SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ______________ to _____________
Commission file number 0-19028
CCFNB BANCORP, INC.
(Name of small business Issuer in its charter)
PENNSYLVANIA 23-2254643
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
232 East Street, Bloomsburg, PA 17815
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (570) 784-4400
Check whether the issuer (1) 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 issuer was required to file such
reports), and (2) has been subject to such filing requirings for the past 90
days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 1,278,708 shares of $1.25
(par) common stock were outstanding as of May 3, 2004.
CCFNB BANCORP, INC. AND SUBSIDIARY
INDEX 10-Q
MARCH 31, 2004
PART I - FINANCIAL INFORMATION:
- Consolidated Balance Sheets 1
- Consolidated Statements of Income 2
- Consolidated Statements of Cash Flows 3
- Notes to Consolidated Financial Statements 4 - 13
- Report of Independent Certified Public Accountants 14
- Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations 15 - 21
- Controls and Procedures 22
PART II - OTHER INFORMATION 23
SIGNATURES 24 - 27
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
Unaudited
March December
31, 2004 31, 2003
-------- --------
ASSETS
Cash and due from banks $ 4,913 $ 6,359
Interest-bearing deposits with other banks 2,926 5,480
Federal funds sold 1,401 523
Investment securities available-for-sale 61,093 62,775
Loans, net of unearned income 146,400 147,630
Allowance for loan losses 1,365 1,415
-------- --------
Net loans 145,035 146,215
Premises and equipment, net 4,430 4,282
Other real estate owned 36 36
Cash surrender value of bank-owned life insurance 5,985 5,908
Accrued interest receivable 761 811
Other assets 711 525
-------- --------
TOTAL ASSETS $227,291 $232,914
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 15,106 $ 17,313
Interest bearing 154,741 154,473
-------- --------
Total Deposits 169,847 171,786
Short-term borrowings 16,806 20,990
Long-term borrowings 11,333 11,335
Accrued interest and other expenses 1,229 1,187
Other liabilities 15 13
-------- --------
TOTAL LIABILITIES 199,230 205,311
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $1.25 per share; authorized
5,000,000 shares; issued and outstanding 1,278,708 shares
in 2004 and 1,276,445 shares in 2003 1,598 1,595
Surplus 3,696 3,635
Retained earnings 22,289 21,997
Accumulated other comprehensive income 478 376
-------- --------
TOTAL STOCKHOLDERS' EQUITY 28,061 27,603
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $227,291 $232,914
======== ========
See accompanying notes to Consolidated Financial Statements.
-1-
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
UNAUDITED
For the Three
Months Ending
March 31,
-----------------------
2004 2003
---- ----
INTEREST INCOME
Interest and fees on loans:
Taxable $ 2,111 $ 2,333
Tax-exempt 74 45
Interest and dividends on investment securities:
Taxable interest 379 340
Tax-exempt interest 127 184
Dividends 18 16
Federal funds sold 1 12
Deposits in other banks 10 14
---------- ----------
TOTAL INTEREST INCOME 2,720 2,944
---------- ----------
INTEREST EXPENSE
Deposits 672 1,017
Short-term borrowings 69 80
Long-term borrowings 170 168
---------- ----------
TOTAL INTEREST EXPENSE 911 1,265
---------- ----------
Net interest income 1,809 1,679
Provision for loan losses 50 50
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,759 1,629
---------- ----------
NON-INTEREST INCOME
Service charges and fees 167 183
Trust department income 34 36
Bank-owned life insurance income 71 54
Other income 49 53
---------- ----------
TOTAL NON-INTEREST INCOME 321 326
---------- ----------
NON-INTEREST EXPENSES
Salaries and wages 571 525
Pensions and other employee benefits 204 186
Occupancy expense, net 105 103
Furniture and equipment expense 107 118
Other operating expenses 458 384
---------- ----------
TOTAL NON-INTEREST EXPENSES 1,445 1,316
---------- ----------
Income before income taxes 635 639
Income tax expense 126 132
---------- ----------
NET INCOME $ 509 $ 507
========== ==========
PER SHARE DATA
Net income $ 0.40 $ 0.39
Cash dividends $ 0.17 $ 0.16
Weighted average shares outstanding 1,276,995 1,289,815
See accompanying notes to Consolidated Financial Statements.
-2-
CCFNB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
For the Three
Months Ending
March 31,
--------------------
2004 2003
---- ----
OPERATING ACTIVITIES
Net income $ 509 $ 507
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 50 50
Depreciation and amortization 83 95
Premium amortization on investment securities 64 105
Discount accretion on investment securities (13) (12)
Deferred income taxes (benefit) 3 (25)
(Gain) on sale of mortgage loans (2) (14)
Proceeds from sale of mortgage loans 150 1,221
Originations of mortgage loans for resale (148) (1,207)
(Gain) on sale of other real estate owned - (12)
Loss from investment in insurance agency 1 6
Decrease in accrued interest receivable and other assets (191) (150)
Net increase in cash surrender value of bank-owned life insurance (77) (47)
Increase (decrease) in accrued interest, other expenses and other
liabilities 44 (93)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 473 424
-------- --------
INVESTING ACTIVITIES
Purchase of investment securities Available-for-Sale (8,513) (16,164)
Proceeds from sales, maturities and redemptions of investment
securities Available-for-Sale 10,297 12,304
Net decrease in loans 1,130 2,273
Purchases of premises and equipment (231) (59)
Proceeds from sale of other real estate owned - 37
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 2,683 (1,609)
-------- --------
FINANCING ACTIVITIES
Net decrease in deposits (1,939) (411)
Net decrease in short-term borrowings (4,184) (2,047)
Net decrease in long-term borrowings (2) (3)
Acquisition of treasury stock - (144)
Proceeds from issuance of common stock 64 52
Cash dividends paid (217) (206)
-------- --------
NET CASH (USED IN) FINANCING ACTIVITIES (6,278) (2,759)
-------- --------
(DECREASE) IN CASH AND CASH EQUIVALENTS (3,122) (3,944)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,362 16,020
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,240 $ 12,076
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 933 $ 1,332
Income taxes $ - $ -
See accompanying notes to Consolidated Financial Statements.
-3-
CCFNB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of CCFNB Bancorp, Inc. and Subsidiary (the
"Corporation") are in accordance with the accounting principles generally
accepted in the United States of America and conform to common practices within
the banking industry. The more significant policies follow:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CCFNB Bancorp,
Inc. and its wholly owned subsidiary, Columbia County Farmers National Bank (the
"Bank"). All significant inter-company balances and transactions have been
eliminated in consolidation.
NATURE OF OPERATIONS & LINES OF BUSINESS
The Corporation provides full banking services, including trust services,
through the Bank, to individuals and corporate customers. The Bank has six
offices covering an area of approximately 484 square miles in Northeastern
Pennsylvania. The Corporation and its banking subsidiary are subject to
regulation of the Office of the Comptroller of the Currency, The Federal Deposit
Insurance Corporation and the Federal Reserve Bank of Philadelphia.
Procuring deposits and making loans are the major lines of business. The
deposits are mainly deposits of individuals and small businesses and the loans
are mainly real estate loans covering primary residences and small business
enterprises. The trust services, under the name of CCFNB and Co., include
administration of various estates, pension plans, self-directed IRA's and other
services. A third-party brokerage arrangement is also resident in the
Lightstreet location. This investment center offers a full line of stocks, bonds
and other non-insured financial services.
USE OF ESTIMATES
The preparation of these consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of these consolidated financial statements and the
reported amounts of income and expenses during the reporting periods. Actual
results could differ from those estimates.
INVESTMENT SECURITIES
The Corporation classifies its investment securities as either
"Held-to-Maturity" or "Available-for-Sale" at the time of purchase. Debt
securities are classified as Held-to-Maturity when the Corporation has the
ability and positive intent to hold the securities to maturity. Investment
securities Held-to-Maturity are carried at cost adjusted for amortization of
premiums and accretion of discounts to maturity.
