Attached files
file | filename |
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EX-32.1 - EX-32.1 - CNB FINANCIAL SERVICES INC | l40441exv32w1.htm |
EX-32.2 - EX-32.2 - CNB FINANCIAL SERVICES INC | l40441exv32w2.htm |
EX-31.2 - EX-31.2 - CNB FINANCIAL SERVICES INC | l40441exv31w2.htm |
EX-31.1 - EX-31.1 - CNB FINANCIAL SERVICES INC | l40441exv31w1.htm |
Table of Contents
United States
Securities and Exchange Commission
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
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 0-30665
CNB Financial Services, Inc.
(Exact Name of Registrant as specified in its charter)
West Virginia | 550773918 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
101 S. Washington Street, Berkeley Springs, WV | 25411 | |
(Address of principal executive offices) | (Zip Code) |
Issuers telephone number, (304) 258 - 1520
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) 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 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.
(Check one)
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 þ NO o
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: 441,348 shares of common stock, par value $1 per share, as of August
5, 2010.
CNB FINANCIAL SERVICES, INC.
TABLE OF CONTENTS
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 indicates that the disclosure of
forward-looking information is desirable for investors and encourages such disclosure by providing
a safe harbor for forward-looking statements that involve risk and uncertainty. All statements
other than statements of historical fact included in this Form 10-Q including statements in
Managements Discussion and Analysis of Financial Condition and Results of Operations are, or may
be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. In order to comply with the terms
of the safe harbor, CNB notes that a variety of factors could cause CNBs actual results and
experience to differ materially from the anticipated results or other expectations expressed in
those forward-looking statements. These factors could include the following possibilities: (1)
competitive pressures among depository and other financial institutions may increase significantly;
(2) changes in the interest rate environment may reduce margins; (3) general economic conditions
may become more unfavorable than expected resulting in reduced credit quality or demand for loans;
(4) legislative or regulatory changes could increase expenses (including changes as a result of
rule 5 regulations adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act);
(5) competitors may have greater financial resources and develop products that enable them to
compete more successfully than CNB; (6) additional assessments may be imposed by the FDIC; (7)
additional expense to the provision for loan losses may be greater than anticipated; (8) loan
activity may continue to be soft in the commercial real estate portfolio with very little
generation of new loans; and (9) real estate activity for 2010 in the Eastern Panhandle of West
Virginia may not improve. Additionally, consideration should be given to the cautionary language
contained elsewhere in this Form 10-Q and in the section on Risk Factors, Item 1A in the
companys Annual Report to Shareholders on Form 10-K for the fiscal year ended December 31, 2009.
2
Table of Contents
CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(Unaudited)
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS |
||||||||
Cash and due from banks |
$ | 4,177,941 | $ | 5,068,118 | ||||
Certificates of deposit investments |
| 1,989,017 | ||||||
Securities available for sale
(at approximate market value) |
74,135,935 | 72,272,665 | ||||||
Federal Home Loan Bank stock, at cost |
2,321,300 | 2,321,300 | ||||||
Loans and lease receivable, net |
189,826,915 | 194,707,226 | ||||||
Accrued interest receivable |
1,304,823 | 1,334,704 | ||||||
Foreclosed real estate (held for sale), net |
414,383 | 386,500 | ||||||
Premises and equipment, net |
5,441,616 | 5,554,927 | ||||||
Deferred income taxes |
1,731,527 | 1,753,665 | ||||||
Cash surrender value of life insurance |
1,690,400 | 1,601,720 | ||||||
Intangible assets |
106,870 | 162,628 | ||||||
Other assets |
1,669,606 | 2,345,418 | ||||||
TOTAL ASSETS |
$ | 282,821,316 | $ | 289,497,888 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
LIABILITIES |
||||||||
Deposits: |
||||||||
Demand |
$ | 41,295,035 | $ | 43,381,922 | ||||
Interest-bearing demand |
35,361,458 | 35,564,826 | ||||||
Savings |
26,528,999 | 24,925,247 | ||||||
Time, $100,000 and over |
70,268,504 | 72,982,196 | ||||||
Other time |
74,710,485 | 75,437,663 | ||||||
$ | 248,164,481 | $ | 252,291,854 | |||||
Accrued interest payable |
1,080,622 | 1,170,417 | ||||||
FHLB borrowings |
2,925,000 | 6,400,000 | ||||||
Accrued expenses and other liabilities |
3,947,594 | 4,005,322 | ||||||
TOTAL LIABILITIES |
$ | 256,117,697 | $ | 263,867,593 | ||||
SHAREHOLDERS EQUITY |
||||||||
Common stock, $1 par value; 5,000,000 shares
authorized; 458,048 shares issued at June 30, 2010 and
December 31, 2009 and 441,348 and 443,648 outstanding at
June 30, 2010 and December 31, 2009, respectively |
$ | 458,048 | $ | 458,048 | ||||
Capital surplus |
4,163,592 | 4,163,592 | ||||||
Retained earnings |
23,092,161 | 22,476,562 | ||||||
Accumulated other comprehensive income (loss) |
(72,284 | ) | (642,839 | ) | ||||
$ | 27,641,517 | $ | 26,455,363 | |||||
Less treasury stock, at cost, 16,700 shares at June 30, 2010
and 14,400 shares at December 31, 2009 |
(937,898 | ) | (825,068 | ) | ||||
TOTAL SHAREHOLDERS EQUITY |
$ | 26,703,619 | $ | 25,630,295 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
$ | 282,821,316 | $ | 289,497,888 | ||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
3
Table of Contents
CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
INTEREST INCOME |
||||||||||||||||
Interest and fees on loans |
$ | 2,998,412 | $ | 3,206,011 | $ | 6,030,211 | $ | 6,474,697 | ||||||||
Interest and dividends on securities
U.S. Government agencies and
corporations |
39,711 | 60,392 | 95,368 | 141,190 | ||||||||||||
Corporate bonds |
59,400 | 97,711 | 121,336 | 196,931 | ||||||||||||
Mortgage backed securities |
306,971 | 343,628 | 615,227 | 711,361 | ||||||||||||
State and political subdivisions |
329,486 | 179,366 | 637,863 | 337,019 | ||||||||||||
Interest on certificates of deposit |
597 | 6,059 | 2,052 | 8,625 | ||||||||||||
Interest on FHLB deposits |
3 | 6 | 57 | 29 | ||||||||||||
Interest on federal funds sold |
394 | 538 | 1,489 | 538 | ||||||||||||
$ | 3,734,974 | $ | 3,893,711 | $ | 7,503,603 | $ | 7,870,390 | |||||||||
INTEREST EXPENSE |
||||||||||||||||
Interest on interest bearing demand,
savings and time deposits |
$ | 1,193,655 | $ | 1,268,891 | $ | 2,431,178 | $ | 2,528,096 | ||||||||
Interest on FHLB borrowings |
2,935 | 74,058 | 26,518 | 160,891 | ||||||||||||
$ | 1,196,590 | $ | 1,342,949 | $ | 2,457,696 | $ | 2,688,987 | |||||||||
NET INTEREST INCOME |
$ | 2,538,384 | $ | 2,550,762 | $ | 5,045,907 | $ | 5,181,403 | ||||||||
PROVISION FOR LOAN LOSSES |
455,000 | 375,000 | 910,000 | 765,000 | ||||||||||||
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES |
$ | 2,083,384 | $ | 2,175,762 | $ | 4,135,907 | $ | 4,416,403 | ||||||||
NONINTEREST INCOME |
||||||||||||||||
Service charges on deposit accounts |
$ | 296,989 | $ | 336,159 | $ | 577,687 | $ | 626,734 | ||||||||
Other service charges, commissions
and fees |
226,461 | 204,630 | 433,678 | 387,108 | ||||||||||||
Other operating income |
27,808 | 20,772 | 51,808 | 98,340 | ||||||||||||
Income from title company |
| 3,267 | | 5,061 | ||||||||||||
Net gain on sales of loans |
9,949 | 19,542 | 14,643 | 20,324 | ||||||||||||
Net gain (loss) on sales and calls of securities |
5,213 | (1,672 | ) | 53,423 | 32,023 | |||||||||||
Net gain on sale of other real estate owned |
3,072 | 29,137 | 14,561 | 27,364 | ||||||||||||
Provision for losses on other real estate owned |
| (60,800 | ) | (48,000 | ) | (75,800 | ) | |||||||||
Net (loss) on disposal of premises, equpment and software |
| | (166 | ) | | |||||||||||
Net gain (loss) on sale of repossessed assets |
2,725 | | (4,425 | ) | | |||||||||||
$ | 572,217 | $ | 551,035 | $ | 1,093,209 | $ | 1,121,154 | |||||||||
NONINTEREST EXPENSES |
||||||||||||||||
Salaries |
$ | 725,968 | $ | 648,579 | $ | 1,467,705 | $ | 1,338,380 | ||||||||
Employee benefits |
299,222 | 282,312 | 588,467 | 577,636 | ||||||||||||
Occupancy of premises |
146,558 | 125,570 | 296,733 | 235,940 | ||||||||||||
Furniture and equipment expense |
156,593 | 159,078 | 313,724 | 319,145 | ||||||||||||
Other operating expenses |
842,223 | 796,838 | 1,571,138 | 1,451,256 | ||||||||||||
$ | 2,170,564 | $ | 2,012,377 | $ | 4,237,767 | $ | 3,922,357 | |||||||||
INCOME BEFORE INCOME TAXES |
$ | 485,037 | $ | 714,420 | $ | 991,349 | $ | 1,615,200 | ||||||||
PROVISION FOR INCOME TAXES |
62,217 | 201,294 | 141,836 | 470,341 | ||||||||||||
NET INCOME |
$ | 422,820 | $ | 513,126 | $ | 849,513 | $ | 1,144,859 | ||||||||
BASIC EARNINGS PER SHARE |
$ | 0.96 | $ | 1.15 | $ | 1.92 | $ | 2.56 | ||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
4
Table of Contents
CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)
Accumulated | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Common | Treasury | Capital | Retained | Comprehensive | Shareholders | |||||||||||||||||||
Stock | Stock | Surplus | Earnings | Income (Loss) | Equity | |||||||||||||||||||
BALANCE, JANUARY 1, 2009 |
$ | 458,048 | $ | (570,512 | ) | $ | 4,163,592 | $ | 21,015,652 | $ | (1,848,990 | ) | $ | 23,217,790 | ||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net income for six months
ended June 30, 2009 |
| | | 1,144,859 | | 1,144,859 | ||||||||||||||||||
Change in unrealized gains
(losses) on securities
available for sale (net of tax of $204,163) |
| | | | 333,108 | 333,108 | ||||||||||||||||||
Total Comprehensive Income |
1,477,967 | |||||||||||||||||||||||
Acquisition of treasury stock, at cost,
3,303 shares |
| (153,616 | ) | | | (153,616 | ) | |||||||||||||||||
Cash dividends ($.53 per share) |
(236,300 | ) | (236,300 | ) | ||||||||||||||||||||
BALANCE, JUNE 30, 2009 |
$ | 458,048 | $ | (724,128 | ) | $ | 4,163,592 | $ | 21,924,211 | $ | (1,515,882 | ) | $ | 24,305,841 | ||||||||||
BALANCE, JANUARY 1, 2010 |
$ | 458,048 | $ | (825,068 | ) | $ | 4,163,592 | $ | 22,476,562 | $ | (642,839 | ) | $ | 25,630,295 | ||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net income for six months
ended June 30, 2010 |
| | | 849,513 | | 849,513 | ||||||||||||||||||
Change in unrealized gains
(losses) on securities
available for sale (net of tax of $349,695) |
| | | | 570,555 | 570,555 | ||||||||||||||||||
Total Comprehensive Income |
1,420,068 | |||||||||||||||||||||||
Acquisition of treasury stock, at cost,
2,300 shares |
| (112,830 | ) | | | | (112,830 | ) | ||||||||||||||||
Cash dividends ($.53 per share) |
(233,914 | ) | (233,914 | ) | ||||||||||||||||||||
