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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM - TO --
Commission file number 0-30665
CNB Financial Services, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
United States of America 55-0773918
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 S. Washington Street, Berkeley Springs, WV 25411
- ----------------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, ( 304 ) 258 - 1520
----- ------------ ----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock $1 par value, 458,048 shares outstanding as of August 1, 2002
CNB FINANCIAL SERVICES, INC.
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 2002 (Unaudited)
and December 31, 2001..............................................................3
Consolidated Statements of Income for the Three and Six Months ended June 30, 2002
and 2001 (Unaudited)..............................................................4
Consolidated Statements of Changes in Shareholders' Equity for the Six
Months Ended June 30, 2002 (Unaudited) and the Year Ended December 31, 2001........5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2002 and 2001 (Unaudited)...........................................6
Notes to Consolidated Financial Statements (Unaudited)................................7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Three and Six Months ended June 30, 2002............12
Item 3. Quantitative and Qualitative Disclosures about Market Risk...........................19
PART II: OTHER INFORMATION
Item 1. Legal Proceedings....................................................................21
Item 4. Submission of Matters to a Vote of Security Holders..................................21
Item 6. Exhibits and Reports on Form 8-K.....................................................22
SIGNATURES...........................................................................24
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 indicates that
the disclosure of forward-looking information is desirable for investors and
encourages such disclosure by providing a safe harbor for forward-looking
statements that involve risk and uncertainty. All statements other than
statements of historical fact included in this Form 10-Q including statements in
Management's Discussion and Analysis of Financial Condition and Results of
Operations are, or may be deemed to be, forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. In order to comply with the terms of the safe
harbor, CNB notes that a variety of factors could cause CNB's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in those forward-looking statements. These factors could
include the following possibilities: (1) competitive pressures among depository
and other financial institutions may increase significantly; (2) changes in the
interest rate environment may reduce margins; (3) general economic conditions
may become unfavorable resulting in reduced credit quality or demand for loans;
(4) legislative or regulatory changes; and (5) competitors may have greater
financial resources and develop products that enable them to compete more
successfully than CNB.
Page 2
CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, DECEMBER 31,
ASSETS 2002 2001
------------ ------------
(Unaudited)
Cash and due from banks $ 9,153,873 $ 4,229,810
Federal funds sold 954,894 -
Securities available for sale
(at approximate market value) 50,620,938 48,913,329
Federal Home Loan Bank stock, at cost 646,900 625,500
Federal Reserve Bank stock, at cost 129,650 129,650
Loans and lease receivable, net 115,120,503 110,536,744
Accrued interest receivable 1,004,194 1,052,620
Foreclosed real estate (held for sale), net - 14,898
Premises and equipment, net 4,510,012 4,283,625
Deferred income taxes 175,928 225,894
Cash surrender value of life insurance 963,452 883,533
Intangible assets 100,825 105,168
Other assets 309,305 540,672
------------ ------------
TOTAL ASSETS $183,690,474 $171,541,443
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 22,303,265 $ 19,174,111
Interest-bearing demand 28,492,332 24,878,709
Savings 19,620,694 17,851,684
Time, $100,000 and over 32,534,831 27,450,519
Other time 62,985,530 65,025,516
------------ ------------
$165,936,652 $154,380,539
Accrued interest payable 1,074,701 1,148,437
Accrued expenses and other liabilities 1,195,986 1,086,230
------------ ------------
TOTAL LIABILITIES $168,207,339 $156,615,206
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, $1 par value; 5,000,000 shares
authorized; 458,048 shares outstanding $ 458,048 $ 458,048
Capital surplus 3,863,592 3,863,592
Retained earnings 10,901,990 10,426,618
Accumulated other comprehensive income 259,505 177,979
------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 15,483,135 $ 14,926,237
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $183,690,474 $171,541,443
============ ============
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Page 3
CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
INTEREST INCOME
Interest and fees on loans $2,268,127 $2,378,042 $4,478,250 $4,669,261
Interest and dividends on securities
United States Treasury securities - - - 274
U.S. Government agencies and
corporations 493,769 550,171 1,073,772 1,106,063
Mortgage backed securities 87,708 - 91,990 -
State and political subdivisions 9,470 7,363 16,833 14,725
Other 7,331 14,689 15,396 32,959
Interest on federal funds sold 22,737 61,968 36,054 89,370
---------- ---------- ---------- ----------
$2,889,142 $3,012,233 $5,712,295 $5,912,652
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on interest bearing demand, $1,343,743 $1,519,570 $2,726,326 $2,989,305
savings and time deposits
Interest on federal funds purchased - - - 2,291
---------- ---------- ---------- ----------
$1,343,743 $1,519,570 $2,726,326 $2,991,596
---------- ---------- ---------- ----------
NET INTEREST INCOME $1,545,399 $1,492,663 $2,985,969 $2,921,056
PROVISION FOR LOAN LOSSES 38,500 61,000 111,500 112,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES $1,506,899 $1,431,663 $2,874,469 $2,809,056
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts $ 190,973 $ 150,426 $ 339,175 $ 218,628
