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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996.
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the Transition Period From ___________ to ___________.
Commission file number 2-96350
CNB CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0792402
(State of incorporation) (I.R.S. Employer Identification No.)
1400 Third Avenue, P.O. Box 320, Conway, South Carolina 29526
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803) 248-5721
Securities registered pursuant to section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class of which registered
Common Stock, par value $10.00 per share...............................None
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months 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 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. [ ]
As of February 28, 1997, 478,623 shares of Common Stock of CNB
Corporation were outstanding and the aggregate market value of such Common
Stock held by nonaffiliates (based upon the price at which stock was sold
during the 60 days prior to the date of filing) was approximately
$45,947,808.
No Documents have been incorporated by reference.
TABLE OF CONTENTS
PART I
Page
ITEM 1. Description of Business and Supplementary Data 1-21
ITEM 2. Properties 22
ITEM 3. Legal Proceedings 22
ITEM 4. Submission of Matters to a Vote of Security Holders 23
PART II
ITEM 5. Market for the Registrant's Common Stock and Related 23
Security Holder Matters
ITEM 6. Selected Financial Data 24
ITEM 7. Management's Discussion and Analysis of Financial 25-30
Condition and Results of Operations
ITEM 8. Financial Statements 31-52
ITEM 9. Disagreements on Accounting and Financial Disclosure 52
PART III
ITEM 10. Directors and Executive Officers of the Registrant 53-57
ITEM 11. Executive Compensation 58-60
ITEM 12. Security Ownership of Certain Beneficial Owners 61
and Management
ITEM 13. Certain Relationships and Related Transactions 61
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, Notes to 62
Financial Statements, and Reports on Form 8-K
PART I
ITEM 1. Description of Business
DESCRIPTION OF CNB CORPORATION
CNB Corporation (the "Company") is a South Carolina business corporation
organized for the purpose of becoming a bank holding company for The Conway
National Bank (the "Bank") under the Bank Holding Company Act. The Company
was organized with $500 of capital on March 8, 1985; received approval from
the Board of Governors of the Federal Reserve System on May 15, 1985, to
become a bank holding company; and on June 10, 1985, acquired, in exchange
for its own shares of common stock, substantially all of the common stock of
the Bank. The activities of the Company are subject to the supervision of
the Federal Reserve, and the Company may engage directly or through
subsidiary corporations in those activities closely related to banking which
are specifically permitted under the Bank Holding Company Act. See
"Supervision and Regulation." Although the Company, after obtaining the
requisite approval of the Federal Reserve and any other appropriate
regulatory agency, may seek to enter businesses closely related to banking or
to acquire existing businesses already engaged in such activities, the
Company has not conducted, and has no present intent to conduct, negotiations
for the acquisition or formation of any entities to engage in other
permissible activities other than the acquisition of the Bank. There can be
no assurance that the Company will form or acquire any other entity.
The Company and the Bank compete with those banks and other financial
institutions that compete with the Bank. See "Competition." In addition,
if the Company attempts to form or acquire other entities and engage in
activities closely related to banking, the Company will be competing with
other bank holding companies and companies currently engaged in lines of
business or permissible activities in which the Company might engage, many
of which have far greater assets and financial resources than the Company and
a greater capacity to raise additional debt and equity capital than the
Company.
DESCRIPTION OF THE SUBSIDIARY
The Bank is an independent community bank engaged in the general commercial
banking business in Horry County, South Carolina. The Bank was organized on
June 5, 1903 as the Bank of Horry located on Main Street in Conway, South
Carolina. The Bank became a national bank operating as The Conway National
Bank in 1914. On June 10, 1985, the Bank was reorganized into a bank
holding company structure when substantially all of the common stock of the
Bank was acquired by CNB Corporation in exchange for its own shares of common
stock. In 1960, the Bank opened its first additional office at 1400 Third
Avenue in Conway. Since that time, the following offices have been opened
in Horry County: Coastal Centre in Conway (1969); Surfside in Surfside Beach
(1971); Northside, north of Myrtle Beach (1977); Red Hill in Conway (1981);
Socastee, in the southern portion of Myrtle Beach (1986); Aynor in the Town
of Aynor (1991), and Myrtle Beach in the City of Myrtle Beach (1995). The
Surfside office was enlarged in 1977 and 1984, and the Coastal Centre office
was expanded in 1980. The Third Avenue office, which houses the Bank's
administrative offices and data processing facilities was expanded in 1982
from 11,150 square feet to 33,616 square feet. The Bank employs
approximately 180 full-time-equivalent employees at its principal office and
eight branch offices.
1
The Bank performs the full range of normal commercial banking functions.
Some of the major services provided include checking accounts, NOW accounts,
money market deposit accounts, IRA accounts, savings and time deposits of
various types and loans to individuals for personal use, home mortgages,
home improvement, automobiles, real estate, agricultural purposes and
business needs. Commercial lending operations include various types of
credit for business, industry, and agriculture. In addition, the Bank
offers safe deposit boxes, wire transfer services, bank money orders, 24-hour
teller machines on the HONOR Network, direct deposits and a MasterCard/Visa
program. Through a correspondent relationship the Bank offers discount
brokerage services. The Bank does not provide trust services; does not sell
annuities; and does not sell mutual funds.
The majority of the Bank's customers are individuals and small to
medium-sized businesses headquartered within the Bank's service area. The
Bank has no material concentration of deposits from any single customer or
group of customers. No significant portion of the Bank's loans is
concentrated within a single industry or group of related industries. There
are no material seasonal factors that would have any adverse effect on the
Bank nor does the Bank rely on foreign sources of funds or income.
COMPETITION
The Bank actively competes with other institutions in Horry County in
providing customers with deposit, credit and other financial services. The
principal competitors of the Bank include local offices of six regional
banks, two state-wide banks, five locally owned banks in Horry County and
various other financial and thrift institutions. The regional banks with
offices in Horry County are Nationsbank of S.C., First Union National Bank of
S.C., United Carolina Bank of S.C., First Citizens Bank and Trust Company,
Branch Bank and Trust of S.C. and Wachovia, N.A. of S.C.. The statewide
banks with offices in Horry County are National Bank of South Carolina and
Carolina First Savings Bank. The locally owned banks having offices in Horry
County are The Anchor Bank of Myrtle Beach, Anderson Brothers Bank, Coastal
Federal Savings Bank, Horry County State Bank and First National South Bank.
Beach First, N.A. received a bank charter in 1996 and will become another
locally owned bank competing within the Myrtle Beach market. In addition,
one thrift institution has offices in Horry County. The Bank also competes
with credit unions, money market funds, brokerage houses, insurance
companies, mortgage companies, leasing companies, consumer finance companies
and other financial institutions. Significant competitive factors include
interest rates on loans and deposits, prices and fees for services, office
location, customer service, community reputation, and continuity of
personnel.
SUPERVISION AND REGULATION
General
The Company and the Bank are subject to an extensive collection of state and
federal banking laws and regulations which impose specific requirements and
restrictions on, and provide for general regulatory oversight with respect
to, virtually all aspects of the Company's and the Bank's operations. The
Company and the Bank are also affected by government monetary policy and by
regulatory measures affecting the banking industry in general. The actions
of the Federal Reserve System affect the money supply and, in general,
the Bank's lending abilities in increasing or decreasing the cost and
2
availability of funds to the Bank. Additionally, the Federal Reserve System
regulates the availability of bank credit in order to combat recession and
curb inflationary pressures in the economy by open market operations in
United States government securities, changes in the discount rate on member
bank borrowings, changes in the reserve requirements against bank deposits
and limitations on interest rates which banks may pay on time and savings
deposits.
During 1989 and 1991, the United States Congress enacted two major pieces of
banking legislation: The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") and the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"). The FIRREA and FDICIA have
significantly changed the commercial banking industry through, among other
things, revising and limiting the types and amounts of investment authority,
significantly increasing minimum regulatory capital requirements, and
broadening the scope and power of federal bank and thrift regulators over
financial institutions and affiliated persons in order to protect the deposit
insurance funds and depositors. These laws, and the resulting implementing
regulations, have subjected the Bank and the Company to extensive regulation,
supervision and examination by the Office of the Comptroller of the Currency
(OCC). This has resulted in increased administrative, professional and
compensation expenses in complying with a substantially increased number of
new regulations and policies. The regulatory structure created by these laws
gives the regulatory authorities extensive authority in connection with their
supervisory and enforcement activities and examination policies.
The following is a brief summary of certain statutes, rules and regulations
affecting the Company and the Bank. This summary is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referred to below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the business of the Company and the
Bank. Any change in applicable laws or regulations may have a material
adverse effect on the business and prospects of the Company and the Bank.
The Company
The Company is a bank holding company within the meaning of the Federal Bank
Holding Company Act of 1956, as amended (the "BHCA") and is registered as
such with the Federal Reserve. The Company is required to file annual
reports and other information regarding its business operations and those of
its subsidiaries. It is also subject to supervision and regular
examinations.
The BHCA requires every bank holding company to obtain the prior approval of
the Federal Reserve Board before (i) it or any of its subsidiaries (other
than a bank) acquires substantially all of the assets of any bank, (ii) it
acquires 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, or (iii) it merges or consolidates with any
other bank holding company.
