITAL
APPENDIX C -- PROVISIONS FOR DISSENTERS' RIGHTS UNDER THE
FLORIDA BUSINESS CORPORATION ACT
- 5 -
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN
ALL RESPECTS BY THE MORE DETAILED INFORMATION INCLUDED IN THIS PROXY STATEMENT-
PROSPECTUS, THE APPENDICES HERETO AND THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE. AS USED IN THIS PROXY STATEMENT-PROSPECTUS, THE TERMS CNB AND RIHERD
REFER TO SUCH CORPORATIONS, RESPECTIVELY, AND WHERE THE CONTEXT REQUIRES, SUCH
CORPORATIONS AND THEIR RESPECTIVE PREDECESSORS AND SUBSIDIARIES ON A
CONSOLIDATED BASIS. ALL INFORMATION CONCERNING CNB INCLUDED IN THIS PROXY
STATEMENT-PROSPECTUS HAS BEEN FURNISHED BY CNB AND ALL INFORMATION CONCERNING
RIHERD INCLUDED IN THIS PROXY STATEMENT-PROSPECTUS HAS BEEN FURNISHED BY RIHERD.
THE COMPANIES
CNB. CNB, a Florida corporation organized on January 15, 1987, is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). CNB acquired a controlling interest in the common
stock of CNB National Bank ("CNB Bank") on March 23, 1987, and subsequently
acquired the remaining outstanding shares. CNB Bank is the sole subsidiary of
CNB and CNB conducts no business other than owning and operating CNB Bank. CNB
Bank has a total of seven offices in Columbia, Suwannee, Baker and Bradford
counties, Florida. At March 31, 1996, CNB Bank had total assets of $181,704,535
and total deposits of $164,148,453.
CNB is a legal entity separate and distinct from it wholly-owned
subsidiary, CNB Bank. Accordingly, the right of CNB, and thus the right of CNB's
creditors and shareholders, to participate in any distribution of the assets or
earnings of its subsidiary is necessarily subject to the prior claims of
creditors of its subsidiary, except to the extent that claims of CNB in its
capacity as a creditor may be recognized. The principal source of CNB's revenues
is dividends from CNB Bank. Declaration of such dividends are subject to various
regulations that generally limit dividends payable by CNB Bank to its net income
for the current period and the past two years, less any dividends already paid.
As of March 31, 1996, CNB Bank could have declared, in accordance with
applicable industry rules and regulations, aggregate dividends payable to CNB of
approximately $1,800,000 without seeking prior approval of regulators.
The executive offices of CNB are located at 201 North Marion Street, Lake
City, Florida 32055. Its mailing address is Post Office Box 3239, Lake City,
Florida 32056, and its telephone number is (904) 755-3240.
RIHERD. Riherd, a Florida corporation organized on August 11, 1987, is a
bank holding company registered under the BHC Act. Riherd has one wholly-owned
subsidiary, Farmers and Dealers Bank ("F&D Bank"), which is a state bank
organized under the laws of the State of Florida.
-6-
<PAGE>
F&D Bank operates one main office and two branch offices. The main office of
F&D Bank is located in Lake Butler, Florida, and both of the branch offices
are located in Gainesville, Florida. At March 31, 1996, F&D Bank had total
assets of $49,453,087 and total deposits of $44,460,432. The principal
source of Riherd's revenues is dividends from F&D Bank.
Under Florida law, the board of directors of F&D Bank, after charging off
bad debts, depreciation, and other worthless assets and making provision for
reasonably anticipated future loan losses, may declare and pay a dividend of so
much of the aggregate of the net profits of the current year, combined with the
retained net profits of the preceding two years without prior regulatory
approval. As of March 31, 1996, F&D Bank could have paid approximately $43,000
in dividends to Riherd without prior regulatory approval. Although upon
specific request F&D Bank might be authorized to pay dividends in excess of that
amount, its ability to pay dividends is limited by the need to maintain adequate
levels of capital.
-7-
<PAGE>
The principal executive offices of Riherd are located at 300 West Main
Street, Lake Butler, Florida 32054. Its mailing address is Post Office Box 358,
Lake Butler, Florida 32054, and its telephone number is 904-496-2101.
ADDITIONAL INFORMATION. For additional information regarding the business
of CNB and Riherd, see "THE MERGER -- Background of the Merger" and
"-- Recommendation of Riherd's Board of Directors; Reasons for the Merger",
"INFORMATION ABOUT RIHERD" and the documents incorporated herein by reference
(see "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE").
THE MERGER
The Merger Agreement provides for the merger of Riherd with and into CNB,
with CNB (hereinafter sometimes referred to as the "Surviving Corporation") as
the surviving corporation. Except as described under "THE MERGER -- Terms of
the Merger," upon consummation of the Merger, each outstanding share of Riherd
Common Stock (other than Dissenting Shares; see "The Merger -- Dissenters'
Rights") will, at the election of each holder of shares of Riherd Common Stock,
be converted into cash in the amount of $79.07 or, at the election of the
shareholder in accordance with the terms and conditions of the Merger Agreement,
5.4909 shares of CNB Common Stock, subject to adjustments and based upon the
occurrence of certain events as set forth in the Merger Agreement (the "Merger
Consideration"). In accordance with the terms and conditions of the Merger
Agreement, the Riherd shareholders must timely elect, in the manner described on
the letter of transmittal, to receive shares of CNB Common Stock in exchange for
their shares of Riherd Common Stock in order to receive CNB Common Stock.
Except as provided below, Riherd shareholders who do not timely elect to receive
shares of CNB Common Stock in exchange for their shares of Riherd Common Stock
(with the exception of Dissenting Shares) will receive in exchange for each
share of Riherd Common Stock registered in their names as of the Effective Date
of the Merger, cash in the amount of $79.07. After consummation of the Merger,
each outstanding share of CNB's capital stock (including CNB Common Stock) will
remain outstanding. Holders of Riherd Common Stock will receive cash (without
interest) in lieu of fractional shares of CNB Common Stock based on an amount of
$14.40 per share. Notwithstanding the foregoing, pursuant to the Merger
Agreement, if the holders of the Riherd Common Stock do not timely elect to
receive at least 246,782 shares of CNB Common Stock, then additional shares of
CNB Common Stock shall be allocated pro rata to all holders of Riherd Common
Stock to the extent they have not timely elected to receive shares of CNB Common
Stock so that 246,782 shares of CNB Common Stock will be issued as a result of
the Merger; provided, however, that no additional shares of CNB Common Stock
will be allocated with respect to Dissenting Shares. See "THE MERGER -- Terms of
the Merger" and " -- Accounting Treatment."
-8-
<PAGE>
THE SPECIAL MEETING
A special meeting of Riherd's shareholders (the "Special Meeting") will be
held on _______________, 1996 at ____ p.m. local time, at the main office of F&D
Bank, 300 West Main Street, Lake Butler, Florida 32054, to consider and vote
upon the Merger Agreement.
Only holders of record of Riherd Common Stock at the close of business on
_____________, 1996 (the "Record Date"), will be entitled to vote at the Special
Meeting. On the Record Date, there were outstanding and entitled to vote 88,125
shares of Riherd Common Stock. Each share of Riherd Common Stock is entitled to
one vote.
For additional information relating to the Special Meeting, see "THE
SPECIAL MEETING."
VOTE REQUIRED
Under Florida law, the Merger Agreement must be approved by the affirmative
vote of the holders of a majority of the outstanding shares of Riherd Common
Stock. The shareholders of CNB are not required to approve the Merger
Agreement.
As of the Record Date, Riherd directors and executive officers beneficially
owned 46.8% of the outstanding Riherd Common Stock. Additionally certain
members of the Riherd family beneficially owned an additional 40.1% of the
Riherd Common Stock.
See "THE SPECIAL MEETING -- Votes Required " and "THE MERGER -- Conditions
to the Merger."
RECOMMENDATION OF RIHERD'S BOARD OF DIRECTORS; REASONS FOR THE MERGER
The members of the Board of Directors of Riherd have unanimously approved
the Merger Agreement. The Board of Directors of Riherd believes that the Merger
is fair to, and in the best interests of, Riherd and its shareholders.
Accordingly, the Board of Directors of Riherd recommends that Riherd's
shareholders vote in favor of the Merger Agreement. This recommendation is
based on a number of factors discussed in this Proxy Statement-Prospectus. See
"THE MERGER--Background of the Merger and "-- Recommendation of Riherd's Board;
Reasons for the Merger."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective on the date and at the time as set forth
in the certificate of merger issued by the Department of State of the State of
Florida, subject to satisfaction or waiver of all other conditions to the Merger
(the "Effective Time"). Subject to the conditions specified in the Merger
Agreement, the parties currently expect that the Merger will become effective on
or about August 30,
-9-
<PAGE>
1996, although there can be no assurance as to whether or when the Merger will
occur. See "THE MERGER -- Effective Time of the Merger" and "-- Conditions
to the Merger."
CONDITIONS TO THE MERGER
The respective obligations of CNB and Riherd to consummate the Merger are
subject to certain conditions (unless satisfied or waived, to the extent waiver
is permitted by law), including (i) the approval by the shareholders of Riherd
of the Merger by the vote of at least a majority of the outstanding shares of
Riherd Common Stock, (ii) receipt of all necessary approvals, waivers and
consents, regulatory or otherwise, required to consummate the Merger, including
the approval or waiver of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") and the approval of the Office of the Comptroller
of the Currency (the "OCC"), (iii) receipt of an opinion of the firm of Mercer
Capital that the consideration to be received by the holders of the Riherd
Common Stock under the terms of the Merger Agreement is fair to them from a
financial point of view, (iv) receipt of an opinion from the law firm of Mahoney
Adams & Criser, P.A., to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and that no gain or loss will be recognized by
the shareholders of Riherd to the extent that they receive CNB Common Stock in
exchange for their Riherd Common Stock in the Merger and (vi) certain other
conditions customary in transactions of this nature. See "THE MERGER --
Conditions to the Merger."
REGULATORY APPROVALS
The Merger Agreement provides that the obligation of each of CNB and Riherd
to consummate the Merger is conditioned upon the approval or other action of
such other regulatory authorities as are required under applicable law.
CNB has filed applications for regulatory review and approval, waiver or
other action with the Federal Reserve and the OCC, and will file with any such
other regulatory authorities as may be required under applicable law. There can
be no assurance that any such regulatory authorities will approve, waive or take
other required action with respect to the Merger or, if approved or waived, as
to the date of such approval, waiver or action.
All regulatory approvals necessary to consummate the Merger have been
received. On May 21, 1996, the OCC approved the Merger. In a letter dated May
24, 1996, the Federal Reserve waived the merger application process.
See "THE MERGER -- Regulatory Approvals."
BUSINESS PENDING THE MERGER
-10-
<PAGE>
Prior to the Effective Time of the Merger, each of CNB and Riherd will
conduct business in the usual, regular and ordinary course consistent with past
practice, use its reasonable best efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees and take no action which
would materially adversely affect or delay the ability of either CNB or Riherd
to obtain any necessary approvals of any governmental authority required for the
Merger or any other transaction contemplated by the Merger Agreement. In
addition to its other obligations prior to the Effective Time, Riherd has
promised not to solicit, encourage or facilitate any takeover proposals other
than the transactions contemplated by the Merger Agreement. See "THE MERGER --
Business Pending the Merger."
WAIVER AND AMENDMENT
Prior to the Effective Time, any provision of the Merger Agreement may be
waived, to the extent permitted by law, by the party entitled to the benefits of
such provision. In addition, the Merger Agreement may be amended at any time
upon the written agreement of CNB and Riherd. Under Section 607.1103 of the
Florida Business Corporation Act, however, any amendment to the Merger Agreement
made after its adoption by the holders of the Riherd Common Stock may not: (i)
change the amount or kind of shares, securities, cash, property or rights to be
received in exchange for or on conversion of the Riherd Common Stock; or (ii)
change any of the terms or conditions of the Merger Agreement if such change
would adversely affect Riherd or the holders of the Riherd Common Stock. See
"THE MERGER -- Waiver and Amendment."
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after any requisite shareholder
approval, (i) by mutual consent of CNB and Riherd, or (ii) by either CNB or
Riherd (A) at any time after August 30, 1996, unless the failure to close the
transaction is due to the failure of the party seeking to terminate the Merger
Agreement to perform or observe its agreements under the Merger Agreement (B)
upon written notice to the other party that a governmental entity has prohibited
the transaction and such prohibition has become final and nonappealable, (C) in
the event of a material breach by another party of any representation, warranty,
covenant or other agreement contained in the Merger Agreement which breach is
not cured within thirty days following written notice to the breaching party,
(D) if the shareholders of Riherd fail to approve the Merger at the Special
Meeting or (E) in the event the conditions to the obligations of the party
seeking to terminate have not been satisfied or waived. See "THE MERGER --
Terms of the Merger," "-- Conditions to the Merger," "-- Regulatory Approvals,"
"-- Waiver and Amendment" and "-- Termination."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
-11-
<PAGE>
Following the Merger, there will be no change in the current officers of
CNB, except that Thomas Riherd, the current President of Riherd and F&D Bank,
will become Chief Financial Officer of CNB. The directors of CNB following
the Merger will remain the same, except that Paul M. Riherd the current
Chairman of Riherd will become an additional director of CNB. See "THE
MERGER -- Management and Operations After the Merger."
Under the Merger Agreement, CNB and Riherd have agreed not to take, or
cause to be taken, any action, whether before or after the Effective Time,
which would disqualify the Merger as a "reorganization" within the meaning of
Section 368(a) of the Code.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
CNB has generally agreed to cause CNB as the Surviving Corporation to
indemnify the present and former officers, directors and employees of Riherd
and F&D Bank against certain liabilities arising prior to the Effective Time
to the full extent then permitted under Florida law and by the Amended and
Restated Articles of Incorporation and Bylaws of Riherd, as in effect on the
date of the Merger Agreement. In addition, CNB will maintain in effect the
current liability insurance for directors and officers of Riherd for a period
of six years (or such lesser time as may be the maximum period available by
the current insurer) with respect to or arising from facts or events that
occurred before the Effective Time.
The Merger Agreement provides that Riherd may nominate one person to the
Board of Directors of CNB. It is anticipated that Paul M. Riherd, the
current Chairman and CEO of Riherd, will be added to the Board of Directors
of CNB. In addition, the Agreement provides that Thomas Riherd will serve as
the Chief Financial Officer of CNB. None of the other directors, executive
officers, or principal shareholders of Riherd or F & D Bank will become an
executive officer or director of CNB or receive any separation payment or
other severance benefit in connection with the Merger.
The Merger Agreement provides that on the Effective Date of the Merger
all employees of Riherd and F&D Bank shall, at CNB's option, either continue
as employees of the consolidated organization or be entitled to receive
severance benefits. It is anticipated that Barbara Riherd, a Vice President
and the Senior Operations Manager of F&D Bank, will continue to serve as an
officer and employee of CNB Bank at a salary equivalent to her present salary
of $37,000. The Merger Agreement obligates CNB to provide to the employees of
Riherd and F&D Bank who remain employees of F&D Bank after the Effective Time
employee benefits substantially equivalent to those provided from time to
time to employees of CNB and its subsidiary. See "THE MERGER -- Management
and Operations After the Merger," and "-- Interests of Certain Persons in the
Merger."
- 12 -
<PAGE>
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a purchase,
rather than as a pooling of interests. See "Description of the Merger --
Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the obligation of Riherd to consummate the Merger
that Mahoney Adams & Criser, P.A., counsel for CNB, will have delivered an
opinion that (i) the Merger will constitute a reorganization within the
meaning of Section 368 of the Code, (ii) no gain or loss will be recognized
by Riherd as a result of the Merger, (iii) no gain or loss will be recognized
by shareholders of Riherd who receive shares of CNB Common Stock in exchange
shares of Riherd Common Stock pursuant to the Merger, (iv) the tax basis of
CNB Common Stock received by shareholders who exchange their Riherd Common
Stock for CNB Common Stock in the Merger will be the same as the tax basis of
the Riherd Common Stock surrendered in exchange therefor (v) the holding
period of the CNB Common Stock in the hands of the Riherd shareholders will,
in each case, include the holding period of the shares of Riherd Common Stock
surrendered in exchange therefor, provided that the Riherd Common Stock was,
in each instance, held as a capital asset in the hands of the Riherd
shareholders on the effective date of the Merger and (vi) cash received by a
holder of Riherd Common Stock under the Merger Agreement will be treated as
having been received in exchange for shares of Riherd Common Stock and will
qualify as a capital gain or loss (assuming the Riherd Common Stock was a
capital asset in the hands of the holder as of the Effective Time). For a
more complete description of the federal income tax consequences of the
Merger, see "THE MERGER -- Certain Federal Income Tax Consequences." Due to,
among other reasons, the individual nature of the tax consequences of the
Merger, each Riherd shareholder should consult his or her own tax advisor
concerning the tax consequences of the Merger.
DISSENTERS' RIGHTS
If the Merger is consummated, the holders of Riherd Common Stock will
have dissenters' rights, provided that such shareholders comply with certain
statutory provisions. Failure to take any step in connection with the
exercise of such dissenter's rights in a timely manner may result in the loss
or waiver of those rights. See "THE MERGER -- Dissenters' Rights."
MARKETS AND MARKET PRICES
No public trading market exists for Riherd Common Stock or CNB Common
Stock and no such market is expected to develop in the foreseeable future.
To the best of Riherd's knowledge, there have been no arm's length sales of
Riherd Common Stock during the last two years, except with respect to the
sale on September 1, 1994, of five shares of
- 13 -
<PAGE>
Riherd Common Stock to Thomas M. Riherd, II, by Gerald White for $51.54 per
share and the redemption of 125 shares of Riherd Common Stock from Gerald
White, for $51.54 per share. Transactions involving the CNB Common
Stock are infrequent and negotiated privately between the persons involved in
the transaction. To the knowledge of CNB, all transactions have been
consummated at CNB's current book value which is currently $9.00 per share.
COMPARATIVE UNAUDITED PER SHARE INFORMATION
The following summary presents selected comparative unaudited per share
information (i) for CNB on a historical basis and on a pro forma combined
basis assuming that the Merger had been effective during the periods
presented and (ii) for Riherd on a historical basis and on a pro forma
equivalent basis. The pro forma financial information should be read in
conjunction with the unaudited pro forma financial statements and the
historical consolidated financial statements of CNB and Riherd and the
related notes thereto included herein or in documents incorporated herein by
reference, as applicable. See "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE" and "INFORMATION ABOUT RIHERD -- Financial Information Regarding
Riherd" and "UNAUDITED PRO FORMA FINANCIAL STATEMENTS."
The following information is not necessarily indicative of the results
of operations or combined financial position that would have resulted had the
Merger been consummated at the beginning of the periods indicated, nor is it
necessarily indicative of the results of operations of future periods or
future combined financial position.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
EQUIVALENT SHARE DATA
Three Months Ended Year Ended
March 31, December 31,
1996 1995
-----------------------------------
<S> <C> <C>
Net income per share:
CNB - historical $ .32 $ 1.12
Riherd - historical .92 2.55
CNB pro forma .29 .97
Riherd pro forma equivalent (1) 1.59 5.33
Cash dividends per common share:
CNB - historical .05 .18
Riherd - historical .14 .55
Riherd pro forma equivalent (2) .27 .99
Book value per common share (period end):
CNB - historical 9.25 9.00
Riherd - historical 53.94 54.39
CNB pro forma 9.19 9.00
Riherd pro forma equivalent (1) 50.46 49.42
</TABLE>
(1) Riherd pro forma equivalent per share amounts for net income and book
value represent the respective CNB pro forma amounts multiplied by
the exchange ratio of 5.4909 shares of CNB common stock for each share
of Riherd common stock.
(2) Riherd pro forma equivalent dividends per share represent historical
dividends per share declared by CNB, multiplied by the exchange ratio
of 5.4909.
- -------------------------------------------------------------------------------
- --------------------------
(1) The shares in the above transaction were purchased for their book
value at that time. The transaction has been adjuted to reflect a 15 for 1
stock split that took place on June 30, 1995.
- 14 -
<PAGE>
SELECTED FINANCIAL INFORMATION
The following tables set forth certain historical selected financial
information for CNB. The historical selected financial information is based
upon, derived from, and should be read in conjunction with, the historical
consolidated financial statements of CNB and the related notes therein,
included in documents incorporated herein by reference. See ""INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE.''
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
CNB
(Dollars in Thousands, Three Months Year Ended
except per share data) Ended March 31, December 31,
1996 1995 1995 1994 1993 1992 1991
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 1,819 $ 1,611 $ 6,779 $ 5,671 $ 4,074 $ 3,421 $ 2,825
Provision for loan losses 115 70 230 125 173 546 288
Non-interest income 426 350 1,478 1,330 1,180 826 711
Non-interest expense 1,313 1,273 5,172 4,819 3,734 2,955 2,619
Net income 531 402 1,841 1,326 707 496 414
Per Share Data:
Net income .32 .25 1.12 .92 .87 .61 .53
Cash dividends .05 .04 .18 .08 0 0 0
Ratios:
Return on average assets 1.20 .96 1.06 .81 .67 .61 .58
Return on average equity 14.17 12.37 13.24 11.28 8.09 6.04 5.53
Average assets $178,170 $ 169,871 $173,978 $163,814 $105,624 $ 80,793 $71,268
Average equity 15,075 13,175 13,907 11,758 8,736 8,202 7,481
At Period End
Total assets 181,744 173,818 176,733 168,512 149,561 93,056 76,670
Long-term debt 650 1,550 950 1,700 2,000 0 0
Shareholders' equity 15,172 13,467 14,754 12,927 9,229 8,522 8,027
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 15 -
<PAGE>
The following tables set forth certain selected historical financial
information for Riherd. The selected historical financial information is
based upon, derived from, and should be read in conjunction with, the
historical consolidated financial statements of Riherd and the related notes
therein. See "FINANCIAL INFORMATION REGARDING RIHERD."
SELECTED FINANCIAL DATA
RIHERD
<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, December 31,
(Dollars in Thousands,
except per share data) 1996 1995 1995 1994 1993 1992 1991
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 494 $ 446 $ 1,888 $ 1,622 $ 1,550 $ 1,515 $ 1,325
Provision for loan losses 0 0 0 0 0 135 40
Non-interest income 155 111 516 398 516 548 457
Non-interest expense 531 461 2,039 2,135 1,798 1581 1541
Net income 81 60 225 (59) 223 278 162
Per Share Data:
Net income .92 .68 2.55 (0.66) 2.48 3.09 1.80
Cash dividends .14 .13 0.55 0.54 0.53 0.53 0.53
Ratios:
Return on average assets .67 .56 0.49 (0.14) 0.55 0.73 0.47
Return on average equity 6.75 5.73 4.91 (1.28) 4.76 6.29 3.81
Average assets $48,909 $43,120 $46,124 $41,586 $40,371 $40,956 $38,267
Average equity 4,840 4,242 4,568 4,605 4,676 4,422 4,251
At Period End
Total assets 49,453 44,419 48,373 42,342 39,748 40,669 40,025
Long-term debt 0 0 0 0 0 0 0
Shareholders' equity 4,754 4,497 4,793 4,258 4,740 4,565 4,335
</TABLE>
- 16 -
<PAGE>
The following unaudited historical combined selected financial data have
been derived from the unaudited selected financial data of CNB and Riherd
presented elsewhere in this Prospectus. The pro forma data have been derived
from the historical combined data, adjusted to give effect to the proposed
merger as though it occurred on January 1, 1995, with respect to income and
expense data, and March 31, 1996, with respect to balance sheet data. The pro
forma data and pro forma adjustments should be read in conjunction with pro
forma condensed financial statements presented elsewhere in this Prospectus.
Transaction costs, which are not expected to be material, have not been
considered in the information presented below.
SELECTED PRO FORMA
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Pro Forma Historical/Combined
-------------------------- -------------------------
(Dollars in Thousands March 31, December 31, March 31, December 31,
except per share data) 1996 1995 1996 1995
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $ 2,270(1) $ 8,473(1) $ 2,313 $ 8,667
Provision for loan losses 115 230 115 230
Non-interest income 581 1,994 581 1,994
Non-interest expense 1861(2) 7,286(2) 1,845 7,211
Net income 568(3) 1,865(3) 612 2,066
Per Share Data(4):
Net income $ 0.29 $ 0.97 $ 0.32 $ 1.07
Cash dividends 0.05 0.18 0.05 0.18
Ratios:
Return on average assets 1.01 0.85 1.08 0.94
Return on average equity 11.47 10.10 12.36 11.18
Average assets $227,079 $220,102 $227,079 $220,102
Average equity 19,915 18,475 19,915 18,475
At December 31,
Total Assets $232,017 $225,926 $231,197 $225,106
Long-term debt 3,650 3,950 650 950
Shareholders' equity 17,745 17,367 19,925 19,547
</TABLE>
- ------------------------
(1) after giving effect to a reduction in net interest income attributable to
borrowings to effect transaction
(2) after giving effect to amortization of deposit intangibles arising in
transaction
(3) after giving effect to 1 and 2 above, and related tax savings
(4) based on 1,930,064 shares as though they were outstanding effective January
1, 1995 - also gives effect to stock dividends and splits at any time before
March 31, 1996
SPECIAL MEETING OF SHAREHOLDERS
PURPOSE, DATE, TIME AND PLACE
This Proxy Statement-Prospectus and the accompanying form of proxy are
furnished in connection with the solicitation of proxies by the Board of
Directors of Riherd for use in connection with the Special Meeting to be held
at the main office of F&D Bank at 300 West Main Street, Lake Butler, Florida
32054, at _____ p.m. on
- 17 -
<PAGE>
______, ____________, 1996. The Special Meeting is being held to consider and
vote on the Merger Agreement.
RECORD DATE
Holders of record of Riherd Common Stock at the close of business on
________________, 1996 are entitled to notice of and to vote at the Special
Meeting.
VOTES REQUIRED; QUORUM
As of the Record Date, 88,125 shares of Riherd Common Stock were issued
and outstanding. Each holder of record of shares of Riherd Common Stock is
entitled to cast, for each share registered in his or her name, one vote on
the Merger Agreement and on each other matter presented to a vote of
shareholders at the Special Meeting. The presence, in person or by proxy, of
the holders of the majority of the outstanding shares of Riherd Common Stock
entitled to vote on the Merger Agreement will constitute a quorum for the
transaction of business at the Special Meeting. The inspectors of election
will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum.
The affirmative vote of the holders of the majority of the outstanding
Riherd Common Stock, whether or not present or represented at the Special
Meeting, is required to approve the Merger Agreement. Abstentions will not be
counted as votes cast for or against the proposal to approve the Merger
Agreement and, as a result, will have the same effect as votes cast against
the Merger Agreement. As of the Record Date, directors and executive officers
of Riherd and their affiliates (including members of their families)
beneficially owned 76,575 shares of Riherd Common Stock (approximately 86.90%
of the outstanding shares of Riherd). None of these persons have entered into
any agreement or other commitment with respect to the vote on the Merger and
Merger Agreement.
Provided that a quorum is present, a majority of the votes present, in
person or by proxy, at the Special Meeting will be required to approve any
other business properly brought before the Special Meeting.
VOTING AND REVOCATION OF PROXIES
Shares of Riherd Common Stock represented by proxy properly signed and
received at or prior to the Special Meeting, unless subsequently revoked,
will be voted in accordance with the instructions thereon. If a proxy is
signed and returned without any voting instructions, shares of Riherd Common
Stock represented by the proxy will be voted FOR the proposal to approve the
Merger
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Agreement. A shareholder may revoke any proxy given pursuant to this
solicitation by delivering to the Chief Executive Officer of Riherd, prior to
or at the Special Meeting, a written notice revoking the proxy or a duly
executed proxy related to the same shares bearing a later date or by voting
in person at the Special Meeting. All written notices of revocation and other
communications with respect to the revocation of Riherd proxy should be
addressed to: Riherd Bank Holding Company, 300 W. Main Street, Lake Butler,
Florida, 32054, Attn: Mr. Thomas M. Riherd. Attendance at the Special Meeting
will not, in and of itself, constitute a revocation of a proxy. The board of
directors of Riherd is not aware of any business to be acted upon at the
Special Meeting other than as described herein. If, however, other matters
are properly brought before the Special Meeting, or any adjournments or
postponements thereof, the persons appointed as proxy will have discretion to
vote or to act in such matters according to their best judgment.