Other service charges, commissions
and fees 105,497 67,479 172,862 124,391
Insurance commissions 26,053 29,491 51,384 58,780
Other operating income 30,463 21,749 81,416 38,841
Net gain on sale of securities 23,903 - 78,028 -
Gain on sale of other real estate owned 4,127 - 3,492 833
---------- ---------- ---------- ----------
$ 381,016 $ 269,145 $ 726,357 $ 441,473
---------- ---------- ---------- ----------
NONINTEREST EXPENSES
Salaries $ 563,720 $ 495,563 $1,095,392 $ 962,518
Employee benefits 182,250 152,388 370,477 305,181
Occupancy of premises 65,190 58,102 142,956 128,760
Furniture and equipment expense 93,737 57,049 180,828 116,073
Other operating expenses 403,595 424,594 825,752 769,469
---------- ---------- ---------- ----------
$1,308,492 $1,187,696 $2,615,405 $2,282,001
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES $ 579,423 $ 513,112 $ 985,421 $ 968,528
PROVISION FOR INCOME TAXES 212,934 186,796 345,151 347,462
---------- ---------- ---------- ----------
NET INCOME $ 366,489 $ 326,316 $ 640,270 $ 621,066
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.80 $ 0.71 $ 1.40 $ 1.36
========== ========== ========== ==========
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Page 4
CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
ACCUMULATED
OTHER TOTAL
COMMON CAPITAL RETAINED COMPREHENSIVE SHAREHOLDERS'
STOCK SURPLUS EARNINGS INCOME EQUITY
--------- ----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 2000 $ 458,048 $ 3,863,592 $ 9,657,422 $(115,244) $13,863,818
-----------
Comprehensive income:
Net income for 2001 - - 1,236,405 - 1,236,405
Change in unrealized gains
(losses) on securities
available for sale (net of tax of $179,718) - - - 293,223 293,223
-----------
Total Comprehensive Income - - - - 1,529,628
-----------
Cash dividends ($1.02 per share) (467,209) (467,209)
--------- ----------- ----------- --------- -----------
BALANCE, DECEMBER 31, 2001 $ 458,048 $ 3,863,592 $10,426,618 $ 177,979 $14,926,237
-----------
Comprehensive income:
Net income for six months
ended June 30, 2002 - - 640,270 - 640,270
Change in unrealized gains
(losses) on securities
available for sale (net of tax of $49,966) - - - 81,526 81,526
-----------
Total Comprehensive Income - - - - 721,796
-----------
Cash dividends ($0.36 per share) (164,898) (164,898)
--------- ----------- ----------- --------- -----------
BALANCE, JUNE 30, 2002 $ 458,048 $ 3,863,592 $10,901,990 $ 259,505 $15,483,135
========= =========== =========== ========= ===========
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Page 5
CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
---------------------------------
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 640,270 $ 621,066
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 184,146 114,519
Provision for loan losses 111,500 112,000
Net (gain) on sale of securities (78,028) (833)
(Gain) on sale of real estate owned (3,492) -
(Increase) decrease in accrued interest receivable 48,426 (19,005)
(Increase) decrease in other assets 246,192 (19,647)
(Decrease) increase in accrued interest payable (73,736) 40,623
(Increase) in cash surrender value on life insurance in excess
of premiums paid (3,408) (30,000)
Increase in accrued expenses and other liabilities 109,756 46,658
Amortization of deferred loan (fees) cost 35,713 23,084
Amortization (accretion) of premium and discount on investments 6,126 (22,644)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,223,465 $ 865,821
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) in loans $ (4,760,972) $ (3,869,459)
Proceeds from sales of securities 7,075,471 901,406
Proceeds from maturities of securities 11,594,511 17,972,222
Purchases of securities (20,195,598) (21,727,451)
Purchases of premises and equipment (448,448) (710,846)
Proceeds from sales of other real estate owned, net 48,390 -
Net (increase) in federal funds sold (954,894) (543,914)
Premiums paid on life insurance (49,078) (49,843)
------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES $ (7,690,618) $ (8,027,885)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits $ 8,511,787 $ 2,155,982
Net increase in time deposits 3,044,326 7,240,894
Cash dividends paid (164,897) (164,897)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 11,391,216 $ 9,231,979
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 4,924,063 $ 2,069,915
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,229,810 3,739,854
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,153,873 $ 5,809,769
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest $ 2,800,063 $ 3,030,277
Income taxes $ 264,000 $ 320,500
Net transfer to foreclosed real estate, held for sale from loans
receivable $ 30,000 $ -
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Page 6
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Formation of Holding Company
In March 2000, Citizens National Bank's Board of Directors
approved the formation of CNB Financial Services, Inc., (CNB) a
financial services holding company. On August 4, 2000, the shareholders
of Citizens National Bank approved an agreement and plan of merger
whereby the Bank became a wholly-owned subsidiary of CNB Financial
Services, Inc., a newly-formed financial services holding company. On
the effective date of this reorganization, each bank shareholder
received two shares of CNB stock for each share of the Bank's common
stock. The Bank expensed all costs of start-up activities of CNB, and
the merger was accounted for as a pooling of interest.
Note 2. Basis of Presentation
In the opinion of CNB, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of CNB financial
condition as of June 30, 2002 and the results of operations for the
three and six months ended June 30, 2002 and 2001 and cash flows for
the six months ended June 30, 2002 and 2001.
The accompanying unaudited financial statements have been
prepared in accordance with the instructions for Form 10-Q. These
financial statements should be read in conjunction with the
consolidated financial statements and the notes included in the CNB's
Annual Report for the year ended December 31, 2001.
