UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
___ EXCHANGE ACT OF 1934 (no fee required) For the quarterly period ended
September 30, 2000
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 Florida Bancshares, Inc.
----------------------------
(Exact Name of Registrant as Specified in Its Charter)
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 October
31, 2000 was 6,091,300 shares, $0.01 par value per share.
<PAGE>
CNB FLORIDA BANCSHARES, INC.
FINANCIAL REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(unaudited)
Consolidated Statement of Financial Condition ........................3
Consolidated Statement of Income......................................4
Consolidated Statement of Cash Flows................................. 6
Notes to Consolidated Financial Statements........................... 7
Selected Financial Data.............................................. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview..............................................................9
Results of Operations.................................................9
Liquidity and Interest Rate Sensitivity..............................12
Earning Assets.......................................................15
Funding Sources......................................................20
Capital Resources....................................................20
Item 3. Quantitative and Qualitative Disclosure About Market Risk...21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 22
Item 2. Changes in Securities ......................................22
Item 3. Defaults Upon Senior Securities ............................22
Item 4. Submission of Matters to a Vote of Security Holders ........22
Item 5. Other Information ..........................................22
Item 6. Exhibits and Reports on Form 8-K ...........................22
2
<PAGE>
<TABLE>
PART I
FINANCIAL INFORMATION
CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Unaudited)
September 30, December 31,
2000 1999
---------- ------------
ASSETS (thousands)
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 21,195 $ 17,235
Interest bearing deposits in other banks 359 285
---------- ---------
Total cash and cash equivalents 21,554 17,520
Investment securities available for sale 32,685 35,111
Investment securities held to maturity 9,204 10,582
Loans:
Commercial, financial and agricultural 183,924 136,937
Real estate - mortgage 106,590 86,275
Real estate - construction 25,217 18,926
Installment and consumer 30,726 23,946
---------- ---------
Total loans, net of unearned income 346,457 266,084
Less: Allowance for loan losses (3,425) (2,671)
---------- ---------
Net loans 343,032 263,413
Premises and equipment, net 21,696 14,395
Other assets 5,369 5,055
---------- ---------
TOTAL ASSETS $ 433,540 $ 346,076
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing demand $ 51,932 $ 42,110
Savings, NOW and money market 130,974 112,103
Time (under $100,000) 103,494 89,141
Time ($100,000 and over) 53,097 44,849
---------- ----------
Total deposits 339,497 288,203
Securities sold under repurchase agreements and federal funds purchased 11,599 12,063
Short term borrowings 35,000 -
Other liabilities 3,402 2,735
---------- ----------
Total liabilities 389,498 303,001
---------- ----------
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;
6,091,300 and 6,116,070 shares issued and outstanding
at September 30, 2000 and December 31, 1999, respectively 61 61
Additional paid-in capital 30,543 30,805
Retained earnings 13,705 12,746
Accumulated other comprehensive income, net of tax (267) (537)
---------- ----------
Total shareholders' equity 44,042 43,075
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 433,540 $ 346,076
========== ==========
</TABLE>
3
<PAGE>
<TABLE>
CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Nine Months Ended September 30,
2000 1999
------------ ------------
(thousands)
<S> <C> <C>
Interest Income
Interest and fees on loans $ 20,610 $ 13,956
Interest on investment securities held to maturity 444 354
Interest on investment securities available for sale 1,593 2,100
Interest on federal funds sold 177 530
Interest on interest bearing deposits 57 408
------------ -----------
Total interest income 22,881 17,348
Interest Expense
Interest on deposits 9,172 6,426
Interest on repurchase agreements and federal funds purchased 378 214
Interest on short-term borrowings 568 -
------------ -----------
Total interest expense 10,118 6,640
------------ -----------
Net interest income 12,763 10,708
Provision for Loan Losses 950 785
------------ -----------
Net interest income after provision for loan losses 11,813 9,923
Non-interest Income
Service charges 1,634 1,556
Other fees and charges 765 613
------------ -----------
Total non-interest income 2,399 2,169
------------ -----------
Non-interest Expense
Salaries and employee benefits 6,337 4,599
Occupancy and equipment expenses 1,576 1,348
Other operating expenses 3,433 2,582
------------ -----------
Total non-interest expense 11,346 8,529
------------ -----------
Income before income taxes 2,866 3,563
Income taxes 990 1,241
------------ -----------
NET INCOME $ 1,876 $ 2,322
============ ===========
Other comprehensive income (loss), net of tax 270 (666)
------------ -----------
Comprehensive income $ 2,146 $ 1,656
============ ===========
Earnings Per Share (Note 3):
Basic earnings per share $ 0.31 $ 0.39
============ ===========
Weighted average shares outstanding 6,099,278 5,956,858
============ ===========
Diluted earnings per share $ 0.31 $ 0.39
============ ===========
Diluted weighted average shares outstanding 6,141,743 6,030,671
============ ===========
</TABLE>
4
<PAGE>
<TABLE>
CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended September 30,
2000 1999
------------ ------------
(thousands)
<S> <C> <C>
Interest Income
Interest and fees on loans $ 7,568 $ 4,929
Interest on investment securities held to maturity 147 152
Interest on investment securities available for sale 532 621
Interest on federal funds sold 17 154
Interest on interest bearing deposits 17 141
------------ ------------
Total interest income 8,281 5,997
Interest Expense
Interest on deposits 3,336 2,136
Interest on repurchase agreements and federal funds purchased 188 87
Interest on short-term borrowings 399 -
------------ ------------
Total interest expense 3,923 2,223
------------ ------------
Net interest income 4,358 3,774
Provision for Loan Losses 350 275
------------ ------------
Net interest income after provision for loan losses 4,008 3,499
Non-interest Income
Service charges 575 557
Other fees and charges 273 182
------------ ------------
Total non-interest income 848 739
------------ ------------
Non-interest Expense
Salaries and employee benefits 2,178 1,620
Occupancy and equipment expenses 558 464
Other operating expenses 1,155 942
------------ ------------
Total non-interest expense 3,891 3,026
------------ ------------
Income before income taxes 965 1,212
Income taxes 333 423
------------ ------------
NET INCOME $ 632 $ 789
============ ============
Other comprehensive income (loss), net of tax 248 (122)
------------ ------------
Comprehensive income $ 880 $ 667
============ ============
Earnings Per Share (Note 3):
Basic earnings per share $ 0.10 $ 0.13
============ ============
Weighted average shares outstanding 6,088,137 6,108,570
============ ============
Diluted earnings per share $ 0.10 $ 0.13
============ ============
Diluted weighted average shares outstanding 6,125,459 6,182,951
============ ============
</TABLE>
5
<PAGE>
<TABLE>
CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
2000 1999
------------ ------------
(thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,876 $ 2,322
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 832 710
Provision for loan loss 950 785
Investment securities amortization (accretion), net 14 (288)
Non-cash compensation 44 -
Changes in assets and liabilities:
Other assets (610) 370
Other liabilities 667 (337)
------------ ------------
Net cash provided by operating activities 3,773 3,562
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale (858) (20,405)
Purchases of investment securities held to maturity - (8,754)
Proceeds from maturities of securities available for sale 3,214 37,639
Proceeds from maturities of securities held to maturity 562 875
Proceeds from called securities available for sale 489 3,000
Proceeds from called securities held to maturity 815 -
Net increase in loans (80,569) (41,710)
Purchases of premises and equipment, net (7,998) (2,953)
------------ ------------
Net cash used in investing activities (84,345) (32,308)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits 51,294 9,348
Decrease in securities sold under repurchase agreements and
federal funds purchased (465) (2,648)
Increase in short term borrowings 35,000 -
Cash dividends paid (917) (854)
Repurchase of common stock (395) -
Issuance of common stock - 11,362
Exercise of options 89 6
------------ ------------
Net cash provided by financing activities 84,606 17,214
------------ ------------
Increase (decrease) in cash and cash equivalents 4,034 (11,532)
Cash and cash equivalents at beginning of period 17,520 48,887
------------ ------------
Cash and cash equivalents at end of period $ 21,554 $ 37,355
============ ============
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 9,329 $ 6,976
============ ============
Taxes paid $ 1,299 $ 1,270
============= ============
</TABLE>
6
<PAGE>
CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-Q 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 and nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. Management's discussion and analysis should be read in
conjunction with the consolidated financial statements.
Note 2. Consolidation
The consolidated financial statements include the accounts of CNB Florida
Bancshares, Inc. and its wholly owned subsidiary, CNB National Bank. All
significant intercompany accounts and transactions have been eliminated.
Note 3. Earnings Per Share
Basic earnings per share is calculated based on weighted average number of
shares of common stock during the period. 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 and restricted stock
outstanding during the periods ended September 30, 2000 and 1999.
Note 4. Comprehensive Income
Comprehensive income is defined as the total of net income and all other changes
in equity. The following table details the Company's comprehensive income for
the three and nine month periods ending September 30, 2000 and 1999.
<TABLE>
Nine Months Three Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
-------- ------ ------- -------
<S> <C> <C> <C> <C>
Net Income $ 1,876 $ 2,322 $ 632 $ 789
Other Comprehensive Income (Loss), Net of Tax
Unrealized Gains (Losses) on Securities:
Unrealized Gains (Losses) on Securities
Arising During the Period 279 (847) 246 (115)
Less: Reclassification Adjustment 9 (181) (2) 7
-------- ------ ------- -------
Total Unrealized Gains (Losses), Net of Tax
Recognized in Other Comprehensive Income 270 (666) 248 (122)
-------- ------ ------- -------
Comprehensive Income, Net of Tax $ 2,146 $ 1,656 $ 880 $ 667
======== ======= ======= =======
</TABLE>
7
<PAGE>
CNB FLORIDA BANCSHARES, INC. AND SUBSIDIARY
Selected Financial Data
<TABLE>
Nine Months Ended September 30,
2000 1999
------------ -------------
Dollars in thousands except per share information.
