10-K405 1 d10k405.txt FORM 10-K 405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 Commission File Number 0-13396 CNB FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 25-1450605 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) County National Bank 1 South Second Street P.O. Box 42 Clearfield, Pennsylvania 16830 (Address of principal executive office) Registrant's telephone number, including area code, (814) 765-9621 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $1.00 Par Value 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 periods 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 --------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by nonaffiliates of the registrant as of March 14, 2002. Common Stock, $1.00 Par Value - $87,825,599 The number of shares outstanding of the issuer's common stock as of March 14, 2002: Common Stock, $1.00 Par Value - 3,629,157 shares DOCUMENTS INCORPORATED BY REFERENCE Portion of the Annual Shareholders' Report for the year ended December 31, 2001 are incorporated by reference into Part I and Part II pursuant to Section 13 of the Act. Portions of the proxy statement for the annual shareholders' meeting on April 16, 2002 are incorporated by reference into Part II and Part III. The incorporation by reference herein of portions of the proxy statement shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of regulation S-K. Exhibit index is located on sequentially numbered page 15. INDEX PART I. ITEM 1. BUSINESS.........................................................3 ITEM 2. PROPERTIES......................................................11 ITEM 3. LEGAL PROCEEDINGS...............................................11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............11 PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................................12 ITEM 6. SELECTED FINANCIAL DATA.........................................12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................12 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.......12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ....................12 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................12 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............13 ITEM 11. EXECUTIVE COMPENSATION..........................................13 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...........................................13 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................13 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ........................................13 SIGNATURES .....................................................14 2 PART I. ITEM 1. BUSINESS CNB FINANCIAL CORPORATION CNB Financial Corporation (the Corporation) is a Bank Holding Company registered under the Bank Holding Company Act of 1956, as amended. It was incorporated under the laws of the Commonwealth of Pennsylvania in 1983 for the purpose of engaging in the business of a Bank Holding Company. On April 26, 1984, the Corporation acquired all of the outstanding capital stock of County National Bank (the Bank), a national banking chartered institution. The Corporation is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System. In general, the Corporation is limited to owning or controlling banks and engaging in such other activity as proper incident thereto. The Corporation is currently engaged in two non-banking activities through its wholly owned subsidiaries CNB Investment Corporation and County Reinsurance Company. CNB Investment Corporation was formed in November 1998 to hold and manage investments that were previously owned by County National Bank and the Corporation and to provide the Corporation with additional latitude to purchase other investments. County Reinsurance Company was formed in June of 2001 as a corporation in the state of Arizona. The company provides accidental death and disability and life insurance as a part of lending relationships of the Bank. The Corporation does not currently engage in any operating business activities, other than the ownership and management of County National Bank, CNB Investment Corporation and County Reinsurance Company COUNTY NATIONAL BANK The Bank is a nationally chartered banking institution incorporated in 1934. The Bank's Main Office is located at 1 South Second Street, Clearfield,(Clearfield County) Pennsylvania. The Bank's primary marketing area consists of the Pennsylvania Countries of Clearfield, Elk (excluding the Townships of Millstone, Highland and Spring Creek), Mckean Cambria and Cameron. It also includes a portion of western Centre County including Philipsburg Borough, Rush Township and the