<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
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of 1934 for the quarterly period ended March 31, 2000.
Or
_____Transition Report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the transition period from __________________ to _____________
Commission File No. 33-69326
CNB HOLDINGS, INC.
(Exact name of the registrant as specified in its charter)
Virginia 54-1663340
(State of Incorporation) (I.R.S. Employer Identification No.)
P.O. Box 1060, 900 Memorial Drive, Pulaski, Virginia 24301
(Address of principal executive offices)
(540) 994-0831
(Issuer's telephone number, including area code)
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(Former name, former address, and former fiscal year, if
changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
926,399 shares of common stock, $5.00 par value per share (the "Common Stock"),
issued and outstanding as of May 8, 2000.
Transitional Small Business Disclosure Format (check one): Yes No X
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<PAGE>
CNB Holdings, Inc.
Form 10-QSB
INDEX
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PART 1. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
The financial statements of CNB Holdings, Inc. (the "Company") are set forth in
the following pages.
Consolidated Balance Sheets as of March 31, 2000 and
December 31,1999 ..........................................................3
Consolidated Statements of Operations for the Three Months
Ended March 31, 2000 and 1999.............................................4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999.............................................5
Notes to Consolidated Financial Statements...................................6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS...........................................7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................8
Item 2. Changes in Securities................................................8
Item 3. Defaults Upon Senior Securities......................................8
Item 4. Submission of Matters to a Vote of Security Holders................. 8
Item 5. Other Information....................................................8
Item 6. Exhibits and Reports on Form 8-K.................................... 8
SIGNATURES...................................................................8
All schedules have been omitted because they are inapplicable or the required
information is provided in the financial statements, including the notes
thereto.
2
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CNB Holdings, Inc. and Subsidiary
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
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<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Assets
Cash and due from banks $ 2,939,166 $ 2,896,627
Federal funds sold 50,000 760,000
Investment securities available for sale 14,403,490 14,188,398
Loans, net of allowance for loan losses
of $337,574 in 2000 and $321,574 in 1999 31,335,782 31,570,674
Property and equipment, net 1,994,246 1,994,281
Accrued income 298,153 307,451
Other assets 63,794 60,900
------------ ------------
Total assets $ 51,084,631 $ 51,778,331
============ ============
Liabilities
Demand deposits $ 2,874,883 $ 3,507,508
Interest-bearing demand deposits 16,132,253 15,923,772
Savings deposits 7,660,154 6,805,463
Large denomination time deposits 3,178,198 4,041,584
Other time deposits 14,754,781 15,491,406
------------ ------------
Total deposits 44,600,269 45,769,733
Federal funds purchased 304,000 -
Other borrowed funds 125,011 126,570
Accrued interest payable 50,141 61,095
Other liabilities 65,084 27,954
------------ ------------
Total liabilities 45,144,505 45,985,352
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value; 1,000,000 shares
authorized; none outstanding - -
Common stock, $5 par value; 10,000,000 shares
authorized; 926,399 shares outstanding
in 2000 and 1999 4,631,995 4,631,995
Surplus 2,803,782 2,803,782
Retained deficit (1,023,148) (1,156,366)
Unrealized depreciation on investment
securities available for sale (472,503) (486,432)
------------ ------------
Total stockholders' equity 5,940,126 5,792,979
------------ ------------
Total liabilities and stockholders' equity $ 51,084,631 $ 51,778,331
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
3
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CNB Holdings, Inc. and Subsidiary
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Consolidated Statements of Operations
Three months ended March 31, 2000 and 1999
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Interest income:
Loans and fees on loans $ 681,327 $ 702,062
Federal funds sold 4,264 13,754
Taxable investment securities 225,306 189,921
--------- ---------
Total interest income 910,897 905,737
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Interest expense:
Deposits 453,591 465,031
Federal funds purchased 2,619 -
Other borrowed funds 1,787 1,873
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Total interest expense 457,997 466,904
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Net interest income 452,900 438,833
Provision for loan losses 15,000 25,076
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Net interest income after provision for loan losses 437,900 413,757
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Noninterest income:
Service charges on deposit accounts 45,671 39,743