BALANCE, JUNE 30, 2010 |
$ | 458,048 | $ | (937,898 | ) | $ | 4,163,592 | $ | 23,092,161 | $ | (72,284 | ) | $ | 26,703,619 | ||||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
5
Table of Contents
CNB FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Unaudited)
Six months ended | ||||||||
June 30, | ||||||||
2010 | 2009 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 849,513 | $ | 1,144,859 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization on premises, equipment and software |
236,811 | 254,340 | ||||||
Provision for loan losses |
910,000 | 765,000 | ||||||
Provision for losses on other real estate owned |
48,000 | | ||||||
Deferred income taxes |
(327,557 | ) | (140,387 | ) | ||||
Net (gain) on sale of securities |
(53,423 | ) | (32,023 | ) | ||||
Net (gain) loss on sale of real estate owned |
(14,183 | ) | 48,436 | |||||
Decrease in deferred gain on sale of real estate owned |
378 | | ||||||
Loss on disposal of premises, equipment and software |
166 | | ||||||
Net (gain) on loans sold |
(14,643 | ) | (20,324 | ) | ||||
Loans originated for sale |
(1,330,300 | ) | (4,029,800 | ) | ||||
Proceeds from loans sold |
1,344,943 | 4,050,124 | ||||||
Decrease in accrued interest receivable |
29,881 | 47,848 | ||||||
(Increase) decrease in other assets |
692,161 | (2,079,124 | ) | |||||
Increase (decrease) in accrued interest payable |
(89,795 | ) | 15,384 | |||||
(Increase) in cash surrender value on life insurance in excess
of premiums paid |
(33,472 | ) | (87,999 | ) | ||||
Proceeds from life insurance death benefits |
| 194,184 | ||||||
(Decrease) in accrued expenses and other liabilities |
(58,106 | ) | (117,891 | ) | ||||
Amortization of deferred loan (fees) cost |
47,300 | 95,235 | ||||||
Amortization (accretion) of premium and discount on securities |
72,940 | 212 | ||||||
Amortization (accretion) of premium and discount on certificates of deposit |
| (364 | ) | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
$ | 2,310,614 | $ | 107,710 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Net decrease in loans, not originated for sale |
$ | 3,258,011 | $ | 729,498 | ||||
Proceeds from sales of securities |
4,813,393 | 1,319,395 | ||||||
Proceeds from maturities, repayments and calls of securities |
9,147,517 | 10,455,130 | ||||||
Proceeds from maturities of certificates of deposit |
1,989,000 | 250,000 | ||||||
Purchases of securities |
(14,919,961 | ) | (7,355,276 | ) | ||||
Purchases of certificates of deposit |
| (4,659,620 | ) | |||||
Purchases of premises, equipment and software |
(87,726 | ) | (100,131 | ) | ||||
Proceeds from sale of real estate owned |
610,892 | 402,906 | ||||||
Costs to acquire foreclosed real estate |
(7,592 | ) | (18,137 | ) | ||||
Net (increase) in federal funds sold |
| (1,050,000 | ) | |||||
Premiums paid on life insurance |
(55,208 | ) | (55,208 | ) | ||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
$ | 4,748,326 | $ | (81,443 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Net increase (decrease) in demand and savings deposits |
$ | (686,503 | ) | $ | 3,776,074 | |||
Net increase (decrease) in time deposits |
(3,440,870 | ) | 14,081,363 | |||||
Net (decrease) in FHLB borrowings |
(3,475,000 | ) | (15,445,000 | ) | ||||
Purchase of treasury stock |
(112,830 | ) | (153,616 | ) | ||||
Cash dividends paid |
(233,914 | ) | (236,300 | ) | ||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
$ | (7,949,117 | ) | $ | 2,022,521 | |||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
$ | (890,177 | ) | $ | 2,048,788 | |||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
5,068,118 | 4,770,724 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 4,177,941 | $ | 6,819,512 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
||||||||
Cash paid during the period: |
||||||||
Interest |
$ | 2,547,491 | $ | 2,673,603 | ||||
Income taxes |
$ | 260,582 | $ | 389,400 | ||||
Net transfer to foreclosed real estate, held for sale
from loans receivable |
$ | 665,000 | $ | 578,332 | ||||
Unrealized gain (loss) on investment securities
available for sale (net of tax) |
$ | 570,555 | $ | 333,108 |
The Notes to Consolidated Financial Statements are an integral part of these statements.
6
Table of Contents
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Unaudited)
Note 1. Basis of Presentation and Contingencies
In the opinion of CNB Financial Services, Inc. (CNB or the Company), the accompanying
unaudited consolidated financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of CNBs financial condition as of June 30,
2010 and the results of operations for the three and six months ended June 30, 2010 and 2009,
changes in shareholders equity and cash flows for the six months ended June 30, 2010 and 2009.
The accompanying unaudited financial statements have been prepared in accordance with the
instructions for Form 10-Q. These financial statements should be read in conjunction with the
audited consolidated financial statements and the notes included in CNBs Annual Report for the
year ended December 31, 2009.
In the ordinary course of business, the Company and its subsidiary are involved in various
legal proceedings. In the opinion of the management of CNB, there are no proceedings pending to
which CNB is a party or to which its property is subject, which, if determined adversely to CNB,
would be material in relation to CNBs financial condition. There are no proceedings pending other
than ordinary routine litigation incident to the business of CNB. In addition, no material
proceedings are pending or are known to be threatened or contemplated against CNB by government
authorities.
Earnings per share have been computed based on the following weighted average shares
outstanding:
6/30/2010 | 6/30/2009 | |||||||
Quarter ending |
441,581 | 446,696 | ||||||
Year to date ending |
442,600 | 447,124 |
7
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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2. Securities
The amortized cost and estimated market value of debt securities at June 30, 2010 and December
31, 2009 by contractual maturity are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
Securities are summarized as follows:
June 30, 2010 | Weighted Average |
|||||||||||||||||||
Gross | Gross | Estimated | Tax | |||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Equivalent | ||||||||||||||||
Cost | Gains | Losses | Value | Yield | ||||||||||||||||
Available for sale: |
||||||||||||||||||||
U.S. Government agencies
and corporations |
||||||||||||||||||||
Within one year |
$ | 730,000 | $ | 2,049 | $ | | $ | 732,049 | 4.00 | % | ||||||||||
After 5 but within 10 years |
5,496,067 | 30,941 | | 5,527,008 | 2.59 | |||||||||||||||
$ | 6,226,067 | $ | 32,990 | $ | | $ | 6,259,057 | 2.76 | % | |||||||||||
Corporate Bonds |
||||||||||||||||||||
Within one year |
$ | 491,939 | $ | 4,770 | $ | | $ | 496,709 | 3.23 | % | ||||||||||
After 1 but within 5 years |
1,474,743 | 117,224 | | 1,591,967 | 5.87 | |||||||||||||||
After 5 but within 10 years |
2,506,502 | 134,888 | 3,465 | 2,637,925 | 5.48 | |||||||||||||||
$ | 4,473,184 | $ | 256,882 | $ | 3,465 | $ | 4,726,601 | 5.36 | % | |||||||||||
States and political subdivisions |
||||||||||||||||||||
Within one year |
$ | 2,262,475 | $ | 8,885 | $ | | $ | 2,271,360 | 2.26 | % | ||||||||||
After 1 but within 5 years |
9,865,300 | 337,173 | 3,772 | 10,198,701 | 3.02 | |||||||||||||||
After 5 but within 10 years |
22,546,116 | 429,351 | 88,304 | 22,887,163 | 4.18 | |||||||||||||||
$ | 34,673,891 | $ | 775,409 | $ | 92,076 | $ | 35,357,224 | 3.72 | % | |||||||||||
Mortgage backed securities: |
||||||||||||||||||||
Government issued or
guaranteed |
$ | 12,110,850 | $ | 914,826 | $ | | $ | 13,025,676 | 5.16 | % | ||||||||||
Collateralized mortgage obligations: |
||||||||||||||||||||
Government issued or
guaranteed |
$ | 13,371,885 | $ | 392,206 | $ | 159 | $ | 13,763,932 | 3.88 | % | ||||||||||
Privately issued |
1,150,607 | | 147,162 | 1,003,445 | 7.60 | |||||||||||||||
$ | 14,522,492 | $ | 392,206 | $ | 147,321 | $ | 14,767,377 | 4.17 | % | |||||||||||
Total securities available for sale |
$ | 72,006,484 | $ | 2,372,313 | $ | 242,862 | $ | 74,135,935 | 4.07 | % | ||||||||||
Restricted: |
||||||||||||||||||||
Federal Home Loan Bank stock |
$ | 2,321,300 | $ | | $ | | $ | 2,321,300 | | % | ||||||||||
8
Table of Contents
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2. Securities (continued)
Weighted | ||||||||||||||||||||
December 31, 2009 | Average | |||||||||||||||||||
Gross | Gross | Estimated | Tax | |||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Equivalent | ||||||||||||||||
Cost | Gains | Losses | Value | Yield | ||||||||||||||||
Available for sale: |
||||||||||||||||||||
U.S. Government agencies
and corporations |
||||||||||||||||||||
Within one year |
$ | 864,592 | $ | 18,441 | $ | | $ | 883,033 | 3.68 | % | ||||||||||
After 1 but within 5 years |
2,006,039 | 1,077 | 17,468 | 1,989,648 | 1.60 | |||||||||||||||
After 5 but within 10 years |
5,742,908 | 29,965 | 22,737 | 5,750,136 | 3.27 | |||||||||||||||
$ | 8,613,539 | $ | 49,483 | $ | 40,205 | $ | 8,622,817 | 2.92 | % | |||||||||||
Corporate Bonds |
||||||||||||||||||||
Within one year |
$ | 252,711 | $ | | $ | 7,614 | $ | 245,097 | 6.76 | % | ||||||||||
After 1 but within 5 years |
1,490,853 | 47,318 | 7,029 | 1,531,142 | 4.84 | |||||||||||||||
After 5 but within 10 years |
2,997,344 | 57,064 | 19,138 | 3,035,270 | 5.60 | |||||||||||||||
$ | 4,740,908 | $ | 104,382 | $ | 33,781 | $ | 4,811,509 | 5.42 | % | |||||||||||
States and political subdivisions |
||||||||||||||||||||
Within one year |
$ | 2,898,507 | $ | 19,824 | $ | | $ | 2,918,331 | 1.92 | % | ||||||||||
After 1 but within 5 years |
9,567,178 | 314,547 | 357 | 9,881,368 | 2.98 | |||||||||||||||
After 5 but within 10 years |
19,656,673 | 216,197 | 139,565 | 19,733,305 | 4.20 | |||||||||||||||
$ | 32,122,358 | $ | 550,568 | $ | 139,922 | $ | 32,533,004 | 3.63 | % | |||||||||||
Mortgage backed securities: |
||||||||||||||||||||
Government issued or
guaranteed |
$ | 12,775,369 | $ | 640,601 | $ | | $ | 13,415,970 | 5.35 | % | ||||||||||
Collateralized mortgage obligations: |
||||||||||||||||||||
Government issued or
guaranteed |
$ | 11,489,702 | $ | 346,900 | $ | 21,947 | $ | 11,814,655 | 4.12 | % | ||||||||||
Privately issued |
1,321,605 | | 246,895 | 1,074,710 | 7.17 | |||||||||||||||
$ | 12,811,307 | $ | 346,900 | $ | 268,842 | $ | 12,889,365 | 4.43 | % | |||||||||||
Total securities available for sale |
$ | 71,063,481 | $ | 1,691,934 | $ | 482,750 | $ | 72,272,665 | 4.12 | % | ||||||||||
Restricted: |
||||||||||||||||||||
Federal Home Loan Bank stock |
$ | 2,321,300 | $ | | $ | | $ | 2,321,300 | | % | ||||||||||
Certificates of deposit |
$ | 1,989,000 | $ | 209 | $ | 192 | $ | 1,989,017 | 0.33 | % | ||||||||||
The fair value of securities pledged to secure public deposits and for other purposes as
required or permitted by law totaled $20,890,565 at June 30, 2010 and $24,761,434 at December 31,
2009.