western portions of Snow Shoe and Burnside Townships and a portion of Jefferson County, consisting of the boroughs of Brockway, Falls Creek, Punxsutawney, Reynoldsville and Skyesville, and the townships of Washington, Winslow and Henderson. The approximate population of the general trade area is 150,000. The economy is diversified and includes manufacturing industries, wholesale and retail trade, services industries, family farms and the production of natural resources of coal, oil, gas and timber. In addition to the Main Office, the Bank has 18 full-service branch offices and 1 limited service branch facility located in various communities in its market area. The Bank is a full-service bank engaging in a full range of banking activities and services for individual, business, governmental and institutional customers. These activities and services principally include checking, savings, time and deposit accounts; real estate, commercial, industrial, residential and consumer loans, and a variety of other specialized financial services. Its Trust division offers a full range of client services. The Bank's customer base is such that loss of one customer relationship or a related group of depositors would not have a materially adverse effect on the business of the Bank. The Bank's portifolio is diversified so that one industry, group of related industries or changes in household economic conditions does not comprise a material portion of the loan portfolio. The Bank's business is not seasonal not does it have any risks attendant to foreign sources. COMPETITION The banking industry in the Bank's service area continues to be extremely competitive, both among commercial banks and with financial service providers such as consumer finance companies, thrifts, investment firms, mutual funds and credit unions. The increased competition has resulted from changes in the legal and regulatory guidelines as well as from economic conditions. Mortgage banking firms, leasing companies, financial affiliates of industrial companies brokerage firms, retirement fund management firms, and even government agencies provide additional competitions for loans and other financial services. Some of the financial service providers operating in the Bank's market area operate on a large-scale regional basis and possess resources greater than those of the Bank and the Corporation. The Bank is generally competitive 3 with all competing financial institutions in its service area with respect to interest rates paid on time and savings deposits, service charges on deposit accounts and interest rates charged on loans. SUPERVISION AND REGULATION The Bank is subject to supervision and examination by applicable federal and state banking agencies, including the Office of the Comptroller of the Currency. In addition, the Bank is insured by and subject to some or all of the regulations of the Federal Deposit Insurance Corporation ("FDIC"). The Bank is also subject to various requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types, amounts and terms and conditions of loans that may be granted, and limitation on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operation of the Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board, including actions taken with respect to interest rates, as it attempts to control the money supply and credit availability in order to influence the economy. EXECUTIVE OFFICERS The table below lists the executive officers of the Corporation and County National Bank and sets forth certain information with respect to such persons.
AGE AT PRINCIPAL OCCUPATION NAME DECEMBER 31, 2001 FOR LAST FIVE YEARS ---- ----------------- --------------------- WILLIAM F. FALGER 54 PRESIDENT AND CHIEF EXECUTIVE OFFICER SINCE 1/1/01 PREVIOUSLY EXECUTIVE VICE PRESIDENT, CNB FINANCIAL CORPORATION SINCE 3/28/95. PRESIDENT AND CHIEF EXECUTIVE OFFICER, COUNTY NATIONAL BANK SINCE 1/01/93 WILLIAM A. FRANSON 58 EXECUTIVE VICE PRESIDENT SINCE 1/1/01 SECRETARY CNB FINANCIAL CORPORATION SINCE 3/28/95, EXECUTIVE VICE PRESIDENT AND CASHIER, CHIEF OPERATING OFFICER COUNTY NATIONAL BANK SINCE 1/01/93, JOSEPH B. BOWER, JR. 38 TREASURER CNB FINANCIAL CORPORATION, SINCE 11/18/97 SENIOR VICE PRESIDENT CHIEF FINANCIAL OFFICER COUNTY NATIONAL BANK, SINCE 11/10/97 PRIOR THERETO. CONTROLLER MIFFLINGBURG BANK MARK D. BREAKEY 43 SENIOR VICE PRESIDENT, SENIOR LOAN OFFICER, COUNTY NATIONAL BANK, SINCE 3/28/95. PREVIOUSLY VICE PRESIDENT, COMMERCIAL BANKING SINCE 4/93, ASSISTANT VICE PRESIDENT COMMUNITY LENDING, ST. MARYS, SINCE 12/23/91 PRIOR THERETO, LENDING OFFICER, MELLON BANK DONALD E. SHAWLEY 46 SENIOR VICE PRESIDENT AND TRUST OFFICER COUNTY NATIONAL BANK, SINCE 9/29/98 TRUST OFFICER SINCE 11/1/85.
