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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 [Fee Required]
For the fiscal year ended December 31, 1995.
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 29, 1995, 477,549 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
$42,382,474.
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 31-49
ITEM 9. Disagreements on Accounting and Financial Disclosure 50
PART III
ITEM 10. Directors and Executive Officers of the Registrant 51-55
ITEM 11. Executive Compensation 56-58
ITEM 12. Security Ownership of Certain Beneficial Owners 59
and Management
ITEM 13. Certain Relationships and Related Transactions 59
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, Notes to 60
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 new 12,000 square foot,
12-person, Myrtle Beach office opened in August, 1995. The Bank employs
approximately 177 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,
Southern National Bank 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. has filed for a bank charter in 1996. If approved, it 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, 1995, has 479,093 shares issued and 477,453 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
1995 March 31 June 30 September 30 December 31
Interest income $ 5,396 $ 5,649 $ 5,736 $ 5,820
Interest expense 2,296 2,542 2,619 2,658
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
1994
Interest income $ 4,670 $ 4,940 $ 5,078 $ 5,159
Interest expense 1,769 1,809 1,977 2,058
Net interest income 2,901 3,131 3,101 3,101
Provision for loan losses 20 80 60 135
Net interest income after
provision for loan losses 2,881 3,051 3,041 2,966
Other income 642 705 846 621
Other expenses 2,215 2,326 2,362 2,696
Income before income taxes 1,308 1,430 1,525 891
Income taxes 407 484 468 298
Net income $ 901 $ 946 $ 1,057 $ 593
Net income per share $ 1.89 $ 1.98 $ 2.22 $ 1.25
Weighted average shares outstanding 476,512 476,496 476,117 476,370
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 12/31/95
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.
8
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.
9
CNB Corporation and Subsidiary
Selected Financial Data
Twelve Months Ended 12/31/93
Average Interest Avg.Annual
Balance Income/ Yield or
Expense(2) Rate
Assets:
Earning assets
Loans, net of
unearned income $131,599 $11,304 8.59%
Investment Securities:
Taxable 90,492 5,631 6.22
Tax-exempt 15,190 1,521 10.01
Federal funds sold and
securities purchased under
agreement to resell 26,176 773 2.95
Other earning assets 116 7 6.03
Total earning assets $263,573 $19,236 7.30
Other assets 17,921
Total assets $281,494
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits $181,100 6,334 3.50
Federal funds purchased and
securities sold under
agreement to repurchase 35,278 998 2.83
Other short-term borrowings 1,335 35 2.62
Mortgage Indebtedness and
obligations under
capitalized leases 31 2 8.00
Total interest-bearing
liabilities $217,744 $ 7,369 3.38
Noninterest-bearing deposits 34,683
Other liabilities 3,252
Stockholders' equity 25,815
Total liabilities and
stockholders' equity $281,494
Net interest income as a
percent of total
earning assets $263,573 $11,867 4.50%
(1) Tax-equivalent adjustment
based on a 34% tax rate $ 517
Ratios:
Annualized return on average total assets 1.17%
Annualized return on average stockholders' equity 12.77
Cash dividends declared as a percent of net income 24.08
Average stockholders' equity as a percent of:
Average total assets 9.17
Average total deposits 11.96
Average loans, net of unearned income 19.62
Average earning assets as a percent of
average total assets 93.63%
(2) The Company had no out-of-period adjustments or foreign activities.
Loan fees of $31 are included in the above interest income. Loans on
a non-accrual basis for the recognition of interest income totalling
$1,015 as of December 31, 1993 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, 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 Due To 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.
11
CNB Corporation and Subsidiary
Rate/Volume Variance Analysis
For the Twelve Months Ended December 31, 1994 and 1993
(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
1994 1993 1994 (1) 1993 (1) 1994 (1) 1993 (1) Variance Rate Volume Volume
Earning Assets:
Loans, Net of unearned
income (2) 140,104 131,599 8.59% 8.59% 12,034 11,304 730 - 730 -
Investment securities:
Taxable 107,891 90,492 5.78% 6.22% 6,240 5,631 609 (398) 1,082 (75)
Tax-exempt 16,098 15,190 9.43% 10.01% 1,518 1,521 (3) (88) 91 (6)
Federal funds sold and
securities purchased under
agreement to resell 14,127 26,176 3.99% 2.95% 564 773 (209) 272 (355) (126)
Other earning assets 116 116 6.03% 6.03% 7 7 - - - -
Total Earning Assets 278,336 263,573 7.32% 7.30% 20,363 19,236 1,127 (214) 1,548 (207)
Interest-bearing Liabilities:
Interest-bearing deposits 190,589 181,100 3.39% 3.50% 6,460 6,334 126 (199) 332 (7)
Federal funds purchased and
securities sold under
agreement to repurchase 35,037 35,278 3.17% 2.83% 1,111 998 113 120 (7) -
Other short-term borrowings 1,163 1,335 3.61% 2.62% 42 35 7 13 (5) (1)
Mortgage indebtedness and
obligations under capital-
ized leases - 31 - 8.00% - 2 (2) - (2) -
Total Interest-bearing
Liabilities 226,789 217,744 3.36% 3.38% 7,613 7,369 244 (66) 318 (8)
Interest-free Funds
Supporting Earning Assets 51,547 45,829
Total Funds Supporting
Earning Assets 278,336 263,573 2.74% 2.80% 7,613 7,369 244 (66) 318 (8)
Interest Rate Spread 3.96% 3.92%
Impact of Non-interest-bearing
Funds on Net Yield on Earning
Assets .62% .58%
Net Yield on Earning Assets 4.58% 4.50% 12,750 11,867
(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 $66,115, $50,615, and $53,905
at December 31, 1995, 1994, and 1993, 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, 1995, 1994, and 1993.
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%
Total available
for sale $61,533 $ 809 $ 92 $62,250 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.
13
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%
Total available
for sale $44,498 $ 37 $1,017 $43,518 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.
14
INVESTMENT SECURITIES, continued
December 31, 1993
Book Unrealized Market
Value Gains Losses Value Yield(1)
U.S. Government
Within 1 year 12,023 162 - 12,185 6.25%
After 1 year but
within 5 years 60,544 953 131 61,366 5.28%
After 5 years but
within 10 years 0 0 0 0 -
Total, U.S. Government 72,567 1,115 131 73,551 5.45%
U.S. Government Agencies
and Corporations
Within 1 year 9,493 274 - 9,767 8.68%
After 1 year but
within 5 years 16,885 634 14 17,505 6.39%
After 5 years but
within 10 years 0 - - 0 -
After 10 years 1,259 19 7 1,271 5.61%
Total, U.S. Government
Agencies and
Corporations 27,637 927 21 28,543 7.14%
State and political
Subdivisions
Within 1 year 1,693 24 - 1,717 11.17%
After 1 year but
within 5 years 7,135 483 1 7,617 10.58%
After 5 years but
within 10 years 7,044 487 28 7,503 7.99%
After 10 years 109 - - 109 7.07%
Total,State and Political
Subdivisions 15,981 984 29 16,946 9.52%
Other Securities
(Equity) 116 - - 116 -
Total Securities 116,301 3,036 181 119,156 6.42%
(1) Tax equivalent adjustment based on a 34% tax rate.
As of the quarter ended December 31, 1993, 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,
1995, 1994, 1993, 1992, and 1991 by major classification:
1995 1994 1993 1992 1991
Real estate Loans - mortgage $ 95,451 $ 89,728 $ 84,806 $ 84,298 $ 71,192
- construction 5,453 6,328 4,051 5,768 7,043
Loans to farmers 1,032 1,180 971 881 680
Commercial and industrial loans 23,133 17,472 14,612 15,102 16,416
Loans to individuals for household
family and other consumer
expenditure 28,095 30,700 28,493 27,039 27,583
All other loans, including
overdrafts 334 186 87 89 94
Gross Loans 153,498 145,594 133,020 133,177 123,008
Less unearned income (1,094) (1,231) (1,286) (1,554) (2,048)
Less reserve for loan losses (2,242) (2,220) (2,170) (2,029) (1,814)
Net loans $150,162 $142,143 $129,564 $129,594 $119,146
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The Company's loan portfolio consisted of approximately $105,744,000 and
$96,708,000 in fixed rate loans as of December 31, 1995 and 1994,
respectively. At December 31, 1995, and 1994, fixed rate loans with
maturities in excess of one year amounted to approximately $75,380,000 and
$67,588,000, 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
1995, 1994, 1993, 1992, 1991:
December 31,
1995 1994 1993 1992 1991
Nonaccrual loans $ 479 $1,062 $1,015 $1,091 $ 179
Accruing loans which are
contractually past due
90 days or more as to
principal or interest
payments $ 87 $ 55 $ 221 $ 318 $ 334
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, 1995 is as follows:
1995
Interest included in income during the
year $ 2
Interest which would have been included
at the original contract rates $ 60
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, 1995, 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, 1995, the Company had no foreign loans
outstanding.
LOAN CONCENTRATIONS
As of the year ended December 31, 1995, 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 has determined
that any impairment of the approximate $2,100,000 cash surrender value of the
policies is remote due to the current financial stability of the U.S.
subsidiary. Accordingly, no loss contingency has been provided for 1995.
