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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, 1997 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
Market and Second Streets
P.O. Box 42
Clearfield, Pennsylvania 16830
(Address of principal executive offices)
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, $4.00 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 preceding 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 February 27, 1998.
Common Stock, $4.00 Par Value - $76,235,405
The number of shares outstanding of the issuer's common stock as of February 27,
1998:
Common Stock, $4.00 Par Value - 1,722,834 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Shareholders' Report for the year ended December 31,
1997 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 21, 1998 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 13.
INDEX
PART I.
ITEM 1. BUSINESS........................................... 3
ITEM 2. PROPERTIES......................................... 10
ITEM 3. LEGAL PROCEEDINGS.................................. 10
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.................... 11
ITEM 6. SELECTED FINANCIAL DATA............................ 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...... 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........ 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................ 11
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.. 11
ITEM 11. EXECUTIVE COMPENSATION.............................. 11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT............................... 11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...... 12
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K............................. 12-13
SIGNATURES.......................................... 16
2
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
the Federal Reserve Board may determine to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
The Corporation does not currently engage in any operating business
activities, other than the ownership and management of County National Bank.
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 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,
Reynoldsville and Sykesville, and the townships of Washington, Winslow and
Henderson. The approximate population of the general trade area is 100,000.
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 13 full-service branch offices
and 2 limited service branch facilities located in various communities in its
market area. In February 1997, the Bank opened a fourth office in the
Clearfield area. This is a full service facility located in the town's
industrial park section.
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 nonbank financial services
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 services 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
3
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.
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, 1997 FOR LAST FIVE YEARS
- ---- ----------------- -------------------
JAMES P. MOORE 62 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 50 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 54 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.
CARL J. PETERSON 60 ASSISTANT SECRETARY,
CNB FINANCIAL CORPORATION, SINCE 3/27/84.
SENIOR VICE PRESIDENT AND TRUST OFFICER,
COUNTY NATIONAL BANK, SINCE 4/15/82.
4
JOSEPH B. BOWER, JR. 34 TREASURER, CNB FINANCIAL CORPORATION
SINCE 11/18/97.
SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER SINCE 11/10/97.
PRIOR THERETO, CONTROLLER, MIFFLINBURG BANK
MARK D. BREAKEY 39 SENIOR VICE PRESIDENT,
SENIOR LOAN OFFICER, SINCE 3/28/95.
VICE PRESIDENT, COMMERCIAL BANKING
SINCE 4/93, ASSISTANT VICE PRESIDENT
COMMUNITY LENDING, ST. MARYS, SINCE 12/23/91
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 the County
National Bank. As of December 31, 1997, the Bank had a total of 209 employees
of which 164 were full time and 45 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 subsidiary. 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, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Average Annual Interest Average Annual Interest
Balance Rate Inc./Exp. Balance Rate Inc./Exp.
