<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 June 30, 1998
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)
FLORIDA 59-2958616
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Post Office Box 3239
201 North Marion Street
Lake City, Florida 32056
--------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 755-3240
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 July 31,
1998 was 2,428,385 shares, $0.01 par value per share.
<PAGE>
CNB, INC.
FINANCIAL REPORT ON FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
(Unaudited)
Consolidated Statement of Financial Condition ................................ 3
Consolidated Statements of Income ............................................ 4
Consolidated Statements of Shareholders' Equity............................... 6
Consolidated Statements of Cash Flows ........................................ 7
Notes to Consolidated Financial Statements ................................... 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 ............................................................... 22
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ................................... 23
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1998
---------
ASSETS (thousands)
<S> <C>
CASH AND CASH EQUIVALENTS:
Cash and due from banks $ 9,374
Federal funds sold 33,025
Interest bearing deposits in other banks 5,866
---------
Total Cash and Cash Equivalents 48,265
Investment securities available for sale 45,688
Investment securities held to maturity 6,637
Loans:
Commercial, Financial & Agricultural 79,674
Real Estate - Mortgage 70,430
Real Estate - Construction 4,346
Installment & Consumer Lines 19,404
---------
Total Loans, net of unearned discount 173,854
Less: Allowance for Loan Losses (1,583)
---------
Net Loans 172,271
Premises and equipment, net 10,216
Other assets 4,675
---------
TOTAL ASSETS $ 287,752
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing demand $ 33,336
Savings, Time & Demand 178,031
Time, $100,000 & over 36,636
---------
Total Deposits 248,003
Securities sold under repurchase agreements 7,262
Other liabilities 2,471
---------
Total Liabilities 257,736
---------
SHAREHOLDERS' EQUITY
Preferred stock; $.01 par value; 500,000 shares
authorized; no shares issued or outstanding --
Common stock; $.01 par value; 10,000,000 shares
authorized; 2,428,385 shares issued and outstanding 24
Additional paid-in capital 19,490
Retained earnings 10,199
Unrealized gain on investment securities available for sale, net of taxes 303
---------
Total Shareholders' Equity 30,016
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 287,752
---------
---------
</TABLE>
3
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
----------- -----------
Interest Income (in thousands)
<S> <C> <C>
Interest and fees on loans $ 7,638 $ 7,088
Interest on investment securities held to maturity 194 264
Interest on investment securities available for sale 1,576 1,841
Interest on federal funds sold 720 242
Interest on interest bearing deposits 160 4
----------- -----------
Total Interest Income 10,288 9,439
----------- -----------
Interest Expense
Interest on deposits 4,393 3,995
Interest on notes payable 7 96
Interest on short-term borrowings 157 121
----------- -----------
Total Interest Expense 4,557 4,212
----------- -----------
Net Interest Income 5,731 5,227
Provision for Loan Loss 230 260
----------- -----------
Net Interest Income After Provision for Loan Loss 5,501 4,967
Non-interest Income
Service charges 853 832
Other fees and charges 282 221
Gain on sale of securities 2 --
----------- -----------
Total Non-Interest Income 1,137 1,053
----------- -----------
Non-interest Expense
Salaries and employee benefits 2,256 1,967
Occupancy and equipment expenses 794 664
Other operating expenses 1,404 1,214
----------- -----------
Total Non-interest Expense 4,454 3,845
----------- -----------
Income Before Income Taxes 2,184 2,175
Income Taxes 755 754
----------- -----------
NET INCOME $ 1,429 $ 1,421
----------- -----------
----------- -----------
Other Comprehensive Income, Net of Tax
Unrealized gains on securities:
Unrealized gains (losses) arising during the period 48 (8)
Less: reclassification adjustment for gains
included in net income (1) --
----------- -----------
Other Comprehensive Income 47 (8)
----------- -----------
Comprehensive Income 1,476 1,413
----------- -----------
----------- -----------
Earnings Per Share (Note 3):
Basic earnings per share $ 0.59 $ 0.73
----------- -----------
----------- -----------
Average common shares 2,428,385 1,937,905
----------- -----------
----------- -----------
Dilutive earnings per share $ 0 .58 $ 0.72
----------- -----------
----------- -----------
Dilutive average common shares and share equivalents 2,471,324 1,967,509
----------- -----------
----------- -----------
</TABLE>
4
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
----------- -----------
Interest Income (thousands)
<S> <C> <C>
Interest and fees on loans $ 3,925 $ 3,592
Interest on investment securities held to maturity 90 132
Interest on investment securities available for sale 744 958
Interest on federal funds sold 422 66
Interest on interest bearing deposits 81 2
----------- -----------
Total Interest Income 5,262 4,750
----------- -----------
Interest Expense
Interest on deposits 2,238 2,047
Interest on notes payable -- 46
Interest on short-term borrowings 83 71
----------- -----------
Total Interest Expense 2,321 2,164
----------- -----------
Net Interest Income 2,941 2,586
Provision for Loan Loss 150 130
----------- -----------
Net Interest Income After Provision for Loan Loss 2,791 2,456
Non-interest Income
Service charges 441 419
Other fees and charges 124 79
Gain on sale of securities -- --
