-----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, EzOjEhxYx3vrlQtLVtN4uJbzFeGmTVqZ4nXYQGhAhrS8T6ZoBez7ZMPdNqqi7ZXj reaov8VTVMKnf7vdEIahXw== 0000950124-02-001708.txt : 20020513 0000950124-02-001708.hdr.sgml : 20020513 ACCESSION NUMBER: 0000950124-02-001708 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 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: 02642819 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 k69455e10-q.txt QUARTERLY REPORT FOR THE QUARTER ENDED 3/31/02 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, 2002 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 May 7, 2002 there were 1,193,195 shares of the issuer's common stock outstanding. 1 ITEM 1- FINANCIAL STATEMENTS (CONDENSED) CONSOLIDATED BALANCE SHEETS (in thousands)
March December 31, 2002 31, 2001 ASSETS (unaudited) Cash and due from banks $ 5,657 $ 9,229 Interest-bearing deposits with other financial institutions 2,408 2,718 Federal funds sold 1,450 4,900 -------- -------- Total cash and cash equivalents 9,515 16,847 Securities available for sale 64,447 61,118 Securities held to maturity(market value of $ 6,222 in 2002 and $ 7,114 in 2001) 6,349 7,168 Other securities 3,610 4,810 Loans, net of allowance for loan losses of $ 1,705 in 2002 and $ 1,667 in 2001 141,399 133,106 Premises and equipment, net 3,499 3,592 Other assets 4,247 4,390 -------- -------- Total assets $233,066 $231,031 ======== ======== LIABILITIES Deposits Non-interest bearing $ 29,239 $ 32,919 Interest-bearing 177,569 171,670 -------- -------- Total deposits 206,808 204,589 Other liabilities 2,576 3,065 -------- -------- Total liabilities 209,384 207,654 -------- -------- SHAREHOLDERS' EQUITY Common stock, $2.50 par value, 2,000,000 shares authorized, shares outstanding 3/31/02-1,193,195; 12/31/01-1,193,415 2,983 2,984 Additional paid-in capital 18,498 18,509 Retained earnings 1,560 983 Accumulated other comprehensive income, net of tax 641 901 -------- -------- Total shareholders' equity 23,682 23,377 -------- -------- Total liabilities and shareholders' equity $233,066 $231,031 ======== ========
See accompanying notes to consolidated financial statements. 2 CONSOLIDATED STATEMENTS OF INCOME (in thousands)
Three months ended March 31, 2002 2001 (Unaudited) INTEREST INCOME $3,714 $4,017 INTEREST EXPENSE ON DEPOSITS 1,463 1,849 ------ ------ NET INTEREST INCOME 2,251 2,168 Provision for loan losses - 28 ------ ------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,251 2,140 ------ ------ NON-INTEREST INCOME 474 344 NON-INTEREST EXPENSES 1,329 1,338 ------ ------ INCOME BEFORE INCOME TAXES 1,396 1,146 Income tax expense 366 338 ------ ------ NET INCOME $1,030 $ 808 ====== ====== TOTAL COMPREHENSIVE INCOME $ 770 $1,181 ====== ====== Return on average assets (annualized) 1.88% 1.48% Return on average equity (annualized) 18.72% 14.69% Basic earnings per share $ 0.86 $ 0.68 Diluted earnings per share $ 0.86 $ 0.67
See accompanying notes to consolidated financial statements. 3 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three months ended March 31, 2002 2001 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 1,030 $ 808 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization 152 56 Provision for loan losses - 28 Loans originated for sale (6,120) (2,992) Proceeds from sales of loans originated for sale 6,190 3,012 Gain on sales of loans (116) (43) (Increase)decrease in other assets 276 (191) Increase (decrease) in other liabilities (468) 164 -------- -------- Total adjustments (86) 34 -------- -------- Net cash from operating activities 944 842 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of securities available for sale 2,817 7,431 Purchase of securities available for sale (6,595) (9,454) Proceeds from maturities of securities held to maturity 859 535 Purchase of securities held to maturity (40) (1,600) Proceeds from maturities of other securities 1,200 - Purchase of other securities - (200) Net (increase)decrease in portfolio loans (8,247) 1,297 Premises and equipment expenditures (4) (69) -------- -------- Net cash from investing activities (10,010) (2,060) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 2,219 691 Dividends paid (474) (1,056) Purchases of common stock (11) (4) -------- -------- Net cash from financing activities 1,734 (369) Net change in cash and cash equivalents (7,332) (1,587) Cash and cash equivalents at beginning of year 16,847 23,310 -------- -------- Cash and cash equivalents at end of period $ 9,515 $ 21,723 ======== ======== Cash paid during the period for: Interest $ 1,451 $ 1,823 Income taxes $ 323 $ 400
