-----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, OoHKeYJUrHtHtYh24W00ey0+2cyrl+kfVkJ1QtQ1r6ZEblzaFJQJJDV7YM5puqfu qNTERnlnTE5iH5OzI5ZLRQ== 0000950124-96-003574.txt : 19960814 0000950124-96-003574.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950124-96-003574 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNB CORP /MI/ CENTRAL INDEX KEY: 0000779125 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-00737 FILM NUMBER: 96610673 BUSINESS ADDRESS: STREET 1: PO BOX 10 CITY: CHEBOYGAN STATE: MI ZIP: 49721 BUSINESS PHONE: 6166277111 10QSB 1 FORM 10-QSB 1 U.S. Securities and Exchange Commission Washington, D.C. 20549 --------------------- FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 Commission File # 0-28388 CNB CORPORATION (Exact name of small business issuer as specified in its charter) MICHIGAN 38-2662386 (State of other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 303 NORTH MAIN STREET, CHEBOYGAN, MI 49721 (Address of principal executive offices, including Zip code) (616) 627-7111 Issuer's telephone number, including area code Check whether the issuer (1) filed all reports required to be filed by Section 13 o 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 ____ NO ____ As of August 9, 1996, there were outstanding 930,772 shares of the issuer's common stock, $2.50 par value. 2 CROSS REFERENCE TABLE ITEM NO. DESCRIPTION PAGE NO. - -------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Condensed) (a) Consolidated Balance Sheet 2 (b) Consolidated Statement of Income 3 (c) Consolidated Statement of Changes in Shareholder Equity 4 (d) Consolidated Statement of Cash Flows 5 (e) Notes to Financial Statements 6 Item 2. Managements Discussion and Analysis Financial Condition 8 Liquidity and Funds management 9 Results of Operations 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 14 Signatures 15 Page 1 3 PART I FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
(A) CONSOLIDATED BALANCE SHEET (UNAUDITED) - -------------------------------------------------------------------------------------------- June 30 December 31 1996 1995 In thousands of dollars ============================================================================================ ASSETS Cash and demand balances in other banks $ 5,444 $ 7,340 Federal funds sold 3,950 7,950 -------- -------- Total cash and cash equivalents 9,394 15,290 Securities available for sale 11,417 11,821 Securities held to maturity (fair value of $51,429 and $47,325 respectively) 51,577 47,011 -------- -------- Total securities 62,994 58,832 Total loans 94,988 88,147 Less: allowance for loan losses (1,326) (1,306) -------- -------- 93,662 86,841 Premises and equipment, net 1,958 1,945 Accrued interest receivable and other assets 4,146 3,652 -------- -------- TOTAL ASSETS $172,154 $166,560 ======== ======== LIABILITIES Deposits Noninterest bearing $ 20,843 $ 20,778 Interest bearing 132,702 127,371 -------- -------- Total deposits 153,545 148,149 Accrued interest payable and other liabilities 1,828 2,160 -------- -------- TOTAL LIABILITIES 155,373 150,309 SHAREHOLDERS' EQUITY Common stock, $2.50 par value; 1,000,000 shares authorized; 930,772 shares issued and outstanding 2,327 2,327 Capital surplus 4,979 4,979 Retained earnings 9,510 8,893 Unrealized gain (loss) on securities available for sale, net of tax of ($18) and $27 respectively (35) 52 -------- -------- TOTAL SHAREHOLDERS' EQUITY 16,781 16,251 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $172,154 $166,560 ======== ========
(a) All per share statistics have been retroactively adjusted to reflect the 2 for 1 stock split of May 31, 1996. See Notes to consolidated financial statements. Page 2 4
(B) CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) - ------------------------------------------------------------------------------------------------------ Three months ended Six months ended June 30, June 30, In thousands of dollars 1996 1995 1996 1995 ====================================================================================================== INTEREST INCOME Interest and fees on loans $2,219 $2,118 $4,383 $4,111 Interest on securities Taxable 832 644 1,606 1,293 Tax exempt 98 91 199 147 Interest on federal funds sold 49 110 165 216 ------ ------ ------ ------ Total interest income 3,198 2,963 6,353 5,767 INTEREST ON DEPOSITS 1,407 1,257 2,812 2,410 NET INTEREST INCOME 1,791 1,706 3,541 3,357 Provision for loan losses 25 25 50 50 ------ ------ ------ ------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,766 1,681 3,491 3,307 OTHER INCOME Service charges on deposit accounts 163 163 314 301 Other service charges 33 20 49 36 Other income 70 73 138 136 ------ ------ ------ ------ Total other income 266 256 501 473 OTHER EXPENSE Salaries and employee benefits 599 566 1,286 1,229 Occupancy and equipment expense 48 49 106 109 Federal deposit insurance premiums 1 77 1 153 Furniture & equipment expense 82 78 161 155 Other expense 381 372 657 664 ------ ------ ------ ------ Total other expense 1,111 1,142 2,211 2,310 ------ ------ ------ ------ INCOME BEFORE FEDERAL INCOME TAX 921 795 1,781 1,470 Federal income tax 280 242 536 442 ------ ------ ------ ------ NET INCOME $ 641 $ 553 $1,245 $1,028 ====== ====== ====== ====== Net income per share of common stock (a) $ 0.69 $ 0.59 $ 1.34 $ 1.10 Cash dividends declared per share of common stock (a) $0.675 $0.550 $0.350 $0.275 Return on average assets (annualized) 1.48% 1.32% 1.50% 1.41% Return on average equity (annualized) 14.95% 13.14% 15.28% 13.42%
(a) All per share statistics have been retroactively adjusted to reflect the 2 for 1 stock split of May 31, 1996. See Notes to consolidated financial statements. Page 3 5
(C) STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) - ---------------------------------------------------------------------------------------------------- Common Capital Retained In thousands of dollars Stock Surplus Earnings (a) Total ==================================================================================================== Balance, December 31, 1994 $2,327 $4,979 $8,110 $(115) $15,301 Net income, 1995 2,365 2,365 Cash dividends declared, $1.70 per share (b) (1,582) (1,582) Net change in unrealized gain (loss) on securities available for sale 167 167 ---- ------- Balance, December 31, 1995 2,327 4,979 8,893 52 $16,251 Net Income YTD 1996 1,245 1,245 Cash dividends declared, $0.675 per share (b) (628) (628) Net change in unrealized gain (loss) on securities available for sale (87) (87) ------ ------ ------ --- ------- Balance, June 30, 1996 $2,327 $4,979 $9,510 $(35) $16,781 ====== ====== ====== === =======
(a) All per share statistics have been retroactively adjusted to reflect the 2 for 1 stock split of May 31, 1996. See Notes to consolidated financial statements. Page 4 6
(d) YEAR TO DATE CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Year to date June 30, ---------------------------------------------------------------------------------------------------- In thousands of dollars 1996 1995 ==================================================================================================== Cash Flows from Operating Activities Net Income $ 1,245 $ 1,028 ------- ------- Adjustments to Reconcile Net Income to Net Cash from Operating Activities Depreciation 120 125 Accretion/amortization on securities 407 409 Provision for loan losses 50 50 Loans originated for sale (320) (1,417) Proceeds from sales of loans originated for sale 328 1,432 Gain on sales of loans (8) (15) Change in income taxes receivable (52) 24 Change in interest receivable (175) (87) Change in interest payable (6) 30 Change in other assets (223) (127) Change in other liabilities 117 178 ------- ------- Total adjustments 238 602 ------- ------- Net cash from operating activities 1,483 1,630 ------- ------- Cash Flows from Investing Activities Proceeds from maturities of securities available for sale 3,485 Purchase of securities available for sale (3,049) (1,977) Proceeds from maturities of securities held to maturity 20,540 15,262 Purchase of securities held to maturity (25,677) (8,617) Net increase in portfolio loans (6,870) (3,442) Premises and equipment expenditures, net (133) (70) ------- ------- Net cash from investing activities (11,704) 1,156 ------- ------- Cash Flows from Financing Activities Net change in deposits 5,395 5,193 Cash dividends paid (1,070) (721) ------- ------- Net cash from financing activities 4,325 4,472 ------- ------- Net change in cash and cash equivalents (5,896) 7,258 ------- ------- Cash and cash equivalents at beginning of year 15,290 9,298 ------- ------- Cash and cash equivalents at end of period $ 9,394 $16,556 ======= ======= Cash Paid During the Period for Interest $ 2,819 $ 2,380 Income taxes $ 484 $ 466 ======= =======
See Notes to consolidated financial statements. Page 5 7 (E) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The unaudited condensed consolidated financial statements of CNB Corporation (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial statements. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ending June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Registration of Securities on Form 10-SB/X Amendment #1 as of March 31, 1996. NOTE 2 - SECURITIES The amortized cost and fair value of securities at June 30, 1996 are shown below in thousands of dollars.