----------- -----------
Total Non-Interest Income 565 498
----------- -----------
Non-interest Expense
Salaries and employee benefits 1,163 986
Occupancy and equipment expenses 400 334
Other operating expenses 729 598
----------- -----------
Total Non-interest Expense 2,292 1,918
----------- -----------
Income Before Income Taxes 1,064 1,036
Income Taxes 367 356
----------- -----------
NET INCOME $ 697 $ 680
----------- -----------
----------- -----------
Other Comprehensive Income, Net of Tax
Unrealized gains on securities:
Unrealized gains arising during the period 4 268
Less: reclassification adjustment for gains
included in net income -- --
----------- -----------
Other Comprehensive Income 4 268
----------- -----------
Comprehensive Income 701 948
----------- -----------
----------- -----------
Earnings Per Share (Note 3):
Basic earnings per share $ 0.29 $ 0.35
----------- -----------
----------- -----------
Average common shares 2,428,385 1,937,905
----------- -----------
----------- -----------
Dilutive earnings per share $ 0.28 $ 0.34
----------- -----------
----------- -----------
Dilutive average common shares and share equivalents 2,471,324 1,967,509
----------- -----------
----------- -----------
</TABLE>
5
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Additional Gain (Loss) Total
Common Paid-in Retained Treasury on Investment Shareholders'
Stock Capital Earnings Stock Securities Equity
--------- ----------- ----------- --------- ---------- ------------
(thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $ 19 $ 12,683 $ 6,901 $ -- $ 66 $ 19,669
Net Income for Six Months
Ended June 30, 1997 -- -- 1,421 -- -- 1,421
Cash Dividends -- -- (233) -- -- (233)
Purchase of Treasury Stock -- -- -- (10) -- (10)
Change in Unrealized Loss on Securities
Available for Sale, net of taxes -- -- -- -- (8) (8)
--------- ----------- ----------- --------- ---------- -----------
BALANCE, JUNE 30, 1997 $ 19 $ 12,683 $ 8,089 $ (10) $ 58 $ 20,839
--------- ----------- ----------- --------- ---------- ------------
--------- ----------- ----------- --------- ---------- ------------
BALANCE, DECEMBER 31, 1997 $ 24 $ 19,490 $ 9,256 $ -- $ 255 $ 29,025
Net income for the Six Months
Ended June 30, 1998 -- -- 1,429 -- -- 1,429
Cash Dividends -- -- (486) -- -- (486)
Change in Unrealized Gain on Securities
Available for Sale, net of taxes -- -- -- -- 48 48
--------- ----------- ----------- --------- ---------- ------------
BALANCE, JUNE 30, 1998 $ 24 $ 19,490 $ 10,199 $ -- $ 303 $ 30,016
--------- ----------- ----------- --------- ---------- ------------
--------- ----------- ----------- --------- ---------- ------------
</TABLE>
6
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES (in thousands)
<S> <C> <C>
Net income $ 1,429 $ 1,421
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 440 397
Provision for loan loss 230 260
Investment securities amortization, net 34 87
Changes in asset and liabilities:
Other Assets (532) (162)
Other Liabilities 216 9
------------ -----------
Net Cash Provided By Operating Activities 1,817 2,012
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale (4,160) (10,168)
Proceeds from called securities available for sale 2,100 4,500
Proceeds from maturities of securities available for sale 7,000 5,000
Proceeds from sale of securities available for sale - -
Principal payments received on mortgage backed securities
available for sale 2,276 1,416
Principal payments received on mortgage backed securities
held to maturity 1,440 845
Net increase in loans (14,347) (7,617)
Purchases of premises and equipment, net (446) (804)
------------ -----------
Net Cash Used In Investing Activities (6,137) (6,828)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 16,559 (2,430)
Securities sold under repurchase agreements (1,895) 1,842
Repayment of note payable (1,450) (600)
Cash dividend(s) (486) (233)
Purchase of treasury stock - (10)
------------ -----------
Net Cash Provided By Financing Activities 12,728 (1,431)
------------ -----------
Net Increase (Decrease) in Cash and Cash Equivalents 8,408 (6,247)
Beginning Balance 39,857 22,880
------------ -----------
Cash and Cash Equivalents at End of Period $ 48,265 $ 16,633
------------ -----------
------------ -----------
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 4,467 $ 4,107
------------ -----------
------------ -----------
Taxes Paid $ 685 $ 900
------------ -----------
------------ -----------
</TABLE>
7
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
Note 1. Consolidation
The consolidated financial statements include the accounts of CNB, Inc., "the
Company" 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. For further information refer to the consolidated financial
statements and footnotes, thereto, included in the Company's annual report on
Form 10-KSB for the year-ended December 31, 1997. 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 six months ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998.
Note 3. Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standard ("SFAS") No. 128, "Earnings Per Share." SFAS
No. 128 replaces the presentation of primary and fully diluted earnings per
share with a presentation of basic and diluted earnings per share. Basic
earnings per share is calculated based on weighted average number of shares of
common stock. Diluted earnings per share is calculated based on the weighted
average number of shares of common stock outstanding and common stock
equivalents, consisting of outstanding stock options. Common stock equivalents
are determined using the treasury method for diluted shares outstanding. The
difference between diluted and basic shares outstanding is common stock
equivalents from stock options outstanding in the periods ended June 30, 1998
and 1997.
