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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 1 0 - K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File Number 0-13396
CNB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1450605
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
County National Bank
1 South Second Street
P.O. Box 42
Clearfield, Pennsylvania 16830
(Address of principal executive office)
Registrant's telephone number, including area code, (814) 765-9621
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
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 preceeding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of 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. [_]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 8, 2000.
Common Stock, $1.00 Par Value - $80,614,798
The number of shares outstanding of the issuer's common stock as of March 8,
2000:
Common Stock, $1.00 Par Value - 3,664,309 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Shareholders' Report for the year ended December 31,
1999 are incorporated by reference into Part I and Part II pursuant to Section
13 of the Act.
Portions of the proxy statement for the annual shareholders' meeting on
April 18, 2000 are incorporated by reference into Part II and Part III. The
incorporation by reference herein of portions of the proxy statement shall not
be deemed to specifically incorporate by reference the information referred to
in Item 402(a)(8) of regulation S-K.
Exhibit index is located on sequentially numbered page 15.
INDEX
PART I.
ITEM 1. BUSINESS........................................... 3
ITEM 2. PROPERTIES......................................... 11
ITEM 3. LEGAL PROCEEDINGS.................................. 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.................... 12
ITEM 6. SELECTED FINANCIAL DATA............................ 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...... 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........ 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................ 12
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 13
ITEM 11. EXECUTIVE COMPENSATION............................ 13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT............................. 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.... 13
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K........................... 13
SIGNATURES........................................ 14
PART I.
ITEM 1. BUSINESS
CNB FINANCIAL CORPORATION
CNB Financial Corporation (the Corporation) is a Bank Holding Company
registered under the Bank Holding Company Act of 1956, as amended. It was
incorporated under the laws of the Commonwealth of Pennsylvania in 1983 for the
purpose of engaging in the business of a Bank Holding Company. On April 26,
1984, the Corporation acquired all of the outstanding capital stock of County
National Bank (the Bank), a national banking chartered institution. The
Corporation is subject to regulation, supervision and examination by the Board
of Governors of the Federal Reserve System. In general, the Corporation is
limited to owning or controlling banks and engaging in such other activity as
proper incident thereto. The Corporation is currently engaged in one nonbanking
activity through its wholly owned subsidiary CNB Investment Corporation. CNB
Investment Corporation was formed in November 1998 to hold and manage
investments that were previously owned by County National Bank and the
Corporation and to provide the Corporation with additional latitude to purchase
other investments.
The Corporation does not currently engage in any operating business
activities, other than the ownership and management of County National Bank and
CNB Investment Corporation.
COUNTY NATIONAL BANK
The Bank is a nationally chartered banking institution incorporated in
1934. The Bank's Main Office is located at 1 South Second Street, Clearfield,
(Clearfield County) Pennsylvania. The Bank's primary marketing area consists of
the Pennsylvania Counties of Clearfield, Elk (excluding the Townships of
Millstone, Highland and Spring Creek), McKean, Cambria and Cameron. It also
includes a portion of western Centre County including Philipsburg Borough, Rush
Township and the western portions of Snow Shoe and Burnside Townships and a
portion of Jefferson County, consisting of the boroughs of Brockway, Falls
Creek, Punxsutawney, Reynoldsville and Sykesville, and the townships of
Washington, Winslow and Henderson. The approximate population of the general
trade area is 150,000. The economy is diversified and includes manufacturing
industries, wholesale and retail trade, services industries, family farms and
the production of natural resources of coal, oil, gas and timber.
In addition to the Main Office, the Bank has 18 full-service branch offices
and 1 limited service branch facility located in various communities in its
market area.
The Bank is a full-service bank engaging in a full range of banking
activities and services for individual, business, governmental and institutional
customers. These activities and services principally include checking, savings,
time and deposit accounts; real estate, commercial, industrial, residential and
consumer loans; and a variety of other specialized financial services. Its
Trust division offers a full range of client services.
The Bank's customer base is such that loss of one customer relationship or
a related group of depositors would not have a materially adverse effect on the
business of the Bank.
The Bank's loan portfolio is diversified so that one industry, group of
related industries or changes in household economic conditions does not comprise
a material portion of the loan portfolio.
The Bank's business is not seasonal nor does it have any risks attendant to
foreign sources.