The BHCA and the Federal Change in Bank Control Act, together with
regulations promulgated by the Federal Reserve Board, require that, depending
on the particular circumstances, either the Federal Reserve Board's approval
must be obtained or notice must be furnished to the Federal Reserve Board and
not disapproved prior to any person or company acquiring control of a bank
holding company, such as the Company, subject to certain exemptions for
certain transactions.
3
Under the BHCA, a bank holding company is generally prohibited from engaging
in, or acquiring direct or indirect control of more than 5% of the voting
shares of any company engaged in, nonbanking activities, unless the Federal
Reserve Board, by order or regulation, has found those activities to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. Some of the activities that the Federal Reserve Board has
determined by regulation to be proper incidents to the business of a bank
holding company include making or servicing loans and certain types of
leases, engaging in certain insurance and discount brokerage activities,
performing certain data processing services, acting in certain circumstances
as a fiduciary or investment or financial adviser, owning savings
associations and making investments in certain corporations or projects
designed primarily to promote community welfare. The Company is also
restricted in its activities by the provisions of the Glass-Stegall Act of
1933, which prohibits the Company from owning subsidiaries that are engaged
principally in the issue, flotation, underwriting, public sale or
distribution of securities. The regulatory requirements to which the Company
is subject also set forth various conditions regarding the eligibility and
qualifications of its directors and officers.
The Bank
The Bank is subject to regulation and supervision, of which regular bank
examinations are a part, by the Comptroller of the Currency. The Bank is a
member of the Federal Deposit Insurance Corporation (the "FDIC") which
currently insures the deposits of each member bank to a maximum of $100,000
per depositor. For this protection, each bank pays a statutory assessment
and is subject to the rules and regulations of the FDIC. The Company is an
"affiliate" of the Bank within the meaning of the Federal Reserve Act and the
Federal Deposit Insurance Act, which imposes restrictions on loans by any
subsidiary bank to the Company, on investments by any subsidiary bank in the
stock or securities of the Company and on the use of such stock or securities
as collateral security for loans by any subsidiary bank to any borrower. The
Company will also be subject to certain restrictions with respect to engaging
in the business of issuing, underwriting and distributing securities.
4
DESCRIPTION OF BANK STOCK
The Bank is authorized to issue 199,536 shares and has outstanding 193,536
shares of Bank Stock. The holders of Bank Stock are entitled to one vote per
share. Holders of shares of Bank Stock have preemptive rights to purchase
additional shares of Bank Stock and have cumulative rights in the elections
of directors of the Bank. The National Bank Act generally provides for a
majority vote of the Bank Stock to approve an action by the Bank but a two-
thirds vote of the outstanding shares of Bank Stock is required to approve
certain fundamental changes.
The National Bank Act, 12 U.S.C. Section 55, provides for the pro rata
assessment of holders of common stock of a national bank in the event that
its capital becomes impaired, such assessment to be enforced by sale to the
extent necessary of the stock of the stockholder failing to pay his
assessment. However, the Company has been advised that the Comptroller of
the Currency has not used this provision in recent years. Accordingly, the
shares of Bank Stock are subject to such assessment. However, the Bank's
management does not anticipate the Bank Stock being assessed in this manner
in the foreseeable future.
The holders of Bank Stock are entitled to receive such dividends as may be
declared by the Board of Directors of the Bank out of funds legally available
therefor. National banking laws and regulations impose restrictions on the
payment of dividends and other distributions to stockholders. The National
Bank Act provides that a national bank cannot pay dividends or other
distributions to stockholders out of any portion of its capital and surplus,
and that no dividend shall be paid by a bank in an amount greater than its
"net profits then on hand" (as defined in the National Bank Act), after
deduction of statutory "bad debts." In addition, 12 U.S.C. Section 60
provides that the approval of the Comptroller of the Currency is required for
the payment of dividends by a national bank if the total of all dividends
declared by the bank in any calendar year shall exceed the total of its "net
profits" of that year combined with its "retained net profits" of the
preceding two years. The same section further provides that, until the
surplus fund of a national bank shall equal its common capital, no dividends
shall be declared unless there has been carried to the surplus fund not less
than one-tenth part of the bank's net profits of the preceding half year in
the case of quarterly or semiannual dividends, or not less than one-tenth
part of its net dividends. Also, under 12 U.S.C. Section 1818, the
Comptroller of the Currency can restrict a national bank's dividend payments
if they are deemed an unsafe or unsound banking practice.
In the event of the liquidation, dissolution or winding-up of the affairs of
the Bank, the holders of outstanding shares of Bank Stock will be entitled to
share pro rata according to their respective interests in the Bank's assets
and funds remaining after payment or provision for payment of all debts and
other liabilities of the Bank.
5
DESCRIPTION OF COMPANY STOCK
General
The Company is authorized to issue 500,000 shares of Company Stock and as of
December 31, 1996, has 479,093 shares issued and 478,018 shares outstanding.
The holders of Company Stock are entitled to one vote per share. Holders of
shares of Company Stock do not have pre-emptive rights to purchase any
additional shares of Company Stock and do not have cumulative voting rights
in the election of directors. Without pre-emptive rights, stockholders could
experience dilution of their voting power and of their equity interest in the
Company.
The ability of the Company to pay dividends to the holders of the Company
Stock depends upon the amount of dividends paid by the Bank to the Company.
The holders of shares of Company Stock will be entitled to receive such
dividends as may be declared by the Board of Directors of the Company out of
the funds legally available therefor. The payment of dividends by the
company are subject to the restrictions of South Carolina laws applicable to
the declaration of dividends by a business corporation. Under such
provisions, dividends may be paid in cash or in property of the Company,
including the shares of other corporations, except when the Company is
insolvent or would thereby be made insolvent or when the declaration of
payment thereof would be contrary to any restrictions in the Company
Articles. Dividends may be declared and paid only out of the unreserved and
unrestricted earned surplus of the Company.
In the event of the liquidation, dissolution or winding-up of the affairs of
the Company, the holders of outstanding shares of Company Stock will be
entitled to share pro rata according to their respective interests in the
Company's assets and funds remaining after payment or provision for payment
of all debts and other liabilities of the Company.
All shares of Company Stock are fully paid and nonassessable.
The Bank is the transfer agent for shares of Company Stock.
6
SUPPLEMENTARY DATA
QUARTERLY SHAREHOLDER INFORMATION
CNB CORPORATION
QUARTERLY SHAREHOLDER INFORMATION
(All Dollar Amounts, Except Per Share Data, in Thousands)
Summary of Operating Results by Quarter
Quarter Ended
1996 March 31 June 30 September 30 December 31
Interest income $ 5,841 $ 6,012 $ 6,196 $ 6,447
Interest expense 2,675 2,634 2,631 2,639
Net interest income 3,166 3,378 3,565 3,808
Provision for loan losses 50 90 90 130
Net interest income after
provision for loan losses 3,116 3,288 3,475 3,678
Other income 742 740 846 687
Other expenses 2,481 2,574 2,489 2,849
Income before income taxes 1,377 1,454 1,832 1,516
Income taxes 450 498 611 536
Net income $ 927 $ 956 $ 1,221 $ 980
Net income per share $ 1.94 $ 2.00 $ 2.56 $ 2.05
Weighted average shares outstanding 477,241 477,257 477,304 478,182
1995
Interest income $ 5,396 $ 5,649 $ 5,736 $ 5,820
Interest expense 2,296 2,542 2,619 2,058
Net interest income 3,100 3,107 3,117 3,162
Provision for loan losses 65 15 25 5
Net interest income after
provision for loan losses 3,035 3,092 3,092 3,157
Other income 663 710 789 790
Other expenses 2,355 2,550 2,330 2,560
Income before income taxes 1,343 1,252 1,551 1,387
Income taxes 414 415 486 462
Net income $ 929 $ 837 $ 1,065 $ 925
Net income per share $ 1.94 $ 1.75 $ 2.23 $ 1.94
Weighted average shares outstanding 477,953 478,045 477,945 477,820
SUPPLEMENTARY INFLATION ADJUSTED FINANCIAL DATA
Inflation-adjusted accounting has not been applied to the Company's financial
information as management does not believe this type of analysis provides
useful information within the financial services industry. The Company
currently does not meet the asset size criteria which would make detailed
disclosure of inflation adjusted data mandatory.
GUIDE 3. STATISTICAL DISCLOSURE BY BANK
HOLDING COMPANIES
The following tables present additional statistical information about CNB
Corporation and its operation and financial condition and should be read in
conjunction with the consolidated financial statements and related notes
thereto contained elsewhere in this report.
DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL
The tables on the following 5 pages present selected financial data and an
analysis of net interest income.