-4-
Debt securities not classified as Held-to-Maturity and equity securities
included in the Available-for-Sale category, are carried at fair value, and the
amount of any unrealized gain or loss net of the effect of deferred income taxes
is reported as other comprehensive income (loss) in the consolidated Statement
of Stockholders' Equity. Management's decision to sell Available-for-Sale
securities is based on changes in economic conditions controlling the sources
and uses of funds, terms, availability of and yield of alternative investments,
interest rate risk, and the need for liquidity.
The cost of debt securities classified as Held-to-Maturity or Available-for-Sale
is adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization and accretion, as well as interest and dividends, is included
in interest income from investments. Realized gains and losses are included in
net investment securities gains. The cost of investment securities sold,
redeemed or matured is based on the specific identification method.
LOANS
Loans are stated at their outstanding principal balances, net of deferred fees
or costs, unearned income, and the allowance for loan losses. Interest on loans
is accrued on the principal amount outstanding, primarily on an actual day
basis. Non-refundable loan fees and certain direct costs are deferred and
amortized over the life of the loans using the interest method. The amortization
is reflected as an interest yield adjustment, and the deferred portion of the
net fees and costs is reflected as a part of the loan balance.
Real estate mortgage loans held for resale are carried at the lower of cost or
market on an aggregate basis. These loans are sold with limited recourse to the
Corporation.
PAST DUE LOANS - Generally, a loan is considered past due when a payment is in
arrears for a period of 10 or 15 days, depending on the type of loan. Delinquent
notices are issued at this point and collection efforts will continue on loans
past due beyond 60 days which have not been satisfied. Past due loans are
continually evaluated with determination for charge-off being made when no
reasonable chance remains that the status of the loan can be improved.
NON-ACCRUAL LOANS - Generally, a loan is classified as non-accrual, with the
accrual of interest on such a loan discontinued when the contractual payment of
principal or interest has become 90 days past due or management has serious
doubts about further collectibility of principal or interest, even though the
loan currently is performing. A loan may remain on accrual status if it is in
the process of collection and is either guaranteed or well secured. When a loan
is placed on non-accrual status, unpaid interest credited to income in the
current year is reversed, and unpaid interest accrued in prior years is charged
against the allowance for loan losses. Certain non-accrual loans may continue to
perform, wherein, payments are still being received with those payments
generally applied to principal. Non-accrual loans remain under constant scrutiny
and if performance continues, interest income may be recorded on a cash basis
based on management's judgement as to collectibility of principal.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is established through
provisions for loan losses charged against income. Loans deemed to be
uncollectible are charged against the allowance for loan losses, and subsequent
recoveries, if any, are credited to the allowance.
A factor in estimating the allowance for loan losses is the measurement of
impaired loans. A loan is considered impaired when, based on current information
and events, it is probable that the Corporation will be unable to collect all
amounts due according to the contractual terms of the loan agreement. Under
current accounting standards, the allowance for loan losses related to impaired
loans is based on discounted cash flows using the loan's effective interest rate
or the fair value of the collateral for certain collateral dependent loans.
-5-
The allowance for loan losses is maintained at a level established by management
to be adequate to absorb estimated potential loan losses. Management's periodic
evaluation of the adequacy of the allowance for loan losses is based on the
Corporation's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay
(including the timing of future payments), the estimated value of any underlying
collateral, composition of the loan portfolio, current economic conditions, and
other relevant factors. This evaluation is inherently subjective as it requires
material estimates, including the amounts and timing of future cash flows
expected to be received on impaired loans that may be susceptible to significant
change.
In addition, an allowance is provided for possible credit losses on off-balance
sheet credit exposures. The allowance is estimated by management and is
classified in other liabilities.
DERIVATIVES
The Bank has outstanding loan commitments that relate to the origination of
mortgage loans that will be held for resale. Pursuant to Statement of Financial
Accounting Standards (SFAS) No. 133 "Accounting for Derivative Instruments and
Hedging Activities" as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", and SFAS No. 149
"Amendments to SFAS 133 on Derivative Instruments and Hedging Activities" and
the guidance contained in the Derivatives Implementation Group Statement 133
Implementation Issue No. C 13, the Bank has accounted for such loan commitments
as derivative instruments. The outstanding loan commitments in this category did
not give rise to any losses for the period ended March 31, 2004 and the year
ended December 31, 2003, as the fair market value of each outstanding loan
commitment exceeded the Bank's cost basis in each loan commitment.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation computed
principally on the straight-line method over the estimated useful lives of the
assets. Maintenance and minor repairs are charged to operations as incurred. The
cost and accumulated depreciation of the premises and equipment retired or sold
are eliminated from the property accounts at the time of retirement or sale, and
the resulting gain or loss is reflected in current operations.
MORTGAGE SERVICING RIGHTS
The Corporation originates and sells real estate loans to investors in the
secondary mortgage market. After the sale, the Corporation retains the right to
service these loans. When originated mortgage loans are sold and servicing is
retained, a servicing asset is capitalized based on relative fair value at the
date of sale. Servicing assets are amortized as an offset to other fees in
proportion to, and over the period of, estimated net servicing income. The
unamortized cost is included in other assets in the accompanying consolidated
balance sheet. The servicing rights are periodically evaluated for impairment
based on their relative fair value.
OTHER REAL ESTATE OWNED
Real estate properties acquired through, or in lieu of, loan foreclosure are
held for sale and are initially recorded at fair value on the date of
foreclosure establishing a new cost basis. After foreclosure, valuations are
periodically performed by management and the real estate is carried at the lower
of carrying amount or fair value less cost to sell and is included in other
assets. Revenues derived from and costs to maintain the assets and subsequent
gains and losses on sales are included in other non-interest income and expense.
-6-
BANK OWNED LIFE INSURANCE
The Corporation invests in Bank Owned Life Insurance (BOLI). Purchase of BOLI
provides life insurance coverage on certain employees with the Corporation being
owner and primary beneficiary of the policies.
INVESTMENT IN INSURANCE AGENCY
On January 2, 2001, the Corporation acquired a 50% interest in a local insurance
agency, a corporation organized under the laws of the Commonwealth of
Pennsylvania. The income or loss from this investment is accounted for under the
equity method of accounting. The carrying value of this investment as of March
31, 2004 and December 31, 2003 was $169,530 and $170,296, respectively, and is
carried in other assets in the accompanying consolidated balance sheets.
INCOME TAXES
The provision for income taxes is based on the results of operations, adjusted
primarily for tax-exempt income. Certain items of income and expense are
reported in different periods for financial reporting and tax return purposes.
Deferred tax assets and liabilities are determined based on the differences
between the consolidated financial statement and income tax bases of assets and
liabilities measured by using the enacted tax rates and laws expected to be in
effect when the timing differences are expected to reverse. Deferred tax expense
or benefit is based on the difference between deferred tax asset or liability
from period to period.
PER SHARE DATA
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", requires dual presentation of basic and diluted earnings per share.
Basic earnings per share is calculated by dividing net income by the weighted
average number of shares of common stock outstanding at the end of each period.
Diluted earnings per share is calculated by increasing the denominator for the
assumed conversion of all potentially dilutive securities. The Corporation does
not have any securities which have or will have a dilutive effect, accordingly,
basic and diluted per share data are the same.
CASH FLOW INFORMATION
For purposes of reporting consolidated cash flows, cash and cash equivalents
include cash on hand and due from banks, interest-bearing deposits in other
banks and federal funds sold. The Corporation considers cash classified as
interest-bearing deposits with other banks as a cash equivalent because they are
represented by cash accounts essentially on a demand basis. Federal funds are
also included as a cash equivalent because they are generally purchased and sold
for one-day periods.
TRUST ASSETS AND INCOME
Property held by the Corporation in a fiduciary or agency capacity for its
customers is not included in the accompanying consolidated financial statements
because such items are not assets of the Corporation. Trust Department income is
generally recognized on a cash basis and is not materially different than if it
was reported on an accrual basis.
