<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --
EXCHANGE ACT OF 1934 (no fee required)
For the quarterly period ended September 30, 1997
OR
- -- TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (no fee required)
For the transition period from__________to__________
COMMISSION FILE NO. 0-25988
CNB, INC.
---------------------------------
(NAME OF SMALL BUSINESS ISSUER)
<TABLE>
<S> <C>
FLORIDA 59-2958616
- ------- -----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Post Office Box 3239
201 North Marion Street
Lake City, Florida 32056
- ------------------ -----
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (904) 755-3240
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares of the registrant's common stock outstanding as of
October 31, 1997 was 2,422,385 shares, $0.01 par value per share.
<PAGE>
CNB, INC.
FINANCIAL REPORT ON FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)............................................ 3
Consolidated Statements of Income (Unaudited)...................................... 4
Consolidated Statements of Shareholders' Equity (Unaudited)........................ 6
Consolidated Statement of Cash Flows (Unaudited)................................... 7
Notes to Consolidated Financial Statements (Unaudited)............................. 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
Selected Financial Data............................................................ 9
Overview........................................................................... 10
Results of Operations.............................................................. 10
Earning Assets..................................................................... 14
Funding Sources.................................................................... 18
Interest Rate Sensitivity / Liquidity.............................................. 18
Capital Ratios..................................................................... 20
PART II--OTHER INFORMATION............................................................. 21
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CNB, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
(IN
THOUSANDS)
ASSETS
Cash and due from banks........................................................................... $ 9,892
Federal funds sold................................................................................ 16,000
Interest bearing deposits in other banks.......................................................... 5,649
-------------
Total Cash and Cash Equivalents................................................................. 31,541
Securities available for sale..................................................................... 54,425
Securities held to maturity....................................................................... 8,673
Loans:
Commercial, Financial & Agricultural............................................................ 69,457
Real Estate--Construction....................................................................... 3,722
Real Estate--Mortgage........................................................................... 66,983
Installment & Consumer Lines.................................................................... 18,489
-------------
Total Loans, net of unearned discount......................................................... 158,651
Less: Allowance for Loan Losses................................................................... (1,483)
-------------
Net Loans....................................................................................... 157,168
Premises and equipment, net....................................................................... 10,125
Other assets...................................................................................... 4,226
-------------
TOTAL ASSETS.................................................................................. $ 266,158
-------------
-------------
LIABILITIES
Deposits:
Non-interest bearing demand................................................................... $ 31,152
Interest Bearing Deposits:
Savings, Time & Demand...................................................................... 167,242
Time, $100,000 & over....................................................................... 31,199
-------------
Total Deposits............................................................................ 229,593
Securities sold under repurchase agreements..................................................... 4,172
Notes payable................................................................................... 1,750
Other liabilities............................................................................... 2,273
-------------
Total Liabilities......................................................................... 237,788
SHAREHOLDERS' EQUITY
-------------
-------------
Common stock:
$.01 par value, 10,000,000 shares authorized; 2,422,385 shares issued and outstanding........... 24
Additional paid-in capital........................................................................ 19,430
Retained earnings................................................................................. 8,710
Net unrealized gain on securities available for sale.............................................. 206
-------------
Total Shareholders' Equity...................................................................... 28,370
-------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................................................... $ 266,158
-------------
-------------
</TABLE>
3
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
(IN THOUSANDS, EXCEPT
SHARE DATA)
Interest Income
Interest and fees on loans................................................ $ 10,799 $ 7,810
Interest on securities held to maturity................................... 378 1,740
Interest on securities available for sale................................. 2,755 539
Interest on federal funds sold............................................ 437 368
Interest on interest bearing deposits..................................... 31 17
------------ ------------
Total Interest Income................................................... 14,400 10,474
Interest Expense
Interest on deposits...................................................... 6,101 4,505
Interest on notes payable................................................. 136 71
Interest on short-term borrowings......................................... 179 --
------------ ------------
Total Interest Expense.................................................. 6,416 4,576
------------ ------------
Net Interest Income................................................... 7,984 5,898
Provision for Loan Loss..................................................... 330 285
------------ ------------
Net Interest Income After Loan Loss Provision............................. 7,654 5,613
Non-interest Income
Service charges........................................................... 1,274 948
Other fees and charges.................................................... 344 288
Gain (loss) on sale of securities......................................... 1 (25)
------------ ------------
Total Non-Interest Income............................................... 1,619 1.211
------------ ------------
Non-interest Expense
Salaries and employee benefits............................................ 2,950 2,163
Occupancy and equipment expenses.......................................... 1,026 667
Other operating expenses.................................................. 1,872 1,654
------------ ------------
Total Non-interest Expense.............................................. 5,848 4,484
------------ ------------
Income Before Income Taxes.................................................. 3,425 2,340
Income Taxes.............................................................. 1,190 817
------------ ------------
NET INCOME.................................................................. $ 2,235 $ 1,523
------------ ------------
------------ ------------
Earnings Per Share:
NET INCOME PER COMMON SHARE............................................. $ 1.08 $ 0.91
------------ ------------
------------ ------------
Weighted average common shares outstanding.............................. 2,076,328 1,672,380
------------ ------------
------------ ------------
</TABLE>
4
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
(IN THOUSANDS, EXCEPT
SHARE DATA)
Interest Income
Interest and fees on loans.................................................. $ 3,711 $ 2,797
Interest on securities held to maturity..................................... 114 189
