SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
CNB Financial Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies.
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------
<PAGE>
CNB FINANCIAL CORP.
24 CHURCH STREET
CANAJOHARIE, NEW YORK 13317
-------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------------------------------------------------------------------------
April 21, 1998
TO THE SHAREHOLDERS OF CNB FINANCIAL CORP.
NOTICE IS HEREBY GIVEN that the ANNUAL MEETING OF SHAREHOLDERS of CNB
FINANCIAL CORP., the parent company of Central National Bank, Canajoharie, will
be held at the FORT RENSSELAER CLUB, Moyer Street, Canajoharie, New York, on May
21, 1998 at 9:30 a.m. for the purpose of considering and voting on the following
matters:
1. The election of two directors for a term of three years or until
their successors have been elected.
2. The approval of an amendment to the Certificate of Incorporation
of the Company to increase the number of authorized shares of
Common Stock from 10,000,000 to 20,000,000.
3. The approval of a two-for-one stock split, including a change in
the par value of the Common Stock from $2.50 per share to $1.25
per share for the purpose of effectuating the two-for-one stock
split.
4. The transaction of any other business which may be properly
brought before the meeting or any adjournment thereof.
Only those shareholders of record at the close of business on March 31,
1998 shall be entitled to notice of the meeting and to vote at the meeting.
By Order of the Board of Directors,
Holly C. Craver
Secretary
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. YOU ARE THEREFORE REQUESTED TO SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, EVEN IF YOU EXPECT TO BE PRESENT AT
THE MEETING. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE MEETING, OR IF
YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AT THAT TIME AND VOTE IN
PERSON IF YOU WISH.
- --------------------------------------------------------------------------------
<PAGE>
CNB FINANCIAL CORP.
24 CHURCH STREET
CANAJOHARIE, NEW YORK 13317
------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 21, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CNB Financial Corp. (the "Company"), the
holding company for Central National Bank, Canajoharie (the "Bank") and Central
Asset Management, Inc., for use at the Annual Meeting of Shareholders of the
Company (the "Meeting") to be held on May 21, 1998 and at any and all
adjournments thereof, for the purposes stated in the accompanying notice of the
Meeting. This Proxy Statement, together with the enclosed proxy, is first being
mailed to shareholders on or about April 21, 1998.
At the Meeting, the shareholders will be asked to vote for the election of
directors. Two of the directors who serve on the Company's classified Board of
Directors will stand for re-election to the Board at the Meeting. In addition,
the Shareholders will be asked (i) to approve an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 10,000,000 to 20,000,000 and (ii) to change the par value of
the Company's Common Stock from $2.50 per share to $1.25 per share in connection
with approving a two-for-one stock split. Voting will also be conducted on any
other matters which are properly brought before the Meeting.
VOTING RIGHTS AND PROXIES
Shareholders of record at the close of business on March 31, 1998 (the
"Record Date") will be entitled to notice of and to vote at the Meeting. On the
Record Date, there were 3,832,960 shares of Common Stock issued and outstanding,
and the Company had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote, except that in the election of
directors, the Common Stock has cumulative voting rights permitting each
shareholder to vote the number of shares held multiplied by the number of
directors to be elected, distributing his or her votes among as many candidates
as he or she may wish. A majority of the outstanding shares of the Company,
represented in person or by proxy, shall constitute a quorum at the Meeting.
The proxy provided with this Proxy Statement grants the proxy agent
discretionary authority to exercise the cumulative voting rights of the
shareholder if no specific instructions are given by the shareholder. The proxy
may be revoked by a later dated proxy or by written notification delivered to
Holly C. Craver, Secretary of the Company, at the above address at any time
prior to the Meeting. If you attend the Meeting, you may withdraw your proxy and
vote by ballot. If not revoked, all properly executed proxies will be voted as
directed.
The solicitation of proxies shall be made through mailings, but proxies may
also be solicited by telephone communications and in person by directors,
officers, and other regular employees of the Company or of the Bank. The cost of
solicitation of proxies will be borne by the Company. The Company will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending the proxy materials to the beneficial
owners of the Common Stock.