Page 7
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3. Securities Available for Sale
The amortized cost and estimated market value of debt
securities at June 30, 2002 and December 31, 2001 by contractual
maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Securities available for sale are summarized as follows:
JUNE 30, 2002 WEIGHTED
-------------------------------------------------------------------- AVERAGE
GROSS GROSS ESTIMATED TAX
AMORTIZED UNREALIZED UNREALIZED FAIR EQUIVALENT
COST GAINS LOSSES VALUE YIELD
--------------- --------------- --------------- ---------------------------------
Available for sale:
U.S. Government agencies
and corporations
Within one year $ 1,000,000 $ 2,031 $ - $ 1,002,031 4.73 %
After 1 but within 5 years 28,536,456 181,902 2,943 28,715,415 4.68
After 5 but within 10 years 9,575,248 182,712 - 9,757,960 6.04
--------------- --------------- --------------- ---------------
$39,111,704 $ 366,645 $ 2,943 $39,475,406 5.02
--------------- --------------- --------------- ---------------
Mortgage backed securities
After 5 but within 10 years $ 2,972,518 $ 16,611 $ - $ 2,989,129 5.18
Over 10 years 6,993,158 37,787 943 7,030,002 5.82
--------------- --------------- --------------- ---------------
$ 9,965,676 $ 54,398 $ 943 $10,019,131 5.64
--------------- --------------- --------------- ---------------
States and political subdivisions
After 1 but within 5 years $ 350,000 $ 32 $ - $ 350,032 6.75
After 5 but within 10 years 775,000 3,502 2,133 776,369 6.91
--------------- --------------- --------------- ---------------
$ 1,125,000 $ 3,534 $ 2,133 $ 1,126,401 6.86
--------------- --------------- --------------- ---------------
Total securities available for sale $50,202,380 $ 424,577 $ 6,019 $50,620,938 5.18 %
=============== =============== =============== ===============
Page 8
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3. Securities Available for Sale (continued)
DECEMBER 31, 2001 WEIGHTED
-------------------------------------------------------------------- AVERAGE
GROSS GROSS ESTIMATED TAX
AMORTIZED UNREALIZED UNREALIZED FAIR EQUIVALENT
COST GAINS LOSSES VALUE YIELD
--------------- --------------- --------------- ---------------------------------
Available for sale:
U.S. Government agencies
and corporations
Within one year $ 1,250,000 $ 1,328 $ - $ 1,251,328 6.63 %
After 1 but within 5 years 29,007,880 116,337 $ 151,186 $28,973,031 4.67
After 5 but within 10 years 17,818,385 327,707 3,568 18,142,524 6.28
--------------- --------------- --------------- ---------------
$48,076,265 $ 445,372 $ 154,754 $48,366,883 5.27
--------------- --------------- --------------- ---------------
States and political subdivisions
After 1 but within 5 years $ 350,000 $ 1,020 $ - $ 351,020 6.75
After 5 but within 10 years 200,000 - 4,574 195,426 8.02
--------------- --------------- --------------- ---------------
$ 550,000 $ 1,020 $ 4,574 $ 546,446 7.21
--------------- --------------- --------------- ---------------
Total securities available for sale $48,626,265 $ 446,392 $ 159,328 $48,913,329 5.30 %
=============== =============== =============== ===============
The carrying value of securities pledged to secure public
deposits and for other purposes as required or permitted by law totaled
$12,826,347 at June 30, 2002 and $12,099,922 at December 31, 2001.
Proceeds from sales of securities available for sale
(excluding maturities) during the six months ended June 30, 2002 and
the year ended December 31, 2001 were $7,075,471 and $901,406,
respectively. Gross gains (losses) of $78,028 and $(-0-) during the six
months ended June 30, 2002 and $7,071 and $(6,238) for the year ended
December 31, 2001 were realized on the respective sales.
Page 9
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4. Loans and Lease Receivable
Major classifications of loans at June 30, 2002 and December
31, 2001, were as follows:
JUNE 30, DECEMBER 31,
2002 2001
------------- --------------
Loans:
Real estate $ 71,992,198 $ 67,859,963
Commercial real estate 13,373,548 12,458,880
Consumer 23,160,755 24,197,964
Commercial 7,627,629 6,977,624
Overdrafts 49,692 86,694
------------- -------------
$ 116,203,822 $ 111,581,125
Lease: 137,346 139,608
------------- -------------
$ 116,341,168 $ 111,720,733
Net deferred loan fees, costs,
premiums and discounts 185,266 152,971
Allowance for loan losses (1,405,931) (1,336,960)
------------- -------------
$ 115,120,503 $ 110,536,744
============= =============
An analysis of the allowance for possible loan losses is as
follows:
JUNE 30, DECEMBER 31,
-------------------------------------- ------------------
2002 2001 2001
---------------- ----------------- ------------------
Balance, Beginning $ 1,336,960 $ 1,216,333 $ 1,216,333
Provision charged to
operations 111,500 112,000 226,000
Recoveries 25,663 9,481 29,729
Loans charged off (68,192) (46,850) (135,102)
---------------- ----------------- ------------------
Balance, Ending $ 1,405,931 $ 1,290,964 $ 1,336,960
================ ================= ==================
Loans are placed in nonaccrual status when, in the judgement
of management, the probability of collection of interest is deemed to
be insufficient to warrant further accrual. A summary of nonaccrual
loans is as follows:
JUNE 30, DECEMBER 31,
--------------------------------------- ------------------
2002 2001 2001
----------------- ----------------- ------------------
Loans:
Consumer $ 3,693 $ 7,315 $ 25,173
================= ================= ==================
Page 10
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4. Loans and Lease Receivable (continued)
Proceeds from sale of loans during the six months ended June
30, 2002 and the year ended December 31, 2001 were $0. There were no
gains or losses on sale of loans.
Note 5. Time Deposits
At June 30, 2002, the scheduled maturities of time deposits
are as follows:
TIME DEPOSITS ALL TIME
$100,000 AND OVER DEPOSITS
------------------ ------------------
Within 3 months $ 2,033,483 $ 12,060,798
3 months thru 6 months 2,537,565 11,564,303
6 months thru 12 months 13,006,778 27,924,962
Over 12 months 14,957,005 43,970,298
------------------ ------------------
$ 32,534,831 $ 95,520,361
================== ==================
Note 6. Shareholders' Equity
On August 31, 2000, CNB became a one-bank holding company by
merger with the Bank, and the shareholders received two shares of CNB
stock with a $1 par value for each share of Bank stock with a $10 par
value. Common stock, capital surplus and retained earnings have been
restated to reflect the change in par value and the shares issued due
to the formation of CNB.