-7-
SEGMENT REPORTING
The Corporation's banking subsidiary acts as an independent community financial
services provider, and offers traditional banking and related financial services
to individual, business and government customers. Through its branch, internet
banking, telephone and automated teller machine network, the Bank offers a full
array of commercial and retail financial services, including the taking of time,
savings and demand deposits; the making of commercial, consumer and mortgage
loans; and the providing of other financial services. The Bank also performs
personal, corporate, pension and fiduciary services through its Trust Department
as well as offering diverse investment products through its investment center.
Management does not separately allocate expenses, including the cost of funding
loan demand, between the commercial, retail, trust and investment center
operations of the Corporation. As such, discrete financial information is not
available and segment reporting would not be meaningful.
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2002, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others". This Interpretation expands the disclosures to be made by a guarantor
about its obligations under certain guarantees and requires the guarantor to
recognize a liability in its financial statements for the obligation assumed
under a guarantee. In general, FIN 45 applies to contracts of indemnification
agreements that contingently require the guarantor to make payments to the
guaranteed party based on changes in an underlying that is related to an asset,
liability, or equity security of the guaranteed party. Certain guarantee
contracts are excluded from both the disclosure and recognition requirements of
this Interpretation, while other guarantees are subject to just the disclosure
requirements of FIN 45 but not to the recognition provisions. The disclosure
requirements of FIN 45 were effective for the Corporation as of December 31,
2002 and require disclosure of the nature of the guarantee, the maximum
potential amount of future payments the guarantor could be required to make
under the guarantee, and the current amount of the liability, if any, for the
guarantor's obligations under the guarantee. The recognition requirements of FIN
45 are applied prospectively to guarantees issued or modified after December 31,
2002. This standard did not have any impact on the Corporation's consolidated
financial condition or results of operations.
In December 2002, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of SFAS No. 123," is generally effective for financial
statements for fiscal years and interim periods beginning after December 31,
2002. The statement amends SFAS No. 123, "Accounting for Stock-Based
Compensation" to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. The statement also amends the disclosure requirements of SFAS No.
123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based compensation and the
effect of the method used on reported results. The Corporation does not have any
stock-based compensation, therefore the standard has no impact on the
Corporation's consolidated financial condition or results of operations.
-8-
In December 2002, the FASB issued Statement of Financial Accounting Standard
(SFAS) No. 149, "Amendments to SFAS 133 on Derivative Instruments and Hedging
Activities" is generally effective for contracts entered into after June 30,
2003. This statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities." The changes in this statement improve financial reporting by
requiring that contracts with comparable characteristics be accounted for
similarly. The changes will result in more consistent reporting of contracts as
either derivatives or hybrid instruments. This standard does not have any impact
on the Corporation's consolidated financial position or results of operations.
In January 2003, the FASB issued FIN 46, which provides guidance on how to
identify a variable interest entity (VIE) and determine when the assets,
liabilities, noncontrolling interests, and results of operations of a VIE are to
be included in an entity's consolidated financial statements. A VIE exists when
either the total equity investment at risk is not sufficient to permit the
entity to finance its activities by itself, or the equity investors lack one of
three characteristics associated with owning a controlling financial interest.
Those characteristics include the direct or indirect ability to make decisions
about an entity's activities through voting rights or similar rights, the
obligations to absorb the expected losses of an entity if they occur, or the
right to receive the expected residual returns of the entity if they occur. This
standard did not have any impact on the Corporation's consolidated financial
positions or results of operations.
In May 2003, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity" is generally effective for financial instruments
entered into or modified after May 31, 2003 and for contracts in existence at
the start of the first interim period beginning after June 15, 2003. This
Statement establishes new standards for classification, measurement and
disclosure of certain types of financial instruments having characteristics of
both liabilities and equity, including instruments that are mandatory redeemable
and that embody obligations requiring or permitting settlement by transferring
assets or by issuing an entity's own shares. In December 2003, the FASB deferred
for an indefinite period the application of the guidance in SFAS 150 to
noncontrolling interests that are classified as equity in the financial
statements of a subsidiary but would be classified as a liability in the
parent's financial statements under SFAS 150. The deferral is limited to
mandatory redeemable noncontrolling interests associated with finite-lived
subsidiaries. This standard does not have any impact on the Corporation's
consolidated financial position or results of operations.
In December 2003, the Emerging Issuance Task Force Issue (EITF) issued No. 03-01
"The Meaning of Other-Than-Temporary Impairment and its Application to Certain
Investments" is generally effective for fiscal years ending after December 15,
2003, and addresses how to define an "other-than-temporary impairment" as well
as its application to investments classified as either "Available-for-Sale" and
"Held-to-Maturity" under SFAS 115. The EITF requires disclosure of securities in
a continuous unrealized loss position to be stratified based on length of time
those securities were carried in such a position (less than 12 months, and 12
months or more). Additional information is required to be disclosed annually to
include the nature of the investment, the cause of the decline in value and the
evidence considered in reaching the conclusion that the investment is not other
than temporarily impaired. The disclosure is required for fiscal years ending
after December 15, 2003. Comparative information for earlier periods is not
required.
ADVERTISING COSTS
It is the Corporation's policy to expense advertising costs in the period in
which they are incurred. Advertising expense for the periods ended March 31,
2004 and March 31, 2003, were approximately $19,111 and $15,871, respectively.
-9-
RECLASSIFICATION
Certain amounts in the consolidated financial statements of the prior years have
been reclassified to conform with presentation used in the 2004 consolidated
financial statements. Such reclassifications had no effect on the Corporation's
consolidated financial condition or net income.
NOTE 2 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the periods ended March 31, 2004
and March 31, 2003 were as follows:
(Amounts in Thousands)
----------------------
2004 2003
---- ----
Balance, beginning of year $ 1,415 $ 1,298
Provision charged to operations 50 50
Loans charged-off (116) (19)
Recoveries 16 21
-------- --------
Balance, March 31 $ 1,365 $ 1,350
======== ========
At March 31, 2004 the recorded investment in loans that are considered to be
impaired as defined by SFAS No. 114 was $89,887. No additional charge to
operations was required to provide for the impaired loans since the total
allowance for loan losses is estimated by management to be adequate to provide
for the loan loss allowance required by SFAS No. 114 along with any other
potential losses.
At March 31, 2004, there were no significant commitments to lend additional
funds with respect to non-accrual and restructured loans. Real estate loans held
for resale were $35,816 at March 31, 2004 and December 31, 2003.
Non-accrual loans at March 31, 2004 and December 31, 2003 were $1,503,000 and
$1,851,686, respectively.
Loans past due 90 days or more and still accruing interest amounted to $119,000
at March 31, 2004.
NOTE 3 - SHORT-TERM BORROWINGS
Federal funds purchased, securities sold under agreements to repurchase, and
Federal Home Loan Bank advances generally represented overnight or less than
30-day borrowings. U.S. Treasury tax and loan notes for collections made by the
Bank were payable on demand.
-10-
NOTE 4 - LONG-TERM BORROWINGS
Long-term borrowings are comprised of advances from the Federal Home Loan Bank.
NOTE 5 - DEFERRED COMPENSATION PLANS
The Bank has entered into certain non-qualified deferred compensation agreements
with certain executive officers and directors. Expense related to these
non-qualified deferred compensation plans amounted to $27,659 and $9,551 for
March 31, 2004 and March 31, 2003, respectively.
There were no substantial changes in other plans as disclosed in the 2003 Annual
Report.