The Annual Report of the Company for the fiscal year ended December 31,
1997 is being sent to shareholders with this Proxy Statement. Copies of the
Annual Report will be distributed without charge to any shareholder upon written
request of such person addressed to Holly C. Craver, Secretary, CNB Financial
Corp., 24 Church Street, Canajoharie, New York 13317.
<PAGE>
ITEM 1: ELECTION OF DIRECTORS AND INFORMATION WITH RESPECT TO
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors is divided into three classes as nearly equal in
number as possible. The members of each class are elected for a term of three
years and until their successors are elected and qualified. One class of
directors is elected annually. In accordance with the Company's Bylaws, the size
of the Board is presently set at seven. Both of the nominees standing for
election at the Meeting are presently directors of the Company and have
indicated a willingness to continue to serve as a director. In the event any
nominee declines or is unable to serve, it is intended that the proxies will be
voted for a successor nominee designated by the Board of Directors.
The following information is furnished for each candidate nominated to
serve as a director and for each director of the Company whose term of office
continues after the Meeting. It is the intention of the individuals named as
proxies to vote for the election of the following nominees:
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR
NOMINEES FOR DIRECTOR (FOR TERMS EXPIRING IN 2001)
Number of Shares
Bank of Common Stock
Occupation During Past Director Beneficially Owned
Name and Age Five Years Since as of 3/31/98 (1)
- -------------------- ----------------------------------------- ----------- -------------------
<S> <C> <C> <C>
J. Carl Barbic Retired Dairy Farmer, Former Clerk of 1989 4,218
Age 71 Schoharie County Board of Supervisors
Donald L. Brass President and CEO of the Bank since 1990 40,200(4)
Age 49 January 1992, President of the Bank since
January 1991, President of the Company
since January, 1993, Former Executive
Vice President of the Bank.
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
DIRECTORS CONTINUING IN OFFICE (TERMS EXPIRING IN 1999)
Number of Shares
Bank of Common Stock
Occupation During Past Director Beneficially Owned
Name and Age Five Years Since as of 3/31/98 (1)
- -------------------- ----------------------------------------- ----------- -------------------
<S> <C> <C> <C>
David J. Nolan Chairman of the Board, CEO and 1981 21,888(2)
Age 73 President of the Bank until retirement in
1991.
Allen H. Samuels Attorney, General Practice in Fort Plain 1961 24,637(2)
Age 74
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS CONTINUING IN OFFICE (TERMS EXPIRING IN 2000)
Number of Shares
Bank of Common Stock
Occupation During Past Director Beneficially Owned
Name and Age Five Years Since as of 3/31/98 (1)
- -------------------- ----------------------------------------- ----------- -------------------
<S> <C> <C> <C>
VanNess D. Robinson Chairman of the Board and Executive Vice 1997 375,564(2)(3)
Age 62 President, New York Central Mutual Fire
Insurance Co.
Joseph A. Santangelo Administrator, Arkell Hall Foundation 1991 2,768(2)
Age 45
John P. Woods, Jr. President, John P. Woods Co., Inc. 1991 241,499(2)(3)
Age 61 (Reinsurance Intermediaries)
</TABLE>
- ---------------
(1) Includes all shares for which named individuals possessed sole or
shared voting or investment powers, including shares held by, in the name of, or
in trust for, spouse and dependent children of named individual and other
relatives living in the same household even if beneficial ownership has been
disclaimed by named individual.
(2) The listed amounts include shares for which certain directors are
deemed to be beneficial owners but for which they are not the sole beneficial
owner as follows: Mr. Nolan holds 14,648 shares jointly with his wife; Mr.
Samuels' wife holds 12,067 shares in her own name; the amount disclosed for Mr.
Robinson includes 375,364 shares held by New York Central Mutual Fire Insurance
Company for which Mr. Robinson serves as Chairman and Executive Vice President;
Mr. Santangelo holds 1,933 shares jointly with his wife and 139 shares jointly
with his children; Mr. Woods holds 81,756 shares jointly with his wife and the
amount disclosed for Mr. Woods also includes 159,107 shares held by companies in
which Mr. Woods owns a controlling interest.