------------------------------------------------------ Gross Gross Amortized Unrealized Unrealized Fair Cost Gain Loss Value -------------------------------------------------- Securities Available for Sale U.S. Treasury and agency securities $ 9,982 $ 23 $ 77 $ 9,928 Tax-exempt obligations of states and political subdivisions 1,308 1 1,309 Other securities 180 180 ------- ---- ---- ------- Total $11,470 $ 24 $ 77 $11,417 ======= ==== ==== ======= Securities Held to Maturity U.S. Treasury and agency securities $39,616 $ 94 $263 $39,447 Tax-exempt obligations of states and political subdivisions 6,779 35 69 6,745 Other securities 5,182 55 5,237 ------- ---- ---- ------- Total $51,577 $184 $332 $51,429 ======= ==== ==== =======
The amortized cost and fair value of securities by contractual maturity at June 30, 1996 are shown below, in thousands of dollars
-------------------------------------------------- Available for Sale Held to Maturity ------------------ ---------------- Amortized Fair Amortized Fair Cost Value Cost Value -------------------------------------------------- Due in one year or less $ 4,492 $ 4,474 $17,331 $17,399 Due after one year through five years 6,978 6,943 31,677 31,549 Due after five years through ten years 2,051 1,983 Due after ten years 518 498 ------- ------- ------- ------- Total $11,470 $11,417 $51,577 $51,429 ======= ======= ======= =======
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Equity securities are included with securities available for sale due in one year or less. Page 6 8 There were no sales of securities for the period ending June 30, 1996 and 1995. Securities carried at $983,524 as of June 30, 1996 were pledged to secure deposits of public funds and for other purposes as required by law. NOTE 3 - ALLOWANCE FOR LOAN LOSSES An analysis of the allowance for loan losses, in thousands of dollars, for the six months ended June 30, 1996 and 1995, follows:
1996 1995 ------------------------- Balance at beginning of period $1,306 $1,246 Loans charged off (37) (7) Recoveries credited to allowance 7 8 Provision charged to operations 50 50 ------ ------ Balance at end of period $1,326 $1,297 ====== ======
The Company adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan," ("SFAS No. 114") at January 1, 1995. Under this standard, the carrying value of loans considered to be impaired is reduced to the present value of expected future cash flows or to the fair value of the collateral by allocating a portion of the allowance for loan losses to such loans. If these allocations cause the allowance for loan losses to require an increase, such increase is reported as bad debt expense. There was no increase in the allowance for loan losses due to the adoption of SFAS No. 114 at January 1, 1995. The Company had no impaired loans during 1996 or 1995. NOTE 4 - PER SHARE CALCULATIONS Earnings per share is calculated on the weighted average number of shares outstanding during the period, giving retroactive effect for the 2 for 1 stock split to shareholders of record as of May 31, 1996. NOTE 5 - COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS The following table shows the commitments to make loans and the unused lines of credit, in thousands of dollars, available to Bank customers at June 30.
1996 1995 Outstanding commitments to make fixed rate loans $ 2,571 $ 5,999 Outstanding commitments to make variable rate loans 6,695 2,634 Unused lines of credit - variable rate 2,762 2,995 Standby letters of credit - variable rate 29 39 ------- ------- $12,057 $11,667 ======= =======
Page 7 9 ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion provides information about the consolidated financial condition and results of operations of CNB Corporation and its subsidiary, Citizens National Bank of Cheboygan ("Bank") for the six month period ending June 30, 1996. FINANCIAL CONDITION SECURITIES Investment balances remained flat during the second quarter as deposit growth was used to fund increased loan demand. Securities available-for-sale represent 17.83% of the portfolio. Since the Bank maintains a short term securities portfolio, not many securities are needed in the available-for-sale portfolio to meet anticipated liquidity needs. The Asset/Liability committee has decided to purchase longer term securities in an attempt to increase the overall investment yield. As the amount of securities maturing on a regular monthly basis decreases, liquidity will be gained by adding more to the available-for-sale portfolio. LOANS Total loans increased $3.9 million during the second quarter. Of this increase, $655,000 was in commercial loans as our business customers get ready for the summer season. Consumer mortgages increased by $3,283,000 as the Bank continues to retain, rather than sell on the secondary market, residential mortgages of 15 years or less. This pattern is expected to continue throughout the year. As the yield on these loans is greater than the yield available on the types of security that the Bank typically invests in, this increase in mortgages will help to increase the Bank's net interest margin. The table below shows total portfolio loans outstanding, in thousands of dollars, at December 31 and June 30, and their percentage of the total loan portfolio. All loans are domestic. A review for loan concentrations at June 30, 1996 indicates that the pattern of loans in our portfolio has not changed. There is no individual industry with more than a 10% concentration. However, all tourism related businesses, when combined, total 13.67% of total loans.
