UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 1O-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly period ending June 30, 1996
Commission File Number 33-45522
CNB FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
New York 22-3203747
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24 Church Street, Canajoharie, N.Y. 13317
(Address of principal executive offices - Zip code)
Registrant's telephone number, include area code (518)673-3243
Indicate by a 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 bank
was required to file such reports), and (2) has been subjected to such filing
requirements for the past 90 days.
Yes X No
----- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares outstanding
Class on June 30, 1996
----- ----------------------------
Common Stock, $2.50 par value 2,678,368 Shares
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<PAGE>
PART I. FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements
1. Consolidated Statement of Condition 3.
2. Consolidated Statement of Operations 4.
3. Consolidated Statement of Changes in
Stockholders' Equity 5.
4. Consolidated Statement of Cash Flows 6.
5. Notes to Consolidated Financial Statements 7.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and reports on Form 8-K
SIGNATURES
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<TABLE>
PART 1. Financial Information
Item 1. Consolidated Financial Statements
<CAPTION>
CNB FINANCIAL CORP. (unaudited)
CONSOLIDATED STATEMENT OF CONDITION June 30, December 31,
1996 1995
In thousands
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks ............................................... $ 17,604 $ 16,200
Federal funds sold .................................................... -- 8,000
Investment securities available for sale .............................. 127,760 120,858
Investment securities held to maturity, market value of
$100,310 in 1996 and $98,259 in 1995 ................................ 98,762 94,592
Loans, net of allowance for possible loan losses ...................... 311,537 308,154
Accrued interest receivable ........................................... 5,040 4,609
Premises and equipment ................................................ 9,094 5,923
Deferred taxes ........................................................ 5,159 3,763
Other assets .......................................................... 2,967 2,693
-------- --------
Total Assets ......................................................... $577,923 $564,792
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Noninterest-bearing deposits .......................................... $ 49,387 $ 47,234
Interest-bearing deposits ............................................. 434,193 449,077
-------- --------
Total Deposits ........................................................ 483,580 496,311
Federal funds purchased and securities
sold under agreements to repurchase ................................. 32,695 7,963
Interest, taxes and other liabilities ................................. 6,627 6,465
Long-term borrowings .................................................. 7,469 6,620
-------- --------
Total Liabilities ................................................... 530,371 517,359
-------- --------
Stockholders' Equity:
Common stock, $2.50 par value, 10,000,000 shares authorined,
2,678,368 shares and 2,671,875 shares, issued and outstanding
in 1996 and 1995, respectively ...................................... 6,696 6,680
Capital in excess of par value ........................................ 10,441 10,346
Retained earnings ..................................................... 32,924 30,243
Security valuation adjustment ......................................... (2,368) 339
Treasury Stock, at cost, 4,937 shares and 6,496 shares in
1996 and 1995, respectively ......................................... (141) (175)
-------- --------
Total Stockholders' Equity ............................................ 47,552 47,433
-------- --------
Total Liabilities and Stockholders' Equity ............................ $577,923 $564,792
======== ========
</TABLE>
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<TABLE>
<CAPTION>
CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
Three months ended Six months ended
June 30, June 30,
In thousands (except per share data) 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans, inluding fees ............................... $ 7,548 $ 7,056 $15,101 $14,141
Investment securities .............................. 4,022 3,482 7,813 6,610
Federal funds sold and other ....................... 161 243 321 329
------- ------- ------- -------
11,731 10,781 23,235 21,080
------- ------- ------- -------
Interest expense:
Deposits ........................................... 5,201 4,805 10,406 8,875
Borrowings ......................................... 261 200 505 441
------- ------- ------- -------
5,462 5,005 10,911 9,316
------- ------- ------- -------
Net interest income .................................. 6,269 5,776 12,324 11,764
Provision for loan losses .......................... 65 220 340 370
------- ------- ------- -------
Net interest income after provision
for loan losses ...................................... 6,204 5,556 11,984 11,394
------- ------- ------- -------
Other income:
Service charges on deposit accounts ................ 344 237 639 427
Gain from sale of investment securities ............ 53 334 513 367
Other .............................................. 255 235 523 457
------- ------- ------- -------
652 806 1,675 1,251
------- ------- ------- -------
Other expense:
Salaries and employee benefits .................... 2,186 1,967 4,298 3,949
Occupancy and equipment expense ................... 413 365 849 732
Other ............................................. 1,926 1,976 3,595 3,561
------- ------- ------- -------
4,525 4,308 8,742 8,242
------- ------- ------- -------
