-----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, Jo2frZEChbLJHIOPVvTGDXq0+LId5KBDCjkV6/zDr2cb0g12aoOqd5waGb8mMBBU Rn+86mr8Uf0hK59w7+v2lg== 0000950124-01-503999.txt : 20020410 0000950124-01-503999.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950124-01-503999 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 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: 1934 Act SEC FILE NUMBER: 033-00737 FILM NUMBER: 1786380 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 k65616e10-q.txt QUARTERLY REPORT 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 September 30, 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 November 5, 2001 there were 1,134,929 shares of the issuer's common stock outstanding. 1 ITEM 1 - FINANCIAL STATEMENTS (CONDENSED) CONSOLIDATED BALANCE SHEETS (in thousands)
September December 30, 2001 31, 2000 ASSETS (unaudited) Cash and due from banks $ 5,614 $ 9,202 Interest-bearing deposits with other financial institutions 7,849 5,258 Federal funds sold 2,550 8,850 -------- -------- Total cash and cash equivalents 16,013 23,310 Securities available for sale 65,865 47,969 Securities held to maturity(market value of $ 7,776 in 2001 and $ 7,976 in 2000) 7,589 7,882 Other securities 5,710 4,653 Loans, net 128,671 126,049 Premises and equipment, net 3,117 3,234 Other assets 5,164 4,628 -------- -------- Total assets $232,129 $217,725 ======== ======== LIABILITIES Deposits Non-interest bearing $ 35,038 $ 30,574 Interest-bearing 170,689 162,517 -------- -------- Total deposits 205,727 193,091 Other liabilities 2,822 3,019 -------- -------- Total liabilities 208,549 196,110 -------- -------- SHAREHOLDERS' EQUITY Common stock, $2.50 par value, 2,000,000 shares authorized, shares outstanding 9/30/01-1,134,929; 12/31/00-1,135,461 2,837 2,839 Additional paid-in capital 15,493 15,549 Retained earnings 4,162 2,959 Accumulated other comprehensive income, net of tax 1,088 268 -------- -------- Total shareholders' equity 23,580 21,615 -------- -------- Total liabilities and shareholders' equity $232,129 $217,725 ======== ========
See accompanying notes to consolidated financial statements. 2 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Dollars in thousands, except for per share data) - --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, 2001 2000 2001 2000 ------- ------- ------- ------- (Unaudited) INTEREST INCOME $ 3,935 $ 4,042 $11,920 $11,618 INTEREST EXPENSE ON DEPOSITS 1,733 1,742 5,347 5,004 ------- ------- ------- ------- NET INTEREST INCOME 2,202 2,300 6,573 6,614 Provision for loan losses 28 27 83 82 ------- ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,174 2,273 6,490 6,532 ------- ------- ------- ------- NON-INTEREST INCOME 398 332 1,163 982 NON-INTEREST EXPENSES 1,418 1,327 4,155 3,936 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 1,154 1,278 3,498 3,578 Income tax expense 322 392 1,001 1,099 ------- ------- ------- ------- NET INCOME $ 832 $ 886 $ 2,497 $ 2,479 ======= ======= ======= ======= TOTAL COMPREHENSIVE INCOME $ 1,216 $ 1,109 $ 3,317 $ 2,688 ======= ======= ======= ======= Return on average assets (annualized) 1.49% 1.64% 1.49% 1.57% Return on average equity (annualized) 14.71% 16.76% 14.72% 16.11% Basic earnings per share $ 0.73 $ 0.78 $ 2.20 $ 2.18 Diluted earnings per share $ 0.73 $ 0.77 $ 2.19 $ 2.16
See accompanying notes to consolidated financial statements. 3 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) - --------------------------------------------------------------------------------
Nine months ended September 30, 2001 2000 -------- -------- (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,497 $ 2,479 Adjustments to reconcile net income to net cash from operating activities Depreciation 272 221 Accretion and amortization of investment securities, net (38) (2) Provision for loan losses 83 82 Loans originated for sale (11,642) (2,336) Proceeds from sales of loans originated for sale 11,736 2,336 Gain on sales of loans (94) (18) (Increase) decrease in other assets (958) (719) Increase (decrease) in other liabilities (197) 387 --------- --------- Total adjustments (838) (49) --------- --------- Net cash from operating activities 1,659 2,430 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of securities available for sale 