Note 4. Comprehensive Income
On January 1, 1998, the Company adopted Statements of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
provides new accounting and reporting standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. The adoption of this standard did not have a material
impact on reported results of operations of the Company.
Total comprehensive income is defined as the total of net income and all other
changes in equity. The Company reported total comprehensive income, net of tax,
for the quarters ended June 30, 1998 and 1997 of $1,476,000 and $1,413,000,
respectively. Total comprehensive net income, net of tax, for the second quarter
of 1998 and 1997, included net gains of $47,000 and net losses of $8,000,
respectively. These changes reflect a market value increase and decrease in
investment securities available-for-sale securities for the quarters ended June
30, 1998 and 1997.
Note 5. New Accounting Pronouncement
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement establishes accounting and
reporting standards for derivative instruments (including certain derivative
instruments imbedded in other contracts). The statement is effective for fiscal
years beginning after June 15, 1999. The financial impact of the adoption of
this statement has not been determined. However, the affect of the adoption of
the statement is not expected to be material.
Note 6. 2-for-1 Stock Split
On July 15, 1998, the Company declared a 2-for-1 stock split for shareholders of
record on August 10, 1998 to be effective on August 17, 1998.
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
operstions. This report contains forward-looking statements within the
meaning of the federal securities laws such as interest rate sensitivity
projections, revenue and expense trends, and long-term objectives. The
forward looking statements in this report are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in or implied by the statements.
<TABLE>
<CAPTION>
Selected Financial Data
Six Months Ended June 30,
1998 1997 Change%
------------ ------------- -------------
Dollars in thousands except per share information.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS:
Total Interest Income $10,288 $9,439 9 %
Total Interest Expense (4,557) (4,212) 8
------------ -------------
Net Interest Income 5,731 5,227 10
Loan Loss Provision (230) (260) (12)
------------ -------------
Net Interest Income After
Provision for Loan Losses 5,501 4,967 11
Non-Interest Income 1,137 1,053 8
Non-Interest Expense (4,454) (3,845) 16
------------ -------------
Income Before Taxes 2,184 2,175 --
Income Taxes (755) (754) --
------------ -------------
Net Income $ 1,429 $1,421 1
------------ -------------
------------ -------------
- ---------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
Net Income Per Common Share $0.59 $0.73 (19)%
Dilutive Earnings Per Common Share 0.58 0.72 (19)
Book Value 12.36 10.75 15
Dividends 0.20 0.12 67
Shares Outstanding 2,428,385 1,937,905 25
Weighted Average Shares Outstanding 2,428,385 1,937,905 25
Dilutive Weighted Average Shares Outstanding 2,471,324 1,967,509 26
- ---------------------------------------------------------------------------------------------------------------------
KEY RATIOS:
Return on Average Assets 1.03% 1.12% (8)%
Return on Average Shareholders' Equity 9.74 14.19 (31)
Dividend Payout-computed on a per share basis 33.90 16.44 106
Overhead Ratio 67.10 63.87 5
Total Risk-Based Capital Ratio 17.60 14.17 24
Average Shareholders' Equity to Assets 10.56 7.91 34
Tier 1 Leverage 9.96 7.57 32
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AT PERIOD-END:
Assets $287,752 $254,936 13 %
Total Loans, net of unearned discount 173,854 156,342 11
Total Deposits 248,003 224,394 11
Common Shareholders' Equity 30,016 20,839 44
</TABLE>
9
<PAGE>
OVERVIEW
Total assets increased during the second quarter of 1998 to $287.8
million or 12.9% compared to $254.9 million for the comparable period in 1997.
Deposits at June 30, 1998 were $248.0 million compared to $224.4 million at June
30, 1997. Loans increased 11.2% to $173.9 million, compared to $156.3 million
for the same period in 1997. Shareholders' equity increased to $30.0 million or
44.0% at June 30, 1998 compared to $20.8 million for the same period in 1997
with $6.8 million attributable to the stock offering which was completed on July
15, 1997, an increase in unrealized gains on securities of $.3 million, $.9 paid
out in dividends and $3.0 million from retained earnings.
Net income for the six month period ended June 30, 1998 was $1.4
million or $.59 per share, coinciding with net income for the same period in
1997, or $.73 per share. These results produced a return on average
shareholders' equity of 9.7% and return on average assets of 1.03% as compared
to 14.2% and 1.12%, respectively, in 1997. The 1998 return on average
shareholders' equity and per share earnings were impacted by the stock offering
in 1997 which contributed 484,480 additional shares of common stock resulting in
an increase of $ 6.8 million in equity.
Allowance for loan losses remained unchanged at $1.6 million at June
30, 1998 and 1997.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, the primary source of revenue for the Bank, was
$5.7 million for the first six months of 1998, an increase of $.5 million, or
9.6% from last year. This increase was primarily a result of growth in loan
income. Interest expense was $4.6 million the first half of 1998 compared to
$4.2 million for the same period in 1997 with growth in time deposits being the
main contributing factor for this increase. Table 1 : "Average Balances - Yields
and Rates", below, provides the Company's average volume of interest earning
assets and interest bearing liabilities for the first half of 1998 and 1997. Net
interest margin essentially remain unchanged in 1998, as compared 1997. The
Company's interest rate spread decreased 18 basis points in 1998 compared to the
same period in 1997, reflecting the competitive interest rate environment for
loans and deposits. The Company has recognized a slight improvement in the
second quarter as compared to the first quarter of 1998 with interest margin
improving to 4.52% from 4.50% and interest spread improving to 3.84% as compared
to 3.82%.