- ----------------------------------------------------------------------------------------------------------------------------------
Assets
Interest-bearing deposits with banks $ 43 0.00% $ 1 $ 14 0.00% $ 0
Federal funds sold and securities
purchased under agreements to resell 3,814 5.48% 209 1,597 5.45% 87
Investment Securities:
Taxable 52,469 6.07% 3,182 55,861 6.17% 3,445
Tax-Exempt (1) 25,125 7.84% 1,971 24,740 7.92% 1,962
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investments 81,451 6.58% 5,363 82,212 6.68% 5,494
Loans
Commercial 52,735 8.22% 4,334 47,679 8.14% 3,882
Mortgage 142,978 8.75% 12,505 116,233 8.96% 10,415
Installment 41,082 9.36% 3,847 40,860 9.40% 3,841
Leasing 10,396 7.95% 826 1,149 8.10% 93
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans (2) 247,191 8.70% 21,512 205,921 8.85% 18,231
Total earning assets 328,642 8.18% 26,875 288,133 8.23% 23,725
Non Interest Bearing Assets
Cash & Due From Banks 9,745 0 8,579 0
Premises & Equipment 9,151 0 8,297 0
Other Assets 6,102 0 2,965 0
Allowance for Possible Loan Losses (2,579) 0 (2,301) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total Non-interest earning assets 22,419 -- 0 17,540 -- 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $351,061 $26,875 $305,673 $23,725
===================================================================================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - interest-bearing $ 83,244 2.94% $ 2,450 $ 76,496 3.13% $ 2,397
Savings 35,052 1.68% 588 36,266 1.66% 601
Time 151,242 5.52% 8,354 117,339 5.47% 6,423
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 269,538 4.23% 11,392 230,101 4.09% 9,421
Short-term borrowings 3,392 5.28% 179 7,186 5.23% 376
Long-term borrowings 4,114 6.10% 251 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 277,044 4.27% 11,822 237,287 4.13% 9,797
Demand - non-interest-bearing 30,513 -- 0 27,852 -- 0
Other liabilities 2,789 -- 0 2,054 -- 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 310,346 3.81% 11,822 267,193 3.67% 9,797
Shareholders' equity 40,715 -- 0 38,480 -- 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $351,061 $11,822 $305,673 $ 9,797
===================================================================================
Interest income/earning assets 8.18% $26,875 8.23% $23,725
Interest expense/interest bearing liabilities 4.27% 11,822 4.13% 9,797
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Spread 3.91% $14,383 4.10% $13,928
============================ =====================
Interest Income/Interest Earning Assets 8.18% $26,875 8.23% $23,725
Interest expense/Interest Earning Assets 3.60% 11,822 3.40% 9,797
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin 4.58% $14,383 4.83% $13,928
======================= ====================
December 31, 1995
- -----------------------------------------------------------------------------------
Average Annual Interest
Balance Rate Inc./Exp.
- -----------------------------------------------------------------------------------
Assets
Interest-bearing deposits with banks 18 2.42% $ 0
Federal funds sold and securities
purchased under agreements to resell 1,450 5.59% 81
Investment Securities:
Taxable 54,681 5.97% 3,264
Tax-Exempt (1) 21,495 8.62% 1,853
- -----------------------------------------------------------------------------------
Total Investments 77,644 6.59% 5,198
Loans
Commercial 44,621 8.56% 3,818
Mortgage 89,215 9.03% 8,057
Installment 54,293 9.16% 4,974
Leasing
----------------------------------------------------------------------------------
Total loans (2) 188,129 8.96% 16,849
Total earning assets 265,773 8.30% 22,047
Non Interest Bearing Assets
Cash & Due From Banks 7,480 0
Premises & Equipment 6,482 0
Other Assets 2,902 0
Allowance for Possible Loan Losses (2,173) 0
- -----------------------------------------------------------------------------------
Total Non-interest earning assets 14,691 -- 0
- -----------------------------------------------------------------------------------
Total Assets 280,464 $22,047
====================================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - interest-bearing $56,284 1.98% $ 1,115
Savings 38,716 2.72% 1,052
Time 116,239 5.83% 6,778
- -----------------------------------------------------------------------------------
Total interest-bearing deposits 211,239 4.23% 8,945
Short-term borrowings 5,229 5.32% 278
Long-term borrowings 0 0
- -----------------------------------------------------------------------------------
Total interest-bearing liabilities 216,468 4.26% 9,223
Demand - non-interest-bearing 25,788 -- 0
Other liabilities 1,766 -- 0
- -----------------------------------------------------------------------------------
Total Liabilities 244,022 3.78% 9,223
Shareholders' equity 36,442 -- 0
- -----------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity 280,464 $ 9,223
====================================
Interest income/earning assets 8.30% $22,047
Interest expense/interest bearing liabilities 4.26% 9,223
- -----------------------------------------------------------------------------------
Net Interest Spread 4.04% $12,824
=======================
Interest Income/Interest Earning Assets 8.30% $22,047
Interest expense/Interest Earning Assets 3.47% 9,223
- -----------------------------------------------------------------------------------
Net Interest Margin 4.83% $12,824
=======================
(1) The amounts are reflected on a fully tax equivalent basis using the federal
statutory rate of 34% 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.