Basic earnings and dividends per share have been computed
based on 458,048 weighted average number of shares outstanding in 2002
and 2001.
Note 7. New Branch
On April 20, 2001, the Bank purchased a parcel of land in
Berkeley County, West Virginia for $450,000 to construct a new branch
facility. The Bank leased a parcel of land adjacent to the purchased
land and rented a temporary facility in which to conduct business while
the permanent bank building was under construction. The temporary
facility opened for business in August 2001. Construction on the
permanent facility began in September 2001 and was completed in March
2002. On March 18, 2002, the temporary facility was closed and the new
branch building was occupied.
Page 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
CNB Financial Services, Inc. ("CNB" or the "Company") was
organized under the laws of West Virginia in March 2000 at the
direction of the Board of Directors of Citizens National Bank (the
"Bank") for the purpose of becoming a financial services holding
company. The Company's primary function is to direct, plan and
coordinate the business activities for the Bank and its subsidiary. We
refer to the Company and its subsidiary as "CNB".
On August 31, 2000, the Bank, via merger, became a
wholly-owned subsidiary of the Company and the shareholders of the Bank
became shareholders of the Company. Each Bank shareholder received two
shares of the Company stock for each share of the Bank's common stock.
The merger was accounted for as a pooling of interests.
The Bank was organized on June 20, 1934, and has operated in
Berkeley Springs, Morgan County, West Virginia, as a national banking
association continuously since that time. The Bank is a full-service
commercial bank conducting general banking and trust activities through
three full-service offices and four automated teller machines located
in Morgan and Berkeley Counties, West Virginia. The Bank formed CNB
Insurance Services, Inc., a wholly owned subsidiary, which is a
property and casualty insurance agency selling primarily personal lines
of insurance.
The Bank purchased a parcel of land in Berkeley County, West
Virginia on April 20, 2001 for $450,000 to construct a new branch
facility. The Bank leased a parcel of land adjacent to the purchased
land and rented a temporary facility in which to conduct business while
the permanent bank building was under construction. The temporary
facility opened for business in August 2001. Construction on the
permanent facility began in September 2001 and was completed in March
2002. On March 18, 2002, the temporary facility was closed, and the new
branch building opened.
The following discussion and analysis presents the significant
changes in financial condition and results of operations of CNB for the
three and six months ended June 30, 2002 and 2001. This discussion may
include forward-looking statements based upon management's
expectations. Actual results may differ. We have rounded amounts and
percentages used in this discussion and have based all average balances
on monthly averages.
EARNINGS SUMMARY
Net income for the three months ended June 30, 2002 was
$366,000, or $0.80 per share compared to $326,000 or $0.71 per share
for the same period in 2001. Annualized return on average assets and
average equity were .81% and 9.74% respectively, for the three months
ended June 30, 2002, compared with .82% and 9.00%, respectively, for
the three months ended June 30, 2001.
Net income for the six months ended June 30, 2002 was
$640,000, or $1.40 per share compared to $621,000 or $1.36 per share
for the same period in 2001. Annualized return on average assets and
average equity were .72% and 8.51% respectively, for the six months
ended June 30, 2002, compared with .80% and 8.68%, respectively for the
six months ended June 30, 2001.
NET INTEREST INCOME
Net interest income represents the primary component of CNB's
earnings. It is the difference between interest and fee income related
to earning assets and interest expense incurred to carry
interest-bearing liabilities. Changes in the volume and mix of interest
earning assets and interest bearing liabilities, as well as changing
interest rates impact net interest income. To manage these changes,
their impact on net interest income and the risk associated with them,
CNB utilizes an ongoing asset/liability management program. This
program includes analysis of the difference between rate sensitive
assets and rate sensitive liabilities, earnings sensitivity to rate
Page 12
changes, and source and use of funds. A discussion of net interest
income and the factors impacting it is presented below.
Net interest income for the three months ended June 30, 2002
increased by $53,000 or 3.5% over the same period in 2001. Interest
income for the three months ended June 30, 2002 decreased by $123,000
or 4.1% compared to the same period in 2001, while interest expense
decreased by $176,000 or 11.6% during the three months ended June 30,
2002, as compared to the same period in the prior year.
Net interest income for the six months ended June 30, 2002
increased by $65,000 or 2.2% over the same period in 2001. Interest
income for the six months ended June 30, 2002 decreased by $200,000 or
3.4% compared to the same period in 2001, while interest expense
decreased by $265,000 or 8.9% during the three months ended June 30,
2002, as compared to the same period in the prior year.
During the second quarter of 2002 compared to the same period
in 2001, average net interest earning assets increased $17.3 million or
11.4% and average net interest earning liabilities increased $17.0
million or 13.6% resulting in increased net interest income. However,
CNB experienced a 32 basis point decrease in the net interest margin.
The 116 basis point decrease in rates earned on average interest
earning assets offset by a 108 basis point decrease in rates paid on
average interest bearing liabilities contributed to the decrease in the
net interest margin. See Table 1 and Table 2 - Distribution of Assets,
Liabilities, and Shareholders' Equity; Interest Rates and Interest
Differential.
Increased net interest income for the three and six month
period is attributable to a significantly higher level of net interest
earning assets offset by a decrease in the net interest margin. During
2001 and into the second quarter of 2002, the Bank enjoyed substantial
deposit growth but slower loan growth resulting in a lower loan to
deposit ratio. Management continued to fund the loan growth with
deposits and the excess deposit growth was invested in high quality
mortgage backed securities or overnight federal funds. Due to the
slower loan demand, the Bank has experienced a shift in the asset mix
from higher yielding loans to a greater emphasis in lower yielding
overnight federal funds and investment securities. Although the average
balance on investment securities and loans increased, total interest
earned decreased due to a decrease in the average rates earned on
interest earning assets. Although the average balance on all interest
bearing liabilities increased, total interest expense decreased due to
a decrease in the average rates paid on all interest bearing
liabilities.