7
CNB Corporation and Subsidiary
Selected Financial Data
Twelve Months Ended 12/31/96
Average Interest Avg. Annual
Balance Income/ Yield or
Expense(2) Rate
Assets:
Earning assets
Loans, net of
unearned income $169,815 $15,808 9.31%
Investment securities:
Taxable 126,252 7,481 5.93
Tax-exempt 13,999 1,121 8.01
Federal funds sold and
securities purchased under
agreement to resell 8,626 460 5.33
Other earning assets 116 7 6.03
Total earning assets $318,808 $24,877 7.80
Other assets 23,374
Total assets $342,182
Liabilities and stockholders'equity:
Interest-bearing liabilities:
Interest-bearing deposits $214,194 8,610 4.02
Federal funds purchased and
securities sold under
agreement to repurchase 39,506 1,906 4.82
Other short-term borrowings 1,164 63 5.41
Total interest-bearing
liabilities $254,864 $10,579 4.15
Noninterest-bearing deposits 51,249
Other liabilities 2,449
Stockholders' equity 33,620
Total liabilities and
stockholders' equity $342,182
Net interest income as a
percent of total
earning assets $318,808 $14,298 4.48%
(1) Tax-equivalent adjustment
based on a 34% tax rate $ 381
Ratios:
Annualized return on average total assets 1.19%
Annualized return on average stockholders' equity 12.15
Cash dividends declared as a percent of net income 35.09
Average stockholders' equity as a percent of:
Average total assets 9.83
Average total deposits 12.67
Average loans, net of unearned income 19.80
Average earning assets as a percent of
average total assets 93.17%
(2) The Company had no out-of-period adjustments or foreign activities.
Loan fees of $0 are included in the above interest income. Loans on
a non-accrual basis for the recognition of interest income totalling
$377 as of December 31, 1996 are included in loans, net of unearned
income, for purpose of this analysis.
8
CNB Corporation and Subsidiary
Selected Financial Data
Twelve Months Ended 12/31/95
Average Interest Avg. Annual
Balance Income/ Yield or
Expense(2) Rate
Assets:
Earning assets
Loans, net of
unearned income $149,940 $14,070 9.38%
Investment securities:
Taxable 114,685 6,755 5.89
Tax-exempt 14,525 1,344 9.25
Federal funds sold and
securities purchased under
agreement to resell 15,136 882 5.83
Other earning assets 116 7 6.03
Total earning assets $294,402 $23,058 7.83
Other assets 21,600
Total assets $316,002
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits $196,195 8,032 4.09
Federal funds purchased and
securities sold under
agreement to repurchase 39,332 2,002 5.09
Other short-term borrowings 1,439 81 5.63
Total interest-bearing
liabilities $236,966 $10,115 4.27
Noninterest-bearing deposits 45,839
Other liabilities 2,084
Stockholders' equity 31,113
Total liabilities and
stockholders' equity $316,002
Net interest income as a
percent of total
earning assets $294,402 $12,943 4.40%
(1) Tax-equivalent adjustment
based on a 34% tax rate $ 457
Ratios:
Annualized return on average total assets 1.19%
Annualized return on average stockholders' equity 12.07
Cash dividends declared as a percent of net income 38.13
Average stockholders' equity as a percent of:
Average total assets 9.85
Average total deposits 12.85
Average loans, net of unearned income 20.75
Average earning assets as a percent of
average total assets 93.16%
(2) The Company had no out-of-period adjustments or foreign activities.
Loan fees of $0 are included in the above interest income. Loans on
a non-accrual basis for the recognition of interest income totalling
$479 as of December 31, 1995 are included in loans, net of unearned
income, for purpose of this analysis.
9
CNB Corporation and Subsidiary
Selected Financial Data
Twelve Months Ended 12/31/94
Average Interest Avg.Annual
Balance Income/ Yield or
Expense(2) Rate
Assets:
Earning assets
Loans, net of
unearned income $140,104 $12,034 8.59%
Investment Securities:
Taxable 107,891 6,240 5.78
Tax-exempt 16,098 1,518 9.43
Federal funds sold and
securities purchased under
agreement to resell 14,127 564 3.99
Other earning assets 116 7 6.03
Total earning assets $278,336 $20,363 7.32
Other assets 19,259
Total assets $297,595
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits $190,589 6,460 3.39
Federal funds purchased and
securities sold under
agreement to repurchase 35,037 1,111 3.17
Other short-term borrowings 1,163 42 3.61
Total interest-bearing
liabilities $226,789 $ 7,613 3.36
Noninterest-bearing deposits 40,181
Other liabilities 2,167
Stockholders' equity 28,458
Total liabilities and
stockholders' equity $297,595
Net interest income as a
percent of total
earning assets $278,336 $12,750 4.58%
(1) Tax-equivalent adjustment
based on a 34% tax rate $ 516
Ratios:
Annualized return on average total assets 1.18%
Annualized return on average stockholders' equity 12.29
Cash dividends declared as a percent of net income 27.31
Average stockholders' equity as a percent of:
Average total assets 9.56
Average total deposits 12.33
Average loans, net of unearned income 20.31
Average earning assets as a percent of
average total assets 93.53%
(2) The Company had no out-of-period adjustments or foreign activities.
Loan fees of $0 are included in the above interest income. Loans on
a non-accrual basis for the recognition of interest income totalling
$1,062 as of December 31, 1994 are included in loans, net of unearned
income, for purpose of this analysis.
10
CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Twelve Months Ended December 31, 1996 and 1995
(Dollars in Thousands)
Change
Average Average Interest Interest Change Change Due To
Volume Volume Yield/Rate Yield/Rate Earned/Paid Earned/Paid Due to Due To Rate X
1996 1995 1996 (1) 1995 (1) 1996 (1) 1995 (1) Variance Rate Volume Volume
Earning Assets:
Loans, Net of unearned
income (2) 169,815 149,940 9.31% 9.38% 15,808 14,070 1,738 (105) 1,857 (14)
Investment securities:
Taxable 126,252 114,685 5.93% 5.89% 7,481 6,755 726 46 675 5
Tax-exempt 13,999 14,525 8.01% 9.25% 1,121 1,344 (223) (180) (50) 7
Federal funds sold and
securities purchased under
agreement to resell 8,626 15,136 5.33% 5.83% 460 882 (422) (76) (379) 33
Other earning assets 116 116 6.03% 6.03% 7 7 - - - -
Total Earning Assets 318,808 294,402 7.80% 7.83% 24,877 23,058 1,819 (315) 2,103 31
Interest-bearing Liabilities
Interest-bearing deposits 214,194 196,195 4.02% 4.09% 8,610 8,032 578 (137) 728 (13)
Federal funds purchased and
securities sold under
agreement to repurchase 39,506 39,332 4.82% 5.09% 1,906 2,002 (96) (106) 10 -
Other short-term borrowings 1,164 1,439 5.41% 5.63% 63 81 (18) (3) (16) 1
Total Interest-bearing
Liabilities 254,864 236,966 4.15% 4.27% 10,579 10,115 464 (246) 722 (12)
Interest-free Funds
Supporting Earning Assets 63,944 57,436
Total Funds Supporting
Earning Assets 318,808 294,402 3.32% 3.43% 10,579 10,115 464 (246) 722 (12)
Interest Rate Spread 3.65% 3.56%
Impact of Non-interest-
bearing Funds on Net Yield
on Earning Assets .83% .84%
Net Yield on Earning Assets 4.48% 4.40% 14,298 12,943
(1) Tax-equivalent adjustment based on a 34% tax rate.
(2) Includes non-accruing loans which does not have a material effect on the
Net Yield on Earning Assets.
11
CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Twelve Months Ended December 31, 1995 and 1994
(Dollars in Thousands)
Change
Average Average Interest Interest Change Change Due To
Volume Volume Yield/Rate Yield/Rate Earned/Paid Earned/Paid Due to DueTo Rate X
1995 1994 1995 (1) 1994 (1) 1995 (1) 1994 (1) Variance Rate Volume Volume
Earning Assets:
Loans, Net of unearned
income (2) 149,940 140,104 9.38% 8.59% 14,070 12,034 2,036 1,111 847 78
Investment securities:
Taxable 114,685 107,891 5.89% 5.78% 6,755 6,240 515 118 390 7
Tax-exempt 14,525 16,098 9.25% 9.43% 1,344 1,518 (174) (29) (148) 3
Federal funds sold and
securities purchased under
agreement to resell 15,136 14,127 5.83% 3.99% 882 564 318 260 40 18
Other earning assets 116 116 6.03% 6.03% 7 7 - - - -
Total Earning Assets 294,402 278,336 7.83% 7.32% 23,058 20,363 2,695 1,460 1,129 106
Interest-bearing Liabilities:
Interest-bearing deposits 196,195 190,589 4.09% 3.39% 8,032 6,460 1,572 1,340 193 39
Federal funds purchased and
securities sold under
agreement to repurchase 39,332 35,037 5.09% 3.17% 2,002 1,111 891 673 136 82
Other short-term borrowings 1,439 1,163 5.63% 3.61% 81 42 39 23 10 6
Total Interest-bearing
Liabilities 236,966 226,789 4.27% 3.36% 10,115 7,613 2,502 2,036 339 127
Interest-free Funds
Supporting Earning Assets 57,436 51,547
Total Funds Supporting
Earning Assets 294,402 278,336 3.43% 2.74% 10,115 7,613 2,502 2,036 339 127
Interest Rate Spread 3.56% 3.96%
Impact of Non-interest-bearing
Funds on Net Yield on Earning
Assets .84% .62%
Net Yield on Earning Assets 4.40% 4.58% 12,943 12,750
(1) Tax-equivalent adjustment based on a 34% tax rate.
