SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ending June 30, 1996
Commission file number 2-80325
BATH NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-1185097
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
44 Liberty Street, Bath, NY 14810
(Address of principal executive offices) (zip code)
(607)-776-9661
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No _
The number of shares outstanding of the issuer's Common Stock, $5 par
value was 1,365,801 shares as of June 30, 1996. <PAGE>
<PAGE>
TABLE OF CONTENTS
Page Number
PART I. FINANCIAL INFORMATION 1 - 5
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 6
ITEM 2. Changes in Securities 6
ITEM 3. Defaults upon Senior Securities 6
ITEM 4. Submission of Matters to a Vote
of Security Holders 6
ITEM 5. Other Information 6
ITEM 6. Exhibits and Reports Form 8-K 6
PART III. MANAGEMENTS DISCUSSION AND ANALYSIS 7 - 9 <PAGE>
<PAGE>
<TABLE>
BATH NATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
CONDITION AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,203,800 $ 10,218,600
Interest Bearing Dep. in other banks 3,346,400 3,535,300
Securities, Available for Sale 72,097,800 64,936,600
Loans (Gross) 153,044,500 150,504,200
LESS: Allowance for loan losses 1,650,000 1,650,000
Premises and equipment-Net 5,167,800 5,110,200
Interest Receivable 1,746,800 1,775,100
Other Assets 1,126,600 735,500
TOTAL ASSETS 242,083,700 235,165,500
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand 23,651,200 27,397,000
Savings 47,080,800 46,510,300
NOW Accounts 35,419,800 32,376,100
Money Market deposit accounts 11,012,500 13,300,700
Time deposits (in denominations of
100,000 or more) 23,525,000 16,222,800
Other time accounts 64,765,200 61,953,100
Total Deposits 205,454,500 197,760,000
Federal Funds Purchased 700,000 2,150,000
Repurchase Agreements 2,280,000 1,070,900
FHLB Borrowings 3,000,000 3,000,000
Other Liabilities 1,705,600 2,630,800
TOTAL LIABILITIES 213,140,100 206,611,700
STOCKHOLDERS' EQUITY:
Preferred Stock: $10 par value
300,000 shares authorized
Common Stock: $5.00 par value;
1,500,000 shares authorized;
issued and outstanding: June
1996 - 1,365,801, December
1995 - 1,366,234 <F1>
6,829,000 6,831,200
Surplus 1,494,700 1,507,900
Undivided profits 21,067,300 19,966,400
Unrealized gain - (loss) investments (447,400) 248,300
TOTAL STOCKHOLDER'S EQUITY 28,943,600 28,553,800
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $242,083,700 $235,165,500
</TABLE>
[FN]
<F1> Shares issued and outstanding as well as common stock and surplus
have been restated to reflect a two for one stock split.
See notes to condensed unaudited consolidated financial statements.
1 <PAGE>
<PAGE>
<TABLE>
BATH NATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995.
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Int. and fees on loans $3,290,700 $3,260,700 $6,563,600 $6,432,200
Int. on fed. funds sold 16,400 85,700 51,200 165,300
Int. on Inv. Securities:
US Treas. & Gov. Agency 301,500 247,400 563,000 401,000
State and Mun. Oblig. 360,600 304,300 703,100 617,100
Taxable Municipal 44,000 46,400 93,200 98,900
Mort. Backed Securities 390,000 299,000 702,200 536,800
Int. Bearing Due From 47,500 53,300 100,400 104,600
Other 14,300 17,500 28,500 30,100
Total Interest Income $4,465,000 $4,314,300 $8,805,200 $8,386,000
INTEREST EXPENSE:
Interest on Deposits $1,679,800 $1,575,500 $3,356,300 $2,959,200
Int. on short term bor. 87,200 400 139,600 400
Int. on repur. agreem. 26,600 58,000 50,900 73,000
Total Interest Expense $1,793,600 $1,633,900 $3,546,800 $3,032,600
NET INTEREST INCOME: $2,671,400 $2,680,400 $5,258,400 $5,353,400
Prov. loan loss (recov.) 69,700 105,100 64,700 95,200
Net int. income after
Prov. for loan losses 2,601,700 2,575,300 5,193,700 5,258,200
OTHER OPERATING INCOME:
Service charges 192,400 171,700 354,200 332,900
Trust department fees 4,900 1,200 17,100 4,300
Invest. gains (losses) 9,900 (1,000) 10,800 (700)
Other 141,900 150,300 275,800 252,900