The net interest margin is impacted by the change in the
spread between yields on earning assets and rates paid on interest
bearing liabilities.
Page 13
TABLE 1. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
JUNE 30, 2002 JUNE 30, 2001
--------------------------------- --------------------------------
QTR QTR
AVERAGE QTR YIELD/ AVERAGE QTR YIELD/
BALANCE INTEREST RATE (4) BALANCE INTEREST RATE (4)
--------------------------------- --------------------------------
(IN THOUSANDS OF DOLLARS)
Interest earning assets:
Federal funds sold $ 4,187 $ 23 1.65% $ 5,097 $ 63 4.23%
Securities:
Taxable 48,878 593 4.85 36,760 568 6.18
Tax-exempt(1) 682 5 4.44 307 4 7.90
Loans (net of unearned interest)(2)(5)(6) 114,723 2,165 7.55 109,043 2,303 8.45
--------------------------------- --------------------------------
Total interest earning assets(1) $ 168,470 $ 2,786 6.61% $ 151,207 $ 2,938 7.77%
--------------------------------- --------------------------------
Nonearning assets:
Cash and due from banks $ 7,665 $ 3,354
Bank premises and equipment, net 4,508 3,651
Other assets 2,348 2,082
Allowance for loan losses (1,398) (1,270)
------------ -----------
Total assets $ 181,593 $ 159,024
============ ===========
Interest bearing liabilities:
Savings deposits $ 19,342 $ 25 0.52% $ 16,756 $ 79 1.89%
Time deposits 95,347 1,229 5.16 84,272 1,287 6.11
NOW accounts 22,513 77 1.37 19,183 127 2.65
Money market accounts 5,087 12 0.94 5,019 27 2.15
Borrowings - - - - -
--------------------------------- --------------------------------
Total interest bearing liabilities $ 142,289 $ 1,343 3.78% $ 125,230 $ 1,520 4.86%
--------------------------------- --------------------------------
Noninterest bearing liabilities:
Demand deposits $ 22,454 $ 17,277
Other liabilities 1,790 2,036
Shareholders' equity 15,060 14,481
------------ -----------
Total liabilities and
shareholders' equity $ 181,593 $ 159,024
============ ===========
--------- -----------
Net interest income (1) $ 1,443 $ 1,418
========= ===========
Net interest spread (3) 2.83% 2.91%
========= ======
Net interest income to average 3.43% 3.75%
========= ======
interest earning assets (1)
(1) Yields are expressed on a tax equivalent basis using a 34% tax rate.
(2) For the purpose of these computations, nonaccruing loans are included in
the amounts of average loans outstanding. (3) Net interest spread is the
difference between the weighted average yield on interest-earning assets
and the weighted average cost of interest-bearing liabilities.
(4) Yields/Rates are expressed on annualized basis.
(5) Interest income on loans excludes fees of $103,000 in 2002 and $75,000 in
2001.
(6) Interest income on loans includes fees of $53,413 in 2002 and $52,313 in
2001 from the Business Manager Program, student loans and lease
receivables.
14
TABLE 2. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
JUNE 30, 2002 JUNE 30, 2001
------------------------------ ------------------------------------
YTD YTD
AVERAGE YTD YIELD/ AVERAGE YTD YIELD/
BALANCE INTEREST RATE (4) BALANCE INTEREST RATE (4)
------------------------------ ------------------------------------
(IN THOUSANDS OF DOLLARS)
Interest earning assets:
Federal funds sold $ 3,691 $ 36 1.64% $ 3,755 $ 90 4.86%
Securities:
Taxable 48,628 1,189 4.89 36,139 1,146 6.34
Tax-exempt(1) 489 9 5.58 306 8 7.92
Loans (net of unearned interest)(2)(5) 113,600 4,305 7.58 107,476 4,543 8.45
------------------------------ ------------------------------------
Total interest earning assets(1) $ 166,408 $ 5,539 6.66% $ 147,676 $ 5,787 7.84%
------------------------------ ------------------------------------
Nonearning assets:
Cash and due from banks $ 6,342 $ 3,636
Bank premises and equipment, net 4,444 3,403
Other assets 2,399 2,147
Allowance for loan losses (1,383) (1,252)
----------- ------------
Total assets $ 178,210 $ 155,610
=========== ============
Interest bearing liabilities:
Savings deposits $ 18,682 $ 66 0.71% $ 16,380 $ 157 1.92%
Time deposits 94,654 2,477 5.23 82,277 2,511 6.10
NOW accounts 21,623 155 1.43 18,876 268 2.84
Money market accounts 5,106 28 1.10 4,972 54 2.17
Borrowings - - 88 2 4.55
------------------------------ ------------------------------------
Total interest bearing liabilities $ 140,065 $ 2,726 3.89% $ 122,593 $ 2,992 4.88%
------------------------------ ------------------------------------
Noninterest bearing liabilities:
Demand deposits $ 21,221 $ 16,766
Other liabilities 1,876 1,935
Shareholders' equity 15,048 14,316
----------- ------------
Total liabilities and
shareholders' equity $ 178,210 $ 155,610
=========== ============
----------- --------------
Net interest income(1) $ 2,813 $ 2,795
=========== ==============
Net interest spread(3) 2.77% 2.96%
======== ======
Net interest income to average 3.38% 3.79%
======== ======
interest earning assets(1)
(1) Yields are expressed on a tax equivalent basis using a 34% tax rate.