4 Officers are elected annually at the reorganization meeting of the Board of Directors. There are not any arrangements or understandings between any and all of the above officers and any other persons pursuant to which they were selected as officers. In addition, there are not any family relationships between the above officers. EMPLOYEES The Corporation has no employees who are not employees of County National Bank. As of December 31, 2001, the Bank had a total of 239 employees of which 173 were full time and 66 were part time. MONETARY POLICIES The earnings and growth of the banking industry are affected by the credit policies of monetary authorities, including, the Federal Reserve System. An important function of the Federal Reserve System is to regulate the national supply of bank credit in order to control recessionary and inflationary pressures. Among the instruments of monetary policy used by the Federal Reserve to implement these objectives are open market activities in U.S. Government Securities, changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These operations are used in varying combinations to influence overall economic growth and indirectly, bank loans, investments, and deposits. These variables may also affect interest rates charged on loans or paid for deposits. The monetary policies of the Federal Reserve authorities have had a significant effect on the operating results of commercial banks in the past and are expected to continue to have such an effect in the future. In view of the changing conditions in the national economy and in the money markets, as well as the effect of actions by monetary and fiscal authorities including the Federal Reserve System, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or their effect on the business and earnings of the Corporation and the Bank. DISTRIBUTION OF ASSETS, LIABILITIES, & SHAREHOLDER'S EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL The following tables set forth statistical information relating to the Registrant and its wholly-owned subsidiaries. The table should be read in conjunction with the consolidated financial statements of the Registrant which are incorporated by reference hereinafter. 5 CNB Financial Corporation Average Balances and Net Interest Margin (Dollars in thousands)
December 31, 2001 December 31, 2000 ---------------------------------------------------------------------------------------------------------- Average Annual Interest Average Annual Interest Balance Rate Inc./Exp. Balance Rate Inc./Exp. ---------------------------------------------------------------------------------------------------------- Assets Interest bearing deposits with banks $ 3,600 4.62% $ 169 $ 2,200 6.23% $ 137 Federal funds sold and securities purchased under agreements to resell 11,535 3.76% 434 1,078 6.22% 67 Securities Taxable 112,446 6.04% 6,788 96,304 6.22% 5,990 Tax-Exempt (1) 30,977 6.81% 2,109 36,575 6.82% 2,493 Equity Securities (1) 10,297 6.99% 720 9,868 7.03% 694 --------------------------------------------------------------------------------------------------------- Total Securities 168,914 6.05% 10,220 146,025 6.42% 9,381 Loans Commerical (1) 85,261 8.00% 6,824 77,347 8.89% 6,873 Mortgage (1) 224,615 8.60% 19,307 220,398 8.69% 19,148 Installment 40,406 9.21% 3,720 44,993 9.18% 4,130 Leasing 23,146 7.33% 1,697 29,437 7.25% 2,134 --------------------------------------------------------------------------------------------------------- Total Loans (2) 373,428 8.45% 31,548 372,175 8.67% 32,285 Total earning assets 542,342 7.70% 41,768 518,200 8.04% 41,666 Non Interest Bearing Assets Cash & Due From Banks 13,353 12,933 Premises & Equipment 12,797 12,912 Other Assets 20,014 18,493 Allowance for Possible Loan Losses (4,033) (3,885) --------------------------------------------------------------------------------------------------------- Total Non Interest Earning Assets 42,131 40,453 --------------------------------------------------------------------------------------------------------- Total Assets $584,473 $41,768 $558,653 $41,666 ============================================================ Liabilities and Shareholders' Equity Interest-Bearing Deposits Demand - interest-bearing $122,709 1.78% $ 2,182 $117,352 2.48% $ 2,910 Savings 77,214 2.98% 2,304 72,128 3.81% 2,748 Time 245,722 5.49% 13,485 242,352 5.36% 13,002 --------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 445,645 4.03% 17,971 431,832 4.32% 18,660 Short-term borrowings 1,503 3.79% 57 5,225 6.18% 323 Long-term borrowings 19,973 5.60% 1,119 13,648 6.24% 851 --------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 467,121 4.10% 19,147 450,705 4.40% 19,834 Demand - non-interest-bearing 54,254 52,092 Other liabilities 8,331 5,474 --------------------------------------------------------------------------------------------------------- Total liabilities 529,706 19,147 508,271 19,834 Shareholders' Equity 54,767 50,382 --------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $584,473 $19,147 $558,653 $19,834 ============================================================ Interest Income/Earning Assets 7.70% $41,768 8.04% $41,666 Interest Expense/Interest Bearing Liabilities 4.10% 19,147 4.40% 19,834 --------------------------------------------------------------------------------------------------------- Net Interest Spread 3.60% $22,621 3.64% $21,832 =============== ================ Interest Income/Interest Earning Assets 7.70% $41,768 8.04% $41,666 Interest Expense/Interest Earning Assets 3.53% 19,147 3.83% 19,834 --------------------------------------------------------------------------------------------------------- Net Interest Margin 4.17% $22,621 4.21% $21,832 =============== ================ December 31, 1999 ------------------------------------------------------------------------- Average Annual Interest Balance Rate Inc./Exp. ------------------------------------------------------------------------- Assets Interest bearing deposits with banks $ 1,133 5.30% $ 60 Federal funds sold and securities purchased under agreements to resell 7,347 5.25% 386 Securities Taxable 82,345 5.67% 4,665 Tax-Exempt (1) 37,830 6.96% 2,632 Equity Securities (1) 5,671 5.27% 299 ----------------------------------------------------------------------- Total Securities 134,326 5.99% 8,042 Loans Commerical (1) 66,475 8.59% 5,712 Mortgage (1) 196,295 8.47% 16,624 Installment 42,324 9.18% 3,884 Leasing 28,875 7.41% 2,140 ----------------------------------------------------------------------- Total Loans (2) 333,969 8.49% 28,360 Total earning assets 468,295 7.77% 36,402 Non Interest Bearing Assets Cash & Due From Banks 12,944 Premises & Equipment 11,279 Other Assets 13,972 Allowance for Possible Loan Losses (3,603) ----------------------------------------------------------------------- Total Non Interest Earning Assets 34,592 ----------------------------------------------------------------------- Total Assets $502,887 $36,402 =========================== Liabilities and Shareholders' Equity Interest-Bearing Deposits Demand - interest-bearing $107,341 2.49% $ 2,676 Savings 67,717 3.32% 2,249 Time 209,709 5.08% 10,654 ----------------------------------------------------------------------- Total interest-bearing deposits 384,767 4.05% 15,579 Short-term borrowings 4,568 4.99% 228 Long-term borrowings 14,977 5.03% 753 ----------------------------------------------------------------------- Total interest-bearing liabilities 404,312 4.10% 16,560 Demand - non-interest-bearing Other liabilities ----------------------------------------------------------------------- Total liabilities 453,852 16,560 Shareholders' Equity 49,035 ----------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $502,887 $16,560 =========================== Interest Income/Earning Assets 7.77% 36,402 Interest Expense/Interest Bearing Liabilities 4.10% 16,560 ----------------------------------------------------------------------- Net Interest Spread 3.68% $19,842 ================ Interest Income/Interest Earning Assets 7.77% $36,402 Interest Expense/Interest Earning Assets 3.54% 16,560 ----------------------------------------------------------------------- Net Interest Margin 4.24% $19,842 ================
(1) The amounts are reflected on a fully tax equivalent basis using the federal statutory rate of 34% in 2001, 2000 and 1999, adjusted for certain tax preferences. (2) Average outstanding includes the average balance outstanding of all non-accrual loans. Loans consist of the average of total loans less average unearned income. The amount of loan fees included in the interest income on loans is not material. 6
