-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CO+Qw056RMSphxQkixpFUb9lnBINUjraK2bAJ5GfCCx+gwimR9w/EQ1vMRHR3CBV 7UmktoaHEKAVKInHSYgaZg== 0000912057-96-014834.txt : 19960718 0000912057-96-014834.hdr.sgml : 19960718 ACCESSION NUMBER: 0000912057-96-014834 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960717 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNB INC /FL CENTRAL INDEX KEY: 0000852618 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 592958616 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-25988 FILM NUMBER: 96595806 BUSINESS ADDRESS: STREET 1: 201 N MARION ST STREET 2: P.O BOX 3239 CITY: LAKE CITY STATE: FL ZIP: 32056 BUSINESS PHONE: 9047553240 MAIL ADDRESS: STREET 1: 121 NORTH MARION ST STREET 2: P O BOX 3239 CITY: LAKE CITY STATE: FL ZIP: 32056 FORMER COMPANY: FORMER CONFORMED NAME: BRADFORD BANKSHARES INC DATE OF NAME CHANGE: 19920703 10-K405/A 1 10-K405/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB/A X AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - --- SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to -------- -------- Commission File No: 33-29695-A CNB, INC. ------------------------------- (Name of Small Business Issuer) FLORIDA 59-2958616 --------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Post Office Box 3239 201 North Marion Street Lake City, Florida 32056 ---------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (904) 755-3240 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK Indicate by 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B not contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. X --- The Registrant's revenues for the fiscal year ended December 31, 1995, totaled $14,223,789. The aggregate market value of the voting stock held by non-affiliates of the Registrant was $6,269,040, as of the most recent date on which stock was sold, March 19, 1996. The number of shares of the registrant's common stock outstanding as of March 15, 1996 was 1,639,733 shares, $0.01 par value per share. Item 7 of the Form 10-KSB for CNB, Inc., File No. 33-29695, is hereby amended and restated in its entirety to provide the information required by Item 310(a) of Regulation S-B in accordance with the response letter dated July 11, 1996 from the Securities and Exchange Commission, Division of Corporation Finance, to CNB, Inc. regarding the Pre-effective Amendment No. 1 filed on June 25, 1996 to the Registration Statement on Form S-4 filed on May 3, 1996, File No. 333-4640. FINANCIAL STATEMENTS CNB, INC. AND SUBSIDIARY LAKE CITY, FLORIDA DECEMBER 31, 1995 INDEX TO FINANCIAL STATEMENTS Report of Independent Certified Public Accountants . . . . . . . . . . .Page 1 Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . 2 Consolidated Statements of Operations. . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Shareholders' Equity. . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 6 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Shareholders CNB, Inc. and Subsidiary Lake City, Florida We have audited the accompanying consolidated balance sheets of CNB, Inc. and Subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CNB, Inc. and Subsidiary as of December 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. OSBURN, HENNING AND COMPANY January 19, 1996 - 1 - CNB, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, 1995 1994 ------------ ------------ ASSETS Cash and due from banks $ 7,898,690 $ 8,830,528 Federal funds sold 4,660,000 3,050,000 Interest bearing deposits in other banks 413,072 385,152 ------------ ------------ Total Cash and Cash Equivalents 12,971,762 12,265,680 Securities available for sale 39,838,485 21,770,605 Securities held to maturity 13,246,806 40,679,401 Loans: Commercial, financial and agricultural 48,948,386 37,165,303 Real estate - construction 2,158,705 1,701,204 Real estate - mortgage 34,911,476 32,913,712 Installment and consumer lines 16,330,111 14,267,161 ------------ ------------ Total loans net of unearned discount 102,348,678 86,047,380 Less: Allowance for loan losses (945,770) (827,052) ------------ ------------ Net Loans 101,402,908 85,220,328 Premises and equipment, net 6,432,547 6,165,568 Other assets 2,840,797 2,410,090 ------------ ------------ TOTAL ASSETS $176,733,305 $168,511,672 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Noninterest-bearing deposits $ 19,110,965 $ 17,977,382 Interest-bearing deposits: Savings, time and demand 126,922,045 122,001,056 Time, $100,000 and over 12,969,601 12,633,810 ------------ ------------ Total Deposits 159,002,611 152,612,248 Note payable 950,000 1,700,000 Other liabilities 1,752,548 998,068 ------------ ------------ Total Liabilities 161,705,159 155,310,316 ------------ ------------ MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES 274,250 274,250 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Note 14) SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, 500,000 shares authorized; no shares issued or outstanding Common stock, $.01 par value, 10,000,000 shares authorized; 1,639,733 shares issued and outstanding 16,397 16,397 Additional paid-in capital 9,784,369 9,784,369 Retained earnings 4,966,357 3,420,252 Net unrealized loss on securities available for sale (13,227) (293,912) ------------ ------------ Total Shareholders' Equity 14,753,896 12,927,106 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $176,733,305 $168,511,672 ------------ ------------ ------------ ------------
See Notes to Consolidated Financial Statements. - 2 - CNB, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 1995 1994 ----------- ----------- INTEREST INCOME Interest and fees on loans $ 9,161,123 $ 6,919,277 Interest on securities held to maturity 2,291,192 1,930,626 Interest on securities available for sale 837,321 1,144,476 Interest on federal funds sold 435,955 294,478 Interest on interest bearing deposits 20,091 14,207 ----------- ----------- Total Interest Income 12,745,682 10,303,064 ----------- ----------- INTEREST EXPENSE Interest on deposits 5,804,836 4,454,234 Other interest expense 161,467 178,185 ----------- ----------- Total Interest Expense 5,966,303 4,632,419 ----------- ----------- Net Interest Income 6,779,379 5,670,645 PROVISION FOR LOAN LOSS 230,000 125,000 ----------- ----------- Net Interest Income After Loan Loss Provision 6,549,379 5,545,645 NON-INTEREST INCOME Service charges 1,187,036 1,106,904 Other fees and charges 291,071 223,106 ----------- ----------- Total Non-interest Income 1,478,107 1,330,010 ----------- ----------- NON-INTEREST EXPENSE Salaries and employee benefits 2,704,200 2,430,633 Occupancy and equipment expenses 809,223 698,283 Other operating expenses 1,658,877 1,690,075 ----------- ----------- Total Non-interest Expense 5,172,300 4,818,991 ----------- ----------- Income Before Income Taxes 2,855,186 2,056,664 INCOME TAXES 1,013,930 730,498 ----------- ----------- NET INCOME $ 1,841,256 $ 1,326,166 ----------- ----------- ----------- ----------- EARNINGS PER SHARE: NET INCOME PER COMMON SHARE $ 1.12 $ .92 ----------- ----------- ----------- ----------- Weighted average common shares outstanding 1,639,733 1,436,024 ----------- ----------- ----------- -----------
- 3 - See Notes to Consolidated Financial Statements. CNB, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock Additional Total ------------------------ Paid-in Retained Shareholders' Shares Par Value Capital Earnings Equity ------- ---------- ---------- ---------- ------------ BALANCE, DECEMBER 31, 1993 813,578 $ 8,136 $6,995,839 $2,225,265 $ 9,229,240 Acquisition of Bradford Bankshares, Inc., effective April 1, 1994 826,155 (1) 8,261 2,788,530 - 2,796,791 Net income for year ended December 31, 1994 - - - 1,326,166 1,326,166 Cash dividends - - - (131,179) (131,179) Unrealized loss on securities available for sale, net of tax effect of $174,847 - - - - (293,912) --------- ---------- ---------- ---------- ----------- BALANCE, DECEMBER 31, 1994 1,639,733 16,397 9,784,369 3,420,252 12,927,106 Net income for year ended December 31, 1995 - - - 1,841,256 1,841,256 Cash dividends - - - (295,151) (295,151) Change in unrealized loss on securities available for sale, net of tax effect of $166,979 - - - - 280,685 --------- ---------- ---------- ---------- ----------- BALANCE DECEMBER 31, 1995 1,639,733 $ 16,397 $9,784,369 $4,966,357 $14,753,896 --------- ---------- ---------- ---------- ----------- --------- ---------- ---------- ---------- -----------
(1) Consists of 388,172 shares issued to the former Bradford Bankshares, Inc. shareholders and 437,983 shares issued to CNB, Inc. shareholders to give effect to the exchange ratio. See Notes to Consolidated Financial Statements. - 4 - CNB, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1995 1994 ----------- ----------- OPERATING ACTIVITIES Net income $ 1,841,256 $ 1,326,166 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 504,784 496,471 Provision for loan losses 230,000 125,000 Security amortization - net 259,214 321,833 Proceeds from sale of other real estate 104,021 - Deferred income taxes 124,129 - Changes in period-end balances of: Other assets (552,613) 245,246 Other liabilities 495,960 (243,658) ----------- ----------- Net Cash Provided By Operating Activities 3,006,751 2,271,058 ----------- ----------- INVESTING ACTIVITIES Purchases of securities available for sale (3,635,985) (2,276,972) Maturities of securities available for sale 11,750,000 6,350,000 Sales of securities available for sale 3,086,221 - Purchases