SOLICITATION OF PROXIES
Riherd will bear all expenses of solicitation of Riherd shareholders in
connection with the Special Meeting. In addition to solicitation by use of
the mail, proxies may be solicited by directors, officers and employees of
Riherd in person or by telephone, telegram, or by other means of
communication. Such directors, officers or employees shall not receive any
compensation for such solicitation, other than compensation which such person
is otherwise entitled to receive in their capacities as directors, officers
or employees.
THE BOARD OF DIRECTORS OF RIHERD RECOMMENDS A VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT. SEE "THE MERGER--RECOMMENDATION OF RIHERD'S BOARD; REASONS
FOR THE MERGER." PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
RIHERD SHAREHOLDERS SHOULD NOT SEND
ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
THE MERGER
This section of the Proxy Statement-Prospectus describes certain aspects
of the proposed Merger. To the extent that it relates to the Merger
Agreement, the following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached as Appendix A to this Proxy Statement-Prospectus and is incorporated
herein by reference. All shareholders are urged to read carefully the Merger
Agreement, as well as the other Appendices, in their entirety.
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BACKGROUND OF THE MERGER
Riherd's only subsidiary, F&D Bank, opened for business in Lake Butler,
Union County, Florida, in December 1911. Since its formation, F&D Bank has
survived several economic cycles and many upheavals that have left it as the
only bank operating in Union County. Riherd was formed in 1987 to provide
greater stability for F&D Bank and flexibility in planning for its future
growth.
In 1990, F&D Bank established a branch office in Gainesville, Alachua
County, Florida, and thereby became one of the first banks in Florida to take
advantage of regulatory changes allowing inter-county branching. In August,
1994, F&D Bank opened another branch in Gainesville as part of its strategic
plan to pursue growth in more attractive markets outside of slow-growing Union
County. Although F&D Bank has experienced growth over the past 4 years, with
total assets increasing from $40 million at December 31, 1991 to $48.3 million
at December 31, 1995, most of that growth has come within the past year, and
earnings have been erratic. Operating losses were suffered in both 1990 and
1994, due in part to the expense of opening the two branch offices. Increased
operating, personnel, and regulatory expenses, combined with a small loan
portfolio, have kept F&D Bank's earnings below that of its peers.
During the last several years, management of Riherd has recognized that
Riherd's operating results would only improve if F&D Bank grew significantly in
size. F&D Bank's ability to achieve this growth was hampered by the lack of
economic growth in Union County and the high level of competition in fast-
growing Alachua County. Furthermore, management believed that it was unlikely
that another bank would be willing to sell an office in Alachua County and that
any such purchase would leave F&D Bank with a large investment in real estate
and a higher level of interest-bearing deposits. These factors would initially
depress earnings due to higher occupancy costs and an inability to reinvest
deposits into higher yielding loans. Although the management of Riherd has
been frustrated by the problems of growing F&D Bank, it did not consider the
sale of F&D Bank to be an attractive alternative for increasing shareholder
value. In this connection, management believed that few community banks would
be interested in F&D Bank's small asset base. Management also believed that an
acquisition by a major regional bank, although more likely, would adversely
affect F&D Bank's customers, employees and community.
In October 1995, K. C. Trowell, President and Chairman of CNB, contacted
Riherd to arrange a meeting to discuss Riherd's interest in a merger. The
meeting was held on October 30, 1995 at F&D Bank's office in Lake Butler,
Florida. At this meeting, Mr. Trowell met with Paul Riherd and Tom Riherd, the
principal executive officers of Riherd. Mr. Trowell suggested that a merger
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of Riherd and CNB could increase value for the shareholders of both companies.
After this meeting, Riherd's management considered Mr. Trowell's proposal
and agreed that it should continue to explore the possibility of a merger
between Riherd and CNB. During these considerations, Riherd's management noted
that CNB Bank had received regulatory approval to open a new branch office in
Lake Butler. It was clear that the opening of this branch would have a negative
impact on F&D Bank's operations and earnings. Riherd's management believed that
CNB Bank would be a strong competitor in Union County because it was similar to
F&D Bank and many of F&D Bank's customers were stockholders of CNB.
On November 10, 1995, Tom Riherd held a meeting with Mr. Trowell at the
main office of CNB Bank in Lake City, Florida to discuss a possible merger. At
this meeting, Mr. Trowell discussed the banking philosophy and history of CNB
and its management style and organization. In addition, Mr. Trowell and Mr.
Riherd compared the products and services offered by both banks, their employee
benefit programs, and the implications of the merger, including the retention of
the existing offices and employees of F&D Bank. They also discussed the
composition of their respective boards of directors, CNB's financial
performance, and its future dividend plans.
On November 15, 1995, the Board of Directors of Riherd discussed the
proposal made by CNB and directed management to continue the discussions.
On November 28, 1995, Tom Riherd met with Mr. Trowell in Lake City to
discuss the terms of the merger. They discussed the financial condition of both
institutions and reviewed the non-economic terms of the proposal, including the
treatment of Riherd's employees. Mr. Trowell also indicated that CNB would
propose a merger in which the shareholders of Riherd would receive, for each
share of Riherd Common Stock, either $79.07, payable in cash, or 5.4909 shares
of CNB Common Stock (up to a maximum of 275,000 shares).
On December 13, 1995, the directors of Riherd met to review an outline of
the merger proposal received from CNB. The directors considered the
implications of the transaction and the benefits to shareholders of combining
the operations of both CNB and F&D Bank. The resulting entity would have
greater prospects of achieving a higher level of profitability and taking
advantage of growth opportunities. Based on this review, the directors approved
a continuation of the merger discussions.
On January 10, 1996, Riherd engaged Mercer Capital to review the financial
terms of the proposal and to render an opinion on the
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fairness of the consideration to be received by Riherd's shareholders. See
"Opinion of Financial Adviser." On January 10, 1996, Riherd also engaged the
law firm of Shutts & Bowen to provide legal services to Riherd in connection
with the transaction.
On January 17, 1996, Mr. Trowell attended a meeting of the Board of
Directors of F&D Bank. During this meeting, he shared his vision for the future
of the combined bank. He also responded to questions posed by the directors.
On January 30, 1996, the Board of Directors of Riherd met with Rod Jones of
Shutts and Bowen to review the terms of the merger agreement. Based on this
meeting, Riherd requested various changes to the structure of the transaction in
order to ensure that the transaction would be a tax-free reorganization for
federal income tax purposes and to address various other issues. CNB agreed to
consider these requested modifications and submitted a revised draft of the
merger to Riherd on February 22, 1996.
The cash consideration of $79.07 offered by CNB for each share of Riherd
Common Stock represented 145% of Riherd's projected book value per share as of
December 31, 1995. The exchange ratio of 5.4909 shares of CNB Common Stock to 1
share of Riherd Common Stock was determined on the basis of an implicit value
for the shares of CNB Common Stock equal to 160% of their projected book value
as of December 31, 1995. The exchange ratio thus reflected the determination by
the boards of directors of Riherd and CNB that the shares of CNB Common Stock
warranted a somewhat higher premium than the shares of Riherd Common Stock in
view of the comparative size, financial performance, and circumstances of the
two companies.
On February 23, 1996, the Board of Directors of Riherd reviewed the latest
draft of the merger agreement prepared by CNB and the written analysis of the
transaction prepared by Mercer Capital. The board of directors of Riherd
considered the assumptions and financial projections included in Mercer
Capital's analysis, which assumptions and financial projections were based on
information provided by the management of Riherd and F&D Bank, and considered
that this information and the related analysis were substantially complete and
reasonable. Rod Jones of Shutts & Bowen and Jeff Davis of Mercer Capital also
participated in the meeting and responded to questions posed by the directors
regarding the structure of the transaction and the fairness of the consideration
to be received by Riherd's shareholders. After extensive discussion, the Board
of Directors of Riherd approved the proposed merger agreement subject to the
following conditions and modifications: (i) the receipt of a written fairness
opinion from Mercer Capital; (ii) the availability of at least 296,000 shares of
CNB Common Stock to be exchanged for shares of Riherd Common Stock; and (iii)
an expiration date not later than August 30, 1996. CNB then delivered a revised
version of the merger agreement which
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included all of the additional conditions and modifications requested by
Riherd. Based on the foregoing, Riherd executed and delivered the Merger
Agreement to CNB on February 26, 1996.
RIHERD'S REASONS FOR THE MERGER
In its deliberations with regard to the Merger, the Board of Directors of
Riherd considered the following factors: (i) the consideration to be received by
the shareholders of Riherd upon the consummation of the Merger; (ii) the federal
income tax consequences of the Merger, including the fact that the Riherd
Shareholders who elected to exchange their shares of Riherd Common Stock for
shares of CNB Common Stock would not recognize taxable income in connection with
the Merger; (iii) the potential that the shares of CNB Common Stock may be more
liquid than the shares of Riherd Common Stock, given that CNB has a greater
number of shareholders and a greater number of outstanding shares, and given the
registration under the Securities Act of the shares of CNB Common Stock issued
in the Merger; (iv) the financial condition, earnings record and business
prospects of Riherd and F&D Bank, as well as those of CNB, particularly since
the larger size of the organization would facilitate the achievement of greater
operating efficiencies, would support the employment of a larger staff with
greater expertise in specialized areas, and would enable the resulting bank to
offer a wider array of products and services to its customers; (v) the amounts
paid in recent acquisitions of other community banks based in Florida; (vi) the
opinion of Mercer Capital that the consideration to be received by the
shareholders of Riherd is fair from a financial point of view; (vii) the impact
of the Merger on F&D Bank's customers, employees, and local community, because
the business strategy of CNB is similar to that of Riherd and CNB is likely to
continue the operations and retain the offices of F&D Bank in a manner similar
to their present operations; and (viii) CNB's ability to offer a broader range
of products and services to the customers of F&D Bank due to the greater size
and financial strength of the combined organization and the substantially
greater customer base and larger network of banking offices. No specific weight
or value was assigned by the Board of Directors to any of the foregoing factors.
VALUATION OF CNB COMMON STOCK
In its consideration of the Merger Agreement, the Board of Directors of
Riherd noted that shareholders of Riherd may elect to receive either cash at a
rate of $79.07 for each share of Riherd Common Stock, or 5.4909 shares of CNB
Common Stock for each share of Riherd Common Stock, provided, however, that in
no event shall CNB issue less than 246,782 shares of CNB Common Stock in
connection with the Merger. For purposes of its deliberations, the Board of
Directors of Riherd assumed that each of the alternatives available to
shareholders of Riherd were equivalent, with the
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exception of the tax consequences. See "Federal Income Tax Consequences."
Accordingly, the Board assumed that each share of CNB Common Stock had a
value of $14.40 per share. Mercer Capital in its analysis of the financial
terms of the Merger, concluded that a value of $14.40 per share for the CNB
Common Stock was supported by its valuation analysis of CNB for purposes of
the Merger. See "Opinion of Financial Advisor."
Shareholders of Riherd should note that CNB, for purposes of the pro forma
financial information included in this Proxy Statement-Prospectus, has valued
each share of CNB Common Stock at $9.00 per share, which is the book value per
share at December 31, 1995. CNB believes that this amount is an accurate
estimate of the fair value of the CNB Common Stock due to the absence of an
active trading market for the CNB Common Stock.
In the event that the Merger is consummated, the Board of Directors of
Riherd recommends that the shareholders of Riherd carefully consider the value
of the CNB Common Stock in exchange for their shares of Riherd Common Stock. In
making such decision, shareholders of Riherd should consider that the Board of
Directors of Riherd, at the time it approved the Merger Agreement, assumed that
the CNB Common Stock had a value of $14.40 per share, which would make an
election for shares of CNB Common Stock have a value of $79.07, which is
equivalent to an election for cash (at $79.07 per share). Shareholders should
also consider that if the CNB Common Stock is valued at $9.00 per share, then an
election for CNB Common Stock would have a value of only $49.42, compared to the
cash option of $79.07.
OPINION OF RIHERD'S FINANCIAL ADVISOR
In January, 1996, Riherd engaged Mercer Capital, a valuation and financial
advisory firm based in Memphis, Tennessee, to provide the Board of Directors of
Riherd with a written opinion regarding the fairness of the Merger from a
financial point of view. Riherd paid Mercer Capital a fee of $ 12,000 for its
services. Riherd also agreed to reimburse Mercer Capital for its reasonable
out-of-pocket expenses and to indemnify Mercer Capital against certain
liabilities, including certain liabilities under the federal securities laws.
Prior to its engagement, Mercer Capital has not had any material relationship
with Riherd, CNB or their respective affiliates.
Mercer Capital has been in the business of providing valuation and related
financial advisory services for 14 years, including the valuation of banking
institutions and their securities in connection with mergers and acquisitions.
Mercer Capital has a history of involvement with the banking industry
nationwide, and is familiar with the Florida market and recent transactions in
this
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market. Riherd engaged Mercer Capital because of its expertise and
experience in representing banks in acquisitions.
On May 1, 1996, Mercer Capital delivered its written opinion to the
Board of Directors of Riherd that the consideration to be received by the
shareholders of Riherd in the Merger is fair from a financial point of view.
The full text of Mercer Capital's written opinion is attached as Appendix B
to this Proxy Statement - Prospectus. It sets forth the procedures followed,
assumptions made, matters considered and limitations on the review
undertaken, by Mercer Capital in connection with its opinion. The following
summary of the opinion is qualified in its entirety by reference to the full
text of the opinion.
In connection with its opinion dated May 1, 1996, Mercer Capital
reviewed: (i) the Agreement; (ii) the annual reports to shareholders of
Riherd and CNB for the five years ended December 31, 1995; (iii) audited
financial statements of Riherd and CNB for the five years ended December 31,
1995; (iv) bank call reports for F & D Bank for the five years ended December
31, 1995; (v) the historical market prices and trading activity for the
common stock of Riherd and CNB; and (vi) financial projections prepared by
the management of Riherd and CNB with respect to their anticipated results of
future operations and business prospects. In addition, Mercer Capital held
discussions with members of the senior management of Riherd and CNB regarding
the historical and current business operations, financial condition and
future prospects of their respective companies.
Neither Riherd nor CNB imposed any limitations on the investigation to
be performed by Mercer Capital in formulating its opinion. Mercer Capital
has relied upon, without independent verification, the accuracy and
completeness of the information reviewed by it for purposes of its opinion.
Mercer Capital did not undertake any independent appraisal of the assets and
liabilities of Riherd or CNB, nor was it furnished with any such appraisals.
Mercer Capital has not reviewed any individual credit files of Riherd or
CNB. Instead, it has relied upon management's representations that the
allowances for each of Riherd and CNB are adequate to cover their potential
loan losses. Mercer Capital assumed that the Merger will be recorded as a
purchase under generally accepted accounting principles. Mercer Capital's
opinion is necessarily based on economic, market and other conditions
existing on the date of its opinion, and on information as of various earlier
dates made available to it.
Mercer Capital made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of
which are beyond the control of Riherd and CNB and which may not be realized.
Any estimates contained in Mercer
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Capital's analysis are not necessarily predictive of future results or
values, which may be significantly more or less favorable than such
estimates. Estimates of values do not purport to be appraisals or
necessarily reflect the prices at which CNB's or Riherd's securities may
actually be sold. Except as described below, none of the analyses performed
by Mercer Capital were assigned a greater significance by Mercer Capital than
any other.
TRANSACTION SUMMARY. Mercer Capital reviewed the terms and
consideration of the proposed Merger, including the exchange ratio and the
aggregate transaction value. Based on a price of $79.07 per share for the
Riherd Common Stock, Mercer Capital calculated that the aggregate transaction
value was $6,968,044, which represented 145% of Riherd's book value and 31.0
times Riherd's 1995 earnings of $225,000. Mercer also calculated that the
transaction value equalled 20.9 times Riherd's pro forma earnings of $334,000
for 1995. The pro forma earnings are based on Riherd's actual earnings of
$225,000, after elimination of certain non-recurring items (consisting of
pension termination expense of $120,000, life insurance premiums of $61,000,
a gain on the sale of securities of $16,000 and related tax adjustments).
COMPARABLE TRANSACTIONS ANALYSIS
Mercer Capital utilized the comparable transaction method to develop an
indication of value for Riherd by analyzing prices paid for similar
institutions in other mergers. With regard to the banking industry, most
transactions are measured in terms of price/book value ("P/BV") ratios,
price/tangible book value ("P/TBV") ratios and price/earnings ("P/E") ratios.
Mercer Capital compared the ratios for the Merger with the ratios other bank
mergers announced or completed in 1995 (the "Comparable Transactions"). The
other bank mergers were divided into five categories: (i) all U.S. bank
mergers, (ii) Southeastern banks mergers, (iii) Florida bank mergers, (iv)
bank mergers in which the consideration received was less than $10 million,
and (v) bank mergers in which the consideration was less than $10 million,
the consideration consisted of cash or combination of cash and stock, and the
acquired bank's equity/asset ratio exceeded 9%.
The following table presents a summary of the median price/earnings and
average price/book value ratios for the five acquisition groups as applied to
Riherd's 1995 year-end reported book value per share, tangible book value per
share, reported earnings per share, and pro forma operating earnings per
share. Implied values for Riherd are then calculated based upon the 1995
transaction data.
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RIHERD BANK HOLDING COMPANY
COMPARABLE TRANSACTIONS PRICING ANALYSIS
Transaction Multiples 1995
- --------------------- ----
Price/ Price/ Price/ Price/
Transaction Group Reported EPS ProFormaEPS Book Tangible Book
- ----------------- ------------ ----------- ---- -------------
National Averages 15.7 15.7 179% 184%
Southeast Averages 18.2 18.2 192% 197%
Florida Acquisitions 20.4 20.4 203% 218%
Acquisitions -$10MM - National 15.1 15.1 159% 161%
ACQUISITIONS -$10MM, CASH/MIX
& EQUITY/ASSETS- 9.0% 14.0 14.0 141% 142%
Riherd BHC Per Share Data $2.55 $3.79 $54.39 $54.39
Implied Values for Riherd Bank Holding Corporation
--------------------------------------------------
Price/ Price/ Price/ Price/
Transaction Group Earnings EarningsEst Book Tangible Book
- ----------------- -------- ----------- ---- -------------
National Averages $40.04 $59.50 $97.36 $100.08
Southeast Averages $46.41 $68.98 $104.43 $107.15
Florida Acquisitions $52.02 $77.32 $110.41 $118.57
Acquisitions -$10MM-National $38.51 $57.23 $86.48 $87.57
ACQUISITIONS -$10MM, CASH/MIX
& EQUITY/ASSETS- 9.0% $35.70 $53.06 $76.69 $77.23
The estimated values range from $35.70 per share to $118.57 per share.
For purposes of this analysis, the transactions involving banks with
above-average equity which were acquired for less than $10 million were
deemed the most comparable given the structure of the proposed Merger. Based
upon the above analysis, the transaction value of $79.07 per share for the
proposed Merger compares favorably with the range of indicated values of
$35.70 per share to $77.23 per share.
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DISCOUNTED CASH FLOW ANALYSIS
Mercer Capital utilized a discounted cash flow ("DCF") analysis to
estimate the present value of Riherd Common Stock, assuming that Riherd is
sold in five years. The value derived from the DCF analysis is equal to the
present value of any interim cash flows (i.e., dividends) and the present
value of the projected sale price. For purposes of this analysis, Mercer
Capital prepared projections of Riherd's future earnings, which were reviewed
and approved by Riherd's management. The projections assumed that Riherd's
return on average assets would increase from .49% for 1995 to 1.32% for 2000,
and that Riherd's return on average equity would increase from 4.97% for 1995
to 13.50% for 2000. To achieve these increases, Mercer Capital assumed that
Riherd's assets would grow at an average annual rate of approximately 10%,
which is significantly higher than Riherd's growth rate over the past five
years. The projections assumed that Riherd would be sold at the end of 5
years at a price/earnings multiple of 14 to 15 times earnings (which was near
the median for the Comparable Transactions). Interim dividends and the sale
price were then discounted to their present values utilizing discount rates
of 16% and 17%. These rates were selected because, in Mercer Capital's
experience, they represent the rates that investors in securities such as the
Riherd Common Stock would demand in light of the potential risks in such an
investment.
On the basis of these assumptions, Mercer Capital calculated that the
present value of Riherd, assuming it remained an independent bank for five
years, ranged from $6,700,000 (or $76.00 per share) to $7,460,000 (or $84.68
per share). This analysis indicated that the consideration to be paid by CNB
in the Merger is within a reasonable range, and that, in view of the
favorable assumptions regarding Riherd's future performance (in light of its
weak performance since 1990), the analysis supported the transaction value of
the Merger.
CONTRIBUTION ANALYSIS
Mercer Capital utilized a contribution analysis to review the relative
value each party to the Merger would contribute, on a pro forma basis, to the
resulting organization. In the case of Riherd's shareholders, pro forma
ownership will be a function of whether they elect to receive cash or CNB
Common Stock. Under the terms of the Agreement, CNB will pay $79.07 in cash
for each share of the Riherd Common Stock, or, at the election of any Riherd
shareholder, CNB will issue 5.4909 shares of the CNB Common Stock in exchange
for each share of the Riherd Common Stock. Based upon the expectations of
Riherd's management, Mercer Capital assumed that Riherd's shareholders would
elect to receive approximately 290,000 shares of the CNB Common Stock. The
remainder of the
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aggregate consideration, approximately $2.79 million, would be paid in cash.
At December 31, 1995, there were 1,639,733 shares of CNB Common Stock
outstanding. Accordingly, on a pro forma basis, as of December 31, 1995, the
estimated 290,000 shares to be issued in the Merger would represent
approximately 15.0% of the outstanding shares of CNB after the Merger.
Mercer Capital analyzed the contribution of each of Riherd and CNB to
the assets, liabilities and historical earnings of the pro forma combined
company as of December 31, 1995. Riherd would have contributed 11% of the
combined net income of the combined company (before any purchase accounting
adjustments), 16% of the total loans, 21% of total assets and 21% of total
deposits (before any purchase accounting adjustments). In exchange for this
contribution, Riherd's shareholders would have received a 15.0% ownership
interest in the resulting entity plus $2.79 million in cash. The foregoing
contribution analysis indicates that the relative ownership structure implied
by the Agreement is favorable to Riherd shareholders.
PRO FORMA ANALYSIS OF PER SHARE DATA. Mercer Capital analyzed certain
per share financial data for Riherd Common Stock on an exchange-adjusted
basis, that is, on the assumption that one share of Riherd Common Stock would
be exchanged for 5.4909 shares of CNB Common Stock. On this basis, CNB's
annualized dividend of $.20 per share is equivalent to a dividend of $1.10
for each exchange-adjusted share of Riherd Common Stock, almost double
Riherd's current annual dividend of $.56 per share. Likewise, CNB's pro
forma earnings per share are projected to be 130% greater than Riherd's 1995
earnings per share on an exchange-adjusted basis, while the exchange-adjusted
book value per share of the CNB Common Stock is estimated to be 9% below the
book value per share of Riherd Common Stock.
SUMMARY OF VALUATION ANALYSES. Mercer Capital concluded that all four
valuation analyses indicated that the transaction value of the proposed
Merger is reasonable. The pricing of the Merger, combined with the
substantial increase in dividends per Riherd exchange adjusted share and the
significant ownership stake which Riherd shareholders will own in CNB, are
major factors which support the opinion that the transaction is fair from a
financial point of view.
CNB FINANCIAL REVIEW
Mercer Capital reviewed and analyzed the comparative historical
financial information and operating results of CNB and Riherd from December
1991 to 1995 in order to evaluate the implied
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value of CNB Common Stock. Based on this review, Mercer Capital made the
following observations:
1. During the past five years, CNB's total assets have increased
130% from $77 million to $177 million, while Riherd's total
assets increased 20% from $40 million to $48 million.
2. CNB's ROA and ROE of 1.06% and 13.24% in 1995 exceed Riherd's 1995 ROA
and ROE of 0.49% and 4.91%. In addition, CNB has consistently
improved earnings during the past five years, while Riherd has either
posted relatively low earnings or, in the case of 1994, a loss.
3. CNB's earnings per share consistently increased on an annual basis
from $0.34 per share in 1991 (on a pro forma basis restated for the
Bradford acquisition) to $1.12 per share in 1995, while Riherd's
earnings fluctuated between a loss of $0.66 per share in 1994 and a
five year high of $3.09 per share in 1992.
4. CNB's book value has increased 40% from $6.41 per share at year-end
1991 (on a pro forma basis restated for the Bradford acquisition) to
$9.00 per share at year-end 1995. During this same period, Riherd's
book value per share increased 13% from $48.17 per share to $54.39 per
share.
5. Unlike Riherd, CNB does not have a long history of dividend payments
to shareholders given its first payment in 1994. However, given CNB's
apparent growth prospects and more stable earnings than Riherd, CNB's
capacity to maintain its dividend and possibly increase it may be
greater than Riherd.
VALUATION ANALYSIS OF CNB. Mercer Capital compared the implied price of
$14.40 per share for CNB Common Stock with the pricing of (i) publicly traded
bank holding companies with assets of less than $500 million, (ii) Florida based
publicly traded bank holding companies; and (iii) southeastern based publicly
traded bank holding companies. In particular, Mercer Capital compared the
average price/earnings ratio for reported 1995 earnings and estimated 1996
earnings, book value per share, tangible book value per share, and dividend
yields of the three groups of public companies with the implied ratios for CNB.
Mercer Capital noted that the pricing of CNB at $14.40 per share
represented 12.9 times reported 1995 earnings of $1.12 per share compared to
multiples of 12.4, 14.0 and 16.4, respectively, for the small public bank
holding companies, southeast based bank holding companies, and Florida Bank
holding companies. In
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addition, the implied price of $14.40 per share for CNB represented 160% of
year-end 1995 book value of $9.00 per share, compared to 160%, 180% and 157%,
respectively, for the small public bank holding companies, southeast based
bank holding companies, and Florida bank holding companies. CNB's current
indicated dividend of $0.20 per share implied a dividend yield of 1.39%,
compared to 1.60%, 2.48% and 1.60%, respectively, for the small public bank
holding companies, southeast based bank holding companies, and Florida bank
holding companies.
Based upon the comparison with other publicly traded bank holding
companies, Mercer Capital concluded that the implied price of $14.40 per share
for CNB Common Stock was reasonable for purposes of the Merger. In reaching
this conclusion Mercer Capital was aware that CNB's management had decided to
value the CNB Common Stock at $9.00 per share for purposes of the pro forma
financial information, set forth in this Proxy Statement-Prospectus.
CONCLUSION. Based upon its analysis, it was the opinion of Mercer Capital
that the proposed Merger is fair from a financial point of view to the
shareholders of Riherd.
TERMS OF THE MERGER
At the Effective Time, Riherd will merge with and into CNB, with CNB as the
surviving corporation. The Amended and Restated Articles of Incorporation and
Bylaws of CNB in effect at the Effective Time will govern the surviving
corporation until amended or repealed in accordance with applicable law. At the
Effective Time, each outstanding share of Riherd Common Stock will be converted,
into cash in the amount of $79.07 or, at the election of the shareholder in
accordance with the terms and conditions of the Merger Agreement, 5.4909 shares
of CNB Common Stock, provided, however, that in no event shall CNB issue less
than 246,782 shares of CNB Common Stock in connection with the Merger. If the
Riherd Shareholders do not timely elect to receive at least 246,782 shares of
CNB Common Stock, then additional shares of CNB Common Stock shall be allocated
pro rata to all Riherd shareholders, to the extent they have not timely elected
to receive CNB Common Stock, so that a minimum of 246,782 shares of CNB Common
Stock will be issued as a result of the Merger; provided, however, that no
additional shares of CNB Common Stock will be allocated with respect to any
Dissenting Shares.