NOTE 6 - STOCKHOLDERS' EQUITY
Changes in stockholders' equity for the period ended March 31, 2004 were as
follows:
(Amounts in Thousands, Except Common Share Data)
------------------------------------------------
Accumulated
Other
Common Common Comprehensive Retained Comprehensive Treasury
Shares Stock Surplus Income Earnings Income Stock Total
--------- ------- ------- ------------- -------- ------------- -------- -----
Balance at January 1, 2004 1,276,445 $ 1,595 $ 3,635 $ 21,997 $ 376 $ - $ 27,603
Comprehensive Income:
Net income 509 509 509
Change in unrealized gain (loss)
on investment securities
available-for-sale net of
reclassification adjustment
and tax effects 102 102 102
-------------
TOTAL COMPREHENSIVE INCOME $ 611
=============
Issuance of 2,263 shares of
common stock under dividend
reinvestment and stock
purchase plans 2,263 3 61 - - - 64
Cash dividends $.17 per share - - - (217) - - (217)
--------- ------- ------- -------- ------------- -------- --------
Balance at March 31, 2004 1,278,708 $ 1,598 $ 3,696 $ 22,289 $ 478 $ - $ 28,061
========= ======= ======= ======== ============= ======== ========
-11-
NOTE 7 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
The Corporation is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These consolidated financial instruments include commitments to extend credit,
standby letters of credit and commercial letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated balance sheets. The contract or
notional amounts of those instruments reflect the extent of involvement the
Corporation has in particular classes of financial instruments. The Corporation
does not engage in trading activities with respect to any of its financial
instruments with off-balance sheet risk.
The Corporation may require collateral or other security to support financial
instruments with off-balance sheet credit risk. The contract or notional amounts
at March 31, 2004 and December 31, 2003 were as follows:
(Amounts in Thousands)
----------------------
March December
31, 2004 31, 2003
-------- --------
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit $ 15,324 $ 13,106
Financial standby letters of credit 1,813 1,813
Performance standby letters of credit 843 843
Dealer floor plans 1,119 1,412
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Because many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Corporation upon extension of credit, is based on
management's credit evaluation of the counter-party. Collateral held varies but
may include accounts receivable, inventory, property, plant, equipment and
income-producing commercial properties.
Standby letters of credit and commercial letters of credit are conditional
commitments issued by the Corporation to guarantee the performance of a customer
to a third party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Corporation holds collateral supporting those commitments for which
collateral is deemed necessary.
The Corporation's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
letters of credit is represented by the contractual notional amount of those
instruments. The Corporation uses the same credit policies in making commitments
and conditional obligations, as it does for on-balance sheet instruments.
-12-
The Corporation granted commercial, consumer and residential loans to customers
within Pennsylvania. Of the total loan portfolio at March 31, 2004, 81.49% was
for real estate loans, principally residential. It was the opinion of management
that the high concentration did not pose an adverse credit risk. Further, it was
management's opinion that the remainder of the loan portfolio was balanced and
diversified to the extent necessary to avoid any significant concentration of
credit.
NOTE 8 - MANAGEMENT'S ASSERTIONS AND COMMENTS REQUIRED TO BE PROVIDED WITH FORM
10Q FILING
In management's opinion, the consolidated interim financial statements reflect
fair presentation of the consolidated financial position of CCFNB Bancorp, Inc.
and Subsidiary, and the results of their operations and their cash flows for the
interim periods presented. Further, the consolidated interim financial
statements are unaudited, however they reflect all adjustments, which are in the
opinion of management, necessary to present fairly the consolidated financial
condition and consolidated results of operations and cash flows for the interim
periods presented and that all such adjustments to the consolidated financial
statements are of a normal recurring nature.
The results of operations for the three-month period ended March 31, 2004, are
not necessarily indicative of the results to be expected for the full year.
These consolidated interim financial statements have been prepared in accordance
with requirements of Form 10Q and therefore do not include all disclosures
normally required by accounting principles generally accepted in the United
States of America applicable to financial institutions as included with
consolidated financial statements included in the Corporation's annual Form 10K
filing. The reader of these consolidated interim financial statements may wish
to refer to the Corporation's annual report or Form 10K for the period ended
December 31, 2003, filed with the Securities and Exchange Commission.
-13-
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders of CCFNB Bancorp, Inc.:
We have reviewed the accompanying consolidated balance sheet of CCFNB Bancorp,
Inc. and Subsidiary as of March 31, 2004, and the related consolidated
statements of income and cash flows for the three month periods ended March 31,
2004 and 2003. These consolidated interim financial statements are the
responsibility of the management of CCFNB Bancorp, Inc. and Subsidiary.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
CCFNB Bancorp, Inc. and Subsidiary as of December 31, 2003, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated January 13,
2004, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 2003, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ J.H. Williams & Co., LLP
----------------------------
J.H. Williams & Co., LLP
Kingston, Pennsylvania
April 19, 2004
-14-
CCFNB BANCORP, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 2004
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Consolidated Summary of Operations
(Dollars in Thousands, except for per share data)
At and For the Three
Months
Ended March 31, At and For the Years Ended December 31,
--------------- ---------------------------------------
2004 2003 2003 2002 2001 2000 1999
---- ---- ---- ---- ---- ---- ----
Income and Expense:
Interest income $ 2,720 $ 2,944 $ 11,221 $ 12,780 $ 13,720 $ 13,552 $ 12,669
Interest expense 911 1,265 4,366 5,741 6,924 6,859 6,099
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income 1,809 1,679 6,855 7,039 6,796 6,693 6,570
Loan loss provision 50 50 200 309 163 54 78
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after loan loss
Provision 1,759 1,629 6,655 6,730 6,633 6,639 6,492
Non-interest income 321 326 1,,508 1,210 1,149 1,053 1,050
Non-interest expense 1,445 1,316 5,409 5,479 5,104 4,967 4,818
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 635 639 2,754 2,461 2,678 2,725 2,724
Income taxes 126 132 591 539 621 671 685
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 509 $ 507 $ 2,163 $ 1,922 $ 2,057 $ 2,054 $ 2,039
=========== ========== ========== ========== ========== ========== ==========
Per Share: (1)
Net income $ .40 $ .39 $ 1.69 $ 1.47 $ 1.54 $ 1.51 $ 1.48
Cash dividends paid .17 .16 .66 .63 .59 .56 .51
Average shares outstanding 1,276,995 1,289,815 1,281,265 1,309,084 1,338,007 1,355,624 1,375,572
Average Balance Sheet:
Loans $ 147,015 $ 150,025 $ 149,485 $ 147,545 $ 139,219 $ 134,325 $ 123,185
Investments 61,934 54,539 58,152 54,197 50,593 47,003 49,827
Other earning assets 5,165 8,016 8,036 5,309 6,569 219 1,638
Total assets 230,103 227,838 230,975 223,476 208,630 196,727 186,597
Deposits 170,817 171,922 171,956 150,883 149,601 139,774 138,963
Other interest-bearing liabilities 30,232 27,595 29.772 29.356 31.629 31,203 23,458
Stockholders' equity 27,832 26,939 27,223 26,615 25,890 23,910 22,874
Balance Sheet Data:
Loans $ 146,400 $ 149,066 $ 147,631 $ 151,338 $ 142,990 $ 137,360 $ 134,423
Investments 61,093 57,277 62,775 53,528 57,121 47,311 49,104
Other earning assets 4,327 7,063 6,882 10,068 9,644 4,814 1,343
Total assets 227,291 226,643 232,914 229,032 214,238 203,054 196,122
Deposits 169,847 171,716 171,786 172,127 155,666 143,169 138,606
Other interest-bearing liabilities 28,139 26,571 32,325 28,621 31,384 33,477 33,224
Stockholders' equity 28,061 27,037 27,603 26,840 26,042 25,050 23,047
Ratios: (2)
Return on average assets .88% .89% .94% .86% .99% 1.04% 1.09%
Return on average equity 7.32% 7.56% 7.95% 7.22% 7.90% 8.59% 8.91%
Dividend payout ratio 42.63% 40.63% 39.02% 42.86% 38.31% 37.09% 34.09%
Average equity to average assets ratio 12.10% 11.52% 11.79% 11.77% 12.16% 12.34% 11.75%
(1) Per share data has been calculated on the weighted average number of shares
outstanding.
(2) The ratios for the three month period ending March 31, 2004 and 2003 are
annualized.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-Q, both in the MD & A and elsewhere, contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are not historical facts and include expressions about our
confidence and strategies and our expectations about new and existing programs
and products, relationships, opportunities, technology and market conditions.