June 30, 1996 December 31, 1995 Portfolio loans: Balance % of total Balance % of total ------- ---------- ------- ---------- Commercial & Agriculture $34,392 36.21% $30,017 34.05% Real estate - mortgage 48,663 51.23% 46,506 52.76% Real estate -construction 2,448 2.58% 2,229 2.53% Installment loans to individuals 9,485 9.99% 9,395 10.66% ------- ------ ------- ------ $94,988 100.00% $88,147 100.00% ======= ====== ======= ======
CREDIT QUALITY The Company continues to maintain a high level of asset quality as a result of actively monitoring delinquencies, nonperforming assets and potential problem loans. The Bank performs ongoing review of all large credits to watch for any deterioration in quality. Nonperforming loans are comprised of (1) loans accounted for on a nonaccrual basis; (2) loans contractually past due 90 days or more as to interest or principal payments (but not included in the nonaccrual loans in (1) above); and (3) other loans whose terms have been renegotiated to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower (exclusive Page 8 10 of loans in (1) or (2) above). The aggregate amount of nonperforming loans, in thousands of dollars, is shown in the table below.
6/30/96 12/31/95 6/30/95 --------------------------------- Nonaccrual loans $ -- $ -- $ 158 Loans past due 90 days or more 184 80 92 Troubled debt restructurings 0 0 0 ----- ----- ----- Total nonperforming loans $ 184 $ 80 $ 250 ===== ===== ===== Percent of total loans 0.19% 0.09% 0.29% ===== ===== =====
DEPOSITS Typically our deposit activity starts to pick up late in the second quarter as summer businesses in the area prepare to reopen for the season. As compared to March 31, 1996, our deposits at June 30, 1996 were up by $5.4 million. Growth was in demand deposits and money market savings accounts. Time deposits during the quarter were down approximately 1%. This increase in noninterest bearing deposits will help our net interest margin over the summer months, but is not expected to continue past fall. Management anticipates that deposit growth during the balance of 1996 will continue to be steady with part of this growth coming through increased market share. LIQUIDITY AND FUNDS MANAGEMENT LIQUIDITY Both loan and deposit growth continued during the second quarter of 1996. Since part of the growth was in demand deposits, the Bank continued to carry a larger balance in Federal Funds sold to provide for the anticipated decline in these deposits at the end of the summer season. The security portfolio continues with short maturities, adding to available liquidity. The loan to deposit ratio was 61.86% at June 30, 1996. Management would like to continue to increase loans until the Bank reaches a loan to deposit ratio of at least 65%. This change in the mix from investments to loans will help to increase the net interest margin over time. FUNDS MANAGEMENT The Funds Management Policy of the Bank provides for a cumulative gap ratio between .80 and 1.10 to one at the six and twelve month time periods. The interest sensitivity of the Bank has remained relatively unchanged during the second quarter, with cumulative gap ratios at the six and twelve month time frame of .81 and 1.00 respectively. Page 9 11 The following chart shows the Bank's interest rate sensitivity as of June 30, 1996 in thousands of dollars
up to 4 to 12 1 to 5 over 3 months months years 5 years --------------------------------------------- Federal funds sold $ 3,950 Taxable investment securities 5,879 12,982 $30,685 Non-taxable investment securities 3,170 2,525 5,903 $ 1,673 Loans 33,967 30,556 24,386 5,349 ------- ------- ------- ------- Total Rate Sensitive Assets 46,966 46,063 60,974 7,022 Interest bearing demand deposits 13,728 Money market savings 36,106 Other time deposits 16,426 26,627 14,441 ------- ------- ------- Total Rate Sensitive Liabilities $66,260 $26,627 $14,441 ------- ------- ------- Gap ($19,294) $19,436 $46,533 $ 7,022 ------- ------- ------- ------- Cumulative gap ($19,294) $ 142 $46,675 $53,697 ======= ======= ======= ======= Cumulative Ratio 70.88% 100.15% ======= =======
CAPITAL RESOURCES The capital ratios of the Company exceed the regulatory guidelines for well capitalized institutions. The following table shows the Company's capital ratios and ratio calculations at June 30, 1996 and 1995 and December 31, 1995. Dollars are shown in thousands.