of securities held to maturity (14,547,968) (7,496,660) Maturities of securities held to maturity 500,000 600,000 Securities held to maturity called by issuer 9,098,568 2,000,000 Mortgage backed securities - principal payments 3,315,687 4,348,758 Net increase in loans (16,580,374) (13,155,142) Net increase in premises and equipment (632,030) (554,919) Cash and cash equivalents from acquisition - 2,059,100 Cash used in acquisition - (23,178) ----------- ----------- Net Cash Used In Investing Activities (7,645,881) (8,149,013) ----------- ----------- FINANCING ACTIVITIES Net increase in deposits 6,390,363 3,808,205 Repayment of note payable (750,000) (300,000) Cash dividends (295,151) (131,179) ----------- ----------- Net Cash Provided By Financing Activities 5,345,212 3,377,026 ----------- ----------- Net Increase (Decrease) in Cash and Cash Equivalents 706,082 (2,500,929) Cash and Cash Equivalents: Beginning of Year 12,265,680 14,766,609 ----------- ----------- End of Year $12,971,762 $12,265,680 ----------- ----------- ----------- ----------- SUPPLEMENTAL INFORMATION: In addition to receipt of net cash of $2,035,922, the Company acquired loans and securities of $11,514,193 and premises, equipment and other assets of $1,235,000, and assumed deposits and other liabilities of $11,988,324 in the April 1, 1994 acquisition discussed in Note 3. See Notes to Consolidated Financial Statements.
- 5 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- ORGANIZATION AND FINANCIAL STATEMENT PRESENTATION ORGANIZATION CNB, Inc. (the "Company") is a registered bank holding company incorporated in Florida. The Company operates a wholly-owned banking subsidiary, CNB National Bank (the "Bank"), formerly Community National Bank, which is chartered as a national bank in Lake City, Florida. The Bank is a member of the Federal Reserve System and conducts business from a total of seven offices in North Florida. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. RECLASSIFICATION Certain amounts and captions presented in the 1994 financial statements have been reclassified to conform to the 1995 presentation. These reclassifications had no effect on total assets, liabilities, equity or operations as previously reported. NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SECURITIES SECURITIES AVAILABLE FOR SALE Securities which are used for asset/liability, liquidity, and other funds management purposes are deemed to have indefinite holding periods (securities available for sale). These securities are accounted for on a fair value basis with market adjustments charged or credited directly to shareholders' equity, net of any associated income tax effect. SECURITIES HELD TO MATURITY Securities where the Company's intent and ability is to hold to maturity (securities held to maturity) are stated at cost, adjusted for amortization of premiums and accretion of discounts. -6- CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) As permitted by applicable accounting standards, in December, 1995 the Company transferred securities held to maturity with an amortized cost of $30,141,854 to its securities available for sale portfolio. The estimated fair value and corresponding unrealized loss on the transferred securities were $30,097,711 and $44,143, respectively, on the date of transfer. The Company's policy as to the acquisition, maintenance and accounting for its securities is otherwise unchanged. Amortization and accretion of premiums and discounts are recognized as adjustments to interest income. Realized gains and losses are recognized using the specific identification method. LOANS AND ALLOWANCE FOR LOAN LOSSES Loans are stated at the amount of unpaid principal, reduced by an allowance for loan losses and any unearned loan income. Interest on substantially all loans other than installment loans is calculated by using the simple interest method on daily balances of the principal amounts outstanding except for those classified as nonaccrual loans. The accrual of interest is discontinued when future collection of principal or interest in accordance with the contractual terms may be doubtful. Interest on some installment loans is recognized under the rule-of-78s method, the results of which are not materially different than the interest method. Loan fees and loan origination costs are recognized as income at the time loans are funded rather than deferred over the life of the loan in view of the relative insignificance of the amount by which loan fees exceed loan origination costs. For 1995 and 1994, loan fees included in interest and fees on loans amounted to $400,602 and $425,118, respectively. The allowance for loan losses is established through a provision for loan losses charged to operations. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible based on evaluations of the collectibility of loans. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and current economic conditions that may affect the borrowers' ability to pay. Accrual of interest is discontinued on loans that are past due 90 days or more as to principal or interest unless substantially collateralized and in process of collection, or sooner, if in the opinion of management the borrowers' financial condition is such that collection of principal or interest is doubtful. - 7 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PREMISES AND EQUIPMENT Premises and equipment are stated at cost less allowances for depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Maintenance and repairs are charged to expenses as incurred. Gains and losses on dispositions are reflected in operations. INTANGIBLES The Company has intangible assets with a carrying amount of $928,058 and $1,070,116 at December 31, 1995 and 1994, respectively. Substantially all of these intangibles relate to core deposits acquired in prior years' acquisitions. Core deposit intangibles are being amortized over a ten year period using the straight-line method. Amortization charged against operations for all intangibles was $150,862 and $160,099 for 1995 and 1994, respectively. INCOME TAXES The Company uses the liability method of accounting for income taxes. This method requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company and the Bank file consolidated federal and state income tax returns. Under a tax-sharing arrangement, income tax charges or credits are generally allocated to the Company and the Bank on the basis of their respective taxable income or loss included in the consolidated income tax return as determined by the separate return method. CASH FLOW INFORMATION For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks, and federal funds sold. Cash paid for interest and income taxes was approximately $5,479,743 and $930,047, respectively, during 1995, and $4,381,000 and $561,000, respectively, during 1994. - 8 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3 -- 1994 ACQUISITION On April 1, 1994, the Company acquired Bradford Bankshares, Inc. (BBI), a registered one bank holding company headquartered in Starke, Florida. The combination was accounted for by the Company as a purchase transaction, and resulted in the Company's issuance of 388,172 of its Common shares. Approximately $266,000 in goodwill was recorded in the transaction. Of this amount, $226,000 was written off in 1994 through the elimination of a deferred tax valuation allowance previously recorded by BBI. The remaining goodwill is being amortized over ten years using the straight-line method. NOTE 4 -- SECURITIES Amortized cost and estimated fair value of securities available for sale at December 31, 1995 are as follows:
U. S. U. S. TREASURY GOVERNMENT SECURITIES AGENCIES OTHER TOTAL ----------- ----------- ---------- ----------- Amortized cost $13,701,198 $25,210,782 $947,600 $39,859,580 Gross unrealized: Gains 26,846 179,038 104 205,988 Losses (95,204) (124,272) (7,607) (227,083) ----------- ----------- ---------- ----------- Estimated fair value $13,632,840 $25,265,548 $940,097 $39,838,485 ----------- ----------- ---------- ----------- ----------- ----------- ---------- ----------- Amortized cost and estimated fair value of securities available for sale at December 31, 1994 are as follows: U. S. U. S. TREASURY GOVERNMENT SECURITIES AGENCIES OTHER TOTAL ----------- ----------- ---------- ----------- Amortized cost $12,871,151 $ 8,436,113 $932,100 $22,239,364 Gross unrealized: Gains 3,976 532 -- 4,508 Losses (147,466) (325,801) -- (473,267) ----------- ----------- ---------- ----------- Estimated fair value $12,727,661 $ 8,110,844 $932,100 $21,770,605 ----------- ----------- ---------- ----------- ----------- ----------- ---------- -----------
- 9 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4 -- SECURITIES (CONTINUED) Amortized cost and estimated fair value of securities held to maturity are summarized as follows:
DECEMBER 31, ------------------------------------------------------------------------------ 1995 1994 ------------------------------------- -------------------------------------- U. S. U. S. U. S. U. S. TREASURY GOVERNMENT TREASURY GOVERNMENT SECURITIES AGENCIES TOTAL SECURITIES AGENCIES TOTAL ----------- ----------- ----------- ----------- ----------- ----------- Amortized cost $ -- $13,246,806 $13,246,806 $14,335,299 $26,344,101 $40,679,400 Gross unrealized: Gains -- 34,666 34,666 -- 2,422 2,422 Losses -- (228,927) (228,927) (804,489) (1,618,124) (2,422,613) ----------- ----------- ----------- ----------- ----------- ----------- Estimated fair value $ -- $13,052,545 $13,052,545 $13,530,810 $24,728,399 $38,259,209 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Securities available for sale with a carrying amount of $3,083,383 were sold for $3,086,221 during 1995, resulting in gross realized gains of $6,146 and losses of $3,308. There were no securities sales during the year ended December 31, 1994. The amortized cost and estimated fair value of securities at December 31, 1995, by contractual maturity, are shown below:
