-----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, BjRF9v0CSHzAPzd75WSiw3K7KbHg/jhkJRAmb+f2+vajqthnstqUC8rjC26JYytL /N4c3m1YJ52xWl/RKi2PRg== 0000950124-01-501102.txt : 20010515 0000950124-01-501102.hdr.sgml : 20010515 ACCESSION NUMBER: 0000950124-01-501102 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNB CORP /MI/ CENTRAL INDEX KEY: 0000779125 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 362662386 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-00737 FILM NUMBER: 1632438 BUSINESS ADDRESS: STREET 1: PO BOX 10 CITY: CHEBOYGAN STATE: MI ZIP: 49721 BUSINESS PHONE: 6166277111 MAIL ADDRESS: STREET 1: P O BOX 10 CITY: CHEBOYGAN STATE: MI ZIP: 49721 10-Q 1 k62343e10-q.txt FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 Commission file # 0-28388 CNB CORPORATION (Exact name of registrant as specified in its charter) Michigan 38-2662386 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 303 North Main Street, Cheboygan, MI 49721 (Address of principal executive offices, including Zip Code) (231) 627-7111 (Registrant's telephone number, including area code) 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 ( ) As of April 27, 2001 there were 1,134,343 shares of the issuer's common stock outstanding. 1 2 ITEM 1- FINANCIAL STATEMENTS (CONDENSED) CONSOLIDATED BALANCE SHEETS (in thousands)
March December 31, 2001 31, 2000 ASSETS (unaudited) Cash and due from banks $ 5,668 $ 9,202 Interest-bearing deposits with other financial institutions 7,405 5,258 Federal funds sold 8,650 8,850 --------------- ---------------- Total cash and cash equivalents 21,723 23,310 Securities available for sale 50,592 47,969 Securities held to maturity (market value of $ 9,481 in 2001 and $ 7,976 in 2000) 8,947 7,882 Other securities 4,853 4,653 Loans, net 124,747 126,049 Premises and equipment, net 3,213 3,234 Other assets 4,626 4,628 --------------- ---------------- Total assets $218,701 $ 217,725 =============== ================ LIABILITIES Deposits Non-interest bearing $ 26,776 $ 30,574 Interest-bearing 167,006 162,517 --------------- ---------------- Total deposits 193,782 193,091 Other liabilities 2,557 3,019 --------------- ---------------- Total liabilities 196,339 196,110 --------------- ---------------- SHAREHOLDERS' EQUITY Common stock, $2.50 par value, 2,000,000 shares authorized, shares outstanding 3/31/01-1,135,411; 12/31/00-1,135,461 2,838 2,839 Additional paid-in capital 15,546 15,549 Retained earnings 3,337 2,959 Accumulated other comprehensive income (loss), net of tax 641 268 --------------- ---------------- Total shareholders' equity 22,362 21,615 --------------- ---------------- Total liabilities and shareholders' equity $218,701 $ 217,725 =============== ================
See accompanying notes to consolidated financial statements. 2 3 CONSOLIDATED STATEMENTS OF INCOME (in thousands)
Three months ended March 31, 2001 2000 (Unaudited) INTEREST INCOME $ 4,017 $ 3,721 INTEREST EXPENSE ON DEPOSITS 1,849 1,618 --------------- ---------------- NET INTEREST INCOME 2,168 2,103 Provision for loan losses 28 28 --------------- ---------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,140 2,075 --------------- ---------------- NON-INTEREST INCOME 344 325 NON-INTEREST EXPENSES 1,338 1,302 --------------- ---------------- INCOME BEFORE INCOME TAXES 1,146 1,098 Income tax expense 338 336 --------------- ---------------- NET INCOME $ 808 $ 762 =============== ================ TOTAL COMPREHENSIVE INCOME $ 1,181 $ 713 =============== ================ Return on average assets (annualized) 1.48% 1.47% Return on average equity (annualized) 14.69% 15.31% Basic earnings per share $ 0.71 $ 0.67 Diluted earnings per share $ 0.71 $ 0.66
3 4 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three months ended March 31, 2001 2000 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 808 $ 762 Adjustments to reconcile net income to net cash from operating activities Depreciation 90 74 Accretion and amortization of investment securities, net (34) 15 Provision for loan losses 28 28 Loans originated for sale (2,992) (743) Proceeds from sales of loans originated for sale 2,992 743 Gain on sales of loans - (6) (Increase) decrease in other assets (191) (115) Increase (decrease) in other liabilities 164 136 -------------- ----------------- Total adjustments 57 132 -------------- ----------------- Net cash from operating activities 865 894 -------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of securities available for sale 7,431 3,425 Purchase of securities available for sale (9,454) (10,827) Proceeds from maturities of securities held to maturity 535 2,324 Purchase of securities held to maturity (1,600) - Proceeds from maturities of other securities - 1,300 Purchase of other securities (200) (500) Net (increase) decrease in portfolio loans 1,274 (2,087) Premises and equipment expenditures (69) (41) -------------- ----------------- Net cash from investing activities (2,083) (6,406) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 691 1,275 Dividends paid (1,056) (999) Proceeds from exercise of stock options - 3 Purchases of common stock (4) (34) -------------- ----------------- Net cash from financing activities (369) 245 Net change in cash and cash equivalents (1,587) (5,267) Cash and cash equivalents at beginning of year 23,310 14,873 -------------- ----------------- Cash and cash equivalents at end of period $ 21,723 $ 9,606 ============== ================= Cash paid during the period for: Interest $ 1,823 $ 1,634 Income taxes $ 400 $ 388