These statements may be identified by such forward-looking terminology as
"expect," "look," "believe," "anticipate," "may," "will," or similar statements
or variations of such terms. Such forward-looking statements involve certain
risks and uncertainties. These include, but are not limited to, the direction of
interest rates, continued levels of loan quality and origination volume,
continued relationships with major customers, and sources for loans, as well as
the effects of economic conditions and legal and regulatory barriers and
structure. Actual results may differ materially from such forward-looking
statements. We assume no obligation for updating any such forward-looking
statement at any time. Our consolidated financial condition and results of
operations are essentially those of our wholly-owned subsidiary bank, Columbia
County Farmers National Bank. Therefore, our discussion and analysis that
follows is primarily centered on the performance of this bank.
EARNINGS SUMMARY
Net income for the three months ended March 31, 2004 was $509 thousand or $.17
per basic and diluted share. These results compare with net income of $507
thousand, or $.16 per basic and diluted share for the same period in 2003.
Annualized return on average equity decreased to 7.32 percent from 7.56 percent,
while the annualized return on average assets increased to .89 percent from .86
percent, for the three months ended March 31, 2004 and 2003 respectively.
Net interest income continues to be the largest source of our operating income.
Net interest income on a tax equivalent basis increased to $1.8 million at March
31, 2004, compared with $1.6 million for the three months ended March 31, 2003.
The increase in net interest income is primarily due to the decreased interest
rates on deposit accounts and renewing certificates of deposit. Overall,
interest earning assets yielded 5.28 percent for the quarter ended March 31,
2004 compared to 5.76
15
percent yield for the quarter ended March 31, 2003. The tax equavilized interest
margin increased to 3.57 percent for the three months ended March 31, 2004
compared to 3.38 percent for the three months ended March 31, 2003.
Average interest earning assets increased $1.5 million or .70 percent for the
three months ended March 31, 2004 over the same period in 2003. Average loans
decreased $3.0 million or 2.0 percent, average investments increased $7.4
million or 13.6 percent and average federal funds sold and interest-bearing
deposits with other financial institutions decreased 2.8 million or 35.6 percent
for this three month period, from $8.0 million at March 31, 2003 to $5.2 million
at March 31, 2004.
Average interest bearing liabilities for the three months ended March 31, 2004
remained at $184.8 million for the three month period ending March 31, 2004 and
2003. Average short-term borrowings were $16.2 million at March 31, 2003 and
$18.9 million at March 31, 2004, an increase of 16.7 percent. Long-term debt,
which includes primarily FHLB advances, was $11.3 million at March 31, 2003 and
2004. Average demand deposits increased $1.5 million from 2003 balances.
The average interest rate for loans decreased 29 basis points to 6.11 percent at
March 31, 2004 compared to 6.40 percent March 31, 2003. Interest-bearing
deposits with other Financial Institutions interest rates decreased 7 basis
points to .95 percent from 1.02 percent at March 31, 2003 Average rates on
interest bearing deposits decreased by 85 basis points from 2.59 percent to 1.74
percent in one year. Average interest rates also decreased on total interest
bearing liabilities by 77 basis points to 1.97 percent from 2.74 percent. The
reason for these decreases on interest bearing liabilities was primarily
attributed to the decreasing rates on all deposit liabilities and the
tied-to-prime interest rates paid on repurchase agreements. The net interest
margin increased to 3.57 percent for the three months ended March 31, 2004 from
3.38 percent for the three months ended March 31, 2003. The increase in the
overall net interest margin is a result of interest rate changes with deposit
rates pricing downward and certificates of deposit coming due being reinvested
at lower rates. Our "asset" sensitive position places us in a position to have
an increase in our net interest margin when rates rise. The cost of long-term
debt averaged 5.99% for the past several years which contributed to the
declining net interest margin. This long-term debt will remain a deterrent to us
in a declining interest rate environment. This is due to the fact that the
Federal Home Loan Bank has the option to reprice these loans at their
discretion. Until interest rates would rise to make the current 5.99% average
rate unattractive, this in all probability will not occur. We will continue to
use the following strategies to mitigate this decline in our net interest
margin: Pricing of deposits will continue to be monitored and lowered, if
necessary, to meet current market conditions; large deposits over $100,000 will
continue to be priced conservatively; and in this low interest rate environment
the majority of new investments will be kept short term in anticipation of
rising rates.
NET INTEREST INCOME
Net interest income increased to $1.8 million for the three months ended March
31, 2004 compared to $1.6 million for the same period in 2003.
The following table reflects the components of net interest income for each of
the three months ended March 31, 2004 and 2003 .
ANALYSIS OF AVERAGE ASSETS, LIABILITIES AND CAPITAL EQUITY
AND
NET INTEREST INCOME ON A TAX EQUIVALENT BASIS
AVERAGE BALANCE SHEET AND RATE ANALYSIS
(Dollars in Thousands)
Three Months Ended March 31, 2004 and 2003
Interest Average Interest Average
Average Income / Yield / Average Income / Yield /
Balance Expense Rate Balance Expense Rate
------- -------- ------- ------- ------- --------
(1) (2) (1) (2)
ASSETS:
Interest-bearing deposits with other financial institutions $ 4,203 $ 10 .95% $ 5,483 $ 14 1.02%
Investment securities (3) 61,934 524 3.38% 54,539 540 4.66%
Federal funds sold 962 1 .42% 2,533 12 1.89%
Loans 147,015 2,185 6.11% 150,025 2,378 6.40%
-------- -------- -------- --------
Total interest earning assets $214,114 $ 2,720 5.28% $212,580 $ 2,944 5.76%
-------- -------- -------- --------
Reserve for loan losses (1,390) (1,324)
Cash and due from banks 5,636 5,483
Other assets 11,743 11,099
-------- --------
Total assets $230,103 $227,838
-------- --------
LIABILITIES AND CAPITAL:
Interest bearing deposits $154,607 $ 672 1.74% $157,177 $ 1,017 2.59%
Short-term borrowings 18,898 69 1.46% 16,250 81 1.98%
Long-term borrowings 11,334 170 6.00% 11,345 167 5.89%
-------- -------- -------- --------
Total interest-bearing liabilities $184,839 $ 911 1.97% $184,772 $ 1,265 2.74%
-------- --------
Demand deposits $ 16,210 $ 14,745
Other liabilities 1,222 1,382
Stockholders' equity 27,832 26,939
-------- --------
Total liabilities and capital $230,103 $227,838
-------- --------
NET INTEREST INCOME /
NET INTEREST MARGIN (4) $ 1,809 3.38% $ 1,679 3.16%
TAX EQUIVALENT NET INTEREST INCOME /
NET INTEREST MARGIN (5) $ 1,913 3.57% $ 1,797 3.38%
16
(1) Average volume information was computed using daily averages.
(2) Interest on loans includes fee income.
(3) Yield on tax-exempt obligations has been computed on a tax-equivalent basis.
(4) Net interest margin is computed by dividing net interest income by total
interest earning assets.
(5) Interest and yield are presented on a tax-equivalent basis using 34 percent
for 2004 and 2003.
The following table demonstrates the relative impact on net interest income of
changes in volume of interest earnings assets and interest bearing liabilities
and changes in rates earned and paid by us on such assets and liabilities.
CHANGE IN NET INTEREST INCOME ON A TAX EQUIVALENT BASIS
Three Months Ended March 31, 2004
Compared with 2003
Increase (Decrease) (2)
Volume Rate Total
------ ---- -----
(In thousands)
Interest income:
Loans (1) (193) (435) (628)
Investments (1) 345 (698) (353)
Federal funds sold and other short-term investments (43) (41) (84)
Interest expense:
Deposits (67) (1,336) (1,403)
Short-term borrowings 52 (85) (33)
Long term debt (1) 12 11
(1) Interest income is adjusted to a tax equivalent basis using a 34 percent tax
rate.
(2) Variances resulting from a combination of changes in volume and rates are
allocated to the categories in proportion to the absolute dollar amounts of
the change in each category.