SECURITIES SECURITIES AVAILABLE FOR SALE HELD TO MATURITY ----------------------------- ----------------------------- AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE ----------- ------------ ----------- ----------- Due in: One year or less $ 5,015,488 $ 5,029,660 $ -- $ -- After one through five years 23,357,364 23,332,365 -- -- After five through ten years 1,489,380 1,540,635 -- -- Mortgage-backed securities and other 9,997,348 9,935,825 13,246,806 13,052,545 ----------- ------------ ----------- ----------- $39,859,580 $ 39,838,485 $13,246,806 $13,052,545 ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
At December 31, 1995, U. S. Treasury and Government agency securities with an amortized cost of $6,938,009 and estimated fair value of $6,929,615 were pledged to secure public funds and treasury tax and loan deposits. - 10 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5 -- ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS Activity in the allowance for loan losses account was as follows:
1995 1994 ---------- ---------- Balance beginning of year $ 827,052 $ 690,038 Acquired in BBI acquisition -- 169,418 Provision 230,000 125,000 Recoveries 59,196 24,513 Charge-offs (170,478) (181,917) ---------- ---------- Balance At End Of Year $ 945,770 $ 827,052 ---------- ---------- ---------- ----------
Loans on a nonaccrual basis totaled approximately $372,000 and $645,000 at December 31, 1995 and 1994, respectively. Foregone interest which would have otherwise been recorded on nonaccrual loans, including those loans that were nonaccrual at sometime during the year and later paid, reinstated or charged off, was approximately $47,897 and $31,000 in 1995 and 1994, respectively. In addition to nonaccrual loans, non-performing assets include Other Real Estate, property acquired by foreclosure in settlement of debt. Other Real Estate was $125,994 and $62,220 at December 31, 1995 and 1994, and is included in the caption "Other Assets" on the accompanying balance sheets. NOTE 6 -- PREMISES AND EQUIPMENT Premises and equipment were comprised of the following components at December 31:
1995 1994 ---------- ---------- Buildings and improvements $5,159,376 $5,027,489 Equipment and furnishings 1,598,842 1,498,133 Land 1,480,177 1,108,577 ---------- ---------- 8,238,395 7,634,199 Less accumulated depreciation (1,805,848) (1,468,631) ---------- ---------- $6,432,547 $6,165,568 ---------- ---------- ---------- ----------
Depreciation charged against operations was $365,041 and $336,372 for 1995 and 1994, respectively. - 11 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- NOTE PAYABLE
December 31, 1995 1994 ---------- ---------- Note payable, secured by all issued and outstanding common stock of the Bank, at prime plus .75%, interest only payable monthly through 1994, principal and interest payable monthly through 1998 $ 950,000 $1,700,000 ---------- ---------- ---------- ----------
The note agreement contains certain restrictions on the Company and the Bank including: maintaining a correspondent relationship; ability to borrow additional funds; the minimum level of capitalization; return on assets; and the maximum level of nonperforming assets. Principal payments required under the note at December 31, 1995 are as follows: 1996 $ 242,857 1997 242,857 1998 464,286 The Company has voluntarily accelerated principal payments in both 1995 and 1994. It is management's intention to continue accelerated liquidation of this note. NOTE 8 -- MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES The Company has issued $274,250 of ten-year $10 Series A Mandatory Convertible Subordinated Debentures (the "Debentures") callable on or after November 1, 1992. The Debentures are convertible into Company common stock at a rate of one share of Company stock for the greater of each $15.60 face amount of Debentures or book value of the Company stock at the time of conversion. The Debentures mature on November 1, 2000, and all outstanding Debentures at that time will be converted into common stock. Interest on the Debentures is paid at a variable rate adjusted semi-annually. The rate is computed at the greater of nine percent or the applicable federal rate under Internal Revenue Code Section 1274. As of December 31, 1995 and 1994, the interest rate was nine percent. - 12 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 -- OTHER OPERATING EXPENSES Components of other operating expenses that equal or exceed $80,000 in either year are as follows:
