<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
March 31, 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
April 30, 1998 was 2,428,385 shares, $0.01 par value per share.
<PAGE>
CNB, INC.
FINANCIAL REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(Unaudited)
Consolidated Statement of Financial Condition . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Shareholders' Equity . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Earning Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Funding Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Interest Rate Sensitivity / Liquidity . . . . . . . . . . . . . . . . . . . . .17
Capital Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . .22
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31,
1998
-----------
ASSETS (thousands)
<S> <C>
CASH AND CASH EQUIVALENTS:
Cash and due from banks......................................... $ 10,025
Federal funds sold.............................................. 29,900
Interest bearing deposits in other banks........................ 5,773
----------
Total Cash and Cash Equivalents........................... 45,698
Investment securities available for sale............................ 52,728
Investment securities held to maturity.............................. 7,544
Loans:
Commercial, Financial & Agricultural........................... 69,785
Real Estate - Mortgage......................................... 68,569
Real Estate - Construction..................................... 3,639
Installment & Consumer Lines................................... 18,410
---------
Total Loans, net of unearned discount..................... 160,403
Less: Allowance for Loan Losses.................................... (1,465)
---------
Net Loans...................................................... 158,938
Premises and equipment, net......................................... 10,178
Other assets........................................................ 4,460
---------
TOTAL ASSETS.............................................. $279,546
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing demand................................... $ 32,783
Savings, Time & Demand........................................ 174,196
Time, $100,000 & over......................................... 34,438
---------
Total Deposits....................................... 241,417
Securities sold under repurchase agreements...................... 6,012
Other liabilities................................................ 2,559
---------
Total Liabilities.................................... 249,988
---------
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.................................................. 9,745
Unrealized gain on investment securities available for sale,
net of taxes.................................................... 299
---------
Total Shareholders' Equity.................................... 29,558
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................... $279,546
---------
---------
</TABLE>
3
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
------------ ------------
(thousands)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans......................................... $ 3,713 $ 3,496
Interest on investment securities held to maturity................. 104 132
Interest on investment securities available for sale............... 832 883
Interest on federal funds sold..................................... 298 176
Interest on interest bearing deposits.............................. 79 2
------------- -------------
Total Interest Income............................................. 5,026 4,689
INTEREST EXPENSE
Interest on deposits............................................... 2,155 1,948
Interest on notes payable.......................................... 7 50
Interest on short-term borrowings.................................. 74 50
------------ -------------
Total Interest Expense............................................ 2,236 2,048
------------ -------------
Net Interest Income......................................... 2,790 2,641
PROVISION FOR LOAN LOSS.............................................. 80 130
------------ -------------
Net Interest Income After Provision for Loan Loss.................. 2,710 2,511
NON-INTEREST INCOME
Service charges.................................................... 412 413
Other fees and charges............................................. 158 142
Gain on sale of securities......................................... 2 -
------------ -------------
Total Non-Interest Income......................................... 572 555
------------ ------------
NON-INTEREST EXPENSE
Salaries and employee benefits..................................... 1,093 981
Occupancy and equipment expenses................................... 394 330
Other operating expenses........................................... 675 616
------------ ------------
Total Non-interest Expense........................................ 2,162 1,927
------------ ------------
Income Before Income Taxes........................................... 1,120 1,139
Income Taxes...................................................... 388 398