(3) The percentage of Common Stock beneficially owned by each director is
less than 1%, except with respect to Mr. Woods whose percentage ownership is
6.30%, and Mr. Robinson whose percentage ownership is 9.80%.
(4) Includes 20,250 shares that Mr. Brass has the right to acquire through
the exercise of stock options issued by the Company. These shares are included
in the total number of shares outstanding for the purpose of calculating Mr.
Brass's percentage ownership, but not for the purpose of calculating the
percentage ownership of other individuals listed in the table.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Each director of the Company also serves as a director of the Bank. The
Bank's Board of Directors meets regularly each month, and the Company's Board
meets at least quarterly. The Board of Directors of the Bank held 13 meetings
during 1997. No incumbent director attended less than 75% of the aggregate
number of meetings of the Board of Directors and meetings held by all committees
of the Board on which such director served during 1997.
Among its standing committees, the Board of the Company has an Executive
Committee, Examining/Audit Committee, and a Personnel Committee. The President
acts as ex-officio member of all committees except the Examining/Audit
Committee. The full Board nominates individuals for election to the Board. The
Board will consider written recommendations from shareholders for nominees to be
elected to the Board of Directors that are sent to the Secretary of the Company
at the Company's address.
-3-
<PAGE>
Section 202 of the Company's Bylaws provides that nominations for
directors, except those made by the Board, must be submitted in writing to the
Secretary of the Company not less than fourteen (14) or more than fifty (50)
days prior to the annual meeting setting forth the name, address and principal
occupation of the proposed nominee and the number of shares which will be voted
for the proposed nominee, as well as the name and address and the number of
shares owned by the notifying shareholder. In the event that less than
twenty-one (21) days notice of the meeting is given to shareholders, such
nominations may be submitted to the Secretary of the Company not later than
seven (7) days following the date of the mailing of the notice of the meeting.
If any nomination is properly and timely made by a shareholder in accordance
with Section 202 of the Company's Bylaws, ballots will be provided for use by
shareholders at the annual meeting bearing the name of such nominee or nominees.
The Examining/Audit Committee, currently composed of Directors C. Wendell
Smith, Allen H. Samuels, and VanNess D. Robinson, reviews the Bank's internal
control and internal audit procedures and coordinates the audit of the Company's
consolidated financial statements conducted by KPMG Peat Marwick LLP. Status
reports were reviewed by the Committee Chairman periodically at regular Board
Meetings. The Examining/Audit Committee met four (4) times in 1997.
The Personnel Committee, composed of Directors John P. Woods, Jr., Allen H.
Samuels and J. Carl Barbic, reviews and makes recommendations to the Board
concerning compensation levels, adjustments and employee benefits. The Personnel
Committee met five (5) times in 1997.
Directors, other than those employed by the Bank in other capacities,
receive a fee of $400 per month plus $400 per meeting of the Board and $250 per
meeting for committee meeting attendance. Directors who are also officers of the
Company or Bank receive no compensation for attendance at Board or committee
meetings.
CERTAIN TRANSACTIONS
During 1997 the Bank had, and expects in the future to have, various
transactions including loans with directors and officers of the Company, the
Bank and their associates in the ordinary course of business. All such
transactions were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the same time for comparable transactions
with other persons and do not involve more than normal risk of collectibility or
present other unfavorable features.
ITEM 2: SHAREHOLDER APPROVAL OF INCREASE IN AUTHORIZED SHARES OF
COMMON STOCK OF THE COMPANY
The Board of Directors is recommending that the shareholders take action at
the Meeting to approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
10,000,000 to 20,000,000. Presently, the Company has 3,878,710 shares of Common
Stock issued and outstanding or subject to options granted. If the two-for-one
stock split proposed as Item 3 of this Proxy Statement is approved by the
shareholders, it would result in 7,757,420 shares of Common Stock issued and
outstanding or subject to options granted, leaving only 2,242,580 shares
available for issuance to meet corporate needs. Accordingly, the Board of
Directors has recommended that action be taken to increase the number of
authorized shares of Common Stock from 10,000,000 to 20,000,000 shares.