10
<PAGE>
Table 1: Average Balances - Yields and Rates
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
------------------------------------ ----------------------------------
Interest Interest
Average Income or Average Average Income or Average
Balance Expense Rate Balance Expense Rate
------- ---------- ------- ------- --------- -------
(dollars in thousands)
ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Federal Funds Sold $ 26,899 $ 720 5.40% $ 9,414 $ 242 5.18%
Securities Available for Sale 51,723 1,576 6.14 61,234 1,841 6.06
Securities Held to Maturity 7,550 194 5.18 9,621 264 5.53
Loans, net unearned (1) 163,745 7,638 9.41 152,088 7,088 9.40
Interest Bearing Deposits 5,789 160 5.57 123 4 6.54
-------- ------- ---- -------- ------ ----
TOTAL EARNING ASSETS 255,706 10,288 8.11 232,480 9,439 8.19
All Other Assets 24,278 22,736
-------- --------
TOTAL ASSETS $279,984 $255,216
-------- --------
-------- --------
LIABILITIES AND
SHAREHOLDERS' EQUITY:
NOW & Money Markets $ 67,473 $ 842 2.52% $ 64,995 $ 803 2.49%
Savings 16,154 156 1.95 15,160 147 1.96
Time Deposits 125,371 3,395 5.46 116,191 3,045 5.28
Short Term Borrowings 6,226 157 5.08 4,900 121 4.98
Notes Payable & Debentures 169 7 8.05 2,400 96 8.07
-------- ------- ---- -------- ------ ----
TOTAL INTEREST BEARING
LIABILITIES 215,393 4,557 4.27 203,646 4,212 4.17
Demand Deposits 32,275 29,091
Other Liabilities 2,749 2,292
Shareholders' Equity 29,567 20,187
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $279,984 $255,216
-------- --------
-------- --------
----- ----
INTEREST SPREAD (2) 3.84% 4.02%
----- ----
----- ----
-------- -------
NET INTEREST INCOME $ 5,731 $5,227
-------- -------
-------- -------
NET INTEREST MARGIN (3) 4.52% 4.53%
---- ----
---- ----
</TABLE>
- ------------------
(1) Interest income on average loans includes loan fee recognition of $268,000
and $274,000 in 1998 and 1997 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
(Unaudited)
<TABLE>
<CAPTION>
NET CHANGE JUNE 30, NET CHANGE JUNE 30,
1997-1998 ATTRIBUTABLE TO: 1996-1997 ATTRIBUTABLE TO:
------------------------------------- -----------------------------------
Net Net
Volume (1) Rate (2) Change Volume (1) Rate (2) Change
---------- -------- ------ ---------- -------- ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Federal Funds Sold $ 449 $ 29 $ 478 $ 23 $ 3 $ 26
Securities Available for Sale (287) 22 (265) 723 32 755
Securities Held to Maturity (57) (13) (70) (87) 1 (86)
Loans 545 5 550 2,182 (107) 2,075
Interest Bearing Deposits 184 (28) 156 (8) -- (8)
-------- -------- -------- --------- --------- --------
Total 834 15 849 2,833 (71) 2,762
-------- -------- -------- --------- --------- --------
INTEREST EXPENSE:
Deposits:
NOW & Money Markets 30 9 39 272 (51) 221
Savings 10 (1) 9 26 (11) 15
Time Deposits 238 112 350 838 26 864
Short Term Borrowings 33 3 36 121 -- 121
Notes Payable & Debentures (89) -- (89) 65 (14) 51
-------- -------- -------- --------- --------- --------
Total 222 123 345 1,322 (50) 1,272
-------- -------- -------- --------- --------- --------
Net Interest Income $ 612 $ (108) $ 504 $ 1,511 $ (21) $ 1,490
-------- -------- -------- --------- --------- --------
-------- -------- -------- --------- --------- --------
</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.
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 unchanged at $1.6 million in
1998 and 1997, but decreased as a percentage of total loans to .91% from 1.00%,
respectively. The provision for loan losses decreased $30,000, or 11.5%, to
$230,000 during the first half of 1998 as compared to $260,000 for the
comparable period in 1997. Table 7, "Activity in Allowance for Loan Losses"
analyzes the activity in the allowance for the first half of 1998 and 1997.
Non-Interest Income
Non-Interest income for the period ended June 30, 1998 was $1,137,000,
a modest increase of $84,000 or 8.0% from the first half of 1997. An increase in
credit life insurance fees and fees collected from mortgage loans sold to
secondary markets were the main contributing factors. As a percentage of average
assets, there was a slight decrease to 0.82% from 0.83%.
12
<PAGE>
Non-Interest Expense
Non-interest expense increased in the first six months of 1998 by 15.8%
to $4.5 million compared to $3.8 million for the same period in 1997.