Income before income taxes ........................ 2,331 2,054 4,917 4,403
Income taxes ...................................... 633 571 1,356 1,226
------- ------- ------- -------
Net income ............................................. 1,698 1,483 3,561 3,177
======= ======= ======= =======
Earnings per share ..................................... $0.63 $0.56 $1.32 $1.18
======= ======= ======= =======
Weighted average shares outstanding .................... 2,698 2,669 2,697 2,682
======= ======= ======= =======
</TABLE>
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<PAGE>
<TABLE>
CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCK HOLDERS' EQUITY
<CAPTION>
(Unaudited)
Capital in Securities
Common Excess of Retained Valuation Treasury
In thousands Stock Par Value Earnings Adjustment Stock Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $6,661 $10,239 $25,592 ($2,594) -- $39,898
Net income - 1995 -- -- 6,572 -- -- $ 6,572
Cash dividends -- -- (1,921) -- -- ($ 1,921)
Common stock issued 19 107 -- -- -- $ 126
Securities valuation adjustment -- -- -- $2,933 -- $ 2,933
Treasury Stock Purchased -- -- -- -- (175) (175)
------ ------- ------- ------- ----- -------
Balance at December 31, 1995 6,680 10,346 30,243 339 (175) 47,433
Net income - 1996 -- -- 3,561 -- -- 3,561
Cash dividends -- -- (880) -- -- (880)
Common stock issued 16 90 -- -- 106
Securities valuation adjustment -- -- -- (2,707) -- (2,707)
Treasury stock sold -- 5 -- -- 34 39
------ ------- ------- ------- ----- -------
Balance June 30, 1996 $6,696 $10,441 $32,924 ($2,368) ($141) $47,552
====== ======= ======= ======= ===== =======
</TABLE>
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<TABLE>
<CAPTION>
CNB FINANCIAL CORP. (unaudited)
CONSOLIDATED STATEMENT OF CASH FLOWS Six months ended June 30,
1996 1995
In thousands
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Interest received .................................................. $22,804 $20,741
Fees and service charges ........................................... 1,315 884
Interest paid ...................................................... (11,441) (9,359)
Cash paid to suppliers and employees ............................... (8,005) (7,695)
Income taxes paid .................................................. (1,530) (1,038)
Trading portfolio activity, net .................................... (268) 17
------- -------
Net cash provided by operating activities ...................... 2,875 3,550
------- -------
Cash flows from investing activities:
Purchase of investment securities:
Held to maturity ................................................. (9,887) (21,377)
Available for sale ............................................... (59,883) (43,341)
Proceeds from sales of investment securities:
Held to maturity ................................................. -- --
Available for sale ............................................... 40,741 37,827
Proceeds from maturities of investment securities:
Held to maturity ................................................. 5,856 4,304
Available for sale ............................................... 8,779 3,668
Net increase in loans .............................................. (3,723) (6,153)
Purchase of premises and equipment ................................. (3,469) (655)
------- -------
Net cash flows used in investing activities .................... (21,586) (25,727)
-------- -------
Cash flows from financing activities:
Net (decrease) increase in deposits ................................ (12,731) 45,107
Net increase (decrease) in short term borrowings ................... 24,732 (13,183)
Payments on long term fluids borrowed .............................. (151) (143)
Dividends paid ..................................................... (880) (800)
Proceeds from issuance of common stock ............................. 106 72
Bonds issued ....................................................... 1,000 3,750
Treasury stock sold ("urchased) .................................... 39 (32)
------- -------
Net cash flows from financing activities ....................... 12,115 34,771
------- -------
Net increase in cash and cash equivalents .......................... (6,596) 12,594
Cash and cash equivalents at beginning of year ..................... 24,200 3,592
------- -------
Cash and cash equivalents at end of quarter .................... 17,604 16,186
======= =======
Reconciliation of net income to cash provided by
operating activities:
Net income ...................................................... 3,561 3,177
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amorttiation ................................. 298 278
Provision for loan loss ....................................... 340 370
Trading portfolio net purchases ............................... (268) 17
Gain on securities ............................................ (513) (367)
Increase in interest receivable ............................... (431) (339)
Increase in accrued expenses .................................. 162 361
(Decrease) increase in other assets ........................... (274) 53
------- -------
$ 2,875 $ 3,550
======= =======
</TABLE>
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CNB Financial Corp.
Notes to Consolidated Financial Statements
June 30, 1996
1. Financial
The accompanying unaudited consolidated financial statements present the
consolidated statements of condition, operations, stockholders' equity, and cash
flows of CNB Financial Corp. for the three and six months ended June 30, 1996
and 1995.
The interim consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and conform to instructions to
Form 10-Q and Rules 10-01 of Regulation S-X. However, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for fair presentation have been included. Operating results for the six month
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996.