(2) Includes non-accruing loans which does not have a material effect on the
Net Yield on Earning Assets.
12
INVESTMENT SECURITIES
Investment securities with a par value of $55,665, $66,115, and $50,615
at December 31, 1996, 1995, and 1994, respectively, were pledged to secure
public deposits and for other purposes required by law.
The following summaries reflect the book value, unrealized gains and
losses, approximate market value, and tax-equivalent yields on investment
securities at December 31, 1996, 1995, and 1994.
December 31, 1996
Book Unrealized Fair
Value Gains Losses Value Yield(1)
AVAILABLE FOR SALE
United States Treasury
Within one year $15,533 $ 52 $ 22 $15,563 5.95%
One to five years 16,262 169 27 16,404 6.46%
31,795 221 49 31,967 6.21%
Federal agencies
One to five years 29,072 48 169 28,951 6.04%
After ten years 784 - 18 766 6.08%
29,856 48 187 29,717 6.04%
State, county and municipal
One to five years 326 12 - 338 7.85%
Other-restricted
Federal Reserve
Bank Stock 116 - - 116 6.03%
Total available
for sale $62,093 $ 281 $ 236 $62,138 6.14%
HELD TO MATURITY
United States Treasury
Within one year $17,066 $ 20 $ 30 $17,056 5.36%
One to five years 23,703 154 176 23,681 5.67%
40,769 174 206 40,737 5.54%
Federal agencies
One to five years 13,320 97 110 13,307 6.27%
Six to ten years 2,002 - 35 1,967 6.40%
15,332 97 145 15,274 6.28%
State, county and municipal
Within one year 1,112 2 2 1,112 8.87%
One to five years 6,950 302 15 7,237 8.72%
Six to ten years 5,626 20 75 5,571 6.98%
After ten years 370 5 - 375 7.89%
14,058 329 92 14,295 8.01%
Total held to maturity $70,149 $ 600 $ 443 $70,306 6.20%
(1) Tax equivalent adjustment based on a 34% tax rate.
As of the quarter ended December 31, 1996, the Bank did not hold any
securities of an issuer that exceeded 10% of stockholders' equity.
13
INVESTMENT SECURITIES, continued
December 31, 1995
Book Unrealized Fair
Value Gains Losses Value Yield(1)
AVAILABLE FOR SALE
United States Treasury
Within one year $11,022 $ 19 $ 21 $11,020 5.04%
One to five years 28,674 591 37 29,228 6.31%
36,696 610 58 40,248 5.96%
Federal agencies
Within one year 417 3 - 420 7.98%
One to five years 20,181 179 19 20,341 5.94%
After ten years 913 1 15 899 6.34%
21,511 183 34 21,660 6.00%
State, county and municipal
One to five years 326 16 - 342 7.85%
Other-restricted
Federal Revenue
Bank Stock 116 - - 116 6.03%
Total available
for sale $61,649 $ 809 $ 92 $62,366 5.98%
HELD TO MATURITY
United States Treasury
Within one year $13,077 $ 59 $ 5 $13,131 5.85%
One to five years 38,875 378 145 39,108 5.48%
51,952 437 150 52,239 5.57%
Federal agencies
Within one year 5,007 69 - 5,076 8.04%
One to five years 3,004 65 - 3,069 6.12%
Six to ten years 2,002 34 - 2,036 6.40%
10,013 168 - 10,181 7.14%
State, county and municipal
Within one year 1,674 17 1 1,690 9.33%
One to five years 6,216 273 8 6,481 8.81%
Six to ten years 6,069 120 35 6,154 7.28%
After ten years 478 8 - 486 7.61%
14,437 418 44 14,811 8.19%
Total held to maturity $76,402 $1,023 $ 194 $77,231 6.27%
(1) Tax equivalent adjustment based on a 34% tax rate.
As of the quarter ended December 31, 1995, the Bank did not hold any
securities of an issuer that exceeded 10% of stockholders' equity.
On December 6, 1995, the Bank transferred a portion of the portfolio from
securities held to maturity to the available for sale classification. These
securities had an amortized cost of $11,566,000 and an unrealized loss of
$68,000 on the date of transfer. This one-time reassessment of securities
was done in compliance with the "Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities," issued by
the Financial Accounting Standards Board.
14
INVESTMENT SECURITIES, continued
December 31, 1994
Book Unrealized Fair
Value Gains Losses Value Yield(1)
AVAILABLE FOR SALE
United States Treasury
Within one year $ 4,985 - 9 4,976 6.93%
One to five years 31,304 - 944 30,360 6.34%
36,289 - 953 35,336 6.42%
Federal agencies
Within one year 4,006 11 2 4,015 7.31%
One to five years 2,523 12 2 2,533 6.62%
After ten years 1,051 - 60 991 5.26%
7,580 23 64 7,539 6.80%
State, county and
municipal
Within one year 303 7 - 310 12.45%
One to five years 326 7 - 333 7.85%
629 14 - 643 10.05%
Other-restricted
Federal Reserve
Bank Stock 116 - - 116 6.03%
Total available
for sale $44,614 $ 37 $1,017 $43,634 6.53%
HELD TO MATURITY
United States Treasury
One to five years $58,669 $ 6 $3,132 $55,543 5.46%
Federal agencies
Six to ten years 8,995 12 359 8,648 6.65%
State, county and
municipal
Within one year 2,932 39 1 2,970 11.64%
One to five years 5,611 101 54 5,658 9.10%
Six to ten years 6,888 66 344 6,610 7.73%
15,431 206 399 15,238 8.97%
Total held to maturity $83,095 $ 224 $3,890 $79,429 6.25%
(1) Tax equivalent adjustment based on a 34% tax rate.
As of the quarter ended December 31, 1994, the Bank did not hold any
securities of an issuer that exceeded 10% of stockholders' equity.
15
LOAN PORTFOLIO
CLASSIFICATION OF LOANS
The following is a summary of loans, in thousands of dollars, at December 31, 1996,
1995, 1994, 1993, and 1992 by major classification:
1996 1995 1994 1993 1992
Real estate Loans - mortgage $111,474 $ 95,451 $ 89,728 $ 84,806 $ 84,298
- construction 15,148 5,453 6,328 4,051 5,768
Loans to farmers 1,328 1,032 1,180 971 881
Commercial and industrial loans 28,105 23,133 17,472 14,612 15,102
Loans to individuals for household
family and other consumer
expenditure 29,642 28,095 30,700 28,493 27,039
All other loans, including
overdrafts 236 334 186 87 89
Gross Loans 185,933 153,498 145,594 133,020 133,177
Less unearned income (1,058) (1,094) (1,231) (1,286) (1,554)
Less reserve
for loan losses (2,370) (2,242) (2,220) (2,170) (2,029)
Net loans $182,505 $150,162 $142,143 $129,564 $129,594
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The Company's loan portfolio consisted of approximately $129,456,000 and
$105,744,000 in fixed rate loans as of December 31, 1996 and 1995,
respectively. At December 31, 1996, and 1995, fixed rate loans with
maturities in excess of one year amounted to approximately $93,017,000 and
$75,380,000, respectively. Variable rate loans are those on which the
interest rate can be adjusted to changes in the Bank's prime rate. Fixed
rate loans are those on which the interest rate generally cannot be changed
for the term of the loan.
16
RISK ELEMENTS
The following information relates to certain assets which are defined as
risk elements by the Securities and Exchange Commission. All loans which
meet the criteria set forth by the Securities and Exchange Commission are
detailed below, regardless of the likelihood of collection in full or in
part. All loans classified for regulatory purposes as loss, doubtful,
substandard, or especially mentioned that have not been disclosed do not
represent or result from trends or uncertainties which management reasonably
expects will materially impact future operating results, liquidity, or
capital resources or represent material credits about which management is
aware of any information which causes management to have serious doubts as to
the ability of such borrower to comply with the loan repayment terms. As a
matter of practice, loans which management has serious concerns about the
borrower being able to pay are put into a non-accrual status and disclosed
under Risk Elements. Management reviews these loans periodically and feels
that the current reserve for possible loan losses more than adequately
provides coverage for actual loss potential. Other interest-bearing assets
considered a risk element are also detailed in this section.
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The following schedule summarizes the amount of nonaccrual, past due, and
restructured loans, in thousands of dollars, for the periods ended December
1996, 1995, 1994, 1993, 1992:
December 31,
1996 1995 1994 1993 1992
Nonaccrual loans $ 377 $ 479 $1,062 $1,015 $1,091
Accruing loans which are
contractually past due
90 days or more as to
principal or interest
payments $ 77 $ 87 $ 55 $ 221 $ 318
Restructed trouble debt None None None None None
Information relating to interest income on nonaccrual and renegotiated loans
outstanding for the year ended December 31, 1996, 1995, and 1994 is as
follows:
1996 1995 1994
Interest included in income during the
year $ 7 $ 2 $ 22
Interest which would have been included
at the original contract rates $ 45 $ 60 $ 93
Loans are placed in a non-accrual status when, in the opinion of management,
the collection of additional interest is questionable. Thereafter no
interest is taken into income unless received in cash or until such time as
the borrower demonstrates the ability to pay principal and interest.