COMPETITION
The banking industry in the Bank's service area continues to be extremely
competitive, both among commercial banks and with financial service providers
such as consumer finance companies, thrifts, investment firms, mutual funds and
credit unions. The increased competition has resulted from changes in the legal
and regulatory guidelines as well as from economic conditions. Mortgage banking
firms, leasing companies, financial affiliates of industrial companies,
brokerage firms, retirement fund management firms, and even government agencies
provide additional competition for loans and other financial services. Some of
the financial service providers operating in the Bank's market area operate on a
large-scale regional basis and possess resources greater than those of the Bank
and the Corporation. The Bank is generally competitive with all competing
financial institutions in its service area with respect to interest rates paid
on time and savings deposits, service charges on deposit accounts and interest
rates charged on loans.
3
SUPERVISION AND REGULATION
The Bank is subject to supervision and examination by applicable federal
and state banking agencies, including the Office of the Comptroller of the
Currency. In addition, the Bank is insured by and subject to some or all of the
regulations of the Federal Deposit Insurance Corporation ("FDIC"). The Bank is
also subject to various requirements and restrictions under federal and state
law, including requirements to maintain reserves against deposits, restrictions
on the types, amounts and terms and conditions of loans that may be granted, and
limitation on the types of investments that may be made and the types of
services that may be offered. Various consumer laws and regulations also affect
the operation of the Bank. In addition to the impact of regulation, commercial
banks are affected significantly by the actions of the Federal Reserve Board,
including actions taken with respect to interest rates, as it attempts to
control the money supply and credit availability in order to influence the
economy.
EXECUTIVE OFFICERS
The table below lists the executive officers of the Corporation and County
National Bank and sets forth certain information with respect to such persons.
AGE AT PRINCIPAL OCCUPATION
NAME DECEMBER 31, 1999 FOR LAST FIVE YEARS
- ------------------------------------------- ---------------------- --------------------------------------
JAMES P. MOORE 64 PRESIDENT AND CHIEF EXECUTIVE OFFICER,
CNB FINANCIAL CORPORATION SINCE 9/20/83.
CHAIRMAN OF THE BOARD,
COUNTY NATIONAL BANK SINCE 3/19/91,
PREVIOUSLY,
PRESIDENT & CHIEF EXECUTIVE OFFICER,
COUNTY NATIONAL BANK SINCE 4/15/82.
WILLIAM F. FALGER 52 EXECUTIVE VICE PRESIDENT,
CNB FINANCIAL CORPORATION SINCE 3/28/95.
PREVIOUSLY VICE PRESIDENT,
SECRETARY AND TREASURER.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
COUNTY NATIONAL BANK SINCE 1/01/93
PREVIOUSLY, GROUP VICE PRESIDENT,
COUNTY NATIONAL BANK SINCE 4/89.
WILLIAM A. FRANSON 56 SECRETARY
CNB FINANCIAL CORPORATION SINCE 3/28/95.
PREVIOUSLY, ASSISTANT SECRETARY
SINCE 3/27/84.
EXECUTIVE VICE PRESIDENT AND CASHIER,
CHIEF OPERATING OFFICER
COUNTY NATIONAL BANK SINCE 1/01/93,
PREVIOUSLY SENIOR VICE PRESIDENT,
COUNTY NATIONAL BANK SINCE 4/15/82.
JOSEPH B. BOWER, JR. 36 TREASURER
CNB FINANCIAL CORPORATION, SINCE 11/18/97
SENIOR VICE PRESIDENT
CHIEF FINANCIAL OFFICER
COUNTY NATIONAL BANK, SINCE 11/10/97
PRIOR THERETO,
CONTROLLER, MIFFLINBURG BANK
4
MARK D. BREAKEY 41 SENIOR VICE PRESIDENT,
SENIOR LOAN OFFICER,
COUNTY NATIONAL BANK, SINCE 3/28/95.
PREVIOUSLY VICE PRESIDENT,
COMMERCIAL BANKING SINCE 4/93,
ASSISTANT VICE PRESIDENT COMMUNITY
LENDING, ST. MARYS, SINCE 12/23/91
PRIOR THERETO, LENDING OFFICER,
MELLON BANK
DONALD E. SHAWLEY 44 SENIOR VICE PRESIDENT AND TRUST OFFICER
COUNTY NATIONAL BANK, SINCE 9/29/98
TRUST OFFICER SINCE 11/1/85.
Officers are elected annually at the reorganization meeting of the Board of
Directors. There are not any arrangements or understandings between any and all
of the above officers and any other persons pursuant to which they were selected
as officers. In addition, there are not any family relationships between the
above officers.