During the first quarter of 1996, SFAS 123 (Accounting for Stock Based
Compensation) become effective. As permitted by SFAS 123, the company has
elected to continue accounting for stock options issued to employees under APB
25.
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<PAGE>
CNB Financial Corp.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The following discussion and analysis sets forth the major factors which
affected the Corporation's results of operations and financial condition
reflected in the unaudited financial statements for the quarters ended June 30,
1996 and 1995.
The Corporation reported net income of $3,561,000 for six months ended June 30,
1996. The earnings compared to the $3,177,000 earned for the same period last
year, are up $384,000 or 12%. Net income per share was $1.32 and $1.18 for the
respective periods.
Net income for the quarter ended June 30, 1996 was $1,698,000 compared to
$1,483,000 for the same period in 1995, an increase of $215,000 or 15%. Net
income per share was $.63 for the quarter and $.56 for the same quarter of last
year.
Results of Operations
Six Months Ending June 30. 1996 vs June 30.1995
Interest income increased from $21,080,000 to $23,235,000 (10%). The increase
resulted from increases in average earnings assets of $65,828,000 but a decrease
in average yield from 8.63% to 8.50%.
The increases in average earning assets include growth in the loan portfolio of
$24,597,000, securities of $39,980,000 and fed funds of $1,088,000. The decrease
in yield is a reflection of general overall rate decreases which have created
lower rates on new loans and securities plus lower rates on the floating rate
items.
Total interest expense increased $1,595,000 (17%) for the six month period ended
June 30, 1996 compared to the same period in 1995. The increase in interest
expense was due to the $57,299,000 (12%) increase in average deposits. However,
the average cost of funds for the period decreased from 4.44% at June 30, 1995
to 4.17% at June 30, 1996.
The net interest income increased by $560,000 (5%) for the six months ended June
30, 1996 when compared to the same period of 1995.
The Corporation recorded a loan loss provision of $340,000 for the six months
ended June 30, 1 996, a decrease of $30,000 from the $370,000 recorded for the
same period of 1995.
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<PAGE>
Activity in the allowance for loan losses was as follows:
Six Month's Ended Year Ended
June 30, 1996 Dec. 31, 1995
---------- ----------
Balance, beginning of year .............. $8,463,000 $8,292,000
Additions:
Charged to expense ...................... 340,000 965,000
---------- ----------
8,803,000 9,257,000
---------- ----------
Charge offs ............................. 597,000 1,315,000
Recoveries .............................. 376,000 521,000
---------- ----------
Net loans charged off ................... 221,000 794,000
---------- ----------
Balance, end of period .................. $8,582,000 $8,463,000
---------- ----------
Other income excluding security transactions increased $278,000 (31%) for the
six month period ended June 30, 1996, compared to the corresponding period for
1995. The increase is primarily due to higher fee income ($195,000) as the
structure on demand deposit account charges was changed and higher Trust income
($24,000).
Other expenses increased $500,000 (6%) for the corresponding six month period.
The increase is primarily related to increases in salary costs and problem loan
expense.
The provision for income taxes for the six month period was $1,356,000 compared
to $1,226,000 for last year, the effective rates for each period were 27.6% and
28%, respectively.
Three Month Period April 1, 1996 to June 30, 1996 compared to the comparable
period last year
Total interest income increased from $10,781,000 to $11,731,000, or $950,000
(9%). The increase is attributable to the growth in earning assets during the
period. Interest expense during the period increased from $5,005,000 to
$5,462,000, $457,000 (9%). The yield on the earning assets increased 5 basis
points from 8.59% to 8.64%. The average cost of funds during the quarter
decreased from 4.61% to 4.12% a decrease of 49 basis points when compared to the
same period last year.
The net interest income for the quarter increased $493,000 from $5,776,000 to
$6,269,000 or 9%.
The provision for loan losses was decreased from $220,000 to $65,000 during the
quarter. Nonaccrual loans increased $353,000 from $2,964,000 at December 31,
1995 to $3,317,000, however the past due loans over 90 days decreased by
$263,000 from $965,000 to $702,000 at the corresponding dates.
Other income, excluding security gains, increased $127,000 (27%) from $472,000
to $599,000. The major increases were in deposit account service fees.
Other expenses rose by $217,000 (5%) during the period. Salaries and occupancy
costs are responsible for the increase.
The effective tax rate for 1996 was lower due to the recovery of Federal taxes
resulting from audits of the 1993 and 1994 tax returns.
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<PAGE>
Financial Condition, Liquidity and Capital Resources
Changes in Financial Condition from
December 31, 1995 to June 30, 1996
Consolidated total assets increased to $577,923,000 at June 30, 1996; compared
to $564,792,000 at December 31, 1995, an increase of $13,131,000, or 2%.