Net Interest Income For Twelve Months Ended December 31, For Twelve Months Ended December 31, Rate-Volume Variance 2001 over (under) 2000 2000 over (under) 1999 (Dollars in thousands) Due to Change in Due to Change in ---------------------------------------------------------------------------------------------------------------------------- Volume Rate Net Volume Rate Net ---------------------------------------------------------------------------------------------------------------------------- Assets Interest-Bearing Deposits with Banks $ 91 $ (59) $ 32 $ 57 $ 20 $ 77 Federal Funds Sold 650 (283) 367 (329) 10 (319) Securities: Taxable 1,004 (206) 798 791 534 1,325 Tax-Exempt (382) (2) (384) (87) (52) (139) Equity Securities 30 (4) 26 220 175 395 ----------------------------------- ------------------------------------- Total Securities 1,393 (554) 839 652 687 1,339 Loans Commercial 703 (752) (49) 934 227 1,161 Mortgage 366 (207) 159 2,041 483 2,524 Installment (421) 11 (410) 245 1 246 Leasing (456) 19 (437) 42 (48) (6) ----------------------------------- ------------------------------------- Total Loans 192 (929) (737) 3,262 663 3,925 ----------------------------------- ------------------------------------- Total Earning Assets $1,585 $(1,483) $ 102 $3,914 $1,350 $5,264 =================================== ===================================== Liabilities and Shareholders' Equity Interest-Bearing Deposits Demand-Interest-Bearing 133 (861) (728) 250 (16) 234 Savings 194 (638) (444) 146 353 499 Time 181 302 483 1,658 690 2,348 ----------------------------------- ------------------------------------- Total Interest-Bearing Deposits 508 (1,197) (689) 2,054 1,027 3,081 Short-Term Borrowings (230) (36) (266) 33 62 95 Long-Term Borrowings 394 (126) 268 (67) 165 98 ----------------------------------- ------------------------------------- Total Interest-Bearing Liabilities $ 672 $(1,359) $(687) $2,020 $1,254 $3,274 =================================== ===================================== ----------------------------------- ------------------------------------- Change in Net Interest Income $ 913 $ (124) $ 789 $1,894 $ 96 $1,990 =================================== =====================================
1. The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. 2. Included in interest income is $1,453, $1,008 and $887 of fees for the years ending 2001, 2000 and 1999, respectively. 3. Income on restructured loans accounted for under SFAS Nos. 114 & 118 are included in interest earning assets. 7 Securities Portfolio (Dollars in Thousands)
December 31,2001 December 31, 2000 ------------------------------------- --------------------------------------- Unrealised Unrealised Amortized --------------- Market Amortized --------------- Market Costs Gains Losses Value Costs Gains Losses Value ------------------------------------- --------------------------------------- Securities held to maturity: U.S. Treasury U.S. Government agencies and corporations Obligations of States and Political Subdivisions Other Debt Securities Securities Available for Sale: U.S. Treasury $ 14,046 $ 263 $ 1 $ 14,308 $ 23,045 $ 122 $ 8 $ 23,159 U.S. Government agencies and corporations 24,073 503 7 24,569 25,926 105 11 26,020 Obligations of States and Political Subdivisions 25,450 478 175 25,753 35,111 428 197 35,342 Other Debt Securities 79,636 1,205 822 80,019 45,241 240 780 44,701 Marketable Equity Securities 8,115 97 104 8,108 7,186 164 322 7,028 ------------------------------------- --------------------------------------- $151,320 $2,546 $1,109 $152,757 $136,509 $1,059 $1,318 $136,250 ===================================== ======================================= December 31, 1999 --------------------------------------- Unrealised Amortized -------------- Market Costs Gains Losses Value ------------------------------------- Securities held to maturity: U.S. Treasury $ $ $ $ -- U.S. Government agencies and corporations -- -- -- -- Obligations of States and Political Subdivisions 2,744 40 1 2,783 Other Debt Securities 999 5 994 ------------------------------------- $ 3,743 $ 40 $ 6 $ 3,777 ===================================== Securities Available for Sale: U.S. Treasury $ 24,127 $ 1 $ 156 $ 23,972 U.S. Government agencies and corporations 27,867 221 27,646 Obligations of States and Political Subdivisions 35,822 151 1,111 34,862 Other Debt Securities 47,923 116 1,145 46,894 Marketable Equity Securities 3,221 622 272 3,571 ------------------------------------- $138,960 $890 $2,905 $136,945 =====================================
Maturity Distribution of Securities (Dollars in Thousands) December 31, 2001
