================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
----------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly period ending June 30, 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
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number (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 JUNE 30, 1997
----------------------------- ----------------------------
Common Stock, $2.50 par value 3,871,929 Shares
================================================================================
-1-
<PAGE>
Page
----
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
-2-
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CONDITION
In thousands
June 30, December 31,
1997 1996
---------- ------------
(unaudited)
ASSETS:
Cash and due from banks ............................... $ 22,561 $ 15,536
Federal funds sold .................................... 0 700
Investment securities available for sale .............. 128,239 130,973
Investment securities held to maturity, market value
of $117,984 in 1997 and $108,380 in 1996 ............ 114,589 104,770
Loans, net of allowance for possible loan losses
and unearned income ................................. 322,016 312,643
Accrued interest receivable ........................... 5,219 4,914
Premises and equipment ................................ 9,721 9,673
Deferred taxes ........................................ 3,345 3,543
Other assets .......................................... 3,622 2,875
-------- --------
TOTAL ASSETS ...................................... $609,312 $585,627
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Noninterest-bearing deposits .......................... $ 55,855 $ 50,313
Interest-bearing deposits ............................. 471,485 458,904
-------- --------
Total Deposits .................................... 527,340 509,217
Federal funds purchased and securities
sold under agreements to repurchase ............... 17,115 13,854
Interest, taxes and other liabilities ................. 6,073 6,852
Long-term borrowings .................................. 7,094 7,313
-------- --------
Total Liabilities ................................. 557,622 537,236
-------- --------
Stockholders' Equity:
Common stock, $2.50 par, 10,000,000 shares authorized,
3,871,929 shares and 3,870,596 shares, issued and
outstanding in 1997 and 1996, respectively .......... 9,680 9,676
Capital in excess of par value ........................ 5,856 5,842
Retained earnings ..................................... 37,058 34,170
Security valuation adjustment ......................... (889) (1,274)
Treasury Stock, at cost, 672 and 1,250 shares in 1997
and 1996, respectively .............................. (15) (23)
-------- --------
Total Stockholders' Equity ......................... 51,690 48,391
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $609,312 $585,627
======== ========
-3-
<PAGE>
<TABLE>
CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
In thousands (except per share data)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ --------------------
1997 1996 1997 1996
------ ------ ------- -------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees ...................... $7,587 $7,548 $14,994 $15,101
Investment securities ...................... 4,516 4,022 8,639 7,813
Federal funds sold and other ............... 128 161 219 321
------ ------ ------- -------
12,231 11,731 23,852 23,235
------ ------ ------- -------
INTEREST EXPENSE:
Deposits ................................... 5,443 5,201 10,409 10,406
Borrowings ................................. 243 261 550 505
------ ------ ------- -------
5,686 5,462 10,959 10,911
------ ------ ------- -------
NET INTEREST INCOME ....................... 6,545 6,269 12,893 12,324
Provision for loan losses ............... 0 65 125 340
------ ------ ------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ....................... 6,545 6,204 12,768 11,984
------ ------ ------- -------
OTHER INCOME:
Service charges on deposit accounts ........ 438 344 801 639
Gain from sale of investment securities .... 27 53 288 513
Other ...................................... 268 255 602 523
------ ------ ------- -------
733 652 1,691 1,675
------ ------ ------- -------
OTHER EXPENSE:
Salaries and employee benefits ............. 2,146 2,186 4,401 4,298
Occupancy and equipment expense ............ 475 413 912 849
Other ...................................... 1,803 1,926 3,695 3,595
------ ------ ------- -------
4,424 4,525 9,008 8,742
------ ------ ------- -------
Income before income taxes ................. 2,854 2,331 5,451 4,917
Income taxes ............................... 856 633 1,635 1,356
------ ------ ------- -------
NET INCOME ................................... $1,998 $1,698 $3,816 $3,561
====== ====== ====== ======
EARNINGS PER SHARE ........................... $0.52 $0.42 $0.99 $0.88
====== ====== ====== ======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (IN THOUSANDS) ................. 3,869 4,047 3,869 4,046
