Attached files
file | filename |
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EX-21 - EX-21 - CNB CORP /MI/ | k49030exv21.htm |
EX-13 - EX-13 - CNB CORP /MI/ | k49030exv13.htm |
EX-23 - EX-23 - CNB CORP /MI/ | k49030exv23.htm |
EX-31.2 - EX-31.2 - CNB CORP /MI/ | k49030exv31w2.htm |
EX-32.1 - EX-32.1 - CNB CORP /MI/ | k49030exv32w1.htm |
EX-32.2 - EX-32.2 - CNB CORP /MI/ | k49030exv32w2.htm |
EX-31.1 - EX-31.1 - CNB CORP /MI/ | k49030exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
Or
o | 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 033-00737
CNB CORPORATION
(Exact name of registrant as specified in its charter)
Michigan | 38-2662386 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
303 North Main Street, Cheboygan, MI 49721
(Address of principal executive offices, including Zip code)
(Address of principal executive offices, including Zip code)
Registrants telephone number, including area code (231) 627-7111
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $2.50 per share
(Title of Class)
Common Stock, par value $2.50 per share
(Title of Class)
Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes o No þ
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
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 the registrants 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. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer. accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
As of June 30, 2009, the aggregate market value of the voting common equity held by non-affiliates
computed by reference to the price at which the common equity was last sold, or the average bid and
asked price of such common equity, as of the last business day the registrants most recently
completed second fiscal quarter as reported by the Over the Counter Bulletin Board, was
$12,742,779. The Registrant does not have any non-voting common equity.
As of March 19, 2010 there were outstanding 1,213,598 shares of the registrants common stock,
$2.50 par value.
1
TABLE OF CONTENTS
Table of Contents
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the registrants annual report to security holders for fiscal year ended
December 31, 2009 are incorporated by reference in Part I and Part II of this report, and specified
portions of the registrants proxy statement for its annual meeting of shareholders to be held May
18, 2010 are incorporated by reference in Part III of this report.
PART I
FORWARD-LOOKING STATEMENTS
When used in this filing and in future filings involving the Company with the Securities and
Exchange Commission, in the Companys press releases or other public or shareholder communications,
or in oral statements made with the approval of an authorized executive officer, the words or
phrases, anticipate, would be, will allow, intends to, will likely result, are expected
to, will continue, is anticipated, estimated, project, or similar expressions are intended
to identify, forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to risks and uncertainties, including but not
limited to changes in economic conditions in the Companys market area, and competition, all or
some of which could cause actual results to differ materially from historical earnings and those
presently anticipated or projected.
The Company wishes to caution readers not to place undue reliance on any such forward-looking
statements, which speak only as to the date made, and advises readers that various factors,
including regional and national economic conditions, substantial changes in levels of market
interest rates, credit and other risks of lending and investing activities, and competitive and
regulatory factors, could affect the Companys financial performance and could cause the Companys
actual results for future periods to differ materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences or unanticipated events or circumstances after
the date of such statements.
2
Table of Contents
ITEM 1-Business
CNB Corporation (the Company) was incorporated in June, 1985 as a business corporation under the
Michigan Business Corporation Act, pursuant to the authorization and direction of the Board of
Directors of the Citizens National Bank of Cheboygan (the Bank).
The Company is a bank holding company registered with the Board of Governors of the Federal Reserve
System (the Federal Reserve Board) under the Bank Holding Company Act with the Bank as its
wholly-owned subsidiary. The Bank was acquired by the Company effective December 31, 1985. The
Company has corporate power to engage in such activities as permitted to business corporations
under the Michigan Business Corporation Act, subject to the limitations of the Bank Holding Company
Act and regulations of the Federal Reserve Board. In general, the Bank Holding Company Act and
regulations restrict the Company with respect to its own activities and activities of any
subsidiaries to the business of banking or such other activities which are closely related to the
business of banking.
During 2001, the Company, through its subsidiary, the Bank, formed the CNB Mortgage Corporation.
Residential mortgages were transferred to the new subsidiary in October, 2001. The change had no
impact on our customers who continue to have their loans serviced locally by our Bank. In November
2009, Citizens National Bank of Cheboygan and CNB Mortgage Corporation merged leaving Citizens
National Bank of Cheboygan as the survivor.
The Bank offers a full range of banking services to individuals, partnerships, corporations, and
other entities. Banking services include checking, NOW accounts, savings, time deposit accounts,
money market deposit accounts, safe deposit facilities and money transfers.