EMPLOYEES
The Corporation has no employees who are not employees of County National
Bank. As of December 31, 1999, the Bank had a total of 248 employees of which
190 were full time and 58 were part time.
MONETARY POLICIES
The earnings and growth of the banking industry are affected by the credit
policies of monetary authorities, including, the Federal Reserve System. An
important function of the Federal Reserve System is to regulate the national
supply of bank credit in order to control recessionary and inflationary
pressures. Among the instruments of monetary policy used by the Federal Reserve
to implement these objectives are open market activities in U.S. Government
Securities, changes in the discount rate on member bank borrowings and changes
in reserve requirements against member bank deposits. These operations are used
in varying combinations to influence overall economic growth and indirectly,
bank loans, investments, and deposits. These variables may also affect interest
rates charged on loans or paid for deposits. The monetary policies of the
Federal Reserve authorities have had a significant effect on the operating
results of commercial banks in the past and are expected to continue to have
such an effect in the future.
In view of the changing conditions in the national economy and in the money
markets, as well as the effect of actions by monetary and fiscal authorities
including the Federal Reserve System, no prediction can be made as to possible
future changes in interest rates, deposit levels, loan demand or their effect on
the business and earnings of the Corporation and the Bank.
DISTRIBUTION OF ASSETS, LIABILITIES, & SHAREHOLDER'S EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following tables set forth statistical information relating to the
Registrant and its wholly-owned subsidiaries. The table should be read in
conjunction with the consolidated financial statements of the Registrant which
are incorporated by reference hereinafter.
5
CNB Financial Corporation
Average Balances and Net Interest Margin
(Dollars in thousands)
December 31, 1999 December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Interest Average Annual Interest
Balance Rate Inc./Exp. Balance Rate Inc./Exp.
- ------------------------------------------------------------------------------------------------------------------------------
Assets
Interest-bearing deposits with banks $ 1,133 5.30% $ 60 $ 208 5.77% $ 12
Federal funds sold and securities
purchased under agreements to resell 7,347 5.25% 386 6,809 5.42% 369
Investment Securities:
Taxable 82,345 5.67% 4,665 67,610 6.05% 4,089
Tax-Exempt (1) 37,830 6.96% 2,632 26,921 7.28% 1,961
Equity Investments (1) 5,671 5.27% 299 5,741 5.02% 288
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments 134,326 5.99% 8,042 107,289 6.26% 6,719
Loans
Commercial (1) 66,475 8.59% 5,712 57,134 8.41% 4,806
Mortgage (1) 196,295 8.47% 16,624 173,983 8.75% 15,229
Installment 42,324 9.18% 3,884 41,699 9.27% 3,866
Leasing 28,875 7.41% 2,140 19,793 7.74% 1,532
- ------------------------------------------------------------------------------------------------------------------------------
Total Loans (2) 333,969 8.49% 28,360 292,609 8.69% 25,433
Total earning assets 468,295 7.77% 36,402 399,898 8.04% 32,152
Non Interest Bearing Assets
Cash & Due From Banks 12,944 - 10,031 -
Premises & Equipment 11,279 - 10,179 -
Other Assets 13,972 - 8,370 -
Allowance for Possible Loan Losses (3,603) - (3,246) -
- ------------------------------------------------------------------------------------------------------------------------------
Total Non Interest Earning Assets 34,592 0.00% - 25,334 0.00% -
- ------------------------------------------------------------------------------------------------------------------------------
Total Assets $502,887 $36,402 $425,232 $32,152
========================================================================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - interest-bearing 107,341 2.49% 2,676 90,818 2.84% 2,582
Savings 67,717 3.32% 2,249 61,958 3.30% 2,046
Time 209,709 5.08% 10,654 166,641 5.45% 9,086
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 384,767 4.05% 15,579 319,417 4.29% 13,714
Short-term borrowings 4,568 4.99% 228 2,202 4.63% 102
Long-term borrowings 14,977 5.03% 753 15,074 5.52% 832
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 404,312 4.10% 16,560 336,693 4.35% 14,648
Demand - non-interest-bearing 43,420 - 35,838 -
Other liabilities 6,120 - 4,768 -
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 453,852 3.65% 16,560 377,299 3.88% 14,648
Shareholders' Equity 49,035 0.00% - 47,933 0.00% -
- ------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity 502,887 16,560 425,232 14,648
========================================================================
Interest Income/Earning Assets 7.77% 36,402 8.04% 32,152
Interest Expense/Interest Bearing Liabilities 4.10% 16,560 4.35% 14,648
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Spread 3.67% $19,842 3.69% $17,504
============================================================
Interest Income/Interest Earning Assets 7.77% 36,402 8.04% 32,152
Interest Expense/Interest Earning Assets 3.54% 16,560 3.66% 14,648
- ------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin 4.23% $19,842 4.38% $17,504
============================================================
December 31, 1997
- -------------------------------------------------------------------------------------
Average Annual Interest
Balance Rate Inc./Exp.