Non-interest expense as a percentage of average assets for the first half of
1998 and 1997 was 3.21% and 3.04%, respectively. Salaries and employee benefits
increased 14.7% to $2.3 million compared to $2.0 million in 1997. The increase
is due mainly to the restructuring plan of the Company to support an expansion
into Duval and Alachua Counties, resulting in the hiring of a Bank President,
two division Presidents and several other key positions during the fourth
quarter of 1997 and the first half of 1998. Full-time equivalent employees were
up 12.8% to 150 at June 30, 1998, compared to one year ago. Occupancy and
equipment expenses have increased $130,000 compared to the same period in 1997.
The most predominant expense that influenced this increase was maintenance
contracts which were purchased on equipment associated with the statement
imaging process at the Operations Center. Another factor was the occupancy and
equipment expense related with the opening of the West 90 Office.
Other operating expenses increased $190,000, or 15.7%, in 1998 compared
to 1997. The increase is mainly attributable to a 62.8% increase in telephone
expense, which resulted when the Bank installed a new toll-free telephone
banking system, which allows our customers access to their accounts 24 hours a
day, seven days a week.
Table 2: Other Operating Expenses
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
----------- ----------
(thousands)
<S> <C> <C>
Data Processing $263 $267
Postage and Delivery 183 166
Other 166 103
Advertising and Promotion 164 143
Telephone 127 78
Supplies 117 122
Legal and Professional 103 75
Amortization of Intangible Assets 95 101
Regulatory Fees 66 54
Loan Expenses 64 58
Administrative 56 47
--------- --------
Total Other Operating Expenses $1,404 $1,214
--------- --------
--------- --------
</TABLE>
Year 2000 Compliance
Non-interest expenses includes the costs of preparing computer systems
and applications for the Year 2000. This process involves analyzing and
upgrading all hardware, software, networks, automated teller machines and other
various processing platforms along with testing of all hardware and software
components. The Company expects to have substantially all of the Year 2000
system and application changes completed by the end of 1998. During 1999 the
Company will have a year to accomplish additional testing and re-testing to
ensure the conversion from 1999 to the year 2000, is uneventful.
At present, it is not possible to give an accurate summation of the
total expenses that the Company will incur, although, the costs are not expected
to have a material impact on the long-term results of the operations or
financial condition of the Company.
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
estimated tax rate for 1998 is 35%, the same as June 30, 1997.
EARNING ASSETS
Loans
During the first six months of 1998, average loans were $163.7 million
and were 67.9% of average deposits, compared to $152.1 million and 67.5% for
1997. Total loans have increased by $17.5 million, or 11.2%, since June 30,
1997. The following table compares the composition of the Company's loan
portfolio as of June 30, 1998, to 1997. Management expects this loan portfolio
composition to stay approximately the same throughout 1998.
Table 3: Loan Portfolio Composition
<TABLE>
<CAPTION>
June 30,
Types of Loans 1998 1997
------------ --------------
(thousands)
<S> <C> <C>
Commercial, Financial and Agricultural $ 79,674 $ 69,497
Real Estate - Mortgage 70,430 64,126
Real Estate - Construction 4,346 3,798
Installment and Consumer Lines 19,404 18,921
---------- ----------
Total Loans, Net of Unearned Discount 173,854 156,342
Less: Allowance for Loan Losses 1,583 1,557
---------- ----------
Net Loans $ 172,271 $ 154,785
---------- ----------
---------- ----------
</TABLE>
The following table sets forth the maturity distribution for selected
components of the Company's loan portfolio on June 30, 1998. 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
June 30, 1998
<TABLE>
<CAPTION>
0-12 1-5 Over 5
Months Years Years Total
--------- --------- --------- ----------
(thousands)
<S> <C> <C> <C> <C>
All Loans Other Than Construction $ 18,684 $ 65,683 $ 85,141 $ 169,508
Real Estate - Construction 4,346 - - 4,346
--------- --------- --------- ----------
Total $ 23,030 $ 65,683 $ 85,141 $ 173,854
--------- --------- --------- ----------
--------- --------- --------- ----------
Fixed Interest Rate $ 10,399 $ 44,657 $ 27,260 $ 82,316
Variable Interest Rate $ 12,631 $ 21,026 $ 57,881 $ 91,538
</TABLE>
14
<PAGE>
Loan Quality. The allowance for loan losses on June 30, 1998, was 0.91% of total
loans, compared to 1.00% 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>
June 30,
1998 1997
----------------------- --------------------------
Percent of Percent of
Loans in Each Loans in Each
Category to Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Commercial, Financial
and Agricultural $ 980 46% $ 962 44%
Real Estate - Mortgage 118 41% 140 41%
Real Estate - Construction 5 2% 3 3%
Consumer 480 11% 452 12%
Unallocated - - - -
-------- ------- ------- -------
Total $1,583 100% $ 1,557 100%
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
Total non-performing assets on June 30, 1998 increased $.8 million or
59.5% to $2.0 million compared to $1.2 million on the same date in 1997.