As of December 31, 1995, 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,
1995 1994 1993 1992 1991
Loans (net of unearned income):
Average loans outstanding for
the period $149,940 $140,104 $131,599 $128,859 $116,798
Reserve for loan losses:
Balance at beginning
of period $ 2,220 $ 2,170 $ 2,029 $ 1,814 $ 1,683
Charge-offs:
Commercial, financial, and
agricultural 133 122 174 226 142
Real Estate - construction
and mortgage 3 57 211 207 27
Loans to individuals 313 277 222 270 296
Total charge-offs $ 449 $ 456 $ 607 $ 703 $ 465
Recoveries:
Commercial, financial, and
agricultural 166 58 96 58 95
Real estate-construction
and mortgage 44 35 108 2 10
Loans to individuals 151 118 99 113 76
Total recoveries $ 361 $ 211 $ 303 $ 173 $ 181
Net charge-offs $ 88 $ 245 $ 304 $ 530 $ 284
Additions charged to operations $ 110 $ 295 $ 445 $ 745 $ 415
Balance at end of period $ 2,242 $ 2,220 $ 2,170 $ 2,029 $ 1,814
Ratio of net charge-offs during
the period to average loans
outstanding during the period .06% .17% .23% .41% .24%
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 $200
during 1996.
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,
1995 1994 1993
Noninterest bearing demand deposits 45,839 40,181 34,683
Interest bearing demand deposits 43,415 44,249 40,037
Savings deposits 33,512 41,870 34,882
Time deposits 119,268 104,470 106,181
Total deposits 242,034 230,770 215,783
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,
1995 1994 1993
Interest bearing demand deposits 2.12% 2.39% 2.33%
Savings deposits 3.28% 3.88% 3.22%
Time deposits 5.04% 3.71% 4.03%
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, 1995:
Time Certificates of Deposit
Maturity within 3 months or less $14,610
Over 3 through 6 months 5,394
Over 6 through 12 months 5,803
Over 12 months 2,700
Total 28,507
20
RETURN ON EQUITY AND ASSETS
The following table presents certain ratios relating to the Company's equity
and assets:
Year ended December 31,
1995 1994 1993
Return on average total assets 1.19% 1.18% 1.17%
Return on average stockholders' equity 12.07% 12.29% 12.77%
Cash dividend payout ratio 38.13% 27.31% 24.08%
Average equity to average assets ratio 9.85% 9.56% 9.17%
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 1995 1994 1993
agreement to repurchase $36,935 $29,236 $31,819
The following information relates to short-term borrowings outstanding during
1995, 1994, and 1993:
Maximum Amount Weighted Average
Outstanding in Any Interest Rate
Month End at December 31,
1995 1994 1993 1995 1994 1993
Federal funds
purchased and
securities sold
under agreement
to repurchase $47,707 $41,537 $38,722 5.10% 4.29% 3.01%
Year ended December 31,
1995 1994 1993
Federal funds purchased and
securities sold under
agreement to repurchase-
average daily amount outstanding $39,332 $35,037 $35,278
Weighted average interest rate paid 5.09% 3.17% 2.83%
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. The
Company opened a ninth banking office on Twenty-First Avenue in Myrtle Beach
on two acres of land previously purchased. This Myrtle Beach office is
12,000 square feet with twelve employees and opened in August, 1995.
ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings against the Company or its
subsidiary, The Conway National Bank, as of December 31, 1995.
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 11, 1995, at the Annual Meeting of CNB Corporation, the security
holders:
1) Nominated and elected four directors to serve for a three-year
term; and
2) Ratified the appointment of Elliott, Davis, and Company,
Certified Public Accountants, an independent auditors for the
Company and its subsidiary for the year ending December 31,
1995.
PART II
ITEM 5. MARKET PRICE OF REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
As of December 31, 1995, there were approximately 586 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 adjusted for the effect of a 20% stock dividend paid during 1994.
1995 1994
High Low High Low
First Quarter $66.25 $66.25 $63.33 $63.33
Second Quarter $79.75 $66.25 $63.54 $63.33
Third Quarter $79.75 $79.75 $63.54 $63.54
Fourth Quarter $88.75 $79.75 $66.25 $63.54
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 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,
1995 1994 1993 1992 1991
Selected Income Statement Data:
Total Interest Income $ 22,601 $ 19,847 $ 18,719 $ 19,244 $ 20,609
Total Interest Expense 10,115 7,613 7,369 8,666 11,554
Net Interest Income 12,486 12,234 11,350 10,578 9,055
Provision for Possible Loan Lossess 110 295 445 745 415
Net Interest Income after
Provision for Possible Loan
Losses 12,376 11,939 10,905 9,833 8,640
Total Other Operating Income 2,954 2,814 2,735 2,564 2,207
Total Other Operating Expense 9,797 9,599 8,850 8,461 7,647
Income Before Income Taxes 5,533 5,154 4,790 3,936 3,200
Income Taxes 1,777 1,657 1,493 1,030 750
Net Income $ 3,756 $ 3,497 $ 3,297 $ 2,906 $ 2,450
Per Share:
Net Income Per Weighted Average
Shares Outstanding* $ 7.86 $ 7.34 $ 6.92 $ 6.09 $ 5.13
Cash Dividend Paid Per Share $ 3.00 $ 2.00 $ 2.00 $ 2.00 $ 1.50
Weighted Average Shares
Outstanding* 477,820 476,370 476,546 477,389 477,246
*Restated for stock dividend
Selected Balance Sheet Data:
Assets $324,694 $297,120 $283,380 $268,078 $241,651
Net Loans 150,162 142,143 129,564 129,594 119,146
Investment Securities 138,652 126,613 116,185 101,703 84,741
Federal Funds Sold 7,300 3,125 14,400 16,125 20,125
Deposits:
Non-Interest-Bearing $ 44,723 $ 40,986 $ 35,369 $ 30,973 $ 25,807
Interest-Bearing 206,433 193,207 183,933 177,866 169,162
Total Deposits $251,156 $234,193 $219,302 $208,839 $194,969
Stockholders' Equity $ 32,195 $ 28,857 $ 26,820 $ 24,443 $ 22,323
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 9.6%
from $131,734 at December 31, 1993 to $144,363 at December 31, 1994; and
5.6% from December 31, 1994 to $152,404 at December 31, 1995. Loan growth is
attributed to overall business development efforts to meet business and
personal loan demand in our market area. Loan demand was strong in our
market area in 1994 and relatively strong in 1995. 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,
increased as a percentage of total assets from 46.5% at year-end 1993 to
48.6% at year-end 1994 but shrank to 46.9% at year-end 1995.
Correspondingly, investment securities and federal funds sold decreased as a
percentage of total assets from 46.1% at year-end 1993 to 43.7% at year-end
1994 but grew to 45.0% at year-end 1995 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 have increased from 7.4% in 1993 to
7.7% in 1994 to 8.1% in 1995 due to significant infrastructure expenditures.
During 1994 a new mainframe, communications system, and PC network were
installed; and during 1995, a ninth banking office was opened. 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 competitive rates.
Non-interest-bearing demand deposits increased as a percentage of total
assets from 12.5% at December 31, 1993 to 13.8% at December 31, 1994, but
remained at 13.8% at December 31, 1995 and 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 77.0% at December 31, 1993 to 75.7% at December 31, 1994 to
75.2% at December 31, 1995.
The following table sets forth the percentage relationship to total assets of
significant components of the Company's balance sheet as of December 31,
1995, 1994 and 1993:
December 31,
1995 1994 1993
Assets:
Earning assets
Loans, net of unearned income 46.9% 48.6% 46.5%
Investment securities:
Taxable 38.3 37.1 35.6
Tax-exempt 4.4 5.5 5.4
Federal funds sold and securities
purchased under agreement to resell 2.3 1.1 5.1
Other earning assets - - -
Total earning assets 91.9 92.3 92.6
Other assets 8.1 7.7 7.4
Total assets 100.0% 100.0% 100.0%
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits 63.6% 65.0% 64.9%
Federal funds purchased and securities
sold under agreement to repurchase 11.4 9.9 11.2
Other short-term borrowings .2 .8 .9
Total interest-bearing liabilities 75.2 75.7 77.0
Non-interest-bearing deposits 13.8 13.8 12.5
Other liabilities 1.1 .8 1.0
Stockholders' equity 9.9 9.7 9.5
Total liabilities and stockholders'equity 100.0% 100.0% 100.0%
25
Results of Operation
CNB Corporation and subsidiary experienced earnings in 1995, 1994 and 1993 of
$3,756, $3,497 and $3,297, respectively, resulting in a return of average
assets of 1.19%, 1.18%, and 1.17% and a return on average stockholders'
equity of 12.07%, 12.29% and 12.77%. 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
$324,694 at December 31, 1995 as compared to $297,120 at December 31,
1994 and $283,380 at December 31, 1993. The following table sets forth the
financial highlights for fiscal years 1995, 1994, and 1993.