1995 1994 ---------- ---------- Regulatory fees $ 302,187 $ 364,351 Data processing 212,789 203,035 Advertising and promotion 166,190 148,494 Amortization of intangible assets 150,862 160,099 Postage and delivery 134,893 171,864 Supplies 94,103 111,628 Telephone 93,981 76,959 Legal and professional 84,087 108,263
The Company follows the policy of expensing advertising costs as incurred. NOTE 10 -- INCOME TAXES The income tax provision for the years ended December 31, 1995 and 1994 consisted of the following components:
1995 1994 -------------------------------- -------------------------------- FEDERAL STATE TOTAL FEDERAL STATE TOTAL -------- -------- ---------- -------- ------- -------- Current $789,801 $100,000 $ 889,801 $630,313 $66,187 $696,500 Deferred 111,719 12,410 124,129 30,598 3,400 33,998 -------- -------- ---------- -------- ------- -------- Total $901,520 $112,410 $1,013,930 $660,911 $69,587 $730,498 -------- -------- ---------- -------- ------- -------- -------- -------- ---------- -------- ------- --------
- 13 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10 -- INCOME TAXES (CONTINUED) Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities and their respective tax bases. Significant components of and the resultant deferred tax assets and liabilities at December 31, 1995 and 1994 are as follows:
DECEMBER 31, ------------------------- 1995 1994 ---------- ---------- Deferred tax liabilities: Basis difference of property and equipment $ 510,458 $ 544,817 Unearned loan fees 84,548 44,650 ---------- ---------- 595,006 589,467 ---------- ---------- Deferred tax assets: Loan loss provisions 220,426 214,150 Unrealized loss on securities available for sale 7,868 174,847 Net operating loss carryover of acquiree 87,338 151,300 Intangible assets 21,017 84,100 Reserve for possible OREO losses -- 7,250 Other items 10,980 1,550 ---------- ---------- 347,629 633,197 ---------- ---------- NET DEFERRED TAX ASSET (LIABILITY) $ (247,377) $ 43,730 ---------- ---------- ---------- ----------
The Company and the Bank have entered into a tax-sharing agreement under which intercompany settlements are made on an "as though separate" basis. NOTE 11 -- LOANS TO RELATED PARTIES Certain officers and directors, and companies in which they held a 10 percent or more beneficial ownership, were indebted (or, in some cases, guaranteed loans) to the Bank as follows:
1995 1994 ---------- ---------- Balance January 1 $1,955,014 $2,655,661 New loans and advances 2,025,274 1,150,436 Repayments (excluding renewals) (2,168,494) (1,851,083) ---------- ---------- Balance December 31 $1,811,794 $1,955,014 ---------- ---------- ---------- ----------
The loans summarized above were made in the normal course of business at prevailing interest rates and terms. - 14 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12 -- REGULATORY LIMITATIONS The Company's primary source of funds is dividends it receives from the Bank. The payment of dividends by the Bank, in turn, is subject to the regulations of the Comptroller of the Currency which require, among other things, that dividends be paid only from net profits of the current and immediately preceding two years. At December 31, 1995, the Bank had approximately $2,420,000 of retained earnings available for dividend to the Company without being required to seek special regulatory approvals. NOTE 13 -- STOCK OPTIONS The Company's President has been granted options to purchase up to 53,558 shares of common stock at prices ranging from $6.11 to $10.40 per share. Of the options outstanding, 35,653 are currently exercisable, all of which have option prices less than $9.00 per share (estimated fair value per share). Of the remaining options that are not yet exercisable, 7,905 have option prices less than $9.00 per share, and 10,000 have option prices in excess of $9.00 per share. The options are exercisable for ten years from the date they first become exercisable. Several key employees have also been granted options totalling 11,350. Of this amount, 4,540 are exercisable. All of these options, exercisable and nonexercisable, have option prices less than $9.00 per share. No options were granted or exercised during 1995. NOTE 14 -- COMMITMENTS AND CONTINGENCIES FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK The financial statements do not reflect various commitments and contingent liabilities that arise in the normal course of business to meet the financing needs of customers. These include commitments to extend credit and honor stand-by letters of credit. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risks in excess of amounts reflected in the balance sheets. The extent of the Bank's involvement in these commitments or contingent liabilities is expressed by the contractual, or notional, amounts of the instruments. Commitments to extend credit, which amount to $10,029,608 and $8,297,000 at December 31, 1995 and 1994, respectively, represent legally binding agreements to lend to customers with fixed expiration dates or other termination clauses. Since many commitments are expected to expire without being funded, committed amounts do not necessarily represent future liquidity requirements. The amount of collateral obtained, if any, is based on management's credit evaluation in the same manner as though an immediate credit extension were to be granted. - 15 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14 -- COMMITMENTS AND CONTINGENCIES (CONTINUED) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED) Stand-by letters of credit are conditional commitments issued by the Bank guaranteeing the performance of a customer to a third party. The decision whether to guarantee such performance and the extent of collateral requirements are made considering the same factors as are considered in credit extension. The Company had $598,000 and $484,000 outstanding on stand-by letters of credit at December 31, 1995 and 1994, respectively. The Company expects no significant losses to be realized in the performance of its obligations under any of the above instruments. CONCENTRATIONS OF CREDIT RISK The Bank originates residential and commercial real estate loans, and other consumer and commercial loans primarily in the north-central Florida area. In addition, the Bank occasionally purchases loans, primarily in Florida. Although the Bank has a diversified loan portfolio, a substantial portion of its borrowers' ability to repay their loans is dependent upon economic conditions in the Bank's market area. USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. For the Company, such estimates significantly affect the amount at which the allowance for loan losses is carried, the amount of the deferred tax assets that are dependent upon future taxable income and the likelihood and timing of realization of such assets, the factors and amounts entering into the estimate of fair value of financial instruments disclosed in Note 15, and other accounts. All such estimates relate to unsettled transactions and events as of the date of the financial statements and, accordingly, upon settlement it is likely that actual amounts will differ from currently estimated amounts. FEDERAL RESERVE REQUIREMENT The Federal Reserve Board requires that certain banks maintain reserves, based on their average deposits, in the form of vault cash and average deposit balances at a Federal Reserve Bank. The requirement as of December 31, 1995 was $1,211,000. - 16 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14 -- COMMITMENTS AND CONTINGENCIES (CONTINUED) POTENTIAL ACQUISITION As of January 19, 1996, the Company had reached an agreement in principle with Riherd Bank Holding Company (RBHC) to acquire RBHC and its banking subsidiary in Lake Butler, Florida. The terms of the agreement would give RBHC shareholders the option of receiving CNB, Inc. common stock or cash, although management of both companies expects the majority of RBHC shareholders will become CNB shareholders. Negotiations are ongoing as to the details of the potential transaction. NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The table which follows shows the estimated fair value and the related carrying amounts of the Company's financial instruments at December 31, 1995. For purposes of this disclosure, the estimated fair value for cash and cash equivalents is considered to approximate their carrying amounts. The estimated fair value for securities is based on quoted market values for the individual or equivalent securities. The estimated fair value for loans is based on interest rates the Company would have charged borrowers at December 31, 1995 for similar loans, maturities and terms. The estimated fair value for demand and savings deposits is based on their carrying amount. The estimated fair value for time deposits is based on rates the Company offered at December 31, 1995 for deposits of similar remaining maturities. The estimated fair value for other financial instruments and off-balance-sheet loan commitments are considered to approximate carrying amount at December 31, 1995. Assets and liabilities of the Company that are not defined as financial instruments, such as premises and equipment, are excluded from these disclosures.