Within After One But After Five But After One Year Within Five Years Within Ten Years Ten Years ------------------------------------------- -------------------------------------------------- $ Amt Yield $ Amt Yield $ Amt Yield $ Amt Yield ------- ----- ------- ----- ------- ----- ------- ----- Securities Available for Sale: U.S. Treasury $ 9,179 6.03% $ 5,129 3.91% $ -- $ -- U.S. Government agencies and corporations 8,170 6.15% 15,385 4.46% 1,014 6.54% Obligations of States and Political Subdivisions 1,256 4.01% 7,046 7.62% 4,640 7.09% 12,811 7.00% Other Debt Securities 537 4.93% 17,512 6.27% 13,029 6.95% 9,939 4.12% ------------------------------------------- ------------------------------------------------- Total $19,142 5.91% $45,072 5.58% $18,683 6.96% $22,750 5.71% =========================================== ================================================= Collateralized Mortgage Obligation and Other Asset Backed Securities ------------------------ $ Amt Yield ------- ----- Securities Available for Sale: U.S. Treasury $ -- U.S. Government agencies and corporations Obligations of States and Political Subdivisions Other Debt Securities 39,002 5.77% ------------------------ Total $39,002 5.77% ========================
The weighed average yields are based on book value and effective yields weighted for the scheduled maturity with tax-exempt securities adjusted to a taxable equivalent basis using a tax rate of 34% 8 LOAN PORTFOLIO (Dollar in thousands) A. TYPE OF LOAN
2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- Commercial, Financial and Agricultural $ 98,745 $ 79,229 $ 78,588 $ 66,257 $ 61,066 Residential Mortgage 154,115 160,525 159,884 134,998 128,161 Commercial Mortgage 73,904 59,680 49,549 46,701 37,702 Installment 39,442 40,126 43,772 38,393 44,661 Lease Receivables 22,249 30,318 35,918 29,362 18,231 -------- -------- -------- -------- -------- GROSS LOANS 388,455 369,878 367,711 315,711 289,821 Less Unearned Income 2,282 3,722 4,947 4,570 3,708 -------- -------- -------- -------- -------- TOTAL LOANS NET OF UNEARNED $386,173 $366,156 $362,764 $311,141 $286,113 ======== ======== ======== ======== ========
B. LOAN MATURITIES AND INTEREST SENSITIVITY
December 31,2001 ------------------------------------------------- One Year One Through Over Total Gross or Less Five Years Five Years Loans -------- ----------- ---------- ----------- Commerical Financial and Agricultural ------------------------------------- Loans with predetermine Rate $10,469 $26,963 $14,156 $51,588 Loans with Floating Rate 35,766 9,043 2,348 47,157 ------- ------- ------- ------- $46,235 $36,006 $16,504 $98,745 ======= ======= ======= =======
C. RISK ELEMENTS
2001 2000 1999 1998 1997 ------ ------ ------ ------ ------ Loans on non-accrual basis $1,174 $ 652 $ 862 $ 198 $ 323 Accruing Lonas which are contractually past due 90 days or more as to interest or principal payment 432 1,136 886 1,479 601 Troubled Debt Restructuring -- -- -- 538 597 ------ ------ ------ ------ ------ $1,606 $1,788 $1,748 $2,215 $1,521 ====== ====== ====== ====== ======
1. Interest income recorded on the non-accrual loans for the year ended December 31, 2001 was $63. Interest income whcich would have been recorded on these loans had they been on accrual status was $132. 2 Loans are placed in non-accrual status when the interest or principal is 90 days past due, unless the loan is in collection, well secured and it is believed that there will be no loss of interest or principal 3. At December 31, 2001 there was $ 6,950 in loans which are considered problem loans which were not included in the table above. In the opinion of management, these loans are adequately secured and losses are believed to be minimal 9 SUMMARY OF LOAN LOSS EXPERIENCE (Dollars in Thousands) Analysis of the Allowance for Loan Losses Years Ended December 31,
2001 2000 1999 1998 1997 ------ ------ ------ ------ ------ Balance at beginning of Period $3,879 $3,890 $3,314 $3,062 $2,683 Charge-Offs: Domestic: Commercial, Financial and Agricultural 38 144 90 77 88 Commercial Mortgages 162 3 54 -- -- Residential Mortgages 87 12 -- 16 28 Consumer Loans and Credit Cards 494 413 379 459 529 Leasing 234 395 93 42 25 ------ ------ ------ ------ ------ 1,015 967 616 594 670 Recoveries: Domestic: Commercial, Financial and Agricultural 1 18 80 21 2 Commercial Mortgages 4 2 4 -- -- Residential Mortgages 8 -- -- 2 1 Consumer Loans and Credit Cards 83 95 103 115 115 Leasing 55 34 6 1 -- ------ ------ ------ ------ ------ 151 149 193 139 118 Net Charge-Offs: (864) (818) (423) (455) (552) Provision for Loan Losses 1,080 807 643 707 931 Adjustments due to acquisition -- -- 356 -- -- ------ ------ ------ ------ ------ Balance at End-of-Period $4,095 $3,879 $3,890 $3,314 $3,062 ====== ====== ====== ====== ====== Percentage of net charge-offs during the period to average loans outstanding 0.23 0.22 0.13 0.16 0.20