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUMMARY OF OPERATIONS:
Total interest income $ 22,881 $ 17,348
Total interest expense (10,118) (6,640)
------------ ------------
Net interest income 12,763 10,708
Provision for loan losses (950) (785)
------------ ------------
Net interest income after
provision for loan losses 11,813 9,923
Non-interest income 2,399 2,169
Non-interest expense (11,346) (8,529)
------------ ------------
Income before taxes 2,866 3,563
Income taxes (990) (1,241)
------------ ------------
Net income $ 1,876 $ 2,322
============ ============
-------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE:
Basic earnings $ 0.31 $ 0.39
Diluted earnings 0.31 0.39
Book value 7.23 7.05
Dividends 0.15 0.15
Actual shares outstanding 6,091,300 6,108,570
Weighted average shares outstanding 6,099,278 5,956,858
Diluted weighted average shares outstanding 6,141,743 6,030,671
-------------------------------------------------------------------------------------------------------------------
KEY RATIOS:
Return on average assets 0.65% 0.98%
Return on average shareholders' equity 5.77 7.50
Dividend payout 48.39 38.46
Efficiency ratio 74.83 66.23
Total risk-based capital ratio 13.51 19.63
Average shareholders' equity to
average assets 11.18 13.07
Tier 1 leverage 10.48 13.05
-------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AT PERIOD-END:
Assets $ 433,540 $ 330,106
Loans 346,457 228,371
Deposits 339,497 274,456
Shareholders' equity 44,042 43,075
-------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following analysis reviews important factors affecting the
financial condition and results of operations of CNB Florida Bancshares, Inc.
("the Company") for the three and nine months ended September 30, 2000 and 1999.
This financial information should be read in conjunction with the unaudited
consolidated financial statements of CNB Florida Bancshares, Inc. and its wholly
owned subsidiary, CNB National Bank ("the Bank"), included in "Item 1. Financial
Statements" above and the audited consolidated financial statements included in
Form 10-K for the year ended December 31, 1999. The analysis contains
forward-looking statements with respect to financial and business matters, which
are subject to risks and uncertainties, that may change over a period of time.
These risks and uncertainties include but are not limited to changes in interest
rates, variances in actual versus projected growth in assets, loan losses, the
ability to control expenses, costs of opening new branches and entering the
Jacksonville and Gainesville markets, competitive factors and general economic
conditions, changes in government regulation, the ability to attract and retain
qualified personnel and the ability to attract new loan and deposit
relationships. Actual results could be significantly different from the
forward-looking statements contained herein. The Company has no foreign
operations; accordingly, there are no assets or liabilities attributable to
foreign operations.
RESULTS OF OPERATIONS
The Company's net income for the nine month period ended September 30,
2000 was $1.9 million, or $0.31 per diluted share, compared to $2.3 million, or
$0.39 per diluted share, for the nine month period in 1999. Net income for the
three month period ended September 30, 2000 was $632,000, or $0.10 per diluted
share, compared to $789,000, or $0.13 per diluted share, for the comparable
period in 1999. These results reflected growth in net interest income and in
non-interest income. Non-interest expenses continue to reflect the Company's
expansion strategy in the Jacksonville and Gainesville markets and the building
of production and operating infrastructure, including people, facilities and
technology platform, to support expansion. During the 2000 third quarter, CNB
National Bank, the Company's banking subsidiary, opened its new Deerwood Park
branch in Jacksonville. The Bank also acquired locations in the Mandarin area of
Jacksonville and St. Augustine for branch sites which will open in the first
half of 2001.
Net Interest Income
Net interest income is the single largest source of revenue for the
Bank and consists of interest and fee income generated by earning assets, less
interest expense paid on interest bearing liabilities. Net interest income was
$12.8 million for the nine month period ending September 30, 2000, compared to
$10.7 million for the comparable period in 1999, an increase of 19.2%. Interest
income for the three and nine month periods ended September 30, 1999, increased
$2.3 million, or 38.1%, and $5.5 million, or 31.9%, respectively, over the
comparable prior year periods. Loan growth continued to positively impact
interest income. Increases in interest income for 2000 were partially offset by
higher funding costs reflecting the Company's reliance on short-term borrowings
to meet loan demand. Interest expense rose $1.7 million, or 76.5% and $3.5
million, or 52.4% for the three and nine months ending September 30, 2000,
respectively, from the comparable 1999 periods.
Loans, which represent the Company's highest yielding assets,
increased on average $95.1 million or 45.8% and represented 86.1% of total
average earning assets for the nine months ended September 30, 2000 versus 71.6%
for 1999. The Company's loan to deposit ratio at September 30, 2000 was 102.0%
compared to 92.3% at December 31, 1999.
The Company's net interest margin decreased slightly to 4.85% in 2000,
compared to 4.93% in 1999. The lower yield in 2000 reflects the Company's
dependence on short-term borrowings to fund loan demand and meeting competitive
rates on deposit accounts.
9
<PAGE>
Total earning asset yields rose to 8.69% in 2000 from 7.99%, while
being offset by a increase in rates on interest-bearing liabilities to 4.62%
from 3.81% in 1999. Table 1: "Average Balances - Yields and Rates" provides the
Company's average volume of interest earning assets and interest bearing
liabilities for the nine months ended September 30, 2000 and 1999. Table 1a
presents an analysis of changes in interest income and expense.