The Merger Agreement provides that, in the event that CNB changes the
number of shares of CNB Common Stock issued and outstanding between the date of
the Merger Agreement and the Effective Time as a result of a stock split, stock
dividend, recapitalization, reclassification or other similar transaction, the
stock portion of the Merger Consideration will be adjusted proportionately.
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No fractional shares of CNB Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each holder of shares of Riherd
Common Stock exchanged pursuant to the Merger, who would otherwise have been
entitled to receive a fraction of a share of CNB Common Stock (after taking into
account all certificates delivered by such holder) will receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of CNB Common Stock multiplied by $14.40. No such holder will be entitled
to dividends, voting rights or any other rights as a shareholder in respect of
any fractional share.
Shares of CNB capital stock (including CNB Common Stock) issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding after the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective on the date and at the time set forth in
the Certificate of Merger issued by the Secretary of State of the State of
Florida. The parties currently expect that the Merger will become effective on
or about August 30, 1996, although there can be no assurance as to whether or
when the Merger will occur. See "-- Conditions to the Merger" and "--
Regulatory Approvals."
SURRENDER OF CERTIFICATES
Promptly after the Effective Time, CNB Bank, acting in the capacity of
exchange agent for CNB (the "Exchange Agent"), will mail to each former holder
of record of shares of Riherd Common Stock a form of letter of transmittal,
together with instructions for the exchange of Riherd stock certificates for
either cash or certificates representing CNB Common Stock, as appropriate.
RIHERD SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE APPROPRIATE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon the surrender to the Exchange Agent of one or more certificates for
Riherd Common Stock, together with a properly completed letter of transmittal,
there will be mailed to the holder thereof either a certificate or certificates
representing the number of shares of CNB Common Stock to which such holder is
entitled, and/or a check for the amount representing any cash portion of the
Merger Consideration, the value of any fractional shares and the amount of, all
declared but unpaid dividends on any outstanding shares (each without interest).
A certificate for CNB Common Stock or any check may be issued in a name other
than the name in which the surrendered certificate is registered only if (i) the
certificate surrendered is properly endorsed, accompanied by a guaranteed
signature if required by the letter of transmittal and
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otherwise in proper form for transfer and (ii) the person requesting the
issuance of such certificate either pays to the Exchange Agent any transfer
or other taxes required by reason of the issuance of a certificate for such
shares in a name other than the registered holder of the certificate
surrendered or establishes to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable. Certificates surrendered for
exchange by any person constituting an "affiliate" of Riherd, for purposes of
Rule 145(c) under the Securities Act, will not be exchanged for certificates
representing whole shares of CNB Common Stock until CNB has received a
written agreement from such person as described under "-- Resale of CNB
Common Stock." The Exchange Agent will issue CNB Common Stock in exchange
for lost, stolen, mutilated or destroyed certificates upon the making of an
affidavit by the person claiming such person's certificate to be lost, stolen
or destroyed and, the agreement of such person to indemnify CNB against
potential claims with respect to such certificate.
All CNB Common Stock issued pursuant to the Merger will be deemed issued as
of the Effective Time. After the Effective Time, former holders of record of
Riherd Common Stock will be entitled to vote the number of shares of CNB Common
Stock into which their Riherd shares have been converted, but only if they have
surrendered their Riherd certificates. No dividend or other distribution
payable to the holders of record of CNB Common Stock at or as of any time after
the Effective Time will be paid to the holder of any Riherd certificate until
such holder physically surrenders such certificate, promptly after which time
all such dividends or distributions will be paid (without interest). After the
Effective Time, there will be no transfers on the transfer books of Riherd of
the shares of Riherd Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates representing such
shares are presented for transfer to the Exchange Agent, they will be canceled
and exchanged for certificates representing shares of CNB Common Stock or cash
in accordance with the Merger Agreement.
Neither CNB, Riherd, the Exchange Agent nor any other person will be liable
to any former holder of Riherd Common Stock for any amount properly delivered to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
CONDITIONS TO THE MERGER
The Merger will occur if the Merger Agreement is approved by the requisite
vote of the shareholders of Riherd. In addition, consummation of the Merger is
subject to the satisfaction of certain other conditions, unless waived, to the
extent waiver is permitted by law. Conditions applicable to all parties
include, but are not limited to: (i) the receipt of all necessary approvals and
consents, regulatory or otherwise, including the approval or
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waiver of the Federal Reserve Board and the approval of the OCC; (ii) the
effectiveness of the Registration Statement, including this Proxy
Statement-Prospectus, and the absence of a stop order or threatened stop
order suspending such effectiveness; and (iii) the absence of an order,
decree or injunction of a court or agency of competent jurisdiction enjoining
or prohibiting consummation of the Merger.
The obligation of Riherd to effect the Merger is subject to the
satisfaction or waiver of the following conditions:
(i) The continued accuracy in all material respects of the
representations and warranties made by CNB.
(ii) Election by the shareholders of Riherd to receive in exchange
for their Riherd Common Shares and amount of CNB Common Shares
sufficient to qualify the Merger as a reorganization within the
meaning of Section 368(A)(1)(a) of the Code.
(iii) The receipt by Riherd of a written opinion of Mahoney Adams &
Criser, P.A., counsel to CNB, in form and substance reasonably
satisfactory to Riherd.
(iv) The receipt by Riherd from Mercer Capital of the Opinion.
(v) Receipt by Riherd of an opinion of Mahoney Adams & Criser,
P.A., of an opinion that (a) the Merger will constitute a
"reorganization" within the meaning of Section 368 of the Code, (b) no
gain or loss will be recognized by Riherd in connection with the
Merger, (c) no gain or loss will be recognized by the shareholders of
Riherd who received shares of CNB Common Stock in exchange for their
shares of Riherd Common Stock, (d) the basis of the CNB Common Stock
received in the Merger will be equal to the basis of the shares of
Riherd Common Stock exchanged in the Merger, (e) the holding period
of the CNB Common Stock will include the holding period of the shares
of Riherd Common Stock exchanged therefor if such shares of Riherd
Common Stock were capital assets in the hands of the exchanging Riherd
shareholder and (f) cash received by a Riherd shareholder under the
Merger Agreement will be treated as having been received in exchange
for shares of Riherd Common Stock and will qualify as a capital gain
or loss (assuming the Riherd Common Stock was a capital asset in the
hands of the holder as of the effective date of the Merger).
(vi) The receipt by the parties of the material consent or approval
of each person, other than governmental entities, whose material
consent or approval is required in connection with the Merger.
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The obligation of CNB to consummate the Merger is subject to the
satisfaction or waiver of the following conditions:
(i) The continued accuracy in all material respects of the
representations and warranties made by Riherd.
(ii) The receipt by CNB of a written opinion of
Shutts & Bowen, L.L.P., counsel to Riherd, in form and substance
reasonably satisfactory to CNB.
(iii) The receipt by the parties of the material consent or
approval of each person, other than governmental entities, whose consent
or approval is required in connection with the Merger Agreement.
The representations and warranties of each of the parties concern, among
other things: their organization, capitalization and subsidiaries, as
applicable; the authorization and enforceability of the Merger Agreement;
their financial statements; the absence of undisclosed liabilities; the
absence of certain changes or events; and reports to regulatory authorities.
In addition, unless waived, each party's obligation to effect the Merger
is also subject to performance by the other party of its material obligations
under the Merger Agreement and the receipt of certain certificates from the
other party. No assurances can be provided as to when or if all of the
conditions precedent to the Merger can or will be satisfied or waived by the
party permitted to do so.
REGULATORY APPROVALS
FEDERAL RESERVE. The Merger is subject to the prior approval of the
Federal Reserve Board under the BHC Act and the Bank Merger Act. Regulation
Y provides that a transaction that otherwise requires approval from the
Federal Reserve Board may be exempt if (1) it involves the acquisition by a
bank holding company of another bank holding company where the acquisition is
part of the merger or consolidation of the banking subsidiaries, (2) the
bank merger occurs simultaneously with the acquisition of the bank holding
company, (3) the transaction requires the prior approval of a Federal
supervisory agency under the Bank Merger Act, (4) the transaction does not
involve the acquisition of any nonbank company that would require prior
approval under section 4 of the BHC Act, (5) both before and after the merger
the acquiring bank meets the Federal Reserve's Capital Adequacy Guidelines
and (6) the acquiring bank holding company provides written notice to the
Federal Reserve Bank at least 30 days prior to the transaction, and during
that period, the Reserve Bank has not informed the bank holding company that
an application to the Federal Reserve Board is required.
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The Merger Agreement also contemplates the simultaneous merger of F&D
Bank with and into CNB Bank. The merger of the two banking subsidiaries
requires the prior approval of the OCC pursuant to the Bank Merger Act.
Neither CNB nor Riherd has any nonbanking subsidiaries. The parties
anticipate that CNB Bank will meet the Federal Reserve Board's Capital
Adequacy Guidelines both before and after the merger of the subsidiary banks.
On or about April 18, 1996, CNB filed with the Federal Reserve Board a
request for a waiver of the application process pursuant to Regulation Y.
CNB has not received notice from the Federal Reserve Board that an
application will be required.
OFFICE OF THE COMPTROLLER OF THE CURRENCY. The merger of F&D Bank with
and into CNB Bank is subject to prior approval by the OCC under the Bank
Merger Act. On or about April 18, 1996, CNB filed an application with the OCC
under Section 18(c) of the Bank Merger Act seeking approval of the merger of
F&D Bank with and into CNB Bank. Under the Bank Merger Act, the OCC is
required, in approving a transaction such as the above-referenced merger, to
take into consideration the financial and managerial resources and future
prospects of the existing and proposed institutions and the convenience and
needs of the communities to be served. In considering financial resources
and future prospects, the OCC will, among other things, evaluate the adequacy
of the capital levels of CNB Bank following the merger of the two
subsidiaries. Depending on the views of the OCC as to what constitutes
adequate capital levels for a financial institution of CNB's size and
financial condition, the OCC may, as a condition to its approval of the
merger of F&D Bank into CNB Bank, require CNB to raise additional capital.
Such capital may take the form of equity or equity-linked securities or
subordinated debt or a combination thereof.
CNB does not currently intend to raise additional capital in connection
with the merger of the bank subsidiaries, either equity or debt, nor has the
OCC indicated to CNB that it intends to require CNB to raise any such capital
as a condition to its approval of the merger of the bank subsidiaries. If
CNB were required by the OCC to raise additional capital, CNB does not
believe that the amount of such capital would be material to the financial
position of CNB.
The OCC also considers the financial history of the merging institutions,
the existence of insider transactions and the adequacy of disclosure of the
terms of the Merger.
The Bank Merger Act prohibits the OCC from approving the merger of the
bank subsidiaries if it would result in a monopoly or be in furtherance of
any combinations or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States, or if its effect in any
section of the country may be to substantially lessen competition or to tend
to create a
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monopoly, or if it would in any other manner result in a restraint in trade,
unless the OCC finds that the anti-competitive effects of the merger of the
bank subsidiaries are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of
the communities to be served. In addition, under the Community Reinvestment
Act of 1977, as amended, the OCC must take into account the record of
performance of the existing institutions in meeting the credit needs of the
entire community, including low- and moderate-income neighborhoods, served by
such institutions.
Under the Bank Merger Act, the merger of the bank subsidiaries may not be
consummated until the thirtieth calendar day following the date of OCC
approval, during which time the United States Department of Justice may
challenge the merger of the bank subsidiaries on antitrust grounds. In the
absence of any adverse comment by the Department of Justice, the OCC may
shorten the 30 day period to as little as 15 days with the concurrence of the
Attorney General. The commencement of an antitrust action would stay the
effectiveness of the OCC's approval unless a court specifically orders
otherwise. It is possible that the OCC or the United States Department of
Justice may request that CNB or Riherd divest certain operations in order to
alleviate what such agency believes would otherwise be an adverse competitive
effect. The application to the OCC has not proposed any such divestiture.
Although CNB and Riherd regard a request for divestiture as unlikely, neither
can predict whether such divestiture will be required, or if required, what
the aggregate amount of such divestiture may be. See "REGULATORY MATTERS --
Anticompetitive Effects of the Merger."
The Merger Agreement would allow either party to terminate the Merger
Agreement if the regulatory authorities enjoined or otherwise prohibited the
Merger.
The Bank Merger Act provides for the publication of notice and public
comment on the applications and authorizes the OCC to permit interested
parties to intervene in the proceedings. If an interested party is permitted
to intervene, such intervention could delay the regulatory approvals required
for consummation of the Merger.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. CNB and Riherd
have filed all applications and have taken other appropriate action with
respect to any requisite approvals or other action of any governmental
authority.
Upon consummation of the merger of the banking subsidiaries, CNB will
surrender F&D Bank's charter from the Florida Department of Banking and
Finance.
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The Merger Agreement provides that the obligation of each of CNB and
Riherd to consummate the Merger is conditioned upon the receipt or waiver of
all material governmental approvals. See "-- Conditions to the Merger," "--
Waiver and Amendment" and "-- Termination." There can be no assurance that
any governmental agency will approve or take any other required action with
respect to the Merger, and, if approvals are received or action is taken,
there can be no assurance that such approvals or action will occur in a
timely manner, that such approval or action will not be conditioned upon such
matters that would cause the parties to abandon the Merger or that no action
will be brought challenging such approvals or action, including a challenge
by the Department of Justice or, if such a challenge is made, that it will be
resolved favorably for consummation of the Merger.
CNB and Riherd are not aware of any governmental approvals or actions
that may be required for consummation of the Merger except as described
above. Should any such approval or action be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance, however, that any such approval or action, if needed, could be
obtained and would not be conditioned in a manner that would cause the
parties to abandon the Merger.
BUSINESS PENDING THE MERGER
The Merger Agreement provides that, during the period from the date of
the Merger Agreement to the Effective Time, except as provided in the Merger
Agreement, Riherd will conduct its business in the usual, regular and
ordinary course consistent with past practice and prudent banking practice,
use its reasonable best efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships, retain the
services of its officers and key employees and take no action which would
materially adversely affect or delay the ability of either CNB or Riherd to
obtain any approvals of any governmental authority that are necessary or
otherwise required for the Merger or any other transaction contemplated by
the Merger Agreement or to perform its covenants and agreements under the
Merger Agreement.
Furthermore, from the date of the Merger Agreement to the Effective Time,
Riherd shall not, without the prior written consent of CNB except as provided
in the Merger Agreement (i) declare or pay any dividends on, or make other
distributions in respect of Riherd capital stock prior to the effectiveness
of the Merger other than the regular quarterly dividend of $0.14 per share;
(ii) issue, sell, redeem, or purchase any of its capital stock or other
equity securities of any kind or grant or issue any additional options or
other rights to acquire any of its equity securities; (iii) amend its
Articles of Incorporation, Bylaws or other similar applicable governing
documents; (iv) make any capital expenditures other than
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in the ordinary course of business or as necessary to maintain existing
assets in good repair; (v) enter into any new line of business; (vi) acquire
or agree to acquire, by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or
by any other manner, any business or division thereof or any entity or, other
than in the ordinary course of business consistent with prior practice,
otherwise acquire any assets that would be material, individually or in the
aggregate, to the condition of Riherd or F&D Bank; (vii) except for increases
in the ordinary course of business consistent with past practice: (A)
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan or agreement
as in effect as of the date of the Merger Agreement (including, without
limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares); or
(B) enter into or modify any contract providing for the payment to any
director, officer or employee of compensation or benefits contingent, or the
terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by the Merger Agreement; (viii) other than
activities in the ordinary course of business consistent with prior practice,
sell, lease, encumber, assign or otherwise dispose of, or agree to sell,
lease, encumber, assign or otherwise dispose of, any of its assets; (ix)
other than in the ordinary course of business consistent with past practice,
incur any indebtedness for borrowed money, assume, guarantee, endorse or
otherwise as an accommodation, become responsible for the obligations of any
other person or entity, or make any equity investment or commitment to make
such an investment in real estate or any real estate development project
other than in connection with foreclosures, settlements in lieu of
foreclosure and troubled loan or debt restructuring in the ordinary course of
business, or make any loan or advance to any person or entity, except in
accordance with prudent banking practice; (x) accelerate, create, renew,
amend or terminate or give notice of a proposed renewal, amendment or
termination of, any material contract to which Riherd or F&D Bank is a party
or by which Riherd, or F&D Bank or any of their assets, are bound, other than
in the ordinary course of business; (xi) make any change in accounting
principles or methods from those currently employed, except as required by
generally accepted accounting principals or by applicable law; (xii) grant
any lien, or permit any lien to be placed on, any of its assets other than in
the ordinary course of business; (xiii) take any action, or fail to take any
action, that is intended or may reasonably be expected to result in a breach
or violation of any of the representations and warranties of Riherd contained
in the Merger Agreement or that would cause any condition to the transactions
contemplated thereby not to be satisfied, except, in every case, as may be
required by law, or take any action that would cause the termination or
cancellation by the Federal Deposit Insurance Corporation of
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insurance in respect of F&D Bank's deposits; (xiv) change its or F&D Bank's
lending, investment, liability management and other material banking policies
in any material respect; or (xv) agree to do any of the foregoing.
In addition, Riherd will not and will not permit or authorize any of its
officers, directors or employees or other agents to solicit, encourage, or
initiate any proposals or offers, which may lead to any acquisition or
purchase of all or a material amount of the assets of, or any securities of,
or any merger, consolidation or business combination with Riherd or F&D Bank.
The Merger Agreement obligates Riherd to promptly advise CNB of any such
inquiries or proposals. The Merger Agreement also prohibits CNB and Riherd
from taking any action, which would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code, as
described in "-- Terms of the Merger."
The Merger Agreement also provides that, during the period from the date
of the Merger Agreement until the Effective Time, neither Riherd nor its
subsidiary shall take any action that is intended or may reasonably be
expected to result in any of Riherd's representations or warranties in the
Merger Agreement becoming untrue in any material respect or in any of the
conditions to the Merger not being satisfied.
WAIVER AND AMENDMENT
Prior to the Effective Time, any provision of the Merger Agreement,
including, without limitation, the conditions to consummation of the Merger
and the restrictions described under "-- Business Pending the Merger," may be
(i) waived, to the extent permitted under law, or (ii) amended at any time by
written agreement of the parties approved by their respective Boards of
Directors, whether before or after the Special Meeting.
TERMINATION
The Merger Agreement provides that, whether before or after the approval
by the shareholders of Riherd at the Special Meeting of the matters to be
voted on in connection with the Merger, the Merger Agreement may be
terminated and the Merger abandoned at any time prior to the Effective Time
(i) by mutual consent of the Board of Directors of CNB and Riherd; (ii) by
either CNB or Riherd (A) upon written notice that any governmental entity of
competent jurisdiction has issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
the Merger Agreement, (B) at any time after August 30, 1996, unless the
failure of the Merger to occur is due to the failure of the party requesting
such termination to perform or observe its agreements under the Merger
Agreement; (C) in the event of a material breach by another party of any
representation,
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warranty, covenant or other agreement contained in the Merger Agreement,
which breach is not cured within 30 days after written notice thereof is
given to the party committing such breach or which breach by its nature
cannot be cured or (D) if the shareholders of Riherd fail to approve the
matters required to be approved by such shareholders at the Special Meeting;
(iii) by CNB, if the conditions to its obligations contained in the Merger
Agreement have not been satisfied or waived or (iv) by Riherd, if the
conditions to its obligations contained in the Merger Agreement have not been
satisfied or waived.
In the event of the termination and abandonment of the Merger Agreement
pursuant to the provisions thereof, the Merger Agreement will become void and
have no effect, except that (i) certain provisions of the Merger Agreement
relating to expenses and confidentiality of information obtained pursuant to
the Merger Agreement or in connection with the negotiation thereof will
survive any such termination and abandonment, and (ii) no party will be
relieved or released from any liability arising out of its willful breach of
any provision of the Merger Agreement.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Upon the Effective Time, the separate corporate existence of Riherd will
cease, and the surviving corporation will be CNB. Simultaneous with the
merger of Riherd with and into CNB, F&D Bank will merge with and into CNB
Bank. CNB's directors and executive officers immediately prior to the
Effective Time shall be the directors and officers of CNB at the Effective
Time, except that Thomas M. Riherd, the current President of Riherd, will be
appointed to the position of Chief Financial Officer and Paul M. Riherd, the
current Chairman of Riherd, will be appointed to the Board of Directors of
CNB, subject to the approval of CNB. The officers and directors of CNB after
the Effective Time will hold office subject to CNB's Amended and Restated
Articles of Incorporation, Bylaws and the laws of the State of Florida. Upon
consummation of the Merger, the present offices and branches of F&D Bank will
conduct their banking operations at the present locations. Under the Merger
Agreement, CNB and Riherd have agreed not to take or cause to be taken any
action, whether before or after the Effective Time, which would disqualify
the Merger as a "reorganization" within the meaning of Section 368(a) of the
Code.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the Agreement, if the Merger is consummated Riherd may
nominate one person to the board of directors of CNB. Such person, who must
be satisfactory to CNB, will hold office in accordance with the articles of
incorporation and bylaws of CNB. It is anticipated that Paul Riherd, the
Chairman and CEO of Riherd, will be added to the Board of Directors of CNB.
In addition, the
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Agreement provides that Thomas Riherd will serve as the Chief Financial
Officer of CNB. In all other respects, the board of directors and executive
officers of CNB after the Merger shall be the same as they were prior to the
Merger.
It is not anticipated that Paul Riherd will be an employee of CNB or
receive any salary as a director. He will, however, be entitled to receive
the usual fees paid to directors of CNB for their services as such, including
their attendance at meetings of the board and committees of the board. CNB
does not pay its directors a fee for attendance at meetings of the board of
directors or for attendance at meetings of committees of the board.
In addition, it is anticipated that Paul Riherd will be engaged as a
consultant to CNB to advise CNB concerning the development of its business in
Union and Alachua counties through the expansion of the existing facilities
of F&D Bank. Mr. Riherd will receive a consulting fee of $3,500 per quarter
for a period of two years following the effective date of the Merger for such
consulting services and will have the use of his present office at the
offices of F&D Bank in Lake Butler.
Thomas Riherd who is presently the controller and a director of Riherd
and is President, CEO and a director of F&D Bank will become the Chief
Financial Officer of CNB following the Merger. Mr. Riherd will have no
employment agreement covering his services as an employee and officer of CNB
and will serve at the pleasure of the President and Chief Executive Officer
of CNB. It is anticipated that Thomas Riherd will be employed at a salary
which is equivalent to his present salary as President and CEO of F&D Bank
and that he will be entitled to receive the same insurance, retirement, and
other benefits that are usually provided to executive officers and employees
of CNB. Mr. Riherd currently receives a total annual salary of approximately
$90,000. It is anticipated that, if CNB's return on average equity equals
15%, the total annual compensation Mr. Riherd can expect to receive from CNB
will be approximately the same as his current annual salary.
The Agreement also provides that on the effective date of the Merger, all
employees of Riherd and F&D Bank shall, at CNB's option, either continue as
employees of the consolidated organization or be entitled to receive
severance policies and that all retained employees shall be entitled to
participate in CNB's existing employee benefit plans. Pursuant to these
provisions, it is anticipated that Barbara Riherd, a Vice President and the
Senior Operations Officer of F&D Bank and the wife of Thomas Riherd, will
continue to serve as an officer and employee of CNB Bank at a salary which is
equivalent to her present salary. She currently receives an annual salary of
approximately $37,000. She will have no employment agreement covering her
services as an employee and
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officer of CNB Bank and will serve at the pleasure of the President and Chief
Executive Officer of CNB Bank.
The Merger Agreement requires Riherd to indemnify present and former
directors, officers and employees of Riherd after the Merger against
liabilities and expenses arising out or acts or omissions and prior to the
Effective Time (including in connection with the Merger) to the fullest
extent permitted by Florida law and Riherd's Amended and Restated Articles of
Incorporation and Bylaws in effect on the date of the Merger Agreement,
including the advancement of legal fees and expenses in any legal proceeding.
For a period of six years after the Effective Time, or such lesser time
as may be the maximum period available by the current insurer, CNB will
maintain in effect the current policies with directors and officers liability
insurance maintained by Riherd with respect to claims arising from facts or
events which occurred before the Effective Time.
ACCOUNTING TREATMENT
The Merger will not qualify for pooling-of-interests accounting treatment
and therefore will be treated as a purchase. Under this method, CNB will
allocate the cost of the acquisition of Riherd to the assets acquired and
liabilities assumed based on their respective fair values. Any amount paid
in excess of the fair value of the net assets acquired that cannot be
attributed to specific tangible and real property will be allocated first to
any identifiable intangible assets, and then to goodwill.
The unaudited pro forma financial information contained in this Proxy
Statement-Prospectus was prepared using the purchase method of accounting to
account for the Merger. See "COMPARATIVE UNAUDITED PER SHARE INFORMATION."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
IN THE OPINION OF MAHONEY ADAMS & CRISER, P.A., COUNSEL TO CNB, THE
FOLLOWING DISCUSSION SETS FORTH THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER TO RIHERD AND ITS SHAREHOLDERS TO THE EXTENT THAT A RIHERD
SHAREHOLDER RECEIVES CNB COMMON STOCK AS A PART OF THE MERGER CONSIDERATION.
NEVERTHELESS, THIS DISCUSSION IS NOT A COMPLETE DESCRIPTION OF ALL THE TAX
CONSEQUENCES OF THE MERGER AND, IN PARTICULAR, MAY NOT ADDRESS FEDERAL INCOME
TAX CONSIDERATIONS THAT MAY BE RELEVANT TO CERTAIN SHAREHOLDERS ENTITLED TO
SPECIAL TREATMENT UNDER THE CODE (INCLUDING, WITHOUT LIMITATION, INSURANCE
COMPANIES, DEALERS IN SECURITIES, CERTAIN RETIREMENT PLANS, FINANCIAL
INSTITUTIONS, TAX EXEMPT ORGANIZATIONS, FOREIGN PERSONS OR SHAREHOLDERS WHO
ACQUIRED THEIR RIHERD COMMON STOCK PURSUANT TO THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION). EACH SHAREHOLDER'S
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INDIVIDUAL CIRCUMSTANCES MAY AFFECT THE TAX CONSEQUENCES OF THE MERGER TO
SUCH SHAREHOLDER. IN ADDITION, THIS DISCUSSION DOES NOT ADDRESS THE TAX
CONSEQUENCES OF THE MERGER UNDER APPLICABLE FOREIGN, STATE OR LOCAL LAWS OR
THE TAX CONSEQUENCES OF THE MERGER TO THE EXTENT THE RIHERD SHAREHOLDER
ELECTS TO RECEIVE CASH AS PART OF THE MERGER CONSIDERATION. CONSEQUENTLY,
EACH RIHERD SHAREHOLDER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER.
Neither CNB nor Riherd has requested an advance ruling from the Internal
Revenue Service as to the tax consequences of the Merger.
As a condition to the consummation of the Merger, Riherd shall have
received an opinion from Mahoney Adams & Criser, P.A., CNB's counsel,
concerning certain federal income tax consequences, based upon certain
customary representations set forth therein. Based in part on such
representations and to the extent that the shareholders of Riherd elect to
receive at least 246,782 shares of CNB Common Stock as part of the Merger
Consideration pursuant to the Merger Agreement, Mahoney Adams & Criser, P.A.,
will issue an opinion that the material federal income tax consequences
expected to result from the Merger, under currently applicable law, are as
follows:
(i) The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code by reason of the operation of Section
368(a)(2)(E) of the Code;
(ii) No gain or loss will be recognized by Riherd as a result of the
Merger;
(iii) No gain or loss will be recognized by the shareholders of Riherd
with respect to their shares of Riherd Common Stock that are exchanged for
shares of CNB Common Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in CNB Common Stock);
(iv) The tax basis of the CNB Common Stock received by Riherd shareholders
with respect to the exchange of their Riherd Common Stock for CNB Common
Stock in the Merger will be the same as the tax basis of the Riherd Common
Stock surrendered in exchange therefor (reduced by any amount allocable to
a fractional share interest for which cash is received); and
(v) The holding period of the CNB Common Stock in the hands of the Riherd
shareholders will, in each case, include the holding period of the shares
of Riherd Common Stock surrendered in exchange therefor, provided that the
Riherd Common Stock was, in each instance, held as a capital asset in
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the hands of the Riherd shareholders on the effective date of the Merger.