The Board believes that the authorization of additional shares of Common
Stock is desirable and would provide future flexibility for the Company. The
increase in authorized shares would provide authorized Common Stock for issuance
from time to time as may be necessary in connection with the dividend
reinvestment plan, future financings, investment opportunities, acquisitions of
other companies, the declaration of stock dividends or stock splits, other
distributions, or for other corporate purposes. Other than the proposed
two-for-one stock split, the Company has no present plans, understandings or
agreements for issuing the additional shares to be authorized by the proposed
Certificate amendment. However, the authorization of the additional shares will
enable the Company to issue shares as the need may arise, and in certain
circumstances to take prompt advantage of market conditions and the availability
of favorable opportunities without the delay and expense incident to the holding
of a special meeting of shareholders of the Company.
-4-
<PAGE>
Although the increase in the number of authorized shares of Common Stock is
not intended for antitakeover purposes, SEC rules require disclosure of existing
Certificate and Bylaw provisions which could have an antitakeover effect. These
include: (i) Board authority under the Certificate of Incorporation to oppose a
takeover attempt on the basis of factors other than economic benefit to
shareholders (e.g. impact of the proposed transaction on the community,
employees, depositors and other customers; and the reputation and business
practices of the proposed acquiror); (ii) the requirement that certain business
combinations be approved by a supermajority vote of directors and shareholders,
and meet certain price requirements; and (iii) the Company's staggered Board of
Directors. In addition, the additional authorized shares, if issued, could be
utilized to deter future attempts to gain control of the Company.
Under New York law, shareholders are not entitled to dissenters' rights
with respect to the proposed amendment to the Company's Certificate of
Incorporation. Holders of Common Stock have no preemptive rights with respect to
any shares which may be issued in the future. The issuance of additional shares
of Common Stock may dilute the equity ownership position of current
shareholders. Unless required by applicable law, no further authorization or
vote of the shareholders will be solicited for the issuance of the additional
shares of Common Stock.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required for the approval of the proposed amendment to the
Company's Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF THE
PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
ITEM 3: SHAREHOLDER APPROVAL OF TWO-FOR-ONE STOCK SPLIT INCLUDING
CHANGE IN PAR VALUE FROM $2.50 PER SHARE TO $1.25 PER SHARE
The Board of Directors has authorized a two-for-one stock split; however,
the stock split is specifically conditioned on approval of the stock split,
including an adjustment in par value from $2.50 per share to $1.25 per share, by
the shareholders of the Company.
If the stock split is approved, each holder of Common Stock of record at
the close of business on June 15, 1998 will receive, as soon as practicable
thereafter, one additional share of Common Stock for each share of Common Stock
held of record. Participants in the Company's existing employee stock plans will
be entitled to receive additional full and fractional shares for each full and
fractional share owned by them as of June 15, 1998. If the stock split is
approved, existing certificates representing shares of Common Stock, par value
$2.50 per share, prior to the stock split will continue to represent the same
number of shares of Common Stock after the split, but with a par value of $1.25
per share. The par value of presently outstanding shares of Common Stock will
automatically be changed on the records of the Company. Shareholders
contemplating any stock transactions should consult with their investment
advisor or broker regarding the effective date and entitlement to the split
shares prior to effectuating transactions in CNB stock.
Certificates representing the additional shares to which a shareholder is
entitled after the stock split will be mailed as soon as practicable following
the effective date of the stock split. In connection with the proposed stock
split, shareholders should not send their certificates for shares of Common
Stock to the Bank or the Company for exchange. The cost basis of pre-split
shares shall be allocated pro rata among the pre-split shares and the split
shares received in respect to those particular pre-split shares. The new shares
will be deemed to have been held for the same period of time as the pre-split
shares to which they relate. The Company has been advised by counsel that, under
current federal tax law, the distribution of additional shares will not result
in taxable income or loss.