Interest on securities available for sale .................................. 914 654
Interest on federal funds sold.............................................. 195 152
Interest on interest bearing deposits....................................... 27 5
------------ ------------
Total Interest Income..................................................... 4,961 3,797
Interest Expense
Interest on deposits........................................................ 2,106 1,610
Interest on notes payable................................................... 40 26
Interest on short-term borrowings........................................... 58 --
------------ ------------
Total Interest Expense.................................................... 2,204 1,636
------------ ------------
Net Interest Income..................................................... 2,757 2,161
Provision for Loan Loss....................................................... 70 80
------------ ------------
Net Interest Income After Loan Loss Provision............................... 2,687 2,081
Non-interest Income
Service charges............................................................. 442 347
Other fees and charges...................................................... 123 68
Gain (loss) on sale of securities........................................... 1 --
------------ ------------
Total Non-Interest Income................................................. 566 415
------------ ------------
Non-interest Expense
Salaries and employee benefits.............................................. 983 778
Occupancy and equipment expenses............................................ 362 252
Other operating expenses.................................................... 658 809
------------ ------------
Total Non-interest Expense................................................ 2,003 1,839
------------ ------------
Income Before Income Taxes.................................................... 1,250 657
Income Taxes................................................................ 436 226
------------ ------------
NET INCOME.................................................................... $ 814 $ 431
------------ ------------
Earnings Per Share:
NET INCOME PER COMMON SHARE................................................. $ 0.35 $ 0.25
------------ ------------
------------ ------------
Weighted average common shares outstanding.................................. 2,348,660 1,736,963
------------ ------------
------------ ------------
</TABLE>
5
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY SHAREHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE, DECEMBER 31, 1995............................. $ 16 $ 9,784 $ 4,967 $ -- $ 14,754
Acquisition of Riherd Bank Holding Company, effective
September 1, 1996.................................... 3 2,899 -- -- 2,902
Net Income for Nine Months Ended September 30, 1996.... -- -- 1,523 -- 1,523
Cash Dividends......................................... -- -- (263) -- (263)
Change in Unrealized Loss on Securities Available for
Sale, net of taxes................................... -- -- -- -- (152)
--- ----------- ----------- ----------- -------------
BALANCE, SEPTEMBER 30, 1996............................ $ 19 $ 12,683 $ 6,227 $ -- $ 18,764
--- ----------- ----------- ----------- -------------
--- ----------- ----------- ----------- -------------
BALANCE, DECEMBER 31, 1996............................. $ 19 $ 12,683 $ 6,901 $ -- $ 19,669
Net income for the Nine Months Ended September 30,
1997................................................. -- -- 2,235 -- 2,235
Cash Dividends......................................... -- -- (426) -- (426)
Issuance of 484,480 shares of common stock @ $14.00 per
share, net of offering cost.......................... 5 6,749 -- -- 6,754
Treasury Stock Transactions............................ -- (2) -- -- (2)
Purchase of Treasury Stock............................. -- -- -- -- --
Change in Unrealized Loss on Securities Available for
Sale, net of taxes................................... -- -- -- -- 140
--- ----------- ----------- ----------- -------------
BALANCE, SEPTEMBER 30, 1997............................ $ 24 $ 19,430 $ 8,710 $ 0 $ 28,370
--- ----------- ----------- ----------- -------------
--- ----------- ----------- ----------- -------------
</TABLE>
6
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income....................................................................... $ 2,235 $ 1,523
Cash and cash equivalents acquired in merger..................................... 2,885
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization................................................ 602 397
Provision for loan loss...................................................... 330 285
Security amortization--net................................................... 115 177
Changes in period-end balances of:
Other Assets............................................................... (150) 460
Other Liabilities.......................................................... 237 374
---------- ----------
Net Cash Provided By Operating Activities.................................. 3,369 6,101
---------- ----------
INVESTING ACTIVITIES
Purchases of securities available for sale....................................... (10,171) (9,995)
Securities available for sale called by issuer................................... 6,750 2,500
Maturities of securities available for sale...................................... 8,000 1,500
Sales of securities available for sale........................................... -- 4,039
Mortgage Backed Securities--Principal Payments................................... 3,307 4,702
Net increase in loans............................................................ (10,070) (9,836)
Net increase in premises and equipment........................................... (1,125) (500)
Net cash paid related to acquisition............................................. -- (2,674)
Other assets received in acquisition............................................. -- (250)
---------- ----------
Net Cash Provided By (Used In) Investing Activities........................ (3,309) (10,514)
---------- ----------
FINANCING ACTIVITIES
Net increase (decrease) in deposits.............................................. 2,769 15,736
Securities sold under repurchase agreements...................................... 406 --
Proceeds from note payable....................................................... -- 2,650
Repayment of note payable........................................................ (900) (650)
Cash dividend(s)................................................................. (426) (263)
Treasury stock transaction....................................................... (2) --
Issuance of common stock......................................................... 6,754 --
---------- ----------
Net Cash Provided By (Used In) Financing Activities........................ 8,601 17,473
---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents....................... 8,661 13,060
Beginning Balance................................................................ 22,880 12,972
---------- ----------
Cash and Cash Equivalents at End of Period....................................... $ 31,541 $ 26,032
---------- ----------
SUPPLEMENTAL DISCLOSURES:
Interest Paid.............................................................. $ 6,180 $ 4,640
---------- ----------
---------- ----------
Taxes Paid................................................................. $ 1,355 $ 993
---------- ----------
---------- ----------
</TABLE>
7
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 1. CONSOLIDATION
The consolidated financial statements include the accounts of CNB, Inc. and
its subsidiary bank, CNB National Bank. All significant intercompany accounts
and transactions have been eliminated.
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB which do not require all
information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, such financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the results for the interim
periods presented. Operating results for the nine months ended September 30,
1997 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997.
NOTE 3. RIGHTS OFFERING
On July 15, 1997, the Company sold 484,480 additional shares of common stock
at $14.00 per share to existing shareholders, resulting in additional equity of
$6.8 million, net of offering costs.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following tables and discussion set forth certain selected financial
information and should be read in conjunction with the consolidated financial
statements (unaudited) of the Company and the Bank included in "Item 1.