Non-performing loans, plus other real estate owned, as a percentage of total
assets at June 30, 1998 and 1996 was .71% and .50%, respectively. The increase
in non-performing assets is mainly attributable to five loan relationships
totalling $.8 million in process of collection. Even though non-performing
assets on June 30, 1998 have increased over June 30,1997, overall classified
assets have decreased, causing Allowance for Loan Losses to remain relatively
constant. Anticipated losses applicable to these loans have been provided for in
the allowance for loan losses on June 30, 1998.
Table 6: Non-Performing Assets
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997 1997
------- ------ ------
(dollars in thousands)
<S> <C> <C> <C>
Non-Accrual Loans $712 $956 $1,045
Past Due Loans 90 Days or
More and Still Accruing 796 246 158
Other Real Estate Owned
Repossessions 521 70 320
------- ------ ------
Total Non-Performing Assets $2,029 $1,272 $1,523
------- ------ ------
------- ------ ------
Percent of Total Assets 0.71% 0.50% 0.56%
</TABLE>
The determination of the reserve level rests upon management's
judgment concerning factors affecting loan quality and assumptions about the
economy. Management considers the period-end allowance appropriate and
adequate to cover inherent losses in the loan portfolio even in light of the
increase in non-performing loans. This judgement is based on the knowledge
that the majority of the increase in non-performing loans is guaranteed by
the SBA, and they are being specifically allocated for in the reserve, as
well as the fact that overall classified assets have decreased over the
comparable period-end in 1997. The total classified assets dropped $.7
million in real dollars and 25% as a function of total assets, going from
1.7% of total assets at June 30, 1997, to 1.3% for the same period in 1998.
While the level of reserves are considered appropriate, 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 six
month period of 1998 as compared to 1997.
15
<PAGE>
Table 7: Activity in Allowance for Loan Losses
<TABLE>
<CAPTION>
June 30,
1998 1997
------- --------
(dollars in thousands)
<S> <C> <C>
Allowance for loan loss balance applicable to:
Balance at Beginning of Year $ 1,495 $ 1,396
Loans Charged-Off:
Commercial, Financial and Agricultural 41 8
Real Estate, Construction - -
Real Estate, Mortgage 3 -
Consumer 140 122
------- --------
Total Loans Charged-Off 184 130
Recoveries on Loans Previously Charged-Off:
Commercial, Financial and Agricultural 26 9
Real Estate, Construction - -
Real Estate, Mortgage - -
Consumer 16 22
-------- ---------
Total Loan Recoveries 42 31
-------- ---------
Net Loans Charged-Off 142 99
------- ---------
Provision for Loan Losses Charged to Expense 230 260
------- --------
Ending Balance $ 1,583 $ 1,557
------- --------
------- --------
Total Loans Outstanding $ 173,854 $ 156,342
Average Loans Outstanding $ 163,745 $ 152,088
Allowance for Loan Losses to Loans Outstanding 0.91% 1.00%
Net Charge-Offs to Average Loans Outstanding 0.09% 0.07%
</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.
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.
16
<PAGE>
Table 8: Maturity Distribution of Investment Securities (1)
<TABLE>
<CAPTION>
June 30, 1998
Thousands Held to Maturity Available for Sale
- -------------------------------------------------------------------------------------------------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
-------------- -------------- --------- --------
<S> <C> <C> <C> <C>
U.S. Treasury:
One Year or Less $ - $ - $ 5,499 $ 5,525
Over One Through Five Years - - 14,961 15,207
-------------- -------------- --------- --------
Total U.S. Treasury - - 20,460 20,732
U.S. Government Agencies
and Corporations:
One Year or Less - - 8,842 8,848
Over One Through Five Years - - 6,149 6,175
Over Five Through Ten Years - - 1,002 1,001
-------------- -------------- ---------- ---------
Total U.S. Government Agencies - - 15,993 16,024
and Corporations
Obligations of State and Political
Subdivisions:
Over One Through Five Years - - 442 449
Over Five Through Ten Years - - 530 547
Over Ten Years - - 608 646
-------------- -------------- ---------- --------
Total Obligations of State and - - 1,580 1,642
Political Subdivisions
Mortgage-Backed Securities (2):
One Year or Less 2,930 2,926 74 74
Over One Through Five Years 3,707 3,670 - -
Over Five Through Ten Years - - 2,002 2,000
Over Ten Years - - 3,653 3,685
------------- ------------ -------- --------
Total Mortgage-Backed Securities 6,637 6,596 5,729 5,759
Other Securities:
Over Ten Years (3) - - 1,443 1,531
------------- ------------- ---------- ----------
Total Other Securities - - 1,443 1,531
Total Securities $ 6,637 $ 6,596 $ 45,205 $ 45,688
-------------- -------------- --------- --------
-------------- -------------- --------- --------
</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.
Table 9: Weighted Average Yield by Range of Maturities
<TABLE>
<CAPTION>
June 30, 1998 December 31,1997 June 30, 1997
------------- ---------------- -------------
<S> <C> <C> <C>
One Year or Less 5.68% 5.63% 5.43%
Over One through Five Years 6.09% 5.93% 6.03%
Over Five through Ten Years 5.96% 6.78% 6.77%
Over Ten Years (1) 6.29% 6.53% 6.33%
</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 June 30, 1998 and 1997.