====== ====== ====== ======
</TABLE>
-4-
<PAGE>
<TABLE>
CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Additional Securities
Common Paid in Retained Valuation Treasury
In thousands Stock Capital Earnings Adjustment Stock Total
- ------------ ------ --------- -------- ----------- -------- -----
<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 ........................... -- -- 3,816 -- -- 3,816
Cash dividends, $.12 per share .............. -- -- (928) -- -- (928)
Issuance of shares for options
and Dividend Reinvestment Plan ........... 4 14 -- -- -- 18
Securities valuation adjustment ............. -- -- -- 385 -- 385
Purchase of treasury stock .................. -- -- -- -- (218) (218)
Issuance of shares for the Dividend
Reinvestment Plan ........................ -- -- -- -- 226 226
------ ------- ------- -------- ------- -------
BALANCE JUNE 30, 1997 ......................... $9,680 $ 5,856 $37,058 ($ 889) ($ 15) $51,690
====== ======= ======= ======== ======= =======
</TABLE>
-5-
<PAGE>
<TABLE>
CNB FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Six months ended June 30,
-------------------------
In thousands 1997 1996
- ------------ -------- --------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Interest received .................................................. $ 23,547 $ 22,804
Fees and service charges ........................................... 1,334 1,315
Interest paid ...................................................... (11,341) (11,441)
Cash paid to suppliers and employees ............................... (9,684) (8,005)
Income taxes paid .................................................. (1,525) (1,530)
Trading portfolio activity, net 3 (268)
Net cash provided by operating activities .................... 2,334 2,875
-------- --------
Cash flows from investing activities:
Purchase of investment securities:
Held to maturity ................................................ (15,129) (9,887)
Available for sale .............................................. (42,821) (59,883)
Proceeds from sales of investment securities:
Available for sale .............................................. 43,785 40,741
Proceeds from maturities of investment securities:
Held to maturity ................................................ 5,267 5,856
Available for sale .............................................. 2,681 8,779
Net increase in loans .............................................. (9,498) (3,723)
Purchase of premises and equipment ................................. (557) (3,469)
-------- --------
Net cash flows used in investing activities ................. (16,272) (21,586)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits ................................ 18,123 (12,731)
Net increase in short term borrowings .............................. 3,262 24,732
Payments on long term funds borrowed ............................... (220) (151)
Bonds issued ....................................................... -- 1,000
Dividends paid ..................................................... (928) (880)
Proceeds from issuance of common stock ............................. 18 106
Purchase of treasury stock ......................................... (218) --
Issuance of shares for the Dividend Reinvestment Program ........... 226 39
-------- --------
Net cash flows from financing activities ..................... 20,263 12,115
-------- --------
Net increase (decrease) in cash and cash equivalents ............... 6,325 (6,596)
Cash and cash equivalents at beginning of year ..................... 16,236 24,200
-------- --------
Cash and cash equivalents at end of quarter .................. 22,561 17,604
-------- --------
Reconciliation of net income to cash provided by
operating activities:
Net income ......................................................... 3,816 3,561
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ...................................... 509 298
Provision for loan loss ............................................ 125 340
Trading portfolio net purchases .................................... 3 (268)
Gain on securities ................................................. (288) (513)
Increase in interest receivable .................................... (305) (431)
(Decrease) increase in accrued expenses ............................ (779) 162
Increase in other assets ........................................... (747) (274)
-------- --------
$ 2,334 $ 2,875
======== ========
</TABLE>
-6-
<PAGE>
CNB FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 and six months ended June 30, 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 six month
period ended June 30, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted on December 31, 1997
with all prior periods being restated. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. This statement is not expected to change earnings per share as
reported for the quarter ended June 30, 1997.