23,324 10,176 Purchase of securities available for sale (39,940) (15,935) Proceeds from maturities of securities held to maturity 3,017 6,694 Purchase of securities held to maturity (2,724) (1,363) Proceeds from maturities of other securities 100 1,400 Purchase of other securities (1,157) (527) Net (increase) decrease in portfolio loans (2,705) (7,747) Premises and equipment expenditures (155) (478) --------- --------- Net cash from investing activities (20,240) (7,780) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 12,636 9,824 Dividends paid (1,294) (1,794) Proceeds from exercise of stock options 18 17 Purchases of common stock (76) (77) --------- --------- Net cash from financing activities 11,284 7,970 Net change in cash and cash equivalents (7,297) 2,620 Cash and cash equivalents at beginning of year 23,310 14,873 --------- --------- Cash and cash equivalents at end of period $ 16,013 $ 17,493 ========= ========= Cash paid during the period for: Interest $ 5,365 $ 5,014 Income taxes $ 995 $ 1,081
See accompanying notes to consolidated financial statements. 4 NOTES TO CONSOLIDATED 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 conjunction 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 accounting principles generally accepted in the United States of America 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. For the three and nine month period ending September 30, 2001 the weighted average shares outstanding in calculating the basic earnings per share were 1,134,298 and 1,134,736 while the weighted average dilutive potential shares for the diluted earnings per share were 1,142,326 and 1,142,983. For the three and nine month period ending September 30, 2000 the weighted average shares outstanding in calculating the basic earnings per share were 1,135,978 and 1,135,706 while the weighted average dilutive potential shares for the diluted earnings per share were 1,156,528 and 1,148,124. 5 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 and nine month period ending September 30, 2001. FINANCIAL CONDITION The Company's balances of cash and cash equivalents decreased $ 7.3 million or 31.3%. During the period ending September 30, 2001, $ 1.7 million of cash was provided from operating activities. Investing activities utilized $ 20.2 million during the period ending September 30, 2001 and financing activities provided $ 11.3 million due to an increase in deposits. SECURITIES Securities increased $ 17.6 million or 31.5% since December 31, 2000. The available for sale portfolio increased to 89.7% of the investment portfolio up 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 ---------------------------------------------------------------- SEPTEMBER 30, 2001 U.S. Government agency $ 37,029 $ 1,074 $ -- $ 38,103 State and municipal 27,188 595 (21) 27,762 ---------------------------------------------------------------- $ 64,217 $ 1,669 $ (21) $ 65,865 ================================================================ 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
Gross Gross Amortized Unrealized Unrealized Fair Held to maturity Cost Gains Losses Value ---------------------------------------------------------------- SEPTEMBER 30, 2001 State and municipal $ 7,589 $ 187 $ -- $ 7,776 ================================================================ $ 7,589 $ 187 $ -- $ 7,776 ================================================================ 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 September 30, 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 $ 13,196 $13,408 $ 2,590 $ 2,607 Due after one year through five years 43,762 45,067 2,273 2,351 Due after five years through ten years 5,950 6,100 1,034 1,092 Due after ten years 1,309 1,290 1,692 1,726 ------------------------------------------------ Total $ 64,217 $65,865 $ 7,589 $ 7,776 ================================================
LOANS Loans at September 30, 2001 increased $ 2.7 million from December 31, 2000. The table below shows total loans outstanding by type, in thousands of dollars, at September 30, 2001 and December 31, 2000, and their percentage of the total loan portfolio. All loans are domestic. A quarterly review of loan concentrations at September 30, 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 8.5% of total loans.