The outstanding balance of loans at March 31, 2004 was $146.4 million compared
to $147.6 million at December 31, 2003.
Income from investment securities declined $16 thousand at $524 thousand for the
three months ended March 31, 2004 compared to $540 thousand at March 31, 2003.
The average balance of investment securities for the three months ended March
31, 2004 increased 13.6 percent to $61.9 million, compared to the $54.5 million
for the same period of 2003.
Total interest expense decreased $354 thousand or 28.0 percent for the first
three months of 2004 as compared to the first three months of 2003. The average
yield on interest earning assets decreased from 5.76 percent to 5.28 percent
through March 2004 and 2003, respectively.
NON-INTEREST INCOME
The following table presents the components of non-interest income for the three
months ended March 31, 2004 and 2003:
Three Months Ended
March 31,
(In thousands)
--------------
2004 2003
---- ----
Service charges and fees $167 $183
Trust Department income 34 36
Investment securities gain - net 0 0
Gain on sale of loans 3 14
Gain on sale of Other Real Estate Owned 3 12
Gain on Cash Surrender Value of BOLI 71 54
Third party brokerage income 23 19
Other 20 8
---- ----
Total $321 $326
---- ----
Non-interest income continues to represent a considerable source of our income.
We are committed to increasing non-interest income. Increases will be from our
existing sources of non-interest income and any new opportunities that may
develop. For the three months ended March 31, 2004, total non-interest income
decreased $5 thousand to $321 thousand or 1.5 percent, compared to $326 thousand
for the three month period ended March 31, 2003. Service charges and fees
decreased $16 thousand from $183 thousand at March 31, 2003 to $167 thousand or
8.7 percent at March 31, 2004. Trust Department income decreased from $36
thousand at March 31, 2003 to $34 thousand or 5.6 percent at March 31, 2004.
Third party brokerage income reflected a $4 thousand increase or 21.1 percent
comparing March 31, 2003 to March 31, 2004. We began selling fixed rate
mortgages during 2003 and the increase in income derived from these sales were
$3 thousand through March 31, 2004 compared to $14 thousand through March 31,
2003. The loans are being serviced by CCFNB and the bank retains some credit
risk. Investment in Bank Owned Life Insurance is reflected in the March 31, 2004
balance sheet and income statement. Other non-interest income increased $12
thousand from $8 thousand at March 31, 2003 to $20 thousand at March 31, 2004.
This increase was attributable mainly to an increase in fees and surcharge on
ATM transactions and fees from servicing MPF mortgage loans.
17
NON-INTEREST EXPENSE
The following table presents the components of non-interest expense for the
three months ended March 31, 2003 and 2004:
Three Months Ended
March 31,
2004 2003
---- ----
(Dollars in Thousands)
Salaries and wages $ 571 $ 525
Employee benefits 204 186
Net occupancy expense 105 103
Furniture and equipment expense 107 118
State shares tax 73 69
Other expense 385 315
------ ------
Total $1,445 $1,316
------ ------
Non-interest expense increased from $1.3 million at March 31, 2003 to $1.4
million at March 31, 2004.
Generally, non-interest expense accounts for the cost of maintaining facilities;
providing salaries and benefits to employees; and paying for insurance,
supplies, advertising, data processing services, taxes and other related
expenses. Some of the costs and expenses are variable while others are fixed. To
the extent possible, we utilize budgets and related measures to control variable
expenses.
Salaries increased 8.8 percent at March 31, 2004 compared to March 31, 2003. A
9.7 percent increase was reflected in employee benefits from $186 thousand at
March 31, 2003 to $204 thousand at March 31, 2004.
Occupancy expense increased 1.9 percent. Furniture and equipment expense
reflects an $11 thousand or 9.3 percent decrease for the first three months of
2004 compared to the first three months of 2003. New computer hardware is
replacing fully depreciated hardware and recognition of depreciation on this new
equipment will have the effect of increased expense beginning the second quarter
of 2004.
Pennsylvania Bank Shares Tax increased 5.8 percent from $69 thousand at March
31, 2003 compared to $73 thousand at March 31, 2004.
Other expenses increased $70 thousand or 22.2 percent from $315 thousand at
March 31, 2003 to $385 thousand at March 31, 2004. The following schedule
defines the increases:
EXPENSE
-------
Directors Fees $ 3
Officer Deferred Retirement 20
Training 4
Donations 4
Supplies 5
Miscellaneous Expense 5
Data Processing Expense 3
ATM Expense 6
Advertising 4
Deferred Costs 16
---
TOTAL $70
---
INCOME TAXES
Income tax expense as a percentage of pre-tax income was 19.8 percent for the
three months ended March 31, 2004 compared with 20.7 percent for the same period
in 2003. The effective tax rate for 2004 remains at 34 percent.
ASSET / LIABILITY MANAGEMENT
INTEREST RATE SENSITIVITY
Our success is largely dependent upon our ability to manage interest rate risk.
Interest rate risk can be defined as the exposure of our net interest income to
the movement in interest rates. We do not currently use derivatives to manage
market and interest rate risks. Our interest rate risk management is the
responsibility of the Asset / Liability Management Committee ("ALCO"), which
reports to the Board of Directors. ALCO establishes policies that monitor and
coordinate our sources, uses and pricing of funds as well as interest-earning
asset pricing and volume.
We use a simulation model to analyze net interest income sensitivity to
movements in interest rates. The simulation model projects net interest income
based on various interest rate scenarios over a 12 and 24 month period. The
model is based on the actual maturity and repricing characteristics of rate
sensitive assets and liabilities. The model incorporates assumptions regarding
the impact of changing interest rates on the prepayment rates of certain assets
and liabilities. In the current interest rate environment, our net interest
income is not expected to change materially.
LIQUIDITY
Liquidity measures the ability to satisfy current and future cash flow needs as
they become due. Maintaining a level of liquid funds through asset / liability
management seeks to ensure that these needs are met at a reasonable cost. On the
asset side, liquid funds are maintained in the form of cash and due from banks,
federal funds sold, investment securities maturing within one year, and security
and loan payments. Liquid assets amounted to $112.8 million and $118.5 million
at March 31, 2004 and December 31, 2003, respectively. This represents 52.7
percent and 54.9 percent of earning assets, and 49.6 percent and 50.9 percent of
total assets at March 31, 2004 and December 31, 2003, respectively.
18
On the liability side, the primary source of funds available to meet liquidity
needs is our core deposit base, which generally excludes certificates of deposit
over $100 thousand . Core deposits averaged approximately $142.5 million for the
three months ended March 31, 2004 and $143.9 million for the year ended December
31, 2003, representing 66.6 percent and 66.7 percent of average earning assets.
Short-term and long-term borrowings through repurchase agreements, Federal Home
Loan Bank advances and large dollar certificates of deposit, generally those
over $100 thousand, are used as supplemental funding sources. Additional
liquidity is derived from scheduled loan and investment payments of principal
and interest, as well as prepayments received.
Our cash requirements consist primarily of dividends to shareholders. This cash
need is routinely satisfied by dividends collected from the bank along with cash
and investments owned. Projected cash flows from this source are expected to be
adequate to pay dividends, given the current capital levels and current
profitable operations of the bank. In addition, we may repurchase shares of our
outstanding common stock for benefit plans and other corporate purposes. The
cash required for a purchase of shares can be met by using our own funds,
dividends received from the bank, and borrowed funds.
As of March 31, 2004, we had $61.1 million of securities available for sale
recorded at their fair value, compared with $62.8 million at December 31, 2003.
As of March 31, 2004, the investment securities available for sale had an
unrealized gain of $478 thousand, net of deferred taxes, compared with an
unrealized gain of $376 thousand, net of deferred taxes, at December 31, 2003.
These securities are not considered trading account securities which may be sold
on a continuous basis, but rather are securities which may be sold to meet our
various liquidity and interest rate requirements.