This quarterly report on Form 10-Q (the "10-Q") includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
All statements other than statements of historical facts, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and located elsewhere herein
regarding industry prospects and the Company's financial position are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the Company's
expectations are disclosed in the 10-Q, including, without limitations, in
conjunction with the forward-looking statements included in this 10-Q.
<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,
1997 and 1996.
The Corporation reported net income of $3,816,000 for six months ended June 30,
1997. The earnings compared to the $3,561,000 earned for the same period last
year, are up $255,000 or 7%. Net income per share was $.99 and $.88 for the
respective periods.
Net income for the quarter ended June 30, 1997 was $1,998,000 compared to
$1,698,000 for the same period in 1996, an increase of $300,000 or 18%. Net
income per share was $.52 for the quarter and $.42 for the same quarter of last
year.
RESULTS OF OPERATIONS
SIX MONTHS ENDING JUNE 30, 1997 VS. JUNE 30, 1996
Interest income increased from $23,235,000 to $23,852,000, (3%). The increase
resulted from increases in average earnings assets of $20,129,000 but a decrease
in average yield from 8.50% to 8.34%.
The increases in average earning assets include growth in the loan portfolio of
$3,957,000, and securities of $19,998,000. The decrease in yield is a reflection
of general overall rate decreases which have created lower rates on new loans.
Total interest expense increased $48,000 for the six month period ended June 30,
1997 compared to the same period in 1996. The average cost of funds for the
period decreased from 4.17% at June 30, 1996 to 3.98% at June 30, 1997.
The net interest income increased by $569,000 (5%) for the six months ended June
30, 1997 when compared to the same period of 1996.
The Corporation recorded a loan loss provision of $125,000 for the six months
ended June 30, 1997, a decrease of $215,000 from the $340,000 recorded for the
same period of 1996. Recoveries for the period exceeded write-offs by $174,000.
<PAGE>
Activity in the allowance for loan losses was as follows:
Six Month's Ended Year Ended
June 30, 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 ........................... 813,000 1,297,000
Recoveries ............................ 987,000 566,000
---------- ----------
Net loans charged off ................. (174,000) 731,000
---------- ----------
Balance, end of period ................ $8,666,000 $8,367,000
---------- ----------
Other income excluding security transactions increased $241,000 (21%) for the
six month period ended June 30, 1997, compared to the corresponding period for
1996. The increase is primarily due to higher fee income ($162,000) on demand
deposit accounts.
Other expenses increased $266,000 (3%) for the corresponding six month period.
The increase is primarily related to increases in data processing, professional
fees and salary costs.
The provision for income taxes for the six month period was $1,635,000 compared
to $1,356,000 for last year, the effective rates for each period were 30.0% and
27.6% respectively.
Three Month Period April 1, 1997 to June 30, 1997 compared to the comparable
period last year
Total interest income increased from $11,731,000 to $12,231,000, or $500,000
(4%). The increase is attributable to the growth in earning assets during the
period. Interest expense during the period increased from $5,462,000 to
$5,686,000, $224,000 (4%). The yield on the earning assets decreased 24 basis
points from 8.64% to 8.40%. The average cost of funds during the quarter
increased from 4.12% to 4.24%, an increase of 12 basis points when compared to
the same period last year.
The net interest income for the quarter increased $276,000 from $6,269,000 to
$6,545,000 or 4%.
There was no provision for loan losses during the quarter, $65,000 was provided
during the same quarter of last year. This year recoveries during the quarter
totaled $898,000, while write-offs were $436,000; net recoveries of $462,000.
Other income, excluding security gains, increased $107,000 (18%) from $599,000
to $706,000. The major increases were in deposit account service fees.
Other expenses decreased by $101,000 (2%) during the period. Employee benefit
costs and investment reserve reductions are primarily responsible for the lower
expenses.
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. The rate for 1997 is
30.0%, while 1996 was 27.2% for the quarter.
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
CHANGES IN FINANCIAL CONDITION FROM
DECEMBER 31,1996 TO JUNE 30,1997
Consolidated total assets increased to $609,312,000 at June 30, 1997; compared
to $585,627,000 at December 31, 1996, an increase of $23,685,000, or 4%.
