CNB Bank & Trust, N.A. Annual Report 2016

Annual Report2016

TABLE OF CONTENTSLetter from Management 1-3Independent Auditors’ Report 4Consolidated Financial Statements Directors and Officers 5-34 35-36

DEAR FELLOW STOCKHOLDERS: In last year’s letter from management, we detailed the company’s statement of values, vision, and mission. At our more recent strategic planning meetings, our board undertook an exercise to define perceived stockholder expectations. An extensive list of likely expectations was prioritized and narrowed to those we feel are consistent with the strategic value and action statements, as well as our historic track record that has defined our success and stockholder support over the years. Six primary expectations made the “short list.” We chose not to assign a relative importance to each, as they clearly overlap and to some extent depend upon each other. Therefore, they are presented here in chart format: JAMES ASHWORTH Continue a consistent dividend policy Retain a high-quality SHAWN DAVIS that allows for dividend growth while management team. maintaining sufficient capital levels1 to fund asset / income growth. Remain a viable independent Continue to diligently manage credit, community bank. market, compliance, reputation, employee, and strategy risks. Stay near the leading edge of Maintain or achieve status as the technology, product development, premier financial institution in the and evolving industry trends. markets we serve. These basic expectations were considered during development of short and long term strategic initiatives, including utilization of emerging technologies. Narrowing our focus to 2017, budgetary assumptions and projections support a continuation of our positive growth and profitability trends. Turning now to a review of the 2016 financial statements, we can see these positive trends numerically. Loan growth of more than $55 million, shown in the Consolidated Balance Sheets on page 5, represents an 8.7% growth rate. Total assets grew at a 10.3% rate, and are now exceeding $900 million. Provisions to the reserve for possible loan losses help support loan growth, and at 12/31/16 the reserve had increased to 1.27% of the loan portfolio. A breakdown showing loan categories and transactions through the reserve are shown in Note 4, pages 19 through 24.

TOTAL LOANS $692.8 Funding for asset growth LETTER FROM MANAGEMENT came from an increase in total $637.0 deposits of more than $82 million, representing a nearly 11% growth $555.6 rate. Note 6 on page 26 shows that we enjoyed growth in all $452.3 $483.0 three categories of deposits, i.e., transaction accounts, savingsIN MILLIONS accounts, and time deposits. Also supporting asset growth 2012 2013 2014 2015 2016 was a level of net profits that provided more than 10% growth inTOTAL DEPOSITS $832.2 retained earnings, after payment of dividends to stockholders, and a $1 $686.2 $749.8 million paydown on notes payable $619.9 $630.2 detailed in Note 10 on page 28. One calculation of book value reversesIN MILLIONS other comprehensive income (loss) from stockholders’ equity, and 2012 2013 2014 2015 2016 results in a value of $325.09 per share at 12/31/16, compared toADJUSTED BOOK VALUE PER SHARE* $297.62 per share at 12/31/15. The Consolidated Statements $297.61 $325.09 of Income on page 6 shows an 8.4% increase in net interest income and $240.86 $258.02 $275.56 a 4.4% increase in non-interest income, reduced by only a 1.6%IN DOLLARS increase in non-interest expense, resulting in the substantial 22.3% increase in net income. The primary driver of this level of profitability is the contribution of interest income from loan growth of recent years. Also notable is a 17.4% increase in income from fiduciary services. And although mortgage banking revenues fell somewhat, they still provided over $1.3 million of revenue in a rising rate environment (which by nature produces fewer refinance transactions). 2012 2013 2014 2015 2016*Stockholders’ equity adjusted by reversing net unrealized gain(or loss) on available-for-sale securities. 2

LETTER FROM MANAGEMENT The Consolidated Statements of Stockholders’ Equity on page 8 shows the IN THOUSANDS typical transactions related to the officers’ stock option plan, increased equity from net income, and the impact of cash dividends paid to stockholders. The 65 cent rise in cash dividends per share represents an 11.1% increase. Note 16 on pages 33 and 34 indicates that the various capital ratio calculations monitored by regulators are all above the levels to be considered “well capitalized.” And, with the exception of Tier 1 capital to average assets, all those ratios have improved. DIVIDENDS TO STOCKHOLDERS The Consolidated Statements of Cash Flows on page 9 displays the loan and deposit growth discussed $1,549 earlier, as well as the consistent activity of mortgage loan origination and sales $1,340 $1,279 $1,391 into the secondary market. Notice that $1,179 at the bottom of these statements, the total of “cash and cash equivalents” nearly tripled; the vast majority of these balances are in interest-bearing balances at other institutions. While they represent increased liquidity, to 2012 2013 2014 2015 2016 some degree they are offset by loans that have been approved but not yet funded and deposits that are expected to be short-term. TOTAL STOCKHOLDERS’ EQUITY As mentioned earlier, we are projecting that growth and profitability $71.9 $76.9 trends will continue, although not at such a brisk pace. Expectations $66.7 under a new, more conservative, $58.9 $60.3 pro-business administration at the executive branch of the U.S. portends IN MILLIONS a reduction in regulations that have steadily been shackled onto financial institutions. While we don’t believe such a swing in the regulatory pendulum will result in more risk- taking by community banks, we do 2012 2013 2014 2015 2016 hope for improved efficiencies. Stockholders are hereby encouraged to contact us with any questions or concerns. If you wish us to add to or modify the list of expectations presented above, please so advise. Your directors comprise an engaged board that pledges to be responsive to all constituents. We look forward to another productive year of providing quality financial services to our communities. James T. Ashworth Shawn Davis President & Vice Chairman President & Chief Executive Officer CNB Bank Shares, Inc. CNB Bank & Trust, N.A.3