26
CNB Corporation and Subsidiary
FINANCIAL HIGHLIGHTS
(All Dollar Amounts, Except Per Share Data, in Thousands)
December 31, 1994 to 1995 December 31, 1993 to 1994 December 31,
1995 Percent 1994 Percent 1993
Increase Increase
(Decrease) (Decrease)
Net interest
income after
provision for
loan losses $ 12,376 3.7% $ 11,939 9.5% $ 10,905
Income before
income taxes 5,533 7.4 5,154 7.6 4,790
Net Income 3,756 7.4 3,497 6.1 3,297
Per share
(weighted
average of
shares
outstanding)* $ 7.86 7.1 $ 7.34 6.1 $ 6.92
Cash dividends
declared 1,432 49.9 955 20.3 794
Per share $ 3.00 50.0 $ 2.00 - $ 2.00
Total assets $324,694 9.3% $297,120 4.8% $283,380
Total deposits 251,156 7.2 234,193 6.8 219,302
Loans, net of
unearned income 152,404 5.6 144,363 9.6 131,734
Investment
securities 138,652 9.5 126,613 9.0 116,185
Stockholders'
equity 32,195 11.6 28,857 7.6 26,820
Book value per
share* - actual
number of
shares outstanding $ 67.43 11.5 $ 60.46 7.3 $ 56.35
*Restated for
stock dividend
Ratios(1):
Returns on
average total
assets 1.19% .8 1.18% .9 1.17%
Return on
average
stockholders'
equity 12.07% (1.8) 12.29% (3.8) 12.77%
(1) For the fiscal years ended December 31, 1995, 1994, and 1993, average
total assets amounted to $316,002, $297,595, and $281,494 with average
stockholders' equity totaling $31,113, $28,458, and $25,815, 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 1995, 1994
and 1993 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 $11,867 in 1993 and
$12,735 in 1994 to $12,943 in 1995. During the three-year period, total
fully-tax-equivalent interest income increased by 5.8% from $19,236 in
1993 to $20,348 in 1994 and increased 13.3% in 1995 to $23,058. Over the
same period, total interest expense increased by 3.3% from $7,369 in 1993 to
$7,613 in 1994 and increased 32.9% to $10,115 in 1995. The increase in 1994
interest income and interest expense was caused by an increase in market
interest rates. The significant increase in 1995 interest income and expense
reflects a rapid rise in market interest rates coupled with higher volumes of
bank assets and liabilities. Fully-tax-equivalent net interest income as a
percentage of average total earning assets has moved in a narrow range from
4.5% in 1993 to 4.6% in 1994 and 4.4% in 1995.
Interest rates paid on deposits and borrowed funds and earned on loans and
investments have generally followed the fluctuations in market interest
rates in 1995, 1994, and 1993. 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 7,300 0 0 0 0 0
Investment Securities 0 6,849 8,265 16,983 98,004 8,550
Loans(net of non
-accruals $479) 47,754 10,736 6,522 11,033 49,639 27,335
Total, RSA 55,054 17,585 14,787 28,016 147,643 35,885
Rate Sensitive
Liabilities (RSL)
Deposits:
Certificates of
Deposit of 0 14,610 5,394 5,803 2,700 0
$100,000 or more
All Other Time
Deposits 0 31,074 26,049 19,585 12,167 0
Money Market
Deposit Accounts 13,703 0 0 0 0 0
Securities Sold
Under Repurchase 19,979 990 7,500 2,350 6,116 0
Agreements
Total, RSL 33,682 46,674 38,943 27,738 20,983 0
RSA-RSL 21,372 (29,089) (24,156) 278 126,660 35,885
Cumulative RSA-RSL 21,372 (7,717) (31,873) (31,595) 95,065 130,950
Cumulative RSA/RSL 1.63 .90 .73 .79 1.57 1.78
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 $110 in 1995, $295 in 1994, and $445 in 1993. Net loan charge-offs
totalled $88 in 1995, $245 in 1994, and $304 in 1993 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 1.49% at December 31,
1995, 1.56% at December 31, 1994, and 1.67% at December 31, 1993.
Securities Transactions - Net unrealized gains/(losses) in the investment
securities portfolio were $1,546 at December 31, 1995, $(4,646) at December
31, 1994, and $2,855 at December 31, 1993. The Bank did not recognize a gain
or loss on security transactions in 1993. The market value of investment
securities declined during 1994 due to the rapid rise in overall market rates
and rose again in 1995 as rates retreated. 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
were taken in early 1995 when bonds were sold to provide additional primary
liquidity.
Other Income - Other income, net of security sales, increased by 9.0% from
$2,735 in 1993 to $2,981 in 1994 and fell 1.7% from $2,981 in 1994 to $2,929
in 1995. The increase in 1994 was the result of higher volume in deposit and
loan accounts and an overall service charge rate increase put into effect
June 1, 1993. Other income fell in 1995 due to lower service charge income
booked on deposit accounts, offset somewhat by higher merchant discount
income.
Other Expenses - Other expenses increased by 8.5% from $8,850 in 1993 to
$9,599 in 1994 and 2.1% from $9,599 in 1994 to $9,797 in 1995. The
components of other expenses are salaries and employee benefits of $4,927,
$5,285, and $5,695; occupancy and furniture and equipment expenses of
$1,341, $1,550, and $1,504; and other operating expenses of $2,582, $2,764,
and $2,598 for 1993, 1994, and 1995, 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 significant increase in occupancy and furniture and
equipment expenses in 1994 was due to the purchase and installation of a new
computer mainframe and software; upgraded communications equipment; and
approximately ninety personal computers throughout the Bank. 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 currently experiencing
significantly lower premiums as is evidenced in the decline in 1995 other
operating expenses. Looking ahead, non-interest expense should grow at only
a nominal rate as no significant staffing and infrastructure expenditures are
expected in the near-term, plus the Bank is experiencing some relief from
significant FDIC premiums paid in the past.
Income Taxes - Provisions for income taxes increased 11.0% from $1,493
in 1993 to $1,657 in 1994 and 7.2% from $1,657 in 1994 to $1,777 in 1995.
The increase in income taxes is primarily due to an increase in income before
income taxes of 7.6% from $4,790 in 1993 to $5,154 in 1994 and 7.4% from
$5,154 in 1994 to $5,533 in 1995. Also, the utilization of tax-free income
as a percentage of income before income taxes declined in 1994 and 1995.
29
NET INCOME (continued)
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 $2,927, $2,358, and $1,717 at December 31, 1995, 1994,
and 1993 with liabilities, consisting of cash dividends payable, totalling
$1,432, $955, and $794, respectively. Management feels that liquidity
sources are more than adequate to meet funding needs.
CAPITAL RESOURCES
Total stockholders' equity was $32,195, $28,857, and $26,820 at December
31, 1995, 1994, and 1993, representing 9.92%, 9.71%, and 9.46% of total
assets, respectively. At December 31, 1995, 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 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, 1995, 1994, and 1993
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 flows 37
NOTES TO FINANCIAL STATEMENTS 38 - 50
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, 1995 and 1994, 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, 1995.
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, 1995 and 1994 and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
Elliott, Davis & Company, L.L.P.