The Board of Directors believes that the stock split is in the best
interests of the Company, its shareholders and its other constituencies because
the increase in the number of outstanding shares of Common Stock and the lower
market price per share resulting from the stock split should help to broaden the
market for and improve the marketability of the Common Stock and increase the
number of shareholders. While the impact on the market price
-5-
<PAGE>
of the shares of Common Stock cannot be predicted with certainty, it is likely
that the stock split will initially result in the market price of each share
being approximately one-half of the market price before the stock split,
although the market value of all shares held by a particular shareholder should
remain approximately the same. Each shareholder's equity or interest in the
Company or other relative rights or interests of such shareholder will not
change as a result of the stock split because each shareholder will receive
additional shares of Common Stock in direct proportion to his or her current
holdings. Because of the greater number of shares of Common Stock outstanding
after the stock split, brokerage commissions (which may be subject to
negotiation), applicable stock transfer taxes and other expenses associated with
sales or purchases of Common Stock may be somewhat higher than before the stock
split in certain transactions involving the purchase or sale of shares of Common
Stock having an equivalent value. However, the stock split should reduce the
expenses of buying or selling shares in cases where a single "round lot" will
result because of the stock split.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required for the approval of the proposed amendment to the
Company's Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF THE
PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth as of the Record Date the ownership of
Common Stock by any person who is known to the Company to be the beneficial
owner of more than five percent of Common Stock and by all directors and
executive officers of the Company as a group.
Amount and
Name and Nature of
Address of Beneficial Ownership Percent
Beneficial Owner as of 3/31/98 of Class
------------------ -------------------- --------
John P. Woods, Jr. 241,499(1) 6.30%
Canajoharie, NY 13317
New York Central Mutual 375,564(2) 9.80%
Fire Insurance Company
Edmeston, NY 13335
Number of shares of 755,931(3) 19.5%
Common Stock beneficially
owned by all directors and
executive officers as a group
(10 persons)
(1) Includes 81,756 shares held jointly with his wife, 10,328 shares held
by the Woods Corporation, and 148,779 shares held by John P. Woods Co. Inc. Mr.
Woods holds a controlling interest in both the Woods Corporation and John P.
Woods Co. Inc.
(2) Includes 200 shares held by VanNess D. Robinson, a director of the
Company, who also serves as Chairman of the Board and Executive Vice President
of New York Central Mutual Fire Insurance Company.
(3) Includes 42,000 shares that executive officers have the right to
acquire through the exercise of stock options issued by the Company. These
shares are included in the total number of shares outstanding for the purpose of
calculating the percentage ownership of the group as a whole, but not for the
purpose of calculating the percentage ownership of the other beneficial owners
listed in the table.
-6-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation paid by
the Bank to the chief executive officer and other most highly compensated
executive officers whose annual salary and bonus exceeded $100,000 during 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
------------
Annual Compensation (1) Securities All Other
Name and ------------------------------ Underlying Compensation
Principal Position Year Salary ($) Bonus ($)(2) Options (#) ($)(3)
------------------ ---- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Donald L. Brass 1997 $217,300 $89,462 0 $15,478
President and CEO 1996 205,000 96,863 11,250 14,300
1995 190,000 73,720 0 19,874
Peter J. Corso 1997 120,000 40,056 0 9,822
Executive Vice President 1996 107,000 40,596 6,000 8,582
and CFO 1995 100,000 29,200 0 10,460
Lawrence G. Knudsen 1997 95,000 24,311 0 6,561
Senior Vice President 1996 91,000 26,053 3,750 6,174
and Cashier 1995 85,000 24,820 0 8,891
Allan F. Woodmancy 1997 94,000 24,055 0 7,116
Senior Vice President 1996 87,800 25,137 3,750 6,450
and Senior Lending Officer 1995 82,000 23,944 0 8,577
</TABLE>
- ---------------
(1) Includes compensation for which payment was deferred pursuant to
non-qualified deferred compensation plans until such time that the executive
retires or leaves the employment of the Company.
(2) The amounts in this column reflect awards made under the Company's
Management Incentive Plan which are based upon the Bank's performance and
obtaining individual goals of executives. Amounts are reported in the year for
which the performance award was based, although such awards are not determined
or paid until the next calendar year.
(3) Consists of amounts contributed by the Company to a 401(k) Profit
Sharing Plan pursuant to a formula which applies uniformly to all employees.