In accordance with disclosures required by EITF NO. 03-1, the summary
below shows the gross unrealized losses and fair value, aggregated by investment
category that individual securities have been in a continuous unrealized loss
position for less than or more than 12 months as of March 31, 2004:
Description of Security Less than 12 months 12 months or more Total
----------------------- ------------------- ----------------- -----
Fair Value Unrealized Fair Value Unrealized Fair Value Unrealized
Loss Loss Loss
Obligations of U.S.
Government Corporations
and Agencies
Mortgage backed $10,322,762 $75,511 $2,900,178 $24,980 $13,222,940 $100,491
Other 0 0 0 0 0 0
Marketable Equity Securities 50,601 3,673 31,721 11,957 82,322 15,630
TOTAL $10,373,363 $79,184 $2,931,899 $36,937 $13,305,262 $116,121
The Corporation invests in various forms of agency debt including mortgage
backed securities and callable agency debt. The fair market value of these
securities is influenced by market interest rates, prepayment speeds on mortgage
securities, bid to offer spreads in the market place and credit premiums for
various types of agency debt. These factors change continuously and therefore
the market value of these securities may be higher or lower than the
Corporations carrying value at any measurement date.
The Corporation's marketable equity securities represent common stock
positions in various financial institutions. The fair market value of these
equities tends to fluctuate with the overall equity markets as well as the
trends specific to each institution.
The Corporation has both the intent and ability to hold the securities
contained in the previous table for a time necessary to recover the cost.
Non-Performing Assets
Shown below is a summary of past due and non-accrual loans:
(Dollars in thousands)
March 31, 2004 December 31, 2003
Past due and non-accrual:
Days 30 - 89 $ 720 $ 585
Days 90 plus 119 269
Non-accrual 1,503 1,852
------ ------
Total $2,342 $2,706
Past due and non-accrual loans decreased 17.4 percent from 2.7 million at
December 31, 2003 to 2.3 million at March 31, 2004. The loan delinquency
expressed as a ratio to total loans was 1.6 percent at March 31, 2004 and 1.8
percent at December 31, 2003.
The provision for loan losses for the first quarter of 2004 and 2003 was $50
thousand. We plan on decreasing the provision during the second quarter of 2004
to $30 thousand. Management is diligent in its efforts to reduce these
delinquencies and has increased monitoring and review of current loans to
foresee future delinquency occurrences and react to them quickly.
Any loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been disclosed under Industry Guide 3 do not (i)
represent or result from trends or uncertainties which we reasonably expect will
materially impact future operating results, liquidity, or capital resources, or
(ii) represent material credits about which we are aware of any information
which causes us to have serious doubts as to the ability of such borrowers to
comply with the loan repayment terms.
We adhere to principles provided by Financial Accounting Standards Board
Statement No. 114, "Accounting by Creditors for Impairment of a Loan" - Refer to
Note 2 above for other details.
The following analysis provides a schedule of loan maturities / interest rate
sensitivities. This schedule presents a repricing and maturity analysis as
required by the FFIEC:
19
(Dollars in
Thousands)
MATURITY AND REPRICING DATA FOR LOANS AND LEASES March 31, 2004
--------------
Closed-end loans secured by first liens and 1-4 family residential properties
with a remaining maturity or repricing frequency of:
(1) Three months or less $ 2,800
(2) Over three months through 12 months 13,309
(3) Over one year through three years 27,307
(4) Over three years through five years 2,809
(5) Over five years through 15 years 21,281
(6) Over 15 years 356
All loans and leases other than closed-end loans secured by first liens on 1-4
family residential properties with a remaining maturity or repricing frequency
of:
(1) Three months or less 26,340
(2) Over three months through 12 months 13,847
(3) Over one year through three years 15,749
(4) Over three years through five years 8,903
(5) Over five years through 15 years 11,834
(6) Over 15 years 415
--------
Sub-total $144,950
Add: Non-accrual loans not included above 1,503
Less: Unearned income (53)
--------
Total Loans and Leases $146,400
ALLOWANCE FOR LOAN LOSSES
Because our loan portfolio and delinquencies contains a significant number of
commercial loans with relatively large balances the deterioration of one or
several of these loans may result in a possible significant increase in loss of
interest income, higher carrying costs, and an increase in the provision for
loan losses and loan charge-offs.
We maintain an allowance for loan losses to absorb any loan losses based on our
historical experience, an evaluation of economic conditions, and regular reviews
of delinquencies and loan portfolio quality. In evaluating our allowance for
loan losses, we segment our loans into the following categories:
- Commercial (including investment property mortgages),
- Residential mortgages, and
- Consumer.
We evaluate some loans as a homogeneous group and others on an individual basis.
Commercial loans with balances exceeding $250 thousand are reviewed
individually. After our evaluation of these loans, we determine the required
allowance for loan losses based upon the following considerations:
- Historical loss levels,
- Prevailing economic conditions,
- Delinquency trends,
- Changes in the nature and volume of the portfolio,
- Concentrations of credit risk, and
- Changes in loan policies or underwriting standards.
Management and the Board of Directors review the adequacy of the reserve on a
quarterly basis and adjustments, if needed, are made accordingly.
For the Three Months
Ending March 31,
Amounts in thousands 2004 2003
-------------------- --------- ---------
Average loans outstanding: $ 147,015 $ 150,025
--------- ---------
Total loans at end of period 146,400 149,066
--------- ---------
Balance at beginning of period 1,415 1,298
Total charge-offs (116) (19)
Total recoveries 16 21
--------- ---------
Net charge-offs (100) 2
Provision for loan losses 50 50
--------- ---------
Balance at end of period $ 1,365 $ 1,350
--------- ---------
Net charge-offs as a percent of average loans outstanding during period .01% .01%
Allowance for loan losses as a percent of total loans .96% .91%
The allowance for loan losses is based on our evaluation of the allowance for
loan losses in relation to the credit risk inherent in the loan portfolio. In
establishing the amount of the provision required, management considers a
variety of factors, including but not limited to, general economic conditions,
volumes of various types of loans, collateral adequacy and potential losses from
significant borrowers. On a monthly basis, the Board of Directors and the bank's
Credit Administration Committee review information regarding specific loans and
the total loan portfolio in general in order to determine the amount to be
charged to the provision for loan losses.
CAPITAL ADEQUACY
A major strength of any financial institution is a strong capital position. This
capital is very critical as it must provide growth, dividend payments to
shareholders, and absorption of unforeseen losses. Our federal regulators
provide standards that must be met. These standards measure "risk-adjusted"
assets against different categories
20
of capital. The "risk-adjusted" assets reflect off balance sheet items, such as
commitments to make loans, and also place balance sheet assets on a "risk" basis
for collectibility. The adjusted assets are measured against the standards of
Tier I Capital and Total Qualifying Capital. Tier I Capital is common
shareholders' equity. Total Qualifying Capital includes so-called Tier II
Capital which is common shareholders' equity and the allowance for loan and
lease losses. The allowance for loan and lease losses must be lower than or
equal to common shareholders' equity to be eligible for Total Qualifying
Capital.
We exceed all minimum capital requirements as reflected in the following table:
March 31, 2004 December 31, 2003
-------------------- --------------------
Minimum Minimum
Calculated Standard Calculated Standard
Ratios Ratios Ratios Ratios
---------- -------- ---------- --------
Risk Based Ratios:
Tier I Capital to risk-weighted assets 18.27% 4.00% 18.53% 4.00%
Total Qualifying Capital to risk-weighted assets 19.24% 8.00% 19.46% 8.00%
Additionally, certain other ratios also provide capital analysis as follows:
March 31, December 31,
2004 2003
--------- ------------
Tier I Capital to average assets 12.05% 11.77%
We believe that the bank's current capital position and liquidity positions are
strong and that its capital position is adequate to support its operations.
Book value per share amounted to $22.02 at March 31, 2004, compared with $21.63
per share at December 31, 2003.
Cash dividends declared amounted to $.17 per share, for the three months ended
March 31, 2004, equivalent to a dividend payout ratio of 42.63 percent, compared
with 40.63 percent for the same period in 2003. Our Board of Directors continues
to believe that cash dividends are an important component of shareholder value
and that, at the bank's current level of performance and capital, we expect to
continue our current dividend policy of a quarterly cash distribution of
earnings to our shareholders.