- -------------------------------------------------------------------------------------
Assets
Interest-bearing deposits with banks $ 43 2.33% $ 1
Federal funds sold and securities
purchased under agreements to resell 4,959 5.46% 271
Investment Securities:
Taxable 55,119 6.31% 3,477
Tax-Exempt (1) 24,742 6.63% 1,641
Equity Investments (1) 3,880 6.80% 264
- -------------------------------------------------------------------------------------
Total Investments 88,743 6.37% 5,654
Loans
Commercial (1) 55,504 8.04% 4,462
Mortgage (1) 158,145 8.66% 13,701
Installment 44,434 9.26% 4,114
Leasing 10,396 7.95% 826
- -------------------------------------------------------------------------------------
Total Loans (2) 268,479 8.61% 23,103
Total earning assets 357,222 8.05% 28,757
Non Interest Bearing Assets
Cash & Due From Banks 10,389 -
Premises & Equipment 9,613 -
Other Assets 7,652 -
Allowance for Possible Loan Losses (2,797) -
- -------------------------------------------------------------------------------------
Total Non Interest Earning Assets 24,857 0.00% -
- -------------------------------------------------------------------------------------
Total Assets $382,079 $28,757
===============================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - interest-bearing 85,530 2.91% 2,489
Savings 62,256 3.17% 1,971
Time 145,759 5.49% 7,999
- -------------------------------------------------------------------------------------
Total interest-bearing deposits 293,545 4.24% 12,459
Short-term borrowings 3,392 5.28% 179
Long-term borrowings 4,114 6.10% 251
- -------------------------------------------------------------------------------------
Total interest-bearing liabilities 301,051 4.28% 12,889
Demand - non-interest-bearing 32,993 -
Other liabilities 3,044 -
- -------------------------------------------------------------------------------------
Total Liabilities 337,088 3.82% 12,889
Shareholders' Equity 44,991 0.00% -
- -------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity 382,079 12,889
==============================
Interest Income/Earning Assets 8.05% 28,757
Interest Expense/Interest Bearing Liabilities 4.28% 12,889
- -------------------------------------------------------------------------------------
Net Interest Spread 3.77% $15,868
==================
Interest Income/Interest Earning Assets 8.05% 28,757
Interest Expense/Interest Earning Assets 3.61% 12,889
- -------------------------------------------------------------------------------------
Net Interest Margin 4.44% $15,868
====================
(1) The amounts are reflected on a fully tax equivalent basis using the federal
statutory rate of 34% in 1999, 1998 and 1997, adjusted for certain tax
preferences.
(2) Average outstanding includes the average balance outstanding of all non-
accrual loans. Loans consist of the average of total loans less average
unearned income. The amount of loan fees included in the interest income on
loans is not material.
6
Net Interest Income For Twelve Months Ended December 31, For Twelve Months Ended December 31,
Rate-Volume Variance 1999 over (under) 1998 1998 over (under) 1997
(Dollars in thousands) Due to Change in Due to Change in
- ----------------------------------------------------------------------------------------------------------------------------------
Volume Rate Net Volume Rate Net
- ----------------------------------------------------------------------------------------------------------------------------------
Assets
Securities
Interest-Bearing Deposits with Banks $ 53 $ (5) $ 48 $ 4 $ 7 $ 11
Federal Funds Sold 29 (12) 17 101 (3) 98
Investment Securities: -
Taxable 891 (315) 576 788 (176) 612
Tax-Exempt 795 (124) 671 145 175 320
Equity Investments (4) 15 11 127 (103) 24
------------------------- -----------------------
Total Securities 1,764 (441) 1,323 1,165 (100) 1,065
Loans
Commercial 786 120 906 131 213 344
Mortgage 1,953 (558) 1,395 1,372 156 1,528
Installment 58 (40) 18 (253) 5 (248)
Leasing 703 (95) 608 747 (41) 706
------------------------- -----------------------
Total Loans 3,500 (573) 2,927 1,997 333 2,330
------------------------- -----------------------
Total Earning Assets $5,264 $(1,014) $4,250 $3,162 $ 233 $3,395
========================= =======================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - Interest-Bearing 470 (376) 94 154 (61) 93
Savings 190 13 203 (9) 84 75
Time 2,348 (780) 1,568 1,146 (59) 1,087
------------------------- -----------------------
Total Interest-Bearing Deposits 3,008 (1,143) 1,865 1,291 (36) 1,255
Short-Term Borrowings 110 16 126 (63) (14) (77)
Long-Term Borrowings (5) (74) (79) 669 (88) 581
------------------------- -----------------------
Total Interest-Bearing Liabilities $3,113 $(1,201) $1,912 $1,897 $(138) $1,759
========================= =======================
------------------------- -----------------------
Change in Net Interest Income $2,151 $ 187 $2,338 $1,265 $ 371 $1,636
========================= =======================
1. The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
2. Included in interest income is $887,300, $394,493 and $341,642 of fees for
the years ending 1999, 1998 and 1997, respectively.