The Banks lending function provides a full range of loan products. These include real estate
mortgages, secured and unsecured commercial and consumer loans, lines of credit, home equity loans
and construction financing. The Bank also participates in specialty loan programs through the
Michigan State Housing Development Authority, Federal Home Loan Mortgage Corporation, Mortgage
Guaranty Insurance Corporation, Farm Service Agency and Small Business Administration. Through
correspondent relationships, the Bank also makes available credit cards.
The Banks loan portfolio consists of over 51% residential real estate mortgages on both primary
and secondary homes. The residential borrower base is very diverse and loan to value ratios are
generally 80% or less. The Bank does not engage in subprime lending and has not originated any
loans that it would consider to be subprime mortgage loans. Commercial loans accounts for
approximately 44% of total loans. Commercial real estate lending, a part of commercial loans, has
decreased slightly down to represent 40% of total loans. These loans are generally for owner
occupied properties with loan to value ratios of 80% or less. Personal guarantees are required on
most commercial loans. Unsecured lending is very limited.
The Bank makes first and second mortgage loans to its customers for the purchase of residential and
commercial properties. Historically, the Bank has sold its long term fixed rate residential
mortgage loans qualifying for the secondary market to the Federal Home Loan Mortgage Corporation
(FHLMC). The mortgage loan portfolio serviced by the Bank for the FHLMC totaled approximately $73
million at December 31, 2009.
Banking services are delivered through seven full-service banking offices and two drive-in branches
plus nine automated teller machines in Cheboygan, Emmet and Presque Isle Counties, Michigan. The
business base of the counties is primarily tourism with light manufacturing. The Bank maintains
correspondent bank relationships with several larger banks, which involve check clearing
operations, transfer of funds, loan participations, and the purchase and sale of federal funds and
other similar services.
Under various agency relationships, the Bank provides trust and discount brokerage services and
mutual fund, annuity and life insurance products to its customers.
3
Table of Contents
In its primary market, which includes Cheboygan County and parts of Emmet, Mackinac and Presque
Isle Counties, the Bank is one of three principal banking institutions. One is a member of a
multi-bank holding company with substantially more assets than the Company, while the other is an
independent community bank. There are also three credit unions, one savings and loan association
and a brokerage firm.
As of December 31, 2009, the Bank employed 72 full-time and 6 part-time employees. This compares
to 77 full-time and 7 part-time employees as of December 31, 2008. The Company does not have any
full-time employees. Its operations and business are carried out by officers and employees of the
Bank who are not compensated by the Company.
Disclosure relating to the Distribution of Assets, Liabilities and StockholdersEquity; Interest
rates and Interest differential is presented on pages 43-44 of Registrants 2009 Annual Report
which is incorporated herein by reference.
Securities
The year end fair values and related gross unrealized gains and losses for securities available for
sale, were as follows:
Available for sale
Gross | Gross | |||||||||||
Fair | Unrealized | Unrealized | ||||||||||
Available for Sale | Value | Gains | Losses | |||||||||
(In thousands) | ||||||||||||
2009 |
||||||||||||
U.S. Government and agency |
$ | 26,312 | $ | 179 | $ | | ||||||
Mortgage-backed |
9,259 | 136 | | |||||||||
State and municipal |
7,836 | 285 | (21 | ) | ||||||||
Corporate obligations |
1,020 | 22 | | |||||||||
Auction rate securities |
1,000 | | | |||||||||
Preferred shares |
46 | 24 | | |||||||||
$ | 45,473 | $ | 646 | $ | (21 | ) | ||||||
2008 |
||||||||||||
U.S. Government and agency |
$ | 17,061 | $ | 265 | $ | | ||||||
Mortgage-backed |
9,629 | 78 | (38 | ) | ||||||||