------------ ------------
NET INCOME........................................................... $ 732 $ 741
------------ ------------
------------ ------------
EARNINGS PER SHARE (NOTE 3):
Basic earnings per share.......................................... $ 0.30 $ 0.38
------------ ------------
------------ ------------
Average common shares............................................. 2,428,385 1,937,905
------------ ------------
------------ ------------
Dilutive earnings per share ...................................... $ 0.30 $ 0.38
------------ ------------
------------ ------------
Dilutive average common shares and share equivalents.............. 2,471,324 1,967,509
------------ ------------
------------ ------------
</TABLE>
4
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NET UNREALIZED
ADDITIONAL GAIN (LOSS) TOTAL
COMMON PAID-IN RETAINED ON INVESTMENT SHAREHOLDERS'
STOCK CAPITAL EARNINGS SECURITIES EQUITY
------------- --------- ----------- ----------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996.......... $ 19 $ 12,683 $ 6,901 $ 66 $ 19,669
Net Income for Three Months Ended
March 31, 1997.................... -- -- 741 -- 741
Cash Dividends...................... -- -- (116) -- (116)
Change in Unrealized Gain (Loss) on
Securities Available for Sale, net
of taxes.......................... -- -- -- (276) (276)
------------- --------- ----------- ----------------- -------------
BALANCE, MARCH 31, 1997............. $ 19 $ 12,683 $ 7,526 $ (210) $ 20,018
------------- --------- ----------- ----------------- -------------
------------- --------- ----------- ----------------- -------------
BALANCE, DECEMBER 31, 1997.......... $ 24 $ 19,490 $ 9,256 $ 255 $ 29,025
Net income for the Three Months
Ended March 31, 1998.............. -- -- 732 -- 732
Cash Dividends...................... -- -- (243) -- (243)
Change in Unrealized Gain on
Securities Available for Sale, net
of taxes.......................... -- -- -- 44 44
------------- --------- ----------- ----------------- -------------
BALANCE, MARCH 31, 1998............. $ 24 $ 19,490 $ 9,745 $ 299 $ 29,558
------------- --------- ----------- ----------------- -------------
------------- --------- ----------- ----------------- -------------
</TABLE>
5
<PAGE>
CNB, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
--------- ---------
(THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $ 732 $ 741
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 219 196
Provision for loan loss........................... 80 130
Investment securities amortization--net........... 14 45
Changes in assets and liabilities:
Other Assets.................................... (270) (440)
Other Liabilities............................... 304 (6)
--------- ---------
Net Cash Provided By Operating Activities....... 1,079 666
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for
sale.............................................. (3,894) (6,759)
Proceeds from securities available for sale called
by issuer......................................... 1,100 2,000
Proceeds from maturities of securities available for
sale.............................................. 2,000 --
Principal payments received on mortgage backed
securities available for sale..................... 973 --
Principal payments received on mortgage backed
securities held to maturity....................... 544 747
Net increase in loans............................... (864) (2,411)
Purchases of premises and equipment, net............ (232) (294)
--------- ---------
Net Cash Used In Investing Activities........... (373) (6,717)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits............................ 9,973 (462)
Securities sold under repurchase agreements......... (3,145) 910
Repayment of note payable........................... (1,450) (300)
Cash dividend....................................... (243) (116)
--------- ---------
Net Cash Provided By Financing Activities....... 5,135 32
--------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents................................... 5,841 (6,019)
Beginning Balance................................... 39,857 22,880
--------- ---------
Cash and Cash Equivalents at End of Period.......... $ 45,698 $ 16,861
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES:
Interest Paid..................................... $ 2,207 $ 2,088
--------- ---------
--------- ---------
Taxes Paid........................................ $ -- $ 100
--------- ---------
--------- ---------
</TABLE>
6
<PAGE>
CNB, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(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 three months ended March 31, 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
March 31, 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 March 31, 1998 and 1997 of $775,000 and $465,000,
respectively. Total comprehensive net income, net of tax, for the first quarter
of 1998 and 1997, included net gains of $43,000 and net losses of $276,000,
respectively. These changes reflect a market value increase and decrease in
investment securities available-for-sale securities for the quarters ended March
31, 1998 and 1997.