-7-
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information for the named executive officers,
with respect to (i) stock options exercised in fiscal year 1997, (ii) the number
of stock options held at the end of fiscal year 1997, and (iii) the value of
in-the-money stock options at the end of fiscal year 1997.
Number of
Securities Value of
Underlying Unexercised(1)
Shares Unexercised(1) In-the-Money
Acquired on Options at Options
Name Exercise (#) Value Realized ($) 12/31/97 (#) at 12/31/97($)
---- ------------ ------------------ ------------ --------------
<S> <C> <C> <C> <C>
Donald L. Brass 3,000 $41,500 20,250 $278,438
Peter J. Corso 2,250 $28,969 12,000 $170,250
Lawrence G. Knudsen 0 0 11,250 $174,375
Allan F. Woodmancy 0 0 9,750 $147,188
</TABLE>
- ------------
(1) All unexercised options are presently exercisable.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Personnel Committee makes recommendations to the Board regarding the
compensation level for the Bank's executive officers. The Committee reviews
salary surveys of the banking industry for similar banks based on asset size and
geographic area. This information is used together with other factors including
experience, internal salary structure, performance, and ability to improve the
profitability, growth, and value of the Company, in determining compensation
levels. Mr. Brass' compensation and the compensation of other executive officers
for the last fiscal year was determined by the Committee, in its discretion,
based upon the foregoing factors and criteria. The Committee reviews the
compensation levels of executive officers on an annual basis and makes its
determinations, in its discretion, on the basis of the foregoing factors and
criteria.
In addition to the foregoing, the Company has adopted a management
incentive plan. The management incentive plan is designed to promote a superior
level of performance relative to the Bank's competition in its market area by
providing management with rewards for meeting and exceeding the Bank's financial
goals, as well as by providing recognition of individual achievements. The
payment of cash awards under the management incentive plan is triggered by the
Bank's performance to targeted return on equity and assets. Award levels, which
amount to a percentage of salary, have been established for different
organizational levels within the Company. The President and CEO may recommend an
adjustment to individual bonus awards, based upon individual merit, not to
exceed 20% of the determined bonus amount. Similar adjustments to the President
and CEO's bonus award may be made by the full Board of Directors. In February,
1998, the Board of Directors approved the payment of incentive awards, as set
forth in the Summary Compensation Table on page 7.
The members of the Personnel Committee are:
John P. Woods, Jr.
Allen H. Samuels
J. Carl Barbic
-8-
<PAGE>
PENSION PLAN
The Bank has in effect a Pension Plan which conforms to the requirements of
the Employee Retirement Income Security Act of 1974 (as amended), provides for
full vesting upon five years of participation, and contains provisions which
permit early retirement within ten years prior to normal retirement date for
participants with at least ten years of credited service. The Plan requires no
contribution from participants, covers all eligible employees, provides for
normal retirement at age 65, and is qualified under Section 401(a) of the
Internal Revenue Code. There were 237 participants in the Plan in 1997. Normal
retirement benefits are based on the greater of (i) 40% of average earnings for
the highest 36 consecutive months, reduced proportionately for less than 20
years of service, or (ii) a minimum of $50 per month after 10 years of service.
The following table sets forth the estimated annual benefits payable on
retirement at age 65 by a participating employee assuming earnings as shown. For
1997, the Internal Revenue Code limits the total compensation that may be taken
into account in calculating benefits to $160,000. The estimated retirement
benefits in the table below are based on the assumption that the persons in the
Plan will continue in employment until age 65 at 1995 salaries. Messrs. Brass,
Corso, Knudsen, and Woodmancy have credited years of service of 8, 11, 5 and 6,
respectively, under the plan.