3. Income on restructured loans accounted for under SFAS Nos. 114 & 118 are
included in interest earning assets.
7
Investment Portfolio
(Dollars In Thousands) December 31, 1999 December 31, 1998
---------------------------------------------- -------------------------------------------
Unrealized Unrealized
Amortized ------------------- Market Amortized ---------------- Market
Cost Gains Losses Value Cost Gains Losses Value
---------------------------------------------- -------------------------------------------
Securities held to maturity:
U.S. Treasury $ - $ - $ - $ - $ - $ - $ - $ -
U.S. Government agencies
and corporations - - - - - - - -
Obligations of States and
Political Subdivisions 2,744 40 1 2,783 4,073 152 - 4,225
Other Debt Securities 999 - 5 994 2,003 33 - 2,036
Restricted Equity Securities 2,875 - - 2,875 1,791 - - 1,791
-------------------------------------------- -------------------------------------------
$ 6,618 $ 40 $6 $ 6,652 $ 7,867 $ 185 $ - $ 8,052
============================================ ===========================================
Securities Available for Sale:
U.S. Treasury $ 24,127 $ 1 $ 156 $ 23,972 $ 14,117 $ 160 $ - $ 14,277
U.S. Government agencies
and corporations 27,867 - 221 27,646 11,730 71 4 11,797
Obligations of States and
Political Subdivisions 35,822 151 1,111 34,862 33,721 1,013 - 34,734
Other Debt Securities 47,923 116 1,145 46,894 40,081 304 184 40,201
Marketable Equity Securities 3,221 622 272 3,571 3,845 1,069 115 4,799
-------------------------------------------- -------------------------------------------
$138,960 $890 $2,905 $136,945 $103,494 $2,617 $303 $105,808
============================================ ===========================================
Investment Portfolio
(Dollars In Thousands) December 31, 1997
--------------------------------------------
Unrealized
Amortized ----------------- Market
Cost Gains Losses Value
---------------------------------------------
Securities held to maturity:
U.S. Treasury $ - $ - $ - $ -
U.S. Government agencies
and corporations - - - -
Obligations of States and
Political Subdivisions 6,398 180 - 6,578
Other Debt Securities 6,006 18 5 6,019
Restricted Equity Securities 1,107 - - 1,107
------------------------------------------
$13,511 $ 198 $ 5 $13,704
==========================================
Securities Available for Sale:
U.S. Treasury $21,672 $ 120 $ 5 $21,787
U.S. Government agencies
and corporations 19,088 100 37 19,151
Obligations of States and
Political Subdivisions 18,888 720 - 19,608
Other Debt Securities 5,352 8 43 5,317
Marketable Equity Securities 3,237 961 1 4,197
------------------------------------------
$68,237 $1,909 $86 $70,060
==========================================
Maturity Distribution of Investment Securities
(Dollars In Thousands)
December 31, 1999
Collaterialized Mortgage
Within After One But After Five But After Obligation and Other
One Year Within Five Years Within Ten Years Ten Years Asset Backed Securities
------------------------------------ ------------------------------------ --------------------------
$ Amt. Yield $ Amt. Yield $ Amt. Yield $ Amt. Yield $ Amt. Yield
------------------------------------ ------------------------------------ --------------------------
Securities held
to maturity:
U.S. Government
agencies
and corporations $ - - - - $ - - $ - $ - $ - -
Obligations of
States and
Political
Subdivisions 1,450 9.38% 1,294 8.35% - - - - - -
Other Debt
Securities - 999 - - - - - -
-------------------------------- ------------------------------- ---------------
$ 1,450 9.38% $ 2,293 7.45% - - - - - -
Securities
Available for
Sale:
U.S. Treasury 1,003 5.51% 7,973 5.49% 15,151 5.54% - - - -
U.S. Government
agencies
and corporations 6,982 5.47% 20,885 5.92% - - - - - -
Obligations of
States and
Political
Subdivisions 1,125 7.06% 2,731 7.67% 15,588 7.21% 16,378 6.98% - -
Other Debt
Securities - - 15,446 6.59% - - 3,848 7.17% 28,629 6.47%
-------------------------------- --------------------------------- ---------------
9,110 5.67% 47,035 6.17% 30,739 6.39% 20,226 7.01% 28,629 6.47%
-------------------------------- --------------------------------- ---------------
TOTAL $10,560 6.18% $49,328 6.23% $30,739 6.39% $20,226 7.01% $28,629 6.47%
================================ ================================= ===============
The weighted average yields are based on book value and effective yields
weighted for the scheduled maturity with tax-exempt securities adjusted to a
taxable-equivalent basis using a tax rate of 34%.