State and municipal |
5,955 | 77 | (56 | ) | ||||||||
Money market preferred stock |
4,793 | | | |||||||||
$ | 37,438 | $ | 420 | $ | (94 | ) | ||||||
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The year end carrying amount, unrecognized gains and losses, and fair value of securities held
to maturity were as follows:
Held to Maturity
Gross | Gross | |||||||||||||||
Carrying | Unrecognized | Unrecognized | Fair | |||||||||||||
Held to Maturity | Amount | Gains | Losses | Value | ||||||||||||
(In thousands) | ||||||||||||||||
2009 |
||||||||||||||||
State and municipal |
$ | 10,302 | $ | 556 | $ | (21 | ) | $ | 10,837 | |||||||
2008 |
||||||||||||||||
U.S. Government |
$ | 2,001 | $ | 19 | $ | | $ | 2,020 | ||||||||
State and municipal |
8,882 | 236 | (19 | ) | 9,099 | |||||||||||
$ | 10,883 | $ | 255 | $ | (19 | ) | $ | 11,119 | ||||||||
Scheduled maturities of the fair value of securities available for sale and the carrying amount of
held to maturity securities at December 31, 2009, were as follows:
Due in | Due from | Due from | Due | |||||||||||||||||
One year | One to | Five to | After ten | |||||||||||||||||
Or less | Five years | Ten years | Years | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
U.S. Government and
agency |
$ | 11,094 | $ | 15,217 | $ | | $ | | $ | 26,311 | ||||||||||
Mortgage-backed |
1,428 | 2,983 | 965 | 3,883 | 9,259 | |||||||||||||||
State and municipial |
5,747 | 6,925 | 4,028 | 1,439 | 18,139 | |||||||||||||||
Corporate obligations |
| 1,020 | | | 1,020 | |||||||||||||||
Aucton rate securites |
| | | 1,000 | 1,000 | |||||||||||||||
Preferred shares |
| | | 46 | 46 | |||||||||||||||
$ | 18,269 | $ | 26,145 | $ | 4,993 | $ | 6,368 | $ | 55,775 | |||||||||||
Yield |
2.01 | % | 2.71 | % | 3.65 | % | 5.01 | % | 2.85 | % | ||||||||||
The Company held securities exceeding 10% of shareholders equity for the following states
(including its political subdivisions) at December 31, 2009:
Book | Fair | |||||||
Value | Value | |||||||
(In thousands) | ||||||||
Michigan |
$ | 13,626 | $ | 14,417 |
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Table of Contents
Loans
The following is a summary of loans at December 31:
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Residential real estate |
$ | 77,152 | $ | 77,734 | $ | 83,264 | $ | 82,842 | $ | 83,234 | ||||||||||
Consumer |
7,002 | 7,518 | 8,709 | 9,444 | 9,922 | |||||||||||||||
Commercial real estate |
60,150 | 67,282 | 68,445 | 61,740 | 53,133 | |||||||||||||||
Commercial |
6,903 | 9,314 | 14,234 | 13,208 | 10,037 | |||||||||||||||
151,207 | 161,848 | 174,652 | 167,234 | 156,326 | ||||||||||||||||
Deferred loan origination fees, net |
(173 | ) | (82 | ) | (28 | ) | (6 | ) | (8 | ) | ||||||||||
Allowance for loan losses |
(2,863 | ) | (1,996 | ) | (1,670 | ) | (1,498 | ) | (1,456 | ) | ||||||||||
$ | 148,171 | $ | 159,770 | $ | 172,954 | $ | 165,730 | $ | 154,862 | |||||||||||
Maturity and Rate Sensitivity of Selected Loans
The following table presents the remaining maturity of total loans outstanding excluding
residential real estate and consumer loans at December 31, 2009, according to scheduled repayments
of principal. The amounts due after one year are classified according to the sensitivity of
changes in interest rates.
Total | ||||
(In thousands) | ||||
In one year or less |
$ | 33,772 | ||
After one year but within five years: |
||||
Interest rates are floating or adjustable |
21 | |||
Interest rates are fixed or predetermined |
29,028 | |||
After five years: |
||||
Interest rates are floating or adjustable |
| |||
Interest rates are fixed or predetermined |
4,232 | |||
$ | 67,053 | |||
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Table of Contents
Summary of loan loss experience is as follows:
Additional information relative to the allowance for loan losses is presented in the following
table. This table summarizes loan balances at the end of each period and daily average balances,
changes in the allowance for loan losses arising from loans charged off and recoveries on loans
previously charged off by loan category, and additions to the allowance for loan losses through
provisions charged to expense.