Financial Statements" above. The Company has no foreign operations; accordingly,
there are no assets or liabilities attributable to foreign operations.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996 CHANGE%
---------- ------------- -----------
<S> <C> <C> <C>
DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION.
SUMMARY OF OPERATIONS:
Total Interest Income............................................ $ 14,400 $ 10,474 37%
Total Interest Expense........................................... (6,416) (4,576) 40
---------- -------------
Net Interest Income............................................ 7,984 5,898 35
Loan Loss Provision.............................................. (330) (285) 16
---------- -------------
Net Interest Income After
Provision for Loan Losses.................................... 7,654 5,613 36
Non-Interest Income.............................................. 1,619 1,211 34
Non-Interest Expense............................................. (5,848) (4,484) 30
---------- -------------
Income Before Taxes.............................................. 3,425 2,340 46
Income Taxes..................................................... (1,190) (817) 46
---------- -------------
Net Income....................................................... $ 2,235 $ 1,523 47%
---------- -------------
---------- -------------
PER COMMON SHARE:
Net Income Per Common Share...................................... $ 1.08 $ 0.91 19%
Book Value....................................................... 11.71 9.68 21
Dividends........................................................ 0.20 0.16 25
Shares Outstanding............................................... 2,422,385 1,937,905 25
Weighted Average Shares Outstanding.............................. 2,076,328 1,672,380 24
KEY RATIOS:
Return on Average Assets......................................... 1.16% 1.09% 6%
Return on Average Shareholders' Equity........................... 13.30 12.92 3
Dividend Payout-computed on a per share basis.................... 18.52 17.23 7
Overhead Ratio................................................... 63.06 65.71 (4)
Total Risk-Based Capital Ratio................................... 18.24 14.07 30
Average Shareholders' Equity to Assets........................... 8.70 8.43 3
Tier 1 Leverage.................................................. 10.13 8.52 19
FINANCIAL CONDITION AT PERIOD-END:
Assets........................................................... $ 266,158 $ 242,226 10%
Total Loans, net of unearned discount............................ 158,651 137,093 16
Total Deposits................................................... 229,593 218,235 5
Common Shareholders' Equity...................................... 28,370 18,764 51
</TABLE>
9
<PAGE>
OVERVIEW
Total assets increased during the third quarter of 1997 to $266.2 million or
9.9% compared to $242.2 million for the comparable period in 1996. Total loans
and deposits were also up 15.7% and 5.2% to $158.7 million and $229.6 million,
respectively. Shareholders' equity was $28.4 million at September 30, 1997, up
51.2%, compared to $18.8 million for the same period in 1996. The Rights
Offering, completed on July 15, 1997, resulted in the issuance of 484,480 shares
of common stock or $6.8 million in additional equity, with the remaining
increase resulting from $2.5 million retained earnings and $.4 million in net
unrealized gain on securities available for sale.
Net income for the nine month period ended September 30, 1997 was $2.2
million or $1.08 per share from the $.91 per share earned in 1996. The earnings
produced a return on average assets of 1.16% and return on average shareholders'
equity of 13.3%.
Improved earnings for the year-to-date are mainly attributable to a 35.4%
increase in net interest income to $8.0 million, from $5.9 million for the
comparable period in 1996. Provision for loan losses for the period was $330,000
compared to $285,000, an increase of $45,000 or 15.8%, due mainly to loan
growth.
Cash dividends paid for the first nine months of 1997 were $0.20 per share,
a 25% increase when compared to $0.16 per share for the comparable period in
1996. The Board of Directors has declared a cash dividend payable on November 5,
1997 of $0.08 per share, which is unchanged from the previous quarter.
Construction was completed on the new branch located at U.S. 90 West, near
I-75 in Lake City, which opened on August 22, 1997 as a full service branch .
With the addition of this location, the company has eleven offices in six
counties.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, the primary source of revenue for the Bank, was $8.0
million for the first nine months of 1997, an increase of $2.1 million, or 35.4%
compared to the same period last year. This increase resulted from $3.0 million
of income obtained from loan growth and an increase in investment interest of
$.9 million, offset by an increase in interest expense of $1.6 million on
deposits and $.2 million in borrowings. Table 1: "Average Balances - Yields and
Rates", below, provides the Company's average volume of interest earning assets
and interest bearing liabilities for the period ending September 30, 1997 and
1996. Net interest margin declined slightly to 4.53% in 1997, compared to 4.60%
in 1996, but has remained unchanged in the third quarter as compared to the
second quarter of 1997.
10
<PAGE>
TABLE 1: AVERAGE BALANCES--YIELDS AND RATES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
INTEREST INTEREST
AVERAGE INCOME OR AVERAGE AVERAGE INCOME OR AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS:
Federal Funds Sold................................ $ 11,056 $ 437 5.28% $ 9,537 $ 368 5.15%
Securities Available for Sale..................... 60,572 2,755 6.08 39,091 1,740 5.95
Securities Held to Maturity....................... 9,403 378 5.37 12,485 539 5.77
Loans, net unearned (1)........................... 154,006 10,799 9.38 109,624 7,810 9.52
Interest Bearing Deposits......................... 683 31 6.06 404 17 5.62
---------- ---------- ----------- ---------- ----------- -----------
TOTAL EARNING ASSETS................................ 235,720 14,400 8.17 171,141 10,474 8.17
---------- -----------
All Other Assets.................................. 22,515 15,810
---------- ----------
TOTAL ASSETS........................................ $ 258,235 $ 186,951
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
NOW & Money Markets............................... $ 62,359 $ 1,161 2.49% $ 46,881 $ 933 2.66%
Savings........................................... 15,107 221 1.96 12,933 202 2.09
Time Deposits..................................... 118,484 4,719 5.33 86,903 3,370 5.18
Short Term Borrowings............................... 4,743 179 5.05 -- -- --
Notes Payable & Debentures.......................... 2,250 136 8.08 1,121 71 8.44
---------- ---------- ----------- ---------- ----------- -----------
TOTAL INTEREST BEARING LIABILITIES.................. 202,943 6,416 4.23 147,838 4,576 4.13
Demand Deposits..................................... 30,459 21,629
Other Liabilities................................... 2,360 1,733
Shareholders' Equity................................ 22,473 15,751
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......... $ 258,235 $ 186,951
---------- ----------
---------- ----------
----------- -----------
INTEREST SPREAD (2)................................. 3.94% 4.04%
----------- -----------
----------- -----------
---------- -----------
NET INTEREST INCOME................................. $ 7,984 $ 5,898
---------- -----------
---------- -----------
NET INTEREST MARGIN (3)............................. 4.53% 4.60%
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(1) Interest income on average loans includes loan fee recognition of $402,000
and $274,000 in 1997 and 1996 respectively.
