<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 of
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1934 for the quarterly period ended June 30, 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 August 4, 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.
<TABLE>
<CAPTION>
<S> <C>
Consolidated Balance Sheets as of June 30, 2000 and
December 31,1999........................................... 3
Consolidated Statements of Operations for the Six Months
Ended June 30, 2000 and 1999.............................. 4
Consolidated Statements of Operations for the Three Months
Ended June 30, 2000 and 1999.............................. 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999.............................. 6
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 2000 and 1999.............................. 7
Notes to Consolidated Financial Statements................... 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 10
Item 2. Changes in Securities................................ 10
Item 3. Defaults Upon Senior Securities...................... 10
Item 4. Submission of Matters to a Vote of Security Holders.. 10
Item 5. Other Information.................................... 10
Item 6. Exhibits and Reports on Form 8-K..................... 10
SIGNATURES................................................... 10
</TABLE>
All schedules have been omitted because they are inapplicable or the required
information is provided in the financial statements, including the notes
thereto.
2
<PAGE>
CNB Holdings, Inc. and Subsidiary
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
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<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Assets
Cash and due from banks $ 3,666,160 $ 2,896,627
Federal funds sold - 760,000
Investment securities available for sale 16,764,853 14,188,398
Loans, net of allowance for loan losses
of $339,496 in 2000 and $321,574 in 1999 31,546,697 31,570,674
Property and equipment, net 1,967,111 1,994,281
Accrued income 316,545 307,451
Other assets 55,709 60,900
----------- -----------
Total assets $54,317,075 $51,778,331
=========== ===========
Liabilities
Demand deposits $ 3,358,933 $ 3,507,508
Interest-bearing demand deposits 16,712,181 15,923,772
Savings deposits 9,403,203 6,805,463
Large denomination time deposits 3,705,747 4,041,584
Other time deposits 14,809,043 15,491,406
----------- -----------
Total deposits 47,989,107 45,769,733
Federal funds purchased 95,000 -
Other borrowed funds 123,430 126,570
Accrued interest payable 59,922 61,095
Other liabilities 18,647 27,954
----------- -----------
Total liabilities 48,286,106 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 (902,344) (1,156,366)
Unrealized depreciation on investment
securities available for sale (502,464) (486,432)
----------- -----------
Total stockholders' equity 6,030,969 5,792,979
----------- -----------
Total liabilities and stockholders' equity $54,317,075 $51,778,331
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
CNB Holdings, Inc. and Subsidiary
Consolidated Statements of Operations
Six months ended June 30, 2000 and 1999
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<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
2000 1999
---------- ----------
<S> <C> <C>
Interest income:
Loans and fees on loans $1,370,919 $1,404,559
Federal funds sold 8,826 39,374
Taxable investment securities 457,308 380,775
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Total interest income 1,837,053 1,824,708
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Interest expense:
Deposits 908,146 934,111
Federal funds purchased 6,923 3,131
Other borrowed funds 3,551 3,724
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Total interest expense 918,620 940,966
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Net interest income 918,433 883,742
Provision for loan losses 28,750 25,489
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Net interest income after provision for loan losses 889,683 858,253
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Noninterest income:
Service charges on deposit accounts 94,381 82,276
Net realized gains on sales of securities - -
Other income 86,898 62,843
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Total noninterest income 181,279 145,119
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Noninterest expense:
Salaries and employee benefits 364,778 431,663
Occupancy expense 64,850 71,266
Equipment expense 51,697 56,975
Other expense 335,615 380,348
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Total noninterest expense 816,940 940,252
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Net income (loss) $ 254,022 $ 63,120
========== ==========
Basic earnings per share $.27 $.07
========== ==========
Weighted average shares outstanding $ 926,399 926,399
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
CNB Holdings, Inc. and Subsidiary
Consolidated Statements of Operations
Three months ended June 30, 2000 and 1999
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<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------
2000 1999
-------- --------
<S> <C> <C>
Interest income:
Loans and fees on loans $689,592 $702,497
Federal funds sold 4,562 25,620
Taxable investment securities 232,002 190,854
-------- --------
Total interest income 926,156 918,971
-------- --------
Interest expense:
Deposits 454,555 469,080
Federal funds purchased 4,304 3,131
Other borrowed funds 1,764 1,851
-------- --------
Total interest expense 460,623 474,062
-------- --------
Net interest income 465,533 444,909
Provision for loan losses 13,750 413
-------- --------
Net interest income after provision for loan losses 451,783 444,496
-------- --------
Noninterest income:
Service charges on deposit accounts 48,710 42,533
Net realized gains on sales of securities - -
Other income 36,682 29,043
-------- --------
Total noninterest income 85,392 71,576
-------- --------
Noninterest expense:
Salaries and employee benefits 189,072 197,365
Occupancy expense 31,631 33,466
Equipment expense 22,654 26,108
Other expense 173,014 177,661
-------- --------
Total noninterest expense 416,371 434,600
-------- --------
Net income $120,804 $ 81,472
======== ========
Basic earnings per share $.13 $.09
======== ========
Weighted average shares outstanding $926,399 926,399
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
CNB Holdings, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999
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<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
2000 1999
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 254,022 $ 63,120
Adjustments to reconcile net income (loss)
to net cash used by operations:
Depreciation and amortization 60,851 66,044
Provision for loan losses 28,750 25,489
Accretion of discount on securities, net 11,338 34,945
Changes in assets and liabilities:
Accrued income (9,094) 64,055
Other assets 5,191 (25,681)
Accrued interest payable (1,173) 10,650
Other liabilities (9,307) (1,545)
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Net cash flows provided by operating activities 340,578 237,077