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Balance at beginning of period |
$ | 1,996 | $ | 1,670 | $ | 1,498 | $ | 1,456 | $ | 1,350 | ||||||||||
Less charge-offs: |
||||||||||||||||||||
Residential real estate |
310 | 373 | 57 | 2 | | |||||||||||||||
Consumer |
82 | 214 | 59 | 63 | 28 | |||||||||||||||
Commercial real estate |
442 | 836 | | | | |||||||||||||||
Commercial |
124 | 128 | 10 | 39 | | |||||||||||||||
Total charge-offs: |
958 | 1,551 | 126 | 104 | 28 | |||||||||||||||
Recoveries: |
||||||||||||||||||||
Residential real estate |
14 | 3 | 5 | 6 | 7 | |||||||||||||||
Consumer |
23 | 25 | 16 | 19 | 7 | |||||||||||||||
Commercial real estate |
53 | 13 | | | | |||||||||||||||
Commercial |
10 | 5 | 2 | 1 | | |||||||||||||||
Total recoveries |
100 | 46 | 23 | 26 | 14 | |||||||||||||||
Net charge-offs |
858 | 1,505 | 103 | 78 | 14 | |||||||||||||||
Provision charged to expense |
1,725 | 1,831 | 275 | 120 | 120 | |||||||||||||||
Allowance for loan losses,
end of period |
$ | 2,863 | $ | 1,996 | $ | 1,670 | $ | 1,498 | $ | 1,456 | ||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Total loans outstanding at end
of period |
$ | 151,207 | $ | 161,848 | $ | 174,652 | $ | 167,234 | $ | 156,326 | ||||||||||
Average loans outstanding for
the year |
$ | 161,400 | $ | 170,355 | $ | 172,144 | $ | 163,146 | $ | 149,681 | ||||||||||
Ratio of net charge-offs to daily
average loans outstanding |
0.53 | % | 0.88 | % | 0.06 | % | 0.05 | % | 0.01 | % | ||||||||||
Ratio of net charge-offs to total
loans outstanding |
0.57 | % | 0.93 | % | 0.06 | % | 0.05 | % | 0.01 | % |
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The allocation of the allowance for loan losses for the years ended December 31 is:
Residential | Commercial | |||||||||||||||||||||||
Real Estate | Consumer | Real Estate | Commercial | Unallocated | Total | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
2009 Allowance amount |
$ | 340 | $ | 107 | $ | 1,996 | $ | 386 | $ | 34 | $ | 2,863 | ||||||||||||
% of Total loans |
51.0 | % | 4.6 | % | 39.8 | % | 4.6 | % | 100.0 | % | ||||||||||||||
2008 Allowance amount |
$ | 169 | $ | 52 | $ | 1,311 | $ | 379 | $ | 85 | $ | 1,996 | ||||||||||||
% of Total loans |
48.0 | % | 4.6 | % | 41.6 | % | 5.8 | % | 100.0 | % | ||||||||||||||
2007 Allowance amount |
$ | 446 | $ | 97 | $ | 814 | $ | 268 | $ | 45 | $ | 1,670 | ||||||||||||
% of Total loans |
47.7 | % | 5.0 | % | 39.2 | % | 8.1 | % | 100.0 | % | ||||||||||||||
2006 Allowance amount |
$ | 437 | $ | 98 | $ | 655 | $ | 228 | $ | 80 | $ | 1,498 | ||||||||||||
% of Total loans |
49.5 | % | 5.7 | % | 36.9 | % | 7.9 | % | 100.0 | % | ||||||||||||||
2005 Allowance amount |
$ | 299 | $ | 35 | $ | 829 | $ | 163 | $ | 130 | $ | 1,456 | ||||||||||||
% of Total loans |
53.2 | % | 6.3 | % | 34.0 | % | 6.5 | % | 100.0 | % |
The review of the loan portfolio revealed no undue concentrations of credit, however, the portfolio
continues to be concentrated in residential real estate mortgages and highly dependent upon the
tourist industry for the source of repayment. Because the reliance on tourism is both primary,
(i.e. loans to motels, hotels, and restaurants, etc.) and secondary (i.e. loans to employees of
tourist related businesses), it is difficult to assess a specific dollar amount of inherent loss
potential. Likewise, the residential real estate market has been stable or increasing, so inherent
loss potential in this concentration is also difficult to reasonably assess. Therefore, the
tourism industry and residential real estate mortgage concentrations are considered in establishing
the allowance for loan loss.
The following is a summary of nonaccrual, past due and restructured loans as of December 31:
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Nonaccrual loans |
$ | 8,095 | $ | 5,356 | $ | 831 | $ | | $ | | ||||||||||
Loans past due 90 days or
more |
83 | 295 | 387 | 177 | 255 | |||||||||||||||
Troubled debt restructurings |
260 | 393 | | | | |||||||||||||||
$ | 8,438 | $ | 6,044 | $ | 1,218 | $ | 177 | $ | 255 | |||||||||||
Deposits
The following table presents the remaining maturity of time deposits individually exceeding
$100,000 at December 31, 2009. Dollars are reported in thousands.
3 Months or less |
$ | 16,565 | ||
Over 3 Months to 6 Months |
5,934 | |||
Over 7 Months through 12 Months |
908 | |||
Over 12 Months |
1,741 | |||
$ | 25,148 | |||
Various ratios required by this section and other ratios commonly used in analyzing bank holding
company financial statements are included in page 1 of Registrants 2009 Annual Report, which is
incorporated herein by reference.
8
Table of Contents
Supervision and Regulation
As a bank holding company within the meaning of the Bank Holding Company Act, the Company is
required to file quarterly and annual reports of its operations and such additional information as
the Federal Reserve Board may require and is subject, along with its subsidiary, to examination by
the Federal Reserve Board. The Federal Reserve Board is the primary regulator of the Company.