Regulatory guidelines CNB Corporation Adequate Well 6/30/96 12/31/95 6/30/95 -------- ---- ------- -------- ------- Tier 1 leverage ratio 4.00% 5.00% 9.74% 9.76% 10.02% Tier 1 risk adjusted capital ratio 4.00% 6.00% 18.45% 18.88% 18.78% Total risk adjusted capital ratio 8.00% 10.00% 19.70% 20.13% 20.39% Total shareholders' equity $16,773 $16,251 $15,927 Unrealized gain (loss) on securities available for sale, net of tax (35) 52 (11) ------- ------- ------- Tier 1 capital 16,808 16,199 15,938 Qualifying loan loss reserves 1,140 1,075 1,062 ------- ------- ------- Tier 2 capital $17,948 $17,274 $17,000 ======= ======= =======
RESULTS OF OPERATIONS NET INTEREST INCOME Net interest income continued to show improvement during the second quarter of 1996. This reflects the growth in deposits, improved loan to deposit ratio and the gradual extension of security maturities. The net spread at June 30, 1996 was 3.46% compared to 3.44% at June 30, 1995. Management expects the net interest margin to improve during the last quarter of the year when approximately $2,000,000 in CDs on which the Bank is paying 8% will roll off. Page 10 12 The table below shows the year to date daily average Consolidated Balance Sheet, revenue on earning assets,(on a pre-tax basis) or expense of interest bearing liabilities, and the annualized effective rate or yield for the period ending June 30,1996 and 1995. YIELD ANALYSIS OF CONSOLIDATED AVERAGE ASSETS AND LIABILITIES in thousands of dollars
-------------------------------------------------------------------- Six Months Ended June 30, 1996 | Six Months Ended June 30, 1995 -------------------------------------------------------------------- Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate -------------------------------------------------------------------- ASSETS Interest earning assets Time deposits in other banks $ 500 $ 16 6.40% $ 177 $ 5 5.65% Federal funds sold 5,653 165 5.84% 6,884 216 6.28% Taxable securities 53,766 1,590 5.91% 49,403 1,329 5.38% Tax exempt securities 8,236 199 4.83% 4,075 107 5.25% Taxable loans 89,299 4,151 9.30% 83,692 3,906 9.33% Tax exempt loans 1,226 35 5.71% 1,423 41 5.76% -------- ------ ------- ------ ---- Total int. earning assets 158,680 $6,156 7.76% 145,654 $5,604 7.69% -------- ------ ------- ------ Cash and due from banks 5,113 4,790 Premises and equipment, net 1,947 2,001 Other assets 3,694 3,694 Unrealized gain securities-AFS 45 (110) Loss allowance for loan losses (1,325) (1,273) -------- -------- TOTAL ASSETS $168,154 $154,756 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities Interest bearing demand deposits $13,807 $ 165 2.39% $ 13,181 $ 158 2.40% Savings deposits 25,239 362 2.87% 26,853 383 2.85% CDs $100,000 and over 11,823 255 4.31% 8,047 185 4.60% Other interest bearing deposits 99,014 2,030 4.10% 71,135 1,684 4.73% -------- ------ ------ ---- Total int bearing deposits 130,963 2,812 4.29% 119,216 2,410 4.04% Noninterest bearing deposits 18,925 18,388 Other liabilities 1,612 1,512 Shareholders' equity 16,654 15,640 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $168,154 $154,756 ======== ======== Net interest income $3,344 $3,194 Net spread 3.46% 3.65% Net yield on interest earning assets 3.54% 3.31% Ratio of interest earning assets to interest bearing liabilities 1.21 1.22
Page 11 13 The table below shows the effect of volume and rate changes on net interest income for the six months ended June 30, on a pre tax basis, in thousands of dollars.