Riherd shareholders who exercise dissenters' rights or who otherwise
receive cash consideration for their Riherd Common Stock should recognize
gain or loss equal to the difference between the amount of cash consideration
they receive and the adjusted basis in the Riherd Common Stock for which an
election to dissent is made or for which cash consideration is chosen. The
tax rules governing the treatment of dissenting shareholders and shareholders
who otherwise elect to receive cash consideration, however, is extremely
complex and may differ from shareholder to shareholder and, accordingly,
Riherd shareholders who exercise dissenters' rights or who otherwise elect to
receive cash consideration are urged to consult with their own tax advisors
regarding the specific tax consequences of such an election to such
shareholder. Moreover, to the extent that a shareholder of Riherd elects the
payment of the cash in exchange for its shares of Riherd Common Stock in lieu
of CNB Common Stock pursuant to the Merger Agreement, the Riherd shareholder
should recognize gain or loss equal to the difference between the amount of
cash consideration received and the adjusted basis of their Riherd Common
Stock exchanged therefor.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL INFORMATION
ONLY AND DOES NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO ALL
SHAREHOLDERS OF RIHERD. IN ADDITION, THE DISCUSSION DOES NOT ADDRESS THE
STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED
ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY
REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT
DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGES
COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. IN VIEW OF THIS AND
THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH RIHERD SHAREHOLDER SHOULD
CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
RESALE OF CNB COMMON STOCK
The shares of CNB Common Stock issuable to shareholders of Riherd upon
consummation of the Merger have been registered under the Securities Act.
Such shares may be traded freely and without restriction by those
shareholders not deemed to be "affiliates" of Riherd as that term is defined
in the rules under the Securities Act. "Affiliates" are generally defined as
persons who control, are controlled by or are under common control with
Riherd at the time of the Special Meeting. Accordingly, "affiliates"
generally will include directors and executive officers of Riherd. CNB
Common Stock received by those shareholders of Riherd who are deemed to be
"affiliates" of Riherd may be resold without
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<PAGE>
registration as permitted by Rules 144 or 145, or as otherwise permitted
under the Securities Act. This Proxy Statement-Prospectus does not cover any
resales of CNB Common Stock received by affiliates of Riherd, or by certain
of their family members or related interests.
Riherd has agreed to use its best efforts to cause each holder of Riherd
Common Stock deemed to be an affiliate of Riherd to enter into an agreement
providing that such affiliate will not sell, pledge, transfer or otherwise
dispose of the shares of CNB Common Stock to be received by such person in
the Merger except in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder.
STOCK EXCHANGE LISTING
The Merger Agreement does not provide for the filing of, and CNB has not
filed, nor does it contemplate filing, a listing application with any stock
exchange.
EXPENSES
The Merger Agreement provides that CNB and Riherd will each pay its own
expenses in connection with the Merger and the transactions contemplated
thereby.
DIVIDENDS
The Merger Agreement provides that, after the date of its execution,
Riherd may not declare or pay any dividends or other distributions with
respect to its capital stock, except for its regular quarterly dividend of
$0.14 per share.
DESCRIPTION OF CNB CAPITAL STOCK
GENERAL
The authorized capital stock of CNB consists of 10,000,000 shares of CNB
Common Stock, par value $.01 per share and 500,000 shares of CNB Preferred
Stock, par value $.01 per share. As of December 31, 1995, there were issued
and outstanding 1,639,733 shares of CNB Common Stock and no shares of CNB
Preferred Stock.
Since CNB is a holding company, the right of CNB, and hence the right of
creditors and shareholders of CNB, to participate in any distribution of
assets of any subsidiary upon its liquidation or reorganization or otherwise
is necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of CNB itself as a creditor of the
subsidiary may be recognized. The principal source of CNB's revenues is
dividends
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from CNB Bank. See "REGULATORY MATTERS" for a discussion of restrictions on
the subsidiary banks' ability to pay dividends to CNB.
The following summary does not purport to be complete and is subject to
in all respects, and qualified in its entirety by, the applicable provisions
of the Florida Business Corporation Act, CNB's Amended and Restated Articles
of Incorporation, and the Bylaws of CNB.
COMMON STOCK
The holders of the CNB Common Stock are entitled to receive dividends
from funds legally available therefor when, as, and if declared by CNB's
Board of Directors, and are entitled upon liquidation to receive pro rata the
net assets of CNB after satisfaction in full of the prior rights of creditors
and senior shareholders of CNB. The principal source of funds for payment of
dividends by CNB is dividends paid by CNB Bank.
The holders of CNB Common Stock are entitled to one vote for each share
held on all matters as to which shareholders are entitled to vote. The
holders of CNB Common Stock do not have cumulative voting rights, any
preferential, subscriptive or preemptive rights with respect to any
securities of CNB, or any conversion rights. The CNB Common Stock is not
subject to redemption. The outstanding shares of CNB Common Stock are fully
paid and nonassessable.
PREFERRED STOCK
There are currently no shares of CNB Preferred Stock issued or
outstanding. The Board of Directors of CNB has the authority, by a resolution
of the Board of Directors, to divide the authorized CNB Preferred Stock into
one or more series. The Board of Directors may fix and determine the
following relative rights and preferences of each established series: (1)
the rate and manner of payment of dividends; (2) whether shares may be called
or redeemed and, if so, the call redemption price and the terms and
conditions of the call or redemption; (3) the amount payable upon shares in
the event of voluntary or involuntary liquidation; (4) sinking fund
provisions, if any, for the call or redemption of shares; (5) terms and
conditions, if any, upon which the shares may be converted into another class
or series; and (6) voting rights, if any.
Prior to the issue of any shares of a series of CNB Preferred Stock, CNB
shall file with the Florida Department of State a statement setting forth the
name of the corporation, the date of the adoption of the resolution
establishing the series and enclosing a copy of the resolution determining
the relative rights
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and preferences thereof, together with a statement that the resolution was
duly adopted by the Board of Directors. Upon the filing of such statement,
the resolution establishing and designating the series and fixing and
determining the relative rights and preferences of the series shall
constitute an amendment to the Articles of Incorporation of CNB.
Any issuance of CNB Preferred Stock could be used to dilute the stock
ownership of persons seeking to gain control of CNB and could otherwise have
the effect of delaying, deferring or preventing a change in control of CNB.
DISSENTERS' RIGHTS
ALTHOUGH THE FOLLOWING CONTAINS A SUMMARY OF THE MATERIAL PROVISIONS OF
FLORIDA LAW PERTAINING TO SHAREHOLDERS' ABILITY TO DISSENT FROM THE MERGER,
THE SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE LAW AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PROVISIONS OF SECTIONS 607.1301
THROUGH 607.1320 OF THE FLORIDA BUSINESS CORPORATION ACT, WHICH ARE ATTACHED
HERETO AS APPENDIX C. SINCE THE PRESERVATION AND EXERCISE OF DISSENTERS'
RIGHTS REQUIRES STRICT ADHERENCE TO THE PROVISIONS OF THESE LAWS,
SHAREHOLDERS WHO MIGHT DESIRE TO EXERCISE SUCH RIGHTS SHOULD REVIEW SUCH LAWS
CAREFULLY, TIMELY CONSULT THEIR OWN LEGAL ADVISOR AND STRICTLY FOLLOW THE
PROVISIONS OF FLORIDA LAW.
Only Riherd shareholders of record at the close of business on
______________, 1996, will have the right to vote on the Merger.
Shareholders who would like to exercise their dissenters' rights under
Florida law to demand that Riherd pay them in cash the fair value of their
shares as of the effective date of the Merger in lieu of receiving CNB Common
Stock (such a shareholder being hereinafter referred to as a "Dissenting
Shareholder") must (i) deliver to Riherd before the vote is taken written
notice of his intent to demand payment for his shares if the Merger is
consummated; and (ii) not vote his shares in favor of the Merger. Fair value
is defined as the value of the shares as of the close of the business on the
day prior to the date on which the shareholders authorize the proposed
action, excluding any appreciation or depreciation in anticipation of the
corporate action unless exclusion would be inequitable. Neither a vote
against the approval of the Merger nor an abstention from voting constitutes
a sufficient objection to the Merger in the absence of the required written
notification. Such a Dissenting Shareholder can neither vote in favor of
approval of the Merger Agreement by proxy or in person nor deliver a signed
but unmarked proxy unless such proxy is revoked prior to the vote on the
Merger.
PURSUANT TO THE ABOVE, ANY DISSENTING SHAREHOLDER SHOULD SEND A WRITTEN
OBJECTION TO THE MERGER, AS SET FORTH ABOVE, TO RIHERD AT
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THE FOLLOWING ADDRESS: 300 WEST MAIN STREET, LAKE BUTLER, FL 33957.
If the Riherd shareholders approve the Merger, Riherd must give written
notice of such approval to the Dissenting Shareholder within ten (10) days of
the Riherd shareholders' approval. Within twenty (20) days after notice from
Riherd, each Dissenting Shareholder to whom Riherd was required to give
notice and who elects to dissent must file with Riherd notice of election to
dissent (an "Election Notice"), stating his name and address, the number of
shares to which he dissents and a demand for payment of the fair value of his
shares. The Dissenting Shareholder may dissent as to less than all the
shares then registered in his name. Any shareholder who fails to file an
Election Notice is bound by the terms of the Merger. A Dissenting
Shareholder must deposit his certificates with Riherd simultaneously with the
filing of his Election Notice.
Holders of Riherd Common Stock who intend to exercise their dissenters'
rights should bear in mind that the fair value of their shares of Riherd
Common Stock, for dissenters' rights purposes, could be determined to be more
than, the same as, or less than, the consideration they would receive
pursuant to the Merger.
Within ten (10) days after the expiration of the period for filing an
Election Notice or within ten (10) days after the Merger is effected,
whichever is later (but in no case later than ninety (90) days after Riherd
shareholders approve the Merger), Riherd must make a written offer to pay an
amount that Riherd estimates to be the fair value for the shares to each
Dissenting Shareholder who has filed an Election Notice. If the Merger has
not been consummated within ninety (90) days of the date on which the Riherd
shareholders approved the Merger, Riherd's offer of payment may be made
conditioned upon the consummation of the Merger. Riherd's offer must be
accompanied by Riherd's current balance sheet and profit and loss statement.
Upon filing an Election Notice, a Dissenting Shareholder is only entitled
to payment as provided by Section 607.1320 of the Florida Business
Corporation Act and is not entitled to vote or exercise other rights of a
shareholder. The Dissenting Shareholder may withdraw the Election Notice in
writing at any time before Riherd makes its offer to pay for the shares.
After Riherd's offer, the Election Notice may be withdrawn if Riherd consents
to the withdrawal.
The right of a Dissenting Shareholder to be paid fair value of his shares
shall cease, and he will be reinstated to have all his rights as a
shareholder, as described in the Florida Business Corporation Act, as of the
filing of the Election Notice, if one of the following events occurs: (i) the
Election Notice is withdrawn;
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(ii) the Merger is abandoned; (iii) no demand or petition for determining
fair value by a court has been made or filed within the time limits provided
under Section 607.1320 of the Florida Business Corporation Act; or (iv) a
court of competent jurisdiction determines that the shareholder is not
entitled to the relief provided by Section 607.1320 of the Florida Business
Corporation Act.
If Riherd fails to make an offer within the prescribed period or if
Riherd makes the offer and any Dissenting Shareholder fails to accept the
offer within the 30 day period, Riherd, within 30 days after receipt of an
Election Notice given within 60 days of the consummation of the Merger,
shall, or at its election at any time within 60 days of the consummation of
the Merger may, petition to the Circuit Court of Union County, requesting
that the fair value of such shares be determined. The Court shall also
determine whether each Dissenting Shareholder is entitled to payment for his
shares. If Riherd fails to institute the proceeding as required, any
Dissenting Shareholder may do so in the name of Riherd. All Dissenting
Shareholders who have not agreed to accept Riherd's offer will be made
parties to the action against their shares and are entitled to judgment
against Riherd for the amount of the fair value of their shares. The Court
may appoint persons as appraisers to receive evidence and recommend a
decision on the question of fair value. Riherd will pay each Dissenting
Shareholder the amount found due to him within ten (10) days after the
Court's final determination. Upon payment of the judgment, the Dissenting
Shareholder shall cease to have any interest in such shares.
The costs and expenses of any such proceeding, including reasonable
compensation used by any party, shall be determined by the Court and assessed
against Riherd. However, the Court may assess all or any part of such costs
and expenses against a shareholder if the Court finds that the shareholder's
refusal to accept Riherd's offer was arbitrary, vexatious or not in good
faith. If the Court determines the fair value of the shares materially
exceeds the amount of Riherd's offer, the Court may award to any shareholder
reasonable compensation for attorneys and experts employed by the shareholder
in the proceeding.
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
Each of CNB and Riherd is a Florida corporation subject to the
provisions of the Florida Business Corporation Act. Shareholders of Riherd,
whose rights are governed by Riherd's Articles of Incorporation and Bylaws,
will, upon consummation of the Merger, become shareholders of CNB. The
rights of such shareholders as shareholders of CNB will then be governed by
the Articles of Incorporation of CNB, and the Bylaws of CNB.
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Except as set forth below, there are no material differences between the
rights of a Riherd shareholder under Riherd's Articles of Incorporation and
Bylaws, on the one hand, and the rights of a CNB shareholder under the
Amended and Restated Articles of Incorporation and Bylaws of CNB on the other
hand. THIS SUMMARY DOES NOT PURPORT TO BE A COMPLETE DISCUSSION OF, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, FLORIDA LAW AND THE AMENDED AND
RESTATED ARTICLES OF INCORPORATION AND BYLAWS OF EACH OF CNB AND RIHERD.
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
CNB. The Board of Directors of CNB consists of not more than 25
members, and the exact number is fixed from time to time by resolution of the
Board of Directors. The Board of Directors has the authority to increase the
number of directors by up to 3 new members each year. Directors hold office
until the annual meeting of shareholders held next after their election or
until their earlier resignation, removal from office or death. If a vacancy
occurs among the directors by reason of the resignation, removal, addition to
the number of directors or death, the vacancy will be filled by a majority
vote of the remaining directors whether or not sufficient to constitute a
quorum. A director elected to fill a vacancy holds office only until the
next election of directors by the shareholders.
RIHERD. The Articles of Incorporation of Riherd provide that the
number of directors shall not be fewer than one (1). The Bylaws provide that
the Board of Directors shall consist of the number of directors elected in
accordance with the Bylaws at the annual meeting of the shareholders.
Directors are elected by a plurality of the votes cast by the shares entitled
to vote in the election at a meeting at which a quorum is present. Vacancies
occurring on the Board of Directors shall be filled by the affirmative vote
of a majority of the remaining members of the board, regardless of whether
such number is sufficient to create a quorum, unless otherwise provided by
law, to serve until the next annual meeting of shareholders. Any vacancy
resulting from an increase of the number of directors shall be filled by
election at the annual meeting of the shareholders or a special meeting of
shareholders called for the purpose of filling such vacancy.
MEETINGS OF SHAREHOLDERS
CNB. Action required or permitted to be taken by the shareholders of
CNB may be taken without a meeting, without notice and without a vote if a
written consent, setting forth the action to be taken, is signed by
two-thirds of the shareholders entitled to vote with respect to the subject
matter of the action.
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RIHERD. Action required or permitted to be taken by the shareholders of
Riherd may be taken without a meeting, without notice and without a vote if a
written consent, setting forth the action to be taken, is signed by the
holders of Riherd's outstanding stock having not less than the minimum number
of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Within 10 days after obtaining such authorization by written consent, notice
containing a fair summary of the material features of the authorized action
must be given to those shareholders who have not consented in writing. If
the action is a merger, consolidation or sale or exchange of assets for which
dissenters' rights are provided by the Florida Business Corporation Act, such
notice shall contain a clear statement of the rights of dissenting
shareholders to be paid the fair value of their shares upon compliance with
the applicable statutory provisions. The Articles of Incorporation of Riherd
also establish certain procedures for giving notice of the meeting to
shareholders.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
CNB. The Bylaws of CNB provide that the authorization or consent of the
shareholders of CNB are not required with respect to the sale, lease,
exchange or other disposition of all or substantially all of the property and
assets of CNB in the usual and regular course of business or with respect to
the mortgage or pledge of any or all of the property and assets of CNB,
whether or not in the usual and regular course of business. The preceding
actions may be made upon such terms and conditions and for such consideration
as are authorized by CNB's Board of Directors.
The authorization or consent of the holders of two-thirds of the issued
and outstanding shares of capital stock are required with respect to the
sale, lease, exchange or other disposition of all or substantially all of the
property and assets of CNB, with or without its goodwill, if such action is
not in the usual and regular course of CNB's business. After the
authorization of the sale, lease, exchange or other disposition of the assets
by the shareholders, the Board of Directors may, in its discretion without
further action or approval of the shareholders, abandon such sale.
RIHERD. The Articles of Incorporation and Bylaws of Riherd make no
special provisions as to the vote required for authorization of certain
actions such as mergers, asset sales, security issuances, recapitalizations,
and liquidations.
AMENDMENT OF CORPORATE CHARTER AND BYLAWS
CNB. There is no provision in the Amended and Restated Articles of
Incorporation of CNB providing for their amendment. The By-Laws of CNB may
be amended by the shareholders at any
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regular or special meeting of the shareholders. If such an action is to be
taken at such a meeting, notice of the general nature of the proposed change
in the By-Laws shall have been given in the notice of a meeting.
RIHERD. Amendment of the Articles of Incorporation of Riherd requires
that the amendment be recommended to the shareholders by the Board of
Directors and, if a quorum of shareholders exists, approved by votes cast in
favor of the amendment exceeding the votes cast opposing the amendment. The
Bylaws of Riherd may be amended, altered or replaced by the Board of
Directors, except to the extent that such power is reserved to the
shareholders by statute. In addition, any Bylaws or amendments thereto as
adopted by the Board of Directors may be altered, amended or repealed and
replaced by vote of the shareholders.
INFORMATION ABOUT RIHERD
BUSINESS OF RIHERD
Riherd was organized as a corporation under the laws of the State of
Florida on August 11, 1987 and is a bank holding company under the Bank
Holding Company Act of 1956, as amended. Riherd owns all of the issued and
outstanding shares of common stock of Farmers and Dealers Bank, a state
banking association organized under the laws of the State of Florida on
October 6, 1911. F&D Bank provides a broad range of retail and commercial
banking services, primarily to customers located in Gainesville and Lake
Butler, Florida. Riherd's main office is located in Lake Butler. Riherd
also has two branch offices in Gainesville, Florida.
MARKET AND DIVIDEND INFORMATION REGARDING RIHERD COMMON STOCK
There is not an established trading market in the shares of Riherd
Common Stock. Riherd is not aware of any transfers of Riherd Common Stock
which have occurred in arm's length transactions in the last two years. In
1993, 1994 and 1995, Riherd paid dividends per share of Riherd Common Stock
of $.53, $.54 and $.55, respectively, to its shareholders.
SECURITY OWNERSHIP OF RIHERD'S MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, the
number of shares of Riherd Common Stock beneficially owned by each director and
executive officer of Riherd and F&D Bank, all directors and executive officers
of Riherd as a group, and each person who beneficially owned 5% or more of the
outstanding Riherd Common Stock.
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<TABLE>
<CAPTION>
Number
of Shares
Positions with Beneficially Percentage
Name Riherd and F&D Bank Owned of Class
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard J. DeVoe(1) Vice President F&D Bank 450 0.51%
Robert A. Driggers Director of Riherd and F&D Bank 1,800 2.04%
Larry T. Hall Sr. Vice President and Chief Lending Officer of
F&D Bank 0 0%
Barbara B. Riherd(2) Vice President and Sr. Operations Officer F&D
Bank 3,210 3.64%
Carl D. Riherd(3) Director of F&D Bank 5,400 6.13%
Martha C. Riherd(4) Director and Vice President of Riherd and
Director of F&D Bank 7,350 8.34%
Paul M. Riherd Chairman, President and CEO of Riherd and
Chairman of F&D Bank 19,770 22.43%
Thomas M. Riherd, II(5) Director, Vice President and Controller of Riherd
and Director, President and CEO of F&D Bank 3,285 3.73%
Thomas C. Spires Director of F&D Bank 0 0%
Barry and Harriett Haynes(6) Principal Shareholders 6,420 7.28%
Bill and Brooke Douglas(7) Principal Shareholders 6,420 7.28%
Bob and Mari Weller(8) Principal Shareholders 6,420 7.28%
Greg Riherd(9) Principal Shareholder 5,400 6.12%
Frances White(10) Principal Shareholder 5,400 6.12%
Hal & Julia Maines(11) Principal Shareholders 4,500 5.10%
------- -----
ALL EXECUTIVE OFFICERS,
DIRECTORS AND PRINCIPAL
SHAREHOLDERS AS A GROUP
(9 PERSONS) 41,265(12) 46.83%
</TABLE>
- ------------------------
(1) His ownership does not include 900 shares owned by Mr. DeVoe's wife.
(2) Barbara B. Riherd is the wife of Thomas M. Riherd, II. Her ownership does
not include 3,285 owned by Thomas M. Riherd, II.
(3) Carl D. Riherd is the nephew of Paul M. Riherd.
(4) Martha C. Riherd is the wife of Paul M. Riherd. Her ownership does not
include 19,770 shares owned by Paul M. Riherd.
(5) Thomas M. Riherd, II, is the son of Paul M. and Martha C. Riherd. His
ownership does not include 3,210 shares owned by his wife Barbara Riherd.
(6) Barry and Harriett Haynes are the son-in-law and daughter of Paul M. Riherd
and Martha Riherd.
(7) Bill and Brooke Douglas are the son-in-law and daughter of Paul M. Riherd
and Martha Riherd.
(8) Bob and Mari Weller are the son-in-law and daughter of Paul M. Riherd and
Martha Riherd.
(9) Greg Riherd is the nephew of Paul M. Riherd and the brother of Carl Riherd.
(10) Frances White is the sister of Paul Riherd. Her ownership does not include
3,450 shares owned by her sons.
(11) Their ownership does not include 2250 shares owned by their daughters.
(12) This amount does not include an additional 35,310 (40.07%) beneficially
owned by other members of the Riherd family who are not directors or
executive officers of Riherd or F&D Bank.
- 54 -
<PAGE>
As of March 31, 1996, there were 27 holders of record of Riherd Common
Stock.
EXECUTIVE COMPENSATION
In 1995, Paul Riherd, the Chairman of Riherd, received $1,800 in
directors fees, $9,280 in fees for consulting services, $48,165 in payments
from a retirement annuity, use of a 1994 automobile having an estimated value
of $4,800, dues for membership in a civic organization having an estimated
value of $500, and the occasional use of secretarial services provided by F&D
Bank.
In 1995, Thomas Riherd, the President of Riherd, received a salary of
$88,894, directors fees amounting to $1,800, and supplemental insurance
benefits valued at $1,332.
During 1995, none of the executive officers of Riherd received
compensation from all sources in excess of $100,000.
- 55 -
<PAGE>
LEGAL PROCEEDINGS
Neither Riherd nor F&D Bank is a party to any legal proceedings, other
than routine litigation incidental to the business of F&D Bank, which, to the
knowledge of the management of Riherd and F&D Bank, after consultation with
counsel, is considered to have any potential material adverse effect on the
financial condition or results of operations of Riherd or F&D Bank.
- 56 -
<PAGE>
FINANCIAL INFORMATION REGARDING RIHERD
INDEPENDENT AUDITORS' REPORT
Board of Directors
Riherd Bank Holding Company
Lake Butler, Florida
We have audited the accompanying consolidated balance sheets of Riherd Bank
Holding Company and subsidiary as of December 31, 1995 and December 31, 1994,
and the related consolidated statements of operations, stockholders' 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Riherd Bank
Holding Company and subsidiary at December 31, 1995 and December 31, 1994, and
the consolidated results of operations and cash flows for the years then ended
in conformity with generally accepted accounting principles.