7
<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>
MARCH 31,
1998 1997 CHANGE%
------------ ------------- -------
DOLLARS IN THOUSANDS EXCEPT PER SHARE INFORMATION.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF OPERATIONS:
Total Interest Income.............................. $ 5,026 $ 4,689 7%
Total Interest Expense............................. (2,236) (2,048) 9
----------- --------------
Net Interest Income............................. 2,790 2,641 6
Loan Loss Provision................................ (80) (130) (38)
----------- --------------
Net Interest Income After
Provision for Loan Losses.................... 2,710 2,511 8
Non-Interest Income................................ 572 555 3
Non-Interest Expense............................... (2,162) (1,927) 12
----------- --------------
Income Before Taxes................................ 1,120 1,139 (2)
Income Taxes....................................... (388) (398) (3)
----------- --------------
Net Income......................................... $ 732 $ 741 (1)%
----------- --------------
----------- --------------
- --------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
Basic Earnings Per Common Share.................... $ 0.30 $ 0.38 (21)%
Dilutive Earnings Per Common Share................. 0.30 0.38 (21)
Book Value......................................... 12.17 10.33 18
Dividends.......................................... 0.10 0.06 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........................... 1.08% 1.17% (8)%
Return on Average Shareholders' Equity............. 10.12 15.08 (33)
Dividend Payout-computed on a per share basis...... 33.33 15.79 111
Overhead Ratio..................................... 65.87 62.83 5
Total Risk-Based Capital Ratio..................... 18.75 14.17 32
Average Shareholders' Equity to Assets............. 10.60 7.78 36
Tier 1 Leverage.................................... 10.15 7.28 39
- --------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AT PERIOD-END:
Assets............................................. $ 279,546 $ 255,435 9 %
Total Loans, net of unearned discount.............. 160,403 151,198 6
Total Deposits..................................... 241,417 226,362 7
Common Shareholders' Equity........................ 29,558 20,018 48
</TABLE>
8
<PAGE>
OVERVIEW
Total assets increased during the first quarter of 1998 to $279.5
million or 9.4% compared to $255.4 million for the comparable period in 1997.
Deposits at March 31, 1998 were $241.4 million compared to $231.4 million at
year-end 1997 and $226.4 million at March 31, 1997. Loans were also up 6.1% to
$160.4 million, compared to $151.2 million for same period in 1997.
Shareholders' equity increased to $29.6 million or 47.7% in 1998 compared to
$20.0 million 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
$.5 million, $.7 million paid out in dividends and $3.0 million from retained
earnings.
Net earnings for the quarter ended March 31, 1998 were $732,000,
compared to $741,000 in 1997 or $.30 and $.38 per share, respectively. The
major contributing factors for the decrease in earnings were a decrease in
net interest margin and an increase in overhead cost. These factors will be
discussed in detail under appropriate sections in this document. Return on
average shareholders' equity and average assets for the period was 10.12% and
1.08%, respectively. In analyzing the per share earnings and ratios
presented, it is prudent to consider the impact of the July, 1997 stock
offering 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 $1.5 million at March 31,
1998 and 1997.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, the primary source of revenue for the Bank, was
$2.8 million for the first quarter of 1998, an increase of $149,000, or 5.6%,
from the first quarter of 1997. This increase was substantially the result of
the overall asset growth during the past year. Total average earning assets
increased by $18.4 million, or 7.9% to $251.5 million in 1998, compared to
$233.1 million in 1997. Net interest margins decreased to 4.50% from 4.59%
reflecting the competitive interest rate market with loan and deposit
pricing. Table 1: "Average Balances - Yields and Rates", on page 10, provides
the Company's average volume of interest earning assets and interest bearing
liabilities for the first quarter of 1998 and 1997. Total earning asset
yields decreased to 8.10% in 1998 from 8.16%, while rates on interest-bearing
liabilities increased to 4.28% from 4.12% in 1997. Average time deposits for
1998 represented 52.3% of total average deposits, compared to 50.8% a year
earlier. Table 1a: "Analysis of Changes in Interest Income and Expense", on
page 11, indicates that the change in interest income was due mainly to
volume increases in the loan portfolio, while the change in interest expense
was primarily due to increased volume in Time Deposits.