Investment securities in the Held-to-Maturity account have increased from
$104,770,000 to $114,589,000, or $9,819,000 (9%) and the corresponding market
values from $108,380,000 to $117,984,000, or $9,604,000 (9%). The
Available-for-Sale portfolio has decreased from $130,973,000 to $128,239,000,
$2,734,000 (2%), in order to fund the liquidity needs created by the failure of
New York State to adopt their fiscal budget in a timely manner. The increase in
both sections of the portfolio are primarily in U.S. Government Agency
Instruments.
Net loans increased by $9,373,000 or 3%. Total loans were $330,682,000 up from
$321,010,000 at December 31, 1996. The allowance for loan losses at June 30,
1997 was $8,666,000, a $299,000 (4%) increase from $8,367,000 at December 31,
1996. As of June 30, 1997 the allowance for loan losses represented 2.62% of
total loans and 261% of the non-performing loans, this compares to 2.61% and
187% at December 31, 1996. Charged off loans for the six months were $813,000
compared to $1,297,000 for the year ended December 31, 1996. Recoveries for the
six month period were $987,000 versus $566,000 for the year 1996.
Non-accrual loans have decreased from $3,253,000 to $1,974,000, a total of
$1,279,000 or 39% during the first six months of 1997. Primarily responsible for
this decrease was a settlement reached with Milltowne Plaza which resulted in a
settlement of the $1,214,000 balance. Past due loans over 90 days increased
$117,000 (9%) to $1,343,000.
Total deposits increased from $509,217,000 to $527,340,000, $18,123,000 (4%).
The non-interest bearing deposits grew by 11% to $55,855,000, while the interest
bearing deposits increased 3% to $471,485,000.
At June 30, 1997, total stockholders equity has increased by $3,299,000, from
December 31, 1996. The main subsidiary had total equity of $48,768,000, core
capital of 8.09% at June 30, 1997, compared to $45,480,000 and 7.84% at December
31, 1996.
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.
<PAGE>
CNB Financial Corp.
Part II - Other Information
Item 1--Legal Proceedings
None
Item 2--Changes in Securities
At the May 15, 1997, annual meeting of CNB Financial Corp., the
stockholders authorized an increase from 5,000,000 to 10,000,000 shares
of common stock.
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 15, 1997. At
the meeting the following directors were elected for terms expiring in
2000: VanNess D. Robinson, Joseph A. Santangelo and John P. Woods, Jr.
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: July , 1997 By: /s/ DONALD L. BASS
---------------------------------
Donald L. Brass
President
Date: July , 1997 By: /s/ PETER J. CORSO
---------------------------------
Peter J. Corso
Vice President
<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> 22,561
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 128,239
<INVESTMENTS-CARRYING> 114,589
<INVESTMENTS-MARKET> 117,984
<LOANS> 322,016
<ALLOWANCE> 0
<TOTAL-ASSETS> 609,312
<DEPOSITS> 527,340
<SHORT-TERM> 17,115
<LIABILITIES-OTHER> 6,073
<LONG-TERM> 7,094
0
0
<COMMON> 9,680
<OTHER-SE> 42,010
<TOTAL-LIABILITIES-AND-EQUITY> 609,312
<INTEREST-LOAN> 14,994
<INTEREST-INVEST> 8,639
<INTEREST-OTHER> 219
<INTEREST-TOTAL> 23,852
<INTEREST-DEPOSIT> 10,409
<INTEREST-EXPENSE> 10,959
<INTEREST-INCOME-NET> 12,893
<LOAN-LOSSES> 125
<SECURITIES-GAINS> 288
<EXPENSE-OTHER> 9,008
<INCOME-PRETAX> 5,451
<INCOME-PRE-EXTRAORDINARY> 5,451
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,816
<EPS-PRIMARY> .99
<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>