Proceeds from sales of securities available for sale (excluding maturities and calls) during
the six months ended June 30, 2010 and 2009 were $4,813,393 and $1,319,395, respectively. Gross
gains (losses) of $53,796 and $(4,543) during the six months ended June 30, 2010 on respective
sales of securities and $33,695 and $(0) for the six months ended June 30, 2009 were realized on
the respective sales. Gross gains (losses) of $4,273 and ($103) and $23 and ($1,695) during the
six months ended June 30, 2010 and 2009, respectively were realized on called securities.
9
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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2. Securities (continued)
The following tables show our investments gross unrealized losses and fair value, aggregated
by investment category and length of time that individual securities have been in a continuous
unrealized loss position, at June 30, 2010 and December 31, 2009.
Securities are summarized as follows:
June 30, 2010 | ||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Description of Securities | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Corporate bonds |
$ | 497,891 | $ | 3,465 | $ | | $ | | $ | 497,891 | $ | 3,465 | ||||||||||||
State and political subdivisions |
5,837,971 | 84,022 | 738,521 | 8,054 | 6,576,492 | 92,076 | ||||||||||||||||||
Collateralized mortgage
obligations: |
||||||||||||||||||||||||
Government issued or
guaranteed |
| | 334,987 | 159 | 334,987 | 159 | ||||||||||||||||||
Privately issued |
| | 1,003,445 | 147,162 | 1,003,445 | 147,162 | ||||||||||||||||||
Total temporarily impaired
securities |
$ | 6,335,862 | $ | 87,487 | $ | 2,076,953 | $ | 155,375 | $ | 8,412,815 | $ | 242,862 | ||||||||||||
December 31, 2009 | ||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Description of Securities | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Corporate bonds |
$ | 990,185 | $ | 19,138 | $ | 723,796 | $ | 14,643 | $ | 1,713,981 | $ | 33,781 | ||||||||||||
U.S. Government agencies
and corporations |
3,207,366 | 40,205 | | | 3,207,366 | 40,205 | ||||||||||||||||||
State and political subdivisions |
8,689,560 | 124,471 | 929,785 | 15,451 | 9,619,345 | 139,922 | ||||||||||||||||||
Collateralized mortgage
obligations: |
||||||||||||||||||||||||
Government issued or
guaranteed |
1,995,305 | 19,204 | 370,595 | 2,742 | 2,365,900 | 21,946 | ||||||||||||||||||
Privately issued |
| | 1,074,651 | 246,896 | 1,074,651 | 246,896 | ||||||||||||||||||
Certificates of deposit |
499,808 | 192 | | | 499,808 | 192 | ||||||||||||||||||
Total temporarily impaired
securities |
$ | 15,382,224 | $ | 203,210 | $ | 3,098,827 | $ | 279,732 | $ | 18,481,051 | $ | 482,942 | ||||||||||||
Management evaluates securities for other-than-temporary impairment at least on a quarterly
basis, and more frequently when economic or market concerns warrant such evaluation. Consideration
is given to (1) the length of time and the extent to which the fair value has been less than cost,
(2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability
of the bank to retain its investment in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value.
10
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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2. Securities (continued)
At June 30, 2010, there were 23 available for sale securities that have unrealized losses with
aggregate depreciation of 2.8% from their amortized cost basis. The unrealized losses relate
principally to privately issue collateralized mortgage obligations. In analyzing these
collateralized mortgage obligations, management considers the collateral composition, prepayment
history and the overall credit worthiness of the investment. Some of the unrealized losses relate
to corporate bonds and municipal obligations and it is more likely than not that management will
not be required to sell the securities before the market value has
recovered. At June 30, 2010,
management analyzed the investment portfolio and determined no other-than-temporary losses were
needed at the present time.
Note 3. Loans and Leases Receivable
Major classifications of loans at June 30, 2010 and December 31, 2009, were as follows:
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
Loans: |
||||||||
Real estate |
$ | 126,114,799 | $ | 129,509,117 | ||||
Commercial real estate |
43,750,794 | 43,972,033 | ||||||
Consumer |
15,654,034 | 16,683,611 | ||||||
Commercial |
7,696,620 | 7,276,430 | ||||||
Overdrafts |
126,249 | 203,337 | ||||||
$ | 193,342,496 | $ | 197,644,528 | |||||
Leases |
517,973 | 585,393 | ||||||
$ | 193,860,469 | $ | 198,229,921 | |||||
Net deferred loan fees, costs,
premiums and discounts |
398,866 | 380,025 | ||||||
Allowance for loan losses |
(4,432,420 | ) | (3,902,720 | ) | ||||
$ | 189,826,915 | $ | 194,707,226 | |||||
An analysis of the allowance for possible loan losses is as follows:
June 30, | December 31, | |||||||||||
2010 | 2009 | 2009 | ||||||||||
Balance, Beginning |
$ | 3,902,720 | $ | 2,751,386 | $ | 2,751,386 | ||||||
Provision charged to
operations |
910,000 | 765,000 | 1,852,726 | |||||||||
Recoveries |
132,761 | 129,179 | 116,135 | |||||||||
Loans charged off |
(513,061 | ) | (528,357 | ) | (817,527 | ) | ||||||
Balance, Ending |
$ | 4,432,420 | $ | 3,117,208 | $ | 3,902,720 | ||||||
11
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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3. Loans and Leases Receivable (continued)
The following is a summary of information pertaining to impaired loans:
June 30, | December 31, | |||||||||||
2010 | 2009 | 2009 | ||||||||||
Impaired loans without a valuation allowance |
$ | | $ | | $ | | ||||||
Impaired loans with a valuation allowance (1) |
821,943 | 1,375,400 | 935,785 | |||||||||
Total impaired loans |
$ | 821,943 | $ | 1,375,400 | $ | 935,785 | ||||||
Valuation allowance related to impaired loans |
$ | 182,138 | $ | 440,285 | $ | 235,073 |
(1) | Some of these loans have government agency guarantees reducing the banks exposure by $18,884 for June 30, 2010, $44,842 at June 30, 2009 and $31,379 for December 31, 2009 |
June 30, | December 31, | |||||||||||
2010 | 2009 | 2009 | ||||||||||
Average investment in impaired loans |
$ | 1,098,672 | $ | 1,301,234 | $ | 1,081,427 | ||||||
Interest income recognized on impaired loans |
$ | 23,041 | $ | 29,458 | $ | 56,662 | ||||||
Interest income recognized on a cash basis on
impaired loans |
$ | 23,041 | $ | 29,458 | $ | 56,662 | ||||||
Loans are placed on nonaccrual status when, in the judgment of management, the probability of
collection of interest is deemed to be insufficient to warrant further accrual. When interest
accruals are discontinued, interest credited to income is reversed. Nonaccrual loans are restored
to accrual status when all delinquent principal and interest becomes current or the loan is
considered secured and in the process of collection. Certain loans that are determined to be
sufficiently collateralized may continue to accrue interest after reaching 90 days past due. A
summary of nonperforming assets is as follows:
June 30, | December 31, | |||||||||||
2010 | 2009 | 2009 | ||||||||||
Foreclosed real estate (other real estate owned) |
$ | 414,383 | $ | 398,427 | $ | 386,500 | ||||||
Impaired loans, not on nonaccrual |
704,011 | 778,483 | 826,658 | |||||||||
Nonaccrual loans, impaired (1) |
117,932 | 596,917 | 109,127 | |||||||||
Nonaccrual loans, not impaired |
2,060,756 | 682,727 | 1,456,367 | |||||||||
Loans past due 90 days or more still accruing
interest |
| | | |||||||||
Total non-performing assets |
$ | 3,297,082 | $ | 2,456,554 | $ | 2,778,652 | ||||||
(1) | Some of these loans have government agency guarantees reducing the banks exposure by $18,884 at June 30, 2010, $44,842 at June 30, 2009 and $31,379 at December 31, 2009. |
12
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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4. Time Deposits
At June 30, 2010, the scheduled maturities of time deposits are as follows:
Time Deposits | All Time | |||||||
$100,000 and Over | Deposits | |||||||
Within 3 months |
$ | 4,371,905 | $ | 10,352,558 | ||||
3 months thru 6 months |
16,173,770 | 29,031,065 | ||||||
6 months thru 12 months |
25,424,719 | 45,116,580 | ||||||
Over 12 months |
24,298,110 | 60,478,786 | ||||||
$ | 70,268,504 | $ | 144,978,989 | |||||
Note 5. Federal Home Loan Bank Borrowings
June 30, | December 31, | |||||||||||
2010 | 2009 | 2009 | ||||||||||
Federal Home Loan Bank
advances |
$ | 2,925,000 | $ | 10,000,000 | $ | 6,400,000 |
CNB Bank, Inc. is a member of the Federal Home Loan Bank (FHLB) of Pittsburgh and, as such,
can take advantage of the FHLB program for overnight and term advances at published daily rates.
At June 30, 2010, the Bank has long term advances with FHLB. Under the terms of a blanket
collateral agreement, advances from the FHLB are collateralized by qualifying mortgages and US
government agencies and mortgage-backed securities. In addition, all of the Banks stock in the
FHLB is pledged as collateral for such debt. Term advances available under this agreement are
limited by available and qualifying collateral and the amount of FHLB stock held by the borrower.