See accompanying notes to consolidated financial statements. 4 5 NOTES TO FINANCIAL STATEMENTS Note 1-Basis of Presentation The consolidated financial statements include the accounts of CNB Corporation and its wholly-owned subsidiary, Citizens National Bank of Cheboygan, after elimination of significant inter-company transactions and accounts. The statements have been prepared by management without an audit by independent certified public accountants. However, these statements reflect all adjustments (consisting of normal recurring accruals) and disclosures which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented and should be read in conjuction with the notes to the financial statements included in the CNB Corporation's Form 10-K for the year ended December 31, 2000. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Because the results of operations are so closely related to and responsive to changes in economic conditions, the results for any interim period are not necessarily indicative of the results that can be expected for the entire year. Note-2 Earnings Per Share Basic earnings per share is calculated solely on weighted-average common shares outstanding. Diluted earnings per share will reflect the potential dilution of stock options and other common stock equivalents. All prior calculations will be restated to be comparable to the new methods. At March 31, 2001 the weighted average shares outstanding in calculating the basic earnings per share was 1,135,413 while the weighted average dilutive potential shares for the diluted earnings per share was 1,143,640. At March 31, 2000 the weighted average shares outstanding in calculating the basic earnings per share was 1,135,460 while the weighted average dilutive potential shares for the diluted earnings per share was 1,149,472. Note-3 New Accounting Pronouncement As of January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 required all derivatives to be recorded at fair value. Unless designated as hedges, changes in these fair values will be recorded in the income statement. Fair value changes involving hedges are generally recorded by offsetting gains and losses on the hedge and on the hedged item, even if the fair value of the hedged item is not otherwise recorded. Adoption of this standard did not have a material impact on the financial condition or results of operations of the Company. 5 6 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 three month period ending March 31, 2001. FINANCIAL CONDITION The Company's balances of cash and cash equivalents decreased $ 1.6 million or 6.8%. During the period ending March 31, 2001, $ 900,000 of cash was provided from operating activities due to net income. Investing activities utilized $ 2.1 million during the period ending March 31, 2001. SECURITIES Securities increased $ 3.7 million or 6.6% since December 31, 2000. The available for sale portfolio decreased to 85.0% of the investment portfolio down from 85.9% at year-end. The amortized cost and fair values of securities were as follows, in thousands of dollars:
Gross Gross Amortized Unrealized Unrealized Fair Available for sale Cost Gains Losses Value ------------------------------------------------------------ MARCH 31, 2001 U.S. Government agency $ 35,946 $ 723 $ - $ 36,669 State and municipal 13,675 251 (3) 13,923 ------------------------------------------------------------ $ 49,621 $ 974 $ (3) $ 50,592 ============================================================ DECEMBER 31, 2000 U.S. Government agency $ 36,838 $ 335 $ (60) $ 37,113 State and municipal 10,726 144 (14) 10,856 ------------------------------------------------------------ $ 47,564 $ 479 $ (74) $ 47,969 ============================================================
6 7
Gross Gross Amortized Unrealized Unrealized Fair Held to maturity Cost Gains Losses Value ------------------------------------------------------------ MARCH 31, 2001 State and municipal 8,947 534 - 9,481 ------------------------------------------------------------ $ 8,947 $ 534 $ - $ 9,481 ============================================================ DECEMBER 31, 2000 State and municipal 7,882 100 (6) 7,976 ------------------------------------------------------------ $ 7,882 $ 100 $ (6) $ 7,976 ============================================================
The amortized cost and fair value of securities by contractual maturity at March 31, 2001 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 $ 17,554 $ 17,625 $ 3,461 $ 3,480 Due after one year through five years 29,763 30,546 2,598 2,669 Due after five years through ten years 2,304 2,421 1,152 1,238 Due after ten years - - 1,736 2,094 -------------------------------------------------------------- Total $ 49,621 $ 50,592 $ 8,947 $ 9,481 ==============================================================
LOANS Loans at March 31, 2001 decreased $ 1.3 million from December 31, 2000. The table below shows total loans outstanding by type, in thousands of dollars, at March 31, 2001 and December 31, 2000, and their percentage of the total loan portfolio. All loans are domestic. A quarterly review of loan concentrations at March 31, 2001 indicates the pattern of loans in the portfolio has not changed. There is no individual industry with more than a 10% concentration. However, all tourism related businesses, when combined, total 9.7% of total loans.
