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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly period ending March 31, 1997
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
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, include area code (518) 673-3243
Indicated 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 MARCH 31, 1997
----------------------------- ----------------------------
Common Stock, $2.50 par value 3,870,930 Shares
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PART I. FINANCIAL INFORMATION
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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PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CONDITION
In thousands
March 31, December 31,
1997 1996
-------- --------
(unaudited)
ASSETS:
Cash and due from banks ............................... $ 20,960 $ 15,536
Federal funds sold .................................... 0 700
Investment securities available for sale .............. 128,286 130,973
Investment securities held to maturity, market value
of $114,875 in 1997 and $108,380 in 1996 ............ 112,914 104,770
Loans, net of allowance for possible loan
losses and unearned income .......................... 309,812 312,643
Accrued interest receivable ........................... 5,537 4,914
Premises and equipment ................................ 9,763 9,673
Deferred taxes ........................................ 4,020 3,543
Other assets .......................................... 3,231 2,875
-------- --------
TOTAL ASSETS ....................................... $594,523 $585,627
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Noninterest-bearing deposits .......................... $ 48,117 $ 50,313
Interest-bearing deposits ............................. 460,602 458,904
-------- --------
Total Deposits ..................................... 508,719 509,217
Federal funds purchased and securities
sold under agreements to repurchase ................. 22,672 13,854
Interest, taxes and other liabilities ................. 7,047 6,852
Long-term borrowings .................................. 7,235 7,313
-------- --------
Total Liabilities .................................. 545,673 537,236
-------- --------
Stockholders' Equity:
Common stock, $2.50 par, 5,000,000 shares authorized,
3,870,930 shares and 3,870,596 shares, issued and
outstanding in 1997 and 1996, respectively .......... 9,677 9,676
Capital in excess of par value ........................ 5,847 5,842
Retained earnings ..................................... 35,524 34,170
Security valuation adjustment ......................... (2,198) (1,274)
Treasury Stock, at cost, 1,250 shares in 1996 ......... -- (23)
-------- --------
Total Stockholders' Equity ......................... 48,850 48,391
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $594,523 $585,627
======== ========
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CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
In thousands (except per share data)
Three months ended
March 31,
---------------------
1997 1996
------- -------
(unaudited)
INTEREST INCOME:
Loans, including fees ............................ $ 7,407 $ 7,553
Investment securities ............................ 4,123 3,791
Federal funds sold and other ..................... 91 160
------- -------
11,621 11,504
------- -------
INTEREST EXPENSE:
Deposits ......................................... 4,966 5,205
Borrowings ....................................... 307 244
------- -------
5,273 5,449
------- -------
NET INTEREST INCOME ............................ 6,348 6,055
Provision for loan losses ........................ 125 275
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES .............................. 6,223 5,780
------- -------
OTHER INCOME:
Service charges on deposit accounts .............. 363 295
Gain from sale of investment securities .......... 261 460
Other ............................................ 334 268
------- -------
958 1,023
------- -------
OTHER EXPENSE:
Salaries and employee benefits ................... 2,255 2,112
Occupancy and equipment expense .................. 437 436
Other ............................................ 1,892 1,669
------- -------
4,584 4,217
------- -------
Income before income taxes ....................... 2,597 2,586
Income taxes ..................................... 779 723
------- -------
NET INCOME ......................................... 1,818 1,863
======= =======
EARNINGS PER SHARE ................................. $ 0.47 $ 0.46
======= =======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (IN THOUSANDS) ....................... 3,868 4,040
======= =======
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CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
In thousands
<CAPTION>
Additional Securities
Common Paid in Retained Valuation Treasury
Stock Capital Earnings Adjustment Stock Total
------ ------- -------- ---------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ................... $6,680 $10,346 $30,243 $ 339 ($ 175) $47,433
Net income -- 1996 ........................... -- -- 7,157 -- -- 7,157
Cash dividends, $.53 per share ............... -- -- (2,080) -- -- (2,080)
Stock retirement ............................ (250) (1,399) (1,150) -- 2,799 --
Issuance of shares for options
and Dividend Reinvestment Plan ............. 21 120 -- -- 452 593
Securities valuation adjustment .............. -- -- -- (1,613) -- (1,613)
Three-for-two stock split .................... 3,225 (3,225) -- -- -- --
Purchase of treasury stock ................... -- -- -- -- (3,099) (3,099)
------ ------- ------- ------- ------- -------
Balance at December 31, 1996 ................... 9,676 5,842 34,170 (1,274) (23) 48,391
------ ------- ------- ------- ------- -------
Net income -- 1997 ........................... -- -- 1,818 -- -- 1,818
Cash dividends, $.12 per share ............... -- -- (464) -- -- (464)
Issuance of shares for options
and Dividend Reinvestment Plan ............. 1 5 -- -- -- 6
Securities valuation adjustment .............. -- -- -- (924) -- (924)
Purchase of treasury stock ................... -- -- -- -- (86) (86)
Issuance of shares for the Dividend
Reinvestment Plan .......................... -- -- -- -- 109 109