September 30, 2001 December 31, 2000 Portfolio loans: Balance % of total Balance % of total -------- ---------- -------- ---------- Residential real estate $ 81,263 62.30% $ 77,823 60.92% Consumer 11,592 8.89% 12,155 9.52% Commercial real estate 25,540 19.58% 26,571 20.80% Commercial 12,036 9.23% 11,193 8.76% --------------------------------------------------- 130,431 100.00% 127,742 100.00% Deferred loan origination fees, net (33) (41) Allowance for loan losses (1,727) (1,652) -------- -------- $128,671 $126,049 ======== ========
7 ALLOWANCE FOR LOAN LOSSES An analysis of the allowance for loan losses, in thousands of dollars, for the nine months ended September 30, follows:
2001 2000 ------- ------- Beginning balance $ 1,652 $ 1,583 Provision for loan losses 83 82 Charge-offs (21) (64) Recoveries 13 30 ------- ------- Ending balance $ 1,727 $ 1,631 ======= =======
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.
September 30, December 31, 2001 2000 ---- ---- (Dollars in thousands) Nonaccrual $ 181 $ 181 Loans past due 90 days or more 171 81 Troubled debt restructurings - - ------- ------- Total nonperforming loans $ 352 $ 262 ======= ======= Percent of total loans 0.27% 0.21%
DEPOSITS Deposits at September 30, 2001 increased $ 12.6 million since December 31, 2000. Interest-bearing deposits increased $ 8.2 million for the nine months ended September 30, 2001, while non-interest bearing increased $ 4.5 million or 14.6%. 8 LIQUIDITY AND FUNDS MANAGEMENT As of September 30, 2001 the Company had $ 2.5 million in federal funds sold, $65.9 million in securities available for sale and $ 2.6 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 34.5% of total deposits as of September 30, 2001. Total equity for the Company at September 30, 2001 was $ 23.6 million compared to $ 21.6 million at December 31, 2000. RESULTS OF OPERATIONS CNB Corporation's 2001 earnings for the first nine months were $ 2.5 million an increase of $ 18,000 compared to 2000 results. This can be attributed to an increase in non interest income. Basic earnings per share were $ 2.20 per share for the first nine months of 2001 compared to $ 2.18 for 2000. The return on assets was 1.49% for the nine months of the year versus 1.57% for the same period in 2000. The return on equity was 14.72% compared to 16.11% for the same period last year. For the quarter ending September 30, 2001 earnings were $ 832,000 compared to $ 886,000 for the same period last year. Basic earnings per share for the quarter ending September 30, 2001 was $ 0.73 compared to $ 0.78 for the same period last year. For the first nine months of 2001 net interest income was $ 6.6 million a slight decrease for the same period in 2000. The net interest margin decreased to 4.18% from the 4.44% reported in 2000. This decrease can be attributed to a greater increase on the rate for interest-bearing liabilities than interest-earning assets. Net interest income for the quarter ending September 30, 2001 was $ 2.2 million, a decrease of $ 98,000 over the same period last year. This can be attributed to the declining rate environment. Non-interest income for the nine months ending September 30, 2001 was $ 1.2 million an increase of $ 181,000 or 18.4% over the same period last year. The increase can be attributed to an increase in the volume of loans sold to the secondary market due to declining interest rates. For the quarter ending September 30, 2001 non-interest income was reported at $ 398,000 compared to $ 332,000 for the same period last year. Non-interest expense was $ 4.2 million compared to $ 3.9 million for 2000. Non-interest expense for the quarter ending was $ 1.4 million compared to $ 1.3 million for 2000. There was no significant change in the income tax position for the Company during the first nine months of 2001. FORWARD-LOOKING STATEMENTS When used in this filing and in future filings involving the Company with the Securities and Exchange Commission, in the Company's press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases, "anticipate," "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "project," or similar expressions are intended to identify, "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties, including but not limited to changes in economic conditions in the Company's market area, and competition, all or some of which could cause actual results to differ materiality from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and advise readers that various factors, including regional and national economic conditions, substantial changes in levels of market interest rates, credit and other risks, of lending and investing activities, and competitive and regulatory factors, could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materiality from those anticipated or projected. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements. 9 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. 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 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: November 8, 2001 /s/ Robert E. Churchill ---------------------- ---------------------------------------- Robert E. Churchill Chairman and Chief Executive Officer Date: November 8, 2001 /s/ James C. Conboy, Jr. ---------------------- ---------------------------------------- James C. Conboy, Jr. President and Chief Operating Officer 10 -----END PRIVACY-ENHANCED MESSAGE-----