<TABLE>
Table 1: Average Balances - Yields and Rates
(Unaudited)
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
---------------------------------- ------------------------------------
Interest Interest
Average Income or Average Average Income or Average
Balance Expense Rate Balance Expense Rate
--------- ----------- ---------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C>
ASSETS:
Federal funds sold $ 3,951 $ 177 5.98% $ 14,864 $ 530 4.77%
Investment securities
available for sale 33,522 1,593 6.35 47,916 2,100 5.86
Investment securities
held to maturity 10,212 444 5.81 8,632 354 5.48
Loans (1) 302,824 20,610 9.09 207,706 13,956 8.98
Interest bearing deposits 1,148 57 6.63 11,132 408 4.90
-------- ----------- ----- --------- -------- ------
TOTAL EARNING ASSETS 351,657 22,881 8.69 290,250 17,348 7.99
All other assets 36,749 26,469
-------- ---------
TOTAL ASSETS $ 388,406 $ 316,719
======== =========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
NOW and money markets $ 108,650 $ 2,698 3.32% $ 78,001 $ 1,212 2.08%
Savings 17,346 180 1.39 17,496 185 1.41
Time deposits 146,272 6,294 5.75 131,226 5,029 5.12
Repurchase agreements and
federal funds purchased 8,830 378 5.72 6,433 214 4.45
Short term borrowings 11,277 568 6.73 - - -
-------- ------- ----- --------- -------- ------
TOTAL INTEREST BEARING
LIABILITIES 292,375 10,118 4.62 233,156 6,640 3.81
Demand deposits 48,759 39,663
Other liabilities 3,841 2,497
Shareholders' equity 43,431 41,403
-------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 388,406 $ 316,719
======== =========
----- ------
INTEREST SPREAD (2) 4.07% 4.18%
===== ======
NET INTEREST INCOME $ 12,763 $ 10,708
======= ========
NET INTEREST MARGIN (3) 4.85% 4.93%
===== ======
<FN>
(1) Interest income on average loans includes loan fee recognition of $644,000
and $473,000 in 2000 and 1999, respectively.
(2) Represents the average rate earned minus average rate paid.
(3) Represents net interest income divided by total earning assets.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
Table 1a: Analysis of Changes in Interest Income and Expense
(Unaudited)
NET CHANGE SEPTEMBER 30, NET CHANGE SEPTEMBER 30,
1999-2000 ATTRIBUTABLE TO: 1998-1999 ATTRIBUTABLE TO:
-------------------------- --------------------------
Net Net
Volume (1) Rate (2) Change Volume (1) Rate (2) Change
---------- -------- ------ ---------- -------- ------
(thousands)
<S> <C> <C>
INTEREST INCOME:
Federal funds sold $ (389) $ 36 $ (353) $ (588) $ (71) $(659)
Investment securities available for sale (630) 123 (507) (64) (89) (153)
Investment securities held to maturity 65 25 90 59 24 83
Loans 6,409 245 6,654 2,784 (539) 2,245
Interest bearing deposits (366) 15 (351) 220 (54) 166
--------- ------- --------- ---------- -------- ------
Total 5,089 444 5,533 2,411 (729) 1,682
--------- ------- --------- ---------- -------- ------
INTEREST EXPENSE:
NOW and money markets 475 1,011 1,486 189 (253) (64)
Savings (1) (4) (5) 18 (70) (52)
Time deposits 580 685 1,265 158 (340) (182)
Repurchase agreements and
federal funds purchased 103 61 164 (14) (33) (47)
Short term borrowings - 568 568 (7) - (7)
--------- ------- --------- ---------- -------- ------
Total 1,157 2,321 3,478 344 (696) (352)
--------- ------- --------- ---------- -------- ------
Net interest income $ 3,932 $ (1,877) $ 2,055 $ 2,067 $ (33) $ 2,034
========= ======= ========= ========== ======== ======
<FN>
(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.
Changes which are not solely due to volume changes or solely due to rate
changes have been attributed to rate changes.
</FN>
</TABLE>
Non-Interest Income
Non-interest income for the nine months ended September 30, 2000 was
$2.4 million, an increase of $230,000, or 10.6% as compared to the same period
in 1999. For the three months ended September 30, 2000, non- interest income
increased $109,000 or 14.8% to $848,000 as compared to $739,000 to the same
period in 1999. Service charges on deposit accounts had modest increases of
$78,000 for the nine month period and $18,000 for the three month period ending
September 30, 2000 as compared to the same periods in 1999. Other fee income,
which includes credit card fees, credit life insurance income, safe deposit box
fees, fees from loans sold to secondary markets, net gains and losses from sale
of securities and other miscellaneous fees, had an increase of 50.0% for the
third quarter of 2000 compared to the third quarter of 1999 and an increase of
24.8% for the first nine months of 2000 versus the comparable period in 1999.
Non-Interest Expense
Non-interest expense increased in the third quarter of 2000 compared to
the same period in 1999 by $865,000 or 28.6%, and $2.8 million, or 33.0% for the
2000 nine month period versus the comparable period in 1999. Non- interest
expense as a percentage of average assets for the nine month period ending
September 30, 2000 and 1999 was 3.90% and 3.60%, respectively. Salaries and
employee benefits increased $1.7 million or 37.8% to $6.3 million for the 2000
nine month period, compared to $4.6 million for the same period in 1999. This
11
<PAGE>
increase reflects the continued implementation of the Company's business plan to
build an organization structure supporting expansion in the Jacksonville and
Gainesville markets.