See accompanying notes to consolidated financial statements. 4 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 and the Bank's wholly-owned subsidiary CNB Mortgage Corporation. All significant intercompany accounts and transactions are eliminated in consolidation. 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 consolidated financial statements included in the CNB Corporation's Form 10-K for the year ended December 31, 2001. 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. All prior calculations will be restated to be comparable to the new methods. At March 31, 2002 the weighted average shares outstanding in calculating the basic earnings per share were 1,193,244 while the weighted average dilutive potential shares for the diluted earnings per share were 1,199,050. At March 31, 2001 the weighted average shares outstanding in calculating the basic earnings per share were 1,192,233 while the weighted average dilutive potential shares for the diluted earnings per share were 1,206,946. Note-3 New Accounting Pronouncement As of January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 141, "Accounting for Business Combinations and Goodwill. SFAS No. 141 required all business combinations to be recorded using the purchase method of accounting for any transaction initiated after June 30, 2001. Adoption of this standard on January 1, 2002 did not have a material impact on the financial condition or results of operations of the Company. 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 month period ending March 31, 2002. FINANCIAL CONDITION The Company's balances of cash and cash equivalents decreased $ 7.3 million or 43.5% since December 31, 2001. During the period ending March 31, 2002, $944,000 of cash was provided from operating activities due to net income. Investing activities utilized $ 10.0 million during the period ending March 31, 2002. This can be attributed to an increase in securities available for sale and the loan portfolios. SECURITIES Securities increased $ 2.5 million or 3.7% since December 31, 2001. The available for sale portfolio increased to 91.0% of the investment portfolio from 89.5% 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, 2002 U.S. Government agency $ 34,121 $ 670 $ (46) $ 34,745 State and municipal 29,353 400 (51) 29,702 ------------------------------------------------------------ $ 63,474 $ 1,070 $ (97) $ 64,447 ============================================================ DECEMBER 31, 2001 U.S. Government agency $ 32,071 $ 986 $ - $ 33,057 State and municipal 27,682 432 (53) 28,061 ------------------------------------------------------------ $ 59,753 $ 1,418 $ (53) $ 61,118 ============================================================
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Gross Gross Amortized Unrealized Unrealized Fair Held to maturity Cost Gains Losses Value ------------------------------------------------------------ MARCH 31, 2002 State and municipal $ 6,349 $ 101 $ (228) $ 6,222 ============================================================ DECEMBER 31, 2001 State and municipal $ 7,168 $ 132 $ (186) $ 7,114 ============================================================
The amortized cost and fair value of securities by contractual maturity at March 31, 2002 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 $ 16,473 $ 16,686 $ 957 $ 966 Due after one year through five years 40,179 40,859 2,756 2,815 Due after five years through ten years 5,525 5,621 992 1,024 Due after ten years 1,297 1,281 1,644 1,417 -------------------------------------------------------------- Total $ 63,474 $ 64,447 $ 6,349 $ 6,222 ==============================================================