Net realized gains on sales of securities - -
Other income 50,216 33,800
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Total noninterest income 95,887 73,543
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Noninterest expense:
Salaries and employee benefits 175,706 234,298
Occupancy expense 33,219 37,800
Equipment expense 29,043 30,867
Other expense 162,601 202,687
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Total noninterest expense 400,569 505,652
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Net income (loss) $ 133,218 $ (18,352)
========= =========
Basic earnings per share $ .14 $ (.02)
========= =========
Weighted average shares outstanding $ 926,399 926,399
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
4
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CNB Holdings, Inc. and Subsidiary
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Consolidated Statements of Cash Flows
Three months ended March 31, 2000 and 1999
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 133,218 $ (18,352)
Adjustments to reconcile net income (loss)
to net cash used by operations:
Depreciation and amortization 30,018 33,090
Provision for loan losses 15,000 25,076
Accretion of discount on securities, net 6,869 19,481
Changes in assets and liabilities:
Accrued income 9,298 91,248
Other assets (2,894) 2,233
Accrued interest payable (10,954) 4,464
Other liabilities 37,130 444
----------- -----------
Net cash flows provided by operating activities 217,685 157,684
----------- -----------
Cash flows from investing activities:
Net (increase) decrease in federal funds sold 710,000 (1,751,000)
Purchases of investment securities (9,281,526) (2,971,994)
Sales of available for sale securities - 2,498,716
Maturities of investment securities 9,073,494 3,904,379
Net (increase) decrease in loans 219,892 (1,980,854)
Purchases of property and equipment (29,983) (15,635)
----------- -----------
Net cash flows provided by investing activities 691,877 (316,388)
----------- -----------
Cash flows from financing activities:
Net increase in demand, NOW, and savings deposits 430,547 715,889
Net increase (decrease) in time deposits (1,600,011) 639,596
Net increase (decrease) in federal funds purchased 304,000 (851,000)
Repayment of borrowed funds (1,559) (1,473)
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Net cash flows used by financing activities (867,023) 503,012
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Net increase in cash and cash equivalents 42,539 344,308
Cash and cash equivalents, beginning 2,896,627 2,925,106
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Cash and cash equivalents, ending $ 2,939,166 $ 3,269,414
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 468,951 $ 462,440
=========== ===========
Income taxes paid - $ -
=========== ===========
Supplemental disclosure of noncash investing activities:
Other real estate acquired in settlement of loans $ $ -
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
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Notes to Consolidated Financial Statements
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Note 1. Organization and Summary of Significant Accounting Policies
Organization
CNB Holdings, Inc. (the Company) is a bank holding company incorporated under
the laws of Virginia on April 29, 1993. On August 29, 1994, the Company's wholly
owned subsidiary, Community National Bank (the Bank), was chartered as an FDIC
insured National Banking Association under the laws of the United States and the
Bank opened for business in Pulaski, Virginia. As an FDIC insured National
Banking Association, the Bank operates two banking offices and is subject to
regulation by the Comptroller of the Currency. The Company is regulated by the
Federal Reserve.
Basis of Presentation
The consolidated financial statements as of March 31, 2000 and for the periods
ended March 31, 2000 and 1999 included herein, have been prepared by CNB
holdings, Inc., without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
information furnished in the interim consolidated financial statements reflects
all adjustments necessary to present fairly the Company's consolidated financial
position, results of operations, changes in stockholders' equity and cash flows
for such interim periods. Management believes that all interim period
adjustments are of a normal recurring nature. These consolidated financial
statements should be read in conjunction with the Company's audited financial
statements and the notes thereto as of December 31, 1999, included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999.
The accounting and reporting policies of the Company and the Bank follow
generally accepted accounting principles and general practices within the
financial services industry.
Note 2. Commitments and Contingencies
Financial Instruments with Off-Balance-Sheet Risk
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending other loan facilities to customers. Collateral held
varies as specified above and is required in instances which the Bank deems
necessary.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANACIAL CONDITION AND
RESULTS OF OPERATIONS.
Discussion of Operations
The Company had net income of $133,000 (or $.14 per share, based on 926,399
weighted average shares of Common Stock outstanding during the period) for the
three months ended March 31, 2000, compared with a loss of $18,000 (or $.02 per
share) for the quarter ended March 31, 1999.