(2) Represents the average rate earned minus average rate paid.
(3) Represents net interest income divided by total earning assets.
11
<PAGE>
TABLE 1A: ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
NET CHANGE SEPTEMBER 30, NET CHANGE SEPTEMBER 30,
1996-1997 ATTRIBUTABLE TO: 1995-1996 ATTRIBUTABLE TO:
----------------------------------- -----------------------------------
NET NET
VOLUME (1) RATE (2) CHANGE VOLUME (1) RATE(2) CHANGE
----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
INTEREST INCOME:
Federal Funds Sold..................... $ 57 $ 12 $ 69 $ 88 $ (49) $ 39
Securities Available for Sale.......... 956 59 1,015 889 139 1,028
Securities Held to Maturity............ (133) (28) (161) (1,153) 23 (1,130)
Loans.................................. 3,156 (167) 2,989 1,340 (233) 1,107
Interest Bearing Deposits.............. 12 2 14 2 -- 2
----------- ----- --------- ----------- ----- ---------
Total.............................. 4,048 (122) 3,926 1,166 (120) 1,046
----------- ----- --------- ----------- ----- ---------
INTEREST EXPENSE:
Deposits:
NOW & Money Markets.................. 308 (80) 228 99 48 147
Savings.............................. 34 (15) 19 15 (63) (48)
Time Deposits........................ 1,221 128 1,349 190 (85) 105
Short Term Borrowings.................. 179 -- 179 -- -- --
Notes Payable & Debentures............. 71 (6) 65 (43) (10) (53)
----------- ----- --------- ----------- ----- ---------
Total................................ 1,813 27 1,840 261 (110) 151
----------- ----- --------- ----------- ----- ---------
Net Interest Income................ $ 2,235 $ (149) $ 2,086 $ 905 $ (10) $ 895
----------- ----- --------- ----------- ----- ---------
----------- ----- --------- ----------- ----- ---------
</TABLE>
- ------------------------
(1) The volume variance reflects the change in the average balance outstanding
multiplied by the actual average rate during the prior period.
(2) The rate variance reflects the change in the actual average rate multiplied
by the average balance outstanding during the prior period.
12
<PAGE>
PROVISION FOR LOAN LOSS
The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The provision for loan loss is a charge to earnings in the
current period to maintain the allowance at a level management has determined to
be adequate. Management periodically evaluates the adequacy of the allowance for
loan losses based on a review of all significant loans, with a particular
emphasis on past due and other loans that management believes require attention.
The allowance for loan losses remained relatively constant at $1.5 million or
.93% of loans outstanding in 1997 compared to $1.4 million or 1.04% in 1996. The
provision for loan losses increased $45,000, or 15.8%, to $330,000 during the
first nine months of 1997 as compared to $285,000 for the comparable period in
1996.
NON-INTEREST INCOME
Non-Interest income for the period ended September 30, 1997 was $1.6
million, an increase of $.4 million or 33.7% from the same period in 1996. The
increase is directly related to internal asset growth and assets acquired from
Riherd Bank Holding Company on September 1, 1996. Although net interest income
increased, non- interest income as a percentage of average assets was .84% for
the period ending September 30, 1997 compared to .86% for 1996.
NON-INTEREST EXPENSE
Non-interest expense increased in the first nine months of 1997, as compared
to 1996, by $1.4 million or 30.4%. Non-interest expense as a percentage of
average assets declined to 3.03% at September 30, 1997, compared to 3.20% for
the same period in 1996. In the third quarter of 1996, the Bank paid a one-time
SAIF assessment expense of $326,823. Without the assessment, non-interest
expense to average assets would have been 2.96% in 1996. Salaries and employee
benefits increased 36.4% to $3.0 million compared to $2.2 million in 1996.
However, as a percentage of average total assets, they have remained unchanged
at 1.53% and 1.54% on September 30, 1997 and 1996, respectively. Occupancy and
equipment expenses have increased $359,000 compared to the same period in 1996.
The three offices purchased in the Riherd acquisition, accounted for $252,000 of
the increase. Another major contributing factor was an increase in additional
data processing costs of $206,000 or 113.8% from 1996, which resulted when the
company renewed a data processing service contract at prevailing market rates.
The overhead efficiency ratio, which is the percentage of overhead expense
to total revenue less interest expense and provision for loan losses, declined
to 63.1% from 65.7% for the period ended September 30, 1997, compared to 1996.
Without the SAIF assessment in September, 1996, the ratio would have been 60.9%.
The increase reflects the additional personnel and occupancy expense associated
with the Riherd acquisition and the increase in data processing costs. However,
the third quarter of 1997, compared to the second quarter of 1997, improved to
63.1% from 63.9%, respectively.