8
LOAN PORTFOLIO
(Dollars in thousands)
A. TYPE OF LOAN
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Commercial, Financial and Agricultural $ 78,588 $ 66,257 $ 61,066 $ 48,242 $ 52,406
Residential Mortgage 159,884 134,998 128,161 114,994 92,023
Commercial Mortgage 49,549 46,701 37,702 31,451 30,658
Installment 43,772 38,393 44,661 46,548 48,005
Lease Receivables 35,918 29,362 18,231 6,069 -
-------- -------- -------- -------- --------
GROSS LOANS 367,711 315,711 289,821 247,304 223,092
Less: Unearned Income 4,947 4,570 3,708 3,308 3,667
-------- -------- -------- -------- --------
TOTAL LOANS NET OF UNEARNED 362,764 311,141 286,113 243,996 219,425
B. LOAN MATURITIES AND INTEREST SENSITIVITY
December 31, 1999
-----------------------------------------------------
One Year One Through Over Total Gross
or Less Five Years Five Years Loans
------- ----------- ---------- -----------
Commercial, Financial and Agricultural
--------------------------------------
Loans With Predetermined Rate $ 2,844 $22,114 $16,874 $41,832
Loans With Floating Rate 29,847 3,033 3,876 36,756
------- ------- ------- -------
$32,691 $25,147 $20,750 $78,588
======= ======= ======= =======
C. RISK ELEMENTS
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
Loans on non-accrual basis $ 862 $ 198 $ 323 $ 271 $ 114
Accruing loans which are contractually
past due 90 days or more as to interest
or principal payment 886 1,479 601 2,168 2,503
Troubled Debt Restructurings - 538 597 654 705
------ ------ ------ ------ ------
$1,748 $2,215 $1,521 $3,093 $3,322
====== ====== ====== ====== ======
1. Interest income recorded on the non-accrual loans for the year ended
December 31, 1999 was $6,580. Interest income which would have been
recorded on these loans had they been on accrual status was $35,797.
2. Loans are placed in non-accrual status when the interest or principal is 90
days past due, unless the loan is in collection, well secured and it is
believed that there will be no loss of interest or principal.
3. At December 31, 1999 there was $7,255,256 in loans which are considered
problem loans. In the opinion of management, these loans are adequately
secured and losses are believed to be minimal.
9
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars In Thousands)
Analysis of the Allowance for Loan Losses
Years Ended December 31,
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
Balance at beginning of Period $3,314 $3,062 $2,683 $2,328 $2,201
Charge-Offs:
Domestic:
Commercial, Financial and Agricultural 90 77 88 5 59
Commercial Mortgages 54 - - - 28
Residential Mortgages - 16 28 - 18
Consumer Loans and Credit Cards 379 459 529 358 298
Leasing 93 42 25 - -
------ ------ ------ ------ ------
616 594 670 363 403
====== ====== ====== ====== ======
Recoveries:
Domestic:
Commercial, Financial and Agricultural 80 21 2 5 -
Commercial Mortgages 4 - - 1 -
Residential Mortgages - 2 1 1 14
Consumer Loans and Credit Cards 103 115 115 86 106
Leasing 6 1 - - -
------ ------ ------ ------ ------
193 139 118 93 120
Net Charge-Offs: (423) (455) (552) (270) (283)
Provision for Loan Losses 643 707 931 625 410
Adjustments due to acquisition 356 - - - -
------ ------ ------ ------ ------
Balance at End-of-Period $3,890 $3,314 $3,062 $2,683 $2,328
====== ====== ====== ====== ======
Percentage of net charge-offs during the period
to average loans outstanding 0.13 0.16 0.2 0.11 0.14
The Provision for loan losses reflects the amount deemed appropriate by
management to establish an adequate reserve to meet the present and foreseeable
risk characteristics of the present loan portfolio. Management's judgement is
based on the evaluation of individual loans, the overall risk characteristics of
various portfolio segments, past experience with losses, the impact of economic
condition on borrowers, and other relevant factors.
ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
(Dollars In Thousands)
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------
% of Loans in % of Loans in % of Loans in % of Loans in % of Loans in
each Category each Category each Category each Category each Category
$ Amt. to Total $ Amt. to Total $ Amt. to Total $ Amt. to Total $ Amt. to Total
---------------------------------------------------------------------------------------------------
Domestic:
Real Estate Mortgages $ 720 56.96% $ 521 57.55% $ 678 57.23% $ 592 59.22% $ 550 54.99%
Installment Loans to Individuals 592 11.90% 453 12.16% 429 15.41% 643 18.82% 442 21.52%
Commercial, Financial
and Agricultural 626 21.37% 435 20.99% 361 21.07% 583 19.50% 446 23.49%
Leasing 177 9.77% 140 9.30% 80 6.29% - 2.46% - 0.00%
Unallocated 1,775 0.00% 1,765 0.00% 1,514 0.00% 865 0.00% 890 0.00%
---------------------------------------------------------------------------------------------------
TOTALS $3,890 100.00% $3,314 100.00% $3,062 100.00% $2,683 100.00% $2,328 100.00%
===================================================================================================
1. In determining the allocation of the allowance for possible credit losses,
County National Bank considers economic trends, historical patterns and
specific credit reviews.
2. With regard to the credit reviews, a "watchlist" is evaluated on a monthly
basis to determine potential commercial losses. Consumer loans and mortgage
loans are allocated using historical loss experience. The total of these
reserves is deemed "allocated", while the remaining balance is
"unallocated".
10
DEPOSITS
(Dollars In Thousands)
December 31, 1999 1998 1997
Amount Amount Amount
-------- -------- --------
Demand - Non Interest Bearing $ 54,891 $ 38,970 $ 35,062
Demand - Interest Bearing 121,615 127,809 84,344
Savings Deposits 73,005 62,102 59,892
Time Deposits 251,240 169,201 166,462
-------- -------- --------
TOTAL DEPOSITS $500,751 $398,082 $345,760
======== ======== ========
The maturity of certificates of deposits and other time deposits in
denomination of $100,000 or more as of December 31, 1999.
(Dollars In Thousands)
Maturing in:
Three months or less $14,380
Greater than three months and through six months 7,382
Greater than six months and through twelve months 8,660
Greater than twelve months 7,607
-------
$38,029
=======
RETURN ON EQUITY AND ASSETS
Information required by this section is presented on pages 26 and 27 of the
Annual Report to Shareholders for the year ended December 31, 1999 and is
incorporated herein by reference.
ITEM 2. PROPERTIES
The headquarters of the Corporation and the Bank is located at 1 South
Second Street, Clearfield, Pennsylvania. The Bank operates 19 full-service and 1
limited service offices. Of these 20 offices, 16 are owned and 4 are leased
from independent owners. There are no incumberances on the offices owned and
the rental expense on the leased property is immaterial in relation to operating
expenses.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Corporation or
the Bank is a party, or of which any of their property is the subject, except
ordinary routing proceedings which are incidental to the ordinary conduct of
business. In the opinion of management and counsel, pending legal proceedings
will not have a material adverse effect on the consolidated financial position
of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through the
solicitation of proxies, or otherwise, for the three months ended December 31,
1999.