Rex Meighen & Company
Certified Public Accountants
Tampa, Florida
January 12, 1996
57
<PAGE>
RIHERD BANK HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------ March 31,
1995 1994 1996
ASSETS ----------- ----------- -----------
(Unaudited)
Cash and cash equivalents:
<S> <C> <C> <C>
Cash and non-interest bearing deposits.................... $ 2,093,507 $ 1,749,062 $ 2,064,876
Federal funds sold........................................ 2,779,000 758,000 203,000
----------- ----------- -----------
4,872,507 2,507,062 2,267,876
Investment securities: (Approximate fair value of
$22,621,597 for 1996; $20,926,930 for 1995; $21,800,861 for
1994)
Securities available for sale............................. 20,926,930 12,810,620 22,621,597
Securities to be held to maturity......................... -- 9,183,166 --
Loans....................................................... 19,427,539 14,359,808 21,316,289
Facilities.................................................. 2,276,065 2,373,362 2,242,798
Accrued interest receivable................................. 380,137 380,702 409,622
Other real estate........................................... 155,008 188,092 155,806
Prepaid expenses............................................ 58,918 227,218 42,573
Other assets................................................ 275,809 311,539 396,526
----------- ----------- -----------
Total assets.......................................... $48,372,913 $42,341,569 $49,453,087
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES
Deposits:
Demand.................................................... $ 7,033,045 $ 6,261,450 $ 6,958,936
Money market accounts..................................... 14,153,606 13,529,820 14,898,512
Savings................................................... 2,469,822 2,097,784 2,702,343
Time, $100,000 and over................................... 4,142,974 2,177,881 4,174,723
Other time................................................ 15,381,650 13,888,228 15,725,918
----------- ----------- -----------
Total deposits........................................ 43,181,097 37,955,163 44,460,432
Deferred income taxes....................................... 49,611 -- 42,458
Income taxes payable........................................ 90,306 -- --
Accrued interest and other liabilities...................... 258,558 128,626 196,532
----------- ----------- -----------
Total liabilities..................................... 43,579,572 38,083,789 44,699,422
----------- ----------- -----------
Commitments and contingencies (Notes A and E)
STOCKHOLDERS' EQUITY
Common stock, $0.006667 par value, authorized 300,000
shares; issued and outstanding
88,125 shares.............................................. 588 588 588
Additional paid-in capital.................................. 3,496,565 3,496,565 3,496,565
Retained earnings........................................... 1,216,843 1,039,938 1,285,759
Net unrealized holding gains (losses) on securities......... 79,345 (279,311) (29,247)
----------- ----------- -----------
Total stockholders' equity............................ 4,793,341 4,257,780 4,753,665
----------- ----------- -----------
Total liabilities and stockholders' equity............ $48,372,913 $42,341,569 $49,453,087
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
58
<PAGE>
RIHERD BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
---------------------------- ------------------------
1995 1994 1996 1995
------------- ------------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................ $ 1,733,067 $ 1,208,289 $ 507,636 $ 387,005
Interest on investment securities:
U. S. Government agencies and corporations.......... 1,330,895 1,188,881 306,579 328,293
States and political subdivisions................... 74,007 73,212 22,231 18,047
Other............................................... -- 1,350 -- --
Interest on Federal funds sold........................ 153,073 115,248 25,166 21,570
------------- ------------- ----------- -----------
Total interest income............................. 3,291,042 2,586,980 861,612 754,915
------------- ------------- ----------- -----------
INTEREST EXPENSE
Interest on deposits.................................. 1,403,126 964,779 367,855 308,601
Interest on Federal funds purchased................... -- -- 213 --
------------- ------------- ----------- -----------
Total interest expense............................ 1,403,126 964,779 368,068 308,601
------------- ------------- ----------- -----------
Net interest income............................... 1,887,916 1,622,201 493,544 446,314
PROVISION FOR LOAN LOSSES............................... -- -- -- --
------------- ------------- ----------- -----------
Net interest income after provision for loan
losses........................................... 1,887,916 1,622,201 493,544 446,314
------------- ------------- ----------- -----------
OTHER INCOME
Investment security gains (losses).................... 16,126 (62,367) 25,884 (14,327)
Service charges on deposit accounts................... 440,545 397,730 116,554 106,796
Miscellaneous income.................................. 59,438 62,212 12,555 18,637
------------- ------------- ----------- -----------
Total other income................................ 516,109 397,575 154,993 111,106
------------- ------------- ----------- -----------
OTHER EXPENSES
Salaries and employee benefits........................ 1,131,176 982,022 259,291 257,277
Occupancy expense..................................... 416,181 431,454 101,787 96,259
Marketing expense..................................... 36,181 94,222 8,429 10,966
Stationery, printing and supplies..................... 42,693 41,362 22,189 13,946
Legal and professional fees........................... 66,680 96,561 51,788 18,585
FDIC insurance........................................ 43,574 79,437 500 20,808
Miscellaneous expense................................. 302,612 399,947 87,429 43,486
------------- ------------- ----------- -----------
Total other expenses.............................. 2,039,097 2,125,005 531,413 461,327
------------- ------------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES....................... 364,928 (105,229) 117,124 96,093
INCOME TAXES (CREDIT)................................... 139,848 (46,405) 35,873 36,124
------------- ------------- ----------- -----------
NET INCOME (LOSS)....................................... $ 225,080 $ (58,824) $ 81,251 $ 59,969
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
PER SHARE AMOUNTS
Net income (loss)..................................... $ 2.55 $ (.66) $ .92 $ .68
Book value at year end................................ $ 54.39 $ 48.32 $ 53.94 $ 51.03
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
59
<PAGE>
RIHERD BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Net
Unrealized
Additional Gains Total
Common Paid-In Retained (Losses) On Stockholders'
Stock Capital Earnings Securities Equity
----------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993.................. $ 600 $ 3,570,960 $ 1,168,745 $ -- $ 4,740,305
1994
Net loss.................................... -- -- (58,824) -- (58,824)
Cash dividends paid to stockholders......... -- -- (47,750) -- (47,750)
Redemption common stock..................... (12) (74,395) (22,233) -- (96,640)
Net change in net unrealized holding losses
on securities.............................. -- -- -- (279,311) (279,311)
----- ------------- ------------- ------------ -------------
Balance, December 31, 1994.................. 588 3,496,565 1,039,938 (279,311) 4,257,780
1995
Net income.................................. -- -- 225,080 -- 225,080
Cash dividends paid to stockholders......... -- -- (48,175) -- (48,175)
Net change in net unrealized holding gains
on securities.............................. -- -- -- 358,656 358,656
----- ------------- ------------- ------------ -------------
Balance, December 31, 1995.................. 588 3,496,565 1,216,843 79,345 4,793,341
1996 (UNAUDITED)
Net income.................................. -- -- 81,251 -- 81,251
Cash dividends paid to stockholders......... -- -- (12,335) -- (12,335)
Net change in net unrealized holding losses
on securities.............................. -- -- -- (108,592) (108,592)
----- ------------- ------------- ------------ -------------
Balance, March 31, 1996..................... $ 588 $ 3,496,565 $ 1,285,759 $ (29,247) $ 4,753,665
----- ------------- ------------- ------------ -------------
----- ------------- ------------- ------------ -------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
60
<PAGE>
RIHERD BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
------------------------------ ----------------------------
1995 1994 1996 1995
-------------- -------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)...................................... $ 225,080 $ (58,824) $ 81,251 $ 59,969
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation......................................... 214,941 228,839 46,706 53,082
Deferred income tax (credit)......................... (62,324) (25,546) 54,755 (15,581)
Net amortization on investment securities............ 52,092 74,837 14,054 8,865
(Gain) loss on the sale of investment securities..... (16,126) 62,367 (25,884) 14,327
Loss on other real estate............................ 25,950 51,282 -- --
(Increase) decrease in assets:
Accrued interest receivable........................ 565 (19,787) (29,485) 5,004
Prepaid expenses and other assets.................. 151,025 (118,604) (80,284) (115,578)
Increase (decrease) in accrued liabilities........... 220,238 14,497 (117,218) 175,327
-------------- -------------- ------------- -------------
Net cash provided (used) by operating
activities...................................... 811,441 209,061 (116,105) 185,415
-------------- -------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Purchase of securities............................... (10,149,376) (8,994,983) (4,405,428) (2,619,016)
Proceeds from sale of securities..................... 8,025,138 7,958,997 1,525,315 2,976,388
Proceeds from maturities of securities............... 1,834,682 177,301 1,026,779 63,389
Securities to be held to maturity:
Purchase of securities............................... (736,117) (2,672,682) -- --
Proceeds from maturities of securities............... 2,580,159 1,984,512 -- 147,649
Purchase of facilities................................. (117,644) (347,612) (13,439) (19,958)
Disposal of other real estate, net..................... 7,134 190,217 -- --
Net increase in loans.................................. (5,067,731) (3,050,029) (1,888,750) (977,480)
-------------- -------------- ------------- -------------
Net cash used in investing activities............ (3,623,755) (4,754,279) (3,755,523) (429,028)
-------------- -------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits............................... 5,225,934 3,153,873 1,279,332 1,659,499
Cash dividends......................................... (48,175) (47,750) (12,335) (11,750)
Redemption of common stock............................. -- (96,640) -- --
-------------- -------------- ------------- -------------
Net cash provided by financing activities........ 5,177,759 3,009,483 1,266,997 1,647,749
-------------- -------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH.......................... 2,365,445 (1,535,735) (2,604,631) 1,404,136
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD..................................... 2,507,062 4,042,797 4,872,507 2,507,062
-------------- -------------- ------------- -------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD........................................... $ 4,872,507 $ 2,507,062 $ 2,267,876 $ 3,911,198
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest............................................. $ 1,386,813 $ 944,992 $ 367,403 $ 302,151
Income taxes......................................... $ 112,200 $ 89,220 $ 97,810 $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
61
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PARENT COMPANY:
The Company's principal asset is its investment in its subsidiary, Farmers
and Dealers Bank (the "Bank"). The Bank is chartered by the State of Florida and
opened on December 9, 1911. The Bank currently has three banking offices; at 300
West Main Street in Lake Butler, Florida, a branch in Alachua County, Florida
that opened during April 1990, and a branch in Alachua County, Florida that
opened in August 1994. The Company was incorporated under the laws of Florida in
1987 and is registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended. The Company acquired the Bank on December 9, 1987, in a
stock-for-stock exchange. Presently the Company has 300,000 shares of common
stock authorized with 88,125 shares issued and outstanding.
CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Farmers and Dealers Bank. All significant
intercompany items are eliminated.
BUSINESS:
The Company provides a wide range of banking services to individual and
corporate customers primarily located in Union, Bradford and Alachua Counties,
Florida. The Company is subject to State and Federal bank regulatory authorities
and undergoes periodic regulatory examinations.
BASIS OF FINANCIAL STATEMENT PRESENTATION:
The accounting and reporting policies of the Company conform with generally
accepted accounting principles and with reporting guidelines as prescribed by
banking regulatory authorities. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determinations of the allowance for loan losses
and the valuation of real estate acquired in connection with foreclosures,
including in-substance foreclosures, or in satisfaction of loans. In connection
with the determination of the allowances for loan losses and real estate owned,
management obtains independent appraisals for real property.
Essentially, all of the Company's real estate loans are secured by real
estate in Union, Bradford and Alachua Counties, Florida. Accordingly, the
ultimate collectibility of a substantial portion of the Company's loan portfolio
and the recovery of the carrying amount of other real estate owned are
susceptible to changes in market conditions in north Florida.
Management believes the allowance for losses on loans and real estate owned
are adequate. While management uses available information to recognize losses on
loans and real estate owned, future additions to the allowances may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowances for losses on loans and real estate owned. Such
agencies may require the Company to recognize additions to the allowances based
on their judgments about information available to them at the time of their
examination.
INVESTMENTS:
Statement of Financial Accounting Standards No. 115 ("FAS 115"), ACCOUNTING
FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, was issued by the
Financial Accounting Standards Board in May 1993. FAS 115 sets the standard for
classification of and accounting for investments in equity securities that have
readily determinable fair values, and all investments in debt securities which
are to be classified as HELD-TO-MATURITY SECURITIES, AVAILABLE-FOR-SALE
SECURITIES, or TRADING SECURITIES.
Debt securities that an enterprise has the positive intent and ability to
hold to maturity are classified as HELD-TO-MATURITY SECURITIES and reported at
amortized cost. Debt and equity securities that are bought and held principally
for the purpose of selling them in the near term are classified as
62
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
TRADING SECURITIES and reported at fair value, with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
AVAILABLE-FOR-SALE securities and reported at fair value, with unrealized gains
and losses excluded from earnings and reported as a separate component of
stockholders' equity.
The Company classifies its investments at the purchase date in accordance
with the above-described guidelines. Premiums or discounts on securities at the
date of purchase are being amortized or accreted, respectively, over the
estimated life of the security using a method which approximates the level yield
method. Gains and losses realized on the disposition of securities are based on
the specific identification method and are reflected in other income.
The Company adopted FAS 115 effective January 1, 1994. The effect of the
change in method of accounting for investments was not material and,
accordingly, prior period financial statements have not been restated.
FACILITIES:
Facilities are stated at cost, less accumulated depreciation and
amortization. Charges to income for depreciation and amortization are computed
on the straight-line method over the assets' estimated useful lives.
When properties are sold or otherwise disposed of, the gain or loss
resulting from the disposition is credited or charged to income. Expenditures
for maintenance and repairs are charged against income and renewals and
betterments are capitalized.
LOANS AND ALLOWANCE FOR LOAN LOSSES:
Loans are carried at the principal amount outstanding less an allowance for
loan losses and net deferred loan origination fees and costs.
Interest income is recognized on principal amounts of loans outstanding
using the interest method. Nonaccrual loans are loans on which the accrual of
interest ceases when the collection of principal or interest payments is
determined to be doubtful by management. It is the policy of the Company to
discontinue the accrual of interest when principal or interest payments are
delinquent 90 days or more, or earlier if in management's opinion the full
timely collection of interest or principal becomes uncertain, unless the loan
principal and interest are determined by management to be fully collateralized
and in the process of collection. Any unpaid amounts previously accrued on these
loans are reversed from income.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged-off against the allowance when
management believes that the collectibility of principal is unlikely. Recoveries
of amounts previously charged-off are credited to the allowance. The allowance
for loan losses is based on management's evaluation of various factors including
prevailing and anticipated economic conditions, diversification and size of the
loan portfolio, current financial status and credit standing of the borrower,
the status and level of nonperforming assets, past and expected loan loss
experience, adequacy of collateral, specific impaired loans and economic
conditions. Allowances for impaired loans are generally determined based on
collateral values or the present value of estimated cash flows.
LOANS:
During 1995, the Company adopted Statement of Financial Accounting Standards
No. 114 ("FAS 114"), ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN, which
sets the standard for recognition of loan impairment and the measurement methods
for certain impaired loans and loans whose terms are modified in troubled debt
restructurings.
Under FAS 114, a loan is impaired when it is PROBABLE that a creditor will
be unable to collect the full amount of principal and interest due according to
the contractual terms of the loan agreement.
63
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
When a loan is impaired, a creditor has a choice of ways to measure the
impairment. The measurement of impairment may be based on (1) the present value
of the expected future cash flows of the impaired loan discounted at the loan's
original effective interest rate, (2) the observable market price of the
impaired loan, or (3) the fair value of the collateral of a collateral-dependent
loan. Creditors may select the measurement method on a loan-by-loan basis,
except that collateral-dependent loans for which foreclosure is probable must be
measured at the fair value of the collateral. A creditor in a troubled debt
restructuring involving a restructured loan should measure impairment by
discounting the total expected future cash flows at the loan's original
effective rate of interest.
The adoption of FAS 114 did not significantly effect the Company's financial
statements.
LOAN FEES:
The portion of loan fees on originated loans that exceeds the cost of
underwriting and closing loans is deferred. The deferred loan fees are
recognized over the lives of the related loans as an adjustment to yield. The
adjustment is accounted for by the straight-line method, which is not materially
different from the adjustment resulting from the use of the interest method.
OTHER REAL ESTATE OWNED:
Other real estate includes both formally foreclosed property and
in-substance foreclosed property. In-substance foreclosed properties are those
properties for which the institution has taken physical possession, regardless
of whether formal foreclosure proceedings have taken place. At the time of
foreclosure, other real estate is recorded at the lower of the Company's cost or
the asset's fair value less costs to sell, which becomes the property's new
basis. Any write-downs based on the asset's fair value at date of acquisition
are charged to the allowance for loan losses. After foreclosure, these assets
are carried at the lower of their new cost basis or fair value less cost to
sell.
OFF BALANCE SHEET FINANCIAL INSTRUMENTS:
In the ordinary course of business the Company has entered into off balance
sheet financial instruments consisting of commitments to extend credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.
INCOME TAXES:
Provisions for income taxes are based on amounts reported in the statements
of income, after exclusion of non-taxable income such as interest on state and
municipal securities, and include deferred taxes on temporary differences in the
recognition of income and expense for tax and financial statement purposes.
Deferred taxes are computed on the liability method as prescribed in FAS No.
109, ACCOUNTING FOR INCOME TAXES.
PER SHARE AMOUNTS:
Per share amounts are computed based on the weighted average shares of
common stock outstanding during the year. Stock splits are retroactively
recognized in determining weighted average shares of common stock outstanding.
STATEMENT OF CASH FLOWS:
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and amounts on deposit in non-interest bearing accounts with other
commercial banks and Federal funds sold.
INTERIM FINANCIAL INFORMATION (UNAUDITED):
The unaudited consolidated interim financial statements for the three-month
periods ended March 31, 1995 and 1996, and as of March 31, 1996, have been
prepared on the same basis as the Company's audited consolidated financial
statements included herein. In the opinion of management,
64
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
all adjustments, consisting of normal, recurring adjustments, necessary for a
fair presentation, have been included. The results of operations for such
interim periods are not necessarily indicative of the results expected for the
full year ending December 31, 1996.
NOTE B -- INVESTMENT SECURITIES
The carrying amounts of investment securities as shown in the consolidated
balance sheets and their approximate fair values were as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Cost Gains Losses Fair Value
-------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE --
DECEMBER 31, 1994
U. S. Treasury..................................... $ 7,501,684 $ 7,816 $ 162,780 $ 7,346,720
U. S. Government agencies.......................... 1,501,028 -- 31,403 1,469,625
Mortgage-backed securities......................... 4,206,924 1,943 214,592 3,994,275
-------------- ----------- ----------- --------------
Total.......................................... $ 13,209,636 $ 9,759 $ 408,775 $ 12,810,620
-------------- ----------- ----------- --------------
-------------- ----------- ----------- --------------
DECEMBER 31, 1995
U. S. Treasury..................................... $ 7,033,412 $ 60,409 $ 6,678 $ 7,087,143
U. S. Government agencies.......................... 3,751,985 16,560 5,940 3,762,605
Mortgage-backed securities......................... 8,507,947 79,316 71,096 8,516,167
States and political subdivisions.................. 1,451,507 58,138 6,130 1,503,515
Other securities................................... 57,500 -- -- 57,500
-------------- ----------- ----------- --------------
Total.......................................... $ 20,802,351 $ 214,423 $ 89,844 $ 20,926,930
-------------- ----------- ----------- --------------
-------------- ----------- ----------- --------------
MARCH 31, 1996 (UNAUDITED)
U. S. Treasury..................................... $ 7,544,349 $ 14,335 $ 29,724 $ 7,528,960
U. S. Government agencies.......................... 4,528,026 11,734 21,119 4,518,641
Mortgage-backed securities......................... 8,727,036 115,489 94,329 8,748,196
States and political subdivisions.................. 1,810,606 40,919 83,225 1,768,300
Other securities................................... 57,500 -- -- 57,500
-------------- ----------- ----------- --------------
Total.......................................... $ 22,667,517 $ 182,477 $ 228,397 $ 22,621,597
-------------- ----------- ----------- --------------
-------------- ----------- ----------- --------------
</TABLE>
SECURITIES TO BE HELD TO MATURITY --
The Bank elected to transfer all of its held-to-maturity securities to
available-for-sale under the FAS 115 "Special Report" issued in November 1995,
which allowed banks a one-time opportunity to reclassify securities without
tainting their portfolio.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U. S. Government agencies............................. $ 3,262,266 $ 5,732 $ 17,240 $ 3,250,758
Mortgage-backed securities............................ 4,697,682 7,926 229,598 4,476,010
States and political subdivisions..................... 1,165,718 30,010 7,612 1,188,116
Other securities...................................... 57,500 17,857 -- 75,357
------------- ----------- ----------- -------------
Total............................................. $ 9,183,166 $ 61,525 $ 254,450 $ 8,990,241
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
The estimated fair value of securities is determined on the basis of market
quotations. Temporary increases (decreases) in fair value of securities
available-for-sale of $79,345 (net of deferred income taxes of $45,235) for
1995, and $(29,247) (net of deferred income taxes of $16,673) for 1996, are
regarded as an adjustment to stockholders' equity.
65
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE B -- INVESTMENT SECURITIES (Continued)
At December 31, 1995 and 1994, and March 31, 1996, securities with book
values of $2,581,002, $2,038,515 and $2,815,959, respectively, were pledged to
secure public deposits and for other purposes required by law or contract.
Gains and losses on sales of securities were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
-------------------------- -----------------------
1995 1994 1996 1995
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Proceeds from sales of securities............. $8,025,138 $7,958,997 $1,525,315 $2,976,388
Gross gain realized on sales.................. 51,784 18,933 25,884 --
Gross losses realized on sales................ 35,658 81,300 -- 14,327
</TABLE>
The cost and estimated fair value of securities available-for-sale, by
contractual maturities, are shown below. 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.
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1996
------------------------------ ------------------------------
Amortized Cost Fair Value Amortized Cost Fair Value
-------------- -------------- -------------- --------------
(unaudited)
<S> <C> <C> <C> <C>
Due in one year or less............... $ 1,901,985 $ 1,915,552 $ 1,729,262 $ 1,730,245
Due from one year to five years....... 9,712,139 9,759,305 10,080,996 10,052,119
Due from five to ten years............ 1,211,550 1,243,533 2,760,088 2,788,689
Due after ten years................... 7,919,177 7,951,040 8,039,701 7,993,044
Other securities...................... 57,500 57,500 57,500 57,500
-------------- -------------- -------------- --------------
$ 20,802,351 $ 20,926,930 $ 22,667,517 $ 22,621,597
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
NOTE C -- LOANS
The loan portfolio is classified as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------ March 31,
1995 1994 1996
-------------- -------------- --------------
(unaudited)
<S> <C> <C> <C>
Commercial and agricultural............................ $ 6,248,404 $ 3,438,134 $ 7,559,037
Real estate............................................ 12,211,828 10,042,350 12,480,169
Installment and other loans............................ 1,486,562 1,273,158 1,807,897
-------------- -------------- --------------
Total loans.......................................... 19,946,794 14,753,642 21,847,103
Less, unearned income................................ (219,487) (95,987) (229,515)
-------------- -------------- --------------
19,727,307 14,657,655 21,617,588
Less, allowance for loan losses...................... (299,768) (297,847) (301,299)
-------------- -------------- --------------
Net loans.......................................... $ 19,427,539 $ 14,359,808 $ 21,316,289
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The following is a summary of the transactions in the allowance for loan
losses:
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
------------------------ ------------------------
1995 1994 1996 1995
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Balance, beginning of period........................ $ 297,847 $ 277,455 $ 299,768 $ 297,847
Loans charged-off................................... (11,548) (12,534) -- (826)
Recoveries.......................................... 13,469 32,926 1,531 1,055
----------- ----------- ----------- -----------
Balance, end of period.............................. $ 299,768 $ 297,847 $ 301,299 $ 298,076
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
66
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE C -- LOANS (CONTINUED)
There were no non-accrual loans at December 31, 1995 and March 31, 1996.
A loan is considered impaired when, according to the contractual terms of
the contract, it is probable that the Bank will be unable to collect all amounts
due. At December 31, 1995 and March 31, 1996, the Bank had not classified any of
its loans as impaired.
NOTE D -- FACILITIES
A summary of the investment in facilities follows:
<TABLE>
<CAPTION>
Accumulated
Depreciation & Net Book Estimated Useful
Cost Amortization Value Lives
------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
Land........................................... $ 337,747 $ -- $ 337,747 --
Building and fixtures.......................... 2,062,757 394,008 1,668,749 31.5 years
Furniture and equipment........................ 1,236,866 870,000 366,749 5 - 31.5 years
------------- -------------- -------------
$ 3,637,370 $ 1,264,008 $ 2,373,362
------------- -------------- -------------
------------- -------------- -------------
DECEMBER 31, 1995
Land........................................... $ 337,747 $ -- $ 337,747 --
Building and fixtures.......................... 2,062,757 468,884 1,593,873 31.5 years
Furniture and equipment........................ 1,354,511 1,010,066 344,445 5 - 31.5 years
------------- -------------- -------------
$ 3,755,015 $ 1,478,950 $ 2,276,065
------------- -------------- -------------
------------- -------------- -------------
MARCH 31, 1996 (UNAUDITED)
Land........................................... $ 337,747 $ -- $ 337,747 --
Building and fixtures.......................... 2,062,757 487,431 1,575,326 31.5 years
Furniture and equipment........................ 1,367,948 1,038,223 329,725 5 - 31.5 years
------------- -------------- -------------
$ 3,768,452 $ 1,525,654 $ 2,242,798
------------- -------------- -------------
------------- -------------- -------------
</TABLE>
Other expenses for the years ended December 31, 1995 and 1994, and the
quarters ended March 31, 1996 and 1995, include depreciation and amortization of
facilities of $214,941, $228,839, $46,706 and $53,082, respectively.
NOTE E -- COMMITMENTS AND CONTINGENCIES
The consolidated financial statements do not reflect various commitments and
contingent liabilities which arise in the normal course of business and which
involve elements of credit risk, interest rate risk, and liquidity risk. These
commitments and contingent liabilities are commitments to extend credit and
standby letters of credit. A summary of these commitments and contingent
liabilities at December 31, 1995 and March 31, 1996, are as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------- -------------
(unaudited)
<S> <C> <C>
Commitments to extend credit.......................... $ 2,058,058 $ 2,704,374
Standby letters of credit............................. $ 100,000 $ 100,000
</TABLE>
The Company uses the same credit policies in making commitments to extend
credit and in issuing standby letters of credit as it does for extensions of
credit shown on the balance sheets.
The Company is claimant in various legal proceedings and, in addition, there
are outstanding commitments and other contingent liabilities incurred in the
normal course of business. In the opinion of management, the resolution of such
matters will not have a material effect on the financial statements.
67
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE F -- CONCENTRATIONS OF CREDIT
Substantially all of the subsidiary Company's loans, commitments and standby
letters of credit have been granted to customers in Union, Bradford and Alachua
Counties, Florida. The concentrations of credit by type of loan are set forth in
Note C. The distribution of commitments to extend credit approximates the
distribution of loans outstanding. Standby letters of credit were granted
primarily to commercial borrowers.
NOTE G -- INCOME TAXES
The provision (credit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
------------------------ ------------------------
1995 1994 1996 1995
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Current:
Federal................................. $ 181,607 $ (20,859) $ (17,907) $ 45,298
State................................... 20,566 -- (975) 6,407
Deferred:
Federal................................. (58,924) (15,703) 49,893 (14,731)
State................................... (3,401) (9,843) 4,862 (850)
----------- ----------- ----------- -----------
Total................................. $ 139,848 $ (46,405) $ 35,873 $ 36,124
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The following is a reconciliation of the income tax computed at the Federal
statutory rate of 34% and the income tax provision (credit):
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
------------------------ ------------------------
1995 1994 1996 1995
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Tentative tax computed at statutory
rate..................................... $ 124,078 $ (35,778) $ 39,822 $ 32,672
Increase (decrease) resulting from:
Tax exempt interest..................... (22,139) (30,509) (7,166) (5,535)
Life insurance.......................... 17,046 21,688 1,210 4,262
Other................................... 20,863 (1,806) 2,007 4,725
----------- ----------- ----------- -----------
Income tax expense (credit)........... $ 139,848 $ (46,405) $ 35,873 $ 36,124
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The components of the deferred income tax asset (liability) are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------ March 31,
1995 1994 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Deferred tax asset:
Federal.............................................. $ 127,745 $ 183,059 $ 128,254
State................................................ 7,233 18,273 12,492
----------- ----------- -----------
134,978 201,332 140,746
----------- ----------- -----------
Deferred tax liability:
Federal.............................................. (175,534) (140,381) 167,219
State................................................ (9,055) (7,947) 15,985
----------- ----------- -----------
(184,589) (148,328) 183,204
----------- ----------- -----------
Net deferred tax asset (liability)................. $ (49,611) $ 53,004 $ (42,458)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
68
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE G -- INCOME TAXES (Continued)
The tax effect of each type of significant item that gave rise to deferred
taxes are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------ March 31,
1995 1994 1996
---------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Net unrealized holding (gain) losses on securities... $ (45,235) $ 119,705 $ 16,673
Cash to accrual adjustment........................... (94,160) (118,339) (138,488)
Allowance for credit losses.......................... 44,880 43,821 45,907
Deferred loan fee income............................. 8,422 (511) 43,516
All other temporary differences...................... 36,482 8,328 (10,066)
---------- ------------ ------------
$ (49,611) $ 53,004 $ (42,458)
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
NOTE H -- RETIREMENT PLANS
Effective June 1, 1994, the Bank adopted a profit sharing plan under Section
401(k) of the Internal Revenue Code. This plan allows employees to defer up to
10% of their income on a pre-tax basis through contributions to the plan. In
line with the provisions of the savings plan, for every dollar the employee
contributes, the Bank will match 50% of the first 6% of the employee's deferral
contribution. Employer matching contributions were $21,175 for 1995 and $5,833
for 1996.
The Bank terminated its noncontributory pension plan, that was administered
by New England Mutual Life Insurance Company. The payout liability is fully
funded. Total expense for this plan was $120,240 for 1995 and $2,259 for 1996.
NOTE I -- RELATED PARTIES
The Company holds loans and engages in transactions in the ordinary course
of business with certain of the directors and senior officers of the Bank. Total
loans to such persons and their affiliates amounted to $66,352, $2,120 and
$65,710 at December 31, 1995 and 1994, and March 31, 1996, respectively.
NOTE J -- LINE OF CREDIT
The Company has an overnight line of credit with Independent Bankers Bank of
Florida for the purchase of Federal funds in the amount of $2,000,000.
NOTE K -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND SHORT-TERM INVESTMENTS:
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
INVESTMENT SECURITIES:
For securities held as investments, fair value equals quoted market price,
if available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.
LOANS RECEIVABLE:
For loans subject to repricing and loans intended for sale within six
months, fair value is estimated at the carrying amount plus accrued
interest.
The fair value of other types of loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities.
69
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE K -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
DEPOSIT LIABILITIES:
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date. The fair
value of long-term fixed-maturity certificates of deposit is estimated using the
rates currently offered for deposits of similar remaining maturities.
SHORT-TERM DEBT:
For short-term debt, including accounts and demand notes payable, the
carrying amount is a reasonable estimate of fair value.
