-----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, I6tqADac+3Dwq30umoOTl9nkTa8IpTZenpXfj85AqdzqFfyX5tiMYKJ/pUPUCF/d 2pjpiUIfLL3HIPZ59MfWMA== 0000950124-04-006435.txt : 20041227 0000950124-04-006435.hdr.sgml : 20041224 20041227143632 ACCESSION NUMBER: 0000950124-04-006435 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20041227 DATE AS OF CHANGE: 20041227 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-00737 FILM NUMBER: 041226226 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-K/A 1 k90714e10vkza.txt AMENDMENT NO. 1 TO FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A AMENDMENT NO.1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 Commission file number 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) Registrant's telephone number (231) 627-7111 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $ 2.50 PER SHARE (Title of Class) 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) Indicate by check mark if registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) Yes [ ] No [X] Aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2003 was $ 53,894,800. As of March 17, 2004 there were outstanding 1,243,652 shares of the registrant's common stock, $ 2.50 par value. DOCUMENTS INCORPORATED BY REFERENCE Specified portions of the registrant's annual report to security holders for fiscal year ended December 31, 2003 are incorporated by reference in Part I and Part II of this report. EXPLANATORY NOTE We are filing this Amendment No.1 to our Annual Report on Form 10-K, originally filed with the Securities and Exchange Commission on March 30, 2004, solely for the purpose of including herein the information required in Part III and to file amended bylaws. New certifications by the Chief Executive Officer and Chief Financial Officer are also included as Exhibits 31.1 and 31.2, respectively, pursuant to Rule 12b-15. Except as specifically indicated herein, no other information included in our Annual Report on Form 10-K is amended by this Form 10-K/A. PART I 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 materially 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 to 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 materially 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. ITEM 1- BUSINESS CNB Corporation (the Company) was incorporated in June, 1985 as a business corporation under the Michigan Business Corporation Act, pursuant to the authorization and direction of the Board of Directors of the Citizens National Bank of Cheboygan (the Bank). The Company is a bank holding company registered with the Board of Governors of the Federal Reserve System (the Federal Reserve Board) under the Bank Holding Company Act with the Bank as its only wholly-owned subsidiary. The Bank was acquired by the Company effective December 31, 1985. The Company has corporate power to engage in such activities as permitted to business corporations under the Michigan Business Corporation Act, subject to the limitations of the Bank Holding Company Act and regulations of the Federal Reserve Board. In general, the Bank Holding Company Act and regulations restrict the Company with respect to its own activities and activities of any subsidiaries to the business of banking or such other activities which are closely related to the business of banking. During 2001, the Company, through its subsidiary, the Bank, formed the CNB Mortgage Corporation. Residential mortgages were transferred to the new subsidiary in October, 2001. The change had no impact on our customers who will continue to have their loans serviced locally by our Bank. The Bank offers a full range of banking services to individuals, partnerships, corporations, and other entities. Banking services include checking, NOW accounts, savings, time deposit accounts, money market deposit accounts, safe deposit facilities and money transfers. The Bank's lending function provides a full range of loan products. These include real estate mortgages, secured and unsecured commercial and consumer loans, check credit loans, lines of credit, home equity loans and construction financing. The Bank also participates in specialty loan programs through the Michigan State Housing Development Authority, Small Business Administration, Federal Home Loan Mortgage Corporation, Farm Service Agency and Mortgage Guaranty Insurance Corporation. Through correspondent relationships, the Bank also 2 makes available credit cards and student loans. The Bank's loan portfolio is over 62% residential real estate mortgages on both primary and secondary homes. The borrower base is very diverse and loan to value ratios are generally 80% or less. The commercial loan portfolio accounts for approximately 6% of total loans. Agricultural lending is minimal and secured by real estate. Construction lending is predominately residential, with only an occasional "spec" home or commercial building. Unsecured lending is very limited and personal guarantees are required on most commercial loans. The Bank makes first and second mortgage loans to its customers for the purchase of residential and commercial properties. Historically, the Bank has sold its long term fixed rate residential mortgage loans qualifying for the secondary market to the Federal Home Loan Mortgage Corporation (FHLMC). The mortgage loan portfolio serviced by the Bank for the FHLMC totaled approximately $ 61 million at December 31, 2003. Banking services are delivered through five full-service banking offices and three drive-in branches plus nine automated teller machines in Cheboygan, Emmet and Presque Isle Counties, Michigan. The business base of the counties is primarily tourism with light manufacturing. The Bank maintains correspondent bank relationships with several larger banks, which involve check clearing operations, transfer of funds, loan participation, and the purchase and sale of federal funds and other similar services. Under various agency relationships, the Bank provides trust and discount brokerage services and mutual fund, annuity and life insurance products to its customers. In its primary market, which includes Cheboygan County and parts of Emmet, Mackinac, Presque Isle and Montmorency Counties, the Bank is one of three principal banking institutions located within this market. One is a member of a multi-bank holding company with substantially more assets than the Company, while the other is an independent community bank. There are also two credit unions, one savings and loan association and a brokerage firm. As of December 31, 2003, the Bank employed 67 full-time and 17 part-time employees. This compares to 68 full-time and 15 part-time employees as of December 31, 2002. Neither the Company or CNB Mortgage Corporation have any full-time employees. Their operation and business are carried out by officers and employees of the Bank who are not compensated by the Company. SECURITIES The year end fair values and related gross unrealized gains and losses for securities available for sale, were as follows: AVAILABLE FOR SALE
Gross Gross Fair Unrealized Unrealized Value Gains Losses ----- ----- ------ (In thousands) 2003 U.S. government and agency $ 48,802 $ 363 $ (28) State and municipal 26,915 638 (8) ------------ ------------ ------------- $ 75,717 $ 1,001 $ (36) ============ ============ ============= 2002 U.S. government and agency $ 26,989 $ 687 $ - State and municipal 30,544 866 (41) ------------ ------------ ------------- $ 57,533 $ 1,553 $ (41) ============ ============ ============= 2001 U.S. government and agency $ 33,057 $ 986 $ - State and municipal 28,061 432 (53) ------------ ------------ ------------- $ 61,118 $ 1,418 $ (53) ============ ============ =============
3 The year end carrying amount, unrecognized gains and losses, and fair value of securities held to maturity were as follows: HELD TO MATURITY
Gross Gross Carrying Unrecognized Unrecognized Fair Amount Gains Losses Value ------ ----- ------ ----- (In thousands) 2003 State and municipal $4,892 $ 117 $ - $5,009 ====== ====== ====== ====== 2002 State and municipal $5,615 $ 140 $ - $5,755 ====== ====== ====== ====== 2001 State and municipal $7,168 $ 132 $ (186) $7,114 ====== ====== ====== ======
Scheduled maturities of the fair value of securities available for sale and the carrying amount of held to maturity securities at December 31, 2003, were as follows:
Due in Due from Due from Due one year one to five to after ten or less five years ten years years Total ------- ---------- --------- ----- ----- (Dollars in thousands) U.S. Government and agencies $ 3,055 $ 45,747 $ - $ - $ 48,802 State and municipal 8,257 17,463 2,300 3,787 31,807 ---------- ------------ ------------ ------------- ----------- $ 11,312 $ 63,210 $ 2,300 $ 3,787 $ 80,609 ========== ============ ============ ============= =========== Yield 3.93% 2.96% 4.04% 3.27% 3.14%
LOANS The following is a summary of loans at December 31:
2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- (In thousands) Residential real estate $ 89,042 $ 92,653 $ 84,588 $ 77,823 $ 71,709 Consumer 9,660 11,270 11,767 12,155 10,891 Commercial real estate 35,258 31,581 26,536 26,571 24,810 Commercial 9,540 10,824 11,912 11,193 11,939 --------- --------- --------- --------- --------- 143,500 146,328 134,803 127,742 119,349 Deferred loan origination fees, net (15) (22) (30) (41) (58) Allowance for loan losses (1,575) (1,669) (1,667) (1,652) (1,583) --------- --------- --------- --------- --------- $ 141,910 $ 144,637 $ 133,106 $ 126,049 $ 117,708 ========= ========= ========= ========= =========
4 Maturity and Rate Sensitivity of Selected Loans The following table presents the remaining maturity of total loans outstanding excluding residential real estate and consumer loans at December 31, 2003, according to scheduled repayments of principal. The amounts due after one year are classified according to the sensitivity of changes in interest rates.
Total -------------- (In thousands) In one year or less $ 14,832 After one year but within five years Interest rates are floating or adjustable 4,248 Interest rates are fixed or predetermined 17,088 After five years Interest rates are floating or adjustable 2,953 Interest rates are fixed or predetermined 5,677 -------- $ 44,798 ========
Summary of loan loss experience is as follows: Additional information relative to the allowance for loan losses is presented in the following table. This table summarizes loan balances at the end of each period and daily average balances, changes in the allowance for loan losses arising from loans charged off and recoveries on loans previously charged off by loan category, and additions to the allowance for loan losses through provisions charged to expense.