6
Net Interest Income For Twelve Months Ended December 31, For Twelve Months Ended December 31,
Rate-Volume Variance 1997 over (under) 1996 1996 over (under) 1995
(Dollars in thousands) Due to Change in Due to Change in
- ------------------------------------------------------------------------------------------ -----------------------------------
Volume Rate Net Volume Rate Net
- ------------------------------------------------------------------------------------------ -----------------------------------
Assets
Securities
Interest-Bearing Deposits with Banks $ 1 $ 0 $ 1 $ 0 $ 0 $ 0
Federal Funds Sold 121 1 122 8 (2) 6
Investment Securities:
Taxable (209) (54) (263) 71 110 181
Tax-Exempt 31 (22) 9 266 (157) 109
------------------------------------------- -----------------------------------
Total Securities (56) (75) (131) 345 (49) 296
Loans
Commercial 416 36 452 198 (134) 64
Mortgage 2,339 (249) 2,090 1,471 370 1,841
Installment 21 (15) 6 (370) (246) (616)
Leasing 736 (3) 733 93 0 93
------------------------------------------- -----------------------------------
Total loans 3,512 (231) 3,281 1,392 (10) 1,382
------------------------------------------- -----------------------------------
Total Earning Assets $3,456 ($306) $3,150 $1,737 ($59) $1,678
=========================================== ===================================
Liabilities and Shareholders' Equity
Interest-Bearing Deposits
Demand - Interest-Bearing $ 199 ($146) $ 53 $ 489 $ 793 $1,282
Savings (20) 7 (13) (63) (388) (451)
Time 1,873 58 1,931 64 (419) (355)
------------------------------------------- -----------------------------------
Total Interest-Bearing Deposits 2,052 (81) 1,971 490 (14) 476
Short-Term Borrowings (200) 3 (197) 85 13 98
Long-Term Borrowings 251 0 251 0 0 0
------------------------------------------- -----------------------------------
Total Interest-Bearing Liabilities $2,103 ($78) $2,025 $ 575 ($1) $ 574
=========================================== ===================================
=========================================== ===================================
Change in Net Interest Income $1,353 ($228) $1,125 $1,162 ($58) $1,104
=========================================== ===================================
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 $360,619, $228,576 and $192,412 of fees for
the years ending 1997, 1996 and 1995, respectively.
3. Income on restructured loans accounted for under SFAS Nos. 114 & 118 are
included in interest earning assets; there is no income being recognized on a
cash basis.
7
Investment Portfolio
(in thousands) December 31, 1997 December 31, 1996
------------------------------------------- ----------------------------------------
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..................... -- -- -- -- 997 -- 1 996
Obligations of States and
Political Subdivisions............... 6,398 180 -- 6,578 7,319 289 -- 7,608
Other Debt Securities................. 6,006 18 5 6,019 9,071 66 24 9,113
Marketable Equities................... 1,107 -- -- 1,107 1,308 -- -- 1,308
------------------------------------------- ------------------------------------------
$13,511 $198 $5 $13,704 $18,695 $355 $25 $19,025
=========================================== ==========================================
Securities Available for Sale:
U.S. Treasury........................ $15,482 $40 $4 $15,518 $13,496 $36 $24 $13,508
U.S. Government agencies
and corporations.................... 19,088 100 37 19,151 26,192 118 203 26,107
Obligations of States and
Political Subdivisions.............. 18,788 718 -- 19,506 17,562 486 -- 18,048
Other Debt Securities................ 5,347 8 43 5,312 1,047 4 6 1,045
Marketable Equities.................. 3,047 961 1 4,034 2,080 538 17 2,601
------------------------------------------- ------------------------------------------
$61,779 $1,827 $85 $63,521 $60,377 $1,182 $250 $61,309
=========================================== ==========================================
(in thousands) December 31, 1995
-------------------------------------------
Unrealized
Amortized ------------------ Market
Cost Gains Losses Value
-------------------------------------------
Securities held to maturity:
U.S. Treasury......................... $ -- $ -- $ -- $ --
U.S. Government agencies
and corporations..................... 1,989 18 -- 2,007
Obligations of States and
Political Subdivisions............... 11,251 439 5 11,685
Other Debt Securities................. 11,681 183 16 11,848
Marketable Equities................... -- -- -- --
-------------------------------------------
$24,921 $640 $21 $25,540
===========================================