PENSION PLAN TABLE
YEARS OF SERVICE
--------------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
- ------------ -------- -------- -------- -------- --------
$ 20,000 $ 6,000 $ 8,000 $ 8,000 $ 8,000 $ 8,000
$ 30,000 $ 9,000 $12,000 $12,000 $12,000 $12,000
$ 40,000 $12,000 $16,000 $16,000 $16,000 $16,000
$ 50,000 $15,000 $20,000 $20,000 $20,000 $20,000
$ 60,000 $18,000 $24,000 $24,000 $24,000 $24,000
$ 80,000 $24,000 $32,000 $32,000 $32,000 $32,000
$100,000 $30,000 $40,000 $40,000 $40,000 $40,000
$125,000 $37,500 $50,000 $50,000 $50,000 $50,000
$150,000 $45,000 $60,000 $60,000 $60,000 $60,000
$160,000 $48,000 $64,000 $64,000 $64,000 $64,000
EXECUTIVE AGREEMENTS
Messrs. Brass and Corso have Senior Executive Severance Agreements with the
Bank and the Company which provide that in the event of a termination of the
executive's employment within 24 months after a Change of Control, the Company
shall be obligated to pay the executive 2.99 times his annualized base salary
(exclusive of bonus payments) in effect immediately prior to the date of
termination, as compensation for services rendered to the Company and as
consideration for the covenant not to compete contained in the Agreement.
Payments to executives under these agreements are payable in eight equal
quarterly installments without interest. Under these agreements, a Change of
Control shall be deemed to have occurred if (i) any person or group becomes the
beneficial owner of 50% or more of the Company's outstanding securities, (ii) as
a result of a tender offer, merger, business combination or contested election,
the persons who were directors of the Company cease to constitute a majority of
the Board, (iii) the Company or Bank is merged with another entity in a
transaction in which less than 50% of the voting securities of the resulting
entity are held by the former shareholders of the Company, (iv) a tender offer
or exchange offer is made for more than 50% of the Company's outstanding
securities, or (v) the Company transfers substantially all of its assets to
another corporation. Under the Agreements, a termination of an executive's
employment is deemed to have occurred if (i) the executive is terminated by the
Company for reasons other than cause, death or disability, or (ii) the executive
resigns following a significant change in the nature of the executive's
authority, a reduction in the executive's total compensation and benefits, a
change in location where executive is required to perform services,
-9-
<PAGE>
or based on a reasonable determination there is a change in circumstances
significantly affecting his position such that he is unable to exercise the
authority, powers, functions or duties of his position.
Messrs. Brass, Corso, Knudsen, and Woodmancy have Executive Salary
Continuation Agreements with the Bank which provide for a supplemental
retirement benefit designed to provide the executive with total retirement
income benefits which will equal at least 65% of the executive's projected total
annual compensation at the time of the executive's retirement. The executive's
projected total annual compensation at retirement is calculated by assuming a 5%
annual increase in current salary amounts until the executive reaches age 65.
The supplemental retirement benefit shall be paid to the executive or his
beneficiary in monthly installments for a period of fifteen years commencing at
age 65. In the event the executive dies prior to age 65, the executive's
beneficiary shall receive a death benefit equal to the supplemental retirement
benefit payable over fifteen years beginning at the time of death. The benefits
under the Agreements fully vest after the executive has been employed by the
Bank for five years and partially vest prior thereto, although benefits are
subject to forfeiture if the executive engages in competition with the Bank. The
benefits under the Agreements are funded by life insurance policies covering the
executives which are owned by the Bank and which name the Bank as the sole
beneficiary under the policies. If all the assumptions concerning mortality,
dividends and salary are met, the proceeds of the policies will cover the Bank's
cost of the Agreements.
-10-
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total shareholder returns on the
Company's stock over the last five fiscal years to the NASDAQ Index and a peer
group of banks in upstate New York. Total return values were calculated assuming
$100 investment on January 1, 1992 and reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among CNB Financial Corp., NASDAQ Stock Market (US Companies) &
Self-Determined Peer Group*
Period Ending December 31, 1997
[GRAPHICAL REPRESENTATION OF CHART BELOW]
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------
NASDAQ .................. 100.00 114.80 112.20 158.70 195.20 239.50
Peer Group* ............. 100.00 127.10 140.60 185.20 244.80 383.40
CNB Financial Corp. ..... 100.00 115.20 137.20 217.70 214.30 336.10
- ----------
* Companies in the Self-Determined Peer Group:
-- FNB Rochester Corp. -- NBT Bancorp Inc.
-- Arrow Financial Corp. -- Evergreen Bancorp Inc.