2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- (Dollars in thousands) Balance at the beginning of the period $ 1,669 $ 1,667 $ 1,652 $ 1,583 $ 1,518 Less Charge-offs: Residential real estate 8 - - - - Consumer 98 49 84 86 40 Commercial real estate - - - - - Commercial - 1 3 - 3 -------- -------- -------- -------- -------- Total charge-offs 106 50 87 86 43 -------- -------- -------- -------- -------- Recoveries: Residential real estate 1 - 3 14 1 Consumer 11 52 15 28 7 Commercial real estate - - - 2 - Commercial - - 1 1 - -------- -------- -------- -------- -------- Total recoveries 12 52 19 45 8 -------- -------- -------- -------- -------- Provision charged to expense - - 83 110 100 -------- -------- -------- -------- -------- Allowance for loan losses, end of period $ 1,575 $ 1,669 $ 1,667 $ 1,652 $ 1,583 ======== ======== ======== ======== ======== Total loans outstanding at end of period $143,500 $146,328 $134,803 $127,742 $119,349
5 Average total loans outstanding for the year $146,330 $143,840 $128,913 $124,732 $114,042 Ratio of net charge-offs to daily average loans outstanding 0.06% 0.00% 0.05% 0.03% 0.03% Ratio of net charge-offs to total loans outstanding 0.07% 0.00% 0.05% 0.03% 0.03%
The allocation of the allowance for loan losses for the years ended December 31 is:
Residential Commercial Real Estate Consumer Real Estate Commercial Unallocated Total ----------- -------- ----------- ---------- ----------- ----- (Dollars in thousands) 2003 Allowance amount $ 258 $ 48 $ 88 $ 49 $ 1,132 $1,575 % of Total loans 62.1% 6.7% 24.6% 6.6% 100.0% 2002 Allowance amount $ 244 $ 32 $ 79 $ 45 $ 1,269 $1,669 % of Total loans 61.8% 7.7% 23.1% 7.4% 100.0% 2001 Allowance amount $ 219 $ 44 $ 65 $ 30 $ 1,309 $1,667 % of Total loans 62.8% 8.7% 19.7% 8.8% 100.0% 2000 Allowance amount $ 218 $ 79 $ 67 $ 64 $ 1,224 $1,652 % of Total loans 60.9% 9.5% 20.8% 8.8% 100.0% 1999 Allowance amount $ 224 $ 35 $ 77 $ 29 $ 1,218 $1,583 % of Total loans 60.1% 9.1% 20.8% 10.0% 100.0%
The review of the loan portfolio revealed no undue concentrations of credit, however, the portfolio continues to be concentrated in residential real estate mortgages and highly dependent upon the tourist industry for the source of repayment. Because the reliance on tourism is both primary, (i.e. loans to motels, hotels and restaurants, etc.) and secondary (i.e. loans to employees of tourist related businesses), it is difficult to assess a specific dollar amount of inherent loss potential. Likewise, the residential real estate market has been stable or increasing, so inherent loss potential in this concentration is also difficult to reasonably assess. Therefore, the tourism industry and residential real estate mortgage concentrations are considered in establishing the allowance for loan loss. The following is a summary of nonaccrual, past due and restructured loans as of December 31:
2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- (In thousands) Nonaccrual loans $ - $ - $ - $181 $181 Loans past due 90 days or more 408 114 647 81 59 Troubled debt restructurings - - - - - ---- ---- ---- ---- ---- $408 $114 $647 $262 $240 ==== ==== ==== ==== ====
6 DEPOSITS The following table presents the remaining maturity of time deposits individually exceeding $ 100,000 at December 31, 2003. Dollars are reported in thousands. Up to 3 Months $ 1,078 3 to 6 Months 2,619 7 to 12 Months 7,447 Over 12 Months 4,409 -------- $ 15,553 ========
SUPERVISION AND REGULATION As a bank holding company within the meaning of the Bank Holding Company Act, the Company is required by said Act to file annual reports of its operations and such additional information as the Federal Reserve Board may require and is subject, along with its subsidiary, to examination by the Federal Reserve Board. The Federal Reserve Board is the primary regulator of the Company. The Bank Holding Company Act requires every bank holding company to obtain prior approval of the Federal Reserve Board before it may merge with or consolidate into another bank holding company, acquire substantially all the assets of any bank, or acquire ownership or control of any voting shares of any bank if after such acquisition it would own or control, directly or indirectly, more than 5% of the voting shares of such bank holding company or bank. The Bank Holding Company Act also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. However, holding companies may engage in, and may own shares of companies engaged in, certain businesses found by the Federal Reserve Board to be so closely related to banking or the management or control of banks as to be a proper incident thereto. Under current regulations of the Federal Reserve Board, a holding company and its nonbank subsidiaries are permitted, among other activities, to engage, subject to certain specified limitations, in such banking related business ventures as consumer finance, equipment leasing, computer service bureau and software operations, data processing, discount securities brokerage, mortgage banking and brokerage, sale and leaseback, and other forms of real estate banking. The Bank Holding Company Act does not place territorial restrictions on the activities of nonbank subsidiaries of bank holding companies. In addition, Federal legislation prohibits acquisition of "control" of a bank or bank holding company without prior notice to certain federal bank regulators. "Control" in certain cases may include the acquisition of as little as 10% of the outstanding shares of capital stock. The Company's cash revenues are derived primarily from dividends paid by the Bank. National banking laws restrict the payment of cash dividends by a national bank by providing, subject to certain exceptions, that dividends may be paid only out of net profits then on hand after deducting therefrom its losses and bad debts, and no dividends may be paid unless the bank will have a surplus amounting to not less than one hundred percent (100%) of its common capital stock. The Bank is a national banking association and as such is subject to the regulations of, and supervision and regular examination by, the Office of the Comptroller of the Currency ("OCC"). Deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation ("FDIC"). Requirements and restrictions under the laws of the State of Michigan and Title 12 of the United 7 States Code include the requirements that banks maintain reserves against deposits, restrictions on the nature and amount of loans which may be made by a bank, and the interest that may be charged thereon, restrictions on the payment of interest on certain deposits, and restrictions relating to investments and other activities of a bank. The Federal Reserve Board has established guidelines for risk based capital by bank holding companies. These guidelines establish a risk adjusted ratio relating capital to risk-weighted assets and off-balance sheet exposures. These capital guidelines primarily define the components of capital, categorize assets into different risk classes, and include certain off-balance-sheet items in the calculation of capital requirements. An analysis of the Company's regulatory capital requirements at December 31, 2003 is presented on page 23 of the Registrant's 2003 Annual Report in Note 14 Regulatory Capital to the Company's consolidated financial statements, which is incorporated herein by reference. ITEM 2- PROPERTIES. The Company and the Bank have their primary office at 303 North Main Street, Cheboygan, Michigan. In addition, the Bank owns and operates the following facilities: Onaway Office, 20581 W. State Street, Onaway; Mackinaw City Office, 580 S. Nicolet Street, Mackinaw City; Pellston Office, 200 Stimpson, Pellston; Indian River Office, 3990 Straits Highway, Indian River; South Side drive-in, 991 1/2 South Main Street, Cheboygan; Downtown drive-in, 414 Division Street, Cheboygan; and East Side drive-in, 816 East State Street, Cheboygan. All properties are owned by the Bank free of any mortgages or encumbrances. ITEM 3- LEGAL PROCEEDINGS. Neither the Company nor the Bank are a party to any pending legal proceedings other than the routine litigation that is incidental to the business of lending. ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no matters submitted to a vote of security holders during the fourth quarter of 2003. PART II ITEM 5-MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The common stock of the Company has no public trading market. All trades are handled on a direct basis between buyer and seller. The Bank acts as the Company's transfer agent. The principal market for the Company's stock consists of existing shareholders, family members of existing shareholders and individuals in its service area. The information detailing the range of high and low bid information for the Company's common stock and cash dividends declared for each full quarterly period within the two most recent fiscal years can be found under the caption "Financial Highlights" of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2003, which is hereby incorporated by reference. 8 The information which indicates the amount of common stock that is subject to outstanding options or warrants to purchase, or securities convertible into, common equity of the registrant can be found in Note 8 on page 18 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2003, which is hereby incorporated by reference. There are no public offerings pending. There are approximately 907 shareholders of record of the common stock of the Company as of January 31, 2004. During 2003, the Company declared regular dividends of $ 1.53 per share plus a special dividend of $ .57 per share. In 2002, the Company declared regular dividends of $ 1.47 plus a special dividend of $ .57. These per share statistics have been restated to reflect the 5% stock dividend paid March 12, 2004. The information detailing the cash dividends declared within the two most recent fiscal years can be found under the caption "Financial Highlights" of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2003, which is hereby incorporated by reference. These have resulted in a dividend payout ratio averaging 65.5% for the past three years. The Federal Reserve Board's Policy on the Payment of Cash Dividends by Bank Holding Companies restricts the payment of cash dividends based on the following criteria: (1) The Company's net income from operations over the past year must be sufficient to fully fund the dividend and (2) the prospective rate of earnings retention must be consistent with the Company's capital needs, asset quality and overall financial condition. ITEM 6-SELECTED FINANCIAL DATA. The information required by this item is included on Page 1 under the caption "Financial Highlights" of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2003, which is hereby incorporated by reference. ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The information required by this item is included on pages 28 through 39 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2003, which is hereby incorporated by reference. ITEM 7A-QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is included on pages 32 through 33 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2003, which is hereby incorporated by reference. ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. This information is included on pages 2 through 26 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2003, which is hereby incorporated by reference. 9 ITEM 9-CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A-CONTROLS AND PROCEDURES. As of the end of the period covered by this report (the "Evaluation Date") an evaluation was carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Treasurer who serves as our Chief Financial and Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Treasurer have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that material information relating to the Company known to others within the Company required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. There has been no change in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2003 that materially affected, or is reasonably likely to materially affect the Company's internal control over financial reporting. PART III ITEM 10-DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. INFORMATION ABOUT THE DIRECTORS OF THE COMPANY IS SET FORTH BELOW. The following table sets forth certain information regarding each director and nominee for director, including name, age, principal occupation for the past five years, and term of service as a director of the Company. The information set forth in the table is based in part on information provided by each director. There are no family relationships between or among any of the directors, nominees or executive officers of the Company.