Securities Available for Sale:
U.S. Treasury........................ $11,500 $99 $5 $11,594
U.S. Government agencies
and corporations.................... 24,527 271 106 24,692
Obligations of States and
Political Subdivisions.............. 11,155 289 10 11,434
Other Debt Securities................ 1,528 17 5 1,540
Marketable Equities.................. 1,405 342 -- 1,747
-------------------------------------------
$50,115 $1,018 $126 $51,007
===========================================
Maturity Distribution of Investment
Securities (in thousands)
December 31, 1997
Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
---------------------------------------- -------------------------------------------
$Amt Yield $Amt Yield $Amt Yield $Amt Yield
----- ------- ----- ------- ------- -------- ------ -------
Securities held to maturity:
U.S. Government agencies
and corporations.................. $ -- -- $ -- -- $ -- -- $ -- --
Obligations of States and
Political Subdivisions............ 2,253 7.82% 3,365 8.60% 781 7.42% -- --
Other Debt Securities.............. 3,998 6.78% 2,007 6.40% -- -- -- --
------------------------------------------- -------------------------------------------
6,251 7.15% 5,372 7.78% 781 7.42% -- --
Securities Available for Sale:
U.S. Treasury...................... 7,991 5.84% 7,491 6.00% -- -- -- --
U.S. Government agencies
and corporations.................. 3,999 5.90% 15,089 6.62% -- -- -- --
Obligations of States and
Political Subdivisions............ -- -- 7,151 7.38% 11,137 7.36% 500 6.89%
Other Debt Securities.............. -- -- -- -- -- -- -- --
------------------------------------------- -------------------------------------------
11,990 5.86% 29,731 6.64% 11,137 7.36% 500 6.89%
=========================================== ============================================
TOTAL $18,241 6.30% $35,103 6.81% $11,918 7.36% $500 6.89%
=========================================== ============================================
Collateralized Mortgage
Obligations and Other
Asset Backed Securities
-----------------------
$Amt Yield
----- -------
Securities held to maturity:
U.S. Government agencies
and corporations.................. $ -- --
Obligations of States and
Political Subdivisions............ -- --
Other Debt Securities.............. -- --
---------- ----------
-- --
Securities Available for Sale:
U.S. Treasury...................... -- --
U.S. Government agencies
and corporations.................. -- --
Obligations of States and
Political Subdivisions............ -- --
Other Debt Securities.............. 5,347 6.69%
---------- ----------
5,347 6.69%
========== ==========
TOTAL $5,347 6.69%
========== ==========
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%.
LOAN PORTFOLIO
A. TYPE OF LOAN
(in thousands) 1997 1996 1995 1994 1993
--------- -------- -------- -------- --------
Commercial, Financial and Agricultural $58,282 $45,037 $49,643 $40,643 $40,953
Residential Mortgage 113,369 100,402 78,111 68,907 58,927
Commercial Mortgage 37,702 31,451 30,658 31,039 30,087
Installment 41,001 43,448 45,294 44,196 40,488
Lease Receivables 18,231 6,069 0 0 0
---------- --------- --------- --------- ---------
GROSS LOANS $268,585 $226,407 $203,706 $184,785 $170,455
LESS: Unearned Income 3,707 3,304 3,668 2,996 2,499
---------- --------- --------- --------- ---------
TOTAL LOANS NET OF UNEARNED $264,878 $223,103 $200,038 $181,789 $167,956
B. LOAN MATURITIES AND INTEREST SENSITIVITY
One Year One Through Over Total Gross
Commercial, Financial and Agricultural or Less Five Years Five Years Loans
- -------------------------------------- -------- ----------- ---------- -----------
Loans with Predetermined Rate $3,623 $13,086 $10,299 $27,008
Loans With Floating Rate 30,821 407 46 31,274
------------------------------------------------------------------
$34,444 $13,493 $10,345 $58,282
==================================================================
C. RISK ELEMENTS
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ------------
Loans on non-accrual basis $305 $230 $114 $957 $1,134
Accruing loans which are contractually past due 90
days or more as to interest or principal payments 600 2,166 2,503 307 518
Troubled Debt Restructurings 597 654 705 -- --
--------------------------------------------------------------------
$1,502 $3,050 $3,322 $1,264 $1,652
====================================================================
1. Interest income recorded on the non-accrual loans for the year ended December
31, 1997 was $11,175. Interest income which would have been recorded on these
loans had they been on accrual status was $35,424.