9
<PAGE>
TABLE 1: AVERAGE BALANCES - YIELDS AND RATES
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1997
----------------------------------- --------------------------------------
INTEREST INTEREST
AVERAGE INCOME OR AVERAGE AVERAGE INCOME OR AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- --------- ------- ------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Federal Funds Sold............. $ 22,995 $ 298 5.26% $ 13,853 $ 176 5.15%
Securities Available for Sale.. 54,969 832 6.14 59,343 883 6.03
Securities Held to Maturity.... 7,900 104 5.34 9,830 132 5.45
Loans, net unearned (1)........ 159,902 3,713 9.42 149,960 3,496 9.45
Interest Bearing Deposits...... 5,769 79 5.55 143 2 5.68
---------- ---------- --------- ---------- ----- ----
TOTAL EARNING ASSETS............. 251,535 5,026 8.10 233,129 4,689 8.16
All Other Assets............... 23,318 23,052
---------- ----------
TOTAL ASSETS..................... $ 274,853 $ 256,181
---------- ----------
---------- ----------
LIABILITIES AND
SHAREHOLDERS' EQUITY:
NOW & Money Markets............ $ 66,092 $ 415 2.55% $ 64,200 $ 385 2.43%
Savings........................ 15,819 76 1.95 15,038 72 1.94
Time Deposits.................. 123,673 1,664 5.46 115,426 1,491 5.24
Short Term Borrowings.......... 5,875 74 5.11 4,169 50 4.86
Notes Payable & Debentures..... 338 7 8.09 2,550 50 7.95
---------- ---------- --------- ---------- --------- ----
TOTAL INTEREST BEARING
LIABILITIES.................... 211,797 2,236 4.28 201,383 2,048 4.12
Demand Deposits................ 31,038 32,369
Other Liabilities.............. 2,669 2,491
Shareholders' Equity........... 29,349 19,938
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........... $ 274,853 $ 256,181
---------- ----------
---------- ----------
---- ----
INTEREST SPREAD (2).............. 3.82% 4.04%
---- ----
---- ----
--------- ---------
NET INTEREST INCOME.............. $ 2,790 $ 2,641
--------- ---------
--------- ---------
NET INTEREST MARGIN (3).......... 4.50% 4.59%
---- ----
---- ----
</TABLE>
- ---------------------
(1) Interest income on average loans includes loan fee recognition of $128,000
and $150,000 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.
10
<PAGE>
TABLE 1A: ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
(Unaudited)
<TABLE>
<CAPTION>
NET CHANGE MARCH 31, NET CHANGE MARCH 31,
1997-1998 ATTRIBUTABLE TO: 1996-1997 ATTRIBUTABLE TO:
------------------------------ ------------------------------
NET NET
VOLUME (1) RATE (2) CHANGE VOLUME (1) RATE (2) CHANGE
---------- -------- ------ ---------- -------- ------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Federal Funds Sold.................... $ 116 $ 6 $ 122 $ 90 $ (6) $ 84
Securities Available for Sale......... (65) 14 (51) 300 14 314
Securities Held to Maturity........... (26) (2) (28) (45) (2) (47)
Loans................................. 232 (15) 217 1,064 (32) 1,032
Interest Bearing Deposits............. 79 (2) 77 (4) - (4)
------- ------ ------ ------- ----- ------
Total........................... 336 1 337 1,405 (26) 1,379
------- ------ ------ ------- ----- ------
INTEREST EXPENSE:
Deposits:
NOW & Money Markets................ 11 19 30 133 (30) 103
Savings............................ 4 - 4 12 (6) 6
Time Deposits...................... 107 66 173 406 (32) 374
Short Term Borrowings................. 21 3 24 50 - 50
Notes Payable & Debentures............ (43) - (43) 38 (14) 24
------- ------ ------ ------- ----- ------
Total.............................. 100 88 188 639 (82) 557
------- ------ ------ ------- ----- ------
Net Interest Income............. $ 236 $ (87) $ 149 $ 766 $ 56 $ 822
------- ------ ------ ------- ----- ------
------- ------ ------ ------- ----- ------
</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.
11
<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 on March 31, 1998,
was $1.5 million, essentially unchanged from 1997. The provision for loan
losses decreased $50,000, or 38.5%, to $80,000 during the first quarter of
1998 as compared to $130,000 for the comparable period in 1997. The decrease
is mainly due to a reduction in classified loans. Table 7, "Analysis of
Allowance for Loan Losses" analyzes the activity in the allowance for first
quarter 1998 and 1997.
NON-INTEREST INCOME
Non-interest income for the quarter ended March 31, 1998 was $572,000, a
modest increase of $17,000 or 3.1% from the first quarter of 1997. The
service charge income received from deposit accounts remained the same which
was mainly attributable to a decrease in overdrawn accounts which reduced the
insufficient charge fee income, offset by the ATM surcharge which began in
the second quarter of 1997. An increase in credit life insurance fees and
fees collected from mortgage loans sold to secondary markets were also
contributing factors. As a percentage of average assets, there was a slight
decrease to 0.84% from 0.88%.