January 11, 1996
33
CNB CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(amounts, except share data, in thousands)
December 31,
1995 1994
ASSETS
CASH AND DUE FROM BANKS - Notes 2 and 16 $ 15,605 $ 14,552
FEDERAL FUNDS SOLD - Note 16 7,300 3,125
INVESTMENT SECURITIES HELD TO MATURITY
(fair value $77,231 in 1995 and
$79,429 in 1994)-Notes 3 and 16 76,402 83,095
INVESTMENT SECURITIES AVAILABLE
FOR SALE -
Notes 3 and 16 62,250 43,518
LOANS - Notes 4 and 16 153,498 145,594
Less unearned income (1,094) (1,231)
Less allowance for loan losses (2,242) (2,220)
Net loans 150,162 142,143
PREMISES AND EQUIPMENT - Note 5 7,166 5,310
ACCRUED INTEREST RECEIVABLE 3,287 2,920
OTHER ASSETS 2,522 2,457
$324,694 $297,120
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits - Notes 6 and 16
Noninterest-bearing $ 44,723 $ 40,986
Interest-bearing 206,433 193,207
Total deposits 251,156 234,193
Securities sold under repurchase
agreements -
Notes 7 and 16 36,935 29,236
United States Treasury demand notes -
Note 16 766 2,494
Other liabilities 3,619 2,320
Minority interest
in consolidated subsidiary 23 20
Total liabilities 292,499 268,263
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 15,676 15,659
Retained earnings 11,431 9,107
Net unrealized holding gain (loss) on
investment securities
available for sale 430 (588)
32,328 28,969
Less 1,640 shares and 1,768 shares held
in Treasury at cost (133) (112)
Total stockholders' equity 32,195 28,857
$324,694 $297,120
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,
1995 1994 1993
INTEREST INCOME
Loans and fees on loans $14,070 $12,034 $11,304
Investment securities
Taxable 6,755 6,240 5,631
Nontaxable 887 1,002 1,004
Total interest on
investment securities 7,642 7,242 6,635
Federal funds sold 882 564 773
Other 7 7 7
Total interest income 22,601 19,847 18,719
INTEREST EXPENSE
Deposits 8,032 6,460 6,334
Securities sold under
repurchase agreements 2,002 1,111 998
United States Treasury demand notes 81 42 37
Total interest expense 10,115 7,613 7,369
Net interest income 12,486 12,234 11,350
PROVISION FOR LOAN LOSSES 110 295 445
Net interest income after
provision for loan losses 12,376 11,939 10,905
NONINTEREST INCOME
Service charges on deposit accounts 1,795 1,844 1,838
Other service and exchange charges 1,134 1,137 897
Gain (loss) on sale of investment
securities available for sale 25 (167) -
Total noninterest income 2,954 2,814 2,735
NONINTEREST EXPENSES
Salaries and wages 4,552 4,214 3,938
Pensions and other employee benefits 1,143 1,071 989
Occupancy 568 600 572
Furniture and equipment 936 950 769
Liability insurance 310 592 546
Office supplies 304 260 272
Credit card operations 528 563 374
Other operating expenses 1,453 1,346 1,388
Minority interest in
income of subsidiary 3 3 2
Total noninterest expenses 9,797 9,599 8,850
Income before provision for income taxes 5,533 5,154 4,790
PROVISION FOR INCOME TAXES - Note 9 1,777 1,657 1,493
NET INCOME $ 3,756 $ 3,497 $ 3,297
NET INCOME PER SHARE OF COMMON STOCK $ 7.86 $ 7.34 $ 6.92
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, 1995, 1994 and 1993
(amounts, except share data, in thousands)
Net unrealized
holding gain
Capital in (loss) on
excess of securities
Common par value Retained Treasury available Total
Shares stock of stock earnings stock for sale equity
BALANCE, DECEMBER 31, 1992 399,353 $ 3,994 $11,325 $ 9,175 $ (51) $ - $24,443
1993
Net income - - - 3,297 - - 3,297
Cash dividend, $2.00 per share - - - (794) - - (794)
Treasury stock transactions (net) - - - - (139) - (139)
Gain on sale of treasury stock - - 13 - - - 13
BALANCE, DECEMBER 31, 1993,
as originally reported 399,353 3,994 11,338 11,678 (190) - 26,820
Effect of adoption of SFAS 115,
net of income taxes of $339 - - - - - 571 571
BALANCE, DECEMBER 31, 1993,
as restated 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
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,
1995 1994 1993
OPERATING ACTIVITIES
Net income $ 3,756 $ 3,497 $ 3,297
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 666 623 474
Provision for loan losses 110 295 445
Provision for deferred income taxes 134 30 -
Loss on sale of premises and equipment - 107 -
Changes in assets and liabilities:
(Increase) decrease in
accrued interest receivable (367) (302) 74
(Increase) decrease in other assets (65) (71) 454
Increase (decrease) in other liabilities 9 (407) (186)
Increase in minority interest
in subsidiary 3 1 2
Net cash provided by operating activities 4,246 3,773 4,560
INVESTING ACTIVITIES
Proceeds from sale of investment
securities available for sale 4,973 14,672 -
Proceeds from maturities of investment
securities held to maturity 3,474 17,627 30,392
Proceeds from maturities of investment
securities available for sale 9,755 3,828 -
Purchases of investment securities
available for sale (20,198) (20,379) -
Purchases of investment securities held
to maturity (8,346) (27,156) (44,874)
Net (increase) decrease in federal
funds sold (4,175) 11,275 1,725
Net increase in loans (8,129) (12,874) (415)
Proceeds received from sale of premises
and equipment - 3 -
Premises and equipment expenditures (2,522) (1,026) (502)
Net cash used for investing activities (25,168) (14,030) (13,674)
FINANCING ACTIVITIES
Dividends paid (955) (794) (797)
Net increase in deposits 16,963 14,891 9,364
Increase (decrease) in securities sold
under repurchase agreements 7,699 (2,583) 3,635
Increase (decrease) in United States
Treasury demand notes (1,728) 2 113
Treasury stock transactions (net) (4) 83 (126)
Net cash provided by financing activities 21,975 11,599 12,189
Net increase in cash and due from banks 1,053 1,342 3,075
CASH AND DUE FROM BANKS,
BEGINNING OF YEAR 14,552 13,210 10,135
CASH AND DUE FROM BANKS,
END OF YEAR $ 15,605 $ 14,552 $ 13,210
CASH PAID FOR
Interest $ 9,772 $ 8,002 $ 7,490
Income taxes $ 1,727 $ 1,611 $ 1,579
See notes to consolidated financial statements which are an integral part of
these statements.
37
CNB CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation and nature of operations
The consolidated financial statements include the accounts of CNB
Corporation ("the Company") and its majority-owned subsidiary, The
Conway National Bank ("the Bank"). All significant intercompany
balances and transactions have been eliminated. The Bank operates
under a national bank charter and provides full banking services to
customers. The Bank is subject to regulation of the Office of the
Comptroller of the Currency and the Federal Deposit Insurance
Corporation. The Company is subject to regulation of the Federal
Reserve Board.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Concentrations of credit risk
The Company, through its subsidiary, makes commercial and personal
loans to individuals and small businesses located primarily in the
South Carolina coastal region. The Company has a diversified loan
portfolio and the borrowers' ability to repay their loans is not
dependent upon any specific economic sector.
Cash and cash equivalents
For purposes of the statements of cash flows, cash and cash equivalents
are defined as those amounts included in the balance sheet caption
"Cash and Due from Banks". Cash and cash equivalents have an original
maturity of three months or less.
Investment securities
In 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Stockholders' equity has been restated in the
consolidated statement of changes in stockholders' equity to reflect
the effect of a change in accounting principle. Adoption of the
standard had no effect on net income.
Debt securities are classified upon purchase as available for sale,
held to maturity or trading. Such assets classified as available for
sale are carried at market value. Unrealized holding gains or losses
are reported as a component of stockholders' equity net of deferred
income taxes. Securities classified as held to maturity are carried at
cost, adjusted for the amortization of premiums and the accretion of
discounts. In order to qualify as held to maturity the Company must
have the intent and ability to hold the securities to maturity.
Trading securities are carried at market value. The Company has no
trading securities. Gains or losses on disposition of securities are
based on the difference between the net proceeds and the adjusted
carrying amount of the securities sold, using the specific
identification method.
Loans
Interest on commercial loans is accrued and taken into income based
upon the interest method. Interest on installment loans is accrued and
taken into income based upon the sum-of-the-months-digits method. The
results from the use of the sum-of-the-months-digits method are not
materially different from those that would be obtained using the
interest method.
(Continued)
38
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Allowance for loan losses
The allowance for loan losses is based on management's ongoing
evaluation of the loan portfolio and reflects an amount that, in
management's opinion, is adequate to absorb losses in the existing
portfolio. In evaluating the portfolio, management takes into
consideration numerous factors, including current economic conditions,
prior loan loss experience, the composition of the loan portfolio, and
management's estimate of anticipated credit losses. Loans are charged
against the allowance at such time as they are determined to be losses.
Subsequent recoveries are credited to the allowance. Management
considers the year-end allowance appropriate and adequate to cover
possible losses in the loan portfolio; however, management's judgment
is based upon a number of assumptions about future events, which are
believed to be reasonable, but which may or may not prove valid. Thus,
there can be no assurance that charge-off's in future periods will not
exceed the allowance for loan losses or that additional increases in
the allowance for loan losses will not be required.
Effective January 1, 1994, the Company adopted the provisions of SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan." SFAS No.
114, as amended by SFAS No. 118, requires that impaired loans be
measured based on the present value of expected future cash flows or
the underlying collateral values as defined in the pronouncement. The
adoption of SFAS No. 114 had no effect on the balance sheet or income
statement of the Company. The Company includes the provisions of SFAS
No. 114 in the allowance for loan losses.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed over the
estimated useful lives of the assets using primarily accelerated
methods. Additions to premises and equipment and major replacements or
improvements are capitalized at cost. Maintenance, repairs and minor
replacements are expensed when incurred. Gains and losses on routine
dispositions are reflected in current operations.
Non-performing assets
Non-performing assets include real estate acquired through foreclosure
or deed taken in lieu of foreclosure, and loans on non-accrual status.
Loans are placed on 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.
Income taxes
Certain items of income and expense for financial reporting
(principally accretion of bond discount, unrealized gain or loss from
investment securities available for sale, provision for loan losses and
depreciation) are recognized differently for income tax purposes.
Provisions for deferred taxes are made in recognition of such temporary
differences as required under SFAS No. 109, "Accounting for Income
Taxes."
Net income per share
Net income per share is computed on the basis of the weighted average
number of common shares outstanding, 477,820 in 1995, 476,370 in 1994,
and 476,546 in 1993. The Company's Board of Directors declared a
twenty percent stock dividend issuable on October 10, 1994, to
stockholders of record on September 16, 1994. Per share data have been
restated to reflect this dividend.
(Continued)
39
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Fair values of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," as amended by SFAS No. 119,
requires disclosure of fair value information for financial
instruments, whether or not recognized in the balance sheet, when it is
practicable to estimate the fair value. SFAS No. 107 defines a
financial instrument as cash, evidence of an ownership interest in an
entity or contractual obligations which require the exchange of cash or
other financial instruments. Certain items are specifically excluded
from the disclosure requirements, including the Company's common stock.
In addition, other nonfinancial instruments such as premises and
equipment and other assets and liabilities are not subject to the
disclosure requirements.
The following methods and assumptions were used by the Bank in
estimating fair values of financial instruments as disclosed herein:
Cash and due from banks - The carrying amounts of
cash and due from banks (cash on hand, due from banks and
interest bearing deposits with other banks) approximate
their fair value.
Federal funds sold - The carrying amounts of federal
funds sold approximate their fair value.