17
POTENTIAL PROBLEM LOANS
In addition to those loans disclosed under "Risk Elements", there are certain
loans in the portfolio which are presently current but about which management
has concerns regarding the ability of the borrower to comply with present
loan repayment terms. Management maintains a loan review of the total loan
portfolio to identify loans where there is concern that the borrower will not
be able to continue to satisfy present loan repayment terms. Such problem
loan identification includes the review of individual loans, loss experience,
and economic conditions. Problem loans include both current and past due
loans.
As of December 31, 1996, loans which management had serious concerns about
the borrower being able to repay were put into a non-accrual status which are
disclosed under "Risk Elements".
FOREIGN OUTSTANDINGS
As of the year ended December 31, 1996, the Company had no foreign loans
outstanding.
LOAN CONCENTRATIONS
As of the year ended December 31, 1996, the Company did not have any
concentration of loans exceeding 10% of total loans which are not otherwise
disclosed as a category of loans pursuant to Item III. A. of Guide 3.
OTHER INTEREST-BEARING ASSETS
The Bank maintains an investment in an executive life insurance program
through Confederation Life Insurance and Annuity Company, Inc.. During 1994
the Michigan Insurance Commission seized control of this United States
Corporation due to a similar action by the Canadian regulatory authorities
over the company's parent corporation, Confederation Life Insurance Company.
Regulatory oversight began as concerns regarding investment losses of the
parent corporation developed during 1993 and 1994. Management determined
that any impairment of the approximate $2,100,000 cash surrender value of the
policies was remote due to the financial stability of the U.S. subsidiary.
Subsequently, on October 23, 1996, a plan of Rehabilitation for Confederation
Life Insurance Company (U.S.) was confirmed by the State of Michigan in the
Circuit Court for the County of Ingham. The plan provides for the assumption
of company owned life insurance policies (COLI), such as the Bank's, to be
assumed by Pacific Mutual Life Insurance Company. Under the agreement,
holders of COLI policies will have the option to have a policy reinsured by
Pacific Mutual which is expected to have the same account value and
substantially the same contract terms as the original policy or to receive
the liquidation or "opt-out" value of the policy. Management anticipates the
Bank's COLI policies to be reinsured by Pacific Mutual prior to year-end
1997.
The Bank's independent external auditors have revisited the facts and
circumstances regarding the investment in the COLI program and have read the
related guidance in SFAS No. 5 and SAB Topic 5(Y). There continues to be no
significant uncertainties requiring the recognition of a loss contingency as
of the date of this report.
As of December 31, 1996, the Company does not have any other interest-bearing
assets that would be required to be disclosed under Item III. C. 1. or 2. if
such assets were loans.
18
SUMMARY OF LOAN LOSS EXPERIENCE
Loan loss experience for each reported period, in thousands of dollars, is
summarized as follows:
Year Ended December 31,
1996 1995 1994 1993 1992
Loans (net of unearned income):
Average loans outstanding for
the period $169,815 $149,940 $140,104 $131,599 $128,859
Reserve for loan losses:
Balance at beginning
of period $ 2,242 $ 2,220 $ 2,170 $ 2,029 $ 1,814
Charge-offs:
Commercial, financial, and
agricultural 111 133 122 174 226
R.E. - construction
and mortgage 22 3 57 211 207
Loans to individuals 296 313 277 222 270
Total charge-offs $ 429 $ 449 $ 456 $ 607 $ 703
Recoveries:
Commercial, financial, and
agricultural 47 166 58 96 58
Real estate-construction
and mortgage 15 44 35 108 2
Loans to individuals 135 151 118 99 113
Total recoveries $ 197 $ 361 $ 211 $ 303 $ 173
Net charge-offs $ 232 $ 88 $ 245 $ 304 $ 530
Additions charged
to operations $ 360 $ 110 $ 295 $ 445 $ 745
Balance at end of period $ 2,370 $ 2,242 $ 2,220 $ 2,170 $ 2,029
Ratio of net charge-offs
during the period to
average loans outstanding
during the period. 14% .06% .17% .23% .41%
The reserve for loan losses is maintained at the greater of 1.20% of net
loans or an amount that bears the same ratio to eligible loans as net
charge-offs to average eligible loans over the past six years. In addition,
the Asset/ Liability Management Committee and the Loan Committee review the
adequacy of the reserve quarterly and make recommendations as to the desired
amount of the reserve. Determination of the adequacy of the reserve is based
on the above ratios and, but not limited to, considerations of classified and
internally-identified problem loans, the current trend in delinquencies, the
volume of past-due loans, and current or expected economic conditions. Based
upon these factors, net charge-offs are anticipated to be approximately $300
during 1997.
19
DEPOSITS
AVERAGE DEPOSITS BY CLASSIFICATION
The following table sets forth the classification of average deposits for the
indicated period, in the thousands of dollars:
Years Ended December 31,
1996 1995 1994
Noninterest bearing demand deposits 51,249 45,839 40,181
Interest bearing demand deposits 44,886 43,415 44,249
Savings deposits 31,375 33,512 41,870
Time deposits 137,733 119,268 104,470
Total deposits 265,443 242,034 230,770
AVERAGE RATES PAID ON DEPOSITS
The following table sets forth average rates paid on categories of
interest-bearing deposits for the periods indicated:
Years Ended December 31,
1996 1995 1994
Interest bearing demand deposits 1.70% 2.12% 2.39%
Savings deposits 2.79% 3.28% 3.88%
Time deposits 5.06% 5.04% 3.71%
MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
The following table sets forth the maturity of time deposits of $100,000 or
more, in thousands of dollars, at December 31, 1996:
Time Certificates of Deposit
Maturity within 3 months or less $13,033
Over 3 through 6 months 7,782
Over 6 through 12 months 8,421
Over 12 months 5,082
Total 34,318
20
RETURN ON EQUITY AND ASSETS
The following table presents certain ratios relating to the Company's equity
and assets:
Year ended December 31,
1996 1995 1994
Return on average total assets 1.19% 1.19% 1.18%
Return on average stockholders' equity 12.15% 12.07% 12.29%
Cash dividend payout ratio 35.09% 38.13% 27.31%
Average equity to average assets ratio 9.83% 9.85% 9.56%
SHORT-TERM BORROWINGS
Federal funds purchased and securities sold under repurchase agreements are
short-term borrowings which generally mature within 90 days from the dates of
issuance. No other category of short-term borrowings had an average balance
outstanding during the reported period which represented 30 percent or more
of stockholders' equity at the end of the period.
The following is a summary of short-term borrowings at December 31 of each
reported period, in thousands of dollars:
December 31,
Federal funds purchased
and securities sold under 1996 1995 1994
agreement to repurchase $33,018 $36,935 $29,236
The following information relates to short-term borrowings outstanding during
1996, 1995, and 1994:
Maximum Amount Weighted Average
Outstanding in Any Interest Rate
Month End at December 31,
1996 1995 1994 1996 1995 1994
Federal funds
purchased and
securities sold
under agreement
to repurchase $45,333 $47,707 $41,537 4.81% 5.10% 4.29%
Year ended December 31,
1996 1995 1994
Federal funds purchased and
securities sold under
agreement to repurchase-
average daily amount outstanding $39,506 $39,332 $35,037
Weighted average interest rate paid 4.82% 5.09% 3.17%
21
ITEM 2. PROPERTIES
The Company's subsidiary, The Conway National Bank, has nine permanent
offices in Horry County. The principal office, located at 1400 Third Avenue
in Conway, houses the Bank's administrative offices and data processing
facilities. This three-story structure, which was significantly expanded
in 1982, contains approximately 33,616 square feet. In addition, the Bank
has a 632 square foot building for express banking services adjacent to the
principal office. The Bank has a two-story office on Main Street in Conway
containing 8,424 square feet. Bank offices are housed in one-story
facilities at the Coastal Centre in Conway (3,500 square feet with an
adjacent 675 square foot building for express banking services), Red Hill in
Conway (3,760 square feet), Surfside in Surfside Beach (6,339 square feet),
Northside, north of Myrtle Beach (2,432 square feet), Socastee in the
southern portion of Myrtle Beach (3,498 square feet), Aynor in The Town of
Aynor (2,809 square feet), and Myrtle Beach in the City of Myrtle Beach
(12,000 square feet). Of the nine offices, the bank owns the principal
office, the office at Red Hill, Northside, Main Street, Socastee, Aynor, and
Myrtle Beach. All other facilities are leased by the Bank under long-term
leases with renewal options. In addition to the existing facilities, the
Company has purchased approximately one and one-half acres of land as a
future office site on Highway 17 south of Myrtle Beach in the Murrell's Inlet
area which is not expected to be utilized within the next two years.
ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings against the Company or its
subsidiary, The Conway National Bank, as of December 31, 1996.
There were no administrative or judicial proceedings arising under Section 8
of the Federal Deposit Insurance Act.
There were no material proceedings to which any director, officer, or owner
of record of more than 5% of the voting securities of the Company or any
associate is a party adverse to the Company.
There are other legal proceedings pending against the Company or its
subsidiary, The Conway National Bank, in the ordinary course of business. In
the opinion of management, based upon the opinion of counsel, liabilities
arising from these proceedings, if any, would not have a material adverse
effect on the financial position of the Company.