LONG-TERM DEBT:
Rates currently available to the Bank for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
The estimated fair values of the Bank's financial instruments as of
December 31, 1995, were as follows:
<TABLE>
<CAPTION>
Carrying
Amount Fair Value
-------------- --------------
<S> <C> <C>
Financial Assets
Cash and deposits on other banks................. $ 2,093,507 $ 2,094,000
Investment securities............................ 20,926,930 20,927,000
Loans............................................ 19,427,539 19,574,000
Federal funds sold............................... 2,779,000 2,779,000
-------------- --------------
Total assets valued.......................... $ 45,226,976 $ 45,374,000
-------------- --------------
-------------- --------------
Financial Liabilities
Deposits......................................... $ 43,181,097 $ 43,285,000
-------------- --------------
Total liabilities valued..................... $ 43,181,097 $ 43,285,000
-------------- --------------
-------------- --------------
</TABLE>
NOTE L -- STOCK SPLIT
On February 18, 1995, the Riherd Bank Holding Company Board of Directors
approved a 15 for 1 stock split.
NOTE M -- PARENT COMPANY FINANCIAL INFORMATION
Presented below are condensed financial statements for Riherd Bank Holding
Company (parent only):
Condensed Balance Sheets as of:
<TABLE>
<CAPTION>
December 31,
---------------------------- March 31,
1995 1994 1996
------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
Assets
Cash........................................... $ 4,065 $ 2,140 $ 4,030
Investment in subsidiary bank.................. 4,789,276 4,255,640 4,749,635
------------- ------------- -------------
Total...................................... $ 4,793,341 $ 4,257,780 $ $4,753,665
------------- ------------- -------------
------------- ------------- -------------
Liabilities and Stockholders' Equity
Stockholders' equity........................... $ 4,793,341 $ 4,257,780 $ 4,753,665
------------- ------------- -------------
Total...................................... $ 4,793,341 $ 4,257,780 $ 4,753,665
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
70
<PAGE>
RIHERD BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AS TO MARCH 31, 1995 AND 1996)
NOTE M -- PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF OPERATIONS AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
---------------------------- ----------------------------
1995 1994 1996 1995
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Equity in net income (loss) of subsidiary
bank:
Distributed.............................. $ 50,100 $ 144,000 $ 12,500 $ 12,000
Undistributed income (loss).............. 174,986 (202,825) 68,951 47,969
Other expenses............................. -- (4) (200) --
------------- ------------- ------------- -------------
Net Income (Loss)...................... 225,086 (58,829) 81,251 59,969
Stockholders' Equity:
Beginning of year........................ 4,257,774 4,740,310 4,793,341 4,257,780
Redemption of common stock............... -- (96,640) -- --
Cash dividends........................... (48,175) (47,750) (12,335) (11,750)
Net change in unrealized holding gains
(losses) on securities.................. 358,656 (279,311) (108,592) (7,991)
------------- ------------- ------------- -------------
End of year............................ $ 4,793,341 $ 4,257,780 $ 4,753,665 $ 4,298,008
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
-------------------------- ----------------------
1995 1994 1996 1995
------------ ------------ ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Operating Activities
Net income (loss).................................. $ 225,086 $ (58,829) $ 81,251 $ 59,969
Adjustment to reconcile net income (loss) to net
cash provided by operating activities:
Equity in undistributed (earnings) loss of
subsidiary...................................... (174,986) 202,825 (68,951) (47,969)
------------ ------------ ---------- ----------
Net Cash Provided by Operating Activities.... 50,100 143,996 12,300 12,000
------------ ------------ ---------- ----------
Financing Activities
Redemption of common stock......................... -- (96,640) -- --
Dividend on common stock........................... (48,175) (47,750) (12,335) (11,750)
------------ ------------ ---------- ----------
Net Cash Used in Financing Activities........ (48,175) (144,390) (12,335) (11,750)
------------ ------------ ---------- ----------
Increase (Decrease) in Cash and Cash Equivalents... 1,925 (394) (35) 250
Cash at beginning of period.................. 2,140 2,534 4,065 2,140
------------ ------------ ---------- ----------
Cash at end of period........................ $ 4,065 $ 2,140 $ 4,030 $ 2,390
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
</TABLE>
71
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma balance sheet and income statements which
follow are based on the assumption that Riherd shareholders will elect to
exchange forty percent of their shares for cash and sixty percent for CNB
stock. The actual exchange mix will differ, resulting in changes to the
overall purchase price. However, management of both companies do not expect
the exchange mix to differ significantly from the assumption above.
-72-
<PAGE>
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENTS
The following unaudited pro forma income statements have been
derived from the income statements of CNB and Riherd for the year and period
ended December 31, 1995, and March 31, 1996, respectively, and adjust such
information to give effect to the proposed merger as if the merger had
occurred on January 1, 1995. The pro forma income statements are presented
for informational purposes only, and do not purport to be indicative of the
results of operations that actually would have resulted if the merger had
been consummated on January 1, 1995. The pro forma income statements should
be read in conjunction with the notes thereto and the historical income
statements of the companies included or incorporated by reference elsewhere
in this Prospectus.
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Pro Forma Adjustments
CNB Riherd Combined AJE# DR AJE# CR Pro Forma
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $12,745,682 $3,291,042 $16,036,724 (2) $10,125 $16,046,849
Interest Expense 5,966,303 1,403,126 7,369,429 (1) 204,726 7,574,155
----------- ---------- ----------- -----------
Net interest income 6,779,379 1,887,916 8,667,295 8,472,694
Provision for loan
losses 230,000 0 230,000 230,000
----------- ---------- ----------- -----------
Net interest income
after provision 6,549,379 1,887,916 8,437,295 8,242,694
Noninterest income 1,478,107 516,109 1,994,216 1,994,216
Noninterest expense 5,172,300 2,039,097 7,211,397 (3) 74,731 7,286,128
----------- ---------- ----------- -----------
Income before
Income tax 2,855,186 364,928 3,220,114 2,950,782
Income tax 1,013,930 139,848 1,153,778 (4) 68,110 1,085,668
----------- ---------- ----------- -----------
Net Income $1,841,256 $225,080 $2,066,336 $279,457 $78,235 $1,865,114
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Weighted average
shares 1,639,733 88,125 N/A 1,930,064
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net Income per
Share $1.12 $2.55 N/A $0.97
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
______________________
NOTES:
(1) Interest expense for one year on debt incurred to fund cash purchase
portion of acquisition. Assumed to bear an 8% rate for a 5 year level
amortization period.
(2) Assumed earnings at 5% on excess borrowings not used for purchase.
(3) Core deposit amortization on accelerated basis over 10 years.
(4) Assumed tax savings on net pro-forma adjustments at 35% rate.
(5) Transaction costs, which are not expected to be material, have not been
considered.
-73-
<PAGE>
Period Ending March 31, 1996*
<TABLE>
<CAPTION>
Pro Forma Adjustments
CNB Riherd Combined AJE# DR AJE# CR Pro Forma
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $3,310,392 $861,612 $4,172,004 (2) $2,514 $4,174,518
Interest Expense 1,490,819 368,068 1,858,887 (1) $45,771 1,904,658
----------- ---------- ----------- -----------
Net interest income 1,819,573 493,544 2,313,117 2,269,860
Provision for loan
losses 115,000 0 115,000 115,000
----------- ---------- ----------- -----------
Net interest income
after provision 1,704,573 493,544 2,198,117 2,154,860
Noninterest income 426,262 154,993 581,255 581,255
Noninterest expense 1,313,847 531,413 1,845,260 (3) 15,880 1,861,148
----------- ---------- ----------- -----------
Income before
income tax 816,988 117,124 934,112 874,975
Income tax 286,047 35,873 321,920 (4) 15,140 306,780
----------- ---------- ----------- ----------- ----------- -----------
Net Income $530,941 $81,251 $612,192 $61,651 $17,654 $568,195
----------- ---------- ----------- ----------- ----------- -----------
----------- ---------- ----------- ----------- ----------- -----------
Weighted average
shares 1,639,733 88,125 N/A 1,930,064
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net Income per
Share $0.32 $0.92 N/A $0.29
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
______________________
NOTES:
(1) Interest expense for one year on debt incurred to fund cash purchase
portion of acquisition. Assumed to bear an 8% rate for a 5 year level
amortization period.
(2) Assumed earnings at 5% on excess borrowings not used for purchase.
(3) Core deposit amortization on accelerated basis over 10 years.
(4) Assumed tax savings on net pro-forma adjustments at 35% rate.
(5) Transaction costs, which are not expected to be material, have not been
considered.
-74-
<PAGE>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The following unaudited pro forma balance sheet has been derived from the
balance sheets of CNB and Riherd at March 31, 1996, and adjusts such information
to give effect to the proposed merger as though the merger occurred on March 31,
1996. The pro forma balance sheet is presented for informational purposes only,
and does not purport to be indicative of the financial condition that actually
would have resulted if the merger had been consummated at March 31, 1996. The
pro forma balance sheet should be read in conjunction with the notes thereto and
the historical March 31, 1996 balance sheets of the companies included or
incorporated by reference elsewhere in this Prospectus.
- 75 -
<PAGE>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
CNB RIHERD Combined AJE# DR AJE# CR Pro Forma
---- ----------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $20,065,4872 $ 2,267,876 $ 22,333,363 (1) $ 3,000,000 (2) $ 2,787,217 $22,546,146
Investments 48,520,594 22,621,597 71,142,191 (2) 5,400,196 (3)(4) 5,400,196 71,142,191
Loans, net 104,029,135 21,316,289 125,345,424 125,345,424
Other assets 9,128,901 3,247,325 12,376,226 (4) 606,855 12,983,081
------------ ----------- ------------ ------------
TOTAL ASSETS $181,744,117 $49,453,087 $231,197,204 $232,016,842
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
LIABILITIES
Deposits $163,822,573 $44,460,432 $208,283,005 $208,283,005
Other liabilities 1,825,568 238,990 2,064,558 2,064,005
Note payable 650,000 0 650,000 (1) 3,000,000 3,650,000
------------ ----------- ------------ ------------
TOTAL LIABILITIES 166,298,141 44,699,422 210,997,563 213,997,563
------------ ----------- ------------ ------------
SUBORDINATED
DEBENTURES 274,250 0 274,250 274,250
SHAREHOLDERS' EQUITY
Common stock 16,397 588 16,985 (3) 588 (2) 2,903 19,300
Preferred stock 0 0 0 0
Addt'l Paid-in capital 9,784,369 3,496,565 13,280,934 (3) 3,496,565 12,384,016
(5) (29,247) (2) 2,570,400
Retained earnings 5,415,312 1,285,759 6,701,071 (3) 1,285,759 5,415,312
SFAS 115 reserve (44,352) (29,247) (73,599) (3) (29,247) (5) (29,247) (73,599)
------------ ----------- ------------ ------------
15,171,726 4,753,665 19,925,391 17,745,029
------------ ----------- ------------ ----------- ---------- ------------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $181,744,117 $49,453,087 $231,197,204 $13,731,469 $13,731,469 $232,016,842
------------ ----------- ------------ ----------- ----------- -----------
------------ ----------- ------------ ----------- ----------- -----------
</TABLE>
- ------------------------
NOTES:
(1) Reflects CNB estimated borrowing of $3,000,000 to effect the cash purchase
portion of the acquisition.
(2) Reflects the payment of the cash portion of the purchase price ($2,787,217)
and issuance of 290,331 shares of CNB, Inc. common stock at an estimated
fair value of $9.00 per share, totalling $2,612,979.
(3) Reflects the elimination of Riherd's net equity of $4,753,665 through the
cancellation of 88,125 shares of Riherd's common stock.
(4) Reflects recordation of the deposit intangible of $498,205 and $108,650
write-up of CSV of life insurance to fair value.
(5) Reclassification.
(6) Transaction costs, which are not expected to be material, have not been
considered.
- 76 -
<PAGE>
PRO FORMA EQUITY CAPITAL AND PRO FORMA
CAPITAL RATIO COMPUTATION
The following pro forma information is based on historical information of
CNB and Riherd as of March 31, 1996, as if the merger were consummated on March
31, 1996.
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CNB Riherd Combined Adjustments
Historical Historical (DR) CR
---------- ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Common Stock $16,397 $588 $16,985 ($235)(1)
(353)(2)
2,903 (2) $ 19,300
- --------------------------------------------------------------------------------------------------------
Shares outstanding 1,639,733 88,125 1,727,858 (88,125)(1)(2)
290,331 (2) 1,930,064
Par Value $0.01 $0.01 $0.02 ($0.01)(1)(2) $0.01
- --------------------------------------------------------------------------------------------------------
Preferred Stock 0 0 0 0
Paid-In Capital 9,784,369 3,496,565 13,280,934 (1,386,927)(1) 12,384,016
(2,080,391)(2)
2,570,400 (2)
Retained Earnings 5,415,312 1,285,759 6,701,071 (514,304)(1) 5,415,312
(771,455)(2)
Net Unrealized Gain or
(Loss) on securities (44,352) (29,247) (73,599) (73,599)
----------- ---------- ----------- ----------- -----------
$15,171,726 $4,753,665 $19,925,391 ($2,180,362) $17,745,029
----------- ---------- ----------- ----------- -----------
----------- ---------- ----------- ----------- -----------
</TABLE>
- -----------------------
NOTES:
(1) - Reflects acquisition and cancellation of 35,250 shares of
Riherd's common stock and 40% of the associated equity
accounts for $2,787,217 cash payment
(2) - Reflects acquisition and cancellation of 52,875 shares of
Riherd's common stock and 60% of the associated equity
accounts for 290,331 shares of CNB's common stock at an
estimated fair market value of $9 per share, or $2,612,979
(3) - Transaction costs, which are not expected to be material,
have not been considered.
-77-
<PAGE>
ADJUSTED CAPITAL, ASSETS AND CAPITAL RATIOS COMPUTATIONS
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments
CNB RIHERD Combined (DR) CR Pro Forma
------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Computation of Adjusted Capital:
Total capital $ 15,171,726 $ 4,753,665 $ 19,925,391 ($2,180,362) $ 17,745,029
Less Intangibles (904,710) 0 (904,710) (498,205) (1,402,915)
SFAS 115 gain or loss 44,352 29,247 (73,599) (73,599)
------------ ----------- ------------ ----------- ------------
Tier 1 14,311,368 4,782,912 19,094,280 (2,678,567) 16,415,713
Tier 2 (a) 1,201,930 290,353 1,492,283 10,946 (b) 1,503,229
------------ ----------- ------------ ----------- ------------
Adjusted Capital $ 15,513,298 $ 5,073,265 $ 20,586,563 ($2,667,621) $ 17,918,942
------------ ----------- ------------ ----------- ------------
------------ ----------- ------------ ----------- ------------
Computation of Adjusted Assets:
Total assets $181,744,117 $49,453,087 $231,197,204 $819,638 $232,016,842
Add Loan loss reserve 927,680 290,353 1,218,033 10,946 (b) 1,228,979
Less Intangibles (904,710) 0 (904,710) (498,205) (1,402,915)
SFAS 115 effect 70,738 45,919 116,657 116,657
------------ ----------- ------------ ----------- ------------
Adjusted Assets $181,837,825 $49,789,359 $231,627,184 $ 332,379 $231,959,563
------------ ----------- ------------ ----------- ------------
------------ ----------- ------------ ----------- ------------
Risk Weighted Assets (RWA) $104,235,000 $23,228,212 $127,463,212 $ 0 $127,463,212
------------ ----------- ------------ ----------- ------------
------------ ----------- ------------ ----------- ------------
RATIOS:
Tier 1 capital to RWA 13.73 20.59 14.98 (2.10) 12.88
Tier 2 capital to RWA 1.15 1.25 1.17 0.01 1.18
------------ ----------- ------------ ----------- ------------
Total capital to RWA 14.88 21.84 16.15 (2.09) 14.06
------------ ----------- ------------ ----------- ------------
------------ ----------- ------------ ----------- ------------
Tier 1 leverage capital ratio (c) 7.91 9.66 8.29 (1.16) 7.12
------------ ----------- ------------ ----------- ------------
------------ ----------- ------------ ----------- ------------
</TABLE>
- ------------------
NOTES:
(a) - Includes loan loss reserve and subordinated debentures
(b) - To record allowable tier 2 capital in consolidation limited
at F&D Bank level due to 1.25% limitation
(c) - Computed using tier 1 adjusted capital divided by adjusted
assets less the loan loss reserve
-78-
<PAGE>
RIHERD MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE FISCAL YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
RESULTS OF OPERATIONS
Riherd had consolidated net income of $225,000 for 1995, compared with
a loss of $59,000 in 1994, and $223,000 of net income in 1993. Net income
(loss) per common share was $2.55 in 1995, ($.66) in 1994, and $2.48 in 1993.
Riherd's net income for the quarter ended March 31, 1996 was $81,251, an
increase of 35% from net income of $59,969 reported in the first quarter of
1995. Net income per share was also up 35% to $0.92 in the first quarter of
1996 from $0.68 reported in the first quarter of 1995.
Riherd's performance in 1995 resulted in a return on average
stockholders' equity of 4.93%, compared to (1.28%) in 1994, and 4.77% in 1993.
The return on average assets was .49% in 1995, compared to (.14%) in 1994, and
.55% in 1993. Riherd's financial performance in 1995 improved significantly
over 1994 because it was able to minimize additions to staff and control other
non-interest expenses while experiencing significant growth in its loan
portfolio. The decline in net income in 1994 was attributable in part to higher
than normal non-interest expenses associated with the opening of the new branch
office in Gainesville and to losses on securities transactions.
Over the past year, the total assets and liabilities of Riherd have
grown significantly. Average assets grew from $41.6 million in 1994 to $46.1
million in 1995, and average liabilities have increased from $37.0 million to
$41.6 million. These increases were the result of the opening of the new branch
office in Gainesville. This expansion has enabled Riherd to target additional
markets and customers through a more diverse offering of products.
The following ratios reflect Riherd's operating results for 1995, 1994
and 1993.
Year Ended December 31,
1995 1994 1993
Return on Average Assets .49% ( .14%) .55%
Return on Average Equity 4.91% (1.28%) 4.76%
Equity to Assets 9.91% 10.06% 11.93%
Dividend Payout to Net Income(Loss) 21.40% (81.17%) 21.52%
Total assets as of March 31, 1996 were $49,453 million, up 11% from $44,419
million on March 31, 1995. The growth in total assets paralleled the growth in
deposits. Net loans totalled $21.3 million at March 31, 1996, representing a
39% increase from $15.3 million reported last year. The increase in loans was
due to
-79-
<PAGE>
increased business development and favorable economic conditions. Investment
securities increased to $22.6 million, up 4% or $1.0 million from the 1995
level of $21.7 million.
The continuing profitability of Riherd resulted in an increase of
stockholders' equity to $4.754 million, or 6% more than the $4.497 million at
March 31, 1995.
Riherd's risk-based capital ratios remained strong at 20.6% for tier one
capital and 21.8% for total capital at March 31, 1996. Risk-based capital
ratios substantially exceeded the regulatory guidelines of 4.0% for tier one
and 8.0% for total capital. The leverage ratio (tier one capital to average
assets) of 9.7% at March 31, 1996 also significantly exceed the regulatory
requirement of 4.0%.
-80-
<PAGE>
NET INTEREST INCOME
Net interest income is defined as the total of interest income on
earning assets less interest expense on deposits and other interest-bearing
liabilities. Earning assets, which consist of loans, investment securities,
and federal funds sold, are financed by a large base of interest bearing
funds in the form of money market, NOW, savings and time deposits. Earning
assets are also funded by the net amount of non-interest related funds, which
consist of non-interest bearing demand deposits, the allowance for loan
losses and stockholders' equity, reduced by non-interest bearing assets such
as cash and due from banks, and premises and equipment, and other real estate
owned ("OREO").
The following table sets forth Riherd's average balance sheets and
related interest, yield and rate information for the last three fiscal years.
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
1995 1994 1993
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
EARNING ASSETS:
Loans, net of unearned
income $16,941 $1,733 10.2% $12,562 $1,208 9.6% $12,247 $1,093 8.9%
Securities 21,760 1,405 6.5% 21,187 1,264 6.0% 21,233 1,306 6.2%
Federal funds sold 2,614 153 5.9% 2,882 115 4.0% 2,730 81 3.0%
------- ------ ------- ------ ------- ------
Total earning assets 41,315 3,291 8.0% 36,631 2,587 7.1% 36,210 2,480 6.8%
------- ------ ------- ------ ------- ------
NON-INTEREST EARNING
ASSETS:
Cash and due from banks 1,819 - - 1,673 - - 1,472 - -
Premises and equipment 2,320 - - 2,390 - - 1,662 - -
Other real estate owned 179 - - 247 - - 440 - -
Other assets 788 - - 932 - - 768 - -
Allowance for loan losses (297) - - (287) - - (285) - -
----- ----- -----
Total non-interest
earning assets 4,809 - - 4,955 - - 4,057 - -
TOTAL ASSETS $46,124 - - $41,586 - - $40,267 - -
------- ------- -------
------- ------- -------
LIABILITIES AND
STOCKHOLDERS EQUITY
INTEREST BEARING LIABILITIES:
Savings accounts $ 2,403 $ 59 2.5% $ 2,391 $ 53 2.2% $ 2,310 $ 51 2.2%
Money market/NOW accounts 13,396 393 2.9% 13,222 330 2.5% 12,961 305 2.4%
Time deposits 18,591 952 5.1% 14,919 582 3.9% 14,643 574 3.9%
------- ------ ---- ------- ------ ---- ------- ------ ---
Total interest
bearing liabilities 34,390 1,404 4.1% 30,532 965 3.2% 29,914 930 3.1%
------- ------ ------- ------ ------- ------
NON-INTEREST BEARING
LIABILITIES:
Demand deposits 6,907 - - 6,106 - - 5,420 - -
Other liabilities 259 - - 343 - - 257 - -
------- ------- -------
Total non-interest
bearing liabilities 7,166 - - 6,449 - - 5,677 - -
------- ------- -------
-81-
<PAGE>
Total liabilities 41,556 - - 36,981 - - 35,591 - -
STOCKHOLDERS' EQUITY 4,568 - - 4,605 - - 4,676 - -
TOTAL LIABILITIES AND
------- ------- -------
STOCKHOLDERS' EQUITY $46,124 - - $41,586 - - $40,267 - -
------- ------- -------
------- ------- -------
Net Interest Income/Spread - $1,887 3.9% - $1,622 3.9% - $1,550 3.8%
Net Interest Yield - - 4.6% - - 4.4% - - 4.3%
</TABLE>
Notes:
- The amounts set forth as average balances are based on daily
averages for each fiscal year.
- Loan fees, which are included in interest income and in the
calculation of average yields, were $63,171, $65,232 and
($68,359) in 1995, 1994 and 1993, respectively. The negative
amount in 1993 was due to the recognition of deferred loan costs
in excess of fee income on loans. Deferred loan costs recognized
totalled $31,562, $34,728 and $120,825 in 1995, 1994 and 1993,
respectively.
- Tax exempt income is not calculated on a tax equivalent basis.
- Non-accruing loans are included in average loans.
Net interest income is primarily affected by changes in the amounts and
types of earning assets, interest-bearing funds and net non-interest related
funds, as well as their relative sensitivity to interest rate movements. The
following chart reflects these factors:
CHANGES IN NET INTEREST INCOME
(AMOUNTS IN THOUSANDS)
1995 vs 1994 1994 vs 1993
Change Due To: Change Due To:
Volume Rate Total Volume Rate Total
------------------- -------------------
Increase (Decrease) in
Interest Income:
Loans $452 $ 73 $525 $29 $ 86 $115
Securities 35 106 141 0 (42) (42)
Federal funds sold (17) 55 38 7 27 34
---- ---- ---- --- ---- ----
Total Interest Income 470 234 704 36 71 107
Increase (Decrease) in
Interest Expense:
Savings accounts (1) 7 6 2 (0) 2
Money market/NOW accounts 10 53 63 12 13 25
Time Deposits 191 179 370 8 0 8
---- ---- ---- --- ---- ----
Total Interest Expense 200 239 439 22 13 35
Increase (Decrease) in Net
Interest Income $270 $ (5) $265 $14 $ 58 $ 72
---- ---- ---- --- ---- ----
---- ---- ---- --- ---- ----
-82-
<PAGE>
Notes: - To calculate volume change, multiply the change in volume from
current year to prior year times the prior year's rate.
- To calculate rate change, multiply the change in rate from
current year to prior year times the prior year's dollar volume.
- Changes which are not due only to volume changes or rate changes
are included in the changes due to volume column.
Net interest income for 1995 was $1,888,000 up 16% from $1,622,000 in 1994
and 22% from $1,550,097 in 1993. The growth in net interest income in 1995 was
attributable to an increase in earning asset volumes, which grew by 13% from
1994. This increase was achieved by attracting deposits of all types, while at
the same time increasing the loan portfolio. Average loans (which are F&D
Bank's highest yielding earning assets) grew 35% in 1995, while investment
securities increased 3%. Riherd was also able to achieve loan growth through
its expanded customer base in the Alachua County market. These increases were
enhanced by a .9% increase in the yield on earning assets from 1994 to 1995.
The average rate on interest bearing liabilities increased from 3.2% in 1994 to
4.1% in 1995. The increase in the size of Riherd significantly affected its
liabilities. Average interest bearing liabilities grew $3,858,000 or 13% in
1995, and average demand deposits climbed $801,000 or 13%.
Net interest income totalled $493,544 for the first quarter of 1996, or 11%
higher than $446,314 in the first quarter of 1995. The increase in net interest
income was due to an increase of $6.0 million or 39% in loans and an increase of
$4.6 million or 14% in interest bearing deposits.
Earning assets as of the end of the first quarter of 1996 were $44.1
million, up 14% or $5.3 million from the $38.8 million reported at March 31,
1995. The increase in earning assets was largely attributable to increases in
loans. Net loans at the end of the first quarter were $21.3 million, reflecting
a $6.0 million increase from March 31, 1995. The increase in earning assets
also reflects a $1.6 million or 89% decrease in federal funds sold and a $1.0
million or 4% increase in investment securities
The net interest margin for the first quarter of 1996 was 4.5%, compared to
4.7% in 1995. This decrease was due to the impact of lower rates on loans and
investments, which declined from the first quarter of 1995 to the first quarter
of 1996.
NON-INTEREST INCOME
Non-interest income totalled $500,000 in 1995, compared with $460,000 in
1994, and $430,000 in 1993. Customer service charges totalled $441,000 in 1995,
up 11% from $398,000 in 1994, and up 24%
- 83 -
<PAGE>
from $355,000 in 1993. The growth in non-interest income from 1993 to 1995 was
primarily due to a substantial increase in the number of checking and deposit
accounts at F&D Bank's new locations.
Non-interest income for the first quarter of 1996 totalled $154,993, which
was 40% more than the $111,106 reported for the first quarter of 1995 due to the
expanded deposit base and the service charges related to those deposit accounts
along with gains on investment securities sold.
INVESTMENT SECURITIES GAINS
At December 31, 1995, Riherd held investment securities with a market value
of $20,927,000, which was $125,000 more than the amortized cost of the
portfolio. Riherd occasionally sells a portion of its investment securities
prior to maturity. This activity resulted in a net securities gain of $16,000
in 1995, a net loss of $62,000 in 1994, and a net gain of $86,000 in 1993.
Since the adoption of SFAS No. 115 in 1994, Riherd has elected to classify all
of its investment securities as "available for sale."
PROVISION FOR LOAN LOSSES
No provision for loan losses has been made for the past three years as
the current allowance for loan losses was deemed adequate for the loan portfolio
as of each year end. No provision for loan losses was required during the first
quarter of 1996 or the first quarter of 1995. See "Allowance and Provision for
Loan Losses."
NON-INTEREST EXPENSES
Non-interest expenses for 1995 totalled $2,039,000 which was down 4%
from $2,125,000 in 1994, and up 13% from $1,798,000 in 1993. The increase in
1994 was primarily due to higher operating expenses due to the establishment of
an additional location. Non-interest expenses are discussed below in more
detail.