(2) For the purpose of these computations, nonaccruing loans are included in
the amounts of average loans outstanding. (3) Net interest spread is the
difference between the weighted average yield on interest-earning assets
and the weighted average cost of interest-bearing liabilities.
(4) Yields/Rates are expressed on annualized basis.
(5) Interest income on loans excludes fees of $173,000 in 2002 and $126,000 in
2001.
(6) Interest income on loans includes fees of $100,278 in 2002 and $100,302 in
2001 from the Business Manager Program, student loans and lease
receivables.
15
PROVISION FOR LOAN LOSSES
The amount charged to provision for loan losses is based on
management's evaluation of the loan portfolio. Management determines
the adequacy of the allowance for loan losses, based on past loan loss
experience, current economic conditions and composition of the loan
portfolio. The allowance for loan losses is the best estimate of
management of the probable losses which have been incurred as of a
balance sheet date.
The provision for loan losses is a charge to earnings which is
made to maintain the allowance for loan losses at a sufficient level.
The provision for loan losses for the three months ended June 30, 2002,
and June 30, 2001, amounted to $39,000 and $61,000, respectively. The
provision for loan losses for the six months ended June 30, 2002, and
June 30, 2001, amounted to $112,000, respectively. Loan quality remains
stable and past due and nonaccruals are minimal. Management believes
the allowance for loan losses is adequate and is not aware of any
information relating to the loan portfolio which it expects will
materially impact future operating results, liquidity or capital
resources. In addition, federal regulators may require additional
reserves as a result of their examination of the bank. See
"Nonperforming Assets and Allowance for Loan Losses" for further
discussion.
NONINTEREST INCOME
Noninterest income for the three months ended June 30, 2002
increased $112,000 or 41.6% to $381,000 from $269,000 in the second
quarter of 2001. The Bank began offering a new service to checking
deposit account holders in April 2001. Bounce Protection is a form of
overdraft protection which enables the customer to have their
insufficient funds checks paid instead of returned. The customer is
charged a fee for each check paid. Fees generated from the Bounce
Protection program, debit cards, gain on sale of securities and gain on
sale of other real estate owned offset by a decrease in insurance
commissions were the primary reasons for the increase in noninterest
income. Another factor contributing to the increase in noninterest
income is the increase in trust fees due to continued growth of trust
assets managed by the Bank. Noninterest income for the six months ended
June 30, 2002 increased $285,000 or 64.5% to $726,000 from $441,000 for
the same period in 2001. The increase in noninterest income was
attributable to fees generated from the Bounce Protection program,
debit card income, title insurance commissions, gain on sale of
securities and gain on sale of other real estate owned. Another factor
contributing to the increase in noninterest income was in March 2002,
one of the Bank's Board of Directors passed away and the Bank was the
beneficiary of a life insurance policy on the director. The Bank
received $43,379 in a death benefit, $21,645 of which was recorded in
assets as cash surrender value. The difference of $21,734 is reflected
in other operating income.
NONINTEREST EXPENSES
Noninterest expenses for the three months ended June 30, 2002,
increased $121,000 or 10.2% primarily due to increases in salaries and
benefits, occupancy expense, and furniture, fixtures and equipment
expenses offset by a decrease in other operating expenses. Salaries and
employee benefits increased due to normal recurring merit increases,
increased health insurance costs and additional hiring for the south
Martinsburg branch facility and hiring in the normal course of
business. The increase in furniture and equipment expense was due to an
increase in depreciation expense related to furniture and equipment
acquired for the new south Martinsburg branch and the new computer
equipment and peripherals associated with the upgrade of the bank's
technology systems.
Noninterest expenses for the six months ended June 30, 2002,
increased $333,000 or 14.6% to $2.6 million from $2.3 million for the
first six months of 2001. The increases were primarily due to higher
costs associated with salaries and benefits , occupancy expense,
furniture, fixture and equipment expense and other operating expenses.
Salaries and employee benefits increases were the result of normal
recurring merit increases, increased health insurance costs and
additional hiring for the south Martinsburg branch facility and in the
normal course of business. Higher advertising, postage, telephone
expenses offset by decreases in stationary, supplies and printing and
data processing accounted for the increase in other operating expenses.
16
INCOME TAXES
The Bank's provision for income taxes increased $26,000 or
14.0% to $213,000 for the three months ended June 30, 2002 and
decreased $2,000 or 0.7% to $345,000 for the six months ended June 30,
2002. The effective tax rates for the second quarter of 2002 and 2001
were 36.8% and 36.4%, respectively and for the first six months of 2002
and 2001 were 35.0% and 35.9%, respectively. The Bank's lower effective
tax rate for the first six months of 2002 compared to the first six
months of 2001, is due to an increase in nontaxable income, principally
life insurance proceeds. The decrease in the income tax provision in
2002 is attributable to lower taxable income. The Bank's income tax
expense differs from the amount computed at statutory rates primarily
due to the tax-exempt earnings from certain investment securities.
FINANCIAL CONDITION
The Bank's total assets at June 30, 2002 increased $12.1
million or 7.1% to $183.7 million from December 31, 2001 due primarily
to a $1.0 million increase in federal funds sold, a $4.6 million
increase in loans, a $4.9 million increase in cash and due from banks
and a $1.7 million increase in investment securities. The Bank's total
liabilities increased $11.6 million or 7.4% to $168.2 million at June
30, 2002, consisting entirely of deposit growth, which increased to
$165.9 million. Shareholders' equity increased $557,000 to $15.5
million at June 30, 2002, primarily due to net income of $640,000 and a
$82,000 increase in accumulated other comprehensive income offset by
the semi-annual cash dividend of $165,000. The only component of
accumulated other comprehensive income at June 30, 2002, was unrealized
gains and losses on available for sale securities, net of deferred
income taxes. The unrealized gains and losses are primarily a function
of available market interest rates relative to the yield being
generated on the available for sale portfolio. No earnings impact
results, however, unless the securities are actually sold.