22
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On April 9, 1996, at the Annual Meeting of CNB Corporation, the security
holders:
1) Nominated and elected five directors to serve for a three-year
term; and
2) Ratified the appointment of Elliott, Davis, and Company,
Certified Public Accountants, as independent auditors for the
Company and its subsidiary for the year ending December 31,
1996.
PART II
ITEM 5. MARKET PRICE OF REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
As of December 31, 1996, there were approximately 615 holders of record of
Company stock. There is no established market for shares of Company stock
and only limited trading in such shares has occurred since the formation of
the Company on June 10, 1985. Most of the limited trading transactions have
been effected through the efforts of officers of the Company in matching
interested purchasers with shareholders who have expressed an interest in
selling their shares of Company stock. Some private trading of Company stock
has occurred without any participation in the transaction by the officers of
the Company other than to effect the transfer on the Company's shareholder
records. Accordingly, management of the Company is not aware of the prices
at which all shares of Company stock have traded. The following table sets
forth the prices known to management of the Company at which shares of
Company stock have traded in each quarter within the two most recent fiscal
years.
1996 1995
High Low High Low
First Quarter $88.75 $88.75 $66.25 $66.25
Second Quarter $93.25 $88.75 $79.75 $66.25
Third Quarter $93.25 $93.25 $79.75 $79.75
Fourth Quarter $96.00 $93.25 $88.75 $79.75
Holders of shares of Company stock are entitled to such dividends as may be
declared from time to time by the Board of Directors of the Company.
The Company paid an annual cash dividend of $3.00 per share in 1996 and 1995,
$2.00 per share in 1994, 1993 and 1992, $1.50 per share in 1991, and $1.00
per share in the years 1985 through 1990. In addition, the Company may
from time to time pay a stock dividend. The Company paid a 20% stock
dividend in September, 1994, a 50% stock dividend in July, 1989, a 20% stock
dividend in August, 1987 and a 15% stock dividend in November, 1985. There
can be no assurance, however, as to the payment of dividends by the Company
in the future since payment will be dependent upon the earnings and
financial condition of the Company and the Bank and other related factors.
23
ITEM 6. SELECTED FINANCIAL DATA
CNB Corporation
FINANCIAL SUMMARY
(All Dollar Amounts, Except Per Share Data, in Thousands)
The following table sets forth certain selected financial data relating
to the Company and subsidiary and is qualified in its entirety by
reference to the more detailed financial statements of the Company and
subsidiary and notes thereto included elsewhere in this report.
Year Ended December 31,
1996 1995 1994 1993 1992
Selected Income Statement Data:
Total Interest Income $ 24,496 $ 22,601 $ 19,847 $ 18,719 $ 19,244
Total Interest Expense 10,579 10,115 7,613 7,369 8,666
Net Interest Income 13,917 12,486 12,234 11,350 10,578
Provision for Possible Loan Lossess 360 110 295 445 745
Net Interest Income after
Provision for Possible Loan
Losses 13,557 12,376 11,939 10,905 9,833
Total Other Operating Income 3,015 2,954 2,814 2,735 2,564
Total Other Operating Expense 10,393 9,797 9,599 8,850 8,461
Income Before Income Taxes 6,179 5,533 5,154 4,790 3,936
Income Taxes 2,095 1,777 1,657 1,493 1,030
Net Income $ 4,084 $ 3,756 $ 3,497 $ 3,297 $ 2,906
Per Share:
Net Income Per Weighted Average
Shares Outstanding* $ 8.55 $ 7.86 $ 7.34 $ 6.92 $ 6.09
Cash Dividend Paid Per Share $ 3.00 $ 3.00 $ 2.00 $ 2.00 $ 2.00
Weighted Average Shares
Outstanding* 477,496 477,820 476,370 476,546 477,389
*Restated for stock dividend
Selected Balance Sheet Data:
Assets $341,818 $324,694 $297,120 $283,380 $268,078
Net Loans 182,505 150,162 142,143 129,564 129,594
Investment Securities 132,287 138,768 126,613 116,185 101,703
Federal Funds Sold - 7,300 3,125 14,400 16,125
Deposits:
Non-Interest-Bearing $ 49,885 $ 44,723 $ 40,986 $ 35,369 $ 30,973
Interest-Bearing 218,528 206,433 193,207 183,933 177,866
Total Deposits $268,413 $251,156 $234,193 $219,302 $208,839
Stockholders' Equity $ 34,496 $ 32,195 $ 28,857 $ 26,820 $ 24,443
24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis" is provided to afford a clearer
understanding of the major elements of the Company's financial
condition, results of operations, liquidity, and capital resources. The
following discussion should be read in conjunction with the Company's
financial statements and notes thereto and other detailed information
appearing elsewhere in this report.
Distribution of Assets and Liabilities
The Company maintains a conservative approach in determining the distribution
of assets and liabilities. Loans, net of unearned income, increased 5.6%
from $144,363 at December 31, 1994 to $152,404 at December 31, 1995; and
21.3% from December 31, 1995 to $184,875 at December 31, 1996. Loan growth
is attributed to overall business development efforts to meet business and
personal loan demand in our market area. Loan demand was relatively strong
in our market area in 1995 and strong in 1996. During 1995, increased rate
and term competition on commercial loans within our market area somewhat
reduced the anticipated rate of loan growth. Loans, net of unearned income,
decreased as a percentage of total assets from 48.6% at year-end 1994 to
46.9% at year-end 1995 but grew strongly to 54.1% at year-end 1996.
Correspondingly, investment securities and federal funds sold increased as a
percentage of total assets from 43.7% at year-end 1994 to 45.0% at year-end
1995 but shrank to 38.7% at year-end 1996 as funds have been utilized to
balance the fluctuations in loan outstandings. Investments and federal funds
sold provide for an adequate supply of secondary liquidity. Year-end other
assets as a percentage of total assets increased from 7.7% in 1994 to 8.1% in
1995 due to the opening of a ninth banking office. This percentage dropped
to 7.2% in 1996 as the Bank grew into its expanded infrastructure. Management
has sought to build the deposit base with stable, relatively non-interest-
rate sensitive deposits by offering the small to medium account holders a
wide array of deposit instruments at competitve rates. Non-interest-bearing
demand deposits remained flat as a percentage of total assets at 13.8% at
December 31, 1994 and December 31, 1995, but grew to 14.6% at December 31,
1996. Demand deposits are expected to decline over the long-term as more
customers utilize interest-bearing deposit and repo accounts. Interest-
bearing liabilities as a percentage of total assets have declined from 75.7%
at December 31, 1994 to 75.2% at December 31, 1995 to 74.3% at December 31,
1996.
The following table sets forth the percentage relationship to total assets of
significant components of the Company's balance sheet as of December 31,
1996, 1995 and 1994:
December 31,
1996 1995 1994
Assets:
Earning assets
Loans, net of
unearned income 54.1% 46.9% 48.6%
Investment securities:
Taxable 34.6 38.3 37.1
Tax-exempt 4.1 4.4 5.5
Federal funds sold and securities
purchased under agreement to resell - 2.3 1.1
Other earning assets - - -
Total earning assets 92.8 91.9 92.3
Other assets 7.2 8.1 7.7
Total assets 100.0% 100.0% 100.0%
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits 63.9% 63.6% 65.0%
Federal funds purchased and securities
sold under agreement to repurchase 9.7 11.4 9.9
Other short-term borrowings .7 .2 .8
Total interest-bearing liabilities 74.3 75.2 75.7
Non-interest-bearing deposits 14.6 13.8 13.8
Other liabilities 1.0 1.1 .8
Stockholders' equity 10.1 9.9 9.7
Total liabilities and stockholders'equity 100.0% 100.0% 100.0%
25
Results of Operation
CNB Corporation and subsidiary experienced earnings in 1996, 1995 and 1994 of
$4,084, $3,756 and $3,497, respectively, resulting in a return of average
assets of 1.19%, 1.19%, and 1.18% and a return on average stockholders'
equity of 12.15%, 12.07% and 12.29%. The earnings were primarily attributable
to favorable net interest margins in each period (see Net Income-Net
Interest Income). Other factors include management's ongoing effort to
maintain other income at adequate levels (see Net Income - Other Income) and
to control other expenses (see Net Income - Other Expenses). These strong
earnings, coupled with a conservative dividend policy, have supplied the
necessary capital funds to support bank operations. Total assets were
$341,818 at December 31, 1996 as compared to $324,694 at December 31,
1995 and $297,120 at December 31, 1994. The following table sets forth the
financial highlights for fiscal years 1996, 1995, and 1994.