Non-interest expenses totalled $531,413 for the first quarter of 1996,
up 15%, or $70,086, from the $461,327 reported for the first quarter of 1995.
The major factor in the increase was the continued growth of the bank, resulting
in increases in operating expenses, costs related to the planned EDP conversion,
higher real estate and intangible taxes, and professional fees related to the
Merger.
PERSONNEL. Personnel expense (which includes salaries and benefits)
represented 55% of total non-interest expenses in 1995, 46% in 1994, and 45% in
1993. Personnel expenses increased 15% to $1,131,000 in 1995, from $982,000 in
1994, and up 39% from $815,000 in 1993. These increases were the result of
salary
- 84 -
<PAGE>
increases, benefit costs, increased number of employees due to growth and
upgrading of personnel. Staff on a full-time equivalent basis averaged 31 in
1995 compared to 29 in 1994, and 27 in 1993.
OCCUPANCY EXPENSE. Net occupancy expense in 1995 totalled $201,000
down 1% from $204,000 in 1994, which represented an increase of .6% over
$202,000 in 1993.
PREMISES AND EQUIPMENT EXPENSE. Premises and equipment expense,
totalled $215,000 in 1995, down 6% from $228,000 in 1994, and up 34% from
$161,000 in 1993. The increase from 1993 reflects the opening of the new
banking office facility in Alachua County in 1994.
OTHER NON-INTEREST EXPENSES. Other non-interest expenses for 1995
totalled $492,000 down 31% from $712,000 in 1994, and down 21% from $620,000 in
1993. Other non-interest expenses were primarily affected by a reduction in
FDIC deposit insurance premiums, a reduction of marketing programs from 1995
levels, less frequent use of outside consultants, and a reduction in costs
related to an environmental assessment.
Non-interest expense in 1994 included $35,292 for the assessment of soil
contamination on a site adjacent to the main office of F&D Bank that was
formerly operated as a gas station and then acquired by F&D Bank in 1972. F&D
Bank anticipates reimbursement by the State of Florida of a significant portion
of the cost of the assessment of the contamination on this site (which
remediation has been accepted into the state program and is not anticipated to
involve additional expenses).
PROVISION FOR INCOME TAXES
The income tax provision totalled $140,000 in 1995 compared with a
credit of $46,000 in 1994, and a provision of $45,000 in 1993. See Note G to
the Consolidated Financial Statements for Riherd for more information regarding
Riherd's income tax provision.
In February 1992, SFAS No. 109, "Accounting for Income Taxes," was
issued by the Financial Accounting Standards Board. Riherd adopted SFAS No. 109
effective January 1, 1993. The effect on the consolidated financial statements
at January 1, 1993, of the adoption of the new standard was not significant.
See Note G to the Consolidated Financial Statements of Riherd.
The income tax provision for the first quarter of 1996 totalled
$35,873, compared with $36,124 for the same period of 1995.
- 85 -
<PAGE>
CAPITAL EXPENDITURES
Riherd's capital expenditures are reviewed by its Board of Directors.
Riherd makes capital expenditures in order to improve its ability to provide
quality services to its customers. Capital expenditures totalled $118,000 in
1995, $348,000 in 1994, and $1,257,000 in 1993. These expenditures were
principally related to equipment purchased for various branch sites and changes
in equipment due to technological advances.
ASSET QUALITY AND CREDIT RISK
INVESTMENT SECURITIES. Riherd maintains a high quality investment
portfolio including U.S. Treasury securities, securities of U.S. government
entities, state and municipal securities, and other securities. Securities
issued by the U.S. Treasury, other U.S. government entities and states
constitute approximately 99% of Riherd's investment portfolio. Riherd believes
that the securities have very little risk of default. At December 31, 1995,
almost all of the securities held in Riherd's investment portfolio were rated
"A" or better. A rating of "A" or better means that the securities are of
"upper medium grade, with strong ability to repay, possibly with some
susceptibility to adverse economic conditions or changing circumstances."
Ratings are assigned by independent rating agencies and are subject to the
accuracy of reported information concerning the issuers and the subjective
judgment and analysis of the rating agencies. They are not a guarantee of
collectibility. Approximately 9.2% of these securities mature in one year or
less and 46.6% in from one to five years. As such, the risk of significant
fluctuations in value due to changes in the general level of interest rates is
limited. All of these securities were classified as "available for sale."
The following table sets forth information regarding the composition
of the investment portfolio at book value for the last three years.
INVESTMENT PORTFOLIO
December 31,
-----------------------------------------
1995 1994 1993
------ ------ ------
(all amounts in thousands)
U.S. Treasury Securities $7,087 $7,348 $8,049
Securities of other U.S. Government
agencies and corporations 12,279 13,423 11,711
Obligations of states and political
subdivisions 1,504 1,166 1,166
Other securities 57 57 57
------ ------ ------
Total investments $20,927 $21,994 $20,983
------ ------ ------
------ ------ ------
- 86 -
<PAGE>
During the past two years, Riherd's investment portfolio remained
stable notwithstanding a significant expansion of Riherd's loans. During this
period, Riherd has adjusted the mix of its investment securities slightly,
shifting investments from U.S. Treasury securities to U.S. Government agencies
and municipals. U.S. Treasury securities represented 38.4% of the portfolio in
1993, 33.4% in 1994, and 33.9% in 1995, while U.S. Government agency and
municipal securities represented 61.4% in 1993, 66.3% in 1994, and 65.9% in
1995.
LOANS. Riherd maintains a high quality portfolio of real estate,
commercial and consumer loans. All loans over individual lending limits are
reviewed and approved by Riherd's loan committee, which ensures that loans
comply with applicable credit standards. In most cases, Riherd requires
collateral from the borrower. The type and amount of collateral varies but may
include residential or commercial real estate, deposits held by financial
institutions, U.S. Treasury securities, other marketable securities and personal
property. Collateral values are monitored to ensure that they are maintained at
proper levels.
As of December 31, 1995, approximately 60% of all Riherd's loans were
real estate loans secured by real estate in North Florida. This level of
concentration could present a potential credit risk to Riherd because the
ultimate collectibility of these loans is susceptible to adverse changes in real
estate market conditions in this market. Riherd has addressed this risk by
limiting most loans to a maximum of 80-85% of the appraised value of the
underlying real estate and maximum amortization schedules of 25 years.
The following table divides Riherd's loan portfolio into four
categories. Most of the commercial loans are short-term and may be renewed or
rolled over at maturity. At that time, Riherd undertakes a complete review of
the borrower's credit worthiness and the value of any collateral. If these
items are satisfactory, Riherd will generally renew the loan at prevailing
interest rates.
- 87 -
<PAGE>
TYPES OF LOANS
December 31,
----------------------------------------
1995 1994 1993
------ ------ ------
(all amounts in thousands)
Commercial, financial and agricultural $6,248 $3,438 $3,385
Real estate 12,212 10,042 7,051
Installment loans to individuals 1,479 1,266 1,224
Overdrafts 8 7 21
------ ------ ------
Total loans $19,947 $14,753 $11,681
------ ------ ------
------ ------ ------
The following table sets forth information regarding the maturities and
repricing of Riherd's loans. For purposes of the table, demand loans are shown
as being payable in one year or less. The entire amount of a balloon loan is
treated as maturing in the year that the balloon payment is due. Variable rate
loans are shown based on earliest repricing opportunity.
MATURITIES OF LOANS BASED ON REPRICING
December 31, 1995
------------------------------------------------------
One Year Over One to Over Five
or Less Five Years Years Total
---------- ---------- ---------- ---------
(all amounts in thousands)
Total Loans:
- ------------
Fixed $ 2,741 $3,462 $ 0 $ 6,203
Variable 13,524 0 0 13,524
------ ----- ------ ------
$16,265 $3,462 $ 0 $19,727
------ ----- ------ ------
------ ----- ------ ------
COMMERCIAL, FINANCIAL AND AGRICULTURAL LOANS. Riherd makes
commercial, financial and agricultural loans to businesses located in North
Florida. The credit risk associated with business lending is influenced by
general economic conditions, as well as the borrower's capital position and
operations. These loans are generally secured by corporate assets, marketable
securities or other liquid financial instruments. These loans totalled
approximately $4,393,000 at December 31, 1995, and $2,549,000 at December 31,
1994. Legally binding commitments to extend credit
- 88 -
<PAGE>
and letters of credit for these borrowers totalled $197,000 on December 31,
1995.
REAL ESTATE LOANS. Riherd makes real estate loans from time to time
for real estate construction projects located in North Florida. Riherd
generally requires security in the form of a mortgage on the underlying real
property and the improvements constructed thereon and personal guarantees. It
attempts to limit its credit exposure to 75% of the appraised value of the
underlying real property. On December 31, 1995, real estate construction loans
totaled $1,038,000. Risks associated with real estate loans include variations
from vacancy projections, delays in construction, environmental factors,
reliability of subcontractors and timing and reliability of inspections, and
cost overruns.
Riherd makes real estate loans secured by commercial real estate,
including loans to acquire or refinance office buildings, warehouses and
apartments. At December 31, 1995, these loans totalled $5.387 million, or 27.3%
of total loans. Most of these loans have a maturity of five years or less.
Almost all of these loans are secured by real property located in North Florida.
These loans generally require a loan-to-collateral value of not more than 75%.
At December 31, 1995, Riherd had legally binding commitments to extend credit or
standby letters of credit involving commercial real estate totalling
approximately $1.86 million.
Residential real estate loans totalled $7.052 million, or 35.8% of
total loans at December 31, 1995, compared with $4.072 million, or 27.8% at
December 31, 1994. Residential real estate loans are predominately adjustable
rate home mortgages which generally require a loan-to-collateral value of not
more than 85% and equity credit lines which generally limit the loan-to-
collateral value to not more than 85%. Most loans have a maximum term of
twenty-five years. Almost all of the residential real estate loans are secured
by homes in North Florida. Legally binding commitments to extend credit secured
by residential mortgages totalled $.062 million as of December 31, 1995.
INSTALLMENT LOANS. Riherd offers secured personal and consumer loans.
The security for these loans ordinarily consists of automobiles, consumer goods,
marketable securities, certificates of deposit and similar items. These loans
totalled approximately $1.849 million, or 9.4% of total loans, on December 31,
1995, compared with $1.863 million, or 12.7% of total loans, on December 31,
1994. Risks associated with installment loans include borrowers' loss of
employment, other declines in the financial condition of borrowers resulting in
delinquencies, and rapid depreciation of loan collateral.
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<PAGE>
NON-PERFORMING ASSETS AND PAST DUE LOANS
Non-performing assets consist of non-accrual loans and residential and
commercial properties acquired in partial or total satisfaction of problem loans
which are known as "other real estate owned" or "OREO." Past due loans are
loans that are delinquent 30 days or more which are still accruing interest.
Maintaining a low level of non-performing assets is important to the
ongoing success of any financial institution. Riherd's credit review and
approval process is critical to Riherd's ability to minimize non-performing
assets on a long term basis. In addition to the negative impact on interest
income, non-performing assets also increase operating costs due to the expense
of collection efforts. It is Riherd's policy to place all loans which are past
due 90 days or more on non-accrual status, unless the loan principal and
interest are determined by management to be fully collateralized and in the
process of collection.
The following table presents Riherd's non-performing assets and past due
loans for March 31, 1996 and December 31, 1995, 1994 and 1993:
NON-PERFORMING ASSETS AND 90 DAY PAST DUE LOANS
March 31, December 31,
-----------------------------------------------
1996 1995 1994 1993
---- ---- ---- ----
(all amounts in thousands)
Non-Accrual Loans $0 $0 $167 $25
OREO and in substance
foreclosed loans, net 156 155 188 273
--- --- --- ---
Total Non Performing Assets $156 $155 $355 $298
--- --- --- ---
Accruing Loans Past Due $ 0 $ 0 $ 7 $181
90 Days --- --- --- ---
--- --- --- ---
Of the total loan portfolio of $19.727 million at December 31, 1995, no
loans were classified as non-performing, a decrease of $167,000 from year end
1994. Non-performing loans at December 31, 1994, consisted of commercial, real
estate, and installment loans. As of March 31, 1996, management of Riherd and
F&D Bank is not aware of any credit problems of borrowers that could have any
material and adverse effect upon the financial condition of Riherd or F&D Bank.
Other real estate owned at December 31, 1995 consisted of $55,000 of
residential real estate and $100,000 of commercial real
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<PAGE>
estate. Riherd believes that the carrying value of its OREO portfolio is
realizable.
The total of non-performing assets at March 31, 1996 was $155,806 compared
to $155,008 at December 31, 1995. Non-accrual loans, of which there were none
at March 31, 1996 and December 31, 1995, have recently been increased to
$25,000. At March 31, 1995, non-accrual loans totalled $5,563. As of March 31,
1996, Riherd had $155,806 of other real estate, compared with a total of
$155,008 at December 31, 1995, and $188,092 at March 31, 1995. Management of
Riherd is not aware of any loans not disclosed above in which management has
serious doubts as to the ability of the borrowers to comply with the present
loan repayment terms.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
Riherd evaluates the adequacy of its allowance for loan losses as part
of its ongoing credit review and approval process. The review process is
intended to identify, as early as possible, customers who may be facing
financial difficulties. Once identified, the extent of the client's financial
difficulty is carefully monitored by Riherd's credit administrator, who
recommends to the directors loan committee the portion of any credit that needs
a specific reserve allocation or should be charged off. Other factors
considered by the loan committee in evaluating the adequacy of the allowance
include overall loan volume, historical net loan loss experience, the level and
composition of non-accrual and past due loans, local economic conditions, and
value of any collateral.
The allowance is not a precise amount, but is derived based upon the
above factors and represents management's best estimate of the amount necessary
to adequately cover probable losses from current credit exposures. The
provision for loan losses is a charge against current earnings and is determined
by management as the amount needed to maintain an adequate allowance.
The overall credit quality of the loan portfolio continues to be high
as evidenced by Riherd's relatively low level of non-performing loans and net
recoveries in recent years. Management relied on its recent history of low loan
losses and its assessment of the financial condition of specific borrowers
facing financial difficulties in deciding to maintain the allowance for loan
losses at approximately $300,000 as of December 31, 1995.
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<PAGE>
The following table summarizes the allowance for loan losses for the years
ended December 31, 1995, 1994 and 1993, and for the quarters ended March 31,
1996 and 1995:
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
March 31, December 31,
-------------------
-----------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(all amounts in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 300 $ 298 $ 298 $ 278 $ 278
------ ------ ------ ------ ------
Charge-offs:
Commercial, fin. and agricultural 0 0 2 0 26
Real estate - nonfarm, nonresidential 0 0 0 0 0
Real estate - residential 0 0 0 0 0
Installment loans 0 1 9 13 9
------ ------ ------ ------ ------
Total charge-offs 0 1 11 13 35
Recoveries:
Commercial, financial and agricultural 0 0 4 25 25
Real estate - construction 0 0 0 0 0
Real estate - nonfarm, nonresidential 0 0 0 0 0
Real estate - residential 0 0 0 0 0
Installment loans to individuals 1 1 9 8 10
------ ------ ------ ------ ------
Total recoveries 1 1 13 33 35
Net charge-offs (Recoveries) (1) 0 (2) (20) 0
Provision charged to operations 0 0 0 0 0
_______ _______ _______ _______ _______
Balance at end of period $ 301 $ 298 $ 300 $ 298 $ 278
------ ------ ----- ------ ------
Average Total Loans $20,304 $15,184 $16,941 $12,562 $12,247
------ ------ ------ ------ ------
Loan Loss Allowance as a
Percentage of Total Loans 1.39% 1.94% 1.52% 2.03% 2.39%
------ ------ ------ ------ ------
Ratio of net charge-offs during
period to average loans outstanding
during period .00% .00% (.01%) (.16%) .00%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
In 1995, less than .06% of the entire loan portfolio was charged off, an
amount which was more than off-set by amounts recovered on previously charged-
off loans. During 1995, Riherd charged- off $2,000 in commercial loans and
$9,000 in installment loans but recovered $4,000 in commercial loans and $9,000
in installment loans for a net recovery of $2,000. In 1994, recoveries also
exceeded charge-offs. As a result, Riherd's allowance for loan losses increased
to $300,000 in 1995 which was
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<PAGE>
approximately 1.5% of total loans ($19.7 million). Since 1994, Riherd has
maintained the allowance for loan losses at approximately 1.5% of outstanding
loans.
FINANCIAL CONDITION
Riherd's goal is to maintain a high quality and liquid balance sheet.
Riherd seeks to achieve this objective through increases in collateralized
loans, a strong portfolio of real estate loans and a stable portfolio of
investment securities of high quality.
INVESTMENT SECURITIES. In 1995, investment securities averaged $21.76
million or 53% of total earning assets. Riherd's management strategy for its
investment account is to maintain a very high quality portfolio with generally
short-term maturities. To maximize after-tax income, investments in municipal
securities are utilized but with somewhat longer maturities. The investment
portfolio decreased 5% from $21.994 million in 1994 to $20.927 million at
December 31, 1995. The decrease was largely due to growth in the loan
portfolio. The following table sets forth information regarding the investment
portfolio at December 31, 1995.
<TABLE>
<CAPTION>
REMAINING MATURITY AND AVERAGE YIELD OF INVESTMENT SECURITIES
(December 31, 1995)
($ amounts in thousands)
One Year or Less One to Five Years Five to Ten Years Over Ten Years Tax Equiv.
---------------- ----------------- ----------------- ----------------- -----------------
Book Yield Book Yield Book Yield Book Yield Total Yield
---- ----- ---- ----- ---- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Securities $0 0% $7,087 6.0% $0 0 $0 0 $7,087 6.0%
Securities of
other U.S.
Governmental
agencies and
corporations 1,766 7.2% 1,997 5.4% 0 0% 0 0% 3,763 6.2%
Mortgage-Backed Sec. 158 3.5% 4,566 6.0% 2,078 6.7% 1,715 7.0% 8,517 6.3%
Obligations of
states and
political
subdivisions 149 7.2% 0 0% 743 8.7% 612 8.1% 1,504 8.3%
Other securities* 0 0% 0 0% 0 0% 57 0% 57 0%
------- ------- ------- ------- ------- ------- -------- ------- ------- -------
Total $ 2,073 6.9% $13,650 5.9% $2,821 7.2% $2,384 7.1% $20,928 6.3%
------- ------- ------- ------- ------- ------- -------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------- ------- ------- -------
</TABLE>
* Common stock of Independent Bankers Bank of Florida, currently paying no
dividend.
- 93 -
<PAGE>
Note: Yields on tax exempt bonds have been computed on a equivalent basis.
Maturities of mortgage-backed securities reflect amortization of principal of
underlying mortgage loans.
LOANS. Loans averaged $16.9 million in 1995, an increase of 35% from
the prior year. The increase in the loan portfolio reflects an expanded
customer base, favorable economic conditions and increased business development.
See "Asset Quality and Credit Risk -- Loans," above.
INTEREST-BEARING LIABILITIES. Total interest-bearing liabilities
averaged $34.4 million in 1995, up from $30.5 million in 1994. Average money
market and NOW deposits increased $.174 million or 1.3% to $13.4 million. The
increase in time deposits of $3.672 million or 26% was attributable to the
expanded market area and new and attractively priced deposit products.
Total deposits at March 31, 1996 were $44.5 million, up 12% or $4.9
million from March 31, 1995. The increase resulted from a $1.4 million increase
in money market savings and NOW deposits, a $3.2 million increase in time
deposits, and a $0.3 million increase in non-interest bearing demand deposits.
The increase in interest-bearing deposits was due to attractive and
competitively priced deposit products and an expanded market base.
The following table sets forth information regarding Riherd's average
deposits for the last three years.
<TABLE>
<CAPTION>
AVERAGE DEPOSITS
1995 1994 1993
----------------------------------------------------------
Average Average Average
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
($ amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits-
non-interest bearing $6,907 -% $6,106 -% $5,420 -%
Savings accounts 2,403 2.5% 2,391 2.2% 2,310 2.2%
Money market and
NOW accounts 13,396 2.9% 13,222 2.5% 12,961 2.4%
Time deposits 18,591 5.1% 14,919 3.9% 14,643 3.9%
------ ------ ------
Total deposits $41,297 3.4% $36,638 2.6% $35,334 2.6%
------ ------ ------
------ ------ ------
</TABLE>
The following table summarizes the maturity of time deposits over $100,000.
SUMMARY OF TIME DEPOSITS OVER $100,000 BY MATURITY
December 31, 1995
(amounts in thousands)
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<PAGE>
Three months or less $582
Three to Six months 815
Six to Twelve months 495
Over Twelve months 2,251
-----
Total $4,143
-----
-----
LIQUIDITY AND RATE SENSITIVITY
The principal functions of asset and liability management are to
provide for adequate liquidity, to manage interest rate exposure by maintaining
a prudent relationship between rate sensitive assets and liabilities and to
manage the size and composition of the balance sheet so as to maximize net
interest income.
Liquidity is the ability to provide funds at minimal cost to meet
fluctuating deposit withdrawals or loan demand. These demands are met by
maturing assets and the capacity to raise funds from internal and external
sources. Riherd primarily utilizes cash and federal funds sold to meet its
daily liquidity needs. Although not utilized in managing daily liquidity needs,
the sale of investment securities provides a secondary source of liquidity.
Fluctuating interest rates, increased competition and changes in the
regulatory environment continue to significantly affect the importance of
interest-rate sensitivity management. Rate sensitivity arises when interest
rates on assets change in a different period of time or a different proportion
than interest rates on liabilities. The primary objective of interest-rate
sensitivity management is to prudently structure the balance sheet so that
movements of interest rates on assets and liabilities are highly correlated and
produce a reasonable net interest margin even in periods of volatile interest
rates.
Regular monitoring of assets and liabilities that are rate sensitive
within 30 days, 90 days, 180 days and one year is an integral part of Riherd's
rate-sensitivity management process. It is Riherd's policy to maintain a
reasonable balance of rate-sensitive assets and liabilities on a cumulative one
year basis, thus minimizing the exposure of net interest income to changes in
interest rates. Riherd's sensitivity position at December 31, 1995 was such
that net interest income would decline modestly if there were a decline in
short-term interest rates.
Riherd monitors the interest rate risk sensitivity with traditional
gap measurements. The gap table has certain limitations in its ability to
accurately portray interest
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<PAGE>
sensitivity; however, it does provide a static reading of Riherd's interest rate
risk exposure.
Riherd's gap table at December 31, 1995 is shown on the following
table. This table shows the repricing structure of Riherd's balance sheet with
each maturity interval referring to the earliest repricing opportunity (i.e.,
the earlier of scheduled contractual maturities or next reset date) for each
asset and liability. As of that date, Riherd remained asset sensitive (interest
sensitive assets subject to repricing exceeded interest sensitive liabilities
subject to repricing) on a 365-day basis to the extent of $5.1 million. This
positive gap at December 31, 1995 was 10.6% of total assets. Riherd's targeted
gap position is in the range of negative 15 percent to positive 15 percent.
Riherd measures its gap position as a percentage of its total assets.
INTEREST SENSITIVITY TABLE
AS OF DECEMBER 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Over One
Total Year and
0-30 30-90 90-180 180-365 Interest Non-interest
Days Days Days Days Sensitive Sensitive Total
--------- --------- --------- --------- --------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans $9,567 $2,582 $1,441 $2,675 $16,265 $3,462 $19,727
Securities 5,110 1,187 3,330 6,232 15,859 5,068 20,927
Federal funds sold 2,779 0 0 0 2,779 0 2,779
----- ------- ------ ------ ------ ------- ------
17,456 3,769 4,771 8,907 34,903 8,530 43,433
Interest Bearing Liabilities:
Deposits 16,680 4,752 4,800 3,562 29,794 13,387 43,181
Gap $ 776 $ (983) $ (29) $ 5,345 $ 5,109 $ (4,857) $ 252
----- ------- ------ ------ ------ ------- ------
----- ------- ------ ------ ------ ------- ------
Cumulative Gap $ 776 $ (207) $ (236) $ 5,109 $ 5,109 $ 252 $ 252
----- ------- ------ ------ ------ ------- ------
----- ------- ------ ------ ------ ------- ------
Cumulative Gap as % of
Total Assets 1.6% (.4%) (.5%) 10.6% 10.6% .5% .5%
----- ------- ------ ----- ----- ------- ------
----- ------- ------ ----- ----- ------- ------
</TABLE>
As of March 31, 1996, there was no material change in the interest
sensitivity of Riherd's assets from the position reflected in the above table.
CAPITAL
One of management's primary objectives is to maintain a strong capital
position to merit the confidence of customers, bank regulators and stockholders.
A strong capital position helps Riherd withstand unforeseen adverse developments
and take advantage of attractive lending and investment opportunities when they
arise.
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<PAGE>
During 1995, stockholders' equity increased by $.535 million, or 13% over 1994.
Under the Federal Reserve's rules pertaining to risk-based capital
adequacy, Riherd's tier one capital was 21.1% and the total capital was 22.3% of
risk-based assets at December 31, 1995. These risk-based capital ratios are
well in excess of the minimum requirements of 4% for tier one and 8% for total
risk-based capital ratios.
Riherd's leverage ratio of 10.2% (tier one capital to total average assets,
adjusted quarterly) at December 31, 1995, is also well in excess of the minimum
4% requirement. All of these capital ratios decreased during 1994.
The following table sets forth Riherd's required and actual capital amounts
and ratios for 1995, 1994 and 1993.
<TABLE>
<CAPTION>
RIHERD BANK HOLDING COMPANY
($ amounts in thousands)
December 31, 1995 December 31, 1994 December 31, 1993
Required Actual Required Actual Required Actual
-------- ------ -------- ------ -------- ------
Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 Capital
(to Risk
Weighted $ 894 4% $4,714 21.1% $ 802 4% $4,255 21.20% $ 680 4% $4,738 27.9%
Assets)
Total Capital
(to
Risk Weighted 1,987 8% 4,993 22.3% 1,605 8% 4,506 22.5% 1,360 8% 4,951 29.1%
Assets)
Tier 1 Capital
(to Average
Total Assets) 1,844 4% 4,714 10.2% 1,702 4% 4,255 10.0% 1,629 4% 4,738 11.6%
</TABLE>
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<PAGE>
REGULATORY MATTERS
GENERAL
As a bank holding company, CNB is subject to regulation and supervision by
the Federal Reserve Board under the BHC Act. CNB Bank is subject to regulation
and supervision by the Office of the Comptroller of the Currency (the "OCC"),
because it is a national bank, and the FDIC. Supervisory safety and soundness
examinations of CNB and CNB Bank were most recently conducted by the Federal
Reserve on March 31, 1995, and by the OCC on April 8, 1996. Neither examination
revealed any material adverse conditions as of the date of such examination.
CNB does not perform any nonbanking activities.
Under Federal Reserve Board policy, CNB is expected to act as a source of
financial strength to CNB Bank and to commit resources to support CNB Bank in
circumstances where CNB might not do so absent such policy. In addition, any
capital loans by CNB to any of its subsidiary banks would also be subordinate in
right of payment to deposits and to certain other obligations of such subsidiary
bank, including any liabilities of such bank to the FDIC under the
"cross-guarantee" provisions described below.
As a result of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution or
(ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of default. "Default" is defined generally as
the appointment of a conservator or receiver and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
"default" is likely to occur in the absence of regulatory assistance.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), after December 31, 1994, the FDIC may not take any action that
would have the effect of increasing the losses to a deposit insurance fund by
protecting depositors for more than the insured portion of deposits (generally,
$100,000) or creditors other than depositors. The FDIC is also authorized by
FDICIA to settle all uninsured and unsecured claims in the insolvency of an
insured bank by making a final settlement payment after the declaration of
insolvency. Such a payment would constitute full payment and disposition of the
FDIC's obligations to claimants. The rate of such final settlement payments is
to be a percentage rate determined by the FDIC
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<PAGE>
reflecting an average of the FDIC's receivership recovery experience.