HAS SERVED AS A NAME AND AGE PRINCIPAL OCCUPATION DIRECTOR SINCE Steven J. Baker, D.V.M., 52(2) Doctor of Veterinary Medicine, Indian 2000(3) River Veterinary Clinic. Robert E. Churchill, 63 Chairman of the Board & Chief Executive 1983 Officer of the Company. Chairman of the Board & Chief Executive Officer of the Bank. James C. Conboy, Jr., 56 President & Chief Operating Officer of the Company. 1983 President & Chief Operating Officer of the Bank. Former Attorney/Partner, Bodman, Longley & Dahling LLP.
10 Kathleen M. Darrow, 61(2) President/Co-owner of Darrow Bros. Excavating, Inc. 1996 Retired Group Sales & Special Events Coordinator for the Mackinac State Historic Parks. Thomas J. Ellenberger, 53(2) Part Owner, Vice President & Secretary of Albert 1996(5) Ellenberger Lumber Co. (retail lumber sales). Vincent J. Hillesheim, 53(2) President of Crusoe's Rivertown Motors, Inc. 1994 Co-Manager of Crusoe Enterprises, LLC. John L. Ormsbee, 65(2) Sole proprietor of Jack's Sales (auctioneering services). 1980 Francis J. Van Antwerp, Jr., 59(2) Vice President of Durocher Marine Division- 1990 Kokosing Construction Company, Inc. (marine construction). John P. Ward, 67 Secretary of the Company. 1994 Retired Senior Vice President of the Company and Senior Vice President & Cashier of the Bank.
(1) Any service as a director prior to 1985, the year the Company was formed, would have been as a director of the Bank. Since 1985, all directors of the Company also have been directors of the Bank. (2) Member of the Audit Committee. (3) Director of the Bank since December, 1999. (4) Director of the Bank since January, 1996. (5) Director of the Bank since August, 1995. INFORMATION ABOUT THE EXECUTIVE OFFICERS OF THE COMPANY IS SET FORTH BELOW.
Name and Age Position - ------------ -------- Robert E. Churchill, 63 Chairman and Chief Executive Officer of the Company and Citizens National Bank of Cheboygan. Mr. Churchill has been an officer of the Company since its inception in 1985 and an employee of the Bank since 1975. He has been in his current position for more than 15 years. James C. Conboy, Jr., 56 President and Chief Operating Officer of the Company and Citizens National Bank of Cheboygan. Mr. Conboy joined the Company and the Bank during 1998. He has been in his current position for more than 5 years. Susan A. Eno, 49 Executive Vice President of the Company; Executive Vice President and Cashier of Citizens National Bank of Cheboygan. Ms. Eno has been an officer of the Company since 1996 and an employee of the Bank since 1971. She has been in her current position for more than 7 years. Douglas W. Damm, 50 Senior Vice President of the Company and Citizens National Bank of Cheboygan. Mr. Damm has been an officer of the Company since 2003 and an employee of the Bank since 1987. He has been in his current position for more than 16 years.
11 John F. Ekdahl, 53 Senior Vice President of the Company and Citizens National Bank of Cheboygan. Mr. Ekdahl has been an officer of the Company since 1993 and an employee of the Bank since 1987. He has been in his current position for more than 10 years. John P. Ward, 67 Secretary of the Company. Mr. Ward retired from the Bank during 1998. Irene M. English, 44 Treasurer of the Company; Vice President and Controller of Citizens National Bank of Cheboygan. Ms. English was appointed an officer of the Company during 1998 and has been an employee of the Bank since 1985.
AUDIT COMMITTEE. The Board of Directors of the Company has an Audit Committee. Its membership is comprised of Directors Hillesheim (who serves as Chairman), Baker, Darrow, Ellenberger, Ormsbee and Van Antwerp. All members qualify as "independent directors" under the NYSE listing standards. Under the Sarbanes-Oxley Act of 2002 and implementing Securities and Exchange Commission rules, the Company is required to disclose whether the Audit Committee has at least one member who qualifies as an "audit committee financial expert" as that term is defined in the rules. Based on the exacting criteria set forth in the Securities and Exchange Commission rules, the Board of Directors has determined that no independent member of the Board of Directors qualifies as an "audit committee financial expert". The present members of the Audit Committee have 66 years of combined service on the Audit Committee. All of the members are financially literate and at least one of the members has expertise in accounting and other aspects of financial management. Considering this experience and expertise and other relevant issues, the Board of Directors believes that the Audit Committee can effectively fulfill its duties and obligations and has determined that appointing an additional director or retaining an individual who would meet the qualifications of an "audit committee financial expert" is neither necessary nor reasonable at this time. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the Securities Exchange Act of 1934 requires directors, executive officers, and any persons beneficially owing more than 10% of the Company's common stock to file reports of ownership and changes in ownership of shares of common stock with the Securities and Exchange Commission. Based upon a review of the Forms 3 and 4 and amendments thereto furnished to the Company during 2003 and Form 5 and amendments thereto furnished to the Company with respect to 2003, and written representations by each director and executive officer, the Company believes that all of the required reports were filed by such persons during 2003. CODE OF ETHICS. The Company has adopted a Senior Financial Officers Code of Ethics that applies to the Company's chief executive officer, treasurer, controller or other senior officers performing similar functions. A copy of the Senior Financial Officers Code of Ethics will be furnished without charge upon written request to: Corporate Secretary, CNB Corporation, 303 N. Main Street, Cheboygan, Michigan 49721. NOMINATION FOR DIRECTORS. In March 2004, the Board of Directors adopted a bylaw provision for the nomination of directors. Beginning with the 2005 Annual Meeting of Shareholders, only persons who are nominated in accordance with that bylaw provision shall be eligible for election as directors. That provision is as follows: 12 "Article III" "Directors" "Section 2. NOMINATION OF DIRECTORS. Nominations of persons for election to the board of directors may be made by or at the direction of the board of directors, by any nominating committee or person appointed by the board of directors, or by any shareholder entitled to vote at a meeting at which one or more directors will be elected who submits timely written notice of any nomination to the secretary of the corporation. "To be timely, a shareholder's notice shall be delivered to, or mailed and received at, the principal business office of the company not less than ninety (90) days nor more than one hundred twenty (120) days prior to the scheduled date of the annual meeting of shareholders, regardless of any postponements, deferrals or adjournments of that meeting to a later date. To be timely in the case of a special meeting of the shareholders or in the event that the date of the applicable annual meeting is changed by more than thirty (30) days from its scheduled date, a shareholder's notice must be received no later than the close of business on the tenth (10th) day following the earlier of the day on which notice of the meeting date was mailed or the day public disclosure of the meeting was made. "To be in proper written form, a shareholder's notice must set forth or include (1) the name and address, as they appear on the records of the corporation, of the shareholder giving the notice and of the beneficial owner, if any, on whose behalf the nomination is made; (2) a representation that the shareholder giving the notice is a holder of record entitled to vote as such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (3) the class and number of shares of the capital stock of the corporation beneficially owned and of record by the shareholder giving the notice and by the beneficial owner, if any, on whose behalf the nomination is made; (4)any material interest or relationship that the shareholder giving the notice and/or the beneficial owner, if any, on whose behalf the nomination is made may have with each proposed nominee; (5) the name, address age, principal occupation or employment, as such other information for each proposed nominee as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the board of directors; and (6) a signed consent of each proposed nominee to serve as a director of the corporation is so elected. "No person shall be eligible for election as a director unless such person has been nominated in accordance with the procedures prescribed herein. If the facts warrant, the person presiding at the meeting will determine and declare to the meeting that a nomination does not satisfy the foregoing requirements and the defective nomination shall be disregarded. Nothing in this Section shall be construed to affect the requirement for proxy statements of the corporation under Regulation 14A of the Securities Exchange Act of 1934, as amended." ITEM 11-EXECUTIVE COMPENSATION. COMPENSATION OF EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE The following table sets forth the compensation received by the named executives for each of the calendar years shown. ANNUAL COMPENSATION
Name and Principal 401 (k) Other Position Year Salary Bonus Match Compensation Robert E. Churchill 2003 $170,000(1) $117,256 $9,465 $8,178 Chairman & Chief 2002 $165,000(1) $103,016 $8,128 $6,487 Executive Officer 2001 $160,000(1) $ 88,912 $6,690 $5,317 James C. Conboy, Jr. 2003 $135,000(1) $ 39,085 $5,203 $7,139 President & Chief 2002 $129,000(1) $ 20,603 $4,593 $7,076 Operating Officer 2001 $124,000(1) $ 17,782 $4,102 $6,652 Susan A. Eno 2003 $ 88,500 $ 15,000 $3,136 $1,410 Executive Vice President & Cashier