Investment securities held to maturity and available for
sale - Fair values for investment securities are based on
quoted market prices.
Loans - For variable rate loans that reprice frequently and
for loans that mature within one year, fair values are based on
carrying values. Fair values for all other loans are estimated
using discounted cash flow analyses, with interest rates
currently being offered for loans with similar terms to borrowers
of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow analyses or underlying
collateral values, where applicable.
Deposits - The fair values disclosed for demand deposits
are, by definition, equal to their carrying amounts. The
carrying amounts of variable rate, fixed-term money market
accounts and short-term certificates of deposit approximate their
fair values at the reporting date. Fair values for long-term
fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of
aggregated expected monthly maturities.
Short-term borrowings - The carrying amounts of borrowings
under repurchase agreements and U. S. Treasury demand notes
approximate their fair values.
Off-balance sheet instruments - Fair values of off-balance
sheet lending commitments are based on fees currently charged to
enter into similar agreements, taking into account the remaining
terms of the agreements and the counterparties' credit standing.
NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain average reserve balances either at the
bank or on deposit with the Federal Reserve Bank. The average amounts of
these reserve balances for the years ended December 31, 1995 and 1994 were
approximately $4,306,000 and $3,988,000, respectively.
40
NOTE 3 - INVESTMENT SECURITIES
The book value and approximate fair value of investment securities are
summarized as follows (amounts in thousands):
1995
Book Unrealized Holding Fair
AVAILABLE FOR SALE value Gains Losses value
United States Treasury
Within one year $ 11,022 $ 19 $ 21 $11,020
One to five years 28,674 591 37 29,228
39,696 610 58 40,248
Federal agencies
Within one year 417 3 - 420
One to five years 20,181 179 19 20,341
After ten years 913 1 15 899
21,511 183 34 21,660
State, county and municipal
One to five years 326 16 - 342
Total available for sale $ 61,533 $ 809 $ 92 $62,250
HELD TO MATURITY
United States Treasury
Within one year $ 13,077 $ 59 $ 5 $13,131
One to five years 38,875 378 145 39,108
51,952 437 150 52,239
Federal agencies
Within one year 5,007 69 - 5,076
One to five years 3,004 65 - 3,069
Six to ten years 2,002 34 - 2,036
10,013 168 - 10,181
State, county and municipal
Within one year 1,674 17 1 1,690
One to five years 6,216 273 8 6,481
Six to ten years 6,069 120 35 6,154
After ten years 478 8 - 486
14,437 418 44 4,811
Total held to maturity $ 76,402 $ 1,023 $ 194 $77,231
1994
Book Unrealized Holding Fair
AVAILABLE FOR SALE value Gains Losses value
United States Treasury
Within one year $ 4,985 $ - $ 9 $ 4,976
One to five years 31,304 - 944 30,360
36,289 - 953 35,336
Federal agencies
Within one year 4,006 11 2 4,015
One to five years 2,523 12 2 2,533
After ten years 1,051 - 60 991
7,580 23 64 7,539
State, county and municipal
Within one year 303 7 - 310
One to five years 326 7 - 333
629 14 - 643
Total available for sale $44,498 $ 37 $ 1,017 $43,518
(Continued)
41
NOTE 3 - INVESTMENT SECURITIES - (Continued)
1994
Unrealized
Book Holding Fair
HELD TO MATURITY value Gains Losses value
United States Treasury
One to five years $58,669 $ 6 $ 3,132 $ 5,543
Federal agencies
Six to ten years 8,995 12 359 8,648
State, county
and municipal
Within one year 2,932 39 1 2,970
One to five years 5,611 101 54 5,658
Six to ten years 6,888 66 344 6,610
15,431 206 399 15,238
Total held to maturity $83,095 $ 224 $ 3,890 $79,429
Investment securities with an aggregate par value of approximately
$66,115,000 at December 31, 1995 and $50,615,000 at December 31, 1994 were
pledged to secure public deposits and for other purposes.
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.
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES
Following is a summary of loans by major classification (amounts in thousands):
December 31,
1995 1994
Real estate - mortgage $ 95,451 $ 89,728
Real estate - construction 5,453 6,328
Commercial and industrial 23,133 17,472
Loans to individuals for household,
family and other consumer expenditures 28,095 30,700
Agriculture 1,032 1,180
All other loans, including overdrafts 334 186
$153,498 $145,594
The Company's loan portfolio consisted of approximately $105,744,000
and $96,708,000 in fixed rate loans as of December 31, 1995 and 1994,
respectively. At December 31, 1995, fixed rate loans with maturities in
excess of one year amounted to approximately $75,380,000.
(Continued)
42
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES - (Continued)
Changes in the allowance for loan losses are summarized as follows (amounts
in thousands):
1995 1994 1993
Balance, beginning of year $ 2,220 $ 2,170 $ 2,029
Recoveries of loans previously
charged against the allowance 361 211 303
Provided from current year's income 110 295 445
Loans charged against the allowance (449) 456) (607)
Balance, end of year $ 2,242 $ 2,220 $ 2,170
At December 31, 1995 and 1994, non-accrual loans totaled $479,000
and $1,062,000, respectively. The total amount of interest earned on non-
accrual loans was $2,000 in 1995 and $22,000 in 1994. The gross interest
income which would have been recorded under the original terms of the non-
accrual loans amounted to $60,000 in 1995 and $93,000 in 1994.
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment at December 31 is summarized as follows (amounts in
thousands):
1995 1994
Land and buildings $ 8,175 $ 6,250
Furniture, fixtures and equipment 5,454 4,653
13,629 10,903
Less accumulated depreciation and amortization 6,463 5,909
7,166 4,994
Construction in progress - 316
$ 7,166 $ 5,310
Depreciation and amortization of bank premises and equipment charged to
operating expense totaled $666,000 in 1995, $623,000 in 1994 and $474,000 in
1993.
NOTE 6 - DEPOSITS
At December 31, 1995 and 1994, certificates of deposit of $100,000 or
more totaled approximately $28,507,000 and $21,008,000, respectively.
Interest expense on these deposits was approximately $1,182,000 in 1995,
$750,000 in 1994, and $868,000 in 1993.
43
NOTE 7 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Securities sold under repurchase agreements are summarized as follows
(amounts in thousands):
December 31 December 31
1995 1994
U. S. Government securities with a book value
of $52,193 ($52,543 market value) and
$35,875 ($34,249 market value) at
December 31, 1995 and 1994, respectively,
are used as collateral for the agreements. $36,935 $29,236
The Bank enters into sales of securities under agreements to
repurchase. These obligations to repurchase securities sold are reflected as
liabilities in the consolidated balance sheets. The dollar amount of
securities underlying the agreements are book entry securities maintained at
the Federal Reserve Bank of Richmond. The weighted-average interest rate of
these agreements was 5.10 percent and 4.29 percent at December 31, 1995 and
1994, respectively. Securities sold under repurchase agreements averaged
$39,332,000 and $35,037,000 during 1995 and 1994, respectively. The maximum
amounts outstanding at any month-end were $47,707,000 and $41,537,000 during
1995 and 1994, respectively.
NOTE 8 - LINES OF CREDIT
At December 31, 1995, the Bank had unused short-term lines of credit
totaling $17,000,000 to purchase Federal Funds from unrelated banks. These
lines of credit are available on a one to seven day basis for general
corporate purposes of the Bank. All of the lenders have reserved the right
to withdraw these lines at their option.
The Company has a demand note through the U.S. Treasury, Tax and Loan
system with the Federal Reserve Bank of Richmond. The Company may borrow up
to $5,000,000 under the arrangement at an interest rate of 5.15%. The note
is secured by U.S. Treasury Notes with a market value of $6,039,000 at
December 31, 1995. The amount outstanding under the note totaled $766,000
and $2,494,000 at December 31, 1995 and 1994, respectively.
NOTE 9 - INCOME TAXES
The following summary of the provision for income taxes includes tax
deferrals which arise from temporary differences in the recognition of
certain items of revenue and expense for tax and financial reporting purposes
(amounts in thousands):
1995 1994 1993
Income taxes currently payable
Federal $ 1,484 $ 1,469 $ 1,348
State 159 158 145
1,643 1,627 1,493
Tax consequences of differences
Loan losses (7) 47 44
Depreciation 80 (57) (46)
Change of accounting method (13) (17) (17)
Accretion on investments 63 8 8
Other 11 49 11
Provision $ 1,777 $ 1,657 $ 1,493
(Continued)
44
NOTE 9 - INCOME TAXES - (Continued)
Deferred income taxes of $673,800 and $194,000 are included in other
liabilities at December 31, 1995 and 1994, respectively.
The provision for income taxes is reconciled to the amount of income
tax computed at the federal statutory rate on income before income taxes as
follows (amounts in thousands):
1995 1994 1993
Amount % Amount % Amount %
Tax expense at statutory rate $1,881 34.0% $1,752 34.0% $1,629 34.0%
Increase (decrease) in taxes
resulting from:
Tax exempt interest (293) (5.3) (330) (6.4) (350) (7.3)
State bank tax (net of
federal benefit) 115 2.1 158 3.0 145 3.0
Other - net 74 1.3 77 1.5 69 1.5
Tax provision $1,777 32.1% $1,657 32.1% $1,493 31.2%
NOTE 10 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. Those instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the statements of financial position. The contract amounts of
those instruments reflect the extent of involvement the Bank has in
particular classes of financial instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for on-
balance-sheet instruments.