NON-INTEREST EXPENSE
Non-interest expense increased in the first quarter of 1998 by 12.2% to
$2.2 million compared to $1.9 million for the first quarter of 1997.
Non-interest expense as a percentage of average assets for the first quarter
of 1998 and 1997 was 3.19% and 3.05%, respectively. The increase is due
mainly to several key personnel positions being filled late in the fourth
quarter of 1997, along with the added personnel cost of the West 90 Office
and the increase in occupancy and equipment relating to the openings of an
Operations Center and the West 90 Office.
Other operating expenses increased $59,000, or 9.6%, in 1998 compared to
1997. The increase is mainly attributable to a 59.0% 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>
Three Months Ended March 31,
1998 1997
---- ----
(thousands)
<S> <C> <C>
Data Processing.................................. $126 $135
Postage and Delivery............................. 91 85
Advertising and Promotion........................ 84 77
Other............................................ 72 63
Telephone........................................ 62 39
Supplies......................................... 58 63
Amortization of Intangible Assets................ 48 51
Legal and Professional........................... 38 34
Loan Expenses.................................... 37 26
Regulatory Fees.................................. 33 22
Administrative................................... 26 21
---- ----
Total Other Operating Expenses................... $675 $616
---- ----
---- ----
</TABLE>
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 rate to such interim pre-tax income. The Company's
estimated tax rate for 1998 is 35%.
12
<PAGE>
EARNING ASSETS
LOANS
During the first quarter of 1998, average loans were $159.9 million and
were 67.6% of average deposits, compared to $150.0 million and 66.1% for 1997.
Total loans have increased by $9.2 million, or 6.1%, since March 31, 1997. The
following table compares the composition of the Company's loan portfolio as of
March 31, 1998, to 1997. Management expects this loan portfolio composition to
stay approximately the same throughout 1998.
TABLE 3: LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
MARCH 31,
Types of Loans 1998 1997
-------- --------
(thousands)
<S> <C> <C>
Commercial, Financial and Agricultural............... $ 69,785 $ 67,488
Real Estate - Mortgage............................... 68,569 60,830
Real Estate - Construction........................... 3,639 3,884
Installment and Consumer Lines....................... 18,410 18,996
-------- --------
Total Loans, Net of Unearned Discount................ 160,403 151,198
Less: Allowance for Loan Losses...................... 1,465 1,489
-------- --------
Net Loans............................................ $158,938 $149,709
-------- --------
-------- --------
</TABLE>
The following table sets forth the maturity distribution for selected
components of the Company's loan portfolio on March 31, 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
MARCH 31, 1998
<TABLE>
<CAPTION>
0-12 1-5 OVER 5
MONTHS YEARS YEARS TOTAL
------- ------- ------- --------
(thousands)
<S> <C> <C> <C> <C>
All Loans Other Than Construction....... $16,539 $61,088 $79,137 $156,764
Real Estate - Construction.............. 3,639 - - 3,639
------- ------- ------- --------
Total................................... $20,178 $61,088 $79,137 $160,403
------- ------- ------- --------
------- ------- ------- --------
Fixed Interest Rate..................... $10,361 $39,365 $23,577 $ 73,303
Variable Interest Rate.................. $ 9,817 $21,723 $55,560 $ 87,100
</TABLE>
13
<PAGE>
LOAN QUALITY
The allowance for loan losses on March 31, 1998, was 0.91% of total
loans, compared to 0.98% 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>
MARCH 31,
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.................... $ 892 44% $ 929 45%
Real Estate - Mortgage................. 120 43% 131 40%
Real Estate- Construction.............. 6 2% 4 2%
Consumer............................... 447 11% 425 13%
Unallocated............................ - - - -
------ ----------- ------ -----------
Total.................................. $1,465 100% $1,489 100%
------ ----------- ------ -----------
------ ----------- ------ -----------
</TABLE>
Total Non-Performing Assets on March 31, 1998 increased $85,000 or 7.3%
to $1.24 million compared to $1.16 million on the same date in 1997.