----------------------------------------------------------------- 1996 Compared to 1995 | 1995 Compared to 1994 ----------------------------------------------------------------- Volume Rate Net Volume Rate Net ----------------------------------------------------------------- Time deposits in other banks $ 10 $ 1 $ 11 $ 5 $ 0 $ 5 Federal funds sold (37) (14) (51) 96 61 157 Taxable securities 123 138 261 (26) 217 191 Tax exempt securities 105 (13) 92 8 0 8 Taxable loans 261 (16) 245 110 464 574 Tax exempt loans (6) (0) (6) (41) 15 (26) ---- ---- ---- ---- ---- ---- Total interest income $456 $ 96 $552 $152 $757 $909 ==== ==== ==== ==== ==== ==== Interest bearing demand deposits $ 7 ($0) $7 ($2) $ 0 ($2) Savings deposits (23) 2 (21) (36) 1 (35) CDs $100,000 and over 84 (14) 70 45 42 87 Other interest bearing deposits 616 (270) 346 65 434 499 ---- ---- ---- ---- ---- ---- Total interest expense $684 ($282) $402 $ 72 $477 $549 ==== ==== ==== ==== ==== ==== Net change in net interest income (a) ($228) $378 $150 $ 80 $280 $360
(a) The net change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. OTHER INCOME Noninterest income continues to improve, although at a slower rate than in previous periods. Year to date figures are up 5.91%. The Company continues to search for new opportunities for noninterest income. OTHER EXPENSES Most categories of other expense showed very minimal from last year. All noninterest expenses, exclusive of FDIC premiums paid, increased just 2.45% from June 30, 1995 to June 30, 1996. A change in the FDIC premium rates reduced this expense from $153 thousand to $1 thousand during this same six month period leaving the Company with a net reduction in noninterest expense of 4.28%. FEDERAL INCOME TAX There was no significant change in the income tax position of the Company during the first six months of 1996. NET INCOME Year to date consolidated net income for the second quarter was $641,000 compared to $553,000 for 1995. Improved net interest income, combined with improved noninterest income and a reduction in noninterest expense have contributed to this improvement. Net income for the quarter is up 15.91% compared to the same period one year ago while year to date net income is up 21.58%. Return on consolidated average assets for the quarter was 1.50%, compared to 1.48 for 1995 and 1.41 for the second quarter in 1995. Page 12 14 PROSPECTIVE ACCOUNTING CHANGES Effective January 1, 1996, the Company adopted Financial Accounting Standards Board Statement 122, Accounting for Mortgage Servicing Rights. The Statement requires that the Company recognize mortgage servicing rights on loans it purchases or originates with the intent to sell as an asset. Capitalized mortgage servicing rights are included in other assets and are not material at June 30, 1996. PART II Other Information ITEM 1 - LEGAL PROCEEDINGS None ITEM 2 - CHANGES IN SECURITIES At the shareholders annual meeting on May 21, 1996, the shareholders approved a 2 for 1 stock split to shareholders of record of May 31, 1996. This transaction increased the number of shares outstanding from 465,386 to 930,772. All per share statistics in this report have been adjusted to reflect this stock split. ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None Page 13 15 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Four matters were submitted to a vote of security holders at the annual meeting held on May 21, 1996. a. To fix the number of directors to be elected at nine. Votes cast for 389,983 Votes cast against 0 b. Election of the following Director nominees listed in the Proxy Statement dated April 29, 1996, Robert E. Churchill Vincent J. Hillesheim James C. Conboy, Jr John L. Ormsbee Kathleen M. Darrow Francis J. VanAntwerp, Jr. Thomas J. Ellenberger John P Ward Thomas J. Fisher Votes cast for 389,900 Votes cast against 0 Votes withheld 83 c. Amendment of the Articles of Incorporation to increase the authorized common stock of the Corporation from 500,000 shares to 1,000,000 shares and change the par value to $2.50 per share to effect a 2 for 1 split of the outstanding shares. Votes cast for 381,324 Votes cast against 8,659 d. Approval of CNB Corporation 1996 Stock Option Plan Votes cast for 378,653 Votes cast against 11,330 ITEM 5 - OTHER INFORMATION Options for 12,500 shares of stock at $32.00 per share were granted by action of the Board of Directors on July 11, 1996. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Listing of Exhibits (numbered as in Item 601 of Regulation S-B): 3(i) Amendment to Articles of Incorporation dated June 4, 1996. 27. Financial Data Schedule (b) The Company has filed no reports on Form 8-K during the quarter ended June 30, 1996. Page 14 16 SIGNATURES Pursuant to the requirements 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 Corporation August 9, 1996 /S/ Jean K. Hunt -------------------------------------- Jean K. Hunt Treasurer (Chief Accounting Officer) Page 15 17 EXHIBIT INDEX Exhibit Number Description - -------------- ----------- 3(i) Amendment to Articles of Incorporation dated June 4, 1996. 