21
CONTROLS AND PROCEDURES
Evaluation of Our Disclosure Controls and Internal Controls. Within the 90-day
period prior to the date of this report on Form 10-K, we evaluated the
effectiveness of the design and operation of our "disclosure controls and
procedures" (Disclosure Controls), and our "internal controls and procedures for
financial reporting" (Internal Controls). This evaluation (the Controls
Evaluation) was done under the supervision and with the participation of
management, including our Chief Executive Officer (CEO) and Chief Financial
Officer (Treasurer). Rules adopted by the SEC require that, in this section of
this report, we present the conclusions of the CEO and the Treasurer about the
effectiveness of our Disclosure Controls and Internal Controls based on and as
of the date of the Controls Evaluation.
CEO and CFO Certifications. Appearing at Exhibits 31.1, 31.2, 32.1 and 32.2 of
this report are two separate forms of "Certifications" for each of the CEO and
the Treasurer. This section of this report which you are currently reading is
the information concerning the Controls Evaluation referred to in the Section
302 Certification and this information should be read in conjunction with the
Section 302 Certification for a more complete understanding of the topics
presented.
Disclosure Controls and Internal Controls. Disclosure Controls are procedures
that are designed with the objective of ensuring that information required to be
disclosed in our reports filed under the Securities Exchange Act of 1934
(Exchange Act), such as this report, is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules. Disclosure
Controls are also designed with the objective of ensuring that such information
is accumulated and communicated to our management, including the CEO and
Treasurer, as appropriate, to allow timely decisions regarding required
disclosure.
The Corporation has created a disclosure committee. The committee consists of
ten key management personnel. The purpose of the committee is to verify that all
internal controls and procedures are in place in each area of authority. Whistle
Blowing procedures have been put in place and communicated to all directors and
employees. The disclosure committee meets quarterly before each quarter end.
We design Internal Controls procedures with the objective of providing
reasonable assurance that: (1) our transactions are properly authorized; (2) our
assets are safeguarded against unauthorized or improper use; and (3) our
transactions are properly recorded and reported, all to permit the preparation
of our financial statements in conformity with generally accepted accounting
principals.
Limitations on the Effectiveness of Controls. Our management, including the CEO
and Treasurer, does not expect that our Disclosure Controls or our Internal
Controls will prevent all error or all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control systems are met. Further, the
design of a control system must reflect the fact that there are resource
constraints, and the benefits or controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our company and the Bank have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, control may become inadequate because of changes
in conditions, or the degree of compliance with the policies and procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
Scope of the Controls Evaluation. The CEO and Treasurer evaluation of our
Disclosure Controls and Internal Controls included a review of the controls'
objectives and design, the control's implementation by us and the Bank and the
effect of the controls on the information generated for use in this report. In
the course of the Controls Evaluation, we sought to identify data errors,
controls problems or acts of fraud and to confirm that appropriate corrective
action, including process improvements, were being undertaken. This type of
evaluation will be done on a quarterly basis so that the conclusions concerning
controls effectiveness can be reported in our Quarterly Reports on Form 10-Q and
Annual Reports on Form 10-K. Our Internal Controls are also evaluated on an
ongoing basis by our Outside Internal Auditors, by other personnel in the Bank
and by our external independent auditors in connection with their audit and
review activities. The overall goals of these various evaluation activities are
to monitor our Disclosure Controls and Internal Controls and to make
modifications as necessary. Our intent in this regard is that the Disclosure
Controls and Internal Controls will be maintained as dynamic systems that change
(including with improvements and corrections) as conditions warrant.
Among other matters, we sought in our evaluation to determine whether there were
any "significant deficiencies" or "material weaknesses" in our and the Bank's
Internal Controls, or whether we had identified any acts of fraud involving
personnel who have a significant role in our and the Bank's Internal Controls.
This information was important both for the Controls Evaluation generally and
because items 5 and 6 in the Section 302 Certifications of the CEO and Treasurer
require that the CEO and Treasurer disclose that information to our Board's
Audit Committee and to our independent auditors and to report on related matters
in this section of our Annual Report. In the professional auditing literature,
"significant deficiencies" are referred to as "reportable conditions"; these are
control issues that could have a significant adverse effect on the ability to
record, process, summarize and report financial data in the financial
statements. A "material weakness" is defined in the auditing literature as a
particularly serious reportable condition where the internal control does not
reduce to a relatively low level the risk that misstatements caused by error or
fraud may occur in amounts that would be material in relation to the financial
statements and not be detected within a timely period by employees in the normal
course of performing their assigned functions. In addition, we sought to deal
with other controls matters in the Controls Evaluation, and in each case if a
problem was identified, we considered what revision, improvement and/or
correction to make in accord with our on-going procedures.
In accord with SEC requirements, the CEO and Treasurer note that, since the date
of the Controls Evaluation (Evaluation Date) to the date of this Annual Report,
there have been no significant changes in Internal Controls or in other factors
that could significantly affect Internal Controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Conclusions. Based upon the Controls Evaluation, our CEO and Treasurer have
concluded that, subject to the limitations noted above, our Disclosure Controls
are effective to ensure that material information relating to CCFNB Bancorp,
Inc. and its consolidated subsidiaries is made known to management, including
the CEO and Treasurer, particularly during the period when our Exchange Act
periodic reports are being prepared, and that our Internal Controls are
effective to provide reasonable assurance that our financial statements are
fairly presented in conformity with generally accepted accounting principles.
22
PART II - OTHER INFORMATION;
Item 1. Legal Proceedings
Management and the Corporation's legal counsel are not aware of any litigation
that would have a material adverse effect on the consolidated financial position
of the Corporation. There are no proceedings pending other than the ordinary
routine litigation incident to the business of the Corporation and its
subsidiary, Columbia County Farmers National Bank. In addition, no material
proceedings are pending or are known to be threatened or contemplated against
the Corporation and the Bank by government authorities.
Item 2. Changes in Securities - Nothing to report.
Item 3. Defaults Upon Senior Securities - Northing to report.
Item 4. Submission of matters to a Vote of Security Holders - Nothing to report.
Item 5. Other Information - Nothing to report
Item 6. Exhibits and Reports on Form 8-K - Nothing to report.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CCFNB BANCORP, INC.
(Registrant)
By /s/ Lance O. Diehl
-------------------------------------
Lance O. Diehl
President and CEO
Date: May 10, 2004
By /s/ Virginia D. Kocher
-------------------------------------
Virginia D. Kocher
Treasurer
Date: May 10, 2004
24
EXHIBIT 31.1
CCFNB BANCORP, INC.
CEO CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Lance O. Diehl, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CCFNB Bancorp,
Inc.
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d - 15 (e) and
internal control over financial reporting (as defined in Exchange
act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles:
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting,
Date: May 10, 2004
/s/ Lance O. Diehl
-------------------------
Lance O. Diehl
Chief Executive Officer
25
EXHIBIT 31.2
CCFNB BANCORP, INC.
CEO CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Virginia D. Kocher, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CCFNB Bancorp,
Inc.
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d - 15 (e) and
internal control over financial reporting (as defined in Exchange
act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles:
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
(c) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(d) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting,
Date: May 10, 2004
/s/ Virginia D. Kocher
------------------------------
Virginia D. Kocher
Principal Financial Officer
CCFNB BANCORP, INC.
CEO CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CCFNB Bancorp, Inc. (the
"Company") on Form 10-Q for the quarter-ended March 31, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Lance
O. Diehl, Chief Executive Officer of the Company, and
I ,Virginia D. Kocher, the Principal Financial Officer of the company,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly represents, in all
material respects, the financial condition and result of operations
of the Company.
Date: May 10, 2004
/s/ Lance O. Diehl
-------------------------------
Lance O. Diehl
Chief Executive Officer
Date: May 10, 2004
/s/ Virginia D. Kocher
-------------------------------
Virginia D. Kocher
Principal Financial Officer