The contract value of the Company's off-balance-sheet financial
instruments is as follows as of December 31, 1995 (amounts in thousands):
Contract
amount
Commitments to extend credit $12,323
Standby letters of credit $ 1,313
Commitments to extend credit are agreements to lend as long as there is
no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by the Bank upon extension of credit
is based on management's credit evaluation.
45
NOTE 11 - COMMITMENTS AND CONTINGENCIES
At December 31, 1995, the Bank was obligated under a number of non-
cancelable operating leases on equipment and land used for branch offices
that had an initial or remaining term of more than one year. Future minimum
rental payments under these leases at December 31, 1995 were (amounts in
thousands):
Payable in year ending Amount
1996 $ 56
1997 53
1998 55
1999 56
2000 57
2001 and thereafter 67
Total future minimum payments required $344
Lease payments under all operating leases charged to expense totaled
$46,000 in 1995, $58,000 in 1994, and $66,000 in 1993. The leases provide
that the lessee pay property taxes, insurance and maintenance cost.
The Company is party to litigation and claims arising in the normal
course of business. Management, after consultation with legal counsel,
believes that the liabilities, if any, arising from such litigation and
claims will not be material to the Bank's financial position.
NOTE 12 - RESTRICTION ON DIVIDENDS
The ability of the Company to pay cash dividends is dependent upon
receiving cash in the form of dividends from the Bank. Federal banking
regulations restrict the amount of dividends that can be paid and such
dividends are payable only from the retained earnings of the Bank. At
December 31, 1995 the Bank's retained earnings were $26,140,000.
NOTE 13 - TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND ASSOCIATES
Directors and executive officers of the Company and the Bank and
associates of such persons are customers of and had transactions with the
Bank in the ordinary course of business. Additional transactions may be
expected to take place in the future. Also, included in such transactions
are outstanding loans and commitments, all of which were made on comparable
terms, including interest rates and collateral, as those prevailing at the
time for other customers of the Bank, and did not involve more than normal
risk of collectibility or present other unfavorable features. Total loans to
all executive officers and directors, including immediate family and business
interests, at December 31, 1995 and 1994, were $2,025,000 and $2,586,000,
respectively. During 1995, $596,000 of new loans were made to this group and
repayments of $1,157,000 were received.
NOTE 14 - EMPLOYEE BENEFIT PLAN
The Bank has a defined contribution pension plan covering all employees
who have attained age twenty-one and have a minimum of one year of service.
Upon ongoing approval of the Board of Directors, the Bank matches one-hundred
percent of employee contributions up to one percent of employee salary
deferred and fifty percent of employee contributions in excess of one percent
and up to six percent of salary deferred. The Board of Directors may also
make discretionary contributions to the Plan. For the years ended December
31, 1995, 1994 and 1993, $266,000, $295,000, and $273,000, respectively, was
charged to operations under the plan.
(Continued)
46
NOTE 14 - EMPLOYEE BENEFIT PLAN - (Continued)
Supplemental benefits are provided to certain key officers under The
Conway National Bank Executive Supplemental Income Plan. This plan is not
qualified under the Internal Revenue Code. The plan is unfunded. However,
certain benefits are informally and indirectly funded by insurance policies
on the lives of the covered employees.
NOTE 15 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory -and possibly additional
discretionary - actions by regulators that, if undertaken, could have a
direct material effect on the financial statements. The regulations require
the Bank to meet specific capital adequacy guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The capital
classification is also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the maintenance of minimum amounts and ratios (set forth in
the table below) of Tier I capital to adjusted total assets (Leverage Capital
ratio) and minimum ratios of Tier I and total capital to risk-weighted
assets. To be considered adequately capitalized under the regulatory
framework for prompt corrective action, the Bank must maintain minimum Tier
I leverage, Tier I risk-based and total risked-based ratios as set forth in
the table. The Bank's actual capital ratios are also presented in the table
below as of December 31, 1995:
Conway National Bank
Ratios
Required
Minimum Actual
Tier I Leverage Capital 4.0% 9.3%
Tier I Risk-based Capital 4.0% 18.6%
Total Risk-based Capital 8.0% 19.8%
47
NOTE 16 - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments were as follows
at December 31 (amounts in thousands):
1995 1994
Carrying Fair Carrying Fair
amount value amount value
FINANCIAL ASSETS
Cash and due from banks $ 15,605 $ 15,605 $ 14,552 $ 14,552
Federal funds sold 7,300 7,300 3,125 3,125
Investment securities held
to maturity 76,402 77,231 83,095 79,429
Investment securities available
for sale 62,250 62,250 43,518 43,518
Loans 153,498 153,301 145,594 140,967
FINANCIAL LIABILITIES
Deposits 251,156 251,266 234,193 234,126
Securities sold under
repurchase agreements 36,935 37,093 29,236 29,236
U.S. Treasury demand notes 766 766 2,494 2,494
OFF-BALANCE-SHEET INSTRUMENTS
Commitments to extend credit 12,323 12,323 14,149 14,149
Standby letters of credit 1,313 1,313 1,946 1,946
NOTE 17 - PARENT COMPANY INFORMATION
Following is condensed financial information of CNB Corporation (parent
company only) (amounts in thousands):
CONDENSED BALANCE SHEETS
December 31,
1995 1994
ASSETS
Cash $ 2,927 $ 2,358
Investment in subsidiary 30,418 27,172
Land 245 245
Other assets 37 37
$33,627 $ 29,812
LIABILITIES AND STOCKHOLDERS' EQUITY
Dividends payable $ 1,432 $ 955
Stockholders' equity (net of $133 and $112
of treasury stock) 32,195 28,857
$33,627 $ 29,812
(Continued)
48
NOTE 17 - PARENT COMPANY INFORMATION - (Continued)
CONDENSED STATEMENTS OF INCOME
For the years ended
December 31,
1995 1994 1993
INCOME
Dividend from bank subsidiary $1,549 $1,161 $ 968
Other income 2 - -
1,551 1,161 968
EXPENSES
Sundry 22 21 25
Income before equity in undistributed
net income of bank subsidiary 1,529 1,140 943
EQUITY IN UNDISTRIBUTED NET INCOME OF
SUBSIDIARY 2,227 2,357 2,354
Net income $3,756 $3,497 $3,297
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended
December 31,
1995 1994 1993
OPERATING ACTIVITIES
Net income $ 3,756 $ 3,497 $ 3,297
Adjustments to reconcile net income to
net cash provided by operating activities
Equity in undistributed net income of
bank subsidiary (2,227) (2,357) (2,354)
Change in other assets - (30) -
Net cash provided by operating activities 1,529 1,110 943
INVESTING ACTIVITIES
Proceeds received from sale of land - 242 -
Net cash provided by investing activities - 242 -
FINANCING ACTIVITIES
Dividends paid (955) (794) (797)
Sale (purchase) of treasury stock - net (5) 83 (127)
Net cash used for financing activities (960) (711) (924)
Net increase in cash 569 641 19
CASH, BEGINNING OF YEAR 2,358 1,717 1,698
CASH, END OF YEAR $ 2,927 $ 2,358 $ 1,717
49
NOTE 18 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited condensed financial data by quarter for 1995 and 1994 is as
follows (amounts, except per share data, in thousands):
Quarter ended
1995 March 31 June 30 September 30 December 31
Interest income $ 5,396 $ 5,649 $ 5,736 $ 5,820
Interest expense 2,296 2,542 2,619 2,658
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
Noninterest income 663 710 789 790
Noninterest 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
Quarter ended
1994 March 31 June 30 September 30 December 31
Interest income $ 4,670 $ 4,940 $ 5,078 $ 5,159
Interest expense 1,769 1,809 1,977 2,058
Net interest income 2,901 3,131 3,101 3,101
Provision for loan losses 20 80 60 135
Net interest income after
provision for loan losses 2,881 3,051 3,041 2,966
Noninterest income 642 705 846 621
Noninterest expenses 2,215 2,326 2,362 2,696
Income before income taxes 1,308 1,430 1,525 891
Income taxes 407 484 468 298
Net income $ 901 $ 946 $ 1,057 $ 593
Net income per share $ 1.89 $ 1.98 $ 2.22 $ 1.25
Weighted average
shares outstanding 476,512 476,496 476,117 476,370
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
50
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT OF THE COMPANY
Directors
The Directors and Nominees for election to the Board of Directors of the
Company are as follows:
Proposed Present Company
Director Term Principal Stock Owned
Name (Age) Since Expires Occupation Number %
Willis J. Duncan
(68) 1958 1997 Chairman of the Board 30,362(1) 6.36
The President of the
Bank from November
1985 to February
1988.
W. Jennings Duncan
(40) 1984 1998 President. Executive 12,112(2) 2.54
Vice President of the
Bank from November
1985 to February 1988.
Dr. R. C. Smith
(81) 1959 1998 Past Chairman of the 2,492 .51
Board.Chairman of the
Board from 1979 to
1985, when he became
Vice Chairman.
Chairman of the
Board from November
1985 to February 1988.
Retired in 1985 as a
physician with Conway
Internists, P.A. of
Conway,South Carolina.