11
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS
MATTERS
Information relating to the Corporation's common stock is on page 11 of the
information section and page 20 of the Annual Shareholders' Report for the year
ended December 31, 1999 and is herein incorporated by reference. There were
1,568 registered shareholders of record as of March 8, 2000.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this section is presented on pages 18 and 19 of the
Annual Shareholders' Report for the year ended December 31, 1999 and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this section is presented on pages 21-29 of the
Annual Shareholders' Report for the year ended December 31, 1999 and is
incorporated herein by reference.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this section is presented on pages 27 and 28 of
the Annual Shareholders' Report for the year ended December 31, 1999 and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements, which appear in the Annual
Shareholders' Report for the year ended December 31, 1999, are incorporated
herein by reference to such annual report:
Pages in
Annual Report
-------------
Report of Independent Auditors 1
Consolidated Statements of Condition 2
Consolidated Statements of Income 3
Consolidated Statements of Cash Flows 4
Consolidated Statements of Changes in Shareholders' Equity.. 5
Notes to Consolidated Financial Statements 6-17
Quarterly financial data relating to the results of operations for the year
ended December 31, 1999 and 1998, appears in the Annual Shareholders' Report for
the year ended December 31, 1999 under the caption "Quarterly Summary of
Earnings" at Page 20 and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
12
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to Executive Officers is included in Part I. and
information describing the Corporation's directors is included by reference on
pages 3 and 4 of the Proxy Statement for the Annual Meeting to be held on April
18, 2000.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this section is presented on pages 5-7 of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 18, 2000 and
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this section is presented on pages 3 and 4 of the
Proxy Statement for the Annual Meeting of Shareholders to be held April 18, 2000
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this section is presented on page 10 of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 18, 2000 and
is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A.) 1. FINANCIAL STATEMENTS FILED
The Financial Statements listed below are incorporated herein by reference
from the Annual Shareholders' Report for the year ended December 31, 1999.
Pages in
Annual Report
-------------
CNB Financial Corporation and Subsidiary:
Report of Independent Auditors 1
Consolidated Statements of Condition 2
Consolidated Statements of Income 3
Consolidated Statements of Cash Flows 4
Consolidated Statements of Changes in Shareholders' Equity.. 5
Notes to Consolidated Financial Statements 6-17
Quarterly Summary of Earnings and Per Share Data 20
2. FINANCIAL STATEMENT SCHEDULES:
All schedules are omitted since they are not applicable.
(B) REPORTS ON FORM 8-K
Forms 8-K dated March 5, 1999 and May 10, 1999 were filed announcing the
merger of The First National Bank of Spangler. The Bank acquired is in Northern
Cambria, PA and consists of approximately $29 million in deposits and $23
million in loans. The Bank was merged into County National Bank.
Form 8-K dated May 10, 1999 was filed announcing the acquisition of four
branches from PNC Bank. The branches acquired are in Bradford, Johnsonburg,
Kane and Ridgway and consist of approximately $116.2 million in deposits and
$21.7 million in loans. The branches were consolidated into County National
Bank.
13
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CNB FINANCIAL CORPORATION
(Registrant)
Date: March 23, 2000 By: /s/ James P. Moore
-------------- ----------------------------------
JAMES P. MOORE
President & Chief Executive Officer
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 the capacities indicated on March 23, 2000.
/s/ James P. Moore
- ----------------------- President and Chief Executive
JAMES P. MOORE Officer, Director
/s/ William F. Falger Executive Vice President
- -----------------------
WILLIAM F. FALGER
/s/ William A. Franson Secretary
- -----------------------
WILLIAM A. FRANSON
/s/ Robert E. Brown Director /s/ Jeffrey S. Powell
- ----------------------- ----------------------------
ROBERT E. BROWN JEFFREY S. POWELL
/s/ Richard D. Gathagan Director /s/ Edward B. Reighard
- ----------------------- ----------------------------
RICHARD D. GATHAGAN EDWARD B. REIGHARD
/s/ James J. Leitzinger Director /s/ Peter F. Smith
- ----------------------- ----------------------------
JAMES J. LEITZINGER PETER F. SMITH
/s/ Dennis L. Merrey Director /s/ James B. Ryan
- ----------------------- ----------------------------
DENNIS L. MERREY JAMES B. RYAN
/s/ William R. Owens Director /s/ Robert G. Spencer
- ----------------------- ----------------------------
WILLIAM R. OWENS ROBERT G. SPENCER
/s/ Robert C. Penoyer Director /s/ Joseph L. Waroquier, Sr.
- ----------------------- ----------------------------
ROBERT C. PENOYER JOSEPH L. WAROQUIER, SR.
/s/ Carl J. Peterson Director
- -----------------------
CARL J. PETERSON
14
EXHIBITS:
The exhibits listed below are filed herewith or are incorporated herein by
reference to other filings:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10 Material Contracts
13 Annual Report to Shareholders for 1999
21 Subsidiaries of the Registrant
23 1998 Audit Opinion Consent
27 Financial Data Schedule
15