Occupancy expense, including premises, furniture, fixtures and
equipment, increased $94,000, or 20.3% and $228,000, or 16.9%, respectively in
2000, over the comparable three and nine month periods in 1999. The increase is
primarily attributable to occupancy expenses associated with the expansion into
Jacksonville and Gainesville. CNB National Bank moved into its new Gainesville
headquarters located in the Tower Hill area during the second quarter and
occupied its new Jacksonville branch in Deerwood Park in the third quarter.
Other operating expenses increased $851,000, or 33.0%, for the nine
months of 2000 compared to the same period in 1999. The following table details
the areas of significance in other operating expenses.
Table 2: Other Operating Expenses
Nine Months Ended September 30,
2000 1999
----------- ----------
(thousands)
Data processing $ 486 $ 433
Advertising and promotion 474 300
Telephone 436 281
Postage and delivery 405 339
Legal and professional 335 235
Supplies 304 221
Administrative 141 123
Other general operating 140 35
Amortization of intangible assets 135 135
Loan expenses 127 142
Regulatory fees 110 107
Insurance and bonding 60 51
Other 280 180
------- ------
Total other operating expenses $3,433 $2,582
======= ======
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 such rate to interim pre-tax income. The Company's
estimated effective tax rate for the corresponding quarter and current year is
approximately 35%.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity management addresses CNB's ability to meet deposit
withdrawals either on demand or at contractual maturity, to repay borrowings and
to make new loans and investments as they arise. Management measures the
Company's liquidity position by giving consideration to both on- and off-balance
sheet sources of and demands for funds on a daily and weekly basis. In addition
to core deposit growth, sources of funds available to meet liquidity demands
include cash received through ordinary business activities such as the
collection of interest and fees, federal funds sold, loan and investment
maturities and lines of credit for the purchase of federal funds by the Company
from its principal correspondent banks. Average liquid assets (cash and amounts
due from banks, interest bearing deposits in other banks, federal funds sold and
investment securities available for sale) totaled $54.8 million and represented
17.1% of average total deposits during the nine months of 2000, compared to
$85.7 million and 32.2% for 1999. Average loans were 94.3% and 78.0% of average
deposits for the nine month period ended September 30, 2000 and 1999,
respectively.
12
<PAGE>
The Company has available lines of credit for the purchase of federal
funds with other financial institutions totaling $15.0 million. The Company is
also a member of the Federal Home Loan Bank and as such has access to both long
and short term funds. There were outstanding balances of $3.1 million in federal
funds purchased from correspondent banks and $35.0 million in short term
borrowings with the Federal Home Loan Bank as of September 30, 2000.
The asset mix of the balance sheet is continually evaluated in terms of
several variables: yield, credit quality, appropriate funding sources and
liquidity. Management of the liability mix of the balance sheet focuses on
expanding the various funding sources.
The Company's gap and liquidity positions are formally reviewed on a
regular basis 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 and interest rates.
In Table 3, "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 September 30, 2000, the estimated fair value
would have been achieved at that date, since market values may differ depending
on various circumstances.
Sources of liquidity include cash and cash equivalents, net of federal
requirements to maintain reserves against deposit liabilities; investment
securities eligible for pledging to secure borrowings from dealers and customers
pursuant to securities sold under repurchase agreements; loan repayments; loan
sales; deposits and certain interest rate- sensitive deposits; and borrowings
under overnight federal fund lines available from correspondent banks. In
addition to interest rate-sensitive deposits, the Company's primary demand for
liquidity is anticipated fundings under credit commitments to customers.
13
<PAGE>
<TABLE>
Table 3: Rate Sensitivity Analysis
September 30, 2000
(dollars in thousands)
Fair
1 Year 2 Years 3 Years 4 Years 5 Years Beyond TOTAL Value
------ ------- ------- ------- ------- ------ ----- -----
INTEREST-EARNING ASSETS:
<S> <C> <C>
Investment securities (1)
Fixed rate investments $ 8,875 $ 90 $ - $ 20,237 $ - $ 8,831 $ 38,033 $ 37,547
Average interest rate 6.24% 4.10% 6.01% 6.08% 6.08%
Variable rate investments - - - - - 1,607 1,607 1,606
Average interest rate 6.94% 6.94%
Loans
Fixed rate loans 16,651 13,164 21,529 28,226 35,242 62,043 176,855 174,683
Average interest rate 8.90% 9.20% 8.92% 8.61% 8.90% 8.21% 8.64%
Variable rate loans 49,705 15,270 11,857 3,645 9,977 79,148 169,602 169,602
Average interest rate 9.74% 9.72% 9.15% 10.03% 9.75% 8.58% 9.16%
Other earning assets (2) 3,033 - - - - - 3,033 3,093
Average interest rate 6.77% 6.77%
------- ------- ------- ------- ------- -------- -------- --------
Total interest-earning assets $ 78,264 $ 28,524 $ 33,386 $ 52,108 $ 45,219 $ 151,629 $ 389,130 $ 386,531
Average interest rate 9.05% 9.46% 9.00% 7.70% 9.09% 8.27% 8.60%
======= ======= ======= ======= ======= ======= ======= ========
INTEREST-BEARING LIABILITIES:
Savings $ - $ - $ - $ - $ - $ 16,201 $ 16,201 $ 16,201
Average interest rate 1.39% 1.39%
NOW 21,949 - - - - 53,505 75,454 75,454
Average interest rate 5.13% 1.23% 2.36%
Money market (3) 37,120 - - - - 2,199 39,319 39,319
Average interest rate 5.20% 2.82% 5.07%
CD's under $100,000 90,721 10,223 2,054 471 25 - 103,494 103,666
Average interest rate 6.03% 6.08% 5.60% 5.52% 5.75% 6.02%
CD's $100,000 and over 48,517 3,506 1,074 - - - 53,097 53,159
Average interest rate 6.38% 6.17% 6.78% 6.38%
Securities sold under
repurchase agreements and
federal funds purchased 11,599 - - - - - 11,599 11,599
Average interest rate 6.59% 6.59%
Short term borrowings 35,000 - - - - - 35,000 35,000
Average interest rate 6.65% 6.65%
------- -------- ------- ------- ------- ------- ------- --------
Total interest-bearing liabilities $ 244,906 $ 13,729 $ 3,128 $ 471 $ 25 $ 71,905 $ 334,164 $ 334,398
Average interest rate 6.01% 6.10% 6.01% 5.52% 5.75% 1.31% 5.00%
======= ======= ======= ======= ======= ======= ======= ========
<FN>
(1) Securities available for sale are shown at their amortized cost, excluding
market value adjustment for unrealized losses of $425,000.