James W. Barnette, Jr.
(50) 1984 1998 President of Surfside 3,887 .81
Rent Mart,Inc., a
general rental company
located in Surfside
Beach, S.C., since
1992. Private real
estate investor from
1988 to 1991.
Previously, Mr.
Barnette was General
Manager of Coastal
Golf Corp., Burning
Ridge Corp., and
Indian Wells Golf
Club, which own and
operate golf courses
in the Myrtle Beach,
South Carolina area.
51
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT OF THE COMPANY (continued)
Proposed Present Company
Director Term Principal Stock Owned
Name (Age) Since Expires Occupation Number %
*Harold G. Cushman, Jr.
(66) 1963 1999 Senior Vice President 21,129(3) 4.42
of Dargan Construction
Company, Inc. President
of the Corporation
prior to semi-
retirement in 1995.
*Charles C. Cutts 1945 1999 Retired. 19,039(4) 3.99
(90)
*G. Heyward Goldfinch
(77) 1976 1999 Retired. Director 1,550 .32
of Goldfinch's, Inc.,
a funeral home, and of
Hillcrest Cemetery of
Conway, Incorporated.
John Monroe J. Holliday
(79) 1969 1997 President of Palmetto 12,189(5) 2.55
Farms Corp. and partner
in Holliday Associates,
diversified agricul-
tural, real estate
development, and retail
companies headquartered
in Horry County, South
Carolina.
*Robert P. Hucks 1993 1999 Executive Vice President 1,320(6) .28
(50) Served as Vice President
and Cashier of the Bank
from 1985 to 1988.
Richard M. Lovelace, Jr.
(49) 1984 1997 Attorney in private 1,280(7) .27
practice with Lovelace
& Rogers, P.A. in
Conway, South Carolina.
John K. Massey
(81) 1959 1998 Retired. 4,178(8) .88
*Howard B. Smith, III
(47) 1993 1999 Practicing certified 1,915 .40
public accountant with
Smith, Sapp, Bookhout,
Crumpler & Calliham,
P.A. in Myrtle Beach,
South Carolina.
* Nominee for election to the Board of Directors.
52
Except as indicated below, each director or director nominee of the
company has sole voting and investment power with respect to all shares of
Company stock owned by such director or director nominee. The address of
each director or director nominee is c/o The Conway National Bank, Post
Office Drawer 320, 1400 Third Avenue, Conway, South Carolina 29526. All
directors and officers of the Company and its subsidiary, The Conway National
Bank, as a group (43 persons), own 124,611 (26.12%) shares of Company stock.
(1) Includes 10,105 shares held by Harriette B. Duncan (wife).
(2) Includes 1,455 shares held by Ann Louise Duncan (daughter);
1,455 shares held by Mary Kathryn Duncan (daughter); 1,455 shares by
Willis Jennings Duncan, V (son); 1,455 shares by Margaret Brunson Duncan
(daughter); and 120 shares by Robin F. Duncan (wife).
(3) Includes 14,900 shares held by the Cushman Family Limited
Partnership; 209 shares held by Dianne C. Cushman (wife); 753 shares held
by Marion Shannon Cushman (son); 388 shares held by Frances Faison Cushman
(daughter); 388 shares held by Harold G. Cushman, III (son); 50 shares held
by Harold G. Cushman, IV; (grandson); 50 shares held by Kara Dawn Cushman
(granddaughter); and 3,905 shares held by Harold Cushman Ward (nephew).
(4) Includes 12,229 shares held by Eugenia B. Cutts (wife).
(5) Includes 1,260 shares held by Marjorie R. Holliday Irrevocable
Trust (wife); 3,304 shares held by M. Russell Holliday, Jr. (daughter);
1,978 shares held by Christian M. Holliday Douglas (daughter); 346 shares
held by Christian M. H. Douglas, Jr. (granddaughter); 346 shares held by
Marjorie Russell Douglas (granddaughter); 346 shares held by David Duvall
Douglas, Jr. (grandson); and 484 shares held by David D. and Christian M.H.
Douglas Trust (grandchildren).
(6) Includes 140 shares held by Willie Ann Hucks (wife); 20
shares held by Mariah J. Hucks (daughter); 50 shares held by Norah Leigh
Hucks (daughter); and 150 shares held by Robert P. Hucks, II (son).
(7) Includes 216 shares held by Rebecca S. Lovelace (wife); 352
shares held by Richard Blake Lovelace (son); and 352 shares held by Macon B.
Lovelace (son).
(8) Includes 1,058 shares held by Bertha T. Massey (wife).
Each director of the Company has been engaged in his principal
occupation of employment as specified above for five (5) years or more unless
otherwise indicated.
W. Jennings Duncan is Willis J. Duncan's son. Richard M.
Lovelace, Jr. is Dr. R. C. Smith's son-in-law. No other family relationships
exist among the above named directors or officers of the Company. None
of the directors of the Company holds a directorship in any company
with a class of securities registered under Section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of Section
15(d) of that act or in any company registered as an investment company
under the Investment Company Act of 1940, as amended.
53
The Board of Directors of the Company, as originally constituted, was
classified into three (3) classes with each class consisting of five (5)
directors. Five (5) directors in Class I will be elected at the 1996 Annual
Meeting to serve for a three (3) year term. Directors in Class III will be
elected at the 1997 Annual Meeting to serve for a three (3) year term and
Directors in Class I will be elected at the 1998 Annual Meeting to serve for
a three (3) year term. Currently, there are twelve (12) Directors, with
five (5) directors in Class II. The Board of Directors has passed a
resolution fixing the total number of Directors at twelve (12).
The Board of Directors of the Company serves as the Board of Directors
of its subsidiary, The Conway National Bank. The Company's Board of
Directors meets as is necessary and the Bank's Board of Directors meets on a
monthly basis.
The Board of Directors of the Bank has an Executive Committee that
meets when necessary between scheduled meetings of the Board of Directors.
The Executive Committee recommends to the Board of Directors the appointment
of officers; determines officer compensation subject to Board approval;
reviews employee salaries; considers any director nominee submitted by the
shareholders; and addresses any other business as is necessary which does not
come under the authority of other committees on the Board of Directors. The
Executive Committee will consider any nominee to the Board of Directors
submitted by the shareholders, provided shareholders intending to nominate
director candidates for election deliver written notice thereof to the
Secretary of the Company not later than (i) with respect to at election to be
held at an Annual Meeting of shareholders, ninety (90) days prior to the
anniversary date of the immediately preceding Annual Meeting of shareholders,
and (ii) with respect to an election to be held at a special meeting of
shareholders, the close of business on the tenth (10th) day following the
date on which notice of such meeting is first given to shareholders. The
Bylaws further provide that the notice shall set forth certain information
concerning such shareholder and his nominee(s), including their names and
addresses, a representation that the shareholder is entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, a description of all
arrangements or understandings between the shareholder and each nominee,
such other information as would be required to be included in a proxy
statement soliciting proxies for the election of the nominees of such
shareholder and the consent of each nominee to serve as Director of the
Company is so elected. The Chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedures. The members of the Executive Committee are Charles C. Cutts,
Willis J. Duncan, W. Jennings Duncan, and Dr. R. C. Smith.
In addition, the Board of Directors of the Bank has Audit, Loan,
Public Relations, and Building Committees. The members of the Audit
Committee are Charles C. Cutts, John Monroe J. Holliday, John K. Massey,
54
Howard B. Smith, III, and Dr. R. C. Smith. The members of the Loan
Committee are James W. Barnette, Jr., Harold G. Cushman, Jr., Willis J.
Duncan, W. Jennings Duncan, G. Heyward Goldfinch, Robert P. Hucks, and
Richard M. Lovelace, Jr. The members of the Public Relations Committee are
James W. Barnette, Jr., G. Heyward Goldfinch, and John K. Massey. The
members of the Building Committee are James W. Barnette, Jr., Harold G.
Cushman, Jr., Willis J. Duncan, W. Jennings Duncan, and Robert P. Hucks,
Willis J. Duncan, Chairman of the Board, and W. Jennings Duncan,
President, are ex officio members of each of these committees of the Board
with the exception of the Audit Committee.
The function of the Audit Committee is to ensure that adequate
accounting procedures are in existence and functioning in a manner adequate
to safeguard the assets of the Bank. The Audit Committee also monitors
internal and external audit activities. The function of the Loan Committee
is to review and approve new loans and monitor the performance and quality of
existing loans, as well as to ensure that sound policies and procedures
exist in the Bank's lending operations.
During 1995, the Company's Board of Directors met two (2) times; the
Bank's Board of Directors met twelve (12) times; the Executive Committee met
nine (9) times; the Audit Committee met nine (9) times; the Loan Committee
met twelve (12) times; the Building Committee did not meet; and the Public
Relations Committee did not meet. Each Director attended at least 75% of
the aggregate of (a) the total number of meetings of the Board of Directors
held during the period for which he served as Director and (b) the total
number of meetings held by all committees of the Board of Directors of which
he served.