Total other operat inc. $ 349,100 $ 322,200 $ 657,900 $ 589,400
OTHER OPERATING EXPENSES:
Salaries & emp benefit $ 930,300 $ 946,800 $1,904,200 $1,910,600
Net occupancy expense
of premises 170,800 140,200 335,900 283,300
Depreciation 96,400 102,000 194,200 204,000
Other 564,400 515,800 1,028,800 999,000
Total other oper. exp. $1,761,900 $1,704,800 $3,463,100 $3,396,900
INCOME BEFORE INCOME TAXES 1,188,900 1,192,700 2,388,500 2,450,700
INCOME TAXES (benefit) 371,000 382,000 743,000 804,000
NET INCOME $ 817,900 $ 810,700 $1,645,500 $1,646,700
EARNINGS PER COMMON SHARE <F1> .60 .60 1.21 1.22
DIVIDENDS DECLARED PER
COMMON SHARE .20 .20 .40 .37
</TABLE>
[FN]
<F1>All per share data adjusted for a two for one stock split April 24,
1996.
See Notes to condensed unaudited consolidated financial statements. <PAGE>
<PAGE>
<TABLE>
BATH NATIONAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
SIX MONTHS ENDED JUNE 30,1996 AND 1995 (Unaudited)
<CAPTION>
June 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,645,500 $ 1,646,700
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 194,200 204,000
Provision for loan losses 64,700 95,200
Loan origination costs deferred (26,900) 10,700
Bond premium amortized and (discount accrued) 95,200 97,000
(Increase) or Decrease in interest receivable 28,300 (159,700)
Increase or (Decrease) in other liabilities (925,200) (1,247,800
(Increase) or Decrease in other assets (391,100) 305,900
Increase or (Decrease) in provision for
deferred tax (642,300) 374,800
Net cash provided by operating activities $ 42,400 $ 1,326,800
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing securities 3,341,300 3,982,900
Proceeds from sales of investment securities 500,000 927,300
Purchases of investment securities (10,907,300)(19,261,000)
(Increase) or decrease in federal funds sold 0 850,000
Increase or (decrease) in federal funds purchased (1,450,000) 0
Increase of (decrease) in repurch. agreements 1,209,100 5,650,000
Net decrease in interest bearing deposits
in other banks 188,900 (600,500)
Principal collected on loans 23,500,600 14,022,400
Loans made to customers (26,343,300)(16,277,700)
Capital expenditures (251,800) (228,300)
Gain from sale of investments 10,800 0
Net cash used or provided in investing
activities (10,201,700)(10,934,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase or (decrease) in demand deposits
NOW, MMDA and savings accounts (2,419,800) (4,282,000)
Proceeds from sale of
certificates of deposit 19,978,600 20,862,100
Payments for maturing
certificates of deposit (9,864,300) (6,258,600)
Dividends paid (550,000) (260,000)
Net cash provided by financing activities 7,144,500 10,061,500
NET INCREASE IN CASH AND CASH EQUIVALENTS (3,014,800) 453,400
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,218,600 $10,607,800
CASH AND CASH EQUIVALENTS AT END OF SIX MONTHS $ 7,203,800 $11,061,200
</TABLE>
<PAGE>
<PAGE>
BATH NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995. (Unaudited)
-------------------------------------------------------------------------
1. GENERAL
The accounting and reporting policies followed by Bath National
Corporation, a bank holding company, and its subsidiary, Bath National
Bank, in the preparation of the accompanying interim financial
statements conform with generally accepted accounting principles and
with general practice within the banking industry.
The accompanying financial statements are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of
financial position and results of operations for the interim periods
have been made. Such adjustments are of a normal recurring nature.
The results of operations for the six month period ended 6/30/96 are
not necessarily inductive of the results to be expected for the full
year.
<TABLE>
2. INVESTMENT SECURITIES
Investment securities are classified as available for sale. The
carrying value, fair market value and unrealized gains and losses of
those securities are as follows:
<CAPTION>
Fair
Book Market Unreal. Unreal.