TABLE 2: OTHER OPERATING EXPENSES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Data Processing.................................................. $ 387 $ 181
Marketing........................................................ 218 208
Supplies......................................................... 187 106
Amortization of Intangible Assets................................ 151 110
Postage and Delivery............................................. 140 99
Telephone........................................................ 128 71
Legal and Professional........................................... 118 89
Loan Expenses.................................................... 112 74
Courier.......................................................... 109 54
Regulatory Fees (1).............................................. 86 480
Administrative................................................... 76 64
Other............................................................ 160 118
--------- ---------
Total Other Operating Expenses................................... $ 1,872 $ 1,654
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Includes one-time SAIF recapitalization assessment of $326,823 in 1996.
13
<PAGE>
INCOME TAXES
The Company's income tax expense in interim reporting periods is determined
by estimating the combined federal and state effective tax rate for the year and
applying the resultant rate to interim pre-tax income. The Company estimates its
blended tax rate for 1997 federal and state taxes to be 34%.
EARNING ASSETS
Loans
During the first nine months of 1997, average loans were $154.0 million and
were 65.3% of average earning assets, compared to $109.6 million and 64.1% for
1996. Total loans have increased by $21.6 million, or 15.7%, since September 30,
1996, to $158.7 million from $137.1 million. The Company's loan-to-deposit ratio
has climbed to 69.1% at September 30, 1997, compared to 62.8% at the end of the
comparable period in 1996. The following table compares the composition of the
Company's loan portfolio as of September 30, 1997, to 1996. Management expects
this loan portfolio composition to stay approximately the same throughout 1997.
TABLE 3: LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
---------- ----------
<S> <C> <C>
(THOUSANDS)
Types of Loans
Commercial, Financial and Agricultural........................... $ 69,457 $ 59,319
Real Estate--Construction........................................ 3,722 5,628
Real Estate--Mortgage............................................ 66,983 52,994
Installment and Consumer Lines................................... 18,489 19,152
---------- ----------
Total Loans, Net of Unearned Discount............................ 158,651 137,093
Less: Allowance for Loan Losses.................................. 1,483 1,419
---------- ----------
Net Loans........................................................ $ 157,168 $ 135,674
---------- ----------
---------- ----------
</TABLE>
The following table sets forth the maturity distribution for selected
components of the Company's loan portfolio including unearned discounts of
$63,000 on September 30, 1997. Demand loans and overdrafts are reported as due
in one year or less, and loan maturity is based upon scheduled principal
payments.
TABLE 4: MATURITY SCHEDULE OF SELECTED LOANS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
0-12 1-5 OVER 5
MONTHS YEARS YEARS TOTAL
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
(THOUSANDS)
All Loans Other Than Construction.................................... $ 14,335 $ 62,126 $ 78,531 $ 154,992
Real Estate--Construction............................................ 3,722 -- -- 3,722
--------- --------- --------- ----------
Total................................................................ $ 18,057 $ 62,126 $ 78,531 $ 158,714
--------- --------- --------- ----------
--------- --------- --------- ----------
Fixed Interest Rate.................................................. $ 8,050 $ 39,999 $ 22,384 $ 70,433
Variable Interest Rate............................................... $ 10,007 $ 22,127 $ 56,147 $ 88,281
</TABLE>
14
<PAGE>
LOAN QUALITY. The allowance for loan losses on September 30, 1997, was .93%
of total loans, compared to 1.04% one year earlier. Table 5: "Allocation of
Allowance for Loan Losses", set forth below, indicates the specific reserves
allocated by loan type.
TABLE 5: ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
---------------------------- ----------------------------
PERCENT OF PERCENT OF
LOANS IN EACH LOANS IN EACH
CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
--------- ----------------- --------- -----------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial, Financial and Agricultural..... $ 906 44% $ 805 43%
Real Estate--Construction.................. 8 2% 16 4%
Real Estate- Mortgage...................... 164 42% 142 39%
Consumer................................... 405 12% 397 14%
Unallocated................................ -- -- 59 --
--------- --- --------- ---
Total...................................... $ 1,483 100% $ 1,419 100%
--------- --- --------- ---
--------- --- --------- ---
</TABLE>
Total non-performing assets on September 30, 1997 increased $1.0 million or
228.7% to $1.4 million compared to $.4 million on the same date in 1996.
Non-performing loans, plus other real estate owned, as a percentage of total
assets at September 30, 1997 and 1996 was .53% and .18%, respectively. The
increase in non-performing assets is mainly attributable to four loan
relationships acquired from the Riherd acquisition totalling $.8 million, which
are in process of collection. Anticipated losses applicable to these loans have
been provided for in the allowance for loan losses on September 30, 1997.
TABLE 6: NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
DECEMBER 31,
1997 1996 1996
--------- --------- -------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Non-Accrual Loans........................................... $ 1,256 $ 112 $ 87
Past Due Loans 90 Days or More and Still Accruing........... 78 192 229
Other Real Estate Owned..................................... 76 125 88
--------- --------- ------
Total Non-Performing Assets................................. $ 1,410 $ 429 $ 404
--------- --------- ------
--------- --------- ------
Percent of Total Assets..................................... 0.53% 0.18% 0.16%
</TABLE>
The determination of the reserve level rests upon management's judgment
about factors affecting loan quality and assumptions about the economy.
Management considers the period-end allowance appropriate and adequate to cover
possible losses in the loan portfolio; however, management's judgment is based
upon a number of assumptions about future events, which are believed to be
reasonable, but which may or may not prove to be valid. Thus, there can be no
assurance that charge-offs in future periods will not exceed the allowance for
loan losses or that additional increases in the allowance for loan losses will
not be required. Table 7: "Activity in Allowance for Loan Losses", below,
indicates activity in the allowance for loan losses for the first nine month
period of 1997 as compared to 1996.