-11-
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's principal accounting firm at December 31, 1997 was KPMG Peat
Marwick LLP. The accounting firm is selected upon recommendation of the
Examining/Audit Committee and approval of the Board of Directors. The Company
expects to continue its engagement of KPMG Peat Marwick LLP and expects that
representatives of the accounting firm will be present at the Meeting. KPMG Peat
Marwick LLP will have the opportunity to make a statement and to be available to
respond to appropriate questions.
The Board of Directors of the Company engaged KPMG Peat Marwick LLP as the
independent accountants for the Company on August 25, 1997 and dismissed the
former independent accountants, Price Waterhouse LLP. During the two fiscal
years ended December 31, 1996, and the subsequent interim period through August
25, 1997, (i) there were no disagreements with Price Waterhouse LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements if not resolved to the
satisfaction of Price Waterhouse LLP would have caused them to make reference in
connection with its report to the subject matter of the disagreement, and (ii)
Price Waterhouse LLP has not advised the Company of any reportable events
pursuant to Item 304(a)(1)(v)(A) through (D) of Regulation S-K promulgated by
the Securities and Exchange Commission. The accountants' report of Price
Waterhouse LLP on the consolidated financial statements of the Company and
subsidiaries as of and for the years ended December 31, 1996 and 1995 did not
contain any adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope, or accounting principles.
KPMG Peat Marwick LLP was not previously engaged regarding the application
of accounting principles on a specific transaction or the type of audit opinion
that might be rendered on the consolidated financial statements.
SHAREHOLDER PROPOSALS
If any shareholder wishes a proposal to be considered for inclusion in the
Company's 1999 Proxy Statement, it must be received by the Secretary of the
Company at 24 Church Street, Canajoharie, New York 13317 no later than December
23, 1998. Any shareholder proposals must be timely submitted and meet the other
requirements established by the Securities and Exchange Commission in order to
be considered for inclusion in the Company's Proxy Statement and proxy relating
to the 1999 Annual Meeting.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1997 accompanies this Proxy Statement. The Annual Report includes a
general description of the business of the Company, management's discussion and
analysis of financial condition and results of operations, and the Company's
consolidated financial statements, with the accountants' report thereon.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
that may come before the Meeting. However, the proxies may be voted with
discretionary authority with respect to any other matters that may properly come
before the Meeting.
Dated: April 21, 1998
HOLLY C. CRAVER
Secretary
-12-
<PAGE>
PROXY FOR 1998 ANNUAL MEETING OF
CNB FINANCIAL CORP.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned Shareholder of CNB FINANCIAL CORP. (the "Company") hereby
appoints VanNess D. Robinson and John P. Woods, Jr., or either of them, my
lawful proxy with full power of substitution to vote on a cumulative basis all
the Common Stock of the Company held of record by me on March 31, 1998 as
designated below at the ANNUAL MEETING of SHAREHOLDERS to be held on May 14,
1998 at 9:30 a.m. or at any adjournment thereof:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
ITEM 1. ELECTION OF DIRECTORS:
_ FOR both nominees listed (except _ WITHHOLD AUTHORITY to vote
|_| as marked to the contrary below) |_| for both nominees listed
J. Carl Barbic and Donald L. Brass
INSTRUCTION: To withhold authority to vote for any individual nominee or give
instructions for cumulative voting, strike that nominee's name
and note your voting instructions.
(continued, and to be signed, on reverse side)
<PAGE>
ITEM 2. APPROVAL OF INCREASE IN SHARES OF AUTHORIZED COMMON STOCK:
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
ITEM 3. APPROVAL OF TWO-FOR-ONE STOCK SPLIT:
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
In their discretion, the Proxies are authorized to vote on any other
business that may properly come before the Annual Meeting or any adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED ABOVE. IN THE
ABSENCE OF ANY DIRECTION, THE SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY
WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
Date: _______________, 1998 Signature: _____________________________
Print Name: _____________________________
Signature: _____________________________
Print Name: _____________________________
When signing as attorney, executor, administrator, trustee or guardian, please
give full title. If more than one trustee, all should sign. (ALL JOINT OWNERS
MUST SIGN.)