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Cash flows from investing activities:
Net (increase) decrease in federal funds sold 760,000 (316,000)
Purchases of investment securities (15,987,334) (6,905,397)
Sales of available for sale securities - 2,498,716
Maturities of investment securities 13,383,509 4,588,430
Net (increase) decrease in loans (4,773) (1,191,511)
Purchases of property and equipment (33,681) (18,793)
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Net cash flows provided by investing activities (1,882,279) (1,344,555)
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Cash flows from financing activities:
Net increase in demand, NOW, and savings deposits 3,237,574 108,803
Net increase (decrease) in time deposits (1,018,200) 1,312,961
Net increase (decrease) in federal funds purchased 95,000 (851,000)
Repayment of borrowed funds (3,140) (2,967)
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Net cash flows used by financing activities 2,311,234 567,797
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Net increase in cash and cash equivalents 769,533 (539,681)
Cash and cash equivalents, beginning 2,896,627 2,925,106
------------ -----------
Cash and cash equivalents, ending $ 3,666,160 $ 2,385,425
============ ===========
Supplemental disclosure of cash flow information:
Interest paid $ 919,793 $ 930,316
============ ===========
Income taxes paid - $ -
============ ===========
Supplemental disclosure of noncash investing activities:
Other real estate acquired in settlement of loans $ - $ -
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
CNB Holdings, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Three months ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 120,804 $ 81,472
Adjustments to reconcile net income (loss)
to net cash used by operations:
Depreciation and amortization 30,833 32,954
Provision for loan losses 13,750 413
Accretion of discount on securities, net 4,469 15,464
Changes in assets and liabilities:
Accrued income (18,392) (27,193)
Other assets 8,085 (27,914)
Accrued interest payable 9,781 6,186
Other liabilities (46,437) (1,989)
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Net cash flows provided by operating activities 122,893 79,393
----------- -----------
Cash flows from investing activities:
Net (increase) decrease in federal funds sold 50,000 1,435,000
Purchases of investment securities (6,705,808) (3,933,403)
Sales of available for sale securities - -
Maturities of investment securities 4,310,015 684,051
Net (increase) decrease in loans (224,665) 789,343
Purchases of property and equipment (3,698) (3,158)
----------- -----------
Net cash flows provided by investing activities (2,574,156) (1,028,167)
----------- -----------
Cash flows from financing activities:
Net increase in demand, NOW, and savings deposits 2,807,027 (607,086)
Net increase (decrease) in time deposits 581,811 673,365
Net increase (decrease) in federal funds purchased (209,000) -
Repayment of borrowed funds (1,581) (1,494)
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Net cash flows used by financing activities 3,178,257 64,785
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Net increase (decrease) in cash and cash equivalents 726,994 (883,989)
Cash and cash equivalents, beginning 2,939,166 3,269,414
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Cash and cash equivalents, ending $ 3,666,160 $ 2,385,425
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 450,842 $ 467,876
=========== ===========
Income taxes paid - $ -
=========== ===========
Supplemental disclosure of noncash investing activities:
Other real estate acquired in settlement of loans $ $ -
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE>
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 June 30, 2000 and for the periods
ended June 30, 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.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANACIAL CONDITION AND
RESULTS OF OPERATIONS.
Discussion of Operations
The Company had net income of $254,000 (or $.27 per share, based on 926,399
weighted average shares of Common Stock outstanding during the period) for the
six months ended June 30, 2000, compared with a income of $63,000 (or $.07 per
share) for the six months ended June 30, 1999.
At June 30, 2000, the Company had total assets of approximately $54.3 million
compared to $51.8 million at December 31, 1999. Total assets had an increase of
$2.5 million, or 4.9% since year end 1999. At June 30, 2000, assets were
comprised principally of loans and investment securities. Loans decreased
slightly, to $31.5 million at June 30, 2000. Loans were $31.6 million at
December 31, 1999. Investment securities increased $2.6 million, or 18.2%. As
quality 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 June 30, 2000 were $48.3 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 $3.2
million, or 12.3% to $29.5 million, and time deposits decreased $1.0 million, or
5.2%, to $18.5 million. At June 30, 2000, $3.4 million, or 7.0%, 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 June 30, 2000 and December 31, 1999, the Company had stockholders' equity of
approximately $6.0 million and $5.8 million, respectively. Stock-holders'
equity was affected by the Company's first six months of 2000 income of
$254,000, and a $16,000 decrease 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 a more 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 June 30, 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 six months ended June 30, 2000 and no future Y2K
expenses are anticipated. Y2K related expense was $15,075 in the first half of
1999.
9
<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
None
Item 5. Other Information
On July 11, 2000, the company announced plans to affiliate with FNB,
Corporation., a bank holding company headquartered in Christiansburg,
Virginia. Under the terms of the agreement, shareholders of CNB will
receive consideration valued at $10.60 for each share of CNB common
stock, in the form of cash, stock of FNB, or a combination of cash and
stock, at each CNB shareholder's election. The cash and FNB stock
portion of the consideration, however, will each be limited to 50
percent of the total consideration paid.
For those CNB shares which are converted into FNB shares, the number of
FNB shares issues will be determined by dividing $10.60 by the average
closing price of FNB share for the 30 trading days ending 10 days prior
to closing, but in no case will FNB issue more than 0.642 shares or less
that 0.544 shares. The transaction will be structured as a tax-free
reorganization to the extent of the shares exchanged and accounted for
under the purchase method of accounting. It is expected to be accretive
to cash earnings per share in the first full year of operation. The plan
is subject to approval by the shareholders of CNB Holdings, Inc.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on 8-K
None.
10
<PAGE>
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: August 8, 2000 By: /s/Phillip M. Baker
______________________________
Phillip M. Baker
Chief Financial Officer