CARRYING ESTIMATED AMOUNT FAIR VALUE ---------- ---------- (In Thousands) Financial Assets Cash and cash equivalents $ 12,972 $ 12,972 Securities available for sale 39,860 39,838 Securities held to maturity 13,247 13,053 Net loans 101,403 101,673 Financial Liabilities Demand and Savings Deposits 74,592 74,592 Time Deposits 84,411 84,855
- 17 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Non-financial instruments typically not recognized in the financial statements nevertheless may have value but are not included in the above disclosures. These include, among other items, the estimated earnings power of core deposit accounts, the earnings potential of loan servicing rights, customer goodwill, and similar items. While these estimates of fair value are based on management's judgment of the most appropriate factors, there is no assurance that, were the Company to have disposed of such items at December 31, 1995, the estimated fair values would necessarily have been achieved at that date, since market values may differ depending on various circumstances. The estimated fair values at December 31, 1995 should not necessarily be considered to apply at subsequent dates. NOTE 16 -- CONDENSED FINANCIAL DATA (PARENT COMPANY ONLY)
December 31, 1995 1994 ----------- ----------- BALANCE SHEETS ASSETS Cash and due from banks $ 317,620 $ 102,602 Investment in CNB National Bank 15,653,382 14,741,682 Other assets 31,105 60,158 ----------- ----------- TOTAL ASSETS $16,002,107 $14,904,442 ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Note payable $950,000 $ 1,700,000 Other liabilities 23,961 3,086 ----------- ----------- Total Liabilities 973,961 1,703,086 ----------- ----------- ----------- ----------- MANDATORY CONVERTIBLE SUBORDINATED DEBENTURES 274,250 274,250 ----------- ----------- SHAREHOLDERS' EQUITY Common stock 16,397 16,397 Additional paid-in capital 9,784,369 9,784,369 Retained earnings 4,966,357 3,420,252 Unrealized loss on securities (13,227) (293,912) ----------- ----------- Total Shareholders' Equity 14,753,896 12,927,106 ----------- ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $16,002,107 $14,904,442 ----------- ----------- ----------- -----------
- 18 - CNB, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 16 -- CONDENSED FINANCIAL DATA (PARENT COMPANY ONLY) (CONTINUED)
Year Ended December 31, 1995 1994 ----------- ----------- STATEMENTS OF OPERATIONS Equity in undistributed Bank earnings $ 625,904 $ 1,047,816 Dividend income 1,315,266 597,848 Interest income 12,088 3,273 Interest expense (161,467) (178,185) Non-interest income 16,594 2,855 Non-interest expense (26,568) (189,252) Income tax benefits 59,439 41,811 ----------- ----------- Net income $ 1,841,256 $ 1,326,166 ----------- ----------- ----------- ----------- STATEMENTS OF CASH FLOWS OPERATING ACTIVITIES Net income $ 1,841,255 $ 1,326,166 Adjustments to reconcile net income to cash provided by operating activities: Undistributed earnings of subsidiary (625,904) (1,047,816) Changes in year-end balances of: Other assets 29,053 53,215 Other liabilities 15,765 (39,517) ----------- ----------- Net Cash Provided By Operating Activities 1,260,169 292,048 ----------- ----------- INVESTING ACTIVITIES Cash received in Bradford acquisition -- 173,019 Cash used in Bradford acquisition -- (23,178) ----------- ----------- Net Cash Provided by Investing Activities -- 149,841 ----------- ----------- FINANCING ACTIVITIES Payments on note payable (750,000) (300,000) Cash dividends (295,151) (131,179) ----------- ----------- Net Cash Used In Investing Activities (1,045,151) (431,179) ----------- ----------- Net Increase in Cash and Cash Equivalents 215,018 10,710 Cash and Cash Equivalents: Beginning of Year 102,602 91,892 ----------- ----------- ----------- ----------- End of Year $ 317,620 $ 102,602 ----------- ----------- ----------- -----------
- 19 - SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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, INC. -------------------------------- (Registrant) By: /s/ -------------------------------- K.C. Trowell President, Principal Executive Officer, and Chief Financial Officer Date: July 16, 1996 -----END PRIVACY-ENHANCED MESSAGE-----