27. Financial Data Schedule EX-3.(I) 2 AMENDMENT TO ARTICLES OF INCORPORATION 1 EXHIBIT 3(i) MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU (FOR BUREAU USE ONLY) Date Received FILED JUN 06 1996 JUN 07 1996 Administrator MI DEPT. OF CONSUMER & INDUSTRY SERVICES Corporation & Securities Bureau - ------------------------------------------------------------------------------------------ Name Lloyd C. Fell, Esq. - ------------------------------------------------------------------------------------------ Address 229 Court Street, P.O. Box 405 - ------------------------------------------------------------------------------------------ City State Zip Code Cheboygan Michigan 48091-0405 EFFECTIVE DATE: - ------------------------------------------------------------------------------------------
Document will be returned to the name and address you enter above CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION FOR USE BY DOMESTIC PROFIT AND NONPROFIT CORPORATIONS (Please read information and instructions on the last page) Pursuant to the provisions of Act 284, Public Acts of 1972 (profit corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the undersigned corporation executes the following Certificate: - -------------------------------------------------------------------------------- 1. The present name of the corporation is: CNB Corporation 2. The identification number assigned by the Bureau is: 253-853 3. The location of the registered office is: 303 North Main Street, Cheboygan ,Michigan 49721 - ----------------------------------------------------- ----------------- (Street Address) (City) (ZIP Code) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. Article III of the Articles of Incorporation is hereby amended ---------------- to read as follows: The total authorized capital stock is: 1,000,000 Common Shares, with a Par Value of $2.50 per share. - -------------------------------------------------------------------------------- 2 5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH. a. / / The foregoing amendment to the Articles of Incorporation was duly adopted on the ____________ day of _______________, 19________, in accordance with the provisions of the Act by the unanimous consent of the incorporator(s) before the first meeting of the Board of Directors or Trustees. Signed this ____________ day of ___________________, 19 ______________. ___________________________________ _________________________________ (Signature) (Signature) ___________________________________ _________________________________ (Type or Print Name) (Type or Print Name) ___________________________________ _________________________________ (Signature) (Signature) ___________________________________ _________________________________ (Type or Print Name) (Type or Print Name) b. /X/ The foregoing amendment to the Articles of Incorporation was duly adopted on the 21st day of May, 1996. The amendment: (check one of the following) /X/ was duly adopted in accordance with Section 611(2) of the Act by the vote of the shareholders if a profit corporation, or by the vote of the shareholders or members if a nonprofit corporation, or by the vote of the directors if a nonprofit corporation organized on a nonstock directorship basis. The necessary votes were cast in favor of the amendment. / / was duly adopted by the written consent of all directors pursuant to Section 525 of the Act and the corporation is a nonprofit corporation organized on a nonstock directorship basis. / / was duly adopted by the written consent of the shareholders or members having not less than the minimum number of votes required by statute in accordance with Section 407(1) and (2) of the Act if a nonprofit corporation, or Section 407(1) of the Act if a profit corporation. Written notice to shareholders who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders or members is permitted only if such provision appears in the Articles of Incorporation.) / / was duly adopted by the written consent of all the shareholders or members entitled to vote in accordance with Section 407(3) of the Act if a nonprofit corporation, or Section 407(2) of the Act if a profit corporation. Signed this 4th day of June, 1996 By John P. Ward ---------------------------------------------- (Only Signature of President, Vice-President, Chairperson, or Vice-Chairperson) John P. Ward, Senior Vice President and Secretary ------------------------------------------------- (Type or Print Name) (Type or Print Title) EX-27 3 FINANCIAL DATA SCHEDULE
9 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 5,444 0 3,950 0 11,417 51,577 51,429 94,988 1,326 172,154 153,545 0 1,828 0 0 0 2,327 14,454 172,154 4,383 1,970 0 6,353 2,812 2,812 3,541 50 0 2,211 1,781 1,781 0 0 1,245 $1.34 $1.34 7.76 0 184 0 184 1,306 37 7 1,326 1,326 0 1,158
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