The provision for loan losses reflects the amount deemed appropriate by management to establish an adequate reserve to meet the present and foreseeable risk characteristics of the present loan portfolio. Management's judgement is based on the evaluation of individual loans, the overall risk characteristics of various portfolio segments, past experience with losses, the impact of economic condition on borrowers, and other relevant factors. ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES (Dollars In Thousands)
2001 2000 1999 1998 1997 ---------------------------------------------------------------------------------------- % of Loans in % of Loans in % of Loans in % of Loans in % of Loans in each Category each Category each Category each Category each Category $ Amt. to Total $ Amt. to Total $ Amt. to Total $ Amt. to Total $ Amt. to Total ---------------------------------------------------------------------------------------- Domestic: Real Estate Mortgages $1,026 58.70% $ 811 59.54% $ 720 56.96% $ 521 57.55% $ 678 57.23% Installment Loans to Individuals 519 10.15% 473 10.84% 592 11.90% 453 12.16% 429 15.41% Commercial, Financial and Agricultural 1,066 25.42% 706 21.42% 626 21.37% 435 20.99% 361 21.07% Leasing 212 5.73% 221 8.20% 177 9.77% 140 9.30% 80 6.29% Unallocated 1,272 0.00% 1,688 0.00% 1,775 0.00% 1,765 0.00% 1,514 0.00% ---------------------------------------------------------------------------------------- TOTALS $4,095 100.00% $3,879 100.00% $3,890 100.00% $3,314 100.00% $3,062 100.00% ========================================================================================
1. In determining the allocation of the allowance for possible credit losses. County National Bank considers economic trends, historical patterns and specific credit reviews. 2. With regard to the credit reviews, a "watchlist" is evaluated on a monthly basis to determine potential commercial losses. Consumer loans and mortgage loans are allocated using historical loss experience. The total of these reserves is deemed "allocated", while the renaming balance is "unallocated". 10 DEPOSITS (Dollars In Thousands)
December 31, 2001 2000 1999 Amount Annual rate Amount Annual rate Amount Annual rate ----------------------------------------------------------------------------------- Demand - Non Interest Bearing $ 54,254 $ 52,092 $ 43,420 Demand - Interest Bearing 122,709 1.78% 117,352 2.48% 107,341 2.49% Savings Deposits 77,214 2.98% 72,128 3.81% 67,717 3.32% Time Deposits 245,722 5.49% 242,352 5.36% 209,709 5.08% -------- -------- -------- TOTAL DEPOSITS $499,899 $483,924 $428,187 ======== ======== ========
The maturity of certificates of deposits and other time deposits in denomination of $100,000 or more as of December 31, 2001. (Dollars In Thousands) Maturing in: Three months or less $ 4,621 Greater than three months and through six months 11,438 Greater than six months and through twelve months 13,435 Greater than twelve months 4,536 ------- $34,030 ======= Key ratios for the Corporation for the years ended December 31, 2001 and 2000 appear in the Annual Shareholders' Report for the year ended December 31, 2001 under the caption "Selected Financial Data" on pages 25 and 26 and is incorporated herein by reference. ITEM 2. PROPERTIES The headquarters of the Corporation and the Bank is located at 1 South Second Street, Clearfield, Pennsylvania. The Bank operates 19 full-service and 1 limited service offices. Of these 20 offices, 16 are owned and four are leased from independent owners. There are no incumberances on the offices owned and the rental expense on the leased property is immaterial in relation to operating expenses. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Corporation or the Bank is a party, or of which any of their property is the subject, except ordinary routing proceedings which are incidental to the ordinary conduct of business. In the opinion of management and counsel, pending legal proceedings will not have a material adverse effect on the consolidated financial position of the Corporation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders through the solicitation of proxies, or otherwise, for the three months ended December 31, 2001. 