Note 6. Pension Plan
CNB Bank, Inc. has an obligation under a defined benefit plan covering all eligible employees.
See Note 11 Pension Plan to our consolidated financial statements in our most recently filed
Annual Report on Form 10-K for further information.
The components of net periodic plan cost charged to operations are as follows:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Service cost |
$ | 65,133 | $ | 59,099 | $ | 130,266 | $ | 118,199 | ||||||||
Interest cost |
86,446 | 79,061 | 172,891 | 158,123 | ||||||||||||
Expected return on plan assets |
(86,656 | ) | (81,877 | ) | (173,311 | ) | (163,754 | ) | ||||||||
Amortization of prior service costs |
3,086 | 3,086 | 6,172 | 6,172 | ||||||||||||
Recognized net actuarial loss |
21,530 | 18,322 | 43,061 | 36,643 | ||||||||||||
Net periodic plan cost |
$ | 89,539 | $ | 77,691 | $ | 179,079 | $ | 155,383 | ||||||||
Employer contributions paid during the periods ended June 30, 2010 and 2009 were $304,000 and
$477,092, respectively.
13
Table of Contents
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7. Supplemental Retirement Plan
On January 2, 2004, the Bank entered into a nonqualified supplemental retirement benefit
agreement with the President which when fully vested would pay the President or his beneficiary an
amount of $30,000 per year for 10 years beginning September 11, 2011, if he retires on or after May
29, 2011. Termination of employment prior to that date other than by reasons of death or
disability will result in a reduced benefit. The expense for the six months ended June 30, 2010
and 2009 was $5,980 and $19,713, respectively.
Note 8. Health Insurance Plan
Effective January 1, 2005, the Bank changed its health insurance program to a high deductible
plan and concurrently established health reimbursement accounts for each employee in the plan. The
Bank has committed to fund $750 for each participant in 2010 and 2009. The expense incurred for
the health reimbursement accounts for the six months ended June 30, 2010 and 2009 was $25,819 and
$26,719, respectively.
Note 9. Fair Value Measurements
The FASB ASC Topic 820, Financial Instruments, requires the disclosure of the estimated fair
value of certain financial instruments. CNBs available for sale investment portfolio is subject
to disclosure for interim reporting. Fair value is the price that would be received upon sale of
an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. The following fair value hierarchy is used in selecting inputs, with the
highest priority given to Level 1, as these are most transparent or reliable.
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the financial
instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the
fair value measurement.
The following describes the valuation techniques used by CNB to measure certain financial
assets and liabilities recorded at fair value on a recurring basis in the financial statements:
Securities available for sale and certificates of deposit investments
Securities available for sale and certificates of deposit investments are recorded at fair
value on a recurring basis. Fair value measurement is based upon quoted market prices, when
available (Level 1). If quoted market prices are not available, fair values are measured utilizing
independent valuation techniques of identical or similar securities for which significant
assumptions are derived primarily from or corroborated by observable market data. Third party
vendors compile prices from various sources and may determine the fair value of identical or
similar securities by using pricing models that considers observable market data (Level 2). In
certain cases where there is limited activity or less transparency around inputs to the valuation,
securities are classified within Level 3 of the valuation hierarchy. At June 30, 2010 and December
31, 2009, all of CNBs securities and certificates of deposit investments are considered to be
Level 2 investments.
14
Table of Contents
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9. Fair Value Measurements (continued)
The following table presents the balances of financial assets and liabilities measured at fair
value on a recurring basis as of June 30, 2010 and December 31, 2009:
Valuation of our Financial Instruments by Fair Value Hierarchy Levels Recurring Basis
June 30, 2010 | ||||||||||||||||
(In Thousands) | ||||||||||||||||
Significant | ||||||||||||||||
In Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets: |
||||||||||||||||
U.S. government agencies and corporations |
$ | 6,259 | $ | | $ | 6,259 | $ | | ||||||||
Corporate bonds |
4,727 | | 4,727 | | ||||||||||||
State and municipal securities |
35,357 | | 35,357 | | ||||||||||||
Residential mortgage-backed securities |
13,026 | | 13,026 | | ||||||||||||
Collateralized mortgage obligations |
14,767 | | 14,767 | |
December 31, 2009 | ||||||||||||||||
(In Thousands) | ||||||||||||||||
Significant | ||||||||||||||||
In Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets: |
||||||||||||||||
U.S. government agencies and corporations |
$ | 8,623 | $ | | $ | 8,623 | $ | | ||||||||
Corporate bonds |
4,812 | | 4,812 | | ||||||||||||
State and municipal securities |
32,533 | | 32,533 | | ||||||||||||
Residential mortgage-backed securities |
13,416 | | 13,416 | | ||||||||||||
Collateralized mortgage obligtions |
12,889 | | 12,889 | | ||||||||||||
Certificates of deposit investments |
1,989 | | 1,989 | |
Certain financial assets are measured at fair value on a nonrecurring basis in accordance
with accounting principles generally accepted in the United States (GAAP). Adjustments to the
fair value of these assets usually result from the application of lower-of-cost-or-market
accounting or write-downs of individual assets.
The following describes the valuation techniques used by CNB to measure certain financial
assets recorded at fair value on a nonrecurring basis in the financial statements:
Loans held for sale
These loans currently consist of one-to-four family residential loans originated for sale in
the secondary market. Fair value is based on the price secondary markets are currently offering
for similar loans using observable market data which is not materially different than cost due to
the short duration between origination and sale (Level 2). Loans held for sale are required to be
measured at lower of cost or fair value. Under ASC Topic 820, market value is to represent fair
value. Management obtains quotes or bids on all or part of these loans directly from the
purchasing financial institutions. Premiums received or to be received on the quotes or bids are
indicative of the fact that cost is lower than fair value. At June 30, 2010, CNB did not have any
loans held for sale.
15
Table of Contents
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9. Fair Value Measurements (continued)
Impaired loans
Loans are designated as impaired when, in the judgment of management based on current
information and events, it is probable that all amounts due according to the contractual terms of
the loan agreement will not be collected. The measurement of loss associated with impaired loans
can be based on either the observable market price of the loan or the fair value of the collateral.
Fair value is measured based on the value of the collateral securing the loans. Collateral may be
in the form of real estate or business assets including equipment, inventory, and accounts
receivable. The value of real estate collateral is determined utilizing an income or market
valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of
the Company using observable market data (Level 2). However, if the collateral is a house or
building in the process of construction or if an appraisal of the real estate property is over two
years old, then the fair value is considered Level 3. The value of business equipment is based
upon an outside appraisal if deemed significant, or the net book value on the applicable business
financial statements if not considered significant using observable market data. Likewise, values
for inventory and accounts receivables collateral are based on financial statement balances or
aging reports (Level 3). Impaired loans allocated to the Allowance for Loan Losses are measured at
fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred
as provision for loan losses on the Consolidated Statements of Income.
Certain assets such as other real estate owned are measured at the lower of cost or fair value
less the estimated cost to sell. Management believes that the fair value component in its
valuation follows the provisions of ASC Topic 820. CNB had no fair value measurement adjustments
to impaired loans during the quarter ended June 30, 2010.
Other Real Estate Owned
Certain assets such as other real estate owned (OREO) are measured at fair value less cost to
sell. CNB had $0 of fair value adjustments during the quarter ended June 30, 2010 and $130,800 of
fair value adjustments during the year ended December 31, 2009 resulting from the inability to sell
a property at its appraised value. We believe that the fair value component in its valuation
follows the provisions of ASC Topic 820.
The following table summarized CNBs financial and nonfinancial assets that were measured at
fair value on a nonrecurring basis during the period.
Valuation of our Financial Instruments by Fair Value Hierarchy Levels Non-recurring Basis
June 30, 2010 | ||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Quoted Prices | Significant | |||||||||||||||||||
In Active | Other | Significant | ||||||||||||||||||
Markets for | Observable | Unobservable | Recognized | |||||||||||||||||
Identical Assets | Inputs | Inputs | Gains | |||||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | (Losses) | |||||||||||||||
Assets: |
||||||||||||||||||||
Impaired loans, net of government
agency guarantees and reserve for losses |
$ | 621 | $ | | $ | 621 | $ | | $ | | ||||||||||
Other real estate owned |
$ | 414 | $ | | $ | 414 | $ | | $ | (33 | ) |
December 31, 2009 | ||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Quoted Prices | Significant | |||||||||||||||||||
In Active | Other | Significant | ||||||||||||||||||
Markets for | Observable | Unobservable | Recognized | |||||||||||||||||
Identical Assets | Inputs | Inputs | Gains | |||||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | (Losses) | |||||||||||||||
Assets: |
||||||||||||||||||||
Impaired loans, net of government agency |
||||||||||||||||||||
guarantees and reserve for losses |
$ | 669 | $ | | $ | 669 | $ | | $ | | ||||||||||
Other real estate owned |
$ | 387 | $ | | $ | 387 | $ | | $ | (149 | ) |
16
Table of Contents
CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9. Fair Value Measurements (continued)
The fair value is the current amount that would be exchanged between willing parties, other
than in a forced liquidation. Fair value is best determined based upon quoted market prices.
However, in many instances, there are no quoted market prices for the Companys various financial
assets. In cases where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash flows. Accordingly,
the fair value estimates may not be realized in an immediate settlement of the assets.
The estimated fair values of the Companys financial instruments at June 30, 2010 and December
31, 2009 are summarized below. The fair values of a significant portion of these financial
instruments are estimates derived using present value techniques and may not be indicative of the
net realizable or liquidation values. Also, the calculation of estimated fair values is based on
market conditions at a specific point in time and may not reflect current or future fair values.
June 30, 2010 | December 31, 2009 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
Financial Assets: |
||||||||||||||||
Cash, due from banks and
federal funds sold |
$ | 4,177,941 | $ | 4,177,941 | $ | 5,068,118 | $ | 5,068,118 | ||||||||
Securities available for
sale |
74,135,935 | 74,135,935 | 72,272,665 | 72,272,665 | ||||||||||||
Loans |
189,826,915 | 185,989,079 | 194,707,226 | 191,450,941 | ||||||||||||
Accrued interest receivable |
1,304,823 | 1,304,823 | 1,334,704 | 1,334,704 | ||||||||||||
Financial Liabilities: |
||||||||||||||||
Demand deposits |
$ | 103,185,492 | $ | 103,185,492 | $ | 103,871,995 | $ | 103,871,995 | ||||||||
Time deposits |
144,978,989 | 148,809,009 | 148,419,859 | 157,634,463 | ||||||||||||
Accrued interest payable |
1,080,622 | 1,080,622 | 1,170,417 | 1,170,417 | ||||||||||||
FHLB borrowings |
2,925,000 | 2,925,000 | 6,400,000 | 6,400,000 | ||||||||||||
Off-Balance Sheet |
||||||||||||||||
Financial Instruments: |
||||||||||||||||
Letters of credit |
$ | | $ | 250 | $ | | $ | |
Note 10. Recently Issued Accounting Standards
ASC Topic 860 Transfers and Servicing (Statement No. 166, Accounting for Transfers of
Financial Assets an amendment of FASB Statement No. 140) (ASC 860). This accounting guidance was
originally issued in June 2009 and is now included in ASC 860. The guidance removes the concept of
a qualifying special purpose entity and changes the requirements for derecognizing financial
assets. Many types of transferred financial assets that would have been derecognized previously are
no longer eligible for derecognition. The guidance is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2009, and early adoption is
prohibited. The guidance applies prospectively to transfers of financial assets occurring on or
after the effective date. The guidance will impact structuring of securitizations and other
transfers of financial assets in order to meet the amended sale treatment criteria.