Investment securities in the Held-to-Maturity account have increased from
$94,592,000 to $98,762,000, or $4,170,000 (4%) and the corresponding market
values from $98,259,000 to $100,310,000, or $2,051,000 (2%). The
Available-for-Sale portfolio has increased from $120,858,000 to $127,760,000,
$6,902,000 or (6%). The increase in both sections of the portfolio are primarily
in U.S. Government Agency Instruments.
Net loans increased by $3,383,000 or 1%. Total loans were $320,119,000 up from
$316,617,000 at December 31, 1995. The allowance for loan losses at June 30,
1996 was $8,582,000, a $119,000 (1%) increase from $8,463,000 at December 31,
1995. As of June 30, 1996 the allowance for loan losses represented 2.68% of
total loans and 214% of the non-performing loans, this compares to 2.67% and
213% at December 31, 1995. Charged off loans for the six months were $597,000
compared to $1,315,000 for the year ended December 31, 1995. Recoveries for the
six month period were $376,000 versus $521,000 for the year 1995.
Non-accrual loans have increased from $3,078,000 to $3,317,000, a total of
$239,000 or 8% during the first six months of 1996. Included in this increase is
$459,000 in loans to the Bennett Funding Group which declared bankruptcy in the
second quarter.
Total deposits decreased from $496,311,000 to $483,580,000, $12,731,000 (3%).
The decrease in deposits resulted from the failure of the New York State
Government to pass their annual budget before June 30. This failure to pass the
budget held up the financial aid payments to the school districts thus creating
a run down in their deposit accounts. This deposit run off was covered by short
term borrowings from correspondent banks and sale of available for sale
securities.
At June 30, 1996, total stockholders equity has increased by $119,000, from
December 31, 1995 in spite of the FASB 115 effect of a $2,707,000 decrease in
market value of the available for sale portfolio. The sole subsidiary, Central
National Bank, Canajoharie, had total equity of $42,095,000, core capital of
7.41% at June 30, 1996, compared to $42,108,000 and 7.58% at December31, 1995.
Liquidity involves the ability to raise funds to support asset growth, meet
deposit withdrawals, maintain reserve requirements, and sustain operations. This
is accomplished through maturities of bonds and loans, deposit growth, purchase
of federal funds, borrowings on lines of credit, and selling securities under
agreements to repurchase. Management considers all of these factors in
evaluating liquidity requirements and believes its present position to be
adequate.
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<PAGE>
CNB Financial Corp.
Part II - Other Information
Item 1 - Legal Proceedings
None
item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to Vote of Security Holders
The annual meeting of CNB Financial Corp. was held on May 16, 1996. At
the meeting the following directors were elected for terms expiring in
1999: David J. Nolan; Robert B. Proper and Allen H. Samuels.
The stockholder proposal put forth by Morris Massry for vote at the
annual meeting that "the bylaws of the Corporation be amended to
provide that the Corporation's Board of Directors shall at all times
contain a member who was not a Director at any time prior to April 7,
1994, . . .", was defeated.
Item 5 - Other Information
On June 17, 1996, the Corporation issued Industrial Development
Revenue Bonds totaling $1,000,000 for completion of its new Operations
Center. These bonds will mature on May 1,2025.
Item 6 - Exhibits and Reports on Form 8-K
None
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 FINANCIAL CORP.
Registrant
Date: July 3l, 1996 By: DONALD L. BRASS
------------------------------
Donald L. Brass
President
Date: July 31, 1996 By: PETER J. CORSO
------------------------------
Peter J. Corso
Vice President
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<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,604
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 127,760
<INVESTMENTS-CARRYING> 98,762
<INVESTMENTS-MARKET> 100,310
<LOANS> 311,537
<ALLOWANCE> 0
<TOTAL-ASSETS> 577,923
<DEPOSITS> 483,580
<SHORT-TERM> 32,695
<LIABILITIES-OTHER> 6,627
<LONG-TERM> 7,469
0
0
<COMMON> 6,696
<OTHER-SE> 40,856
<TOTAL-LIABILITIES-AND-EQUITY> 577,923
<INTEREST-LOAN> 15,101
<INTEREST-INVEST> 7,813
<INTEREST-OTHER> 321
<INTEREST-TOTAL> 23,235
<INTEREST-DEPOSIT> 10,406
<INTEREST-EXPENSE> 505
<INTEREST-INCOME-NET> 12,324
<LOAN-LOSSES> 340
<SECURITIES-GAINS> 513
<EXPENSE-OTHER> 8,742
<INCOME-PRETAX> 4,917
<INCOME-PRE-EXTRAORDINARY> 3,561
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,561
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