Non-performing assets have decreased by $281,000, or 18.5% since the 1997
year end. Non-performing loans, plus other real estate owned, as a percentage
of total assets for March 31, 1998 and 1997 were .44% and .45%, respectively.
Anticipated losses applicable to these loans have been provided for in the
allowance for loan losses on March 31, 1998.
TABLE 6: NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997 1997
------ ------ ------
(dollars in thousands)
<S> <C> <C> <C>
Non-Accrual Loans..................... $ 806 $ 939 $1,045
Past Due Loans 90 Days or
More and Still Accruing............ 35 130 158
Other Real Estate Owned............... 401 88 320
------ ------ ------
Total Non-Performing Assets........... $1,242 $1,157 $1,523
------ ------ ------
------ ------ ------
Percent of Total Assets............... 0.44% 0.45% 0.56%
</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
14
<PAGE>
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 three month period of 1998 as compared to 1997.
TABLE 7: ACTIVITY IN ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
MARCH 31,
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.................. 34 -
Real Estate, Construction............................... - -
Real Estate, Mortgage................................... 3 -
Consumer................................................ 89 45
-------- --------
Total Loans Charged-Off.............................. 126 45
Recoveries on Loans Previously Charged-Off:
Commercial, Financial and Agricultural.................. 8 -
Real Estate, Construction............................... - -
Real Estate, Mortgage................................... - -
Consumer................................................ 8 8
-------- --------
Total Loan Recoveries................................ 16 8
-------- --------
Net Loans Charged-Off.............................. 110 37
-------- --------
Provision for Loan Losses Charged to Expense............... 80 130
-------- --------
Ending Balance............................................. $ 1,465 $ 1,489
-------- --------
-------- --------
Total Loans Outstanding.................................... $160,403 $151,198
Average Loans Outstanding.................................. $159,902 $149,960
Allowance for Loan Losses to Loans Outstanding............. 0.91% 0.98%
Net Charge-Offs to Average Loans Outstanding............... 0.07% 0.02%
</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.
15
<PAGE>
TABLE 8: MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
March 31, 1998
<TABLE>
<CAPTION>
HELD TO MATURITY 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................ $ -- $ -- $ 7,496 $ 7,508
Over One Through Five Years..... -- -- 17,957 18,250
----------- ------------- ----------- -------------
Total U.S. Treasury............... -- -- 25,453 25,758
U.S. Government Agencies and
Corporations:
One Year or Less................ -- -- 8,843 8,857
Over One Through Five Years..... -- -- 6,152 6,179
Over Five Through Ten Years..... -- -- 2,004 2,003
----------- ------------- ----------- -------------
Total U.S. Government Agencies and
Corporations...................... -- -- 16,999 17,039
Obligations of State and
Political Subdivisions:
Over One Through Five Years..... -- -- 177 186
Over Five Through Ten Years..... -- -- 530 550
Over Ten Years.................. -- -- 608 648
----------- ------------- ----------- -------------
Total Obligations of State and
Political Subdivisions............ -- -- 1,315 1,384
Mortgage-Backed Securities (2):
One Year or Less................ 3,409 3,360 104 104
Over One Through Five Years..... 4,135 4,086 -- --
Over Five Through Ten Years..... -- -- 2,142 2,136
Over Ten Years.................. -- -- 4,796 4,864
----------- ------------- ----------- -------------
Total Mortgage-Backed
Securities........................ 7,544 7,446 7,042 7,104
Other Securities:
Over Ten Years (3).............. -- -- 1,443 1,443
----------- ------------- ----------- -------------
Total Other Securities............ -- -- 1,443 1,443
----------- ------------- ----------- -------------
Total Securities.................. $ 7,544 $ 7,446 $ 52,252 $ 52,728
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
- ------------------------------------------------------------
(1) All securities, excluding Obligations of State and Political Subdivisions,
are taxable.
(2) Represents investments in mortgage-backed securities which are subject to
early repayment.
(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
March 31, 1998
<TABLE>
<CAPTION>
March 31, 1998 December 31,1997 March 31, 1997
-------------- ---------------- --------------
<S> <C> <C> <C>
One Year or Less 5.69% 5.63% 5.03%
Over One through Five Years 6.13% 5.93% 6.06%
Over Five through Ten Years 6.40% 6.78% 6.67%
Over Ten Years (1) 6.51% 6.53% 5.52%
</TABLE>
- ------------------
(1) Represents adjustable rate mortgage-backed securities which are repriceable
within one year.