ASC Topic 810 Consolidation (Statement No. 167, Amendments to FASB Interpretation No.
46R) (ASC 810) This accounting guidance was originally issued in June 2009 and is now included in
ASC 810. The guidance amends the consolidation guidance applicable for variable interest entities
(VIE). The guidance is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2009, and early adoption is
prohibited. The adoption of this guidance did not have a material impact on CNBs consolidated
financial statements.
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CNB FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 10. Recently Issued Accounting Standards (continued)
Accounting Standards Update (ASU) 2010-6 Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements. The ASU amends Subtopic 820-10 with new
disclosure requirements and clarification of existing disclosure requirements. New disclosures
required include the amount of significant transfers in and out of levels 1 and 2 fair value
measurements and the reasons for the transfers. In addition, the reconciliation for level 3
activity will be required on a gross rather than net basis. The ASU provides additional guidance
related to the level of disaggregation in determining classes of assets and liabilities and
disclosures about inputs and valuation techniques. The amendments are effective for annual or
interim reporting periods beginning after December 15, 2009, except for the requirement to provide
the reconciliation for level 3 activity on a gross basis which will be effective for fiscal years
beginning after December 15, 2010.
Accounting Standards Update (ASU) 2010-9 Subsequent Events (Topic 855): Amendments to
Certain Recognition and Disclosure Requirements. ASU 2010-9 amends Topic 855 to exclude SEC
reporting entities from the requirement to disclose the date on which subsequent events have been
evaluated. In addition, it modifies the requirement to disclose the date on which subsequent
events have been evaluated in reissued financial statements to apply only to such statements that
have been restated to correct an error or to apply U.S. GAAP retrospectively. The amendments are
generally effective immediately, but with respect to the requirement that conduit obligors evaluate
subsequent events through the date the financial statements are issued, the effective date is for
interim or annual reporting periods ending after June 15, 2010. CNB has adopted ASU 2010-9 with no
material impact on the consolidated financial statements.
Accounting Standards Update (ASU) 2010-18 Effect of a Loan Modification When the Loan is Part of
a Pool that is Accounted for as a Single Asset (Topic 310). ASU 2010-18 was issued in April 2010.
This guidance is effective for modifications of loans accounted for within pools under Subtopic
310-30 occurring in the first interim or annual period ending after July 15, 2010. As a result of
the amendments in this Update, modification of loans within the pool does not result in the removal
of those loans from the pool even if the modification of those loans would otherwise be considered
a trouble debt restructuring. An entity will continue to be required to consider whether the pool
of assets in which the loan is included is impaired if expected cash flows for the pool change.
However, loans within the scope of Subtopic 310-30 that are accounted for individually will
continue to be subject to the troubled debt restructuring accounting provisions. The provisions of
this Update will be applied prospectively with early application permitted. Upon initial adoption
of the guidance in this Update, an entity may make a one-time election to terminate accounting for
loans as a pool under Subtopic 310-30. The election may be applied on a pool-by-pool basis and does
not preclude an entity from applying pool accounting to subsequent acquisitions of loans with
credit deterioration. CNB does not have any pools of loans accounted for as a single asset as
defined in Subtopic 310-30, and therefore, the adoption of this Update will not have a significant
effect on CNBs financial statements.
Accounting Standards Update (ASU) 2010-20 Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses (Topic 310). ASU 2010-20 was issued in July 2010.
This guidance will significantly expand the disclosures that the Company must make about the credit
quality of financing receivables and the allowance for credit losses. The objectives of the
enhanced disclosures are to provide financial statement users with additional information about the
nature of credit risks inherent in the Companys financing receivables, how credit risk is analyzed
and assessed when determining the allowance for credit losses, and the reasons for the change in
the allowance for credit losses. The disclosures as of the end of the reporting period are
effective for the Companys interim and annual periods ending on or after December 15, 2010. The
disclosures about activity that occurs during a reporting period are effective for the Companys
interim and annual periods beginning on or after December 15, 2010. The adoption of this Update
requires enhanced disclosures and is not expected to have a significant effect on CNBs financial
statements.
Note 11. Subsequent Events
The Company has evaluated events and transactions subsequent to June 30, 2010 through the date
these consolidated financial statements were included in this Form 10-Q and filed with the SEC.
Based on the definitions and requirements of Generally Accepted Accounting Principles, we have
identified an event that has occurred subsequent to June 30, 2010, that requires recognition or
disclosure in the consolidated financial statements. On July 6, 2010, CNB filed Schedule 13E-3 and
Schedule 14A with the Securities and Exchange Commission detailing their request to become a
privately held company.
18
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
CNB Financial Services, Inc. (CNB or the Company) was organized under the laws of West
Virginia in March 2000 at the direction of the Board of Directors of CNB Bank, Inc. formerly
Citizens National Bank, (the Bank) for the purpose of becoming a financial services holding
company. The Companys primary function is to direct, plan and coordinate the business activities
for the Bank and its subsidiary. We refer to the Company and its subsidiary as CNB.
On August 31, 2000, the Bank, via merger, became a wholly-owned subsidiary of the Company and
the shareholders of the Bank became shareholders of the Company. Each Bank shareholder received
two shares of the Company stock for each share of the Banks common stock. The merger was
accounted for as a pooling of interests.
The Bank was organized on June 20, 1934, and has operated in Berkeley Springs in Morgan
County, West Virginia, as a national banking association continuously until October 16, 2006, at
which time the Bank obtained a West Virginia state charter and began operating as a state banking
association.
The Bank is a full-service commercial bank conducting general banking and trust activities
through six full-service offices and six automated teller machines located in Morgan and Berkeley
Counties, West Virginia and Washington County, Maryland.
The following discussion and analysis presents the significant changes in financial condition
and results of operations of CNB for the three and six months ended June 30, 2010 and 2009. This
discussion may include forward-looking statements based upon managements expectations. Actual
results may differ. We have rounded amounts and percentages used in this discussion and have based
all average balances on daily averages.
CRITICAL ACCOUNTING POLICIES
CNB has established various accounting policies which govern the application of accounting
principles generally accepted in the United States of America in the preparation and presentation
of CNBs consolidated financial statements. The significant accounting policies of CNB are
described in Item 1, Critical Accounting Policies and Note 1: Summary of Significant Accounting
Policies of the Consolidated Financial Statements on Form 10-K as of December 31, 2009, and along
with the disclosures presented in other financial statement notes, provide information on how
significant assets and liabilities are valued in the financial statements and how those values are
determined. Certain accounting policies involve significant judgments, assumptions and estimates
by management that have a material impact on the carrying value of certain assets and liabilities,
which management considers to be critical accounting policies. The judgments, assumptions and
estimates used by management are based on historical experience, knowledge of the accounts and
other factors, which are believed to be reasonable under the circumstances. Because of the nature
of the judgment and assumptions made by management, actual results could differ from these
judgments and estimates, which could have a material impact on the carrying values of assets and
liabilities and the results of operations of the Company.
CNB views the determination of the allowance for loan losses as a critical accounting policy
that requires the most significant judgments, assumptions and estimates used in the preparation of
its consolidated financial statements. For a more detailed discussion on the allowance for loan
losses, see Nonperforming Loans and Allowance For Loan Losses in the Managements Discussion and
Analysis and Allowance for Loan Losses in Note 1: Summary of Significant Accounting Policies and
Note 4: Loans and Leases Receivable in the Notes to Consolidated Financial Statements in the Form
10-K for December 31, 2009.
19
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EARNINGS SUMMARY
Net income for the three months ended June 30, 2010 was $423,000 or $0.96 per share compared
to $513,000 or $1.15 per share for the same period in 2009. Annualized return on average assets
and average equity were .6% and 6.5% respectively, for the three months ended June 30, 2010,
compared with 0.7% and 8.6%, respectively, for the three months ended June 30, 2009.
Net income for the six months ended June 30, 2010 was $850,000 or $1.92 per share compared to
$1.1 million or $2.56 per share for the same period in 2009. Annualized return on average assets
and average equity were .6% and 6.6% respectively, for the six months ended June 30, 2010, compared
with 0.8% and 9.7%, respectively, for the six months ended June 30, 2009.
Earnings projections for the remainder of 2010 are expected to be impacted by the continued
slowing in the Banks loan demand and poor economic conditions. The Bank is anticipating an
additional expense of approximately $990,000 to the provision for loan losses for the remainder of
2010 due to the continued foreclosure activity, increased number of impaired loans and loans with
weaknesses. Another significant factor affecting the 2010 net income are increased expenses
related to the FDIC insurance regular assessment. The Federal Reserve amended Regulation E to
require financial institutions to obtain a specific opt-in consent from customers in order for the
institution to be able to pay into overdraft and charge an overdraft fee whenever a customers ATM
transactions and one-time debit card transactions, such as point-of-sale transactions, cause an
account to go into overdraft. This amendment will have an impact on the banks overdraft fee
income in 2010. The passage of the interchange act by Congress in July 2010 will have an impact on
the banks ATM and debit card interchange fee income in 2010.
NET INTEREST INCOME
Net interest income represents the primary component of CNBs earnings. It is the difference
between interest and fee income related to earning assets and interest expense incurred to carry
interest-bearing liabilities. Changes in the volume and mix of interest earning assets and
interest bearing liabilities, as well as changing interest rates, impact net interest income. To
manage these changes, their impact on net interest income and the risk associated with them, CNB
utilizes an ongoing asset/liability management program. This program includes analysis of the
difference between rate sensitive assets and rate sensitive liabilities, earnings sensitivity to
rate changes, and source and use of funds. A discussion of net interest income and the factors
impacting it is presented below.
Net interest income for the three months ended June 30, 2010 decreased by $12,000 or .5% over
the same period in 2009. Interest income for the three months ended June 30, 2010 decreased by
$159,000 or 4.1% compared to the same period in 2009, while interest expense decreased by $146,000
or 10.9% during the three months ended June 30, 2010, as compared to the same period in the prior
year.
Net interest income for the six months ended June 30, 2010 decreased by $135,000 or 2.6% over
the same period in 2009. Interest income for the six months ended June 30, 2010 decreased by
$367,000 or 4.7% compared to the same period in 2009, while interest expense decreased by $231,000
or 8.6% during the six months ended June 30, 2010, as compared to the same period in the prior
year.