15
<PAGE>
TABLE 7: ACTIVITY IN ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Allowance for loan loss balance applicable to:
Balance at Beginning of Year........................................ $ 1,396 $ 946
Allowance--Acquired in merger....................................... 371
Loans Charged-Off:
Commercial, Financial and Agricultural............................ 115 61
Real Estate, Construction......................................... -- --
Real Estate, Mortgage............................................. -- 1
Consumer.......................................................... 171 142
---------- ----------
Total Loans Charged-Off......................................... 286 204
---------- ----------
Recoveries on Loans Previously Charged-Off:
Commercial, Financial and Agricultural............................ 11 7
Real Estate, Construction......................................... -- --
Real Estate, Mortgage............................................. -- 1
Consumer.......................................................... 32 13
---------- ----------
Total Loan Recoveries........................................... 43 21
---------- ----------
Net Loans Charged-Off......................................... 243 183
---------- ----------
Provision for Loan Losses Charged to Expense........................ 330 285
---------- ----------
Ending Balance...................................................... $ 1,483 $ 1,419
---------- ----------
---------- ----------
Total Loans Outstanding............................................. $ 158,651 $ 137,093
Average Loans Outstanding........................................... $ 154,006 $ 109,624
Allowance for Loan Losses to Loans Outstanding...................... 0.93% 1.04%
Net Charge-Offs to Average Loans Outstanding........................ 0.16% 0.17%
</TABLE>
SECURITIES
When the Company's liquidity position exceeds expected loan demand, other
investments are considered by management as a secondary earnings alternative.
Typically, management remains short-term (under 5 years) in its decision to
invest in certain securities and always strives to ensure a portion of its
investment portfolio to be maturing in the next quarter. As these investments
mature, they will be used to meet cash needs or will be reinvested to maintain a
desired liquidity position. Most of the investment portfolio is designated as
available for sale to provide the company flexibility, and in case an immediate
need for liquidity arises. The Federal Reserve Bank and the Federal Home Loan
Bank also require equity investments to be maintained by the Bank as a member of
their services.
16
<PAGE>
The following tables set forth the maturity distribution and the weighted
average yields of the Company's investment portfolio by those securities held to
maturity and available for sale.
TABLE 8: MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HELD TO MATURITY (4) AVAILABLE FOR SALE
-------------------------- -------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
THOUSANDS COST MARKET VALUE COST MARKET VALUE
- ------------------------------------------------------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury:
One Year or Less........................................... $ -- $ -- $ 11,500 $ 11,517
Over One Through Five Years................................ -- -- 20,452 20,651
----------- ------ ----------- ------------
Total U.S. Treasury.......................................... -- -- 31,952 32,168
U.S. Government Agencies and Corporations:
One Year or Less........................................... 71 72 500 497
Over One Through Five Years................................ 8,602 8,410 8,380 8,396
Over Five Through Ten Years (4)............................ -- -- 2,865 2,868
Over Ten Years (4)......................................... -- -- 7,596 7,639
----------- ------ ----------- ------------
Total U.S. Government Agencies and Corporations.............. 8,673 8,482 19,341 19,400
Obligations of State and Political Subdivisions:
Over One Through Five Years................................ -- -- 100 103
Over Five Through Ten Years................................ -- -- 706 739
Over Ten Years............................................. -- -- 608 627
----------- ------ ----------- ------------
Total Obligations of State and Political Subdivisions........ -- -- 1,414 1,469
Other Securities:
One Year or Less (2)....................................... -- -- 5,573 5,573
Over One Through Five Years (2)............................ -- -- 76 76
Over Ten Years (3)......................................... -- -- 1,388 1,388
----------- ------ ----------- ------------
Total Other Securities....................................... -- -- 7,037 7,037
----------- ------ ----------- ------------
Total Securities............................................. $ 8,673 $ 8,482 $ 59,744 $ 60,074
----------- ------ ----------- ------------
----------- ------ ----------- ------------
</TABLE>
- ------------------------
(1) All securities, excluding Obligations of State and Political Subdivisions,
are taxable.
(2) Represents Interest-bearing deposits in other banks.
(3) Represents investment in Federal Reserve Bank and Federal Home Loan Bank
stock and other marketable equity securities.
(4) Includes investments in mortgage-backed securities which are subject to
early repayment.
TABLE 9: WEIGHTED AVERAGE YIELD BY RANGE OF MATURITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31,1996 SEPTEMBER 30, 1996
--------------------- ------------------- ---------------------
<S> <C> <C> <C>
One Year or Less....................................... 5.49% 5.24% 5.79%
Over One through Five Years............................ 6.02% 6.09% 5.95%
Over Five through Ten Years............................ 6.78% 6.43% 6.39%
Over Ten Years (1)..................................... 6.39% 6.14% 6.19%
</TABLE>
- ------------------------
(1) Represents adjustable rate mortgage-backed securities which are repriceable
within one year.
17
<PAGE>
OTHER EARNING ASSETS
Temporary investment needs are created in the day-to-day liquidity movement
of the Bank and are satisfied by selling excess funds overnight (Fed Funds Sold)
to larger, well capitalized banking institutions. If these funds become
excessive, management determines what portion, if any, of the liquidity may be
rolled into longer term investments as securities.
FUNDING SOURCES
Deposits
The Bank does not rely on purchased or brokered deposits as a source of
funds. Instead, competing for deposits within its market area serves as the
Bank's fundamental tool in providing a source of funds to be invested primarily
in loans. The following table sets forth certain deposit categories for the
periods ended September 30, 1997 and 1996.