(1)Included compensation and $4,000 deferred annual director fee. 13 Pension Plan Table The defined benefit retirement plan covers employees over 20 years of age with more than six months of eligible service. Normal retirement age is 65. Participants receive credit for 1.1% of average compensation multiplied by years of credited benefit service, plus .65% of average compensation in excess of covered compensation multiplied by years of credited benefit service (maximum of 35 years). YEARS OF SERVICE
Remuneration 15 20 25 30 35 100,000 19,986 26,648 33,310 39,972 46,634 125,000 26,548 35,398 44,247 53,097 61,946 150,000 33,111 44,148 55,185 66,222 77,259 175,000 39,673 52,898 66,122 79,347 92,571 200,000 46,236 61,648 77,060 92,472 107,884 225,000 46,236 61,648 77,060 92,472 107,884
The law in effect throughout 2003 limited remuneration considered for benefit purposes to $200,000. Covered remuneration for the named executives who participated in the plan is $200,000 for Mr. Churchill, $170,085 for Mr. Conboy and $103,500 for Mrs. Eno. As of December 31, 2003, Mr. Churchill was credited with 28.83 years of service, Mr. Conboy was credited with 5 years of service and Mrs. Eno was credited with 32.08 years of service. The annual benefit is based upon a 10-year period certain and life annuity and is not subject to any deduction for Social Security or other offset amounts. OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
% of Total Potential Realized Options/ Value at Assumed Number of SARs Annual Rates of Securities Granted to Stock Price Underlying Employees Exercise or Appreciation for Options/SAR in Fiscal Base Expire. Option Term Name Granted Year Price Date 5% 10% James C. Conboy, Jr. 1,050 12.60% $51 12/24/13 56,228 58,905 Susan A. Eno 945 11.30% $51 12/24/13 50,605 53,014
14 Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table sets forth the options exercised by the named executives under the CNB Corporation 1996 Stock Option Plan during the fiscal year ended December 31, 2003 and the value of unexercised options as of such date.
NUMBER OF SECURITIES VALUE OF SHARES UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY ACQUIRED OPTIONS AT FISCAL OPTIONS AT FISCAL YEAR ON VALUE YEAR END(1) END(2) NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE Robert E. Churchill Chairman & Chief Executive Officer 0 0 5,149 0 $54,311 $0 James C. Conboy, Jr. President & Chief Operating Officer 0 0 4,882 1,050 $(1,529) $2,551 Susan A. Eno Executive Vice President 0 0 3,983 945 $57,702 $2,296
(1)The number of shares shown have been adjusted to reflect three 5% stock dividends. (2)The value shown is calculated by determining the difference between the fair market value of the common stock and the exercise price of the options (adjusted for stock dividends) at fiscal year end. For purposes of this value, fair market value is deemed to be $51.00 per share, the price at which the stock last traded on or before December 31, 2003. Report on Executive Compensation The Company's compensation program for executive officers is administered by the entire Board of Directors, including Robert E. Churchill, Chairman & Chief Executive Officer; James C. Conboy, Jr., President & Chief Operating Officer; and John P. Ward, Secretary. At present, all officers of the Company, with the exception of Mr. Ward, the Company's Secretary, are also officers of the Bank, and although they receive compensation from the Bank in their capacity as officers of the Bank, they receive no separate cash compensation from the Company. Mr. Ward receives no compensation as Secretary of the Company. The Board of Directors has developed and implemented compensation plans which seek to align the financial interests of the Company's senior officers with those of its shareholders. The Company's executive compensation program is comprised of three primary components: base salary, annual cash incentive bonus opportunities and longer-term incentive opportunities in the form of stock option awards. Executives also participate in the Bank's 401(k) Savings Plan and Pension Plan and are eligible to participate in the Bank's 1997 Deferred Compensation Plan. To attract and retain officers with exceptional abilities and talent, annual base salaries are set to provide competitive levels of compensation recognizing individual performance and achievements. Annual cash incentive bonuses are used to reward senior officers and other key employees for individual performance, accomplishments and achievement of annual business targets. A significant portion of career compensation for senior officers is linked to corporate performance through stock option awards. The Board of Directors determines the annual base salary, incentive bonus and stock option awards for the Chief Executive Officer. Annual base salary, incentive bonus and stock option awards with respect to the Company's other senior officers are recommended by the Chief Executive Officer to, and ultimately determined by, the Board of Directors. All recommendations of the Chief Executive Officer were approved by the Board of Directors for the most recent calendar year. 15 In evaluating the performance of and determining the annual base salary, incentive bonus and stock option awards for the Chief Executive Officer and other senior management, the Board of Directors takes into account management's contribution to the long-term success of the Company. The Board of Directors considers return to shareholders to be primary in measuring financial performance. The mission of the Company is to maximize long-term return to shareholders consistent with its commitments to maintain the safety and soundness of the Company and the Bank and provide the highest possible service at a fair price to the customers and communities that it serves. The Board of Directors has taken these subjective and qualitative factors into account, along with other quantitative measures of corporate performance, in establishing the base salary, incentive bonus and stock option awards for the Chief Executive Officer and the Company's other senior management, giving at least equal weight to the subjective and qualitative factors and no particular weight to any given factor. The determination of the size of stock option awards is based upon a subjective analysis of each recipient's position within the organization, his or her individual performance and his or her growth potential within the organization. The Board of Directors primarily considers five quantitative measures of corporate performance in establishing the compensation to be paid to the Chief Executive Officer and the Company's other senior management. These measures of corporate performance are: (i)after-tax earnings and earnings growth; (ii)capital position; (iii)quality of the Bank's loan portfolio; (iv)targeted as compared to actual operating performance; and (v)the Company's performance and financial condition as compared to that of its Federal Reserve Bank peer group. These measures were considered by the Board of Directors in determining each component of executive compensation, with particular weight being given to after-tax earnings and earnings growth. The Board of Directors also takes into consideration compensation levels at comparable financial institutions based on various general and targeted compensation surveys of peer group commercial banks with total assets between $100 and $500 million located in the Midwest United States and the state of Michigan. Submitted by the Board of Directors: Steven J. Baker Robert E. Churchill James C. Conboy, Jr. Kathleen M. Darrow Thomas J. Ellenberger Vincent J. Hillesheim John L. Ormsbee Francis J. Van Antwerp, Jr. John P. Ward Compensation of Directors All directors initially elected prior to January 1, 1994 participate in the Citizens National Bank of Cheboygan 1985 Directors' Deferred Compensation plan in lieu of current payment of director fees. The plan was adopted by the Bank in 1985 and in 1993 participation in the plan was closed to directors initially elected after January 1, 1994. The plan provides for retirement and death benefits to be paid to the participating directors by the Bank over a minimum of fifteen years. The Bank is the owner and beneficiary of life insurance policies which are structured to fund the Bank's obligations under the terms of the plan. Directors initially elected after January 1, 1994, may participate in the Citizens National Bank of Cheboygan 1997 Deferred Compensation Plan. The plan was adopted by the Bank effective September 1, 1997. The plan permits deferral of all or any portion of your current director fees. Amounts deferred are credited with interest at a rate equal to the Bank's "yield on earning assets" as calculated at year end of the prior year. Upon separation for any reason of the services of a participating director from the Bank, the director will be entitled to receive the balance of his or her account either in a lump sum or in approximately equal installments over a period of ten years. During 2003 directors participating in the 1985 Directors' Deferred Compensation Plan received a deferred annual retainer of $4,000 for services on the Board of Directors of the Company and the Bank. Directors not eligible to participate in the 1985 Directors' Deferred Compensation Plan received a quarterly retainer of $2,250 for service on the two Boards. Directors are not compensated for attendance at Board or Committee meetings, but are reimbursed for travel expenses for meetings attended. 16 Performance Graph Set forth below is a line graph comparing yearly percentage change in the cumulative total shareholder return on the Company Common Stock (based on the last reported sales price of the respective year) with the cumulative total return of the NASDAQ Stock Market Index(United States stock only) and the NASDAQ Bank Stock Index. The following information is based on an investment of $100 on December 31, 1998, with dividends reinvested quarterly.