The Bank Holding Company Act requires every bank holding company to obtain prior approval of the
Federal Reserve Board before it may merge with or consolidate into another bank holding company,
acquire substantially all the assets of any bank, or acquire ownership or control of any voting
shares of any bank if after such acquisition it would own or control, directly or indirectly, more
than 5% of the voting shares of such bank holding company or bank. The Bank Holding Company Act
also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect
ownership or control of more than 5% of the voting shares of any company which is not a bank and
from engaging in any business other than that of banking, managing and controlling banks or
furnishing services to banks and their subsidiaries. However, holding companies may engage in, and
may own shares of companies engaged in, certain businesses found by the Federal Reserve Board to be
so closely related to banking or the management or control of banks as to be a proper incident
thereto.
Under current regulations of the Federal Reserve Board, a holding company and its nonbank
subsidiaries are permitted, among other activities, to engage, subject to certain specified
limitations, in such banking related business as consumer finance, equipment leasing, computer
service bureau and software operations, data processing, discount securities brokerage, mortgage
banking and brokerage, sale and leaseback, and other forms of real estate banking. The Bank
Holding Company Act does not place territorial restrictions on the activities of nonbank
subsidiaries of bank holding companies.
In addition, Federal legislation prohibits acquisition of control of a bank or bank holding
company without prior notice to certain federal bank regulators. Control in certain cases may
include the acquisition of as little as 10% of the outstanding shares of capital stock.
The Companys cash revenues are derived primarily from dividends paid by the Bank. Without prior
approval, a national bank may not declare a dividend if the total amount of all dividends declared
by the bank in any calendar year exceeds the total banks retained net income for the current year
and retained net income for the preceding two years. Under federal law, the Bank cannot pay a
dividend if, after paying the dividend, the Bank will be undercapitalized.
The Bank is a national banking association and as such is subject to the regulations of, and
supervision and regular examination by, the Office of the Comptroller of the Currency (OCC).
Deposit accounts of the bank are insured by the Federal Deposit Insurance Corporation (FDIC).
Requirements and restrictions under the laws of the State of Michigan and Title 12 of the United
States Code include the requirements that banks maintain reserves against deposits, restrictions on
the nature and amount of loans which may be made by a bank, and the interest that may be charged
thereon, restrictions on the payment of interest on certain deposits, and restrictions relating to
investments and other activities of a bank. The Federal Reserve Board has established guidelines
for risk based capital by bank holding companies. These guidelines establish a risk adjusted ratio
relating capital to risk-weighted assets and off-balance sheet exposures. These capital guidelines
primarily define the components of capital, categorize assets into different risk classes, and
include certain off-balance sheet items in the calculation of capital requirements.
An analysis of the Banks regulatory capital requirements at December 31, 2009 is presented on page
32 of the Registrants 2009 Annual Report in Note 16 Regulatory Capital to the Companys
consolidated financial statements, which is incorporated herein by reference.
The Bank is participating in the FDICs Transaction Account Guarantee Program (TAGP), which
originally provided FDIC insurance coverage for all non-interest and certain interest bearing
transaction accounts through December 31,
9
Table of Contents
2009. FDIC coverage on interest bearing transaction accounts is limited to those paying rates no
higher than 0.50%. The initial increase in FDIC insurance coverage was limited to savings accounts
with maximum coverage of $250,000; TAGP effectively provided 100% FDIC coverage of all funds on
deposit in covered transaction accounts through December 31, 2009. Prior to December 31, 2009 the
insurance coverage under the TAGP was extended, effectively providing coverage through June 30,
2010. Additionally, under its Debt Guarantee Program (DGP), the FDIC will guarantee the payment of
newly issued senior unsecured debt of a financial institution based on the earlier of the maturity
date of the debt or June 30, 2012. As there is no cost until the FDIC-guarantee is accessed, the
Bank is participating in the DGP although it has no debt and does not anticipate incurring any
debt.
In light of current conditions in the U.S. and global financial markets, regulators have increased
their focus on regulation of the financial services industry. Proposals that could intensify the
regulation of the financial services industry being or are expected to be introduced in the U.S.
Congress, in state legislatures and from applicable regulatory authorities. These proposals may
change banking statutes and regulations and, as a result, our operating environment. We cannot
forecast whether any of these proposals or regulations will be enacted and, if enacted, the effect
that they would have on our business, results of operation or financial condition.
ITEM 1A-Risk Factors
Not applicable.
ITEM 1B-Unresolved Staff Comments
Not applicable.
ITEM 2-Properties
The Company and the Bank have their primary office at 303 North Main Street, Cheboygan, Michigan.