16
<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 March 31, 1998 and 1997.
Table 10: Total Deposits
<TABLE>
<CAPTION>
March 31,
1998 1997
---------- ---------
(thousands)
<S> <C> <C>
Non-Interest Bearing:
Demand Checking $ 32,783 $ 31,773
Interest Bearing:
NOW Checking 42,932 37,707
Money Market Checking 24,704 26,731
Savings 15,934 15,441
Certificates of Deposit 125,064 114,710
---------- ---------
Total Deposits $ 241,417 $ 226,362
---------- ---------
---------- ---------
</TABLE>
Note Payable
The Company borrowed $2.7 million in connection with the acquisition of
Riherd Bank Holding Company. On January 22, 1998, the Company paid off the note
payable. The Company also has available lines of credit with certain other
financial institutions totaling $4.0 million. The amount outstanding as of March
31, 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 $5.9 million and $4.2 million,
respectively. Interest expense in 1998 and 1997 was $74,000 and $50,000,
respectively, resulting in an average rate paid of 5.11% in 1998 and 4.86% 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 internal, 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.
17
<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 requirement 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 March 31, 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 March 31, 1998 should not
necessarily be considered to apply at subsequent dates.
18
<PAGE>
Table 11: Rate Sensitivity Analysis
March 31, 1998
<TABLE>
<CAPTION>
(Dollars in thousands) Fair
1998 1999 2000 2001 2002 Beyond TOTAL Value
--------- --------- --------- --------- --------- ---------- --------- -----------
INTEREST-EARNING ASSETS:
Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Loans $ 10,361 $ 7,923 $ 9,883 $ 12,655 $ 8,904 $ 23,577 $ 73,303 $ 73,520
Average Interest Rate 8.89% 10.69% 9.66% 9.04% 9.39% 8.55% 9.17%
Variable Rate Loans 9,817 4,562 7,724 5,173 4,264 55,560 87,100 87,100
Average Interest Rate 9.83% 10.09% 9.48% 9.06% 9.23% 8.43% 8.84%
Investment Securities(1)
Fixed Rate Investments 19,852 11,012 8,710 5,521 3,177 5,839 54,111 54,422
Average Interest Rate 5.69% 6.01% 5.72% 6.56% 6.90% 6.17% 5.97%
Variable Rate Investments -- -- -- -- -- 4,242 4,242 4,309
Average Interest Rate 6.86% 6.86%
Federal Funds Sold 29,900 -- -- -- -- -- 29,900 29,900
Average Interest Rate 5.10% 5.10%
Other Earning Assets(2) 7,215 -- -- -- -- -- 7,215 7,215
Average Interest Rate 5.67% 5.67%
--------- --------- --------- --------- --------- ---------- --------- -----------
Total Interest-Earning
Assets $ 77,145 $ 23,497 $ 26,317 $ 23,349 $ 16,345 $ 89,218 $ 255,871 $ 256,466
Average Interest Rate 6.42% 8.38% 8.30% 8.46% 8.86% 8.24% 7.77%
--------- --------- --------- --------- --------- ---------- --------- -----------
--------- --------- --------- --------- --------- ---------- --------- -----------
INTEREST-BEARING LIABILITIES:
NOW $ 12,880 $ -- $ -- $ -- $ -- $ 30,052 $ 42,932 $ 42,932
Average Interest Rate 1.78% 1.78% 1.78%
Money Market 22,001 -- -- -- -- 2,702 24,703 24,703
Average Interest Rate 3.87% 2.14% 3.68%
Savings 4,780 -- -- -- -- 11,154 15,934 15,934
Average Interest Rate 1.98% 1.98% 1.98%
CD's $100,000 and Over 22,564 3,295 7,530 926 123 -- 34,438 34,322
Average Interest Rate 5.68% 6.19% 6.32% 6.11% 6.50% 5.88%
CD's Under $100,000 73,614 10,349 3,691 2,835 112 26 90,627 90,495
Average Interest Rate 5.16% 5.71% 5.79% 5.85% 5.82% 6.29% 5.27%
Securities Sold Under
Repurchase Agreements 6,012 -- -- -- -- -- 6,012 6,012
Average Interest Rate 5.08% 5.08%
Notes Payable -- -- -- -- -- -- -- --
Average Interest Rate
--------- --------- --------- --------- --------- ---------- --------- -----------
Total Interest-Bearing
Liabilities $ 141,851 $ 13,644 $ 11,221 $ 3,761 $ 235 $ 43,934 $ 214,646 $ 214,398
Average Interest Rate 4.63% 5.83% 6.15% 5.91% 6.18% 1.86% 4.24%
--------- --------- --------- --------- --------- ---------- --------- -----------
--------- --------- --------- --------- --------- ---------- --------- -----------
</TABLE>
(1) Securities available for sale are shown at their amortized cost, excluding
market value adjustment for unrealized gains of $477,000.