TABLE 10: TOTAL DEPOSITS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 1996
---------- ----------
<S> <C> <C>
(THOUSANDS)
Non-Interest Bearing:
Demand Checking..................................................... $ 31,152 $ 29,777
Interest Bearing:
NOW Checking........................................................ 39,121 33,496
Money Market Checking............................................... 23,092 28,703
Savings............................................................. 14,360 14,952
Certificates of Deposit............................................. 121,868 111,307
---------- ----------
Total Deposits........................................................ $ 229,593 $ 218,235
---------- ----------
---------- ----------
</TABLE>
NOTE PAYABLE
The Company borrowed $2.7 million in connection with the acquisition of
Riherd Bank Holding Company in September, 1996. Total notes outstanding on
September 30, 1997 were $1.8 million compared to $3.0 million in 1996. During
the past year, the Company has continued to voluntarily accelerate principal
payments on its note payable. This effort is reflected by the $1.2 million
decrease in outstanding balance when comparing September 30, 1997 to the same
period in 1996.
REPURCHASE AGREEMENTS
The Bank has entered into repurchase agreements with several customers under
which the Bank pledges investment securities owned and under its control as
collateral against the one-day agreements. The daily average balance of these
agreements during 1997 has been $4.7 million. Interest expense was $179,000.
There were no agreements of this nature during the period ended September 30,
1996.
INTEREST RATE SENSITIVITY/LIQUIDITY
Net interest income, the Company's primary source of revenue, is affected
by changes in interest rates as well as levels and mix of earning assets and
interest-bearing liabilities. The impact on net interest income as a result
of changes in interest rate and balance sheet mix constitutes the Company's
interest rate sensitivity. The interest rate sensitivity position at the end
of the first nine months of 1997 is presented in Table 11: "Rate Sensitivity
Analysis." The difference between rate-sensitive assets and rate-sensitive
liabilities, or the interest rate sensitivity gap, is shown at the bottom of
the table.
The Company would benefit from increasing market rates when it is asset
sensitive and would benefit from
18
<PAGE>
decreasing market rates when it is liability sensitive. At September 30,
1997, the Company had a liability sensitive gap (more liabilities than assets
subject to repricing within the stated time frame) of $16.4 million within a
one-year period. This suggests that if interest rates should decline over
this period, the net interest margin should improve, and if interest rates
should increase, the net interest margin should decline. Since all interest
rates and yields do not adjust at the same velocity, the gap is only a
general indicator of rate sensitivity.
TABLE 11: RATE SENSITIVITY ANALYSIS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
0-3 4-6 7-12 1-5 OVER 5
(DOLLARS IN THOUSANDS) MONTHS MONTHS MONTHS YEARS YEARS TOTAL
- ------------------------------------------------ --------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Federal Funds Sold.............................. $ 16,000 $ -- $ -- $ -- $ -- $ 16,000
Securities Held to Maturity..................... 57 -- 14 8,602 -- 8,673
Securities Available for Sale (1,2)............. 12,831 5,859 4,987 29,007 7,060 59,744
Loans (3)....................................... 46,092 12,129 22,589 59,104 18,800 158,714
--------- ---------- ---------- --------- ---------- ----------
Total Earning Assets............................ 74,980 17,988 27,590 96,713 25,860 243,131
--------- ---------- ---------- --------- ---------- ----------
INTEREST BEARING LIABILITIES:
NOW & Money Market (4).......................... 32,091 -- -- -- 30,122 62,213
Savings (4)..................................... 4,308 -- -- -- 10,052 14,360
Time Deposits................................... 27,456 30,161 37,054 27,170 27 121,868
Securities Sold Under Repurchase Agreements..... 4,172 -- -- -- -- 4,172
Notes Payable & Debentures...................... 1,750 -- -- -- -- 1,750
--------- ---------- ---------- --------- ---------- ----------
Total Interest Bearing.......................... 69,777 30,161 37,054 27,170 40,201 204,363
--------- ---------- ---------- --------- ---------- ----------
Int. Rate Sens. Gap............................. $ 5,203 $ (12,173) $ (9,464) $ 69,543 $ (14,341) 38,768
--------- ---------- ---------- --------- ---------- ----------
--------- ---------- ---------- --------- ---------- ----------
Cum. Int. Rate Sens. Gap........................ $ 5,203 $ (6,970) $ (16,434) $ 53,109 $ 38,768 $ 38,768
--------- ---------- ---------- --------- ---------- ----------
--------- ---------- ---------- --------- ---------- ----------
Int. Rate Sens. Gap Ratio....................... 1.07 0.60 0.74 3.56 0.64 1.19
--------- ---------- ---------- --------- ---------- ----------
--------- ---------- ---------- --------- ---------- ----------
Cum. Int. Rate Sens. Gap Ratio.................. 1.07 0.93 0.88 1.32 1.19 1.19
--------- ---------- ---------- --------- ---------- ----------
--------- ---------- ---------- --------- ---------- ----------
Ratio of Cumulative Gap to
Total Earning Assets:
September 30,1997........................... 2.14% (2.87)% (6.76)% 21.84% 15.95%
--------- ---------- ---------- --------- ----------
--------- ---------- ---------- --------- ----------
September 30, 1996.......................... 0.40% (4.89)% (8.70)% 20.17% 11.91%
--------- ---------- ---------- --------- ----------
--------- ---------- ---------- --------- ----------
</TABLE>
- ------------------------
(1) Includes Interest Bearing Deposits of $5,649,000.
(2) Includes equity in Federal Home Loan Bank of $764,000 and Federal Reserve
Bank of $518,000. Securities are shown at their amortized cost, excluding
market value adjustment for unrealized gains of $330,000.
(3) Total Loans including Unearned Discount of $63,000.
(4) Certain deposit accounts are included in the After Five Years category. If
these deposit accounts had been included in the Within Three Months
category, the ratio of cumulative gap to total earning assets would have
been (23.28) for the one year category at September 30, 1997.
The Bank's interest rate sensitivity, gap and liquidity positions are
formally reviewed quarterly by management to determine whether or not changes
in policies and procedures are necessary to achieve financial goals. Included
in the review is an internal analysis of the possible impact on net interest
income due to market rate changes of plus and minus 1%. In the rate
sensitivity analysis, current average rates within the repricing periods of
affected balance sheet categories are adjusted to a historical percentage of
market change according to each rate shock scenario. The adjusted rates are
then substituted in interest computations and compared to actual results.