During the second quarter of 2010, the average balance of interest bearing liabilities, net of
the average balance of borrowings, increased at a faster pace than the average balance of interest
earning assets increased, while the interest expense paid on the liabilities net of borrowings
decreased at a slower pace than the interest earned on the assets resulting in a decrease in net
interest income for the three month period ending June 30, 2010. The 34 basis point decrease in
rates earned on average interest earning assets offset by a 28 basis point decrease in rates paid
on average interest bearing liabilities contributed to the 6 basis point decrease in the net
interest margin while the ratio of net interest income to average interest earning assets also
decreased by 7 basis points.
For the three and six month periods ending June 30, 2010 compared to the same periods in 2009,
CNB experienced an increase in the average balance of interest earning assets of $6.1 and 7.2
million, respectively along with a shift in the composition of the interest earning assets. The
increase in the average balance of interest earning assets is a result of higher balances in the
lower yielding federal funds sold and investment securities with a strong emphasis in tax exempt
securities offset by a decrease in the average balance on loans. The reason for the decrease in
the average balance on loans was due to the continued slow housing market and the overall lower
loan demand. Along with the shift to lower yielding interest earning assets was the decrease in
the yields of all earning assets. These factors impacted the 34 and 39 basis point decreases in
the average interest earned on these assets for the three and six month periods ending June 30,
2010.
For the three and six month period ending June 30, 2010 compared to the same period in 2009,
CNB experienced an increase in the average balance of interest bearing liabilities. Although,
each interest bearing deposit category has shown
20
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growth in aggregate of $10.4 million and $13.4 million, respectively during the three and six
month periods ending June 30, 2010 compared to the same periods in 2009 except for money market
accounts, the decrease in the average balance of borrowings of $9.7 million and $11.7 million,
respectively overshadowed the increases in the deposits. The full impact of the increase in
average interest bearing deposit accounts was reduced by the decreased average balance of
borrowings the bank held during this same period. During the aforementioned time frames, the Bank
has also experienced lower rates paid on these interest bearing liabilities. These factors impacted
the 28 and 23 basis point decrease in the average interest paid on these liabilities for the three
and six month periods ending June 30, 2010.
See Table 1 and Table 2 Distribution of Assets, Liabilities, and Shareholders Equity;
Interest Rates and Interest Differential.
The net interest margin is impacted by the change in the spread between yields on earning
assets and rates paid on interest bearing liabilities.
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TABLE 1. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
RATES AND INTEREST DIFFERENTIAL
JUNE 30, 2010 | JUNE 30, 2009 | |||||||||||||||||||||||
QTR | QTR | |||||||||||||||||||||||
AVERAGE | QTR | YIELD/ | AVERAGE | QTR | YIELD/ | |||||||||||||||||||
BALANCE | INTEREST | RATE(4) | BALANCE | INTEREST | RATE(4) | |||||||||||||||||||
(IN THOUSANDS OF DOLLARS) | ||||||||||||||||||||||||
Interest earning assets: |
||||||||||||||||||||||||
Federal funds sold |
$ | 317 | $ | | 0.19 | % | $ | 1,165 | $ | 1 | 0.18 | % | ||||||||||||
Certificates of deposit |
773 | 1 | 0.52 | 2,704 | 6 | 0.89 | ||||||||||||||||||
Securities: |
||||||||||||||||||||||||
Taxable |
45,834 | 486 | 4.24 | 41,790 | 519 | 4.97 | ||||||||||||||||||
Tax-exempt (1) |
30,152 | 249 | 5.00 | 18,789 | 162 | 5.23 | ||||||||||||||||||
Loans (net of unearned interest) (2)(5)(6) |
194,789 | 2,952 | 6.06 | 201,321 | 3,143 | 6.24 | ||||||||||||||||||
Total interest earning assets (1) |
$ | 271,865 | $ | 3,688 | 5.43 | % | $ | 265,769 | $ | 3,831 | 5.77 | % | ||||||||||||
Nonearning assets: |
||||||||||||||||||||||||
Cash and due from banks |
$ | 4,054 | $ | 5,806 | ||||||||||||||||||||
Bank premises and equipment, net |
5,451 | 5,757 | ||||||||||||||||||||||
Other assets |
6,898 | 7,115 | ||||||||||||||||||||||
Allowance for loan losses |
(4,287 | ) | (2,979 | ) | ||||||||||||||||||||
Total assets |
$ | 283,981 | $ | 281,468 | ||||||||||||||||||||
Interest bearing liabilities: |
||||||||||||||||||||||||
Savings deposits |
$ | 26,507 | $ | 7 | 0.11 | % | $ | 24,759 | $ | 6 | 0.10 | % | ||||||||||||
Time deposits |
147,198 | 1,157 | 3.14 | 138,999 | 1,233 | 3.55 | ||||||||||||||||||
NOW accounts |
24,338 | 26 | 0.43 | 21,936 | 25 | 0.46 | ||||||||||||||||||
Money market accounts |
10,640 | 4 | 0.15 | 12,634 | 5 | 0.16 | ||||||||||||||||||
Borrowings |
1,643 | 3 | 0.73 | 11,293 | 74 | 2.62 | ||||||||||||||||||
Total interest bearing liabilities |
$ | 210,326 | $ | 1,197 | 2.28 | % | $ | 209,621 | $ | 1,343 | 2.56 | % | ||||||||||||
Noninterest bearing liabilities: |
||||||||||||||||||||||||
Demand deposits |
$ | 42,608 | $ | 42,660 | ||||||||||||||||||||
Other liabilities |
4,867 | 5,358 | ||||||||||||||||||||||
Shareholders equity |
26,180 | 23,829 | ||||||||||||||||||||||
Total liabilities and
shareholders equity |
$ | 283,981 | $ | 281,468 | ||||||||||||||||||||
Net interest income (1) |
$ | 2,491 | $ | 2,488 | ||||||||||||||||||||
Net interest spread (3) |
3.15 | % | 3.21 | % | ||||||||||||||||||||
Net interest income to average
interest earning assets (1) |
3.67 | % | 3.74 | % | ||||||||||||||||||||
(1) | Yields are expressed on a tax equivalent basis using a 34% tax rate. | |
(2) | For the purpose of these computations, nonaccruing loans are included in the amounts of average loans outstanding. | |
(3) | Net interest spread is the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. | |
(4) | Yields/Rates are expressed on an annualized basis. | |
(5) | Interest income on loans excludes fees of $46,854 in 2010 and $62,662 in 2009. | |
(6) | Interest income on loans includes fees of $16,810 in 2010 and $23,321 in 2009 from student loans and lease receivables. |
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TABLE 2. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY; INTEREST RATES AND
INTEREST DIFFERENTIAL
INTEREST DIFFERENTIAL
JUNE 30, 2010 | JUNE 30, 2009 | |||||||||||||||||||||||
YTD | YTD | |||||||||||||||||||||||
AVERAGE | YTD | YIELD/ | AVERAGE | YTD | YIELD/ | |||||||||||||||||||
BALANCE | INTEREST | RATE(4) | BALANCE | INTEREST | RATE(4) | |||||||||||||||||||
(IN THOUSANDS OF DOLLARS) | ||||||||||||||||||||||||
Interest earning assets: |
||||||||||||||||||||||||
Federal funds sold |
$ | 642 | $ | 2 | 0.16 | % | $ | 586 | $ | 1 | 0.18 | % | ||||||||||||
Certificates of deposit |
1,321 | 2 | 0.30 | 1,747 | 9 | 1.03 | ||||||||||||||||||
Securities: |
||||||||||||||||||||||||
Taxable |
45,969 | 986 | 4.29 | 43,362 | 1,069 | 4.93 | ||||||||||||||||||
Tax-exempt (1) |
29,444 | 484 | 4.98 | 18,079 | 317 | 5.31 | ||||||||||||||||||
Loans (net of unearned interest) (2)(5)(6) |
195,701 | 5,948 | 6.08 | 202,147 | 6,361 | 6.29 | ||||||||||||||||||
Total interest earning assets (1) |
$ | 273,077 | $ | 7,422 | 5.44 | % | $ | 265,921 | $ | 7,757 | 5.83 | % | ||||||||||||
Nonearning assets: |
||||||||||||||||||||||||
Cash and due from banks |
$ | 4,253 | $ | 5,881 | ||||||||||||||||||||
Bank premises and equipment, net |
5,487 | 5,783 | ||||||||||||||||||||||
Other assets |
7,257 | 6,672 | ||||||||||||||||||||||
Allowance for loan losses |
(4,164 | ) | (2,948 | ) | ||||||||||||||||||||
Total assets |
$ | 285,910 | $ | 281,309 | ||||||||||||||||||||
Interest bearing liabilities: |
||||||||||||||||||||||||
Savings deposits |
$ | 25,998 | $ | 13 | 0.10 | % | $ | 24,442 | $ | 16 | 0.13 | % | ||||||||||||
Time deposits |
148,089 | 2,359 | 3.19 | 136,239 | 2,448 | 3.59 | ||||||||||||||||||
NOW accounts |
23,523 | 51 | 0.43 | 21,494 | 50 | 0.47 | ||||||||||||||||||
Money market accounts |
10,914 | 8 | 0.15 | 12,926 | 14 | 0.22 | ||||||||||||||||||
Borrowings |
3,790 | 27 | 1.42 | 15,465 | 161 | 2.08 | ||||||||||||||||||
Total interest bearing liabilities |
$ | 212,314 | $ | 2,458 | 2.32 | % | $ | 210,566 | $ | 2,689 | 2.55 | % | ||||||||||||
Noninterest bearing liabilities: |
||||||||||||||||||||||||
Demand deposits |
$ | 42,860 | $ | 41,756 | ||||||||||||||||||||
Other liabilities |
4,915 | 5,465 | ||||||||||||||||||||||
Shareholders equity |
25,821 | 23,522 | ||||||||||||||||||||||
Total liabilities and
shareholders equity |
$ | 285,910 | $ | 281,309 | ||||||||||||||||||||
Net interest income (1) |
$ | 4,964 | $ | 5,068 | ||||||||||||||||||||
Net interest spread (3) |
3.12 | % | 3.28 | % | ||||||||||||||||||||
Net interest income to average
interest earning assets (1) |
3.64 | % | 3.81 | % | ||||||||||||||||||||
(1) | Yields are expressed on a tax equivalent basis using a 34% tax rate. | |
(2) | For the purpose of these computations, nonaccruing loans are included in the amounts of average loans outstanding. | |
(3) | Net interest spread is the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. | |
(4) | Yields/Rates are expressed on an annualized basis. | |
(5) | Interest income on loans excludes fees of $82,309 in 2010 and $113,503 in 2009. | |
(6) | Interest income on loans includes fees of $33,409 in 2010 and $48,037 in 2009 from student loans and lease receivables. |
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PROVISION FOR LOAN LOSSES
The amount charged to provision for loan losses is based on managements evaluation of the
loan portfolio. Management determines the adequacy of the allowance for loan losses, based on past
loan loss experience, current economic conditions and composition of the loan portfolio. The
allowance for loan losses is the best estimate of management of the probable losses which have been
incurred as of a balance sheet date.