1998 1999 2000 2001 2002 2003 CNB Corporation $100 $172 $136 $142 $134 $142 NASDAQ Stock Market 100 185 112 89 61 92 NASDAQ Bank Stock 100 96 110 119 122 157
[LINE CHART] ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table sets forth certain information as of March 19, 2004, with respect to those persons known by the Corporation to be the beneficial owner of more than five percent(5%) of the Corporation's outstanding common stock. AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
Sole Voting Shared Voting Total Name and Address of and Dispositive or Dispositive Beneficial Percent of Beneficial Owner Power Power(2) Ownership Class Dessie M. Ormsbee P.O. Box 5157 Cheboygan, MI 49721 37,279 37,279 74,558 5.99%
(1) The number of shares stated include shares personally owned of record by that person and shares which, under applicable regulations, are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person will also be considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. 17 (2)These numbers include shares over which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust, or other contract or property right, and shares held by spouses and children over whom the listed person may have substantial influence by reason of relationship. The following table sets forth certain information as of March 19, 2004, as to the common stock of the Company owned beneficially by each director and nominee for director, each named executive officer, and by all directors and executive officers of the Company as a group. AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
SOLE VOTING SHARED VOTING TOTAL NAME OF AND/OR AND/OR BENEFICIAL PERCENT OF BENEFICIAL OWNER DISPOSITIVE POWER DISPOSITIVE POWER(2) OWNERSHIP CLASS Steven J. Baker 1,716 1,716 * Robert E. Churchill 17,563 22,712 (3) 1.42% James C. Conboy, Jr. 9,006 14,938 (3) * Kathleen M. Darrow 2,415 2,415 * Thomas J. Ellenberger 3,379 10,086 13,465 1.08% Vincent J. Hillesheim 23,829 1,179 25,008 2.01% John L. Ormsbee 14,681 14,681 29,362 2.36% Francis J. Van Antwerp, Jr. 736 7,217 7,953 * John P. Ward 3,919 3,919 * All directors and officers as a group (12 persons) 45,995 69,591 126,667 (4) 10.17%
* Less than 1% (1)The number of shares stated include shares personally owned of record by that person and shares which, under applicable regulations, are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person will also be considered the beneficial owner of security if the person has the right to acquire beneficial ownership of the security within 60 days. (2)These numbers include shares over which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust, or other contract or property right, and shares held by spouses and children over whom the listed person may have substantial influence by reason of relationship. (3)Includes 5.149 shares and 5,932 shares that may be acquired within 60 days by Mr. Churchill and Mr. Conboy, respectively, through the exercise of stock options. (4)Includes 22,991 shares that may be acquired within 60 days by executive officers of the Company through the exercise of stock options. 18 SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
(c) (a) Number of Number of (b) securities remaining securities to Weighted-average available for be issued exercise price future issuance upon exercise of outstanding under equity of outstanding options, warrants compensation plans options, warrants and rights (excluding securities Plan Category and rights reflected in column (a)) Equity compensation 39,342 $44.10 9,952 plans approved by security holders Equity compensation None plans not approved by security holders Total 39,342 $44.10 9,952
ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Directors and officers of the Corporation, as well as members of their immediate families and the companies, organizations an other entities with which they are associated, have had, and are expected to have in the future, transactions with the Bank. All such transactions are made in the ordinary course of business and on substantially the same terms, including interest rates and collateral requirements on loan transactions, as those prevailing at the same time for comparable transactions with other persons. All such loan transactions do not involve more than normal risk of collectibility or present other unfavorable features and, when required, are approved by the Board of Directors. Director Conboy serves of counsel to the law firm of Bodman, Longley & Dahling LLP which provided legal services to the Corporation and the Bank during 2003. It is anticipated that Bodman, Longley & Dahling LLP will continue to furnish legal services in the future. Director Ward served as a consultant to, and worked on various projects for, the Bank during 2003 and was compensated $7,200 for his services. ITEM 14-PRINCIPAL ACCOUNTANT FEES AND SERVICES. In 2003, Crowe Chizek and Company LLC performed audit and audit related services for the Company and the Bank, which included examination of the consolidated financial statements of the Company and consultation on accounting and reporting matters. 19 Crowe Chizek and Company LLC has served as the independent internal external auditors for the Bank since 1980 and for the Company since its formation in 1985 and the Audit Committee has selected Crowe Chizek and Company LLC to serve as the Company's independent external auditors for 2004. Aggregate fees billed to the Company by Crowe Chizek and Company LLC, for the years ended December 31, 2003 and 2002 were as follows:
2003 2002 Audit Fees $42,754.00 $39,377.00 Audit-Related Fees 0.00 0.00 Tax Fees 7,000.00 6,900.00 All Other Fees 1,000.00 0.00
Tax fees relate to tax return preparation and tax consulting. All other fees for 2003 were for determination of expense under the 1985 Directors Deferred Compensation Plan. All of the services provided by the Company's independent external auditors set forth above were approved by the Audit Committee. The Audit Committee will annually review and pre-approve the services that may by provided by the independent external auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee may change the list of general pre-approved services from time to time based on subsequent determinations. Under no circumstances will the Audit Committee delegate its authority or responsibilities to pre-approve services performed by the independent external auditors to management. PART IV ITEM 15-EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) (1) Financial Statements. The following financial statements, notes to financial statements and independent auditor's report of CNB Corporation and its subsidiary are incorporated by reference in Item 8 of this report: Consolidated Balance Sheets-December 31, 2003 and 2002. Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2003, 2002 and 2001. Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001. Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001. Notes to Consolidated Financial Statements. Independent Auditor's Report dated February 12, 2004. (2) Financial Statement Schedules. Not applicable 20 (3) Exhibits. (3a) Articles of Incorporation. Previously filed as exhibit to the registrant's Form 10-KSB filed April 26, 1996 and hereby incorporated by reference. (3b) By-laws as amended through March 25, 2004 (filed herewith). (11) Statement regarding computation per share earnings. This information is disclosed in Note 10 to the Company's Financial Statements for the year ended December 31, 2003, which was previously filed as Exhibit 13 to the Company's Form 10-K for the fiscal year ended December 31, 2003 filed March 30, 2004, and is hereby incorporated by reference. (13) Annual report to shareholders for the year ended December 31, 2003. Previously filed as as Exhibit 13 to the Company's Form 10-K for the fiscal year ended December 31, 2003 filed March 30, 2004, and hereby incorporated by reference. (21) Subsidiaries of the Company. Previously filed as Exhibit 21 to the Company's Form 10-K for the fiscal year ended December 31, 2004 filed March 30, 2004, and hereby incorporated by reference. (23) Consent of Independent Auditors. Previously filed as Exhibit 23 to the Company's Form 10-K for the fiscal year ended December 31, 2003 filed March 30, 2004, and hereby incorporated by reference. (31.1) Certification of Chief Executive Officer (filed herewith). (31.2) Certification of Chief Financial Officer (filed herewith). (32.1) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). (b) Reports on Form 8-K. No reports on Form 8-K were filed during the last calendar quarter of the year covered by this report. (c) See Item 15(a) (3) (d) Financial Statement Schedules. Not applicable. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 December 20, 2004 /s/ James C. Conboy, Jr. - -------------------------------------- James C. Conboy, Jr. President and Chief Executive Officer EXHIBIT INDEX (3a) Articles of Incorporation. Previously filed as an exhibit to the registrant's Form 10-KSB filed April 26, 1996 and hereby incorporated by reference. (3b) By-laws as amended through March 25, 2004 (filed herewith). (11) Statement regarding computation per share earnings. This information is disclosed in Note 10 to the Company's Financial Statements for the year ended December 31, 2003 contained in its annual report to shareholders for the year ended December 31, 2003, which was previously filed as Exhibit 11 to the Company's Form 10-K for the fiscal year ended December 31, 2003 filed March 30, 2004, and is hereby incorporated by reference. (13) Annual report to shareholders for the year ended December 31, 2003. Previously filed as Exhibit 13 to the Company's Form 10-K for the fiscal year ended December 31, 2003 filed March 30, 2004, and hereby incorporated by reference. (21) Subsidiaries of the Company. Previously filed as Exhibit 21 to the Comapany's Form 10-K for the fiscal year ended December 31, 2003 filed March 30, 2004, and hereby incorporated by reference. (23) Consent of Independent Auditors. Previously filed as Exhibit 23 to the Company's Form 10-K for the fiscal year ended December 31, 2003 filed March 30, 2004, and hereby incorporated by reference. (31.1) Certification of Chief Executive Officer (filed herewith). (31.2) Certification of Chief Financial Officer (filed herewith). (32.1) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). EX-3.