(2) Represents interest bearing deposits with other banks, Federal Reserve Bank
Stock, Federal Home Loan Bank Stock and other marketable equity securities.
(3) All Money Market accounts $25,000 and over and 30% of Money Market accounts
under $25,000 have been designated as maturing within one year.
</FN>
</TABLE>
14
<PAGE>
Core deposits, which represent all deposits other than time deposits in
excess of $100,000, were 84.4% of total deposits at September 30, 2000 and 84.4%
at December 31, 1999. 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 4, 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 4: Maturity of Time Deposits of $100,000 or More
September 30, 2000
(dollars in thousands)
Amount
Three months or less $ 11,827
Three through six months 13,260
Six through twelve months 23,430
Over twelve months 4,580
-------
Total $ 53,097
=======
EARNING ASSETS
Loans
Loan growth continued to fuel the increases in interest income which
increased 38.1% for the 2000 third quarter and 31.9% for the first nine months
of 2000 compared to the respective 1999 periods.
Average loans during the nine month period ending September 30, 2000
were $302.8 million and were 94.3% of average deposits, compared to $207.7
million and 78.0% for 1999. Total loans have increased by $80.4 million, or
30.2%, since December 31, 1999. This growth is reflective of the Company's
business plan to increase its loan to deposit ratio. The following table
reflects the composition of the Company's loan portfolio as of September 30,
2000 compared to December 31, 1999.
Table 5: Loan Portfolio Composition
September 30, December 31,
2000 1999
-------------- ------------
(thousands)
Commercial, financial and agricultural $ 183,924 $ 136,937
Real estate - mortgage 106,590 86,275
Real estate - construction 25,217 18,926
Installment and consumer 30,726 23,946
-------- --------
Total loans, net of unearned income 346,457 266,084
Less: allowance for loan losses (3,425) (2,671)
-------- -------
Net loans $ 343,032 $ 263,413
======== =======
The following table sets forth the maturity distribution for selected
components of the Company's loan portfolio on September 30, 2000. Demand loans
and overdrafts are reported as due in one year or less, and loan maturity is
based upon scheduled principal payments.
15
<PAGE>
<TABLE>
Table 6: Maturity Schedule of Selected Loans
September 30, 2000
0-12 1-5 Over 5
Months Years Years Total
-------- --------- ---------- --------
(thousands)
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 24,731 $ 92,594 $ 66,599 $ 183,924
Real estate - construction 25,217 - - 25,217
All other loans 16,408 46,316 74,592 137,316
------- ------- ------- --------
Total $ 66,356 $138,910 $ 141,191 $ 346,457
======= ======= ======== ========
Fixed interest rate $ 16,651 $ 98,161 $ 62,043 $ 176,855
Variable interest rate $ 49,705 $ 40,749 $ 79,148 $ 169,602
</TABLE>
Loan Quality
The allowance for loan losses represents a reserve for potential
losses in the loan portfolio. On an ongoing basis, management attempts to
maintain the allowance for loan losses at levels sufficient to provide for
losses inherent in the loan portfolio. The allowance for loan losses is
established through a provision charged to expense. In determining the adequacy
of the reserve for loan losses, management considers those levels maintained by
other peer banks, conditions of the individual borrowers, the Company's
historical loan loss experience and the general economic environment, as well as
the overall portfolio composition. Loans are charged against the allowance when
it is recognized that collection of the principal is unlikely. The allowance for
loan losses on September 30, 2000, was 0.99% of total loans, compared to 1.00%
on December 31, 1999. Table 7: "Allocation of Allowance for Loan Losses", set
forth below, indicates the specific reserves allocated by loan type.