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BOARD OF DIRECTORS RICHARD WALDEN* JAMES ASHWORTH* CHAIRMAN VICE CHAIRMAN RALPH ANTLE* JUDITH BAKER* JOHN BOEHM RICK CHAMPLEY SHAWN DAVIS* LARRY FRANKLIN PETER GENTA* JOE HEITZ* NANCY RUYLE* JIM SALSKE GEORGE YARD *CNB BANK SHARES, INC. BOARD MEMBER CNB BANK & TRUST, N.A. BOARD MEMBER35

Officer Title Officer TitleCNB Bank Shares, Inc. Brandon Gerard Commercial Loan OfficerJames Ashworth President Jarrett Norris Commercial Loan OfficerThomas DeRobertis Senior VP & Controller James Sanderson Commercial Loan OfficerRebecca Lowrance VP Human Resources Jack Tinberg Commercial Loan OfficerCNB Bank & Trust Kelly Dulakis AVP & Retail Lending Officer Senior Management Susan Montgomery AVP & Retail Lending OfficerShawn Davis President & CEO Michele Martin Retail Lending Officer & Coordinating Larry Franklin Executive VP & Chief Operating Officer Supervisor Operations Amy Roady Retail Lending Officer & CSR Supervisor IIMaureen Oswald Senior VP & Cashier Diane Heitzig Retail Loan Officer Kimberly Murray VP Operations Mortgage Lisa Wolf AVP Computer Operations Sally James VP Mortgage LendingKent Brueggemann VP & Director of Commercial Rose Best AVP Loan Servicing Supervisor Services & E-Banking Laura Gerdes Mortgage Loan Underwriter & Natalie Magnuson E-Banking Coordinator Processing SupervisorAaron Shipley Project Coordinator Deposits Matthew Turley VP Chief Information Officer JoAnn Garland AVP & Regional CSR SupervisorTimothy Bradshaw Technology & Security Officer Heather Jones Regional CSR ManagerMark Totsch Information Security Officer Barbara Bergamo Regional CSR Supervisor Credit Administration Cortney Dornhecker CSR SupervisorChristopher Williams Senior VP & Chief Credit Officer Karen Draper CSR SupervisorEric Pfeiffer Credit Analyst Carol Wills Lead CSR & IRA SpecialistZachary Meyer Loan Review Officer Jeanie Glass AVP & Regional Teller SupervisorBradley Dobson AVP Credit Analyst Angela Levora AVP & Regional Teller SupervisorJodi Simons AVP Loan Administrator Kelly Wood AVP & Regional Teller SupervisorJill Plato Loan Administration Supervisor II Ann Weller Assistant Cashier & Teller SupervisorDebora Zacha Loan Administration Supervisor II Debbie Beilsmith Teller SupervisorRoberta Mitchell Loan Administration Supervisor Tina Carter Teller Supervisor Branch Management/Loans Angela Hunn Teller SupervisorGary Graham Regional President Kendra Lane Teller SupervisorAnthony Heitzig Regional President Shelley Malik Teller SupervisorAndrew Tinberg Regional President Jacqueline Schilling Teller SupervisorMark Haggard Market President Deborah Stepp Teller SupervisorDaniel Jung Market President Marketing Kent Richardson Market President Shelley Singleton Director of MarketingRobert Straz Market President Katie Nicholson CRM OfficerDavid Hurley Senior VP & Commercial Lending Team Leader Human Resources Daniel Walsh VP & Senior Commercial Loan Officer II Angel Hopper Asst Director of Human ResourcesColby Schmid VP & Senior Commercial Loan Officer Corporate ServicesThomas Schnelt VP & Senior Commercial Loan Officer Sallie Bowers AVP BSA Officer & Assistant ControllerCraig Frankford VP & Commercial Loan Officer Carol Fletcher CRA & Compliance OfficerThomas Jelinek VP & Commercial Loan Officer Shelley Tallant Accounts Payable SupervisorJames Rathgeb VP & Commercial Loan Officer Lori McCoy Administrative AssistantJordan Ruppert VP & Commercial Loan Officer Trust/Wealth Management Gavin Weir VP & Commercial Loan Officer Darlene Ward Senior VP TrustKelli Chasteen VP & Senior Retail Loan Officer Terry Daniels Senior Trust Portfolio ManagerGregory Paetow VP Business Development Officer Victor Henson Trust OfficerNoelle Flesner AVP & Commercial Loan Officer Ruth Menz Trust Operations OfficerMatthew Eschbach AVP & Commercial Loan Officer Matthew Slightom Farm & Assistant Portfolio ManagerCraig Gamrath AVP & Commercial Loan Officer Matthew Scandrett Trust Tax & Assistant Portfolio ManagerDaniel Henry AVP & Commercial Loan OfficerGordon Rahe AVP & Commercial Loan OfficerMichael Brokaw Commercial Loan OfficerEvan Campbell Commercial Loan OfficerMichael Davis Commercial Loan Officer 36

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