As a result of the provisions of law described above, in the event of the
insolvency of a subsidiary bank, the FDIC could limit or prohibit dividends
payable to CNB by such subsidiary and any debt securities could be treated
differently from, and holders of any debt securities could receive significantly
less than holders of, deposit obligations of such a subsidiary.
FEDERAL DEPOSITOR PREFERENCE LEGISLATION
On August 10, 1993, the Federal Deposit Insurance Act was amended to
provide that in the event of the liquidation or other resolution of an insured
depository institution occurring on or after such date, the claims of depositors
of such institution (including claims by the FDIC as subrogee of insured
depositors) are entitled to priority in payment over the claims of any other
senior or general creditors of the institution, including any obligations to
shareholders of such depository institution in their capacity as such.
DIVIDENDS
The principal source of funds for CNB is dividends paid to it by CNB Bank.
The National Bank Act limits the amount of dividends CNB Bank can pay to CNB.
The approval of the OCC is required for any dividend by a national bank if the
total of all dividends declared by the bank in any calendar year would exceed
the total of its net income, as defined by the OCC, for that year to date
combined with its retained net income for the preceding two years less any
required transfers to surplus or a fund for the retirement of any preferred
stock. In addition, a national bank may not pay a dividend in an amount greater
than its undivided profits then on hand. Under these provisions, CNB Bank could
have declared, as of March 31, 1996, aggregate dividends of approximately
$1,800,000. The payment of dividends by subsidiary banks is affected by various
factors, such as the maintenance of adequate capital for such national banks as
described more fully below. The Federal Reserve Board, the OCC and the FDIC have
indicated that as a general matter dividends should be paid by banks only to the
extent of earnings from continuing operations.
CAPITAL
The Federal Reserve Board's risk-based capital guidelines for state member
banks and bank holding companies were fully phased in at the end of 1992. Under
those guidelines, the minimum ratio of total capital to risk-weighted assets is
8%. At least half of the total capital is to be comprised of common equity,
retained earnings and qualifying perpetual preferred stock, after
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<PAGE>
subtracting goodwill and other intangibles (with certain limited exceptions), as
described below ("Tier 1 capital"). The remainder ("Tier 2 capital") may
consist of perpetual debt, mandatorily convertible debt securities, a limited
amount of subordinated debt, term preferred stock and a limited amount of loan
loss reserves. CNB Bank is subject to similar capital requirements adopted by
the OCC. In addition, the Federal Reserve Board requires a minimum leverage
ratio (Tier 1 capital to total average assets, excluding goodwill and other
ineligible intangibles) of 3% for bank holding companies that meet certain
specified criteria, including having the highest regulatory rating. The rule
indicates that the minimum leverage ratio should be at least 1-2% higher for
bank holding companies that do not have the highest rating or that are
undertaking major expansion programs. The OCC has adopted substantially
identical minimum leverage ratio requirements. At March 31, 1996, CNB had a
Tier 1 risk-based capital ratio of 13.7% and a total risk-based capital ratio of
14.9%. At that date, CNB had a Tier 1 leverage ratio of 7.9%.
Under the Federal Reserve Board's guidelines, the only types of intangible
assets that may be included in (i.e., not deducted from) a bank holding
company's capital are readily marketable purchased mortgage servicing rights
("PMSRs") and purchased credit card relationships ("PCCRs"), provided that, in
the aggregate, the total amount of PMSRs and PCCRs included in capital does not
exceed 50% of Tier 1 capital. PCCRs are subject to a separate sublimit of 25% of
Tier 1 capital. The amount of PMSRs and PCCRs that a bank holding company may
include in its capital is limited to the lesser of (i) 90% of such assets' fair
market value (as determined under the guidelines) or (ii) 100% of such assets'
book value, each determined quarterly. Identifiable intangible assets (i.e.,
intangible assets other than goodwill) other than PMSRs and PCCRs, including
core deposit intangibles, acquired on or before February 19, 1992 (the date the
Federal Reserve Board issued its original proposal for public comment) generally
will not be deducted from capital for supervisory purposes, although they will
continue to be deducted for purposes of evaluating applications filed by bank
holding companies.
On September 14, 1993, the Federal Reserve Board, the FDIC and the OCC
issued a joint notice of proposed rulemaking, soliciting comments on a proposal
to revise their risk-based capital standards to take account of interest rate
risk. The adopted proposal requires examiners to take the interest rate risk
into consideration when considering the adequacy of risk-based capital.
Consideration of the interest rate risk by the examiner involves the discretion
of the examiner and is necessarily subjective.
FDICIA
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<PAGE>
The Federal Deposit Insurance Corporation Improvement Act of 1991, enacted
in December 1991 ("FDICIA"), specifies, among other things, the following
capital standard categories for depository institutions: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. FDICIA imposes progressively more restrictive
constraints on operations, management and capital distributions depending on the
category in which an institution is classified. Each of the federal banking
agencies has issued final uniform regulations that became effective December 19,
1992, which, among other things, define the capital levels described above.
Under the final regulations, a bank is considered "well capitalized" if it
(i) has a total risk-based capital ratio of 10% or greater, (ii) has a Tier 1
risk-based capital ratio of 6% or greater, (iii) has a leverage ratio of 5% or
greater and (iv) is not subject to any order or written directive to meet and
maintain a specific capital level for any capital measure. An "adequately
capitalized" bank is defined as one that has (i) a total risk-based capital
ratio of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or greater
and (iii) a leverage ratio of 4% or greater (or 3% or greater in the case of a
bank with a composite CAMEL rating of 1).
A bank is considered (A) "undercapitalized" if it has (i) a total
risk-based capital ratio of less than 8%, (ii) a Tier 1 risk-based capital ratio
of less than 4% or (iii) a leverage ratio of less than 4% (or 3% in the case of
a bank with a composite CAMEL rating of 1); (B) "significantly undercapitalized"
if the bank has (i) a total risk-based capital ratio of less than 6%, (ii) a
Tier 1 risk-based capital ratio of less than 3% or (iii) a leverage ratio of
less than 3%; and (C) "critically undercapitalized" if the bank has a ratio of
tangible equity to total assets equal to or less than 2%. The applicable federal
regulatory agency for a bank that is "well capitalized" may reclassify it as
"adequately capitalized," or subject an "adequately capitalized" or
"undercapitalized" institution to the supervisory actions applicable to the next
lower capital category, if it determines that the bank is in an unsafe or
unsound condition or deems the bank to be engaged in an unsafe or unsound
practice and not to have corrected the deficiency. As of December 31, 1995, CNB
Bank met the definition of a "well capitalized" institution.
"Undercapitalized" depository institutions, among other things, are subject
to growth limitations, are prohibited, with certain exceptions, from making
capital distributions, are limited in their ability to obtain funding from a
Federal Reserve Bank and are required to submit a capital restoration plan. The
federal banking agencies may not accept a capital plan without determining,
among other things, that the plan is based on realistic assumptions and is
likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company
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<PAGE>
must guarantee that the institution will comply with such capital restoration
plan and provide appropriate assurances of performance. If a depository
institution fails to submit an acceptable plan, including if the holding company
refuses or is unable to make the guarantee described in the previous sentence,
it is treated as if it is "significantly undercapitalized." Failure to submit or
implement an acceptable capital plan also is grounds for the appointment of a
conservator or a receiver. "Significantly undercapitalized" depository
institutions may be subject to a number of additional requirements and
restrictions, including orders to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total assets and cessation of
receipt of deposits from correspondent banks. "Critically undercapitalized"
institutions, among other things, are prohibited from making any payments of
principal and interest on subordinated debt, and are subject to the appointment
of a receiver or conservator.
Under FDICIA, the FDIC is permitted to provide financial assistance to an
insured bank before appointment of a conservator or receiver only if (i) such
assistance would be the least costly method of meeting the FDIC's insurance
obligations, (ii) grounds for appointment of a conservator or a receiver exist
or are likely to exist, (iii) it is unlikely that the bank can meet all capital
standards without assistance and (iv) the bank's management has been competent,
has complied with applicable laws, regulations, rules and supervisory directives
and has not engaged in any insider dealing, speculative practice or other
abusive activity.
FDICIA also contains a variety of other provisions that may affect the
operations of CNB including reporting requirements, regulatory standards for
real estate lending, "truth in savings" provisions, and the requirement that a
depository institution give 90 days prior notice to customers and regulatory
authorities before closing any branch. FDICIA also contains a prohibition on the
acceptance or renewal of brokered deposits by depository institutions that are
not "well capitalized" or are "adequately capitalized" and have not received a
waiver from the FDIC.
FDICIA provides the federal banking agencies with significantly expanded
powers to take enforcement action against institutions which fail to comply with
capital or other standards. Such action may include the termination of deposit
insurance by the FDIC or the appointment of a receiver or conservator for the
institution.
The foregoing necessarily is a general description of certain provisions of
FDICIA and does not purport to be complete. The provisions of FDICIA are
implemented through regulations issued by the various federal banking agencies.
Although certain of those regulations were adopted in final form in 1994, others
remain in
- 102 -
<PAGE>
proposed form. Accordingly, the effect of FDICIA on CNB is not yet fully
ascertainable.
INTERSTATE BANKING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 was
enacted into law on September 29, 1994. The law provides that, among other
things, substantially all state law barriers to the acquisition of banks by out-
of-state bank holding companies have been eliminated effective as of September
29, 1995. The law will also permit interstate branching by banks effective as
of June 1, 1997, subject to the ability of states to opt-out completely or to
set an earlier effective date. CNB anticipates that the effect of the new law
will be to increase competition within the markets in which it now operates,
although CNB cannot predict the extent to which competition will increase in
such markets or the timing of such increase.
ANTICOMPETITIVE EFFECTS OF THE MERGER
It is possible that the OCC or the United States Department of Justice may
request that CNB or Riherd divest certain operations in order to alleviate what
such agency believes would otherwise be an adverse competitive effect. Although
CNB and Riherd regard a request for divestiture as unlikely, neither can predict
whether such divestitures will be required, or if required, what the aggregate
amount of any such divestitures may be. The application to the OCC has not
proposed any such divestiture.
Supervisory safety and soundness examinations of F&D Bank were most
recently conducted by the FDIC using financial information as of March 31, 1994,
and by the Florida Department of Banking as of June 14, 1995. Neither
examination revealed any material adverse conditions as of the date of such
examination. Regulatory compliance and Community Reinvestment Act examinations
of F&D Bank were conducted by the FDIC as of March 21, 1996, with satisfactory
results. The financial condition of Riherd was last inspected by the Federal
Reserve as of February 26, 1992, with no findings of any material adverse
conditions.
- 103 -
<PAGE>
EXPERTS
The consolidated financial statements of CNB incorporated into this Proxy
Statement-Prospectus by reference from CNB's Annual Report on Form 10-KSB for
the year ended December 31, 1995 have been audited by Osburn, Henning and
Company, independent certified public accountants, as stated in their report
which is incorporated herein by reference in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Riherd as of December 31, 1995 and
1994, and for each of the years then ended, have been included herein in
reliance on the report of Rex Meighen & Company, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
LEGAL OPINION
The validity of the shares of CNB Common Stock to be issued to the
shareholders of Riherd pursuant to the Merger will be passed upon by Mahoney
Adams & Criser, P.A. (Jacksonville, Florida), counsel for CNB.
- 104 -
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Articles of Incorporation, as amended, and the Bylaws of CNB, Inc.
require the indemnification of directors and officers to the fullest extent
permitted by law.
Subsection (1) of Section 607.0850 of the Florida Business Corporation Act
empowers a corporation to indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against liability incurred in connection
with such proceeding (including any appeal thereof) if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (2) of Section 607.0850 empowers a corporation to indemnify any
person who was or is a party to any proceeding by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth in the preceding paragraph,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expenses of litigating the proceeding
to conclusion, actually and reasonably incurred in connection with the defense
or settlement of such proceeding, including appeals, provided that the person
acted under the standards set forth in the preceding paragraph. However, no
indemnification should be made for any claim, issue or matter as to which such
person is adjudged to be liable unless, and only to the extent that, the court
in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
deems proper.
Subsection (3) provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or (2) of Section 607.0850 or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses actually and reasonably incurred by him in connection therewith.
Subsection (4) provides that any indemnification under subsection (1) or
(2) of Section 607.0850, unless determined by a court, shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsection
(1) or (2) of Section 607.0850. Such determination shall be made:
(a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) if such a quorum is not obtainable, or, even if obtainable, by
majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two
or more directors not at the time parties to the proceeding;
<PAGE>
(c) by independent legal counsel:
(1) selected by the board of directors as prescribed in
paragraph (a) or the committee selected as prescribed in paragraph
(b); or
(2) if no quorum of directors can be obtained under paragraph
(a) or no committee can be designated under paragraph (b), by a
majority vote of the full board of directors (in which directors who
are parties may participate); or
(d) by the shareholders by a majority vote of a quorum of
shareholders who were not parties to such proceedings or, if no quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
Under subsection (6), expenses incurred by a director or officer in
defending a civil or criminal proceeding may be paid by the corporation in
advance of the final disposition thereof upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it is ultimately
determined that such director or officer is not entitled to indemnification
under Section 607.0850.
Subsection (7) states that indemnification and advancement of expenses
provided under Section 607.0850 are not exclusive and empowers the corporation
to make any other or further indemnification or advancement of expenses under
any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, for actions in an official capacity and in other capacities while
holding an office. However, a corporation cannot indemnify or advance expenses
if a judgment or other final adjudication establishes that the actions or
omissions to act of the director or officer were material to the adjudicated
cause of action and the director or officer (a) violated criminal law, unless
the director or officer had reasonable cause to believe his conduct was lawful
or had no reasonable cause to believe his conduct was unlawful, (b) derived an
improper personal benefit from a transaction, (c) was or is a director in a
circumstance where the liability under Section 607.0834 (relating to unlawful
distributions) applies, or (d) engaged in willful misconduct or conscious
disregard for the best interests of the corporation in a proceeding by or in
right of the corporation to procure a judgment in its favor or in a proceeding
by or in right of a shareholder.
Subsection (9) permits any director or officer who is or was a party to a
proceeding to apply for indemnification or advancement of expenses, or both, to
any court of competent jurisdiction and lists the determinations the court
should make before ordering indemnification or advancement of expenses.
Subsection (12) permits a corporation to purchase and maintain insurance
for a director or officer against any liability incurred in his official
capacity or arising out of his status as such regardless of the corporation's
power to indemnify him against such liability under Section 607.0850.
As allowed by Section 607.0850(12), CNB, Inc. maintains liability insurance
covering directors and officers.
ITEM 21. EXHIBITS.
The exhibits listed on the Exhibit Index on page II-5 of this Registration
Statement have been previously filed, are filed herewith, will be filed by
amendment, or are incorporated herein by reference to other filings.
ITEM 22. UNDERTAKINGS.
-II-2-
<PAGE>
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 20
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Jacksonville, Florida,
on the 24th day of June, 1996.
CNB, INC. (Registrant)
By: /s/ K.C. Trowell
-----------------------------------
K. C. Trowell, Chairman and
Chief Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* /s/ C. Lavoye Boggus Director June 24, 1996
- ------------------------------
C. Lavoye Boggus
* /s/ Seymour Chotiner Director June 24, 1996
- ------------------------------
Seymour Chotiner
* /s/ Marvin H. Pritchett Director June 24, 1996
- ------------------------------
Marvin H. Pritchett
* /s/ William J. Stricher Director June 24, 1996
- ------------------------------
William J. Stricher
* /s/ T. Allison Scott Director June 24, 1996
- ------------------------------
T. Allison Scott
* /s/ K.C. Trowell President and June 24, 1996
- ------------------------------ Chief Executive
K.C. Trowell Officer & Chief
Financial Officer
Director
* Martha Williams Principal June 24, 1996
- ------------------------------ Accounting Officer
Martha Williams & Cashier
</TABLE>
<PAGE>
EXHIBIT INDEX
PAGINATION/
EXHIBIT EXHIBIT NUMBERING
NUMBER DESIGNATION SYSTEM
- ------ ----------- -----------------
(2) Agreement and Plan of Merger dated Appendix A to Proxy
February 26, 1996, by and among CNB, Statement-Prospectus
Inc., and Riherd Bank Holding Company.
(5) **Opinion of Mahoney Adams & Criser, P.A.
as to the legality of shares.
(8) Opinion of Mahoney Adams & Criser, as
to certain federal income tax matters.
(10)(a) Voting Trust Agreement (incorporated by reference
to Exhibit 9.1 to CNB's
Registration Statement No.
33-71082 on Form S-4)
(10)(b) Employment Agreement dated August 3, (incorporated by reference
1987, as amended by Employment Agreement to Exhibit 10.4 to CNB's
Amendment dated as of July 20, 1994. Registration No. 33-71082
on Form S-4)
(13)(a) *Annual Report on Form 10-KSB for the
year ended December 31, 1995
(13)(b) *Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1996
(23)(a) Consent of Osburn, Henning & Company
(relating to financial statements of
CNB, Inc.)
(23)(b) **Consent of Mahoney Adams & Criser, P.A.,
counsel to CNB, Inc. (included in
Exhibit (5)).
(23)(c) Consent of Rex, Meighen & Co., (relating
to financial statements of Riherd Bank
Holding Company)
(23)(d) *Consent of Mercer Capital (Opinion included
as Appendix B to Proxy Statement-Prospectus).
-II-5-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------
*Previously filed.
**To be filed by amendment.
-II-6-
<PAGE>
June 21, 1996
Riherd Bank Holding Company
300 West Main Street
Post Office Box 358
Lake Butler, FL 32054
Re: Agreement and Plan of Merger dated as of February 26, 1996, by and
between CNB, Inc. and Riherd Bank Holding Company
Ladies and Gentlemen:
This letter responds to your request for our opinion as to whether the
acquisition (the "Merger") by CNB, Inc. ("CNB") of Riherd Bank Holding Company
("Riherd") pursuant to the Agreement and Plan of Merger (the "Merger Agreement")
dated as of February 26, 1996 constitutes a reorganization under Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations thereunder as well as certain other related tax issues arising
as a consequence of such reorganization. Unless otherwise provided, all
references herein to "Section" refer to the Code and all references to "Treas.
Reg." refer to the Treasury Regulations adopted or proposed as of the date of
this opinion.
Pursuant to the Merger Agreement, Riherd, a Florida corporation, will merge
into and with CNB, a Florida corporation, under the laws of the State of
Florida, with CNB being the surviving corporation. As a result, Farmers and
Dealers Bank, a Florida state banking association organized under the laws of
the State of Florida ("F&D Bank"), will become a wholly-owned subsidiary of CNB.
Shareholders of Riherd will surrender one hundred percent of the issued and
outstanding shares of Riherd Common Stock, $0.0067 par value (the "Riherd Common
Stock") in exchange for CNB voting common stock ("CNB Common Stock") and certain
consideration other than CNB Common Stock. No more than forty-nine percent of
the total purchase price for all Riherd Common Stock will be paid in
consideration other than CNB Common Stock.
In rendering the opinions expressed herein, we have reviewed and, where
appropriate relied on, such information as we have deemed relevant, including
the S-4 Registration Statement originally filed with the Securities Exchange
Commission, as amended (the "Registration Statement"), the Merger Agreement, and
the Certificates of Representations dated on or about June 21, 1996, of Riherd
and CNB (which "Certificates" are incorporated herein by
<PAGE>
reference and are attached hereto as Exhibits A and B) (all of which are
collectively referred to herein as the "Documents"). In our examination of the
Documents, we have assumed with your consent that all Documents submitted to us
as photocopies faithfully reproduce the originals thereof, that such originals
are authentic, that all such Documents have been duly executed to the extent
required, and that all statements set forth in such Documents are accurate.
LAW
To qualify as a Section 368(a)(1)(A) reorganization, the Merger must (1)
constitute a merger effected pursuant to State law, (2) be consummated pursuant
to a duly adopted plan of reorganization, (3) be undertaken for a genuine
corporate or business purpose, (4) satisfy the continuity of business enterprise
requirement and (5) satisfy the continuity of interest requirement, as discussed
below:
(1) The Merger must constitute a merger effected pursuant to the
corporation laws of the United States or a state or territory or the District of
Columbia. Treas. Reg. Section 1.368-2(b)(1). In this regard, Riherd will be
merged with and into CNB pursuant to and in conformity with Section 607.1101 of
the Florida Business Corporation Act.
(2) The Merger and exchange of stock must be consummated pursuant to a
plan of reorganization. The plan of reorganization must be adopted by each of
the corporations that are parties to the transaction, and the adoption must be
shown by the acts of its duly constituted responsible officers and appear upon
the official records of the corporation. Treas. Reg. Section 1.368-3(a). In
this regard, the Merger and the exchange of stock will be effected pursuant to
the Merger Agreement and a plan of reorganization duly adopted and executed by
CNB and Riherd.
(3) The Merger must be undertaken for a genuine corporate or business
purpose other than the avoidance of federal income taxes. Treas. Reg. Sections
1.368-1(b), 1(c) and 2(g); GREGORY V. HELVERING, 293 U.S. 465 (1935). In this
regard, it has been represented to us that the Merger is being accomplished so
that, among other reasons, CNB will acquire competitive advantages, including
synergistic marketing opportunities and improved access to capital from the
acquisition of F&D Bank, the stock of which is wholly-owned by Riherd. CNB and
Riherd will also benefit economically from the competitive advantages of having
CNB acquire F&D Bank, the reduced costs of the combined entities, and from the
ability to take advantage of recent changes in the banking industry.
(4) The Merger must satisfy the continuity of business enterprise
requirement. To qualify, CNB must either (i) continue the historic business of
Riherd or (ii) use a significant portion of the historic business assets of
Riherd in a business. Treas. Reg. Section 1.368-1(d). In this regard, the only
historic business of Riherd is to operate as a bank holding company and
<PAGE>
the value of Riherd's stock in F&D Bank represents the majority of Riherd's
assets. Per the Certificates, you have represented and we have assumed that, if
a merger of CNB and F&D Bank occurs, with CNB as the surviving corporation, CNB
intends to retain all of the historic business assets of F&D Bank and to
continue indefinitely the historic business of Riherd and F&D Bank.
(5) The owners of Riherd must also receive and retain a continuing
proprietary interest in CNB. Treas. Reg. Sections 1.368-1(b) and (c). For
advance ruling purposes, the Internal Revenue Service will consider the
continuity of interest requirement satisfied if shareholders of Riherd receive
and retain an amount of stock of CNB equal in value, as of the effective date of
the reorganization, to at least fifty percent of the value of all of the
outstanding stock of Riherd as of the same date. Rev. Proc. 77-37, 1977-2 C.B.
568, 569. In addition, courts have held the continuity of interest requirement
to be satisfied where the shareholders of the acquired corporation receive and
retain an amount of stock equal in value to somewhat less than fifty percent of
the value of the acquired corporation's stock. SEE, E.G., JOHN A. NELSON CO. V.
HELVERING, 296 U.S. 374 (1935). In this regard, the Certificates state that
shareholders of Riherd will receive and are expected to indefinitely retain an
amount of stock of CNB equal in value, as of the effective date of the Merger,
in excess of fifty percent of the value of all of the outstanding stock of
Riherd as of the same date.
OPINION
Based on the foregoing and in reliance on the Certificates of
Representations as to factual matters relevant to our determinations, we are of
the opinion that the Merger qualifies as a reorganization under Section
368(a)(1)(A). We are also of the opinion that:
(1) Riherd Common Stock is a capital asset within the meaning of Section
1221 to the extent that Riherd Common Stock is held by persons who are
United States citizens, who hold such stock for investment.
(2) No gain or loss will be recognized by Riherd as a result of the Merger
under Section 361 or any other provision of the Code pertaining to
reorganizations under Section 368(a)(1)(A); however, we express no
opinion regarding whether gain or loss will be recognized by Riherd as
a result of the application of any other provision of the Code, such
as accounting considerations, reserves, etc., which may be affected by
the reorganization.
(3) No gain or loss will be recognized by Riherd shareholders to the
extent that such shareholders receive CNB Common Stock in connection
with the Merger in exchange for Riherd Common Stock (except as
discussed below with respect to
<PAGE>
the Cash Portion and cash received in lieu of a fractional interest in
CNB Common Stock).
(4) The tax basis of the CNB Common Stock to be received by the Riherd
shareholders in connection with the Merger will be the same as the
basis in the Riherd Common Stock surrendered in exchange therefor: (i)
reduced by the amount of the cash received in lieu of CNB Common Stock
(the "Cash Portion") and the cash received in lieu of a fractional
share interest in CNB Common Stock; and (ii) increased by the amount
of gain, if any, recognized in connection with the receipt of such
Cash Portion and the cash received in lieu of a fractional interest in
CNB Common Stock, as discussed below.
(5) The holding period of the CNB Common Stock to be received by Riherd
shareholders in connection with the Merger will include the holding
period of the Riherd Common Stock surrendered in exchange therefor,
provided that the Riherd Common Stock is held as a capital asset by
such shareholder at the effective time of the Merger.
(6) A Riherd shareholder who receives a Cash Portion or cash in lieu of a
fractional share interest of CNB Common Stock in connection with the
Merger will recognize capital gain (but not loss) equal to the lesser
of (i) such cash amount and the fair market value of other property,
if any, and (ii) the difference between (x) the sum of (i) the Cash
Portion, (ii) cash received in lieu of a fractional share interest in
CNB Common Stock and (iii) the fair market value of CNB Common Stock
received in connection with the Merger and (y) the shareholder's basis
in the Riherd Common Stock exchanged therefor, as long as such Riherd
Common Stock is held by such shareholder as a capital asset at the
effective time.
The opinions expressed herein are based upon existing statutory and
regulatory authority, as of the date of this opinion, any of which may be
changed at any time with retroactive effect. In addition, our opinions are
based solely on the Documents that we have examined, the Certificates, the
additional information that we have obtained, and the statements set out herein,
which we have assumed are true on the date hereof and will be true on the date
on which the sale is consummated. Our opinions cannot be relied upon if any of
the facts pertinent to the Federal income tax treatment of the Merger stated in
such Documents or Certificates, or in such additional information is, or later
becomes, inaccurate or incomplete, or if any of the statements set out herein
are, or later become, inaccurate or incomplete. Finally, our opinions are
limited to the tax matters specifically covered thereby. We have not been asked
to address, nor have we addressed, any other tax consequences associated with
any other transactions involving the Merger, CNB, Riherd, or F&D Bank or any
shareholders thereof.
<PAGE>
This opinion is being provided solely for the benefit of the shareholders
of Riherd. No other person or party shall be entitled to rely on this opinion
without our prior written permission.
Sincerely,
MAHONEY ADAMS & CRISER, P.A.
<PAGE>
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
the Registration Statement of CNB, Inc. on Form S-4 of our report dated
January 19, 1996, appearing in the Annual Report on Form 10-KSB of CNB, Inc.
for the year ended December 31, 1995, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of such Registration
Statement.
/s/ OSBURN, HENNING AND COMPANY
-------------------------------
OSBURN, HENNING AND COMPANY
Orlando, Florida
June 21, 1996
<PAGE>
Exhibit 23(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Registration Statement of CNB, Inc. on
Form S-4 of our report dated January 12, 1996, relating to the consolidated
balance sheet of Riherd Bank Holding Company and subsidiary as of December 31,
1995 and December 31, 1994, and the related consolidated statements of
operations, stockholders' equity, an cash flows for the two years then ended,
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of this Registration Statement.
Rex Meighen & Company
Certified Public Accountants
Tampa, Florida
June 21, 1996
<PAGE>
Exhibit 99(A)
CONSENT OF PAUL M. RIHERD
In accordance with Rule 438 of Regulation C, I hereby consent to the filing
of this Registration Statement on Form S-4 and the inclusion of my name therein
as a person who is about to become a director of CNB, Inc.
-----------------------------------
PAUL M. RIHERD
June 21, 1996