LOANS Loans at March 31, 2002 increased $ 8.3 million from December 31, 2001. Substantial growth occurred in our commercial real estate lending which increased to $ 35.7 million in 2002 from $ 26.5 million in 2001, or a 34.5% increase. The table below shows total loans outstanding by type, in thousands of dollars, at March 31, 2002 and December 31, 2001, and their percentage of the total loan portfolio. All loans are domestic. A quarterly review of loan concentrations at March 31, 2002 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, 2002 December 31, 2001 Portfolio loans: Balance % of total Balance % of total ------- ---------- ------- ---------- Residential real estate $ 85,522 59.75% $ 84,588 62.74% Consumer 11,249 7.86% 11,767 8.73% Commercial real estate 35,703 24.94% 26,536 19.69% Commercial 10,660 7.45% 11,912 8.84% ------------------------------------------------------ 143,134 100.00% 134,803 100.00% Deferred loan origination fees, net (30) (30) Allowance for loan losses (1,705) (1,667) --------- -------- $ 141,399 $133,106 ========= ========
7 ALLOWANCE FOR LOAN LOSSES An analysis of the allowance for loan losses, in thousands of dollars, for the three months ended March 31, follows:
2002 2001 ---- ---- Beginning balance $ 1,667 $ 1,652 Provision for loan losses - 28 Charge-offs (8) (2) Recoveries 46 4 ------- ------- Ending balance $ 1,705 $ 1,682 ======= =======
The Company had no impaired loans for 2002 and 2001. 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, 2002 2001 ---- ---- (In thousands) Nonaccrual $ - $ - Loans past due 90 days or more 693 647 Troubled debt restructurings - - ---- ---- Total nonperforming loans $693 $647 ==== ==== Percent of total loans 0.48% 0.48%
DEPOSITS Deposits at March 31, 2002 increased $ 2.2 million since December 31, 2001. Interest-bearing deposits increased $ 5.9 million or 3.4% for the three months ended March 31, 2002, while non-interest bearing deposits decreased $ 3.7 million or 11.2%. 8 LIQUIDITY AND FUNDS MANAGEMENT As of March 31, 2002 the Company had $ 1.5 million in federal funds sold, $ 64.4 million in securities available for sale and $ 957,000 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 32.3% of total deposits as of March 31, 2002. Total equity for the Company at March 31, 2002 was $ 23.7 million compared to $ 23.4 million at December 31, 2001. RESULTS OF OPERATIONS CNB Corporation's 2002 earnings for the first three months were $ 1,030,000 an increase of $ 222,000 compared to 2001 results. This increase can be partially attributed to life insurance proceeds, which amounted to $ 105,000. Income, prior to life insurance proceeds, for the first three months of 2002 was $925,000 compared to $808,000 or a 14.4% increase. Basic earnings per share were $ .86 per share for 2002 compared to $ .68 for 2001. The return on assets was 1.88% for the first three months of the year versus 1.48% for the same period in 2001. The return on equity was 18.72% compared to 14.69% for the same period last year. For the first three months of 2002 net interest income was $ 2.3 million, a slight increase over the $ 2.2 million for the same period in 2001. The net interest spread increased to 3.44% from 3.35% in 2001. This can be attributed to a greater decrease in the rate of interest-bearing liabilities compared to the yield earned on interest-earning assets. Non-interest income was $ 474,000, a $ 130,000 increase or 37.8% over the same period last year. The increase can be attributed to an increase in the volume of loans sold to the secondary market and to life insurance proceeds as previously discussed. Non-interest expense was $ 1.3 million for the periods ending 2002 and 2001. There was no significant change in the income tax position for the Company during the first three months of 2002. 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 9 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, 2001 Management Discussion and Analysis appearing in the December 31, 2001 Annual Report. 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 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 9, 2002 /s/ Robert E. Churchill ----------------- ------------------------------------- Robert E. Churchill Chairman and Chief Executive Officer Date: May 9, 2002 /s/ James C. Conboy, Jr. ----------------- ------------------------------------- James C. Conboy, Jr. President and Chief Operating Officer 11 -----END PRIVACY-ENHANCED MESSAGE-----