(B) 2 k90714exv3wxby.txt BY-LAWS AS AMENDED THROUGH MARCH 25, 2004 EXHIBIT 3B BYLAWS OF CNB CORPORATION (As Amended Through March 25, 2004) ARTICLE 1 OFFICES SECTION 1. REGISTERED OFFICE. The registered office shall be in the City of Cheboygan, County of Cheboygan, State of Michigan. SECTION 2. OTHER OFFICES. The corporation may also have offices at such other places both within and without the State of Michigan as the board of directors may from time to time determine of the business of the corporation may require. ARTICLE II SHAREHOLDERS SECTION 1. PLACE OF MEETING. All meetings of the shareholders of this corporation shall be held at the registered office or such other place, either within or without the State of Michigan, as may be determined from time to time by the board of directors. SECTION 2. ANNUAL MEETING OF SHAREHOLDERS. The annual meeting of shareholders for election of directors and for such other business as may properly come before the meeting shall be held on the third Tuesday of May, if not a legal holiday, and if a legal holiday, then on the next business day following, or at such other date as shall be determined from time to time by the board of directors. If the annual meeting is not held on the date designated therefor, the board shall cause the meeting to be held as soon thereafter as convenient. SECTION 3. NOTICE OF MEETING OF SHAREHOLDERS. Except as otherwise provided in the Michigan Business Corporation Act (herein called the "Act"), written notice of the time, place, and purposes of a meeting of shareholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, to each shareholder of record entitled to vote at the meeting. When a meeting is adjourned to another time or place, it is not necessary to give notice of the a adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken and at the adjourned meeting only such business is transacted as might have been transacted at the original meeting. However, if after the adjournment the board of director fixes a new record date for the adjourned meeting a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to vote at the meeting. SECTION 4. LIST OF SHAREHOLDERS ENTITLED TO VOTE. The officer or agent having charge of the stock transfer books for of the corporation shall make and certify a complete list of the shareholders entitled to vote at a shareholders' meeting or any adjournment thereof. The list shall: (a) Be arrange alphabetically within each class and series, with the address of, and the number of shares held by, each shareholder. (b) Be produced at the time and place of the meeting. (c) Be subject to inspection by any shareholder during the whole time of the meeting. (d) Be prima facie evidence as to who are the shareholders entitled to examine the list or to vote at the meeting. SECTION 5. SPECIAL MEETING OF SHAREHOLDERS. A special meeting of shareholders may be called at any time by the chief executive officer of the corporation (See Article V, Section 4) or by a majority of the members of the board of directors then in office, or by ten (10) shareholders owning, in the aggregate, not less than twenty percent (20%) of all the shares entitled to vote at such special meeting. The method by which such meeting may be called is as follows: Upon receipt of a specification in writing setting forth the date and objects of such proposes special meeting, signed by the chief executive officer, or by a majority of the members of the board of directors then in office, or by shareholders as above provided, the secretary of this corporation shall prepare, sign, and mail the notices requisite to such meeting. SECTION 6. QUORUM OF SHAREHOLDERS. Unless a greater or lesser quorum is provided in the Articles of Incorporation, in a bylaw adopted by the shareholders or in the Act, shares entitled to cast a majority of the votes at the meeting constitute a quorum at the meeting. The shareholders present in person or by proxy at such meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Whether or not a quorum is present, the meeting may be adjourned by a vote of the shares present. SECTION 7. VOTE OF SHAREHOLDERS. Each outstanding share is entitled to one (1) vote on each matter submitted to a vote, unless otherwise provided in the Articles of Incorporation. A vote may be cast either orally or in writing. When an action, other than the election of directors is to be taken by vote of shareholders, it shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon, unless a greater plurality is required by the Articles of Incorporation or the Act. Directors shall be elected by a plurality of votes cast at an election. SECTION 8. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS. For the purpose of determining shareholders entitled to notice of and to vote at a meeting of shareholders or an adjournment thereof, or to express consent or the dissent from a proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of a dividend or allotment of a right, 2 or for the purpose of any other action, the board may fix, in advance, a date as the record date for any such determination of shareholders. The date shall not be more than sixty (60) nor less than ten (10) days before the date of the meeting, nor more than sixty (60) days before any other action. If a record date is not fixed (a) the record date for determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day next preceding the day on which the meeting is held, and (b) the record date for determining shareholders for any purpose other than that specified in subdivision (a) shall be the close of business on the day on which the resolution of the board relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders has been made as provided in this Section, the determination applies to any adjournment of the meeting, unless the board fixes a new record date under this Section for the adjourned meeting. SECTION 9. PROXIES. A shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize one or more other persons to act for him/her by proxy. A proxy shall be signed by the shareholder or his/her authorized agent or representative. A proxy must state its duration, but in any case, a proxy is not valid after the expiration of three (3) years from its date. SECTION 10. INSPECTORS OF ELECTION. The board of directors, in advance of a shareholders' meeting, may appoint one (1) or more inspectors of election to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders' meeting may, and on request of a shareholder entitled to vote thereat shall, appoint one (1) or more inspectors. In case a person appointed fails to appear or act, the vacancy may be filled by appointment made by the board of directors in advance of the meeting or at the meeting by the person presiding thereat. The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes ballots or consents, hear and determine challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election with fairness to all shareholders. On request of the person presiding at the meeting or a shareholder entitled to vote thereat, the inspectors shall make and execute a written report to the person presiding at the meeting of any of the facts found by them and matters determined by them. The report is prima facie evidence of the facts stated and of the vote as certified by the inspectors. ARTICLE III DIRECTORS SECTION 1. NUMBER AND TERM OF DIRECTORS. The number of directors which shall constitute the whole board shall be not less than one (1) nor more than seventeen (17). The first board shall consist of one (1) director. Thereafter, the number of directors 3 which shall constitute the board of directors for each ensuing year shall be determined at the annual meeting by vote of the shareholders prior to such election; provided, however, that if a motion is not made and carried to increase or decrease the number of directors, the board shall consist of the same number of directors as were elected for the preceding year. The first board of directors shall hold office until the first annual meeting of shareholders. At the first annual meeting of shareholders and at each annual meeting thereafter the shareholders shall elect directors to hold office until the succeeding annual meeting. A director shall hold office for the term for which he/she is elected and until his/her successor is elected and qualified, or until his/her resignation or removal. Directors must be shareholders. SECTION 2. NOMINATION OF DIRECTORS. Nominations of persons for election to the board of directors may be made by or at the direction of the board of directors, by any nominating committee or person appointed by the board of directors, or by any shareholder entitled to vote at a meeting at which one or more directors will be elected who submits timely written notice of any nomination to the secretary of the corporation. To be timely, a shareholder's notice shall be delivered to, or mailed and received at, the principal business office of the corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the scheduled date of the annual meeting of shareholders, regardless of any postponements, deferrals or adjournments of that meeting to a later date. To be timely in the case of a special meeting of the shareholders or in the event that the date of the applicable annual meeting is changed by more than thirty (30) days from its scheduled date, a shareholder's notice must be received no later than the close of business on the tenth (10th) day following the earlier of the day on which notice of the meeting date was mailed or the day public disclosure of the meeting was made. To be in proper written form, a shareholder's notice must set forth or include (a) the name and address, as they appear on the records of the corporation, of the shareholder giving the notice and of the beneficial owner, if any, on whose behalf the nomination is made: (b) a representation that the shareholder giving the notice is a holder of record entitled to vote as such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;(C)the class and number of shares of the capital stock of the corporation beneficially owned and of record by the shareholder giving the notice and by the beneficial owner, if any, on whose behalf the nomination is made; (d) any material interest or relationship that the shareholder is giving the notice and/or the beneficial owner, if any, on whose behalf the nomination is made may have with each proposed nominee; (e) the name, address, age, principal occupation or employment, and such other information for each proposed nominee as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the board of directors; and (f) a signed consent of each proposed nominee to serve as a director of the corporation if so elected. 4 No person shall be eligible for election as a director unless such person has been nominated in accordance with the procedures prescribed herein. If the facts warrant, the person presiding at the meeting will determine and declare to the meeting that a nomination does not satisfy the foregoing requirements and the defective nomination shall be disregarded. Nothing in this Section shall be construed to affect the requirement for proxy statements of the corporation under Regulation 14A of the Securities Exchange Act of 1934, as amended. SECTION 3. VACANCIES. A position occurring in the board resulting from a vacancy or an increase in the number of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board for a term of office continuing only until the next election of directors by the shareholders. If because of death, resignation or other cause, the corporation has no directors in office, an officer, a shareholder or, on behalf of a shareholder, an executor, administrator, trustee or guardian of a shareholder, or other fiduciary entrusted with like responsibility for the person or estate of a shareholder, may call a special meeting of shareholders in accordance with the Articles of Incorporation or these Bylaws. SECTION 4. REMOVAL. A director or the entire board may be removed at any time, with or without cause, by vote of the holders of a majority of the shares entitled to vote at an election of directors. SECTION 5. RESIGNATION. A director may resign by written notice to the corporation. The resignation is effective upon its receipt by the corporation or a subsequent time as set forth in the notice of resignation. SECTION 6. POWERS. The business and affairs of the corporation shall be managed by its board of directors except as otherwise provided in the Act or in the Articles of Incorporation. SECTION 7. LOCATION OF MEETINGS. Regular or special meetings of the board of directors may be held either within or without the State of Michigan. SECTION 8. ORGANIZATION MEETING OF BOARD. The first meeting of each newly elected board of directors shall be held at the place of holding the annual meeting of shareholders, and immediately following the same, for the purpose of electing officers and transacting any other business properly brought before it, provided that the organization meeting in any year may be held at a different time and place than that herein provided by a consent of a majority of the directors of such new board. No notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, unless said meeting is not held at the place of holding and immediately following the annual meeting of shareholders. SECTION 9. REGULAR MEETING OF THE BOARD. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. SECTION 10. SPECIAL MEETING OF THE BOARD. Special meetings of the board of directors may be called by the chief executive 5 officer, the chairperson of the board, or by twenty-five percent (25%) of the persons then comprising the board of directors, at any time by means of written notice of the time and place thereof to each director, given not less than twenty-four (24) hours before the time such special meeting is to be held. SECTION 11. COMMITTEES OF DIRECTORS. The board of directors may designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the corporation. The board may designate one (1) or more directors as alternate members of any committee, who may replace an absent or disqualified member at a meeting of the committee. In the absence or disqualification of a member of a committee, the members thereof present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors in the management of the business and affairs of the corporation. However, such a committee does not have the power or authority to amend the Articles of Incorporation, adopt an agreement of merger or consolidation, recommend to the shareholders the sale, lease, or exchange of all or substantially all of the corporation's property and assets, recommend to the shareholders a dissolution of the corporation or a revocation of a dissolution, amend these Bylaws, fill vacancies in the board of directors, or fix compensation of the directors serving on the board or on a committee; and, unless the resolution of the board of directors creating such a committee or the Articles of Incorporation expressly so provides, such a committee does not have the power or authority to declare a dividend or to authorize the issuance of stock. Any such committee, and each member thereof, shall serve at the pleasure of the board of directors. SECTION 12. QUORUM AND REQUIRED VOTE OF BOARD AND COMMITTEES. At all meetings of the board of directors, or of a committee thereof, a majority of the members of the board then in office, or of the members of a committee thereof, constitutes a quorum for transaction of business. The vote of the majority of members present at a meeting at which a quorum is present constitutes the action of the board or of the committee unless the vote of a larger number is required by the Act. Amendment of these Bylaws by the board requires the vote of not less than a majority of the members of the board then in office. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 13. COMPENSATION OF DIRECTORS. The board of directors, by affirmative vote of a majority of directors in office irrespective of any personal interest of any of them, may establish reasonable compensation of directors for services to the corporation as directors or officers, but approval of the shareholders is required if the Articles of Incorporation, these Bylaws, or any provisions of the Act so require. 6 SECTION 14. PARTICIPATION IN MEETING BY TELEPHONE. By oral or written permission of a majority of the board of directors, a member of the board of directors or of a committee designated by the board may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section constitutes presence in person at the meeting. ARTICLE IV NOTICES SECTION 1. NOTICE. Whenever any notice or communication is required to be given by mail to any director or shareholder under any provision of the Act, or of the Articles of Incorporation or of these Bylaws, it shall be given in writing, except as otherwise provided in the Act, to such director or shareholder at the address designated by him/her for that purpose or, if none is designated, at his/her last known address. The notice or communication is given when deposited, with postage thereon prepaid, in a post office or official depository under exclusive care and custody of the United States postal service. The mailing shall be registered, certified or other first class mail except where otherwise provided in the Act. Written notice may also be given in person or by telegram, telex, radiogram, cablegram, or mailgram, and such notice shall be deemed to be given when the recipient receives the notice personally, or when the notice, addressed as provided above, has been delivered to the company, or to the equipment transmitting such notice. The business to be transacted at and the purpose of a special meeting of the board of directors must be specified in the notice of the meeting. SECTION 2. WAIVER OF NOTICE. When, under the Act or the Articles of Incorporation or by these Bylaws, or by the terms of an agreement or instrument, the corporation or the board or any committee thereof may take action after notice to any person or after lapse of a prescribed period of time, the action may be taken without notice and without lapse of the period of time, if at any time before or after the action is completed the person entitled to notice or to participate in the action to be taken or, in case of a shareholder, by his/her attorney-in-fact, submits a signed waiver of such requirements. Neither the business to be transacted at, nor the purpose of, a regular or special meeting of the board of directors need to be specified in the waiver of notice of the meeting. Attendance of a person at a meeting of shareholders, in person or by proxy, or of a director at a meeting constitutes a waiver of notice of such meeting, except when the person or director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE V OFFICERS SECTION 1. SELECTION. The board of directors, at its first meeting and at each meeting following the annual meeting of 7 shareholders, shall elect or appoint a president, a secretary and a treasurer. The board of directors may also elect or appoint a chairperson of the board, one (1) or more vice presidents and such other officers, employees and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Two (2) or more offices may be held by the same person but an officer shall not execute, acknowledge, or verify an instrument in more than one (1) capacity. SECTION 2. COMPENSATION. The salaries of all officers, employees and agents of the corporation shall be fixed by the board of directors; provided, however, that the board may delegate to the officers the fixing of compensation of assistant officers, employees and agents. SECTION 3. TERM, REMOVAL AND VACANCIES. Each officer of the corporation shall hold office for the term for which he/she is elected or appointed and until his/her successor is elected or appointed and qualified, or until his/her resignation or removal. An officer elected or appointed by the board of directors may be removed by the board with or without cause at any time. An officer may resign by written notice to the corporation. The resignation is effective upon its receipt by the corporation or at a subsequent time specified in the notice of resignation. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. SECTION 4. CHIEF EXECUTIVE OFFICER. At the first meeting of each newly-elected board of directors, the board shall designate a chief executive officer of the corporation; provided, however, that if a motion is not made and carried to change the designation, the designation shall be the same as the designation for the preceding year; provided, further, that the designation of the chief executive officer may be changed at any meeting of the board of directors. The chief executive officer shall be responsible to the board of directors for the general supervision and management of the business and affairs of the corporation and shall see that all orders and resolutions of the board are carried into effect. SECTION 5. CHAIRPERSON OF THE BOARD OF DIRECTORS. If the board of directors elects or appoints a chairperson of the board, he/she shall be elected or appointed by, and from among the membership of, the board of directors. He/she shall preside at all meetings of the shareholders, of the board of directors and of any executive committee. He/she shall perform such other duties and functions as shall be assigned to him/her from time to time by the board of directors. He/she shall be, ex officio, a member of all standing committees other than the audit committee. Except where by law the signature of the president of the corporation is required, the chairperson of the board of directors shall possess the same power and authority to sign all certificates, contracts, instruments, papers and documents of every kind and character whatsoever in the name of and on behalf of the corporation which may be authorized by the board of directors. SECTION 6. PRESIDENT. The president shall be elected or appointed by, and from among the membership of, the board of 8 directors. During the absence or disability of the chairperson of the board, or while that office is vacant, the president shall preside over all meetings of the board of directors, of the shareholders and of any executive committee, and shall perform all of the duties and functions, and when so acting shall have all powers and authority, of the chairperson of the board. He/she shall be, ex officio, a member of all standing committees other than the audit committee. The president shall, in general, perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors. SECTION 7. VICE PRESIDENTS. The board of directors may elect or appoint one or more vice presidents. The board of directors may designate one or more vice presidents as executive or senior vice presidents. Unless the board of directors shall otherwise provide by resolution duly adopted by it, the vice president whom shall have been designated executive or senior vice president shall perform the duties and exercise the powers of the president during the absence or disability of the president. The vice presidents shall perform such other duties as may be delegated to them by the board of directors, any executive committee, the chairperson of the board, or the president. SECTION 8. SECRETARY. The secretary shall attend all meetings of the shareholders, and of the board of directors and of any executive committee, and shall preserve in the books of the corporation true minutes of the proceedings of all such meetings. He/she shall safely keep in his/her custody the seal of the corporation and shall have authority to affix the same to all instruments where its use is required or permitted. He/she shall give all notice required by the Act, these Bylaws or resolution. He/she shall perform such other duties as may be delegated to him/her by the board of directors, any executive committee, the chairperson of the board, or the president. SECTION 9. TREASURER. The treasurer shall have custody of all corporate funds and securities and shall keep in books belonging to the corporation full and accurate accounts of all receipts and disbursements; he/she shall deposit all moneys, securities and other valuable effects in the name of the corporation in such depositories as may be designated for that purpose by the board of directors. He/she shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the chief executive officer and the board of directors whenever requested an account of all his/her transactions as treasurer and of the financial condition of the corporation. If required by the board of directors, he/she shall keep in force a bond in form, amount and with a surety or sureties satisfactory to the board of directors, conditioned for faithful performance of the duties of his/her office, and for restoration to the corporation in case of his/her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and property of whatever kind in his/her possession or under his/her control belonging to the corporation. He/she shall perform such other duties as may be delegated to him/her by the board of directors, and any executive committee, the chairperson of the board, or the president. SECTION 10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretary or assistant secretaries, in the 9 absence or disability of the secretary, shall perform, the duties and exercise powers of the secretary. The assistant treasurer or assistant treasurers, in the absence or disability of the treasurer shall perform the duties and exercise the powers of the treasurer. Any assistant treasurers, if required by the board of directors, shall keep in force a bond as provided in Article V, Section 9. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or by the treasurer, respectively, or by the board of directors, any executive committee, the chairperson of the board, or the president. SECTION 11. DELEGATION OF AUTHORITY AND DUTIES BY BOARD OF DIRECTORS. All officers, employees and agents shall, in addition to the authority conferred, or duties imposed, on them by these Bylaws, have such authority and perform such duties in the management of the corporation as may be determined by resolution of the board of directors not inconsistent with these Bylaws. ARTICLE VI STOCK AND TRANSFERS SECTION 1. SHARE CERTIFICATES: REQUIRED SIGNATURES. The shares of the corporation shall be represented by certificates signed by the chairperson of the board of directors, president or a vice president and by the treasurer, assistant treasurer, secretary or assistant secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of the officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the corporation itself or its employee. In case an officer who has signed or whose facsimile signature has been placed upon a certificate ceases to be such officer before the certificate is issued, it may be issued by the corporation with the same effect as if he/she were such officer at the date of issue. SECTION 2. SHARE CERTIFICATES: REQUIRED PROVISIONS. A certificate representing shares of the corporation shall state upon its face: (a) That the corporation is formed under the laws of this state. (b) The name of the person to whom issued. (c) The number and class of shares, and the designation of the series, if any, which the certificate represents. (d) The par value of each share represented by the certificate, or a statement that the shares are without par value. If the corporation is authorized to issue shares of more than one class, a certificate representing shares of the corporation shall set forth on its face of back or state that the corporation will furnish to a shareholder upon request and without charge a full statement 10 of the designation, relative rights, preferences and limitations of the shares of each class authorized to be issued, and if the corporation is authorized to issue any class of shares in series, the designation, relative rights, preferences and limitations of each series so far as the same have been prescribed and the authority of the board to designate and prescribe the relative rights, preferences and limitations of other series. SECTION 3. REPLACEMENT OF LOST OR DESTROYED SHARE CERTIFICATES. The corporation may issue a new certificate for shares or fractional shares in place of a certificate theretofore issued by it, alleged to have been lost or destroyed, and the board of directors may require the owner of the lost or destroyed certificates, or his/her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged lost or destroyed certificate or the issuance of such new certificate. SECTION 4. REGISTERED SHAREHOLDERS. The corporation shall have the right to treat the registered holder of any share as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the corporation shall have express or other notice thereof, save as may be otherwise provided by the statutes of Michigan. SECTION 5. TRANSFER AGENT AND REGISTRAR. The board of directors may appoint a transfer agent and a registrar for the registration of transfers of its securities. SECTION 6. REGULATIONS. The board of directors shall have power and authority to make all such rules and regulations as the board shall deem expedient regulating the issue, transfer and registration of certificates for shares in this corporation. ARTICLE VII GENERAL PROVISIONS SECTION 1. DIVIDENDS OR OTHER DISTRIBUTIONS IN CASH OR PROPERTY. By action of the board of directors, the corporation may declare and pay dividends or make other distributions in cash, bonds or property, including the shares or bonds of other corporations, on its outstanding shares, except when currently the corporation is insolvent or would thereby be made insolvent, or when the declaration, payment or distribution would be contrary to any restriction contained in the Articles of Incorporation. Dividends may be declared or paid and other distributions may be made out of surplus only. A dividend paid or any other distribution made, in any part, from sources other than earned surplus, shall be accompanied by a written notice (a) disclosing the amounts by which the dividend or distribution affects stated capital, capital surplus and earned surplus, or (b) if such amounts are not determinable at the time of the notice, disclosing the approximate effect of the dividend or distribution upon stated capital, capital surplus and earned surplus and stating that the amounts are not yet determinable. 11 SECTION 2. RESERVES. The board of directors shall have power and authority to set apart, out of any funds available for dividends, such reserve or reserves, for any proper purpose, as the board in its discretion shall approve, and the board shall have the power and authority to abolish any reserve created by the board. SECTION 3. VOTING SECURITIES. Unless otherwise directed by the board, the chairperson of the board or president, or in the case of their absence or inability to act, the vice presidents, in order of their seniority, shall have full power and authority on behalf of the corporation to attend and to act and to vote, or to execute in the name or on behalf of the corporation a consent in writing in lieu of a meeting of shareholders or a proxy authorizing an agent or attorney-in-fact for the corporation to attend and vote at any meetings of security holders of corporations, other than banking corporations, in which the corporation may hold securities, and at such meetings as he/she or his/her duly authorized agent or attorney-in-fact shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the corporation might have possessed and exercised if present. The board by resolution from time to time may confer like power upon any other person or persons. SECTION 4. CHECKS. All checks, drafts and orders for the payment of money shall be signed in the name of the corporation in such manner and by such officer or officers or such other person or persons as the board of directors shall from time to time designate for that purpose. SECTION 5. CONTRACTS, CONVEYANCES, ETC. When the execution of any contract, conveyance or other instrument has been authorized without specification of the executing officers, the chairperson of the board, president or any vice president, and the secretary or assistant secretary, may execute the same in the name and on behalf of this corporation and may affix the corporate seal thereto. The board of directors shall have power to designate the officers and agents who shall have authority to execute any instrument in behalf of this corporation. SECTION 6. CORPORATE BOOKS AND RECORDS. The corporation shall keep books and records of account and minutes of the proceedings of its shareholders, board of directors and executive committees, if any. The books, records and minutes may be kept outside this state. The corporation shall keep at its registered office, or at the office of its transfer agent within or without this state, records containing the names and addresses of all shareholders, the number, class and series of shares held by each and the dates when they respectively became holders of record thereof. Any such books, records or minutes may be in written form or in any other form capable of being converted into written form or in any other form capable of being converted into written form within a reasonable time. The corporation shall convert into written form without charge any such record not in such form, upon written request of a person entitled to inspect them. SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall begin on the first day of January in each year. 12 SECTION 8. SEAL. If the corporation has a corporate seal, it shall have inscribed thereon the name of the corporation and the words "Corporate Seal" and "Michigan". The seal may be used by causing it or a facsimile to be affixed, impressed or reproduced in any other manner. ARTICLE VIII AMENDMENTS SECTION 1. The shareholders or the board of directors may amend or repeal these Bylaws or adopt new bylaws unless power to do so is reserved exclusively to the shareholders by the Articles of Incorporation. Such action may be taken at any meeting of shareholders or the board of directors; provided that if notice of any such meeting is required by these Bylaws, the notice of the meeting shall contain notice of the proposed amendment, repeal or new bylaws. Any bylaw hereafter made by the shareholders shall not be altered or repealed by the board. 13 EX-31.1 3 k90714exv31w1.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, James C. Conboy, Jr., Chief Executive Officer of CNB Corporation (the "registrant") certify that: 1.) I have reviewed this annual report on Form 10-K of the registrant; 2.) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3.) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4.) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a.) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this annual report is being prepared; b.) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c.) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during registrant's most recent fiscal quarter (registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, registrant's internal control over financial reporting; and 5.) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent functions): a.) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the registrant's ability to record, process, summarize and report financial information; and b.) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and Date: December 20, 2004 /s/ James C. Conboy, Jr. ------------------------------------------- James C. Conboy, Jr. President & CEO EX-31.2 4 k90714exv31w2.txt CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Irene M. English, Treasurer of CNB Corporation (the "registrant") certify that: 1.) I have reviewed this annual report on Form 10-K of the registrant; 2.) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3.) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4.) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a.) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this annual report is being prepared; b.) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c.) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during registrant's most recent fiscal quarter (registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, registrant's internal control over financial reporting; and 5.) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the board of directors (or persons fulfilling the equivalent functions): a.) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the registrant's ability to record, process, summarize and report financial information; and b.) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 20, 2004 /s/ Irene M. English ------------------------------------------- Irene M. English, Treasurer (Chief Financial Officer) EX-32.1 5 k90714exv32w1.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, to the best of our respective knowledge and belief, that this Annual Report on Form 10-K for the period ended December 31, 2003 ("Report") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that information contained in this Report presents, in all material respects, the financial condition and results of operations of the registrant. /s/ James C. Conboy, Jr. ------------------------------------------- Dated: December 20, 2004 James C. Conboy, Jr. President & Chief Executive Officer /s/ Irene M. English ------------------------------------------- Irene M. English Treasurer (Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----