These efforts will continue to provide the tools necessary in the Company's
attempt to maximize its primary earnings factor: net interest income.
19
<PAGE>
Liquidity represents the ability to provide steady sources of funds for loan
commitments and investment activities, as well as to provide sufficient funds to
cover deposit withdrawals and payment of debt and operating obligations. These
funds can be obtained by converting assets to cash or by attracting new
deposits. Average liquid assets (cash and amounts due from banks, interest
bearing deposits in other banks, federal funds sold and securities available for
sale) totaled $81.7 million and represented 36.1% of average total deposits
during the first nine months of 1997, compared to $56.1 million and 33.4% for
1996. Average loans were 68.0% and 65.1% of average deposits for the nine month
period ended September 30, 1997 and 1996, respectively. As noted in Table 3:
"Loan Portfolio Composition", approximately $140.2 million, or 88.3%, of the
loan portfolio consisted of commercial loans, real estate mortgage loans and
real estate construction loans. Approximately 11.4% of the portfolio matures
within one year.
Core deposits, which represent all deposits other than time deposits in
excess of $100,000, were 86.4% of total deposits at the end of the first nine
months of 1997 and 89.8% in the comparable period in 1996. The Bank closely
monitors its reliance on time deposits in excess of $100,000, which are
generally considered less stable and less reliable than core deposits. Table 12,
below, sets forth the amounts of time deposits with balances of $100,000 or more
that mature within indicated periods. The Bank does not nor has it ever
solicited brokered deposits.
TABLE 12: MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
AMOUNT
-------------
<S> <C>
(IN
THOUSANDS)
Three Months or Less........................................................... $ 6,161
Three Through Six Months....................................................... 4,304
Six Through Twelve Months...................................................... 9,042
Over Twelve Months............................................................. 11,692
-------------
Total.......................................................................... $ 31,199
-------------
-------------
</TABLE>
CAPITAL RESOURCES
The OCC regulates risk based capital guidelines for national banks. These
guidelines are intended to provide an additional measure of a bank's capital
adequacy by assigning weighted levels of risk to asset categories. Banks are
also required to systematically hold capital against such "off balance sheet"
activities as loans sold with recourse, loan commitments, guarantees and standby
letters of credit. These guidelines are intended to strengthen the quality of
capital by increasing the emphasis on common equity and restricting the amount
of loss reserves and other forms of equity such as preferred stock that may be
included in capital.
Under the terms of the guidelines, banks must meet minimum capital adequacy
based upon both total assets and risk adjusted assets. All banks are required to
maintain a minimum ratio of total capital to risk-weighted assets of 8% and a
minimum ratio of Tier 1 capital to risk-weighted assets of 4%. Adherence to
these guidelines has not had an adverse impact on the Company or the Bank.
Selected capital ratios at September 30, 1997 compared to 1996 are as follows:
TABLE 13: CAPITAL RATIOS
<TABLE>
<CAPTION>
SEPTEMBER 30, WELL CAPITALIZED REGULATORY
1997 1996 REQUIREMENTS MINIMUMS
--------- --------- ----------------- ---------------
<S> <C> <C> <C> <C>
Risk Based Capital Ratios:
Tier 1 Capital Ratio.............................................. 17.3% 12.8% 6.0% 4.0%
Total Capital to
Risk-Weighted Assets............................................ 18.2% 14.1% 10.0% 8.0%
Tier 1 Leverage Ratio............................................... 10.1% 8.5% 5.0% 4.0%
</TABLE>
20
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS--There are no material pending
legal proceedings to which the Company or any of its subsidiaries is a party or
of which any of their property is the subject.
ITEM 2. CHANGES IN SECURITIES--
(a) Not applicable.
(b) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES--NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NOT APPLICABLE
ITEM 5. OTHER INFORMATION--NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
None
(b) Reports on Form 8-K--No reports on Form 8-K were filed by the registrant
during the three month period ended September 30, 1997.
21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CNB, INC.(REGISTRANT)
BY: /S/ K. C. TROWELL
-----------------------------------------
K. C. Trowell
PRESIDENT, PRINCIPAL EXECUTIVE
OFFICER, AND CHIEF FINANCIAL
OFFICER
DATE: NOVEMBER 7,1997
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,892
<INT-BEARING-DEPOSITS> 5,649
<FED-FUNDS-SOLD> 16,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 54,425
<INVESTMENTS-CARRYING> 8,673
<INVESTMENTS-MARKET> 8,482
<LOANS> 158,651
<ALLOWANCE> 1,483
<TOTAL-ASSETS> 266,158
<DEPOSITS> 229,593
<SHORT-TERM> 4,172
<LIABILITIES-OTHER> 2,273
<LONG-TERM> 1,750
0
0
<COMMON> 24
<OTHER-SE> 28,346
<TOTAL-LIABILITIES-AND-EQUITY> 266,158
<INTEREST-LOAN> 10,799
<INTEREST-INVEST> 3,133
<INTEREST-OTHER> 468
<INTEREST-TOTAL> 14,400
<INTEREST-DEPOSIT> 6,101
<INTEREST-EXPENSE> 6,416
<INTEREST-INCOME-NET> 7,984
<LOAN-LOSSES> 330
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 5,848
<INCOME-PRETAX> 3,425
<INCOME-PRE-EXTRAORDINARY> 2,235
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,235
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<YIELD-ACTUAL> 4.53
<LOANS-NON> 1,256
<LOANS-PAST> 78
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,396
<CHARGE-OFFS> 286
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 1,483
<ALLOWANCE-DOMESTIC> 1,483
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