March 31, 2001 December 31, 2000 Portfolio loans: Balance % of total Balance % of total ------- ---------- ------- ---------- Residential real estate $ 76,284 60.32% $ 77,823 60.92% Consumer 11,624 9.19% 12,155 9.52% Commercial real estate 27,025 21.37% 26,571 20.80% Commercial 11,534 9.12% 11,193 8.76% ------------------------------------------------------------ 126,467 100.00% 127,742 100.00% Deferred loan origination fees, net (38) (41) Allowance for loan losses (1,682) (1,652) --------------- -------------- $ 124,747 $126,049 =============== ==============
7 8 ALLOWANCE FOR LOAN LOSSES An analysis of the allowance for loan losses, in thousands of dollars, for the three months ended March 31, follows:
2001 2000 ---- ---- Beginning balance $ 1,652 $ 1,583 Provision for loan losses 28 28 Charge-offs (2) (54) Recoveries 4 22 --------------- -------------- Ending balance $ 1,682 $ 1,579 =============== ==============
The Company had no impaired loans for 2001 and 2000. CREDIT QUALITY The Company maintains a high level of asset quality as a result of actively managing delinquencies, nonperforming assets and potential problem loans. The Company performs an 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 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 of loans in (1) or (2) above). The aggregate amount of nonperforming loans is shown in the table below.
March 31, December 31, 2001 2000 ---- ---- (In thousands) Nonaccrual $ 181 $ 181 Loans past due 90 days or more 87 81 Troubled debt restructurings - - --------------- -------------- Total nonperforming loans $ 268 $ 262 =============== ============== Percent of total loans 0.21% 0.21%
DEPOSITS Deposits at March 31, 2001 increased $ 691,000 since December 31, 2000. Interest-bearing deposits increased $ 4.5 million or 2.8% for the three months ended March 31, 2001, while non-interest bearing decreased $ 3.8 million or 12.4%. 8 9 LIQUIDITY AND FUNDS MANAGEMENT As of March 31, 2001 the Company had $ 8.7 million in federal funds sold, $ 50.6 million in securities available for sale and $ 3.5 million in held to maturity maturing within one year. These sources of liquidity are supplemented by new deposits and by loan payments received by customers. These short-term assets represents 32.2% of total deposits as of March 31, 2001. Total equity for the Company at March 31, 2001 was $ 22.4 million compared to $ 21.6 million at December 31, 2000. RESULTS OF OPERATIONS CNB Corporation's 2001 earnings for the first three months were $ 808,000 an increase of $ 46,000 compared to 2000 results. This can be attributed to improved net interest income. Earnings per share were $ .71 per share for 2001 compared to $ .67 for 2000. The return on assets was 1.48% for the three months of the year versus 1.47% for the same period in 2000. The return on equity was 14.69% compared to 15.31% for the same period last year. For the first three months of 2001 net interest income was $ 2.2 million a slight increase over the $ 2.1 million for the same period in 2000. The net interest margin decreased to 4.20% from 4.29% in 2000. This decrease can be attributed to a greater increase on the rate for interest-bearing liabilities than interest-earning assets. Non-interest income was $ 344,000 a $ 19,000 increase or 5.8% over the same period last year. The increase can be attributed to an increase in the volume of loans sold to the secondary market. Non-interest expense was $ 1.3 million for the periods ending 2001 and 2000. There was no significant change in the income tax position for the Company during the first three months of 2001. ITEM 3-QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The primary source of market risk for the financial instruments held by the Corporation is interest rate risk. That is, the risk that an adverse change in market rates will adversely affect the market value of the instruments. Generally, the longer the maturity, the higher the interest rate risk exposure. While maturity information does not necessarily present all aspects of exposure, it may provide an indication of where risks are prevalent. All financial institutions assume interest rate risk as an integral part of normal operations. Managing and measuring interest rate risk is a dynamic, multi-faceted process that ranges from reducing the exposure of the Corporation's net interest margin to swings in interest rates, to assuring sufficient capital and liquidity to support future balance sheet growth. The Corporation manages interest rate risk through the Asset/Liability Committee. The Asset/Liability Committee is comprised of bank officers from various disciplines. The Committee establishes policies and rates which lead to prudent investment of resources, the effective management of risks associated with changing interest rates, the maintenance of adequate liquidity, and the earning of an adequate return on shareholders' equity. 9 10 Management believes that there has been no significant changes to the interest rate sensitivity since the presentation in the December 31, 2000 Management Discussion and Analysis appearing in the December 31, 2000 10K. PART II- OTHER INFORMATION ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 6- EXHIBITS AND REPORTS OF FORM 8-K a.) None b.) None 10 11 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 ------------------------------ (Registrant) Date: May 10, 2001 /s/ Robert E. Churchill -------------------------- ----------------------------------------------- Robert E. Churchill Chairman and Chief Executive Officer Date: May 10, 2001 /s/ James C. Conboy, Jr. -------------------------- ----------------------------------------------- James C. Conboy, Jr. President and Chief Operating Officer
11 -----END PRIVACY-ENHANCED MESSAGE-----