------ ------- ------- ------- ------- -------
BALANCE MARCH 31, 1996 ......................... $9,677 $ 5,847 $35,524 ($2,198) $ 0 $48,850
====== ======= ======= ======= ======= =======
</TABLE>
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<TABLE>
CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
In thousands
<CAPTION>
Three months
ended March 31,
------------------------
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Interest received ....................................................... $ 10,998 $ 10,989
Fees and service charges ................................................ 643 565
Interest paid ........................................................... (5,604) (5,791)
Cash paid to suppliers and employees .................................... (4,828) (4,114)
Income taxes paid ....................................................... (51) (200)
Trading portfolio activity, net ......................................... -- (5,704)
-------- --------
Net cash (used in) and provided by operating activities......... 1,158 (4,255)
-------- --------
Cash flows from investing activities:
Purchase of investment securities:
Held to maturity .................................................... (9,538) (3,565)
Available for sale .................................................. (20,978) (35,552)
Proceeds from sales of investment securities:
Held to maturity .................................................... -- --
Available for sale .................................................. 21,586 24,735
Proceeds from maturities of investment securities:
Held to maturity .................................................... 1,394 2,510
Available for sale .................................................. 939 4,627
Net decrease (increase) in loans ....................................... 2,706 (850)
Purchase of premises and equipment ..................................... (350) (1,087)
-------- --------
Net cash flows used in investing activities ................... (4,241) (9,182)
-------- --------
Cash flows from financing activities:
Net (decrease) increase in deposits ..................................... (498) 16,816
Net increase in short term borrowings ................................... 8,818 1,303
Payments on long term funds borrowed .................................... (78) (76)
Dividends paid .......................................................... (464) (440)
Proceeds from issuance of common stock .................................. 6 19
Purchase of treasury stock .............................................. (86) --
Issuance of share for the Dividend Reinvestment Program ................. 109 22
-------- --------
Net cash flows from financing activities ....................... 7,807 17,644
-------- --------
Net increase in cash and cash equivalents ............................... 4,724 4,207
Cash and cash equivalents at beginning of year .......................... 16,236 24,200
-------- --------
Cash and cash equivalents at end of quarter .................... 20,960 28,407
======== ========
Reconciliation of net income to cash provided by
operating activities:
Net income ............................................................ 1,818 1,863
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................................... 260 145
Provision for loan loss ........................................... 125 275
Trading portfolio net purchases ................................... -- (5,704)
Gain on securities ................................................ (261) (724)
Increase in interest receivable ................................... (623) (515)
Increase in accrued expenses ...................................... 195 536
Increase in other assets .......................................... (356) (131)
-------- --------
$ 1,158 ($ 4,255)
======== ========
</TABLE>
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CNB FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
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 months ended March 31, 1997 and 1996.
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 three month
period ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997.
FASB 125
In June 1996, a Statement of Financial Accounting Standards (SFAS) No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, was issued. This Statement provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities. The standards are based on consistent application of a financial-
components approach. Under this Statement, after a transfer of financial assets,
an entity recognizes the financial and servicing assets it controls and the
liabilities it has increased, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished.
This Statement, as amended by SFAS No. 127, Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125, is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996, and is to be applied prospectively. The provisions of this
Statement will be adopted by the Bank if they are deemed to be material.
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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 March 31,
1997 and 1996.
The Corporation reported net income of $1,818,000 for three months ended March
31, 1997. The earnings, compared to the $1,863,000 earned for the same period
last year, are down $45,000 or 2%. Net income per share was $.47 and $.46 for
the respective periods.
RESULTS OF OPERATIONS
Interest income increased from $11,504,000 to $11,621,000, $117,000 (1%). The
increase is attributed to the increase in total earning assets offset by a
decrease in yield from 8.52% to 8.33% for the current period. Interest expense
decreased from $5,449,000, to $5,273,000, $176,000 (31%). The average cost of
funds decreased to 3.92% from 4.60% for the quarter ended March 31, 1996.
The resulting net interest income increased by $293,000 for the comparable
quarters. The net interest rate spread increased from 3.92% in the first quarter
of 1996, to 4.41% in the current quarter.
The provision for loan losses was decreased from $275,000 to $125,000 during the
quarter. The allowance for loan losses decreased to $8,204,000 on March 31, 1997
from $8,468,000 on March 31, 1996 while the non-performing loans increased from
$3,929,000 to $4,714,000 (20%) during the quarter.