At March 31, 2000, the Company had total assets of approximately $51.1 million
compared to $51.8 million at December 31, 1999. Total assets had a decrease of
$694,000, or 1.3% since year end 1999. At March 31, 2000, assets were comprised
principally of loans and investment securities. Loans decreased $235,000, or
.7%, to $31.3 million at March 31, 2000. Investment securities increased
$215,000, or 1.5%. As loan demand continues to develop, the bank will be in a
position to invest more of its excess funds into higher yielding loans instead
of investment securities.
The Company's liabilities at March 31, 2000 were $45.1 million compared to $46.0
million at December 31, 1999. These liabilities consisted almost entirely of
deposits for both periods. Demand and saving deposits increased by $431,000, or
1.6% to $26.7 million, and time deposits decreased $1.6 million, or 8.2%, to
$17.9 million. At March 31, 2000, $2.9 million, or 6.4%, of total deposits were
non interest-bearing compared to $3.5 million, or 7.7%, at December 31, 1999.
The Bank offers competitive interest rates in its local market and has been
successful at attracting depositors.
At March 31, 2000 and December 31, 1999, the Company had stockholders' equity of
approximately $5.9 million and $5.8 million, respectively. Stock-holders' equity
was affected by the Company's first three months of 2000 income of $133,000, and
a $13,000 increase in the market value of investment securities available for
sale.
Management of the Company believes that the Bank has sufficient capital to fund
its operations until the Bank begins to generate profits on consistent basis,
but there can be no assurance that this will be the case. During the first
quarter of 1999 the Bank became a member of the Federal Home Loan Bank system
which would provide the Bank with borrowing capacity to meet liquidity or loan
needs, however, management has not identified other sources of capital for the
Company or the Bank should they be needed.
At March 31, 2000, the Bank was in compliance with all regulatory capital
requirements. Management believes that the Bank has sufficient liquidity on a
short-term basis to meet any funding needs it may have, and expects that its
long term liquidity needs can be achieved through deposit growth, however there
can be no assurance that such growth will develop.
Year 2000 Compliance
The Company experienced no problems related to Y2K. The Company incurred no Y2K
related expenses in the quarter ended March 31, 2000 and no future Y2K expenses
are anticipated. Y2K related expense was $4,075 in the first quarter of 1999.
7
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
There are no matters pending legal proceedings to which the Company or any of
its subsidiaries is a party or of which any of their property is subject.
Item 2. Changes in Securities
(a) Not applicable.
(b) Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on April 13, 2000, the
shareholders of the Company voted upon the following matters with the following
results:
(1) The election of the following persons as directors of the
Company to serve until the third annual meeting following their
election and therefore until their successors have been elected
and have qualified:
Name Votes For Votes witheld
----------------- --------- -------------
Jack W. Bowling 672,025 1,950
Jackson M. Bruce 665,959 8,016
Nathan R. Tuck 667,321 6,654
Sybil S. Atkinson, Randolph V. Christley, Hiawatha Nicely, Jr, A. Carole Pratt,
David W. Ratcliff, Jr. and J. David Wine, continue to service as directors after
the Annual Meeting under terms which did not expire at the Annual Meeting.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on 8-K
None.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CNB HOLDINGS, INC.
Date: May 12, 1999 By: /s/Phillip M. Baker
--------------------------
Phillip M. Baker
Chief Financial Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000912566
<NAME> CNB HOLDINGS INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,939
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 50
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,403
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 31,673
<ALLOWANCE> 338
<TOTAL-ASSETS> 51,085
<DEPOSITS> 44,600
<SHORT-TERM> 304
<LIABILITIES-OTHER> 115,225
<LONG-TERM> 125
4,632
0
<COMMON> 0
<OTHER-SE> 1,308
<TOTAL-LIABILITIES-AND-EQUITY> 51,085
<INTEREST-LOAN> 681
<INTEREST-INVEST> 225
<INTEREST-OTHER> 4
<INTEREST-TOTAL> 911
<INTEREST-DEPOSIT> 454
<INTEREST-EXPENSE> 458
<INTEREST-INCOME-NET> 453
<LOAN-LOSSES> 15
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 401
<INCOME-PRETAX> 133
<INCOME-PRE-EXTRAORDINARY> 133
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.14
<YIELD-ACTUAL> 3.93
<LOANS-NON> 126
<LOANS-PAST> 0
<LOANS-TROUBLED> 357
<LOANS-PROBLEM> 51
<ALLOWANCE-OPEN> 323
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 338
<ALLOWANCE-DOMESTIC> 338
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 338
</TABLE>