LOAN PORTFOLIO
At June 30, 2002, total loans increased $4.6 million or 4.2%
to $115.1 million from $110.5 million at December 31, 2001. The loan
mix did not change in any material respect compared with December 31,
2001. The loan portfolio increase is the result of new mortgage loans.
The Bank feels additional growth in all lending areas is possible
during the remainder of 2002.
NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
Nonperforming assets consist of nonaccrual loans, loans which
are past due 90 days or more and still accruing interest, restructured
loans and other real estate owned. The following table summarized the
Bank's nonperforming assets as of the periods shown:
JUNE 30, DECEMBER 31,
---------------------- ------------
2002 2001 2001
-------- -------- --------
Nonaccrual loans $ 3,693 $ 7,315 $ 25,173
Loans past due 90 days or more
still accruing interest 149,779 143,944 449,675
-------- -------- --------
Total nonperforming loans $153,472 $151,259 $474,848
-------- -------- --------
Other real estate owned $ - $ - $ 14,899
-------- -------- --------
Total nonperforming assets $153,472 $151,259 $489,747
======== ======== ========
Nonperforming loans/Total loans 0.13% 0.14% 0.43%
Nonperforming assets/Total assets 0.08% 0.09% 0.29%
Allowance for loan losses/Total loans 1.22% 1.18% 1.21%
17
As of June 30, 2002, the Bank has no loans which management
considers to be impaired. Management is aware of one commercial loan
and one mortgage loan with aggregate uninsured balances of $276,472
which the borrowers have exhibited weaknesses. A specific allowance of
$50,000 related to these loans has been established as part of the
allowance for loan losses. The loans are collateralized and management
anticipates any additional potential loss would be minimal.
The allowance for loan losses is the best estimate by
management of the probable losses which have been incurred as of a
balance sheet date. Management makes this determination quarterly by
its analysis of overall loan quality, changes in the mix and size of
the loan portfolio, previous loss experience, general economic
conditions, information about specific borrowers and other factors. The
Bank's methodology for determining the allowance for loan losses
established both an allocated and an unallocated component. The
allocated portion of the allowance represents the results of analyses
of individual loans that the Bank monitors for potential credit
problems and pools of loans with the portfolio. Management bases the
allocated portion of the allowance for loans principally on current
loan risk ratings, historical loan loss rates adjusted to reflect
current conditions, as well as analyses of other factors that may have
affected the collectibility of loans in the portfolio. The Bank
analyzes all commercial loans it is monitoring as potential credit
problems to determine whether those loans are impaired, with impairment
measured by reference to the borrowers' collateral values and cash
flows.
The unallocated portion of the allowance for loan losses
represents the results of analyses that measure probable losses
inherent in the portfolio that are not adequately captured in the
allocated allowance analyses. These analyses include consideration of
unidentified losses inherent in the portfolio resulting from changing
underwriting criteria, changes in the types and mix of loans
originated, industry concentrations and evaluations, allowance levels
relative to selected overall credit criteria and other economic
indicators used to estimate probable incurred losses. At June 30, 2002,
and December 31, 2001, the allowance for loans losses totaled $1.4
million and $1.3 million, respectively. The allowance for loans losses
as a percentage of loans was 1.22% and 1.21% as of June 30, 2002 and
December 31, 2001.
An analysis of the allowance for loan losses is summarized
below:
In thousands JUNE 30, DECEMBER 31,
------------------------ ----------------------------
2002 2001
------------------------ ----------------------------
PERCENT OF PERCENT OF
LOANS IN EACH LOANS IN EACH
CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ -----------
Commercial, financial $ 275 7 % $ 363 6 %
and agriculture
Real estate - mortgage 350 73 294 72
Installment and other 393 20 370 22
Uallocated 388 N/A 310 N/A
------ ----- ------ -----
Total $1,406 100 % $1,337 100 %
====== ===== ====== =====
DEPOSITS
The Bank's deposits increased $11.6 million or 7.5% during the
six months ended June 30, 2002. The Bank has experienced a slight
change in the deposit account mix during the first six months of 2002.
Steady growth continues in noninterest bearing and interest-bearing
demand and savings deposits. The Bank has experienced a slight shift
from other time deposits to rate sensitive jumbo certificate of
deposits during the first six months of 2002. The increase in
noninterest-bearing and interest-bearing deposits is primarily due to
the influx of accounts at the south Martinsburg Branch. The increase in
jumbo certificates of deposit is primarily due to the continued growth
in the 36-month Ultimate Certificate of Deposit. The Bank's 36-month
Ultimate Certificate of Deposit allows the customer to withdraw all or
a portion of the CD on the first or second year anniversary date
without penalty. Deposits may also be made to this CD at any time.
18
CAPITAL RESOURCES
Shareholders' equity increased $557,000 or 3.7% during the
first six months of 2002 due to $640,000 in net income and a $82,000
increase in accumulated other comprehensive income partially offset by
the semi-annual cash dividend of $165,000. The Bank is subject to
regulations of the Office of the Comptroller of the Currency that
impose certain minimum regulatory capital requirements. Under each
measure, the Bank was substantially in excess of the minimum regulatory
requirements, and, by definition was "well capitalized" at June 30,
2002. The following table summarized, as of June 30, 2002, the Bank's
capital ratios.
Components Actual Required
of Capital Ratio Ratio
---------- ----- -----
Tier 1 Capital $15,211 8.4% 4.0%
Total Risk Based Capital $16,538 15.6% 8.0%
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to economic loss that arises from
changes in the values of certain financial instruments. The types of
market risk exposures generally faced by banking entities include
interest rate risk, equity market price risk, foreign currency risk and
commodity price risk. Due to the nature of its operations, only equity
market price risk and interest rate risk are significant to the bank.