The provision for loan losses is a charge to earnings which is made to maintain the allowance
for loan losses at a sufficient level. The provision for loan losses for the three months ended
June 30, 2010 and June 30, 2009 amounted to $455,000 and $375,000, respectively. The provision for
loan losses for the six months ended June 30, 2010 and June 30, 2009 amounted to $910,000 and
$765,000, respectively. Nonperforming assets have increased from the same period in 2009 and
foreclosure activity remains constant while past due loans have increased from 2.7% of total loans
as of June 30, 2009 to 3.7% of total loans as of June 30, 2010. Management believes the allowance
for loan losses is adequate and is not aware of any information relating to the loan portfolio
which it expects will materially impact future operating results, liquidity or capital resources.
In addition, federal regulators may require an adjustment to the reserves as a result of their
examination of the Bank. See Nonperforming Assets and Allowance for Loan Losses for further
discussion.
NONINTEREST INCOME
Noninterest income for the three months ended June 30, 2010 increased $21,000 or 3.8% to
$572,000 from $551,000. Noninterest income for the six months ended June 30, 2010 decreased $28,000
or 2.5% to $1.1 million. The increase in noninterest income for the three months ended June 30,
2010 is partially a result of an increase in debit card fee income, ATM fee income, trust income
and lockbox income offset by a decrease in overdraft account fees. The decrease in fees related to
overdrafts is a result of the Banks customer base being much more aware of the status of their
deposit accounts and proactive in keeping these accounts in a satisfactory condition. The increase
in debit card and ATM fee income is a direct result of an increase in the interchange rates for the
banks ATM/debit card network provider along with increased usage by our customers. Trust fee
income increased $4,000 due to a 5.1% increase in the balance of trust assets during this time
frame. In the fourth quarter of 2009, the bank began offering a lockbox service to our commercial
customers which generated $7,000 in the second quarter of 2010 and $12,000 for the six months ended
June 30, 2010. These aforementioned factors also affected noninterest income in the same manner
for the six months ended June 30, 2010.
Other factors impacting noninterest income for the three and six months ending June 30, 2010
is the fact that during the second quarter 2010 no additional provision for losses on other real
estate owned was assessed. This compares to a provision of $60,800 in the second quarter 2009.
For the six months ended June 30, 2010, the provision totaled $48,000 which compared to $75,800 for
the same period in 2009. Larger gains were recorded in the second quarter 2010 as compared to the
same time frame in 2009 on the sale of investment securities which impacted the increase in
noninterest income. Also, a decrease in 2010 in the gain on sale of other real estate owned along
with smaller gains recorded on loans sold due to a smaller volume of loans were sold during the
first half of 2010 compared to the same period in 2009. During the first half of 2009, the bank
recorded income from the title company. The title company was dissolved on August 31, 2009.
Additionally, one of the Banks Board of Directors passed away in February 2009 and the Bank was
the named beneficiary of a life insurance policy on the director. The Bank received $194,184 in a
death benefit, $135,326 of which was recorded in assets as cash surrender value. The difference of
$58,858 was reflected in other operating income.
NONINTEREST EXPENSES
Noninterest expenses for the three months ended June 30, 2010, increased $158,000 or 7.9% and
for the six months ended June 30, 2010, increased $315,000 or 8.0%. The most significant factor
leading to the increase in noninterest expenses for the three and six month periods ending June 30,
2010 is the increased FDIC assessment. The three year prepayment of the FDIC assessment was
payable on December 31, 2009 and totaled $1.5 million. The monthly assessment expense for the
first half of 2010 was $254,000 compared to $208,000 in the first half of 2009.
Salaries increased by $77,000 for the three months ending June 30, 2010 and $129,000 for the
six months ending June 30, 2010 due to normal merit increases and a decrease in the deferred loan
costs offset by a decrease of four in the number of full time equivalent employees employed.
These deferred costs are based on loan volumes and during the first six months of 2010 the loan
demand remained soft. Consumers are concentrated on decreasing their current debt instead of
taking on more debt. Employee benefits increased during these same time periods primarily due to
an increase in the pension plan expense and the post retirement expense. These expenses were
offset by decreases in the 401k expense and the supplemental non qualified retirement benefit plan
expense. The 401k expense is down due to the expected decrease in employer contributions for 2010
compared to 2009.
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The increase of $21,000 in other occupancy expense for the three months and $61,000 for the
six months ended June 30, 2010 are mainly due to painting and minor building repairs at the banks
facilities and the cost of snow removal at all six bank locations in the Eastern Panhandle of West
Virginia and in Hancock, Maryland during the first quarter of 2010.
The increase of $45,000 in other operating expenses for the three months and $120,000 for the
six months ended June 30, 2010, are due to increases in the Banks FDIC assessment fee, data
processing expenses, debit card expense, legal fees offset by decreases in marketing expense,
stationery, supplies and printing and ATM expense. The three year prepayment of the FDIC
assessment was payable on December 31, 2009 and totaled $1.5 million. The monthly assessment
expense for the first six months of 2010 was $254,000 compared to $208,000 for the first half of
2009. Data processing expense increased due to the expenses related to the monthly outsourcing
charges of the Banks data processing system. The increase in the banks debit card expense is
related to the cost of the fraud monitoring monthly fee being assessed by the banks software
vendor to this account. For the first nine months of 2009, this monthly fee was being assessed to
ATM expense causing this account in the first half of 2010 to show a decrease over the first half
of 2009. The increase in legal fees relates to the banks ongoing process of reclassification of
the common stock. Beginning in 2009, the bank scaled back its newspaper advertising along with
basically all of its marketing expenditures and the trend has continued into the first half of
2010. The bank continues to be in a cost cutting mode and continues to reduce non essential
expenses to a minimum.
INCOME TAXES
The banks provision for income taxes decreased $139,000 or 69.1% to $62,000 for the three
months ended June 30, 2010 and decreased $329,000 or 69.8% to $142,000 for the six months ended
June 30,2 010. The effective tax rates for the second quarter of 2010 and 2009 were 12.8% and
28.2%, respectively. The effective tax rates for the six months ended June 30, 2010 and 2009, were
14.3% and 29.1%, respectively. The effective tax rates for the quarter and six months ending June
30, 2010 are lower due in part to a significant increase in tax exempt interest income and an
adjustment to deferred tax liability related to the bank changing its estimate of the likelihood of
the taxability for the cash surrender value life insurance related to the deferred compensation
plan. The banks income tax expense differs from the amount computed at statutory rates primarily
due to the tax-exempt earnings from certain investment securities and loans, and non-deductible
expenses, such as life insurance premiums.
FINANCIAL CONDITION
The banks total assets as of June 30, 2010 decreased $6.7 million or 2.3% to $282.8 million
from December 31, 2009 due primarily to a $4.9 million decrease in loans, a $890,000 decrease in
cash and due from banks, a $2.0 million decrease in certificates of deposit investments and a
$676,000 decrease in other assets offset by a $1.9 million increase in investment securities The
Banks total liabilities decreased $7.7 million or 2.9% to $256.1 million from December 31, 2009
due to a $3.5 million decrease in borrowings and a $4.1 million decrease in deposits.
Shareholders equity increased $1.1 million to $26.7 million at June 30, 2010, due to net income of
$850,000 and a $571,000 increase in accumulated other comprehensive income offset by stock
repurchases of $113,000 and cash dividends paid of $234,000. The $571,000 increase in accumulated
other comprehensive income is a direct result of the increase in market value of available for sale
securities. The components of accumulated other comprehensive income at June 30, 2010 and December
31, 2009, were unrealized gains and losses on available for sale securities, net of deferred income
taxes and unrecognized pension costs, net of deferred income taxes. The unrealized gains and
losses are primarily a function of available market interest rates relative to the yield being
generated on the available for sale portfolio. No earnings impact results unless the securities
are actually sold.
During the third quarter 2007, the Bank instituted a stock repurchase program to repurchase
issued shares of common stock of CNB Financial Services, Inc. Through this program as of June 30,
2010, the Bank has repurchased 16,700 shares of CNB Financial Services, Inc. common stock reducing
shareholders equity by $937,898.
LOAN PORTFOLIO
At June 30, 2010, total loans decreased $4.9 million or 2.5% to $189.8 million from $194.7
million at December 31, 2009. All loan categories showed decreases during the first six months of
2010. In general, several reasons have caused this continued decline in the loan demand. The
overall economy and the financial uncertainty surrounding it along with unemployment have increased
while housing prices have declined. Customers continue to concentrate on paying off their debt
instead of borrowing additional funds. During this unstable economy, the bank continues to tighten
its credit standards and is performing more rigorous underwriting standards. Although the banks
lending officers continue to be proactive in their marketing effort in the banks lending area, the
uncertainty of the current financial position of prospective bank customers have caused a
deficiency in the officer calls made to these prospective clients during the first half of 2010.
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During the first half of 2010, real estate loans outstanding decreased by $3.4 million.
Beyond the factors already explained, another factor impacting the decrease was CNB originated and
sold $1.3 million of loans to secondary market investors. CNB began selling all fixed rate mortgage
loans to secondary market investors in January 2007. An additional factor impacting the decrease
in real estate loans were the foreclosures of six loans during the first six months of 2010.
NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
Nonperforming assets consist of nonaccrual loans, loans which are past due 90 days or more and
still accruing interest, impaired loans and foreclosed real estate. The following table summarized
the Banks nonperforming assets as of the periods shown:
June 30, | December 31, | |||||||||||
2010 | 2009 | 2009 | ||||||||||
Impaired loans, not on nonaccrual |
704,011 | 778,483 | 826,658 | |||||||||
Nonaccrual loans, impaired (1) |
117,932 | 596,917 | 109,127 | |||||||||
Nonaccrual loans, not impaired |
2,060,756 | 682,727 | 1,456,367 | |||||||||
Loans past due 90 days or more still accruing interest |
| | | |||||||||
Total non-performing loans |
$ | 2,882,699 | $ | 2,058,127 | $ | 2,392,152 | ||||||
Foreclosed real estate (other real estate owned) |
$ | 414,383 | $ | 398,427 | $ | 386,500 | ||||||
Total nonperforming assets |
$ | 3,297,082 | $ | 2,456,554 | $ | 2,778,652 | ||||||
Nonperforming loans/Total loans |
1.52 | % | 1.04 | % | 1.23 | % | ||||||
Nonperforming assets/Total assets |
1.17 | % | 0.86 | % | 0.96 | % | ||||||
Allowance for loan losses/Total loans |
2.33 | % | 1.57 | % | 2.00 | % |
(1) | Some of these loans have government agency guarantees reducing the banks exposure by $18,884 at June 30, 2010, $44,842 at June 30, 2009 and $31,379 at December 31, 2009. |
As of June 30, 2010, there are nine loans considered to be impaired with a balance of
$803,000 (net of government agency guarantees) and a specific allowance of $166,000. As of June
30, 2010, management is aware of forty seven borrowers who have exhibited weaknesses. Their loans
have aggregate uninsured balances of $11.5 million. A specific allowance of $1.4 million related
to these loans has been established as part of the allowance for loan losses. The Bank continues
to experience additional foreclosures in its mortgage loan portfolio. Although the Banks mortgage
loan portfolio is well secured, if the Bank needs to go to foreclosure on a property, the value of
the property may possibly be less than the current appraised value considering the current real
estate market. In turn, the Bank may begin to see future write downs on foreclosed properties.