11 PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS MATTERS Information relating to the Corporation's common stock is on pages 24 and 39 of the Annual Shareholders' Report for the year ended December 31, 2001 and is herein incorporated by reference. There were 1,557 registered shareholders of record as of March 6, 2002. ITEM 6. SELECTED FINANCIAL DATA Information required by this section is presented on pages 25 and 26 of the Annual Shareholders' Report for the year ended December 31, 2001 and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information required by this section is presented on pages 27-35 of the Annual Shareholders' Report for the year ended December 31, 2001 and is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required by this section is presented on pages 33 and 34 of the Annual Shareholders' Report for the year ended December 31, 2001 and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements, which appear in the Annual Shareholders' Report for the year ended December 31, 2001, are incorporated herein by reference to such annual report: Pages in Annual Report ------------- Consolidated Statements of Condition 5 Consolidated Statements of Income 6 Consolidated Statements of Cash Flows 7 Consolidated Statements of Changes in Shareholders' Equity 8 Notes to Consolidated Financial Statements 9-22 Report of Independent Auditors 23 Quarterly financial data relating to the results of operations for the years ended December 31, 2001 and 2000, appears in the Annual Shareholders' Report for the year ended December 31, 2001 under the caption "Quarterly Financial Data" (unaudited) at Page 22 and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 12 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information relating to Executive Officers is included in Part I and information describing the Corporation's directors is included by reference on pages 3 and 4 of the Proxy Statement for the Annual Meeting to be held on April 16, 2002. ITEM 11. EXECUTIVE COMPENSATION Information required by this section is presented on pages 7-10 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 16, 2002 and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required by this section is presented on pages 3 and 4 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 16, 2002 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this section is presented on page 11 of the Proxy Statement for the Annual Meeting of Shareholders to be held April 16, 2002 and is incorporated herein by reference. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS FILED The Financial Statements listed below are incorporated herein by reference from the Annual Shareholders' Report for the year ended December 31, 2001 Pages in Annual Report ------------- CNB Financial Corporation and Subsidiary: Consolidated Statements of Condition 5 Consolidated Statements of Income 6 Consolidated Statements of Cash Flows 7 Consolidated Statements of Changes in Shareholders' Equity 8 Notes to Consolidated Financial Statements 9-22 Quarterly Summary of Earnings and Per Share Data 22 Report of Independent Auditors 23 Per Share Data 24 2. FINANCIAL STATEMENTS SCHEDULES: All schedules are omitted since they are not applicable. (B) REPORTS ON FORM 8-K Form 8-K dated August 15, 2001 was filed announcing the approval of a plan to repurchase up to 180,000 shares of its common stock. The plan for repurchase will expire on August 14, 2002 unless extended by the Board of Directors. 13 Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CNB FINANCIAL CORPORATION (Registrant) Date: March 27, 2002 By: /s/ William F. Falger ------------------------------- ------------------------------------ WILLIAM F. FALGER President & Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 27, 2002. /s/ William F. Falger President & Chief Executive Officer, ------------------------ Director WILLIAM F. FALGER /s/ William A. Franson Executive Vice-president and Secretary, ------------------------ Director WILLIAM A. FRANSON /s/ Robert E. Brown Director /s/ Jeffrey S. Powell ------------------------ ----------------------------------- ROBERT E. BROWN JEFFREY S. POWELL /s/ Richard D. Gathagan Director /s/ James B. Ryan ------------------------ ----------------------------------- RICHARD D. GATHAGAN JAMES B. RYAN /s/ James J. Leitzinger Director /s/ Peter F. Smith ------------------------ ----------------------------------- JAMES J. LEITZINGER PETER F. SMITH /s/ Dennis L. Merrey Director /s/ Joseph L. Waroquier, Sr. ------------------------ ----------------------------------- DENNIS L. MERREY JOSEPH L. WAROQUIER, SR /s/ William R. Owens Director /s/ James P. Moore ------------------------ ----------------------------------- WILLIAM R. OWENS JAMES P. MOORE /s/ Robert C. Penoyer Director ------------------------ ROBERT C. PENOYER 14 EXHIBITS: The exhibits listed below are filed herewith or are incorporated herein by reference to other filings: EXHIBIT NUMBER DESCRIPTION ------ ----------- 10 Material Contracts 13 Annual Report to Shareholders for 2001 21 Subsidiaries of the Registrant 15