Table 10: Total Deposits
<TABLE>
<CAPTION>
June 30,
1998 1997
--------- ----------
(thousands)
<S> <C> <C>
Non-Interest Bearing:
Demand Checking $ 33,336 $ 29,305
Interest Bearing:
NOW Checking 43,152 38,302
Money Market Checking 26,199 21,736
Savings 16,169 15,297
Certificates of Deposit 129,147 119,754
--------- ----------
Total Deposits $ 248,003 $ 224,394
--------- ----------
--------- ----------
</TABLE>
Note Payable
The Company has available lines of credit with certain financial
institutions totaling $4.0 million. The amount outstanding as of June 30, 1998
was $0.
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 1998 and 1997 was approximately $6.2 million and $4.9 million,
respectively. Interest expense in 1998 and 1997 was $157,000 and $121,000,
respectively, resulting in an average rate paid of 5.08% in 1998 and 4.98% in
1997.
INTEREST RATE SENSITIVITY / LIQUIDITY
Interest rate sensitivity refers to the responsiveness of
interest-earning assets and interest-bearing liabilities to changes in market
interest rates. The rate sensitive position, or gap, is the difference in the
volume of rate-sensitive assets and liabilities, at a given time interval,
including both floating rate and instruments which are approaching maturity. The
measurement of the Company's interest rate sensitivity, or gap, is one of the
principal techniques used in asset and liability management. Management
generally attempts to maintain a balance between rate-sensitive assets and
liabilities as the exposure period is lengthened to minimize the overall
interest rate risks to the Company. In the future, the Company will attempt to
maintain, with respect to management's expectations of interest rate changes in
the immediate twelve months, a cumulative gap position with plus, or minus 20%
of total assets.
18
<PAGE>
The asset mix of the balance sheet is continually evaluated in terms of
several variables: yield, credit quality, appropriate funding sources and
liquidity.
On January 28, 1997, the Securities and Exchange Commission adopted
amendments to Regulation S-K, Regulation S-X and various forms (Securities Act
Release No. 7386) to clarify and expand existing requirements for disclosures
about derivatives and market risks inherent in derivatives and other financial
instruments. No derivative financial instruments are held by the Company, but
other financial instruments, which include investments, loans and deposit
liabilities are included in the Company's balance sheet. The release requires
quantitative and qualitative disclosures about market risk.
In Table 11, "Rate Sensitivity Analysis", rate sensitive assets and
liabilities are shown by maturity, separating fixed and variable interest rates.
The estimated fair value of each instrument category is also shown in the table.
While these estimates of fair value are based on management's judgment of the
most appropriate factors, there is no assurance that, were the Company to have
disposed of such instruments at June 30, 1998, the estimated fair value would
have been achieved at that date, since market values may differ depending on
various circumstances. The estimated fair values at June 30, 1998 should not
necessarily be considered to apply at subsequent dates.
19
<PAGE>
Table 11: Rate Sensitivity Analysis
June 30, 1998
<TABLE>
<CAPTION>
(Dollars in thousands) Fair
1 Year 2 Years 3 Years 4 Years 5 Years Beyond TOTAL Value
------ ------- ------- ------- ------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans
Fixed Rate Loans $ 10,399 $ 8,609 $ 9,580 $ 13,716 $ 12,752 $ 27,260 $ 82,316 $ 82,640
Average Interest Rate 9.09% 10.46% 9.58% 9.14% 9.06% 8.56% 9.12%
Variable Rate Loans 12,631 4,765 7,174 4,074 5,013 57,881 91,538 91,538
Average Interest Rate 9.70% 10.20% 9.09% 9.38% 9.02% 8.39% 8.80%
Investment Securities(1)
Fixed Rate Investments 17,345 8,010 12,343 1,638 3,267 4,326 46,929 47,251
Average Interest Rate 5.72% 5.87% 6.01% 6.29% 6.82% 5.85% 5.93%
Variable Rate Investments - - - - - 3,470 3,470 3,502
Average Interest Rate 6.55% 6.55%
Federal Funds Sold 33,025 - - - - - 33,025 33,025
Average Interest Rate 5.36% 5.36%
Other Earning Assets(2) 7,309 - - - - - 7,309 7,309
Average Interest Rate 5.69% 5.69%
--------- -------- --------- --------- --------- --------- --------- ---------
Total Interest-Earning
Assets $ 80,709 $ 21,384 $ 29,097 $ 19,428 $ 21,032 $ 92,937 $ 264,587 $ 265,265
Average Interest Rate 6.63% 8.68% 7.94% 8.95% 8.70% 8.25% 7.84%
--------- -------- --------- --------- --------- --------- --------- ----------
--------- -------- --------- --------- --------- --------- --------- ----------
INTEREST-BEARING LIABILITIES:
NOW $ 12,946 $ - $ - $ - $ - $ 30,206 $ 43,152 $ 43,152
Average Interest Rate 1.73% 1.73% 1.73%
Money Market 23,687 - - - - 2,512 26,199 26,199
Average Interest Rate 3.86% 1.95% 3.68%
Savings 4,851 - - - - 11,318 16,169 16,169
Average Interest Rate 1.98% 1.98% 1.98%
CD's $100,000 and Over 25,440 4,788 5,257 1,028 123 - 36,636 36,538
Average Interest Rate 5.72% 6.04% 6.43% 6.09% 6.50% 5.88%
CD's Under $100,000 73,885 11,292 4,100 3,003 205 26 92,511 92,381
Average Interest Rate 5.18% 5.66% 5.75% 5.84% 6.01% 6.27% 5.29%
--------- -------- --------- --------- --------- --------- --------- ----------
Securities Sold Under
Repurchase Agreements 7,262 - - - - - 7,262 7,262
Average Interest Rate 5.10% 5.10%
Notes Payable - - - - - - - -
Average Interest Rate
--------- -------- --------- --------- --------- --------- --------- ----------
Total Interest-Bearing
Liabilities $ 148,071 $ 16,080 $ 9,357 $ 4,031 $ 328 $ 44,062 $ 221,929 $ 221,701
Average Interest Rate 4.65% 5.77% 6.13% 5.90% 6.19% 1.81% 4.25%
--------- -------- --------- --------- --------- --------- --------- ---------
--------- -------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ---------------------------
(1) Securities available for sale are shown at their amortized cost, excluding
market value adjustment for unrealized gains of $483,000.