(2) Represents interest bearing deposits with Banks, FRB Stock, Federal
Home Loan Bank Stock and other marketable equity securities.
19
<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 $93.7 million and represented 39.6%
of average total deposits during the first quarter of 1998, compared to $81.0
million and 35.7% for 1997. Average loans were 67.6% and 66.1% of average
deposits for the three month period ended March 31, 1998 and 1997,
respectively. As noted in Table 3: "Loan Portfolio Composition", approximately
$142.0 million, or 88.5%, of the loan portfolio consisted of commercial loans,
real estate mortgage loans and real estate construction loans. Approximately
12.6% of the portfolio matures within one year.
Core deposits, which represent all deposits other than time deposits in
excess of $100,000, were 85.7% of total deposits in the first quarter of 1998
and 89.5% 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
March 31, 1998
<TABLE>
<CAPTION>
Amount
(thousands)
<S> <C>
Three Months or Less $ 7,434
Three Through Six Months 4,925
Six Through Twelve Months 10,205
Over Twelve Months 11,874
----------
Total $ 34,438
----------
----------
</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.
20
<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 riskweighted 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 March 31, 1998 compared to 1997 are as
follows:
Table 13: Capital Ratios
<TABLE>
<CAPTION>
March 31, Well Capitalized Regulatory
1998 1997 Requirements Minimums
----- ----- ---------------- ----------
<S> <C> <C> <C> <C>
Risk Based Capital Ratios:
Tier 1 Capital Ratio 17.8% 13.1% 6.0% 4.0%
Total Capital to
Risk-Weighted Assets 18.7% 14.2% 10.0% 8.0%
Tier 1 Leverage Ratio 10.2% 7.3% 5.0% 4.0%
</TABLE>
21
<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.
(c) Not applicable.
Item 3. Defaults Upon Senior Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - There
were no matters submitted to a vote of security holders
during the three months ended March 31, 1998. 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) was 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 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 March 31, 1998.
22
<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: May 6, 1998
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 10,025
<INT-BEARING-DEPOSITS> 5,773
<FED-FUNDS-SOLD> 29,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 52,728
<INVESTMENTS-CARRYING> 7,544
<INVESTMENTS-MARKET> 7,446
<LOANS> 160,403
<ALLOWANCE> 1,465
<TOTAL-ASSETS> 279,546
<DEPOSITS> 241,417
<SHORT-TERM> 6,012
<LIABILITIES-OTHER> 2,559
<LONG-TERM> 0
0
0
<COMMON> 24
<OTHER-SE> 29,534
<TOTAL-LIABILITIES-AND-EQUITY> 279,546
<INTEREST-LOAN> 3,713
<INTEREST-INVEST> 936
<INTEREST-OTHER> 377
<INTEREST-TOTAL> 5,026
<INTEREST-DEPOSIT> 2,155
<INTEREST-EXPENSE> 2,236
<INTEREST-INCOME-NET> 2,790
<LOAN-LOSSES> 80
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 2,162
<INCOME-PRETAX> 1,120
<INCOME-PRE-EXTRAORDINARY> 732
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 732
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 4.50
<LOANS-NON> 806
<LOANS-PAST> 35
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,495
<CHARGE-OFFS> 126
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 1,465
<ALLOWANCE-DOMESTIC> 1,465
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