In addition, the Bank owns and operates the following facilities: Cheboygan South, 10854 North
Straits Highway; Onaway Office, 20581 W. State Street, Onaway; Mackinaw City Office, 580 S. Nicolet
Street, Mackinaw City; Pellston Office, 200 Stimpson, Pellston; Indian River Office, 3990 Straits
Highway, Indian River, Alanson Office, 8011 S. US 31, Alanson and Downtown drive-in, 414 Division
Street, Cheboygan. All properties are owned by the Bank free of any mortgages or encumbrances but
for the Alanson Office property upon which there is a purchase money mortgage which was entered
into to accommodate the seller.
ITEM 3-Legal Proceedings
CNB vs. Heber Fuger Wendin, Inc. and Mark Williams
The Bank filed a complaint in the Circuit Court for the County of Cheboygan on May 19, 2009 and
served the defendants in this matter, Heber Fuger Wendin, Inc. (HFW) and Mark Williams, President
of HFW, on May 26, 2009. The complaint is the consequence of losses incurred by the Bank as a
result of its purchase of money market preferred (MMP) securities beginning in 2006 and ending in
2007 on the advice of Mr. Williams. Upon subsequent review and investigation it was determined
MMPs were not a suitable investment for the Bank and as an investment advisor HFW did not perform
sufficient due diligence to adequately advise the Bank of the associated potential risk. The six
counts charged in the complaint are: (i) breach of fiduciary duty; (ii) negligence; (iii) breach of
contract; (iv) common law fraud; (v) negligent misrepresentation; and (vi) violation of Michigan
Uniform Securities Act. The case is in discovery.
ITEM 4-Reserved.
10
Table of Contents
PART II
ITEM 5-Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities
The Companys common stock is listed on the Over-the-counter Bulletin Board under the symbol
CNBZ. All trades are handled on a direct basis between buyer and seller. The Bank acts as the
Companys transfer agent. The principal market for the Companys stock consists of existing
shareholders, family members of existing shareholders and individuals in the service area.
The information detailing the range of high and low selling prices of known transactions for the
Companys common stock and cash dividends declared for each full quarterly period within the two
most recent fiscal years can be found under the caption Financial Highlights on page 1 of the
Companys Annual Report to Shareholders for the fiscal year ended December 31, 2009, which is
hereby incorporated by reference.
The information which indicates the amount of common stock that is subject to outstanding options
or warrants to purchase, or securities convertible into, common equity of the registrant can be
found in Note 9 on page 23 of the Companys Annual Report to Shareholders for the fiscal year ended
December 31, 2009, which is hereby incorporated by reference.
There are approximately 990 shareholders of record of common stock of the Company as of January 31,
2010.
During 2009 the Company did not declare any dividends. The information detailing the cash
dividends declared within the two most recent fiscal years can be found under the caption
Financial Highlights on page 1 of the Companys Annual Report to Shareholders for the fiscal year
ended December 31, 2009, which is hereby incorporated by reference. These have resulted in a
dividend payout ratio averaging 35.7% for the past three years.
The Federal Reserve Boards policy of Cash Dividends by Bank Holding Companies restricts the
payment of cash dividends based on the following criteria: (1) the Companys net income from
operations over the past year must be sufficient to fully fund the dividend and (2) the prospective
rate of earnings retention must be consistent with the Companys capital needs, asset quality and
overall financial condition.
ITEM 6-Selected Financial Data
The information required by this item is included on Page 1 under the caption Financial
Highlights of the Companys Annual Report to Shareholders for the fiscal year ended December 31,
2009, which is hereby incorporated by reference.
ITEM 7-Managements Discussion and Analysis of Financial Condition and Results of Operations
The information required by this item is included on pages 37 through 50 of the Companys Annual
Report to Shareholders for the fiscal year ended December 31, 2009, which is hereby incorporated by
reference.
ITEM 7A-Quantitative and Qualitative Disclosures about Market Risk
The information required by this item is included on pages 43 through 44 of the Companys Annual
Report to Shareholders for the fiscal year ended December 31, 2009, which is hereby incorporated by
reference.
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ITEM 8-Financial Statements and Supplementary Data
This information is included on pages 2 through 35 of the Companys Annual Report to Shareholders
for the fiscal year ended December 31, 2009, which is hereby incorporated by reference.
ITEM 9-Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
ITEM 9AT-Controls and Procedures
Disclosure on Controls and Procedures
Management is responsible for establishing and maintaining effective disclosure controls and
procedures, as defined under Rule 13a-15 of the Securities Exchange Act of 1934, that are designed
to cause the material information required to be disclosed by the Company in the reports it files
or submits under the Securities Exchange Act of 1934 to be recorded, processed, summarized, and
reported to the extent applicable within the time periods required by the Securities and Exchange
Commissions rules and forms. In designing and evaluating the disclosure controls and procedures,
management recognized that a control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. Because
of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, with a company have been
detected.