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, 1997 there was $2,781,752 in loans which are considered
problem loans. In the opinion of management, these loans are adequately
secured and losses are believed to be minimal.
8
Summary of Loan Loss Experience
Analysis of the Allowance for Loan Losses
($'s in Thousands) Years Ended December 31,
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Balance at beginning of Period $2,473 $2,145 $2,033 $1,750 $1,502
Charge-offs:
Domestic:
Commercial, Financial and Agricultural 88 5 59 0 198
Commerical Mortgages 0 0 28 95 0
Residential Mortgages 14 0 0 33 0
Consumer Loans and Credit Cards 513 355 282 254 135
Leasing 25 0 0 0 0
--------- --------- --------- --------- ---------
640 360 369 382 333
Recoveries:
Domestic:
Commercial, Financial and Agricultural 2 5 0 19 26
Commercial Mortgages 0 1 0 0 0
Residential Mortgages 0 0 0 0 0
Consumer Loans and Credit Cards 114 82 101 121 30
Leasing 0 0 0 0 0
--------- --------- --------- --------- ---------
116 88 101 140 56
Net Charge-offs (524) (272) (268) (242) (277)
Provision for Loan Losses 900 600 380 525 525
========= ========= ========= ========= =========
Balance at End-of-Period $2,849 $2,473 $2,145 $2,033 $1,750
========= ========= ========= ========= =========
Percentages of net charge-offs during
the period to average loans outstanding 0.21 0.13 0.14 0.18 0.25
The provision for loan losses reflects the amount deemed appropriate by
management to establish an adequate reserve to meet the present and foreseeable
risk characteristics of the present loan portfolio. Management's judgement is
based on the evaluation of individual loans, the overall risk characteristics of
various portfolio segments, past experience with losses, the impact of economic
conditions on borrowers, and other relevant factors.
ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
($'s in thousands)
1997 1996 1995 1994
----------------------------------------------------------------------------------------------
Domestic % of Loans in % of Loans in % of Loans in $ of Loans in
each Category each Category each Category each Category
$ Amt. to Total $ Amt. to Total $ Amt. to Total $ Amt. to Total
----------------------------------------------------------------------------------------------
Real Estate Mortgages $492 56.25% $425 58.24% $387 53.40% $60 54.09%
Installment Loans to Individuals 402 15.27% 600 21.87% 422 22.24 210 23.92%
Commercial, Financial and 361 21.70% 583 19.89% 446 24.36% 895 21.99%
Agricultural
Leasing 80 6.78% 0 0.00% 0 0.00% 0 0.00%
Unallocated 1,514 N/A 865 N/A 890 N/A 868 N/A
==============================================================================================
TOTALS $2,849 100.00% $2,473 100.00% $2,145 100.00% $2,033 100.00%
==============================================================================================
($'s in thousands)
1993
----------------------
Domestic % of Loans in
each Category
$ Amt. to Total
----------------------
Real Estate Mortgages $47 52.22%
Installment Loans to Individuals 167 23.75%
Commercial, Financial and 834 24.03%
Agricultural
Leasing 0 0.00%
Unallocated 702 N/A
=======================
TOTALS $1,750 100.00%
=======================
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."