26
CNB Corporation and Subsidiary
FINANCIAL HIGHLIGHTS
(All Dollar Amounts, Except Per Share Data, in Thousands)
December 31, 1995 to 1996 December 31, 1994 to 1995 December 31,
1996 Percent 1995 Percent 1994
Increase Increase
(Decrease) (Decrease)
Net interest
income after
provision for
loan losses $ 13,557 9.5% $ 12,376 3.7% $ 11,939
Income before
income taxes 6,179 11.7 5,533 7.4 5,154
Net Income 4,084 8.7 3,756 7.4 3,497
Per share
(weighted
average of
shares
outstanding) $ 8.55 8.8 $ 7.86 7.1 $ 7.34
Cash dividends
declared 1,433 .1 1,432 49.9 955
Per share $ 3.00 - $ 3.00 50.0 $ 2.00
Total assets $341,818 5.3% $324,694 9.3% $297,120
Total deposits 268,413 6.9 251,156 7.2 234,193
Loans, net of
unearned income 184,875 21.3 152,404 5.6 144,363
Investment
securities 132,287 (4.7) 138,768 9.6 126,613
Stockholders'
equity 34,496 7.1 32,195 11.6 28,857
Book value per
share - actual
number of
shares outstanding $ 72.16 7.0 $ 67.43 11.5 $ 60.46
Ratios(1):
Returns on
average total
assets 1.19% - 1.19% .8 1.18%
Return on
average
stockholders'
equity 12.15% .7 12.07% (1.8) 12.29%
(1) For the fiscal years ended December 31, 1996, 1995, and 1994, average
total assets amounted to $342,182, $316,002, and $297,595 with average
stockholders' equity totaling $33,620, $31,113, and $28,458, respectively.
27
NET INCOME
Net Interest Income - Earnings are dependent to a large degree on net
interest income, defined as the difference between gross interest and fees
earned on earning assets, primarily loans and investment securities, and
interest paid on deposits and borrowed funds. Net interest income is
affected by the interest rates earned or paid and by volume changes in
loans, investment securities, deposits, and borrowed funds.
The Bank has maintained strong net interest margins in 1996, 1995
and 1994 by earning adequate yields on loans and investments and funding
these assets with a favorable deposit and repurchase agreement mix.
Fully-tax-equivalent net interest income has grown from $12,750 in 1994 and
$12,943 in 1995 to $14,298 in 1996. During the three-year period, total
fully-tax-equivalent interest income increased by 13.2% from $20,363 in
1994 to $23,058 in 1995 and increased 7.9% in 1996 to $24,877. Over the
same period, total interest expense increased by 32.9% from $7,613 in 1994 to
$10,115 in 1995 and increased 4.6% to $10,579 in 1996. The significant
increase in 1995 interest income and expense reflected a rapid rise in market
interest rates coupled with higher volumes of bank assets and liabilities
while changes in 1996 were reflective of more modest interest rate and asset
increases. Fully-tax-equivalent net interest income as a percentage of
average total earning assets has moved in a narrow range from 4.6% in 1994 to
4.4% in 1995 and 4.5% in 1996.
Interest rates paid on deposits and borrowed funds and earned on loans and
investments have generally followed the fluctuations in market interest
rates in 1996, 1995, and 1994. However, fluctuations in market interest
rates do not necessarily have a significant impact on net interest income,
depending on the Bank's rate sensitivity position. A rate sensitive asset
(RSA) is any loan or investment that can be repriced up or down in interest
rate within a certain time interval. A rate sensitive liability (RSL) is
an interest paying deposit or other liability that can be repriced either up
or down in interest rate within a certain time interval. When a proper
balance between RSA and RSL exists, market interest rate fluctuations should
not have a significant impact on earnings. The larger the imbalance, the
greater the interest rate risk assumed by the Bank and the greater the
positive or negative impact of interest rate fluctuations on earnings. The
Bank seeks to manage its assets and liabilities in a manner that will
limit interest rate risk and thus stabilize long-run earning power. The
following table sets forth the Bank's rate sensitivity position at each of
the time intervals indicated. The table illustrates the Bank's rate
sensitivity position on specific dates and may not be indicative of the
position at other points in time. Management believes that a rise or fall in
interest rates will not materially effect earnings.
Interest Rate Sensitivity Analysis
Over 1 to 5 Over 5
1 Day 90 Days 180 Days 365 Days Years Years
Rate Sensitive Assets (RSA)
Federal Funds Sold 0 0 0 0 0 0
Investment Securities 0 9,569 8,305 16,635 89,664 7,998
Loans(net of non
-accruals $377) 56,100 17,093 6,669 12,677 62,254 30,763
Total, RSA 56,100 26,662 14,974 29,312 151,918 38,761
Rate Sensitive
Liabilities (RSL)
Deposits:
Certificates of
Deposit of 0 13,033 7,782 8,421 5,082 0
$100,000 or more
All Other Time
Deposits 0 37,258 27,212 21,757 9,510 0
Money Market
Deposit Accounts 13,159 0 0 0 0 0
Securities Sold
Under Repurchase 26,415 488 0 765 5,350 0
Agreements
Total, RSL 39,574 50,779 34,994 30,943 19,942 0
RSA-RSL 16,526 (24,117) (20,020) (1,631) 131,976 38,761
Cumulative RSA-RSL 16,526 (7,591) (27,611) (20,242) 102,734 141,495
Cumulative RSA/RSL 1.42 .92 .78 .81 1.58 1.80
28
NET INCOME (continued)
Provision for Possible Loan Losses - It is the policy of the bank to
maintain the reserve for possible loan losses at the greater of 1.20% of
net loans or the percentage based on the actual loan loss experience over
the previous five years. In addition, management may increase the reserve
to a level above these guidelines to cover potential losses identified during
the ongoing in-house problem loan identification process. The Company
includes the provisions of SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan", in the allowance for loan losses (see NOTE 1 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES). The provision for possible loan losses
was $360 in 1996, $110 in 1995, and $295 in 1994. Net loan charge-offs
totalled $232 in 1996, $88 in 1995, and $245 in 1994 with net charge-offs
being centered in consumer purpose loans during each period. The reserve for
possible loan losses as a percentage of net loans was 1.30% at December 31,
1996, 1.49% at December 31, 1995, and 1.56% at December 31, 1994.
Securities Transactions - Net unrealized gains/(losses) in the investment
securities portfolio were $202 at December 31, 1996, $1,546 at December 31,
1995, and $(4,646) at December 31, 1994. The market value of investment
securities declined during 1994 due to the rapid rise in overall market
rates, rose again in 1995 as rates retreated, and declined modestly in 1996
as market rates rose somewhat. Security losses of $167 were taken in 1994 in
transactions to sell short-term low-yielding bonds and re-investing in
higher-yielding intermediate-term bonds. Security gains of $25 and $41 were
taken in 1995 and 1996, respectively, when bonds were sold to provide
additional primary liquidity and to manage the bank's interest rate
sensitivity position.
Other Income - Other income, net of security sales, decreased by 1.7% from
$2,981 in 1994 to $2,929 in 1995 and grew 1.5% from $2,929 in 1995 to $2,974
in 1996. Other income fell in 1995 due to lower service charge income booked
on deposit accounts, offset somewhat by higher merchant discount income, but
rose again in 1996 due to higher volumes in deposit and loan account
activity.
Other Expenses - Other expenses increased by 2.1% from $9,599 in 1994 to
$9,797 in 1995 and 6.1% from $9,797 in 1995 to $10,393 in 1996. The
components of other expenses are salaries and employee benefits of $5,285,
$5,695 and $6,166; occupancy and furniture and equipment expenses of $1,550,
$1,504, and $1,759; and other operating expenses of $2,764, $2,598, and
$2,468 for 1994, 1995, and 1996, respectively. The increase in salaries and
employee benefits reflects compensation increments, the increased costs of
providing employee benefits, and the 1995 addition of a 12-person Myrtle
Beach office. The Myrtle Beach office also impacted 1996 occupancy and
furniture and equipment expense as this was the first full year of operation.
During the third quarter of 1995, the Federal Deposit Insurance Corporation
(FDIC) announced that the bank insurance fund was fully capitalized and banks
were due a rebate of excessive paid-in insurance premiums. The Conway
National Bank received a $145 FDIC insurance premium rebate and is
experiencing significantly lower premiums as is evidenced in the decline in
1995 and 1996 other operating expenses. Looking ahead, non-interest expense
should grow at only a nominal rate during 1997 as no significant staffing and
infrastructure expenditures are expected, but may increase in 1998 due to
potential expansion in the bank's branch network.
Income Taxes - Provisions for income taxes increased 7.2% from $1,657 in
1994 to $1,777 in 1995 and 17.9% from $1,777 in 1995 to $2,095 in 1996.
The increase in income taxes is primarily due to an increase in income before
income taxes of 7.4% from $5,154 in 1994 to $5,533 in 1995 and 11.7% from
$5,533 in 1995 to $6,179 in 1996. Also, the utilization of tax-free income
as a percentage of income before income taxes declined in 1995 and 1996.
29
LIQUIDITY
The bank's liquidity position is primarily dependent on short-term demands
for funds caused by customer credit needs and deposit withdrawals and upon
the liquidity of bank assets to meet these needs. The bank's liquidity
sources include cash and due from banks, federal funds sold and short-term
investments. In addition, the bank has established federal funds lines of
credit from correspondent banks and has the ability, on a short-term basis,
to borrow funds from the Federal Reserve System. The Company has cash
balances on hand of $3,078, $2,927, and $2,358 at December 31, 1996, 1995,
and 1994 with liabilities, consisting of cash dividends payable, totalling
$1,435, $1,432, and $955, respectively. Management feels that liquidity
sources are more than adequate to meet funding needs.