As of the end of the period covered by this report, the Company performed an evaluation under the
supervision and with the participation of management, including the Chief Executive Officer and
Principal Financial Officer, of the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based upon
that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the
disclosure controls and procedures were effective at the reasonable assurance level.
Report on Managements Assessment of Internal Control over Financial Reporting
The management of CNB Corporation is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is defined under
applicable Securities and Exchange Commission rules as a process designed under the supervision of
the Companys Chief Executive Officer and Chief Financial Officer and effected by the Companys
Board of Directors, management and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the Companys financial statements for
external purposes in accordance with U.S. generally accepted accounting principles. The Companys
internal control over financial reporting includes those policies and procedures that:
| Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; | |
| Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and | |
| Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements. |
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Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2009, management, with the participation of the Companys Chief Executive
Officer and Principal Financial Officer, assessed the effectiveness of the Companys internal
control over financial reporting based on the criteria for effective internal control over
financial reporting established in Internal Control Integrated Framework, issued by the
Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on the assessment,
management determined that the Companys internal control over financial reporting was effective as
of December 31, 2009.
This annual report does not include an attestation report of the Companys registered public
accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by the Companys registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Company to provide only
managements repot in this annual report.
/s/ Susan A. Eno
|
/s/ Shanna L. Hanley
|
|||
President and Chief Executive Officer
|
Treasurer (Principal Financial and Accounting Officer) |
Changes in Internal Control over Financial Reporting
No changes were made to the Companys internal control over financial reporting (as defined in Rule
13a-15 under the Securities Exchange Act of 1934) during the last fiscal quarter that materially
affected, or are reasonably likely to materially affect, the Companys internal control over
financial reporting.
ITEM 9B-Other Information
None.
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PART III
ITEM 10-Directors, Executive Officers and Corporate Governance
Certain information required by this item is included under the captions Information about
Director Nominees, Committees and Meetings of the Board of Directors, Code of Ethics, and
Section 16(a) Beneficial Ownership Reporting Compliance in the Companys proxy statement for the
annual meeting of shareholders scheduled for May 18, 2010, which is hereby incorporated by
reference.
Information about the executive officers of the Corporation is set forth below.
Name and Age | Position | |
Vincent J. Hillesheim, 59
|
Chairman of the Corporation and Citizens National Bank of Cheboygan. Mr. Hillesheim was elected Chairman in 2006. | |
Susan A. Eno, 55
|
Chief Executive Officer and President of the Corporation and Citizens National Bank of Cheboygan. Ms. Eno has been an officer of the Corporation since 1996 and an employee of the Bank since 1971. She has been in her current position since January 1, 2008 and was in her previous position as Executive Vice President and Secretary of the Corporation and Executive Vice President and Cashier of Citizens National Bank of Cheboygan for more than 11 years. | |
Douglas W. Damm, 56
|
Senior Vice President of the Corporation and Citizens National Bank of Cheboygan. Mr. Damm has been an officer of the Corporation since 2003 and an employee of the Bank since 1987. He has been in his current position for more than 22 years and has 31 years experience in the banking business. | |
Shanna L. Hanley, 32
|
Treasurer of the Corporation; Vice President and Senior Controller of Citizens National Bank of Cheboygan. Ms. Hanley joined the Bank during 2005. |
Item 11-Executive Compensation
The information required by this item is included under the caption Compensation Discussion and
Analysis of the Companys proxy statement for the annual meeting of shareholders scheduled for May
18, 2010, which is hereby incorporated by reference.
Item 12-Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item is included under the caption Ownership of Common Stock of
the Companys proxy statement for the annual meeting of shareholders scheduled for May 18, 2010,
which is hereby incorporated by reference.
The information required by this item is included under the caption Securities Authorized for
Issuance Under Equity Compensation Plan Information in the Companys proxy statement for the
annual meeting of shareholders scheduled for May 18, 2010, which is hereby incorporated by
reference.
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Item 13-Certain Relationships and Related Transactions, and Director Independence
The information required by this item is included under the caption Certain Relationships and
Related Transactions in the Companys proxy statement for the annual meeting of shareholders
scheduled for May 18, 2010, which is hereby incorporated by reference.
Item 14-Principal Accountant Fees and Services
The information required by this item is included under the caption Independent Auditors in the
Companys proxy statement for the annual meeting of shareholders scheduled for May 18, 2010, which
is hereby incorporated by reference.