The allowance for loan losses was as follows:
Quarter Ended Year Ended
March 31, 1997 Dec. 31, 1996
-------------- -------------
Balance, beginning of year ............. $8,367,000 $8,463,000
Additions:
Charged to expense ................... 125,000 635,000
---------- ----------
8,492,000 9,098,000
---------- ----------
Charge offs ............................ 377,000 1,297,000
Recoveries ............................. 89,000 566,000
---------- ----------
Net loans charged off .................. 288,000 731,000
---------- ----------
Balance, end of period ................. $8,204,000 $8,367,000
========== ==========
Other income decreased from $1,023,000 to $958,000, $65,000 (7%), due to a
decline in security gains taken.
Other expenses rose by $367,000 (9%) during the period. The largest increase was
in employee cost, $143,000 (7%).
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The income tax provision increased from $723,000 to $779,000 due to an increase
in the effective tax rate.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
CHANGES IN FINANCIAL CONDITION FROM DECEMBER 31,1996 TO MARCH 31,1997
Consolidated total assets increased to $594,523,000 at March 31, 1997; compared
to $585,627,000 at December 31, 1996, an increase of $8,896,000, or 1.5%.
Investment securities in the Held-to-Maturity account have increased from
$104,770,000 to $112,914,000, $8,144,000, and the corresponding market values
have increased from $108,380,000 to $114,875,000, or $6,495,000. The
Available-for-Sale portfolio (at market value) decreased from $130,973,000 to
$128,286,000, or $2,687,000 (2%).
Net loans decreased from $312,643,000 to $309,812,000 or $2,831,000 (1%) during
the reporting period. The mix of loans remained consistent during the period.
The allowance for loan losses represented 2.58% coverage of total loans and 174%
of non-performing loans at March 31, 1997 vs. 2.61% and 187% at December 31,
1996.
Total deposits decreased $498,000 from December 31, 1996 to March 31, 1997.
Borrowings at the quarter end were $11,325,000. There were no borrowings at
December 31, 1996.
At March 31, 1997, the Corporation had total shareholder' equity of $48,850,000,
an increase of $459,000 from year end. Net earnings for the quarter were
$1,818,000 of which $464,000 was paid out in dividends. The market value of the
available for sale portion of the investment portfolio declined by $924,000
during the quarter. Central National Bank, the main subsidiary, had total equity
of $45,842,000 and a core capital ratio of 7.79%, compared to $45,480,000 and
7.84% at year-end.
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 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.
CNB FINANCIAL CORP.
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
None
ITEM 2 -- CHANGES IN SECURITIES
On December 17, 1996, the Board of Directors declared a three-for-two stock
split to holders of record as of December 31, 1996. The split was distributed on
January 15, 1997. The number of shares issued increased from 2,580,397,
immediately prior to the split, to 3,870,596 after the split.
On February 18, 1997, the Board of Directors authorized the repurchase of up to
236,000 of its outstanding shares in the open market during the period March 15,
1997 to March 15, 1998.
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ITEM 3 -- DEFAULTS ON SENIOR SECURITIES
None
ITEM 4 -- SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The approval of an amendment to the Certificate of Incorporation of the Company
to increase the number of authorized shares from 5,000,000 to 10,000,000.
ITEM 5 -- OTHER INFORMATION
None
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: May 9, 1997 By: DONALD L. BRASS
---------------------------
Donald L. Brass
President
Date: May 9, 1997 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 20,960
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 128,286
<INVESTMENTS-CARRYING> 112,914
<INVESTMENTS-MARKET> 114,875
<LOANS> 309,812
<ALLOWANCE> 0
<TOTAL-ASSETS> 594,523
<DEPOSITS> 508,719
<SHORT-TERM> 22,672
<LIABILITIES-OTHER> 7,047
<LONG-TERM> 7,235
0
0
<COMMON> 9,677
<OTHER-SE> 39,173
<TOTAL-LIABILITIES-AND-EQUITY> 594,523
<INTEREST-LOAN> 7,407
<INTEREST-INVEST> 4,123
<INTEREST-OTHER> 91
<INTEREST-TOTAL> 11,621
<INTEREST-DEPOSIT> 4,966
<INTEREST-EXPENSE> 5,273
<INTEREST-INCOME-NET> 6,348
<LOAN-LOSSES> 125
<SECURITIES-GAINS> 261
<EXPENSE-OTHER> 4,584
<INCOME-PRETAX> 2,597
<INCOME-PRE-EXTRAORDINARY> 2,597
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,818
<EPS-PRIMARY> 0.47
<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>