(2) Represents interest bearing deposits with Banks, FRB Stock, Federal Home
Loan Bank Stock and other marketable equity securities.
20
<PAGE>
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 an 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.
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 $94.7 million and represented 39.3% of average total
deposits during the first half of 1998, compared to $80.5 million and 35.7% for
1997. Average loans were 67.9% and 67.5% of average deposits for the six month
period ended June 30, 1998 and 1997, respectively. As noted in Table 3: "Loan
Portfolio Composition", approximately $154.5 million, or 88.8%, of the loan
portfolio consisted of commercial loans, real estate mortgage loans and real
estate construction loans. Approximately 13.2% of the portfolio matures within
one year.
Core deposits, which represent all deposits other than time deposits in
excess of $100,000, were 85.2% of total deposits at the end of the first six
months of 1998 and 87.5% in the comparable period in 1997. 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
June 30, 1998
<TABLE>
<CAPTION>
Amount
--------------
(in thousands)
<S> <C>
Three Months or Less $ 6,880
Three Through Six Months 6,585
Six Through Twelve Months 11,975
Over Twelve Months 11,196
---------
Total $ 36,636
---------
---------
</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.
21
<PAGE>
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 June 30, 1998 compared to 1997 are as
follows:
Table 13: Capital Ratios
<TABLE>
<CAPTION>
June 30, Well Capitalized Regulatory
1998 1997 Requirements Minimums
---- ---- ------------ --------
<S> <C> <C> <C> <C>
Risk Based Capital Ratios:
Tier 1 Capital Ratio 16.7% 13.1% 6.0% 4.0%
Total Capital to
Risk-Weighted Assets 17.6% 14.2% 10.0% 8.0%
Tier 1 Leverage Ratio 10.0% 7.6% 5.0% 4.0%
</TABLE>
22
<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 - On
April 15, 1998, the Company held its Annual Meeting of
Shareholders, whereby the Board of Directors (Thomas R.
Andrews, Audrey S. Bullard, Raymond Land, Sr., Marvin H.
Pritchett, William Streicher and K.C. Trowell) were elected.
The total vote consisted of 1,843,685 votes for the election
of directors and 76,076 votes withheld on certain directorship
nominees. Of the 2,428,385 total outstanding shares of the
Company common stock, there were 1,919,761 shares, or 79.06%,
represented at the meeting; 811,206 votes, or 33.41%, were
made by the Company's solicitation of proxies, and 1,108,555
votes, or 45.65%, were made in person. An Incentive Plan was
also approved by the Shareholders. The total vote consisted of
1,782,433 votes for, 600 votes withheld and 136,728 votes
against the approval of the Incentive Plan.
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 June 30, 1998.
23
<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: August 5,1998
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 9,374
<INT-BEARING-DEPOSITS> 5,866
<FED-FUNDS-SOLD> 33,025
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45,688
<INVESTMENTS-CARRYING> 6,637
<INVESTMENTS-MARKET> 6,596
<LOANS> 173,854
<ALLOWANCE> 1,583
<TOTAL-ASSETS> 287,752
<DEPOSITS> 248,003
<SHORT-TERM> 7,262
<LIABILITIES-OTHER> 2,471
<LONG-TERM> 0
0
0
<COMMON> 24
<OTHER-SE> 29,992
<TOTAL-LIABILITIES-AND-EQUITY> 287,752
<INTEREST-LOAN> 7,638
<INTEREST-INVEST> 1,770
<INTEREST-OTHER> 880
<INTEREST-TOTAL> 10,288
<INTEREST-DEPOSIT> 4,393
<INTEREST-EXPENSE> 4,557
<INTEREST-INCOME-NET> 5,731
<LOAN-LOSSES> 230
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 4,454
<INCOME-PRETAX> 2,184
<INCOME-PRE-EXTRAORDINARY> 1,429
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,429
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 4.52
<LOANS-NON> 712
<LOANS-PAST> 796
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,495
<CHARGE-OFFS> 184
<RECOVERIES> 42
<ALLOWANCE-CLOSE> 1,583
<ALLOWANCE-DOMESTIC> 1,583
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