Table 7: Allocation of Allowance for Loan Losses
September 30, December, 31
2000 1999
------------------------- ---------------------
Percent of Percent of
Loans in Each Loans in Each
Category to Category to
Amount Total Loans Amount Total Loans
--------- ------------- ------- -------------
(dollars in thousands)
Commercial, financial
and agricultural $ 2,367 53% $ 1,670 52%
Real estate - mortgage 262 31% 220 32%
Real estate- construction 14 7% 12 7%
Consumer 772 9% 769 9%
Unallocated 10 - - -
----- ---- ------ ----
Total $ 3,425 100% $ 2,671 100%
===== ==== ====== ====
Total non-performing assets increased by $127,000 or 15.3% to $958,000
on September 30, 2000, compared to $831,000 on December 31, 1999. Non-performing
assets as a percentage of total assets decreased to 0.22% on September 30, 2000
from 0.24% on December 31, 1999. Non-accrual loans have decreased $84,000 since
December 31, 1999. This decrease is primarily due to the pay-off of a large
residential loan.
16
<PAGE>
Table 8: Non-Performing Assets
September 30, December 31,
2000 1999
---------- ----------
(dollars in thousands)
Non-accrual loans $ 465 $ 549
Past due loans 90 days or
more and still accruing 465 180
Other real estate owned
and repossessions 28 102
------ ------
Total non-performing assets $ 958 $ 831
====== ======
Percent of total assets 0.22% 0.24%
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
inherent losses in the loan portfolio; however, management's judgment is based
upon a number of assumptions about future events, which are believed to be
reasonable, but which may or may not prove to be valid. Thus, there can be no
assurance that charge-offs in future periods will not exceed the allowance for
loan losses or that additional increases in the allowance for loan losses will
not be required. Table 9: "Activity in Allowance for Loan Losses", below,
indicates activity in the allowance for loan losses for the nine month period
ending September 30, 2000 as compared to 1999.
Table 9: Activity in Allowance for Loan Losses
September 30,
2000 1999
---- ----
(dollars in thousands)
Balance at beginning of year $ 2,671 $ 1,875
Loans charged-off:
Commercial, financial and agricultural 64 291
Real estate, mortgage 40 13
Real estate, construction - -
Consumer 239 195
-------- --------
Total loans charged-off (343) (499)
Recoveries on loans previously charged-off:
Commercial, financial and agricultural 25 113
Real estate, mortgage - -
Real estate, construction - -
Consumer 122 32
-------- --------
Total loan recoveries 147 145
-------- --------
Net loans charged-off (196) (354)
-------- --------
Provision for loan losses charged to expense 950 785
-------- --------
Ending balance $ 3,425 $ 2,306
======== ========
Total loans outstanding $ 346,457 $ 228,371
Average loans outstanding $ 302,824 $ 207,706
Allowance for loan losses to loans outstanding 0.99% 1.01%
Net charge-offs to average loans outstanding,
annualized 0.09% 0.23%
17
<PAGE>
Investment Portfolio
The Company uses its securities portfolio primarily as a source of
liquidity and a base from which to pledge assets for repurchase agreements and
public deposits. The total recorded value of securities was $41.9 million at
September 30, 2000, a decrease of 8.3% from $45.7 million at the end of 1999.
Securities are classified as either held-to-maturity or available-for-sale which
are recorded at fair market value. Securities available-for- sale, which made up
78.0% of the total investment portfolio as of September 30, 2000 had a value of
$41.9 million. With most of the portfolio being in the available-for-sale
category, the Company has the flexibility in case an immediate need for
liquidity arises. The unrealized gains or losses, net of tax, do not impact net
income or regulatory capital but are recorded as adjustments to shareholders'
equity. At September 30, 2000, shareholders' equity included a net unrealized
loss of $267,000 compared to a net unrealized loss of $537,000 at December 31,
1999.
As a percent of total earning assets, the investment portfolio has
decreased to a level of 10.8% at September 30, 2000 compared to 14.6% for year
ended 1999. The decrease in the size of the portfolio relative to total earning
assets is attributable to the increase in loan growth which improved the mix of
earning assets.
The Company invests primarily in direct obligations of the United
States, obligations guaranteed as to the principal and interest by the United
States and obligations of agencies of the United States. In addition, the
Company enters into federal funds transactions with its principal correspondent
banks. The Federal Reserve Bank and Federal Home Loan Bank also require equity
investments to be maintained by the Company.
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.
18
<PAGE>
<TABLE>
Table 10: Maturity Distribution of Investment Securities (1)
September 30, 2000
(dollars in thousands) Held to Maturity Available for Sale
-------------------------------------------------------------------------------------------------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
<S> <C> <C>
U.S. Treasury:
One year or less $ - $ - $ 7,492 $ 7,501
------------- ------------- --------- --------
Total U.S. Treasury - - 7,492 7,501
U.S. Government Agencies
and Corporations:
Over one through five years 7,911 7,909 20,000 19,494
---------- ----------- ------- -------
Total U.S. Government Agencies 7,911 7,909 20,000 19,494
and Corporations
Obligations of State and Political
Subdivisions:
One year or less - - 90 89
Over one through five years - - 327 325
Over ten years - - 608 625
------------- ------------- ---------- ----------
Total Obligations of State and - - 1,025 1,039
Political Subdivisions
Mortgage-Backed Securities (2):
One year or less 1,293 1,293 - -
Over five through ten years - - 566 565
Over ten years - - 1,353 1,352
------------- ------------- --------- ----------
Total Mortgage-Backed Securities 1,293 1,293 1,919 1,917
Other Securities:
Over ten years (3) - - 2,674 2,734
------------- ------------- --------- ----------
Total Other Securities - - 2,674 2,734
Total Securities $ 9,204 $ 9,202 $ 33,110 $ 32,685
========== ========== ======== ========
<FN>
(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.