9
DEPOSITS
(in thousands)
December 31, 1997 1996 1995
Amount Amount Amount
---------- ---------- ---------
Demand - Non Interest Bearing $32,893 $30,812 $25,705
Demand - Interest Bearing 82,339 82,184 78,821
Savings Deposits 32,676 36,183 35,589
Time Deposits 171,565 120,877 115,672
========== ========== =========
TOTAL DEPOSITS $319,473 $270,056 $255,787
========== ========== =========
The maturity of certificates of deposits and other time
deposits in denomination of $100,000 or more
as of December 31, 1997 (in thousands):
Maturing in:
Three months or less............................................. $4,008
Greater than three months and through six months................. 2,851
Greater than six months and through twelve months................ 3,514
Greater than twelve months....................................... 10,466
=========
TOTAL $20,839
=========
RETURN ON EQUITY AND ASSETS
Information required by this section is presented on pages 20 and 21 of the
Annual Report to Shareholders for the year ended December 31, 1997, 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 13 full-service and 2
limited service offices. Of these 15 offices, 11 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 routine 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,
1997.
10
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 pages 19 and
32 of the Annual Shareholders' Report for the year ended December 31, 1997 and
is herein incorporated by reference. There were 1,433 registered shareholders
of record as of February 27, 1998.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this section is presented on pages 20 and 21 of the
Annual Shareholders' Report for the year ended December 31, 1997 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 22- 28 of the
Annual Shareholders' Report for the year ended December 31, 1997 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, 1997 are incorporated
herein by reference to such annual report:
Pages in
Annual Report
-------------
Report of Independent Auditors 5
Consolidated Statements of Condition 6
Consolidated Statements of Income 7
Consolidated Statements of Cash Flows 8
Consolidated Statements of Changes in Shareholders' Equity 9
Notes to Consolidated Financial Statements 10 - 18
Quarterly financial data relating to the results of operations for the year
ended December 31, 1997 and 1996, appears in the Annual Shareholders' Report for
the year ended December 31, 1997 under the caption "Quarterly Summary of
Earnings" at Page 19 and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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
21, 1998.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this section is presented on pages 4 - 7 of the
Proxy Statement for the Annual Meeting of Shareholders to be held April 21, 1998
and is incorporated herein by reference.
11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this section is presented on pages 3 - 4 of the
Proxy Statement for the Annual Meeting of Shareholders to be held April 21, 1998
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this section is presented on page 8 of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 21, 1998 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 Shareholder's Report for the year ended December 31, 1997.
Pages in
Annual Report
-------------
CNB Financial Corporation and Subsidiary:
Report of Independent Auditors 5
Consolidated Statements of Condition 6
Consolidated Statements of Income 7
Consolidated Statements of Cash Flows 8
Consolidated Statements of Changes in Shareholders' Equity 9
Notes to Consolidated Financial Statements 10 to 18
Quarterly Summary of Earnings and Per Share Data 19
2. FINANCIAL STATEMENT SCHEDULES:
All schedules are omitted since they are not applicable.
(B.) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1997.
12
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 10, 1998 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 10, 1998.
/s/ James P. Moore
- ------------------------ President and Chief Executive Officer,
JAMES P. MOORE Director
/s/ William F. Falger
- ------------------------ Executive Vice President, Principal Financial Officer,
WILLIAM F. FALGER Principal Accounting Officer
/s/ William A. Franson Secretary
- -------------------------
WILLIAM A. FRANSON
/s/ Carl J. Peterson
- ------------------------- Assistant Secretary, Director
CARL J. PETERSON
/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/ L.E. Soult, Jr.
- ------------------------- ------------------------
DENNIS L. MERREY L.E. SOULT, JR.
/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.
EXHIBITS:
The exhibits listed below are filed herewith or are incorporated herein by
reference to other filings:
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
10 Material Contracts 14
13 Annual Report to Shareholders for 1997
21 Subsidiaries of the Registrant 15
27 Financial Data Schedule