CAPITAL RESOURCES
Total stockholders' equity was $34,496, $32,195, and $28,857 at December
31, 1996, 1995, and 1994, representing 10.09%, 9.92%, and 9.71% of total
assets, respectively. At December 31, 1996, the Bank exceeds quantitative
measures established by regulation to ensure capital adequacy (see NOTE 15 -
REGULATORY MATTERS). Capital is considered sufficient by management to meet
current and prospective capital requirements and to support anticipated
growth in bank operations.
EFFECTS OF INFLATION
Inflation normally has the effect of accelerating the growth of both
a bank's assets and liabilities. One result of this inflationary effect is
an increased need for equity capital. Income is also affected by inflation.
While interest rates have traditionally moved with inflation, the effect on
net income is diminished because both interest earned on assets and interest
paid on liabilities vary directly with each other. In some cases,
however, rate increases are delayed on fixed-rate instruments. Loan demand
normally declines during periods of high inflation. Inflation has a direct
impact on the Bank's non-interest expense. The Bank responds to inflation
changes through readjusting non-interest income by repricing services.
EFFECTS OF REGULATORY ACTION
The Federal Deposit Insurance Corporation (FDIC) reduced FDIC insurance
premium rates during the third quarter of 1995. This decrease had a positive
effect on earnings in 1995 and 1996 and should favorably impact future years
income. (see NET INCOME - Other Expenses). The management of the Company and
the Bank is not aware of any other current recommendations by the regulatory
authorities which, if they were to be implemented, would have a material
effect on liquidity, capital resources, or operations.
30
ITEM 8 - FINANCIAL STATEMENTS
CNB CORPORATION AND SUBSIDIARY
REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
31
CNB CORPORATION AND SUBSIDIARY
CONWAY, SOUTH CAROLINA
CONTENTS
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 33
FINANCIAL STATEMENTS
Consolidated balance sheets 34
Consolidated statements of income 35
Consolidated statements of changes in stockholders' equity 36
Consolidated statements of cash flow 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 38 - 52
32
Elliott, Davis & Company, L.L.P.
Certified Public Accountants
Members of the American Institute of Certified Public Accountants
Greenville, S.C.
Greenwood, S.C.
Anderson, S.C.
Aiken, S.C.
Columbia, S.C.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Directors and Stockholders
CNB Corporation
Conway, South Carolina
We have audited the accompanying consolidated balance sheets of CNB
Corporation and Subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CNB
Corporation and Subsidiary at December 31, 1996 and 1995 and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Elliott, Davis & Company, L.L.P.
January 17, 1997
Internationally - Moore Stephens Elliott Davis, L.L.C.
870 S. Pleasantburg Drive
Post Office Box 6286
Greenville, South Carolina 29606-6286
Telephone (864) 242-3370 Telefax (864) 232-7161
33
CNB CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(amounts, except share data, in thousands)
DECEMBER 31,
1996 1995
ASSETS
CASH AND DUE FROM BANKS - Notes 2 and 16 $ 14,350 $ 15,605
FEDERAL FUNDS SOLD - Note 16 - 7,300
INVESTMENT SECURITIES HELD TO MATURITY
(fair value $70,306 in 1996 and $77,231
in 1995) - Notes 3 and 16 70,149 76,402
INVESTMENT SECURITIES AVAILABLE FOR SALE - Notes 3 and 16 62,138 62,366
LOANS - Notes 4 and 16 185,933 153,498
Less unearned income (1,058) (1,094)
Less allowance for loan losses (2,370) (2,242)
Net loans 182,505 150,162
PREMISES AND EQUIPMENT - Note 5 6,866 7,166
ACCRUED INTEREST RECEIVABLE 3,325 3,287
OTHER ASSETS 2,485 2,406
$ 341,818 $ 324,694
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits - Notes 6 and 16
Noninterest-bearing $ 49,885 $ 44,723
Interest-bearing 218,528 206,433
Total deposits 268,413 251,156
Securities sold under
repurchase agreements - Notes 7 and 16 29,018 36,935
Federal Funds purchased - Note 16 4,000 -
United States Treasury demand notes - Note 16 2,319 766
Other liabilities 3,547 3,619
Minority interest in consolidated subsidiary 25 23
Total liabilities 307,322 292,499
COMMITMENTS AND CONTINGENT LIABILITIES - Notes 10 and 11
STOCKHOLDERS' EQUITY
Common stock - $10 par value; authorized 500,000 shares;
issued 479,093 shares 4,791 4,791
Capital in excess of par value of stock 15,697 15,676
Retained earnings 14,082 11,431
Net unrealized holding gain on investment
securities available for sale 27 430
34,597 32,328
Less 1,075 shares and 1,640 shares held in Treasury at cost (101) (133)
Total stockholders' equity 34,496 32,195
$ 341,818 $ 324,694
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
34
CNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(amounts, except per share data, in thousands)
For the years ended December 31,
1996 1995 1994
INTEREST INCOME
Loans and fees on loans $ 15,808 $ 14,070 $ 12,034
Investment securities
Taxable 7,481 6,755 6,240
Nontaxable 740 887 1,002
Total interest on investment securities 8,221 7,642 7,242
Federal funds sold 460 882 564
Other 7 7 7
Total interest income 24,496 22,601 19,847
INTEREST EXPENSE
Deposits 8,610 8,032 6,460
Securities sold under repurchase agreements 1,906 2,002 1,111
United States Treasury demand notes 63 81 42
Total interest expense 10,579 10,115 7,613
Net interest income 13,917 12,486 12,234
PROVISION FOR LOAN LOSSES 360 110 295
Net interest income after provision for loan losses 13,557 12,376 11,939
NONINTEREST INCOME
Service charges on deposit accounts 1,956 1,795 1,844
Other service and exchange charges 1,018 1,134 1,137
Gain (loss) on sale of investment securities available for sale 41 25 (167)
Total noninterest income 3,015 2,954 2,814
NONINTEREST EXPENSES
Salaries and wages 5,031 4,552 4,214
Pensions and other employee benefits 1,135 1,143 1,071
Occupancy 737 568 600
Furniture and equipment 1,022 936 950
Liability insurance 79 310 592
Office supplies 290 304 260
Credit card operations 569 528 563
Other operating expenses 1,527 1,453 1,346
Minority interest in income of subsidiary 3 3 3
Total noninterest expenses 10,393 9,797 9,599
Income before provision for income taxes 6,179 5,533 5,154
PROVISION FOR INCOME TAXES - Note 9 2,095 1,777 1,657
Net income $ 4,084 $ 3,756 $ 3,497
NET INCOME PER SHARE OF COMMON STOCK $ 8.55 $ 7.86 $ 7.34
See Notes to Consolidated Financial Statements which are an integral part of
these statements.
35
CNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995 and 1994
(amounts, except share data, in thousands)
Net unrealized
holding gain
Capital in (loss) on
excess of securities Total
Common par value Retained Treasury available S.E.
Shares stock of stock earnings stock for sale equity
BALANCE, DECEMBER 31, 1993 399,353 $ 3,994 $ 11,338 $ 11,678 $ (190) $ 571 $ 27,391
1994
Net income - - - 3,497 - - 3,497
Cash dividend, $2.00 per share - - - (955) - - (955)
Stock dividend 79,740 797 4,306 (5,113) - - (10)
Treasury stock transactions (net) - - - - 78 - 78
Gain on sale of treasury stock - - 15 - - - 15
Net change in unrealized holding
gain, net of income taxes of $731 - - - - - (1,159) (1,159)
BALANCE, DECEMBER 31, 1994 479,093 4,791 15,659 9,107 (112) (588) 28,857
1995
Net income - - - 3,756 - - 3,756
Cash dividend, $3.00 per share - - - (1,432) - - (1,432)
Treasury stock transactions (net) - - - - (21) - (21)
Gain on sale of treasury stock - - 17 - - - 17
Net change in unrealized holding
loss, net of income taxes of $678 - - - - - 1,018 1,018
BALANCE, DECEMBER 31, 1995 479,093 4,791 15,676 11,431 (133) 430 32,195
1996
Net income - - - 4,084 - - 4,084
Cash dividend, $3.00 per share - - - (1,433) - - (1,433)
Treasury stock transactions (net) - - - - 32 - 32
Gain on sale of treasury stock - - 21 - - - 21
Net change in unrealized holding gain,
net of income taxes of $269 - - - - - (403) (403)
BALANCE, DECEMBER 31, 1996 479,093 $ 4,791 $ 15,697 $ 14,082 $ (101) $ 27 $ 34,496
See Notes to Consolidated Financial Statements which are an integral part
of these statements.
36
CNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
For the years ended December 31,
1996 1995 1994
OPERATING ACTIVITIES
Net income $ 4,084 $ 3,756 $ 3,497
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 757 666 623
Provision for loan losses 360 110 295
Provision for deferred income taxes 89 134 30
Loss on sale of premises and equipment - - 107
Changes in assets and liabilities:
Increase in accrued interest receivable (38) (367) (302)
Increase in other assets (79) (65) (71)
Increase (decrease) in other liabilities 106 9 (407)
Increase in minority interest in subsidiary