</FN>
</TABLE>
<TABLE>
Table 11: Weighted Average Yield by Range of Maturities
September 30, 2000 December 31, 1999 September 30, 1999
------------------ ----------------- ------------------
<S> <C> <C> <C>
One Year or Less 6.24% 5.81% 6.01%
Over One through Five Years 6.00% 6.15% 6.09%
Over Five through Ten Years 6.18% 5.78% 5.74%
Over Ten Years (1) 6.36% 5.65% 5.61%
<FN>
(1) Represents adjustable rate mortgage-backed securities which are
repriceable within one year.
</FN>
</TABLE>
19
<PAGE>
Other Earning Assets
Temporary investment needs are created in the day-to-day liquidity
movement of the Bank and are satisfied by selling excess funds overnight (Fed
Funds Sold) to larger, well capitalized banking institutions. If these funds
become excessive, management determines what portion, if any, of the liquidity
may be rolled into longer term investments as securities.
FUNDING SOURCES
Deposits
The Bank does not rely on purchased or brokered deposits as a source of
funds. Instead, competing for deposits within its market area serves as the
Bank's fundamental tool in providing a source of funds to be invested primarily
in loans. The following table sets forth certain deposit categories for the
periods ended September 30, 2000 and December 31, 1999.
Table 12: Total Deposits
September 30, December 31,
2000 1999
----------- ------------
(thousands)
Non-interest bearing:
Demand checking $ 51,932 $ 42,110
Interest bearing:
NOW checking 75,454 61,977
Money market checking 39,319 33,589
Savings 16,201 16,537
Certificates of deposit 156,591 133,990
-------- --------
Total deposits $ 339,497 $ 288,203
======== ========
CAPITAL RESOURCES
Shareholders' equity at September 30, 2000 was $44.0 million, as
compared to $43.1 million at December 31, 1999. At September 30, 2000, the
Company's common stock had a book value of $7.23 per share compared to $7.04 per
share at December 31, 1999.
The Comptroller regulates risk based capital guidelines for national
banks. These guidelines are intended to provide an additional measure of a
bank's capital adequacy by assigning weighted levels of risk to asset
categories. Banks are also required to systematically hold capital against such
"off balance sheet" activities as loans sold with recourse, loan commitments,
guarantees and standby letters of credit. These guidelines are intended to
strengthen the quality of capital by increasing the emphasis on common equity
and restricting the amount of loss reserves and other forms of equity such as
preferred stock that may be included in capital.
Under the terms of the guidelines, banks must meet minimum capital
adequacy ratios 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%. Tier 1 Capital includes common shareholders' equity and qualifying preferred
stock, less goodwill and other adjustments. Tier 2 Capital consists of preferred
stock not qualifying as Tier 1 Capital, mandatory convertible debt, limited
amounts of subordinated debt, other qualifying term debt and the allowance for
credit losses up to 1.25% of risk-weighted assets. Total Capital consists of
Tier 1 Capital and Tier 2 Capital. The regulatory agencies have also established
20
<PAGE>
an additional capital adequacy guideline referred to as the Tier 1 leverage
ratio that measures the ratio of Tier 1 capital to average quarterly assets.
Adherence to these guidelines has not had an adverse impact on the Company or
the Bank. Selected capital ratios at September 30, 2000 compared to December 31,
1999 and regulatory requirements are as follows:
<TABLE>
Table 12: Capital Ratios
September 30, December 31, Well Capitalized Regulatory
2000 1999 Requirements Minimums
------------ ------------ ------------ --------
<S> <C> <C>
Risk Based Capital Ratios:
Tier 1 Capital Ratio 12.5% 16.2% 6.0% 4.0%
Total Capital to
Risk-Weighted Assets 13.5% 17.3% 10.0% 8.0%
Tier 1 Leverage Ratio 10.5% 12.7% 5.0% 4.0%
</TABLE>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
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. The Company attempts to maintain a
cumulative gap position equaling plus, or minus 20% of total assets.
In the Company's analysis, current average rates within the repricing
periods of affected balance sheet categories are adjusted to a historical
percentage of market change according to each rate shock scenario. The adjusted
rates are then substituted in interest computations and compared to actual
results. These efforts will continue to provide the tools necessary in the
Company's attempt to maximize its primary earnings factor-net interest income.
The estimated fair values at September 30, 2000 should not necessarily
be considered to apply at subsequent dates.
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 - Not applicable.
Item 3. Defaults Upon Senior Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - Not
applicable.
Item 5. Other Information - Not applicable.
Item 6. Exhibits and Reports on Form 8-K -
(a) Exhibits:
27 - Financial Data Schedule
b. Form 8-K:
Not applicable.
22
<PAGE>
SIGNATURES
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 Florida Bancshares, Inc.
--------------------------------
(Registrant)
By: /s/ G. Thomas Frankland
----------------------------
G. Thomas Frankland
Executive Vice President
and Chief Financial Officer
Date: November 10, 2000
23