PART IV
Item 15-Exhibits and Financial Statement Schedules
(a) | (1)Financial Statements. The following financial statements, notes to financial statements and independent report of CNB Corporation and its subsidiary are referenced in Item 8 of this report and are hereby incorporated by reference: | ||
Consolidated Balance Sheets-December 31, 2009 and 2008. | |||
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2009, 2008 and 2007. | |||
Consolidated Statement of Changes in Shareholders Equity for the years ended December 31, 2009, 2008 and 2007. | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007. | |||
Notes to Consolidated Financial Statements. | |||
Report of Independent Registered Public Accounting Firm dated March 25, 2010. | |||
(2) Financial Statement Schedules. Not applicable | |||
(3) Exhibits. |
(3a)Articles of Incorporation. Previously filed as exhibit to the registrants Form
10-KSB filed April 26, 1996, and hereby incorporated by reference.
(3b)By-Laws as amended through March 25, 2004. Previously filed as Exhibit 3b to the
Companys Form 10-K for the fiscal year ended December 31, 2003 filed December 27,
2004, and hereby incorporated by reference.
(10) 1996 Stock Option Plan. Previously filed as Exhibit 10 to the Companys Form
10-Q for the quarter ended September 30, 1996 and hereby incorporated by reference.
(11)Statement regarding computation of per share earnings. This information is
disclosed in Note 11 to the Companys Financial Statements for the year ended December 31, 2009, which are
included in the annual report to shareholders for the year ended December 31, 2009
which is filed as Exhibit 13 to the
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Companys Form 10-K for the fiscal year ended December 31, 2009, and hereby
incorporated by reference.
(13)Annual report to shareholders for the year ended December 31, 2009. (filed
herewith).
(21)Subsidiaries of the Company. (filed herewith).
(23)Consent of Independent Registered Public Accounting Firm. (filed herewith).
(31.1)Certification of Chief Executive Officer. (filed herewith).
(31.2)Certification of Chief Financial Officer. (filed herewith).
(32.1)Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed
herewith).
(32.2)Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed
herewith).
(b)See Item 15(a) (3) above.
(c)Financial Statement Schedules. Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CNB CORPORATION
(Registrant)
(Registrant)
Date: March 25, 2010
/s/ Susan A. Eno | ||||
Susan A. Eno | ||||
President and Chief Executive Officer | ||||
Pursuant to the requirement 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
25, 2010.
/s/ Steven J. Baker
|
/s/ Kathleen A. Lieder | /s/ Shanna L. Hanley | ||
Steven J. Baker
|
Kathleen A. Lieder | Shanna L. Hanley | ||
Director
|
Director | Treasurer (Principal Financial | ||
and Accounting Officer) | ||||
/s/ James C. Conboy, Jr.
|
/s/ R. Jeffery Swadling | |||
James C. Conboy, Jr.
|
R. Jeffery Swadling | |||
Director
|
Director | |||
/s/ Kathleen M. Darrow
|
/s/ Francis J. VanAntwerp, Jr. | |||
Kathleen M. Darrow
|
Francis J. VanAntwerp, Jr. | |||
Director
|
Director | |||
/s/ Thomas J. Ellenberger
|
/s/ Susan A. Eno. | |||
Thomas J. Ellenberger
|
Susan A. Eno. | |||
Director
|
Director | |||
President and Chief Executive Officer | ||||
/s/ Vincent J. Hillesheim
|
||||
Vincent J. Hillesheim |
||||
Director |
||||
Chairman |
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EXHIBIT INDEX
(3a)Articles of Incorporation. Previously filed as an exhibit to the registrants Form 10-KSB
filed April 26, 1996 and hereby incorporated by reference.
(3b)By-Laws as amended through March 25, 2004. Previously filed as Exhibit 3b to the Companys Form
10-K for the fiscal year ended December 31, 2003 filed December 27, 2004, and hereby incorporated
by reference.
(10) 1996 Stock Option Plan. Previously filed as Exhibit 10 to the Companys Form 10-Q for the
quarter ended September 30, 1996 and hereby incorporated by reference.
(11) Statement regarding computation per share earnings. This information is disclosed in Note 11
to the Companys Financial Statements for the year ended December 31, 2009 which are included in
the annual report to shareholders for the year ended December 31, 2009 which is filed as Exhibit 13
to the Companys Form 10-K for the fiscal year ended December 31, 2009, and hereby incorporated by
reference.
(13) Annual report to shareholders for the year ended December 31, 2009. (filed herewith)
(21) Subsidiaries of the Company. (filed herewith)
(23) Consent of Independent Registered Public Accounting firm. (filed herewith)
(31.1) Certification of Chief Executive Officer. (filed herewith)
(31.2) Certification of Chief Financial Officer. (filed herewith)
(32.1) Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002. (filed herewith)
(32.2) Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002. (filed herewith)
18