The objective of the Bank's liquidity management program is
to ensure the continuous availability of funds to meet the withdrawal
demands of depositors and the credit needs of borrowers. The basis of
the Bank's liquidity comes from the stability of its core deposits.
Liquidity is also available through the available for sale securities
portfolio and short-term funds such as federal funds sold. At June 30,
2002, these totaled $51.6 million, or 28.1% of total assets. In
addition, liquidity may be generated through loan repayments and over
$7.0 million of available borrowing arrangements with correspondent
banks. At June 30, 2002, management considered the Bank's ability to
satisfy its anticipated liquidity needs over the next twelve months.
Management believes that the Bank is well positioned and has ample
liquidity to satisfy these needs. The Bank generated $1.2 million of
cash from operations in the first six months of 2002, which compares to
$866,000 during the same time period in 2001. Additional cash of $11.4
million was generated through net financing activities through June 30,
2002, which compares to $9.2 million for the first six months of 2001.
These proceeds along with proceeds from the sales and maturities of
investment securities were used to fund loans and purchase securities
during each year. Net cash used in investing activities totaled $7.7
million during the first six months of 2002 compared to $8.0 million
during the same time period in 2001. Details on both the sources and
uses of cash are presented in the Consolidated Statements of Cash Flows
contained in the financial statements.
The objective of the Bank's interest rate sensitivity
management program, also known as asset/liability management, is to
maximize net interest income while minimizing the risk of adverse
effects from changing interest rates. This is done by controlling the
mix and maturities of interest sensitive assets and liabilities. The
Bank has established an asset/liability committee for this purpose.
Daily management of the Bank's sensitivity of earnings to changes in
interest rates within the Bank's policy guidelines are monitored by
using a combination of off-balance sheet and on-balance sheet financial
instruments. The Bank's Chief Executive Officer, Vice President of
Mortgage Loans and the Chief Financial Officer monitor day to day
deposit flows, lending requirements and the competitive environment.
Rate changes occur within policy guidelines if necessary to minimize
adverse effects. Also, the Bank's policy is intended to ensure the Bank
measures a range of rate scenarios and patterns of rate movements that
are reasonably possible. The Bank measures the impact that 200 basis
point changes in rates would have on earnings over the next twelve
months.
In analyzing interest rate sensitivity for policy measurement,
the Bank compares its forecasted earnings in both a "high rate" and
"low rate" scenario to a base-line scenario. The Bank's base-line
scenario is its estimated most likely path for future short-term
interest rates over
19
the next 12 months. The "high rate" and "low rate" scenarios assumes a
100 and 200 basis point increases or decreases in the prime rate from
the beginning point of the base-line scenario over the most current
12-month period. The Bank's policy limit for the maximum negative
impact on earnings resulting from "high rate" or "low rate" scenarios
is 10 percent. The policy measurement period is 12 months in length,
beginning with the first month of the forecast.
The Bank's base-line scenario holds the prime rate constant at
4.75 percent through June 2003. Based on the July 2002 outlook, if
interest rates increased or decreased by 200 basis points, the model
indicates that net interest income during the policy measurement period
would be affected by less than 10 percent, in both an increasing or
decreasing interest rate scenario.
20
PART II: OTHER INFORMATION
Item 1: Legal Proceedings
None; however, CNB is involved in various legal proceedings
occurring in the ordinary course of business. There are no
material legal proceedings to which CNB or its subsidiary is a
part, or to which any of their property is subject.
Item 4: Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of CNB Financial Services,
Inc. was held April 3, 2002.
(b) Proxies for the annual meeting were solicited pursuant to
Regulation 14A under the Securities and Exchange Act of 1934.
There was no solicitation in opposition to management's
nominees as listed in the proxy statement, and all such
nominees were re-elected.
(c) (1) Election of Directors
Elected to serve as directors until the 2003 annual meeting of
stockholders:
Without
For Authority
J. Robert Ayers 332,660 450
John E. Barker 332,660 450
Margaret S. Bartles 332,660 450
Jay E. Dick 332,660 450
Herbert L. Eppinger 332,660 450
Robert L. Hawvermale 332,660 450
J. Philip Kesecker 332,660 450
Jerald McGraw 332,660 450
Martha H. Quarantillo 332,660 450
Thomas F. Rokisky 332,660 450
Charles S. Trump, IV 332,660 450
Arlie R. Yost 332,660 450
21
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CNB Financial
Services, Inc. (the "Company") on Form 10-Q for the period
ending June 30, 2002 as filed with the Federal Deposit
Insurance Corporation on the date hereof (the "Report"), the
undersigned, Chief Executive Officer of the Company,
certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant
to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Thomas F. Rokisky, Chief Executive Officer
----------------------------------------------
Thomas F. Rokisky
Chief Executive Officer
August 12, 2002
22
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K continued
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CNB Financial
Services, Inc. (the "Company") on Form 10-Q for the period
ending June 30, 2002 as filed with the Federal Deposit
Insurance Corporation on the date hereof (the "Report"), the
undersigned, Chief Financial Officer of the Company,
certifies, pursuant to 18 U.S.C. Sec. 1350, as adopted
pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Rebecca S. Stotler, Chief Financial Officer
-----------------------------------------------
Rebecca S. Stotler
Chief Financial Officer
August 12, 2002
23
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CNB Financial Services, Inc.
----------------------------
(Registrant)
Date August 12, 2002 /s/ Rebecca S. Stotler, Vice President/CFO
--------------- ------------------------------------------
Date August 12, 2002 /s/ Thomas F. Rokisky, President/CEO
--------------- ------------------------------------------
24