The allowance for loan losses is the best estimate by management of the probable losses which
have been incurred as of a balance sheet date. Management makes this determination quarterly by
its analysis of overall loan quality, changes in the mix and size of the loan portfolio, previous
loss experience, general economic conditions, information about specific borrowers and other
factors. The Banks methodology for determining the allowance for loan losses established both an
allocated and an unallocated component. The allocated portion of the allowance represents the
results of analyses of individual loans that the Bank monitors for potential credit problems and
pools of loans within the portfolio. Management bases the allocated portion of the allowance for
loans principally on current loan risk ratings, historical loan loss rates adjusted to reflect
current conditions, as well as analyses of other factors that may have affected the collectibility
of loans in the portfolio. The Bank analyzes all commercial loans it is monitoring as potential
credit problems to determine whether those loans are impaired, with impairment measured by
reference to the borrowers collateral values and cash flows.
The unallocated portion of the allowance for loan losses represents the results of analyses
that measure probable losses inherent in the portfolio that are not adequately captured in the
allocated allowance analyses. These analyses include consideration of unidentified losses inherent
in the portfolio resulting from changing underwriting criteria, changes in the types and mix of
loans originated, industry concentrations and evaluations, allowance levels relative to selected
overall credit criteria and other economic indicators used to estimate probable incurred losses.
During the second quarter, the Bank considered the general economic conditions in its market area
and the significant slowdown in the residential housing market. At June 30, 2010, the Bank had
outstanding loans for the development of residential property including loans for spec homes and
subdivisions totaling $14.0 million with an additional undisbursed commitment of $1.6 million. At
June 30, 2010 and
December 31, 2009, the allowance for loan losses totaled $4.4 million and $3.9 million,
respectively. The allowance for loan losses as a percentage of loans was 2.3% as of June 30, 2010
and 2.0% as of December 31, 2009.
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An analysis of the allowance for loan losses is summarized below:
June 30, | December 31, | |||||||||||||||
2010 | 2009 | |||||||||||||||
Percent of | Percent of | |||||||||||||||
Loans in Each | Loans in Each | |||||||||||||||
Category to | Category to | |||||||||||||||
Amount | Total Loans | Amount | Total Loans | |||||||||||||
Commercial, financial
and agriculture |
$ | 1,766 | 27 | % | $ | 1,428 | 26 | % | ||||||||
Real estate residential
mortgage |
1,773 | 65 | 1,613 | 66 | ||||||||||||
Installment and other |
549 | 8 | 483 | 8 | ||||||||||||
Impaired loans |
182 | | 235 | | ||||||||||||
Unallocated |
162 | N/A | 144 | N/A | ||||||||||||
Total |
$ | 4,432 | 100 | % | $ | 3,903 | 100 | % | ||||||||
DEPOSITS
The Banks deposits decreased $4.1 million during the six months ended June 30, 2010. This
decrease was reflected in all deposit categories except savings accounts. The increase in savings
account balances is from customers wanting immediate liquidity of their funds, when needed. During
the past six months, the volume of new account activity has slowed significantly as compared to the
same time frame last year. The decrease in demand accounts is completely attributable to the
decrease in balances held by one large commercial customer. Although, certificates of deposit
accounts over $100,000 decreased $2.7 million, these accounts actually showed growth of $2.8
million during the first six months of 2010 due to the fact that during this time frame, the bank
experienced the maturity of $5.5 million in certificate of deposit funds from the State of WV
Treasurers office. These certificates of deposit carried interest rates of .18 and .351%.
Factors affecting the shift between certificates of deposit and certificates of deposit over
$100,000 are the increase in IRA rollovers by customers from their qualified retirement plans and
the continued growth of our Washington County, Maryland branch from the proactive approach of
management in establishing new customer relationships to the continued trust of existing customers
as deposits are made to certificates of deposit accounts. The Banks 36-month Ultimate
Certificates of Deposit continues to be the certificate of choice for customers. The Banks
36-month Ultimate Certificate of Deposit allows the customer to withdraw all or a portion of the
certificate of deposit on the first or second year anniversary date without penalty and deposits
may be made to this CD at any time.
CAPITAL RESOURCES
Shareholders equity increased $1.1 million or 4.2% during the first six months of 2010 due to
$850,000 in net income and a $571,000 increase in accumulated other comprehensive income offset by
stock repurchases of $113,000 and cash dividends paid of $234,000.
During the third quarter 2007, the Bank instituted a stock repurchase program to repurchase
issued shares of common stock of CNB Financial Services, Inc. Through this program as of June 30,
2010, the Bank has repurchased 16,700 shares of CNB Financial Services, Inc. common stock reducing
shareholders equity by $937,898.
The Bank is subject to various regulatory capital requirements administered by the banking
regulatory agencies. Under each measure, the Bank was substantially in excess of the minimum
regulatory requirements, and, by definition was well capitalized at June 30, 2010. The following
table summarizes, as of June 30, 2010, the Banks capital ratios.
Components | Actual | Required | ||||||||||
of Capital | Ratio | Ratio | ||||||||||
Tier 1 Capital |
$ | 26,318 | 9.3 | % | 4.0 | % | ||||||
Total Risk Based Capital |
$ | 28,484 | 16.7 | % | 8.0 | % |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to economic loss that arises from changes in the values of certain
financial instruments. The types of market risk exposures generally faced by banking entities
include interest rate risk, bond market price risk, real estate market risk, foreign currency risk
and commodity price risk. Due to the nature of its operations, only bond market price risk,
interest rate risk and real estate market risk are significant to the Bank.
The objective of the Banks liquidity management program is to ensure the continuous
availability of funds to meet the withdrawal demands of depositors and the credit needs of
borrowers. The basis of the Banks liquidity comes from the stability of its core deposits.
Liquidity is also available through the available for sale securities portfolio and short-term
funds such as federal funds sold which totaled $74.1 million, or 26.2% of total assets at June 30,
2010. In addition, liquidity may be generated through loan repayments, FHLB borrowings and over
$6.5 million of available borrowing arrangements with correspondent banks. At June 30, 2010,
management considered the Banks ability to satisfy its anticipated liquidity needs over the next
twelve months. Management believes that the Bank is well positioned and has ample liquidity to
satisfy these needs. The Bank generated $2.3 million of cash from operations in the first six
months of 2010, which compares to $108,000 during the same time period in 2009. Additional cash of
$4.7 million was provided by net investing activities through June 30, 2010, which compares to
$81,000 used in net investing activities for the first six months of 2009. Net cash used in
financing activities totaled $7.9 million during the first six months of 2010, which compares to
$2.0 million provided by financing activities during the same time period in 2009. Details on both
the sources and uses of cash are presented in the Consolidated Statements of Cash Flows contained
in the financial statements.
The objective of the Banks interest rate sensitivity management program, also known as
asset/liability management, is to maximize net interest income while minimizing the risk of adverse
effects from changing interest rates. This is done by controlling the mix and maturities of
interest sensitive assets and liabilities. The Bank has established an asset/liability committee
for this purpose. Daily management of the Banks sensitivity of earnings to changes in interest
rates within the Banks policy guidelines are monitored by using a combination of off-balance sheet
and on-balance sheet financial instruments. The Banks Chief Executive Officer, Senior Lending
Officer, Chief Financial Officer and the Chief Operations Officer monitor day to day deposit flows,
lending requirements and the competitive environment. Rate changes occur within policy guidelines
if necessary to minimize adverse effects. Also, the Banks policy is intended to ensure the Bank
measures a range of rate scenarios and patterns of rate movements that are reasonably possible.
The Bank measures the impact that 200 basis point changes in rates would have on earnings over the
next twelve months.
In analyzing interest rate sensitivity for policy measurement, the Bank compares its
forecasted earnings in both a high rate and low rate scenario to a base-line scenario. The
Banks base-line scenario is its estimated most likely path for future short-term interest rates
over the next 12 months. The high rate and low rate scenarios assumes 100 through 300 basis
point increases or decreases in the prime rate from the beginning point of the base-line scenario
over the most current 12-month period. The Banks policy limit for the maximum negative impact on
earnings resulting from high rate or low rate scenarios is 10 percent. The policy measurement
period is 12 months in length, beginning with the first month of the forecast.
The Banks base-line scenario holds the prime rate constant at 3.25 percent through June 2011.
Based on the July 2010 outlook, if interest rates increased or decreased by 200 basis points, the
model indicates that net interest income during the policy measurement period would be affected by
less than 10 percent, in both an increasing and decreasing interest rate scenario.
CONTRACTUAL OBLIGATIONS
There were no other material changes outside the normal course of business to the quantitative
and qualitative disclosures about contractual obligations previously reported on Form 10-K for the
year ended December 31, 2009. See Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations Contractual Obligations in the Form 10-K for December 31,
2009 for a detailed discussion.
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ITEM 4. CONTROLS AND PROCEDURES
The Companys chief executive officer and chief financial officer, based on their evaluation
as of the end of the reporting period of this quarterly report of the Companys disclosure controls
and procedures (as defined in Rule 13 (a) 14 (c) of the Securities Exchange Act of 1934), have
concluded that the Companys disclosure controls and procedures are adequate and effective for
purposes of Rule 13 (a) 14 (c) and timely, alerting them to material information relating to the
Company required to be included in the Companys filings with the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
There have been no changes in the Companys internal controls over financial reporting in the
fiscal quarter ended June 30, 2010, that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which CNB or its subsidiary is a party, or to
which any of their property is subject. However, CNB is involved in various legal
proceedings occurring in the ordinary course of business.
Item 1a. Risk Factors
There have been no material changes to CNBs risk factors since these factors were
previously disclosed in CNBs annual report on Form 10-K for the period ended December 31,
2009.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
Total Number | Total Number of Shares Purchased | Maximum Number of Shares | ||||||||||||||
of Shares | Average Price | as Part of Publicly Announced | that may yet be purchased under | |||||||||||||
Period | Purchased | Paid per Share | Plans or Programs | the Plans or Programs | ||||||||||||
Beginning balance March 31, 2010 |
15,244 | 30,561 | ||||||||||||||
April 1, 2010 April 30, 2010 |
1,366 | $ | 50.23 | 1,366 | 29,195 | |||||||||||
May 1, 2010 May 31, 2010 |
90 | $ | 50.50 | 90 | 29,105 | |||||||||||
June 1, 2010 June 30, 2010 |
| $ | | | 29,105 | |||||||||||
Total |
1,456 | 16,700 | ||||||||||||||
On August 23, 2007, the Board of Directors approved a stock repurchase program to
repurchase issued shares of common stock of CNB Financial Services, Inc. Management is
authorized to repurchase up to 45,804 shares or 10% of the outstanding shares of CNB
Financial Services, Inc. common stock at the prevailing fair market value. The stock
repurchase program will terminate upon the repurchase of 45,804 shares.
Item 4. Removed and Reserved.
Item 6. Exhibits
31.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CNB Financial Services, Inc.
|
||||
Date August 5, 2010
|
/s/ Thomas F. Rokisky, President/CEO
|
|||
Date August 5, 2010
|
/s/ Rebecca S. Stotler, Senior Vice President/CFO
|
31