Executive Officers:
The Executive Officers and other officers of the Company are
as follows:
Position(s) Currently
Name Age With The Company
Willis J. Duncan 68 Chairman of the Board (1)
W. Jennings Duncan 40 President and Director (1)
Robert P. Hucks 50 Executive Vice President and Director (1)
Verta Lee Chestnut 57 Secretary
Paul R. Dusenbury 37 Treasurer (1)
(Chief Financial Officer and
Chief Accounting Officer)
_________________
(1) Executive Officer
All executive officers and other officers serve at the pleasure
of the Board of Directors of the Company. Each executive officer and other
officer of the Company has been an officer of the Company and/or the Bank for
five (5) years.
55
ITEM 11. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Company pays no remuneration to its Directors and Executive
Officers. All remuneration for services rendered are paid by the Company's
subsidiary, The Conway National Bank, Conway, South Carolina ("the Bank").
Compensation Committee Report
The Executive Committee of the Bank recommends to the Board of
Directors the appointment of officers; determines officer compensation
subject to Board approval; and reviews employee salaries. The compensation
of the President (Chief Executive Officer) and the other executive officers
is not tied directly to corporate performance or any measure thereof.
However, it would be deemed unacceptable by the Executive Committee, Board,
and management to establish compensation levels that are not consistent with
the performance of the Bank or return to shareholders. During the
compensation decision process, much emphasis is placed on the Job Evaluation
Salary Administration Program (JESAP) Committee. The "JESAP" Committee is
charged with the responsibility of establishing job position descriptions;
applying values to each job position in the form of a salary range; and
obtaining salary surveys of a local, regional, and national level to
determine that salary ranges are consistent with the industry and peers. The
"JESAP" committee utilizes an independent management consulting firm to aid
in this process. For each Bank employee, including the President (Chief
Executive Officer) and all executive officers, a salary minimum, midpoint,
and maximum is established. For fiscal 1995, all executive officer
compensation levels were below the midpoint as established by the JESAP
process.
Summary Compensation Table
Annual Compensation Long-Term
Compensation
Awards Payouts
Stock Long-Term
Other Restricted Options Incentive
Name and ($) ($) Annual(1) Stock($) /SAR'S Payout All Other(2)
Principal Position Year Salary Bonus Compensation Awards (#) ($) Compensation
W. Jennings Duncan 1995 110,145 865 2,570 0 0 0 7,159
President and 1994 101,256 944 2,072 0 0 0 7,594
Director of Bank 1993 94,620 699 1,397 0 0 0 7,097
Robert P. Hucks 1995 98,010 865 750 0 0 0 6,371
Executive Vice 1994 90,600 944 0 0 0 0 6,795
President and 1993 84,660 699 0 0 0 0 6,350
Director of Bank
(1) Cash value of personal use of automobile furnished by the Bank or
automobile travel allowance.
2) Cash contributions made by the Bank to the Bank's contributory
profit-sharing and savings defined contribution plan.
56
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS (continued)
PENSION PLAN DISCLOSURE
The Bank has a defined contribution pension plan
covering all employees who have attained age twenty-one and have a
minimum one year of service. Upon ongoing approval of the Board of
Directors, the Bank matches one hundred percent of employee
contributions up to one percent of employee contributions of salary
deferred and fifty percent of employee contributions in excess of one
percent and up to six percent of salary deferred. For the years ended
December 31, 1995, 1994, and 1993, $266,000, $295,000, and $273,000,
respectively, was charged to operations under the plan.
The Board of Directors of the Bank have designed and
implemented a non-qualified Executive Supplemental Income (ESI) Plan for
Willis J. Duncan, W. Jennings Duncan, Robert P. Hucks, and Paul R.
Dusenbury. Under the provisions of the ESI Plan, the Bank and the
participating employees will execute agreements providing each
employee (or his beneficiary, if applicable) with a pre-retirement
death benefit and a post-retirement annuity benefit. The ESI Plan is
designed to provide participating employees with a pre-retirement
benefit based on a percentage of the employee's current compensation.
The ESI agreement's post-retirement benefit is designed to supplement a
participating employee's retirement benefits from Social Security in order
to provide the employee with a certain percentage of his final average
income at retirement age. While the employee is receiving benefits
under the ESI Agreement, the agreement will prohibit the employee from
competing with the Bank and will require the participating
employee to be available for consulting work for the Bank. The ESI
Agreement may be amended or revoked at any time prior to the participating
employee's death or retirement, but only with the mutual written consent
of the covered employee and the Bank. The ESI Agreements require that
the participating employee be employed at the Bank at the earlier of
death or retirement to be eligible to receive, or have his beneficiary
receive, benefits under the agreement. The ESI Plan is an unfunded plan,
although the Bank has the right to acquire investments to informally
and indirectly provide funding for the benefits payable under the plan.
Performance Graphs
The performance graph shall be submitted in paper form under cover of Form
SE as provided in Rule 304(d) of Regulation S-T.
57
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS (continued)
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
No Compensation Committee interlocks exist. The members of the
Executive Committee of the Board, which serves as the Compensation Committee,
are Charles C. Cutts (outside Director), Willis J. Duncan (Chairman of the
Board and inside Director), W. Jennings Duncan (President and inside
Director), and Dr. R.C. Smith (outside Director). Membership of the "JESAP"
committee consists of six Bank officers.
Director Compensation
Directors who are not Bank officers receive $300 for each monthly
meeting of the Board of Directors and an additional $100 for each committee
meeting attended.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities to file
reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with
the Securities and Exchange Commission (the "SEC") and the National
Association of Securities Dealers. Such officers, directors, and 10 percent
shareholders are also required by SEC rules to furnish the Company with
copies of all Section 16(a) forms that they file.
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that
during the fiscal year ended December 31, 1995, all Section 16(a) filing
requirements applicable to its officers, directors, and 10 percent
shareholders were complied with.
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ITEM 12. SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of December 31, 1995 certain
information regarding the ownership of Company Stock of all officers and
directors of the Company. No shareholder who is not an officer or director
of the Company is known to the management of the Company to be the beneficial
owner of more than five (5%) percent of the Company Stock. The Company Stock
is the Company's only class of voting securities.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class
Willis J. Duncan 30,362 6.4%
1400 Third Avenue
Conway, South Carolina 29526
All Officers and Directors as a Group
(43 persons) (2) 124,611 26.1%
_________________
(1) For a description of the amount and nature of ownership of the
directors of the Company, see "Management of the Company -- Directors".
(2) Includes 29 officers of the subsidiary, The Conway National Bank,
who are not officers of the Company.
ITEM 13. CERTAIN TRANSACTIONS
Directors, principal shareholders, and Executive Officers of the Company
and the Bank are customers of and had transactions with the Bank in the
ordinary course of business. Included in such transactions are outstanding
loans and commitments, all of which were made on comparable terms, including
interest rates and collateral as those prevailing at the time for other
customers of the Bank, and did not involve more than normal risk of
collectibility or present other unfavorable features.
59
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following exhibits, financial statements and financial
statement schedules are filed as part of this report:
FINANCIAL STATEMENTS
Report of Independent Public Accountants
Consolidated Statements of Condition - December 31, 1995 and 1994
Consolidated Statements of Income - Years ended December 31, 1995,
1994, and 1993
Consolidated Statements of Changes in Stockholders' Equity - Years
ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows - Years Ended December 31,
1995, 1994, and 1993
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted from this Annual
Report because the required information is presented in the
financial statements or in the notes thereto or the required
subject matter is not applicable.
EXHIBITS
See Exhibit Index appearing below.
(b) Reports on Form 8-K- No reports on Form 8-K were filed
during the last quarter of the period covered by this report.
EXHIBIT INDEX
Exhibit
Number
3 Articles of Incorporation - A copy of the Articles of
Incorporation of the Company is incorporated herein
by reference to Exhibit 3(a) which was filed with a
Form 10-K Annual Report dated March 28, 1986
By-laws of the Company - A copy of the By-laws of the
Company is incorporated herein by reference to Exhibit
3(b) which was filed with a Form 10-K Annual Report
dated March 28, 1986.
22 Subsidiaries of the Registrant - A copy of the subsidi-
aries of the registrant is incorporated herein by refer-
ence to Exhibit 22 which was filed with a Form 10-K
Annual Report dated March 28, 1986.
27 Financial Data Schedule - Article 9 Financial Data
Schedule for 10-k for electronic filers (pages 62 and 63).
All other exhibits, the filing of which are required with this Form,
are not applicable.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
In addition to the Form 10-K Annual Report and related exhibits,
the registrant has included the annual report to security
holders covering the registrant's last fiscal year and the proxy
statement, form of proxy and proxy soliciting material sent to the
registrant's security holders with respect to the annual meeting.
Such material is not deemed to be "filed" with the Commission or
subject to the liabilities of Section 18 of the Act and is not
incorporated into the Form 10-K Annual Report by reference.
60
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
W. Jennings Duncan, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the registrant and in their capacities on March
18, 1996.
Signature Capacity
Willis J. Duncan Chairman of the Board
W. Jennings Duncan President and Director
Robert P. Hucks Executive Vice President and
Director
Verta Lee Chestnut Secretary
Paul R. Dusenbury Treasurer
(Chief Financial Officer
and Chief Accounting Officer)
Dr. R. C. Smith Past Chairman of the Board
and Director
James W. Barnette, Jr. Director
Harold G. Cushman, Jr. Director
Charles C. Cutts Director
G. Heyward Goldfinch Director
Richard M. Lovelace, Jr. Director
John K. Massey Director
61