Value Value Gain Loss Net
<S> <C> <C> <C> <C> <C>
U.S. Treasury &
Agencies 20,810,100 20,376,400 14,900 (448,600) (433,700)
States and
Pol. Subdiv. 28,607,000 28,587,900 323,900 (343,000) (19,100)
Mortgage
Backed Sec. 22,471,900 22,064,700 104,500 (511,700) (407,200)
Equity Securities 1,069,000 1,069,000 - - -
Total 72,958,000 72,098,000 443,300 (1,303,300) (860,000)
</TABLE>
3. ALLOWANCE FOR LOAN LOSSES
The provision for loan losses is based on management's evaluation of the
relative risks inherent in the loan portfolio and, on an annual basis,
generally exceeds the amount of net losses charged against the
allowance.
Balance - January 1, 1996 $1,650,000
Charge offs (103,000)
Recoveries 38,000
Provision charged to income 65,000
Balance - June 30, 1996 $1,650,000
4. INCOME TAXES
Provision for deferred income taxes are made as a result of timing
differences between financial and taxable income. These differences
relate principally to depreciation of bank premises and equipment,
market value adjustments on investment securities held as available for
sale, and provisions for loan losses.
<PAGE> <PAGE>
5. STOCK RECLASSIFICATION
On April 24, 1996, the Board of Directors authorized a two for one
stock split, thereby increasing the number of issued and outstanding
shares to 1,365,801. All references in the accompanying financial
statements to the number of common shares and per share amounts for
1996 and 1995 have been restated to reflect the stock split. <PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of Bath National
Corporation was held April 24, 1996. The following directors
were elected:
NAME TERM VOTES FOR VOTES AGAINST ABSTAIN
Robert H. Cole 3 years 523,033 49 -0-
Herbert Fort 3 years 508,538 14,454 -0-
Patrick Sullivan 3 years 522,522 560 -0-
Alan J. Wilcox 3 years 523,033 49 -0-
Two for 1 stock
split 523,082 -0- -0-
Amendment to
Certificate of
Incorporation 511,987 11,095 -0-
Appointment of Urbach,
Kahn & Werlin as
Certified Public
Accountants 520,148 496 410
ITEM 5. Other Information
There were no reports filed on Form 8-K
ITEM 6. Exhibits and Reports on Form 8-K
N/A
<PAGE> <PAGE>
Discussions and Analysis of Financial Condition and Result of Operations
(Interim) (Unaudited)
Bath National Corporation has one subsidiary bank (Bath National
Bank). There are no non-banking subsidiaries.
Liquidity and Capital Resources:
Management has not identified any trends, demands, commitments,
events or uncertainties likely to result in any significant deficiencies
or increases in liquidity.
Liquidity is an important factor in the financial condition of Bath
National Corporation and affects it's ability to meet the borrowing
needs and deposit withdrawal requirements of its customers. Assets,
consisting principally of loans and investment securities, are funded by
customer deposits.
The investment portfolio is one of Bath National's primary sources
of liquidity. Maturities of securities and principal payments on
mortgage backed securities provide a constant flow of funds which are
available for cash needs. Interest bearing deposits in other financial
institutions maturing within one year total $1.0 million. Also, high
quality securities are readily marketable and provide another level of
liquidity. Maturities in the loan portfolio also provide a steady flow
of funds. At June 30, 1996 loans with an aggregate balance of $12.6
million and securities of $6.4 million were due to mature in one year or
less. Additional funds flow from payments on instalment and revolving
credit loans. Bath National's liquidity also continues to be enhanced
by a relatively stable deposit base. On June 30, 1996, the loan to
deposit ratio was 75% and the ratio of loans to core deposits (excluding
certificates of deposit of $100,000 or more) was 84%.
In addition to the sources of liquidity above, Bath National Bank
may borrow from the Federal Reserve Bank in the event of a short term
liquidity deficiency. The bank also has an agreement with our
correspondent bank to borrow overnight funds with a maximum limit of $2
million. During 1996, the bank had an average net daily federal funds
purchased of $1.2 million.
Bath National Bank is a member of the Federal Home Loan Bank (FHLB)
System and based upon the current level of stock ownership, the bank may
borrow up to $9.7 million. As of June 30, 1996, the bank has borrowed
$3.0 million against this line of credit.
The Federal Reserve Board and Office of the Comptroller of the
Currency have guidelines as to the minimum risk based capital
requirement of community banks. This minimum is presently 8%.
Bath National Corporation had primary capital at June 30, 1996 as
follows:
<PAGE>
<PAGE>
Components of Capital 6-30-96 6-30-95
Common Equity $28,943,600 $26,976,300
Allowance for loan losses 1,650,000 1,725,000
Subtotal 30,593.600 28,701,300
Less: Goodwill 341,800 360,000
TOTAL PRIMARY CAPITAL $30,251,800 $28,341,300
The company's capital to asset ratios as of June 30, 1995 and 1996 are
as follows:
TIER I LEVERAGE RATIO RISK BASED
Required Required
Minimum Actual Minimum Actual
June 30, 1995 4.00% 12.56% 8.00% 19.65%
June 30, 1996 4.00% 12.50% 8.00% 19.13%
Net Interest Income
Net interest income for the three and six month periods of 1996
decreased slightly from the same periods of 1995. Higher costs of funds
decreased the net interest margin, although higher volumes allowed the
bank to maintain approximately the same net interest income. The
average cost of funds for the second quarter 1995 was 3.63%, while the
second quarter 1996 reflects an average cost of funds of 3.82%.
Provision for Loan Losses
The company's management recognizes the fact that there are risks
of loss involved in any lending function. Identifying the extent of the
risk for each loan category, and the probability that losses will be
sustained based on delinquency experience, is part of the overall plan
for establishing an Allowance for Loan Losses.
Bath National Bank recognized net loan charge offs totaling
$105,100 for the three months ended June 30, 1995 versus a net charge
off of $69,700 for the comparable three months of 1996. The reserve for
loan loss totals $1,650,000. The Board of Directors has determined that
$1,650,000 is a sufficient reserve for loan losses based on an analysis
of past due loans, historical data and specific identification of
problem loans.
Non-Performing Assets
The Bank's policy is to discontinue the accrual of interest on
loans (other than instalment loans and 1-4 family residential mortgages)
for which principal or interest is past due 120 days or more and which
are not fully collateralized. Such loans are classified as non-accrual
by BNC. This classification does not, however, necessarily indicate
that the principal of the loan is uncollectible, but does warrant a
review of the collectability. When a loan is placed on a non-accrual
basis, any unpaid interest accrued is reversed against current income.
On June 30, 1996, total non-accruing assets were $519,000.
Collateral supporting the loans totals $431,000. <PAGE>
<PAGE>
NON PERFORMING LOANS
Non-performing loans are summarized as follows:
Other Real Estate $ 330,000
Non-accrual loans $ 519,000
Past due 90 days or more and still accruing $ 376,000
Total $1,225,000
Other Operating Expenses
Other operating expense increased from $1,704,800 to $1,761,900 for
the comparable three months of 1995 and 1996. Costs associated with the
acquisition of other real estate amounted to an additional $150,000 in
1996, while maintenance contract costs on equipment increased by $13,000
for the three months ended June 30, 1996. FDIC assessments decreased
dramatically from $100,000 in 1995 to $1,000 in 1996 for the
corresponding second quarter.
Other Operating Income
Other operating income increased from $322,000 for the three months
ended June 30, 1995 to $349,000 for the second quarter 1996. No
significant increases or decreases in individual other income accounts
are noted. <PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
BATH NATIONAL CORPORATION
DATE: ____________________ _________________________
Robert H. Cole, Sr.
President
DATE: ____________________ _________________________
Edward C. Galpin Vice President
and Treasurer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,204
<SECURITIES> 72,098
<RECEIVABLES> 0
<ALLOWANCES> (1,650)
<INVENTORY> 0
<CURRENT-ASSETS> 3,346
<PP&E> 5,168
<DEPRECIATION> 194
<TOTAL-ASSETS> 242,084
<CURRENT-LIABILITIES> 208,435
<BONDS> 0
0
0
<COMMON> 6,829
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 242,084
<SALES> 0
<TOTAL-REVENUES> 8,805
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,463
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 3,547
<INCOME-PRETAX> 2,389
<INCOME-TAX> 743
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,646
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
</TABLE>
